Project Report

A PROJECT REPORT ON

“A REPORT ON MUTUAL FUND

PORTFOLIO REVOSION AND ANALYSIS

OF HSBC EQUITY FUNDS”

SUBMITTED TO

ALL INDIA MANAGEMENT ASSOCIATION

CENTRE FOR MANAGEMENT EDUCATION

MANAGEMNET HOUSE, 14 INSTITUTIONAL, AREA

LODHI ROAD, NEW DELHI-110003

JULY 2012

BY

VIVEK SHARMA

REGISTRATION NO-421010152

GUIDED BYMR. TANVEER SAHAB

ASSISTANCE PROFESSOR

For the partial fulfillment of

Post Graduate Diploma in Management

Mutual Fund Portfolio Revision And Analysis of HSBC Equity Funds

CONTENTS

PART-1 PAGE NO

1. INTRODUCTION 6

1.1 HBSC (About the Company)

1.2 Equity Mutual Fund

A) Types of Equity Funds

B) Why equity funds

2. Management Strategy

A) Active Management

B) Passive Management

2. PORTFOLIO OF HSBC EQUITY MUTUAL FUNDS 16

3. INDUSTRY PROFILE 18

PART-2

4 RESEARCH METHODOLOGY 19

4.1. Statement of Problem

4.2.Justification of Study

4.3. Objective of Study

4.4. Research Design

4.5. List of Table’s.

4.6 Sources of Data.

4.7. Analysis and Presentation

4.8. Limitation of Study.

5. CONCLUSION & SUGGESTION. 33


6. APPENDICES 34

7. QUESTIONNAIRE 41

ACKNOWLEDGEMENT

“Expression of feelings by words makes them less significant when it comes to make statement of gratitude”

I take this opportunity to express my gratitude to all the people who have guided with limitless humility, I would like to praise and thank ‘God’ the supreme and the merciful, who blessed me with all favorable circumstance and supports to go through the gigantic task. His constant moral encouragement has always been a source of inspiration for me to pursue for excellence. I have had considerable help and support in Finance this project a reality. First and foremost, a gratitude goes to “Mr. AVINASH KHANNA” ,Chairman of ‘National Institute of Entrepreneurship’ who provide me always mental support , motivate me and also appreciate me. I am also thankful to “Mrs. NEETA KHANNA” ACADEMIC DIRECTOR of ‘NATIONAL INSTITUTE OF ENTREPRENEURSHIP’, Who provided me help and guidance during my data analysis phase of the study. MR TANVEER SAHAB Assistance Professor – NIE NOIDA, who provide me all the guidance and support in realizing the dissertation. His valuable suggestions and helping hands has helped me to complete my project successfully. Thanks are also due to the staffs of NIE Team.

I am also thankful to last but not least I would like to thanks ALL INDIA MANAGEMENT

ASSOCIATION. For their cooperation enabling me to understand the subject practically

and providing facility during the course of action.

The warmth showered upon me through every handshake, every smile and many time trough

unsaid words is warmly acknowledged.

Vivek Sharma Registration No. 421010152


PREFACE

PGDM is a stepping-stone to the management carrier and to develop good manager. It is necessary that the theoretical must be supplemented with exposure to the real Environment. Theoretical knowledge just provides the base and it’s not sufficient to produce a good manager that’s why practical knowledge is needed.

Therefore the research product is an essential requirement for the student of PGDM. This research project not only helps the student to utilize his skills properly learn field realities but also provides a chance to the organization to find out talent among the budding managers in the very beginning.Investing money where the risk is less has always been risky to decide. The first factor, which an investor would like to see before investing, is risk factor. Diversification of risk gave birth to the phenomenon called Mutual Fund. The Mutual Fund Industry is in the growing stage in India, which is evident from the flood of mutual funds offered by the Banks, Financial Institutes & Private Financial Companies. In accordance with the requirement of PGDM course I have done Research project on The Topic OF “A REPORT ON MUTUAL FUNDS PORTFOLIO REVISION AND ANALYSIS OF HSBC EQUITY FUNDS”.

For conducting the research project sample size of 60 customers of Mutual Funds were selected. The information regarding the project research was collected through the questionnaire formed by me which was filled by the investors of Mutual Funds.


SUMMARY

Indian Stock market has undergone tremendous changes over the years. Investment in Mutual Funds has become a major alternative among Investors. The project has been carried out to have an overview of Mutual Fund Industry and to understand investor’s perception about Mutual Funds in the context of their trading preference, explore investor’s risk perception & find out their preference over Top Mutual funds. The methodology used was data collection using Schedule.

Secondary data was collected from Internet and Books. Primary Data was Collected through survey among existing clients along with the other investors. The procedure adopted to select sample was simple random sampling. The research design is analytical in nature.

A questionnaire was prepared and distributed to Investors. The investor’s profile is based on the results of a questionnaire that the Investors completed. The Sample consists of 60 investors from various broker’s premises.

The target customers were Investors who are investing in mutual fund.


INTRODUCTION


INTRODUCTION

Investment in share markets are influenced by the analysis & reasoning which help in predicting the market to some extent. Over the past years a number of technical & theories for analysis have evolved, these combined with modern technology guides the investor. The big players in the market, like Foreign Institutional Investors, Mutual Funds, etc. have the expertise for various analytical tools & make use of them. The small investors are not in a position to benefit from the market the way Mutual Funds can do. Generally a small investor’s investments are based on market sentiments, inside information, through grapevine, tips & intuition. The small investors depend on brokers and brokerage house for his investments. They can invest through the Mutual Funds who are more experienced and expert in this field than a small investor himself. In recent years a large number of players have entered into his market. The project has been carried out to have an overview of Mutual Fund Industry and to understand investor’s perception about Mutual Funds in the context of their trading preference, explore investor’s risk perception & find out their preference over Top Mutual Fund.

