A COMPARATIVE STUDY OF SELECTED SCHEMES OF HDFC MUTUAL FUNDS

1. Dr. Anil Kumar Goyal

Professor,

Rukmini Devi Institute of Advanced Studies, Delhi

2. Tamanna Madan

Student, Management Studies,

Rukmini Devi Institute of Advanced Studies, Delhi

ABSTRACT-

Mutual funds allow tax benefits, diversification and other various options through making an

investment in equity, debt or hybrid funds. Using different measures of scale this study aims at

evaluating the best performing HDFC mutual fund scheme by comparing among selected 10

HDFC mutual funds and NIFTY on the basis of their daily NAV.

Keyword: Mutual Funds, HDFC, NAV.

INTRODUCTION-

Mutual funds refers to the investment that is made with the purpose to earn more in long term

with an advantage of withdrawing money as and when needed or required. This money is further

invested by professionals in that company which will yield better returns in future.

Mutual fund investments are subject to market risks. Please read the offer document carefully

before investing.

The mutual funds are then further divided into 3 parts that are:

1. Equity funds

2. Debt funds

3. Hybrid funds

Equity funds: It refers to the funds that highly fluctuate in short span of period but the return is

also in this is high. Equity funds are also called Stock funds.

Debt funds: In this investor has an option whether to invest for shorter period of time or for

longer period of time and the return the investor would get is mostly fixed.

Hybrid funds: This is a mix of both Equity funds as well as Debt funds.

ADVANTAGES:

1. Professional management - As every person involved in this field is experienced they

know when the market goes up and when it is not stable. So they know better when to

invest and when not to.

2. Liquidity – If in any case you do not want to invest further in mutual funds you just

simply has to tell your broker or agent and if invested directly you just have to drop a

mail and maximum within 24 hours you can convert your mutual funds into cash.

3. Diversification – When you invest in mutual funds you don’t invest in Single

Corporation rather you invest in multiple corporations, so that you don’t have to bear

loss if the value of certain stock goes down through other shares you risk can be

minimized.

DISADVANTAGES:

1. Agent’s commission – The main disadvantage of mutual fund is that the investor has

to pay agent’s commission which is an add on cost for purchasing securities. So, that

has to be borne by investor only.

2. Blocking money – The money of investor is blocked for a longer period because in

short term no one would get more return so mostly people invest for longer period of

time which is considered as blocking self’s money.

3. Mutual fund charges – For smooth functioning of the funds invested by investors i.e

for smooth operations there is a certain fee that is charged by the name mutual fund

charges so as to maintain the account of the investor.

Net Asset Value – NAV is the sum total of the market value of all the shares held in the portfolio

including cash, less the liabilities, divided by the total number of units outstanding.

Thus, NAV of a mutual fund unit is nothing but the 'book value.'

NAV= (Market value of scheme’s investment + receivables + accrued income + other assets –

accrued expenses – payables – other liabilities) / No. of outstanding units

HDFC MUTUAL FUNDS: HDFC Mutual Fund has been constituted as a trust in accordance

with the provisions of the Indian Trusts Act, 1882, as per the terms of the trust deed dated June 8,

2000 with Housing Development Finance Corporation Limited (HDFC) and Standard Life

Investments Limited as the Sponsors / Settlors and HDFC Trustee Company Limited, as the

Trustee. The Trust Deed has been registered under the Indian Registration Act, 1908. The

Mutual Fund has been registered with SEBI.

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act,

1956, on December 10, 1999, and was approved to act as an Asset Management Company for

the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.

In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset

Management Company Limited to manage the Mutual Fund.

Why only HDFC mutual funds?

HDFC is India's leading housing finance company, HDFC Bank is one of India's premier banks

providing a wide range of financial products and services to its over 18 million customers across

hundreds of Indian cities using multiple distribution channels including a pan-India network of

branches, ATMs, phone banking, net banking and mobile banking. Within a relatively short span

of time, the bank has emerged as a leading player in retail banking, wholesale banking, and

treasury operations, its three principal business segments. And as the bank has successfully

gained market share in its target customer franchises while maintaining healthy profitability and

asset quality so, I choose HDFC mutual funds.

LITERATURE REVIEW-

Pala & Chandani (2014) underwent a study of “A Critical Analysis of Selected Mutual Funds

in India”. Under this study their main objective was to know the performance of top 10 equity

mutual fund schemes in various categories, the best mutual fund house in Equity Mutual Fund

category, & finally to compare the performance of top 10 equity mutual fund schemes according

to the performance parameters.

