Comparative Analysis of Hdfc and Icici Mutual Funds

7/28/2019 Comparative Analysis of Hdfc and Icici Mutual Funds

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INTRODUCTION TO THE STUDY

Financial management is an integral part of overall management and not merely a

staff Function. It is not only confined to fund raising operation but extends beyond it

is to Cover utilization of funds and monitoring its uses .These functions influence the

operations of other crucial functional areas of the firm such as production, marketing

and human resources. The financial management of a firm affects its very survival

because the survival of the firm depends on strategic decisions made in such

important matters such as product development, market development, entry in new

product line, retrenchment of a product, expansion of the plant, change in location etc.

In all these Matters assessment of financial implications of inescapable.

The management of the finances of a business / organization in order to achieve

financial objectives

Taking a commercial business as the most common organizational structure, the key

objectives of financial management would be to:

Create wealth for the business

Generate cash, and

Provide an adequate return on investment bearing in mind the risks that

the business is

Taking and the resources invested there are three key elements to the process of

financial management

(1) Financial Planning

Management need to ensure that enough funding is available at the right time to

meet the needs of the business. In the short term, funding may be needed to

invest in equipment and stocks, pay employees and fund sales made on credit.

In the medium and long term, funding may be required for significant additions

to the productive capacity of the business or to make acquisitions.


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(2) Financial Control

Financial control is a critically important activity to help the business ensure that the

business is meeting its objectives. Financial control addresses questions such as:

Are assets being used efficiently?

Are the businesses assets secure?

Do management act in the best interest of shareholders and in accordance

with business rules?

(3) Financial Decision-making

The key aspects of financial decision-making relate to investment, financing and

dividends:

Investments must be financed in some way however there are always

financing alternatives that can be considered. For example it is possible to

raise finance from selling new shares, borrowing from banks or taking credit

from suppliers

A key financing decision is whether profits earned by the business should be

retained rather than distributed to shareholders via dividends. If dividends are

too high, the business may be starved of funding to reinvest in growing

revenues and profits further.

Financial services industry is the main stay of any economy as it mirrors the

financial health of the country. Indian financial markets are highly regulated

with different authorities keeping an eye on every avenue of financial sub-

segments viz. Stock markets, mutual funds, insurance and banking. Stock

markets are regulated by Securities and Exchange Board of India (SEBI) while

Insurance Regulatory and Development Authority (IRDA) keep an eye on the

insurance industry. Similarly, Reserve Bank of India (RBI) keeps a check on the

Indian banking sector and Association of Mutual Funds in India (AMFI) takes

care of the mutual fund segment. India boasts of a Rs 23, 000 crore (US$ 4.44billion) - financial services distribution and advice market. Recent developments,


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Government measures, key facts and figures pertaining to the same are

discussed hereafter.

Insurance Sector

Even when the turbulent times are prevalent in the global financial markets,

India Consumers have not lost faith in their financial systems. This fact is

Marjory driving Indian insurance market.

Banking Services

Ratings agency Moody's believe that strong deposit base of Indian lenders and

Government's persistent support to public sector and private banks would act as

positive Factors for the 64 trillion (US$ 1.23 trillion) Indian banking industry amidst

the negative Global scenario.

According to the RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled

Commercial Banks', March 2011, Nationalized Banks, as a group, accounted For

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

Associates accounted for 21.6 per cent. The share of new private sector banks,

Old private Sector banks, Foreign banks and Regional Rural banks in aggregate

deposits was 13.4 per Cent, 4.6 per cent, 4.4 per cent and 3 per cent respectively.

Mutual Funds Industry in India

Mutual Funds Definition refers to the meaning of Mutual Fund, Which is a fund,

managed by an investment company with the financial objective of generating high

Rate of Returns. These asset management or investment management companiescollects money from the investors and invests those money in different Stocks, Bonds

and other financial securities in a diversified manner. Before investing they carry out

thorough research and detailed analysis on the market conditions and market trends of

stock and bond prices. These things help the fund mangers to speculate properly in the

right direction.


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Recent data released by AMFI stated that the cumulative average Asset Under

Management (AUM) of all fund houses aggregated to about Rs 6,87,640 core

(US$ 132.77 billion) in the last quarter of 2011.

Investing in the financial markets is no easy task, but learning the basics can move,

you ahead and make you feel confident about where you decide to put your money.

Thats what getting started is all about 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 invested by the found manager in different types of securities depending

upon the objective of the scheme. These could range from shares to debentures to

money market instruments. The income earned through these investments and thecapital appreciations realized by the scheme are shared by its unit holders in

proportion to the number of units owned by them (pro rata). 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 portfolio at a relatively low cost. Anybody with

an inventible surplus of as little as a few thousand rupees can invest in mutual funds.

Each mutual funds scheme has a defined investment objective and strategy.

A mutual fund is the ideal investment vehicle for todays complex and modern

financial scenario markets for equity shares, bounds and other fixed income

instruments, real estate, derivatives and other assets have become mature and

information driven. Price changes in these assets are driven by global events

occurring in faraway places. A typical individual is unlikely to have the knowledge,

skills, inclination and time to keep track of events, understand their implications and

act speedily. An individual also finds it difficult to keep track of ownership of his

assets, investment brokerage dues and bank transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified

and experienced staff that manages each of these functions on a full time basis. The

large pool of money collected in the fund allows it to hire such staff at a very low cost

to each investor. In effect, the mutual fund vehicle exploits economies of scale in all

three areas research, investments and transaction processing. While the concept of

individuals coming together to invest money collectively is not new, the mutual fund

in its present form is a 20 th century phenomenon.


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In fact, mutual funds gained popularity only after the Second World War. Globally,

there are thousand of firms offering tens of thousand of mutual funds with different

investment objectives. Today, mutual funds collectively manage almost as much as or

more money as compared to banks.