Introduction to HSBC Mutual Fund

HSBC Holdings plc (commonly known as HSBC) is a British multinational banking and financial services company headquartered in London, United Kingdom. As of 2011 it was the world's second-largest banking and financial services group and second-largest public company according to a composite measure by Forbes magazine.

HSBC is a universal bank and is organized within four business groups: Commercial Banking; Global Banking and Markets (investment banking); Retail Banking and Wealth Management (retail banking and consumer finance); and Global Private Banking. It has around 7,200 offices in 85 countries and territories across Africa, Asia, Europe, North America and South America and around 89 million customers. As of 31 March 2012, it had total assets of $2.637 trillion, of which roughly half were in Europe, a quarter in the Americas and a quarter in Asia.

HSBC Holdings plc was founded in London in 1991 by The Hong Kong and Shanghai Banking Corporation to act as a new group holding company and to enable the acquisition of UK-based Midland Bank. The origins of the bank lie in Hong Kong and Shanghai, where branches were first opened in 1865. Today, HSBC remains the largest bank in Hong Kong, and recent expansion in mainland China, where it is now the largest international bank, has returned it to that part of its roots.

HSBC has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. As of December 2011 it had a market capitalization of £87.4 billion, the third-largest of


any company listed on the London Stock Exchange. It has secondary listings on the Hong Kong Stock Exchange (where it is a constituent of the Hang Seng Index), the New York Stock Exchange, Euro next Paris and the Bermuda Stock Exchange.

ABOUT MUTUAL FUNDS

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of amutual fund.

· The structure of Mutual Funds in India is governed by SEBI (Mutual Fund) Regulations, 1996.

SEBIAMC Unit holders Savings Units Trust investments Returns Trust Custodian AMC Registrar

· It is mandatory to have a three tier structure of Sponsor – Trustee – Asset Management Company.· The trust is established by a Sponsor or more than one sponsor who is like a promoter of a company. He appoints the Trustees who are responsible to the investors of the fund.· The Trustees of the mutual fund hold its property for the benefit of the unit holders.· Asset Management Company (AMC) approved by SEBI is the business face of the mutual fund as it manages all the affairs of the fund by making investments in various types of securities.· Custodian, who is registered with SEBI, holds the securities of various schemes of the funds in its custody.

WHY MUTUAL FUNDS

An investor normally prioritizes his investment needs before undertaking an investment. So different goals will be allocated different proportions of the total disposable amount. Investments for specific goals normally find their way into the debt market as risk reduction is of prime importance. This is the area for the risk averse investors and here, mutual funds are generally the best option. The reasons are not difficult to see.

One can avail of the benefits of better returns with added benefits of anytime liquidity by investing in open-ended debt funds at lower risk. Many people have burnt their fingers by investing in fixed deposits of companies who were assuring high returns but have gone bust in course of time leading to distraught investors as well as pending cases in the Company Law Board.


This risk of default by any company that one has chosen to invest in, can be minimized by investing in mutual funds as the fund managers analyze the companies’ financials more minutely than an individual can do as they have the expertise to do so. They can manage the maturity of their portfolio by investing in instruments of varied maturity profiles. Since there is no penalty on pre-mature withdrawal, as in the cases of fixed deposits, debt funds provide enough liquidity.Moreover, mutual funds are better placed to absorb the fluctuations in the prices of the securities as a result of interest rate variation and one can benefits from any such price movement.

Apart from liquidity, these funds have also provided very good post-tax returns on year to year basis. Even historically, we find that some of the debt funds have generated superior returns at relatively low level of risks. On an average debt funds have posted returns over 10 percent over one-year horizon. The best performing funds have given returns of around 14 percent in the last one-year period.

In nutshell we can say that these funds have delivered more than what one expects of debt avenues such as post office schemes or bank fixed deposits. Though they are charged with a dividend distribution tax on dividend payout at 10 percent (plus a surcharge of 10 percent), the net income received is still tax free in the hands of investor and is generally much more than all other avenues, on a post tax basis.

Moving up in the risk spectrum, we have people who would like to take some risk and invest in equity funds/capital market. However, since their appetite for risk is also limited, they would rather have some exposure to debt as well. For these investors, balanced funds provide an easy route of investment.

Armed with the expertise of investment techniques, they can invest in equity as well as good quality debt thereby reducing risks and providing the investor with better returns than he could otherwise manage. Since they can reshuffle their portfolio as per market conditions, they are likely to generate moderate returns even in pessimistic market conditions.This risk of default by any company that one has chosen to invest in, can be minimized by investing in mutual funds as the fund managers analyze the companies’ financials more minutely than an individual can do as they have the expertise to do so. They can manage the maturity of their portfolio by investing in instruments of varied maturity profiles. Since there is no penalty on pre-mature withdrawal, as in the cases of fixed deposits, debt funds provide enough liquidity.

Moreover, mutual funds are better placed to absorb the fluctuations in the prices of the securities as a result of interest rate variation and one can benefits from any such price movement.