Ashraf – In the study “Performance Evaluation of Indian Equity Mutual Funds against

Established Benchmarks Index” Ashraf studied about the return earned by the sample mutual

funds schemes and compare against the benchmark market returns and whether the degree of

correlation exist between fund and market return or not. He also studied the performance of

equity mutual fund scheme to understand the impact of benchmark index on mutual fund

performance & to find out the mutual fund schemes offering the advantages of diversification,

along with adequate systematic risk compared to market beta risk.

Panwar & Madhumathi (2006) on “CHARACTERISTICS AND PERFORMANCE

EVALUATION OF SELECTED MUTUAL FUNDS IN INDIA”, identified differences in

characteristics of public-sector sponsored & private-sector sponsored mutual funds and

compared their performance using traditional investment measures. Net Asset Value (NAV) for

the medium-term period May,2002 to May,2005 of selected mutual funds along with the index

value of the two benchmark market indices, namely S &P CNX NIFTY and CRISIL Balanced

Fund Index were taken.

Venkataraman and Venkatesan (2016) – studied about “Evaluation of Growth of Mutual

Funds and Exchange Traded Funds in India” studied the performance of different schemes of

mutual fund companies on the basis of risk and return so as to analyze the funds benchmarked to

their index and compare their performance to a common index & also to evaluate the investment

performance of the mutual funds with respect to standard deviation, Sharpe’s ratio, Treynor’s

ratio and Jenson’s alpha.

RESEARCH METHODOLOGY-

Research Objectives:

1. To compare the returns of 10 selected HDFC mutual funds scheme with that of the

NIFTY.

2. To compare the average returns of 10 selected HDFC mutual funds and find out the best

scheme from April’17 to March’18.

Research Approach:

In this particular research, quantitative approach has been used and the data is secondary which

was collected through company’s website and various other mutual funds websites. Observations

are analyzed and hence the result has been driven through applying various modes like tables,

charts etc.

Research Instrument:

Through yahoo finance I collected the data of 10 selected schemes of HDFC mutual funds for

their historical NAV. Then I collected the data from NSE of NIFTY for historical NAV. So, that

I could make a comparison of the returns of both and can compare that through which the returns

are more stable. And also to calculate that which scheme gives best return among all the 10.

The data of the following mutual fund schemes are collected:

1. HDFC Banking & PSU Direct plan- Dividend option

2. HDFC Balanced Fund Direct plan- Dividend option

3. HDFC Capital Builder Fund Direct plan- Dividend option

4. HDFC Cash mgt. Fund- Call plan Dividend option

5. HDFC Core & satellite fund direct plan- Dividend option

6. HDFC Equity Savings Fund-Direct plan Dividend Option

7. HDFC Growth fund- Dividend option

8. HDFC High interest fund short term plan direct plan-Normal dividend option

9. HDFC Income fund Regular plan-Normal Dividend option

10. HDFC Large cap. Fund- direct dividend option

DATA ANALYSIS AND INTERPRETATION-

Data is collected only through secondary mode which is collected through company’s website

and other mutual fund websites.

Analysis of data: Data that is collected has been analyzed & presented in the form of charts. I

have collected NAV of top 10 HDFC mutual funds schemes & that is compared with NAV of

NIFTY. After this I have also shown that among HDFC mutual funds schemes which one is

better.

1. This is the comparison of average returns of 10 selected HDFC mutual funds schemes

with NIFTY

Interpretation: In this we can clearly see that the average returns that all HDFC mutual funds

schemes we are getting is not much fluctuating in long term whereas the Average Returns of

NIFTY are fluctuating at a very high rate.

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

1 2 3 4 5 6 7 8 9 10 11

HDFC Banking & PSU Direct plan-Dividend option

HDFC Balanced Fund Direct plan-Dividend option

HDFC Capital Builder Fund Directplan- Dividend option

HDFC Cash mgt. Fund- Call planDividend option

HDFC Core & satellite fund directplan- Dividend option

HDFC Equity Savings Fund-Directplan Dividend Option

HDFC Growth fund- Dividendoption

HDFC High interest fund shortterm plan direct plan-Normaldividend option

HDFC Income fund Regular plan-Normal Dividend option

HDFC Large cap. Fund- directdividend option

NIFTY

2. This is the Average returns of all 10 selected HDFC mutual funds schemes to know

which one is best.

PLANS→

MONTHS

↓ HDFC

Banking

& PSU

Direct

plan-

Dividend

option

HDFC

Balanced

Fund

Direct

plan-

Dividend

option

HDFC

Capital

Builder

Fund

Direct

plan-

Dividend

option

HDFC

Cash

mgt.

Fund-

Call plan

Dividend

option

HDFC

Core &

satellite

fund

direct

plan-

Dividend

option

HDFC

Equity

Savings

Fund-

Direct

plan

Dividend

Option

HDFC

Growth

fund-

Dividend

option

HDFC

High

interest

fund short

term plan

direct

plan-

Normal

dividend

option

HDFC

Income

fund

Regular

plan-

Normal

Dividend

option

HDFC

Large

cap.