A draft offer document is to be prepared at the time of launching the fund. Typically,

it per specifies the investment objectives of the fund, the risk associated, the costs

involved in the process and broad rules for entry into and exit from the fund and other

areas of operation. In India, as in most countries, these sponsors need approval from a

regulator, SEBI (Securities exchange board of India) in our case. SEBI looks at track

records of the sponsor and its financial strength in granting approval to the fund forcommencing operations.

A sponsor then hires an asset management company to invest the funds according to

the investment objective. It also hires another entity to be the custodian of the assets

of the fund and perhaps a third one to handle registry work for the unit holders

(subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management Company also, inwhich it holds a majority stake. In many cases a sponsor can hold a 100% stake in the

asset management company (AMC).

E.g. Birla Global Finance is the sponsor of the Birla Sun Life Asset Management

Company Ltd., which has floated different mutual funds schemes and also acts as an

asset manager for the funds collected under the schemes.

A stock exchange provides services for stock brokers and traders to trade stocks,bonds, and other securities. Stock exchanges also provide facilities for issue and

redemption of securities and other financial instruments, and capital events including

the payment of income and dividends .Securities traded on a stock exchange include

shares issued by companies, unit trusts, derivatives pooled investment products and

bonds. To be able to trade a security on a certain stock exchange, it must be listed

there. Usually, there is a central location at least for record keeping, but trade is

increasingly less linked to such a physical place, as modern markets are electronic

networks which give those advantages of increased speed and reduced cost of


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transactions. Trade on an exchange is by members only. The initial offering of stocks

and bonds to investors is by definition done in the primary market and subsequent

trading is done in the secondary market .There are two main major stock exchanges in

India. They are BSE and NSE. The Bombay Stock Exchange (BSE) is known as the

oldest exchange in Asia. It traces its history to the 1850s, when Stockbrokers would

gather under banyan trees in front of Mumbais Town Hall. The location of these

meetings changed many times, as the number of brokers constantly increased. Capital

market reforms in India and the launch of the Securities and Exchange Board of India

(SEBI) accelerated the integration of the second Indian stock exchange called the

National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE hasbecome the largest stock exchange in India.

Three segments of the NSE trading platform were established one after another. The

Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital

Market (CM) segment was opened at the end of 1994. Finally, the Futures and

Options segment began operating in 2000. Today the NSE takes the 14th position in

the top 40 futures exchanges in the world. In 1996, the National Stock Exchange of

India launched S&P CNX Nifty and CNX Junior Indices that make up 100 most

liquid stocks in India. CNX Nifty is a diversified index of 50 stocks from 25 different

economy sectors. The Indices are owned and managed by India Index Services and

Products Ltd (IISL) that has a consulting and licensing agreement with Standard &

Poors. In 1998, the National Stock Exchange of India launched its web-site and was

the first exchange in India that started trading stock on the Internet in2000. The NSE

has also proved its leadership in the Indian financial market by gaining many awards

such as Best IT Usage Award by Computer Society in India (in 1996 and 1997) and

CHIP Web Award by CHIP magazine (1999).


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NEED FOR THE STUDY

Indian mutual fund industry today, occupies a prominent place in Indias investment

industry the mutual fund industry today is being universally acknowledged as

knowledge-driven and globally competitive one of largest among in the developing

countries. Middle class people (or) investors with less risk lower try to invest in

Mutual Funds. Now-a-days three are number of Mutual Fund companies in India with

various investment options. So the investors are in a dilemma to select the Mutual

Fund Company. Hence the performance analysis of Mutual Funds will help Investors

to select a specific type of Mutual Fund. Hence there is a need to study an the topic

COMPARATIVE ANALYSIS OF MUTUAL FUNDS A COMPARATIVESTUDY OF HDFC AND ICICI PRUDENTIAL (GROWTH) FUNDS

OBJECTIVES OF THE STUDY

1. To understand the concept relating to mutual funds.

2. To know the profile of HDFC and ICICI Mutual funds.

3. To analyse the performance of growth scheme HDFC and ICICI MutualFunds.

4. To make conclusions based on the study.

SCOPE OF THE STUDY

The scope of the project includes knowledge about the Mutual fund industry. As a

whole this includes the detailed study of Mutual Funds, their types, benefits, present

scenario, equities as a part of mutual funds, the risk return relationship related to

investment avenues.

Its also included the marketing and promotional aspects, the marketing &

promotional activities have been carried out at the HDFC prudential mutual funds,

Hyderabad. They have provided an opportunity to apply the financial planning

process in practice & recommending financial strategies to investors. It enabled to

create awareness among the investors about the right investment products, helping


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investors understand the risk & return in the fund investing recommending model

portfolios and selecting the right fund.

METHODOLOGY OF THE STUDY

DATA COLLECTION METHODS:

PRIMARY DATA

Primary data is the data gathered for a specific purpose or for a specific

research report for the first time or Data observed or collecteddirectlyfrom first-

handexperience.

SECONDARY DATA

Secondary data is the data that have been already collected by and readily

available from other sources. Such data are cheaper and more quickly obtainable than

the primary data and also may be available when primary data can not be obtained at

all.

For the purpose of the study data was collected through secondary source.

Major source of the data are published Net Asset Value (NAV) of ICICI FMCG

Equity Fund.

The data is relating to daily NAV pertains to 3year i.e., April 2010 to march 2012.

LIMITATIONS OF THE STUDY

The time period taken for doing the analysis has been taken from April 2009

to March 2012 only.

The performance of mutual fund cannot be judged with one year data.

The mathematic errors may arise due to round off calculation.

There is no overall performance of all mutual funds.
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Comparative Analysis of Hdfc and Icici Mutual Funds

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