Next come the risk takers. Risk takers by their very nature, would not be averse to investing in high-risk avenues. Capital markets find their fancy more often than not, because they have historically generated better returns than any other avenue, provided, the money was judiciously invested. Though the risk associated is generally on the higher side of the spectrum, the return-potential compensates for the risk attached.

Capital markets interest people, albeit not all for there are several problems associated. First issue is that of expertise. While investing directly into capital market one has to be analytical enough


to judge the valuation of the stock and understand the complex undertones of the stock. One needs to judge the right valuation for exiting the stock too. It is very difficult for a small investor to keep track of the movements of the market. Entrusting the job to experts, who watch the trends of the market and analyze the valuations of the stocks will solve thisproblem for an investor. Mutual funds specialize in identification of stocks through dedicated experts in the field and this enables them to pick stocks at the right moment. Sector funds provide an edge and generate good returns if the particular sector is doing well.

Next problem is that of funds/money. A single person can’t invest in multiple high-priced stocks for the sole reason that his pockets are not likely to be deep enough. This limits him from diversifying his portfolio as well as benefiting from multiple investments.

Here again, investing through MF route enables an investor to invest in many good stocks and reap benefits even through a small investment. This not only diversifies the portfolio and helps in generating returns from a number of sectors but reduces the risk as well. Though identification of the right fund might not be an easy task, availability of good investment consultants and counselors will help investors take informed decision.

How are the Mutual Funds Structured?

The Mutual Funds are structured in two forms: Company form and Trust form.

· Company Form : These forms of mutual funds are more popular in US.

· Trust Form : In India, mutual funds are organized as Trusts. The Trust is either managed by a Board of Trustees or by a Trustee Company.There must be at least 4 members in the Board of Trustees and at least 2/3 of the members of the board must be independent.Trustee of one mutual fund cannot be a trustee of another mutual fund.

Unit Trusts – Constituents:

A Mutual Fund is set up in the form of a Trust which has the following constituents:-1. Fund Sponsor

2. Mutual Fund as Trust

3. Asset Management Company

4. Other Fund Constituents:-

4.1. Custodian and Depositors

4.2. Brokers

4.3. Transfer Agent

4.4. Distributors


CONCEPT

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart

ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:

Organization of a Mutual Fund


ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a Mutual Fund are: Professional Management

Diversification

Convenient Administration

Return Potential

Low Costs

Liquidity

Transparency

Flexibility

Choice of schemes

Tax benefits

Well regulated

TYPES OF MUTUAL FUND SCHEMES

Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.


TYPES OF MUTUAL FUNDS SCHEMES

BY STRUCTURE Open-Ended Schemes Close-Ended Schemes Interval Schemes

BY INVESTMENT OBJECTIVE Growth Schemes Income Schemes Money Market Schemes

OTHER SCHEMES Tax Saving Schemes Special Schemes Index Schemes Sector Specific Schemes

FREQUENTLY USED TERMS

Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit

NAV is the net asset value of the scheme divided by the number of units outstanding on the

Valuation Date.

Net Asset Value (NAV) Calculation

Whenever we buy open ended mutual fund units the number of units we get for our investment is calculated based on Net Asset Value (NAV) of the fund. Similarly when we sell our units the amount to be returned to us is calculated based on NAV.

NAV is actually NAV per unit but every one use the term NAV as a short form. NAV is Net Assets of the fund per Number of Units outstanding. It is calculated by the below formula.

(Market Value of the Investments + Receivables + Other Accrued Income + Other Assets – Accrued Expenses – Other Payables – Other Liabilities) / (No. of units outstanding as on the NAV date)

Market Value of the Investments is calculated as per the last traded or closing price of the securities/debentures.Accrued income is dividends and interests received.Other Assets Include Cash, Cash equivalents etc

If NAV value of a scheme is high it doesn’t mean that the unit is over priced. In case of open ended mutual funds the NAV actually reflects the market prices of the funds’ assets neither at premium nor at discount.


TYPES OF MUTUAL FUNDS SCHEMES

BY STRUCTURE Open-Ended Schemes Close-Ended Schemes Interval Schemes

BY INVESTMENT OBJECTIVE Growth Schemes Income Schemes Money Market Schemes

OTHER SCHEMES Tax Saving Schemes Special Schemes Index Schemes Sector Specific Schemes

Sale Price

Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales

load.

Repurchase Price

Is the price at which units under open-ended schemes are repurchased by the Mutual Fund. Such

prices are NAV related.

Redemption Price

Is the price at which close-ended schemes redeem their units on maturity. Such prices are NAV

related.

Banking Services

According to the world's largest rating agency, Standard & Poor (S&P)'s Ratings Services, India's banking system has a high level of stable, core customer deposits supported by the system's good franchise, extensive branch networks, and large, yet growing, domestic savings.

According to the Reserve Bank of India (RBI)'s 'Quarterly Statistics on Deposits and

Credit of Scheduled Commercial Banks', September 2011, Nationalized Banks, as a group,

accounted for 52.2 per cent of the aggregate deposits, while State Bank of India (SBI) and its

associates accounted for 21.8 per cent. The share of New private sector banks, Old private sector

banks, Foreign banks and Regional Rural banks in aggregate deposits was 13.7 per cent, 4.8 per

Percent 4.6 percent and 29 Percent Respectively.