Fund-

direct

dividend

option NIFTY

APRIL -0.07 1.76 0.1 0 2.39 0.48 0.89 0.24 -0.13 1.33 -6.66

MAY 0.03 2.25 0.42 0 1.24 0.83 2.67 0.86 1.62 4.22 2.29

JUNE -0.17 -1.02 -0.36 0 -0.98 -1.47 -0.32 0.74 1.46 -2.22 6.33

JULY 0.29 3.64 4.83 0 4.45 1.88 4.38 0.93 0.98 4.65 2.88

AUGUST 0.05 -1.26 -0.97 0 -1.75 -0.31 -2.37 0.48 0.08 -2.87 4.96

SEPTEMBER -0.21 -2.96 -0.34 0 -2.47 -1.85 -1.57 0.18 -0.56 -3.22 1.52

OCTOBER -0.26 4.28 7.48 0 6.51 2.02 7.85 0.7 -0.36 7.36 -0.3

NOVEMBER -0.22 -0.09 1.22 0 3.3 0.34 -0.66 0.17 -0.47 -1.15 0.77

DECEMBER -0.3 1.87 4.72 0 5.61 -0.42 3.84 -0.11 -0.84 3.34 1.22

JANUARY 0.35 1.57 2.29 0 -1.24 1.17 3.35 0.29 -0.54 4.42 2.66

FEBRUARY -0.17 -2.68 -14 0 -1.39 -1.45 -14.17 0.24 -0.32 -6.15 -2.43

MARCH 0.65 -2.05 -3.33 0 -5.03 -0.88 -3.74 0.94 1.08 -11.38 -2.37

TOTAL 0 5.33 2.06 0 10.65 0.32 0.14 5.66 2.02 -1.68 10.87

Interpretation: So after comparison of all the 10 selected HDFC mutual funds schemes we see

the average return of HDFC Core & Satellite funds direct plan- Dividend option is best to invest

& the second best option would be HDFC high interest fund short term plan direct plan- Normal

dividend option after taking all the performance parameters into consideration.

CONCLUSION-

Based on the research of HDFC mutual funds, the following conclusion can be made-

It is found that while comparing 10 schemes of HDFC mutual funds i.e HDFC Banking & PSU

Direct plan- Dividend option, HDFC Balanced Fund Direct plan- Dividend option, HDFC

Capital Builder Fund Direct plan- Dividend option, HDFC Cash mgt. Fund- Call plan Dividend

option, HDFC Core & satellite fund direct plan- Dividend option, HDFC Equity Savings Fund-

Direct plan Dividend Option, HDFC Growth fund- Dividend option, HDFC High interest fund

short term plan direct plan-Normal dividend option, HDFC Income fund Regular plan-Normal

Dividend option, HDFC Large capital Fund-direct dividend option. The trend has been studied

from April 2017 to March 2018 & the average returns of all these schemes are compared with

the average return of NIFTY. Looking at the performance of these 10 selected HDFC mutual

funds schemes, in last one year, their performance has been barely beating the index. So, this

research proves that the schemes of HDFC mutual funds are not able to beat the benchmark of

NIFTY as they the return we are getting from NIFTY is comparatively higher than that of HDFC

mutual funds. Hence, according to my research it’s proved that in India it is a bit riskier to buy

10 selected HDFC mutual funds schemes according to what the index has been set.

The another point that this research proves is that HDFC Core & Satellite funds direct plan-

Dividend option is best to invest & the second best option for investment is HDFC high interest

fund short term plan direct plan- Normal dividend option.

HDFC Core & satellite fund direct

plan- Dividend option

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Ms. Shilpi Pal, Arti Chandani Prof. (2014) - A Critical Analysis of Selected Mutual Funds in

India. The journal of Procedia Economics & Finance, Volume 11, 481-494 DOI

https://doi.org/10.1016/S2212-5671 (14)00214-7

Syed Husain Ashraf and Dhanraj Sharma (2014)- Performance Evaluation of Indian Equity

Mutual Funds against Established Benchmarks Index. International Journal of Accounting

Research DOI: 10.4172/2472-114X.1000113

Panwar, Sharad and Madhumathi, R.(2006)- Characteristics and Performance Evaluation of

Selected Mutual Funds in India. Indian Institute of Capital Markets 9th Capital Markets

HDFC High interest fund short

term plan direct plan-Normal

dividend option

HDFC High interest fund short

term plan direct plan-Normal

dividend option

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R. Venkataraman, Thilak Venkatesan (2016)- Evaluation of Growth of Mutual Funds and

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