With respect to gross bank credit also, Nationalized banks hold the highest share of 51.6

per cent in the total bank credit, with SBI and its associates at 22.1 per cent and New Private

sector banks at 13.8 per cent. Foreign banks, Old private sector banks and Regional Rural banks

held relatively lower shares in the total bank credit with 5.2 per cent, 4.8 per cent and 2.5 per

cent, respectively.


Another statement released by the RBI stated that bank deposits grew 13.4 per cent to Rs

60.72 trillion (US$ 1.18 trillion) in the fiscal 2011-12 (the year to March 23, 2011) while loans

and advances grew 17.08 percent to Rs 47.54 trillion (US$ 927.16 billion).

Mutual Funds Industry in India

The Rs 6.70 trillion (US$ 130.66 billion) Indian mutual funds (MF) industry has 44 asset

management companies (AMCs). Recent data released by the Association of Mutual Funds in

India (AMFI) indicated that average assets under management (AUM) reported by these fund

houses amounted to Rs 6,68,824 Crore (US$ 130.33 billion) in 2011-12.

HDFC Mutual Fund maintained its top position as the country's biggest MF with an average

AUM of Rs 89,879 crore (US$ 17.51 billion), followed by Reliance MF (Rs 78,112 crore [US$

15.22 billion]), ICICI Prudential MF (Rs 68,718 crore [US$ 13.39 billion]), Birla Sun life MF

(Rs 61,143 crore [US$ 11.92 billion]) and UTI MF (Rs 58,922 crore [US$ 11.48 billion]).

Private Equity (PE) and Mergers & Acquisitions (M&A) in India

India Inc witnessed 202 merger and acquisition (M&A) deals worth US$ 9.4 billion during the

first quarter of 2012. According to Ernst & Young (E&Y)'s latest transactions quarterly report,

deals in January-March 2012 were 22 per cent higher than those of October-December 2011

quarter in terms of volume and 4.5 times higher in terms of value. Domestic deals dominated the

M&A space as they accounted for 63 per cent of the total number of deals and contributed 88.4

per cent of the total disclosed deal value for the quarter.


Introduction to Portfolio of Equity Funds

Portfolio literally means "a case for carrying loose papers

From about 1930 it has also come to mean a "collection of securities or responsibilities held by an individual and so may refer to:

A type of briefcase

Portfolio (government), the post and responsibilities of a head of a government department

Portfolio (finance), a collection of investments held by an institution or a private individual

Career portfolio, an organized presentation of an individual's education, work samples, and

skills

Almerindo Portfolio (1877–1966), Businessman, New York City Treasurer

Business networking a philosophy of working for several diverse projects directly rather than

earning a salary from a regular employer.

Artist's portfolio, a sample of an artist's work or a case used to display artwork, photographs

etc.

Electronic portfolio, a collection of electronic documents

Patent portfolio, a collection of patents owned by a single entity

Product portfolio (business administration), 2D separation of products by their market share

and profits or growth rates

IT Portfolio, in IT portfolio management, the portfolio of large classes of items of enterprise

Information Technology (IT)

Project Portfolio, in Project portfolio management, the portfolio of projects in an

organization


Portfolio: An Intercontinental Quarterly, a cross-disciplinary literary journal published

between 1945 and 1947

Atari Portfolio, a palmtop computer

Extensis Portfolio, a digital asset manager

Portfolio.com, a business magazine

electronic portfolio, a portfolio that has been prepared for distribution online

Portfolio (Grace Jones album)Portfolio (Yolandita Monge album)

The Indian financial services industry has a lot of scope for further penetration, and thus has immense scope and potential to grow exponentially. The online genre, mobile explosion, emergence of social media platforms, technologies like cloud computing and increasing pace of convergence and interconnectivity of devices are intensely driving the growth of this industry. These are playing pivotal roles in transforming the way financial services are delivered to the end-consumer. Further, financial institutions are revamping their operational infrastructure and business delivery models.

Financial services industry mainly comprises the BFSI industry, that is, banking, financial services (such as mutual funds) and insurance. Key developments and performance pointers pertaining to each of these sub-segments are discussed in this overview.


INDUSTRY PROFILE

Structure of the Indian Mutual Fund industry

The largest categories of Mutual Funds are the ones floated by the private sector and by Foreign Asset Management Companies. The largest of these are Prudential ICICI AMC and Birla Sun Life AMC. The aggregate corpus of assets managed by this category of AMCs is in excess of Rs.350 bn. Earlier the Indian Mutual Fund industry was dominated by the Unit Trust of India which has a total corpus of Rs.700 bn. collected from more than 20 million investors.

The UTI has many funds/schemes in all categories i.e. equity, balanced, income etc. with some being open-ended and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of about Rs.200 bn. UTI was floated by financial institutions and is governed by a special Act of Parliament.

Most of its investors believe that the UTI is government owned and controlled, which, while legally incorrect, is true for all practical purposes.

The second largest categories of mutual funds are the ones floated by nationalized banks. Can bank Asset Management floated by Canara Bank and SBI Funds Management floated by the State Bank of India are the largest of these. GIC AMC floated by the General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones.

The aggregate corpus of funds managed by this category of AMCs is about Rs.200 bn.


PART -2

RESEARCH METHOLODOGY

Statement of Problems:--

To identify and create a portfolio of a stocks suitable for the optimize return of HSBCEquity fund as per sharpe model optimization.


Justification of study:-

Recent development in global economics scenrio,has forced, investors as well as , institution players,Government, regular body to re-think & Replane , their respective strategy.

Over domestic economics scenrio is also affected through the containgent behaviour. Asset management is one of the tool of investment & wealth creation & is responsibility for the challization of in the economy .

In this regards portfolio revision & portfolio churing is very important.To offer sustainable return & justification of fund objective.Hence , HSBC equity fund has been identify as suitable option for this projects.

Objective of study:-

The purpose of the study was to identify factors which play important role in HSBC Equity fund, so that it could best rate of return. The following factors of Mutual fund the subject of study:

Rate of Return

Growth of the company

Risk diversification or Averter

Rate of Return:-

The gain or loss on an investment over a specified period, expressed as a percentage increase

over the initial investment cost. Gains on investments are considered to be any income received

from the security plus realized capital gains.

Mutual fund and investment company returns:-

Mutual funds, exchange-traded funds (ETFs), and other equitized investments (such as unit investment trusts or UITs, insurance separate accounts and related variable products such as variable universal life insurance policies and variable annuity contracts, and bank-sponsored commingled funds, collective benefit funds or common trust funds) are essentially portfolios of various investment securities such as stocks, bonds and money market instruments which are


equitized by selling shares or units to investors. Investors and other parties are interested to know how the investment has performed over various periods of time.Performance is usually quantified by a fund's total return. In the 1990s, many different fund companies were advertising various total returns—some cumulative, some averaged, some with or without deduction of sales loads or commissions, etc. To level the playing field and help investors compare performance returns of one fund to another, the U.S. Securities and Exchange Commission (SEC) began requiring funds to compute and report total returns based upon a standardized formula—so called "SEC Standardized total return" which is the average annual total return assuming reinvestment of dividends and distributions and deduction of sales loads or charges. Funds may compute and advertise returns on other bases (so-called "non-standardized" returns), so long as they also publish no less prominently the "standardized" return data.Subsequent to this, apparently investors who'd sold their fund shares after a large increase in the share price in the late 1990s and early 2000s were ignorant of how significant the impact of income/capital gain taxes was on their fund "gross" returns. That is, they had little idea how significant the difference could be between "gross" returns (returns before federal taxes) and "net" returns (after-tax returns). In reaction to this apparent investor ignorance, and perhaps for other reasons, the SEC made further rule-making to require mutual funds to publish in their annual prospectus, among other things, total returns before and after the impact of U.S federal individual income taxes. And further, the after-tax returns would include 1) returns on a hypothetical taxable account after deducting taxes on dividends and capital gain distributions received during the illustrated periods and 2) the impacts of the items in #1) as well as assuming the entire investment shares were sold at the end of the period (realizing capital gain/loss on liquidation of the shares). These after-tax returns would apply of course only to taxable accounts and not to tax-deferred or retirement accounts such as IRAs.Lastly, in more recent years, "personalized" investment returns have been demanded by investors. In other words, investors are saying more or less the fund returns may not be what their actual account returns are based upon the actual investment account transaction history. This is because investments may have been made on various dates and additional purchases and withdrawals may have occurred which vary in amount and date and thus are unique to the particular account. More and more fund and brokerage firms have begun providing personalized account returns on investor's account statements in response to this need.With that out of the way, here's how basic earnings and gains/losses work on a mutual fund. The fund records income for dividends and interest earned which typically increases the value of the mutual fund shares, while expenses set aside have an offsetting impact to share value. When the fund's investments increase in market value, so too does the value of the fund shares (or units) owned by the investors. When investments increase (decrease) in market value, so too the fund shares value increases (or decreases). When the fund sells investments at a profit, it turns or reclassifies that paper profit or unrealized gain into an actual or realized gain. The sale has no effect on the value of fund shares but it has reclassified a component of its value from one bucket to another on the fund books—which will have future impact to investors. At least annually, a fund usually pays dividends from its net income (income less expenses) and net capital gains realized out to shareholders as an IRS requirement. This way, the fund pays no taxes but rather all the investors in taxable accounts do. Mutual fund share prices are typically valued each day the stock or bond markets are open and typically the value of a share is the net asset value of the fund shares investors own.


Total returns:-

This section addresses only total returns without the impact of U.S. federal individual income and capital gains taxes.

Mutual funds report total returns assuming reinvestment of dividend and capital gain distributions. That is, the dollar amounts distributed are used to purchase additional shares of the funds as of the reinvestment/ex-dividend date. Reinvestment rates or factors are based on total distributions (dividends plus capital gains) during each period.

Growth of the company:-

An investor likes to see a company grow because, if profits grow, so do returns to the investor. The important thing for the investor, however, is that the company increases the returns to shareholders. A company that grows, at the expense of shareholder returns, is not generally a good investment.Any firm whose business generates significant positive cash flows or earnings, which increase at significantly faster rates than the overall economy. A growth company tends to have very profitable reinvestment opportunities for its own retained earnings. Thus, it typically pays little to no dividends to stockholders, opting instead to plow most or all of its profits back into its expanding business.

Risk diversification or Averter:-

In finance, diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of its constituents. Therefore, any risk-averse investor will diversify to at least some extent, with more risk-averse investors diversifying more completely than less risk-averse investors.


Diversification is one of two general techniques for reducing investment risk. The other is hedging. Diversification relies on the lack of a tight positive relationship among the assets' returns, and works even when correlations are near zero or somewhat positive. Hedging relies on negative correlation among assets, or shorting assets with positive correlation.

Examples:-

The simplest example of diversification is provided by the proverb "Don't put all your eggs in one basket". Dropping the basket will break all the eggs. Placing each egg in a different basket is more diversified. There is more risk of losing one egg, but less risk of losing all of them. In finance, an example of an undiversified portfolio is to hold only one stock. This is risky; it is not unusual for a single stock to go down 50% in one year. It is much less common for a portfolio of 20 stocks to go down that much, even if they are selected at random. If the stocks are selected from a variety of industries, company sizes and types (such as some growth stocks and some value stocks) it is still less likely.Further diversification can be obtained by investing in stocks from different countries, and in different asset classes such as bonds, real estate, private equity, infrastructure and commodities such as heating oil or gold. Since the mid-1970s, it has also been argued that geographic diversification would generate superior risk-adjusted returns for large institutional investors by reducing overall portfolio risk while capturing some of the higher rates of return offered by the emerging markets of Asia and Latin America.

Diversifiable and non-diversifiable risk:--

The Capital Asset Pricing Model introduced the concepts of diversifiable and non-diversifiable risk. Synonyms for diversifiable risk are idiosyncratic risk, unsystematic risk, and security-specific risk. Synonyms for non-diversifiable risk are systematic risk, beta risk and market risk.If one buys all the stocks in the S&P 500 one is obviously exposed only to movements in that index. If one buys a single stock in the S&P 500, one is exposed both to index movements and movements in the stock based on its underlying company. The first risk is called “non-diversifiable,” because it exists however many S&P 500 stocks are bought. The second risk is called “diversifiable,” because it can be reduced it by diversifying among stocks.Note that there is also the risk of over diversifying to the point that your performance will suffer and you will end up paying mostly for fees.The Capital Asset Pricing Model argues that investors should only be compensated for non-diversifiable risk. Other financial models allow for multiple sources of non-diversifiable risk, but also insist that diversifiable risk should not carry any extra expected return. Still other models do not accept this contention

This study was an effort to find out the following objectives:

To do analysis of the objectives of HSBC equity fund.


Management

The portfolio managers, Jitendra Sriram and Nilang Mehta, are co-managers of the HSBC Equity Fund. Mr. Sriram has overall 14 years of capital markets experience and manages this fund since May 2006. Mr. Mehta has overall eight years of investment management experience and has been managing this fund since the last three months. Mr. Mihir Vohra, who was earlier managing this fund, left the fund house in December 2008.The fund is supported by seven analysts-four in the mutual fund division and the rest three in the portfolio management services division. The mutual fund house shares research generated by the mutual fund and PMS divisions for investment decisions. Each analyst has average four years of stock research experience and covers two-three sectors each, covering 200 stocks actively. The fund management team also tracks another 150 stocks on a passive basis.

Strategy

This fund invests 85% of its corpus in large-cap stocks and the rest in mid-cap stocks in line with its benchmark, the BSE 200 Index. It invests across market spectrum and strives to achieve long-term capital growth. The fund follows top-down investment approach for sector orientation and bottom-up approach for stocks selection. The fund seeks to invest in stocks, which can offer growth at reasonable price. During market downturn, the fund is likely to maintain cash exposure to the extent of 20% of its corpus. Portfolio manager, Mr. Jitendra Sriram, admitted that the fund’s higher cash exposure as of February 2009 had impacted its performance between March-May 2009 when markets surged around 70%. We believe it is difficult to catch such sharp rallies and match the main indices in short-term, however, higher cash allocation could prove to be detrimental to fund’s long-term performance as study shows sharp rallies in equities has come over a short period of time.This fund differentiates itself from the competition as a pure large-cap fund to the extent of 85% of portfolio size and would not invest in mid-caps more than 15% of its corpus at all times.The portfolio management team has price targets for each security in place and would evaluate the future outlook of the security once the price target is breached.The portfolio’s risk is controlled through position size and the fund uses MSCI Barra to identify potential risks and portfolio allocation vis-a-vis benchmark.We think the portfolio manager, Jitendra Sriram, has sound understanding of fund’s investment strategy, portfolio allocation process and has conviction in his picks. The portfolio manager is benchmark conscious and picks growth-oriented stocks from the benchmark sectors.

Performance

During the five-year period ended April 2009, the fund outperformed approx 80% of its peers and registered 18.2% return. In comparison, the large-cap category posted 14.8% return. The fund also showed strong performance during the last three-year period and was rated five stars by


Morningstar. In terms of return rating, the fund bagged the “Above average” rating during the five-year period.On the risk front, the fund performed well too. Its risk during the five-year period was lower than the category average and therefore, was assigned “Below average” risk rating. During the five-year period, the fund was rated with four stars by Morningstar.The fund manager increased the fund’s exposure to the energy sector in early 2007 and gradually doubled as of April 2009, owing to increasing profit margins and oil exploration and production (upstream) segment gaining traction. As the energy sector accounted for the second largest position in the fund’s portfolio, a decline in crude oil price is likely to have a larger impact on the fund’s return.The fund manager favored the consumer staples sector in late 2007 and significantly increased exposure in 2008, owing to its defensive investment approach. The fund’s return, however, was impacted recently, owing to overweight exposure, relative to the benchmark, to this sector. This sector accounted for the largest holding in the fund’s portfolio as of April 2009.The manager cut the fund’s exposure to the materials sector in early 2008, owing to a decline in global commodity prices, led by a slowing economic growth. Exposure to the industrials sector was reduced in early 2008, owing to capex issues, driven by the financial markets turmoil and slowdown in domestic economic growth.

Costs

This fund’s 2.0% annual expense ratio hovers around the median compared with similar large-cap funds.

DATA COLLECTION AND ANALYSIS:-

1. Methodology


Research is a systematic method of finding solutions to problems. It is essentially an investigation, a recording and an analysis of evidence for the purpose of gaining knowledge. According to Clifford woody, “research comprises of defining and redefining problem, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, reaching conclusions, testing conclusions to determine whether they fit the formulated hypothesis”.Exploratory: To find the per day stock and per day sale at different outlets exploratory research method are adopted. A survey form was prepared and the retailers were asked to answer them during the course of their interview.

Literature Research: Books, Annual Report, web sites, Published and unpublished materials.Field Observation: During training period we did extensive survey of the distribution outlets and consumer to observe the marketing operation performed by the organization.

Schedule Method: Dealer’s responses were conducted with the help of a prepared schedule. Samples are taken at different locations of NCR area.

Sampling Technique: The study will be using Simple Random Sampling. All data will help in formulating research study. All sample units will be personally contacted and interviewed.

2. Design

We used both qualitative and quantitative methodology in data collection and data analysis.Data Collection:Data collection is a term used to describe a process of preparing and collecting business data - for example as part of a process improvement or similar project. Data collection usually takes place early on in an improvement project, and is often formalized through a data collection Plan which often contains the following activity.

1. Pre collection activity – Agree goals, target data, definitions, methods2. Collection – data collection3. Present Findings – usually involves some form of sorting analysis and/or presentation

There are two methods of data collection which are discussed below:

DATA COLLECTION

Primary Data Secondary Data


(Data collection techniques)

Questionnaire Interview External Internet Internal Source source

Sources of Data:-

Primary Data:-In primary data collection, you collect the data yourself using methods such as interviews and questionnaires. The key point here is that the data you collect is unique to you and your research and, until you publish, no one else has access to it. I have tried to collect the data using methods such as interviews and questionnaires. The key point here is that the data collected is unique and research and, no one else has access to it. It is done to get the real scenario and to get the original data of present.

DATA COLLECTION TECHNIQUE

Questionnaire:

Questionnaire are a popular means of collecting data, but are difficult to design and often require many rewrites before an acceptable questionnaire is produced. The features included in questionnaire are:Theme and covering letterInstruction for completionTypes of questionsLengthInterview:

This technique is primarily used to gain an understanding of the underlying reasons and motivations for people’s attitudes, preferences or behavior. The interview was done by asking a general question. I encourage the respondent to talk freely. I have used an unstructured format, the subsequent direction of the interview being determined by the respondent’s initial reply, and come to know what is its initial problem is.

4. Presentation of DataThe data has been presented through charts and tables.

TABLES


We use Many tables to analysis of HSBC Equity fund &Mutual fund Portfolio Revision.

Table List:-

1.1 BSE Sensex

1.2 Find out Sum & Calculate Mean Return,Slope,Variance,Total Risk.

1.3 Calculation of following:

Calculate Beta

Calculate Risk free return.

Difference Between Ri-Rf.

1.4 Company List.

1.5 .Standard Chartered Enterprise Equity


Analysis And presentation:-




LIMITATIONS

We took only Last two year data rather than three year or more than it. We also adopte past data exceptional latest data.

There were certain limitations faced during the study.

Some people were not willing to disclose the investment profile .The biasness was being taken care of.

The area of sample was decided after taking into consideration the major factors like Availability of investors Approachability,Time available with investor for interaction, etc.

More difficulty in collecting data from different sites as well different books and Place’s.

We use more calculation that will create difficult whenever in analysis.

CONCLUSION & SUGGESTION

The study done was a tool to analyze the present setup and to know the investors perception regarding investment in Mutual Funds . The study proved fruitful and many facts came to the light. The following were the findings of the study:

This fund is one of the best choices within the large-cap category. However, we think the current portfolio management team is approx three-year old (Sriram since May 2006 and Mehta just few


months old on this fund) and therefore, we would like to see this team’s performance over five year period.

To make a comparison between HBSC Equity fund with their competitors.

To do SWOT analysis of the HSBC equity fund.

To study the Importance of Investment.

To study the purpose, process, principle, functions of the HSBC Equity Fund.

To study the different types of methods/techniques used to evaluate them.

To study the level of evaluations.

To know the challenges which are faced in present market scenario.

Appendices

During our research, we used the following sources for collecting information:

Books:

Security Analysis & Portfolio Management, Study Material for FM-03.

Financial Management ( I M Pandy)

Analysis of financial Statement ( T.S.Grewal’s)


Internet sites:

http://www.moneycontrol.com/india/mutualfunds/mfinfo/portfolio_holdings/MHS001

http://www.nseindia.com

http://www.bseindia.com

http://www.hsbs.co.in

http://www.assetmanagement.hsbc.com

Portfolio Selection:-

We have already covered the Lagrange multiplier method and Sharpe single index model in the

previous section

We know look at Sharpe index model with more constraints on the weights

Sharpe’s Optimization Model

Uses a single number to decide whether a security should be a part of portfolio or not.

A security is preferred to another if it excess return to beta ratio is more than the other security


R i−RFβi

http://www.assetmanagement.hsbc.com/

http://www.hsbs.co.in/

http://www.bseindia.com/

http://www.nseindia.com/

http://www.moneycontrol.com/india/mutualfunds/mfinfo/portfolio_holdings/MHS001

Sharpe computes a number which is compared to the above ratio for all the securities. Only

those securities are selected which have excess return to beta ratio above this number.

Steps in arriving at the optimal portfolio

1. Calculate the excess return to beta ratio for each stock and rank it in

descending order.

2.Find out all the stocks for which the excess return to beta ratio is more than a cut-off rate.

3. Determine the weight ages in which the investments have to be made in the stocks in the

optimal portfolio

Risk-free Rate=5%

Now arrange the securities in the descending order of the excess return to beta ratio

Starting from the top, portfolios are constructed with the first portfolio including only the first

security, the second portfolio including the first and second security and so on.


For each of these portfolios a number C(i) is computed where C(i) is given by the following

equation:

Where:


2

ie

C i=

σm2 ∑i=1

i (Ri−RF)∗βiσei

2

1+σ m2 ∑i=1

i β i2

σ ei

2

σ ei2 :unsystematic risk for security i

σm2 : market var iance

Now only those securities are selected for which the excess return to beta is more than the

corresponding C(i) value. So the first 5 securities are selected

The cut-off ratio C* has to be such that all the securities above the lowest selected security are

selected. In this case it turns out to be 5.45.

Determining the Weight ages

The percentage X(i) to be invested in security say (i) is given:


2

*)(

ie

iFi RR

2

2

ie

i

i

i e

iFi

i

RR

12

*)(

i

i e

i

i12

2

iC

Computing iC

i

Fi RR

)(

102 mfor

X i=Z i

∑i=1

N

Z i

Zi=β iσei

2 (Ri−RFβi

−C∗)

This cut-off rate is computed from the characteristics of all of the securities that belong in the

optimum portfolio.

To determine this rate it is necessary to calculate its value as if different number of securities

were in the optimum portfolio

QUESTIONNAIRE

.I am doing PGDM at National Institute of Entrepreneurship, Noida and this is to acknowledge that the following survey is purely for academic purpose.

My project topic is about knowing the “Investors perception about investment in mutual funds”. The identity of the respondent will be kept confidential. And it does not carry any commercial value

Name: ...…………………….. Occupation: ………………………

Phone: ...……………………..

(1) Age


A. 22-30 B. 30-40 More than 40

(2)What is your annual income?

A. Less than 2 lakh B. 2 – 3 lakh C. More than 3 lakh

(3) Do you invest in Mutual Funds?

A. Yes B. No

If No Then,

What is the most important reason for not investing in mutual funds?

A. Lack of knowledge about mutual fundsB. Enjoys investing in other optionsC. Its benefits are not enough to drive you for investmentD. No trust over the fund managers

(4) Please rank the following investment instruments according to your preference.(On the basis of risk and return concept)

A. Fixed instrumentB. Mutual fundC. Direct Equity

(5) What is your Average investment period?

A. Less than 6 months. B. 6 to 12 months.C. 12 months to 2 year. D. More than 2 year.

(6) Which are the primary sources of your knowledge about Mutual Funds as an investment option? Corresponding to your choices how would you rate their influence on your final Mutual Fund purchase decision. Please rank them on a scale of 1-5 with 1 representing minimal influence and 5 representing Strong influence.

Source: Television 1 2 3 4 5

Least Influential Most Influential

Rank this source *Source: Internet1 2 3 4 5


A. Least Influential Most

(7) How much Risk are you willing to take?

A. Low B. Moderate C. High

(8) What is your preference in Mutual Funds?

A. Equity Funds B. Income FundsC. Money Market Funds D. ELSS (Tax Saver)E. Balanced Funds F. SIP

(9) How much return do you expect from your Investments?

A. Up to 15% B. 15%-25% C. 25%-35% D. More than 35%

(10) Which type of Mutual funds do you prefer?

A. Open Ended Schemes B. Closed Ended Schemes

(11) Do you get influenced by the name of Company promoting Mutual Funds?

A. Yes B. No

(12) Rank the following companies according to your investment preferenceA. Reliance Mutual Fund B. UTI Mutual FundC. SBI Mutual Fund D. HDFC Mutual FundE. Birla Sun Life Mutual Fund F.ICICI PrudentialG. Principal PNB H. Franklin Templeton

(13) Do you get influenced by the returns given by a fund or by the current NAV of a fund?

A. By NAV B. By Returns C. By Both

(14) Where do you find yourself as a mutual fund investor?

A. Totally ignorantB. Partial knowledge of mutual fundsC. Aware only of any specific scheme in which you invested.


D. Fully aware

(15) What is the major reason for using financial advisors?

A. Want help with asset allocationB. Don’t have time to make my own investment decisionC. To explain various investment optionsD. Want to make sure I am investing enough to meet my financial goals

(16) From where do you purchase mutual funds?

A. Directly from the AMCsB. Brokers onlyC. Brokers/ sub-brokersD. Other sources

(17) Rank the following feature of the mutual funds that attracts you most.(Where 1 is most preferable and 4th is less is preferable)

A. DiversificationB. Professional managementC. Reduction in risk and transaction costD. Helps in achieving long term goals

(18) According to you which is the most suitable stage to invest in mutual funds?

A. Young unmarried stageB. Young Married with children stageC. Married with older children stageD. Pre-retirement stage


Project Report

Documents

capital appreciation realized

hsbc equity funds

simple random sampling

varied maturity profiles

common financial goal

hsbc equity fund

private sector banks

interest rate variation