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TABLE OF CONTENTS

DECLARATION

CERTIFICATE BY GUIDE

ACKNOWLEDGEMENT

EXECUTIVE

SUMMARY

TOPICS # PG NO.

1. INTRODUCTION 10

2.

ORGANISATION OF MUTUAL FUND1

2

3. CHARACTERISTICS OF MUTUAL FUND 13

4. OBJECTIVES OF MUTUAL FUND 14

5. STRUCTURE OF MUTUAL FUND 14

6. INVESTOR PROFILE 17

7. FACTORS IMPACTING THE INDUSTRY 18

8. OPPURTUNITIES & THREATS 20

9. BENEFITS OF MUTUAL FUND 22

10. CATEGORIES OF MUTUAL FUND 26

11. THE WAY TO INVEST IN MUTUAL FUND 31

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12. LEGAL FRAMEWORK OF SEBI 32

13. REGULATORY OF MUTUAL FUND 34

14. MUTUAL FUND IN INDIA AT A GLANCE 37

15. COMPANY DETAIL 42

16. COMPETITOR ANALYSIS 57

17. COMPARATIVE ANALYSIS BETWEEN HDFC & TATA 62

18. FUTURE GROWTH DRIVERS 68

19. FINANCIAL ANALYSES 71

20. CONCLUSION 74

21. SUGGESTIONS 75

22. GLOSSARY 77

23. BIBLIOGRAPHY 78

24. QUESTIONAIRE

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PART A

INDUSTRY OVERVIEW

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INTRODUCTION

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 appreciations 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.

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A Mutual Fund is a body corporate registered with the Securities and Exchange

Board of India (SEBI) that pools up the money from individual/corporate investors

and invests the same on behalf of the investors/unit holders, in Equity shares,

Government securities, Bonds, Call Money Markets etc, and distributes the

profits. In the other words, a Mutual Fund allows investors to indirectly take a

position in a basket of assets. Mutual Fund is a mechanism for pooling the

resources by issuing units to the investors and investing funds in securities in

accordance with objectives as disclosed in offer document. Investments in

securities are spread among a wide cross-section of industries and sectors thus

the risk is reduced. Diversification reduces the risk because all stocks may not

move in the same direction in the same proportion at same time . Investors of

mutual funds are known as unit holders.

The investors in proportion to their investments share the profits or losses. The

mutual funds normally come out with a number of schemes with different

investment objectives which are launched from time to time. A Mutual Fund is

required to be registered with Securities Exchange Board of India (SEBI) which

regulates securities markets before it can collect funds from the public.

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ORGANISATION OF A MUTUAL FUND:-

There are many entities involved and the diagram below illustrates the

organizational set up of a Mutual Fund:

Mutual Funds diversify their risk by holding a portfolio of instead of only one

asset. This is because by holding all your money in just one asset, the entire

fortunes of your portfolio depend on this one asset. By creating a portfolio of a

variety of assets, this risk is substantially reduced. Mutual Fund investments are

not totally risk free. In fact, investing in Mutual Funds contains the same risk as

investing in the markets, the only difference being that due to professionalmanagement of funds the controllable risks are substantially reduced. A very

important risk involved in Mutual Fund investments is the market risk. However,

the company specific risks are largely eliminated due to professional fund

management.

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CHARACTERISTICS OF A MUTUAL FUND:-

A Mutual Fund actually belongs to the investors who have pooled their funds.

The ownership of the mutual fund is in the hands of the Investors.

A Mutual Fund is managed by investment professional and other Service

providers, who earns a fee for their services, from the funds.

The pool of Funds is invested in a portfolio of marketable investments.

The value of the portfolio is updated every day.

The investors share in the fund is denominated by units. The value of the

units changes with change in the portfolio value, every day. The value of one unit

of investment is called net asset value (NAV).

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

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OBJECTIVES OF A MUTUAL FUND:-

To Provide an opportunity for lower income groups to acquire without much

difficulty, property in the form of shares.

To Cater mainly of the need of individual investors, whose means are small?

To Manage investors portfolio that provides regular income, growth, Safety,

liquidity, tax advantage, professional management and diversification.

STRUCTURE OF A MUTUAL FUND:-

THE STRUCTURE CONSISTS OF:

HDFC MUTUAL FUND

15 | Page

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SPONSOR : Sponsor is the person who acting alone or in combination with

another body corporate establishes a mutual fund. Sponsor must contribute at

least 40% of the net worth of the Investment managed and meet the eligibility

criteria prescribed under the Securities and Exchange Board of India (Mutual

Fund) Regulations, 1996. The sponsor is not responsible or liable for any loss orshortfall resulting from the operation of the Schemes beyond the initial

contribution made by it towards setting up of the Mutual Fund.

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TRUST: The Mutual Fund is constituted as a trust in accordance with the

provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is

registered under the Indian Registration Act, 1908.

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TRUSTEE: Trustee is usually a company (corporate body) or a Board of Trustees

(body of individuals). The main responsibility of the Trustee is to safeguard the

interest of the unit holders and ensure that the AMC functions in the interest of

investors and in accordance with the Securities and Exchange Board of India

(Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the OfferDocuments of the respective Schemes. At least 2/3rd directors of the Trustee are

independent directors who are not associated with the Sponsor in any manner .

HDFC MUTUAL FUND 16 | Page

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ASSET MANAGEMENT COMPANY (AMC): The AMC is appointed by the

Trustee as the Investment Manager of the Mutual Fund. The AMC is required to

be approved by the Securities and Exchange Board of India (SEBI) to act as an

asset management company of the Mutual Fund. At least 50% of the directors of

the AMC are independent directors who are not associated with the Sponsor inany manner. The AMC must have a net worth of at least 10 cores at all times.

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REGISTRAR AND TRANSFER AGENT: The AMC if so authorized by the Trust

Deed appoints the Registrar and Transfer Agent to the Mutual Fund . The Registrar

processes the application form, redemption requests and dispatches account

statements to the unit holders. The Registrar and Transfer agent also handles

communications with investors and updates investor records.HDFC MUTUALFUND 17 | Page INVESTORS PROFILE:An investor normally prioritizes his investment needs before undertaking an

investment. So different goals will be allocated to 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.

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, 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. Moving up

the risk spectrum, there are 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 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.HDFC MUTUAL FUND 18 | Page Next comes the risk takers,

risk takers by their 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.

FACTORS IMPACTING THE INDUSTRY:PEST Analysis: Political Factors:

a) Government Regulation: SEBI regulates the industry and every decision taken

by them impact the industry very quickly.

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b) Stable constituency: The mutual fund industry can take long term decision if

the government is stable.

c) Fiscal policy: tax structure plays a very important role in the growth of the

industry .If the tax structure will be high than there will be less savings andinvestment. We have seen the interest rate reducing continuously which boost

the industry to sell products which are better than the FDs, PF, NSC and KVPs.

HDFC MUTUAL FUND 19 | Page Economic factors:

d) Market performance: The last five years witnessed a sharp rise in the markets .

The mutual fund industry basically works parallel with the markets. Suppose, if

the markets always be on downside, then the investors will not be so comfortable

to invest. This will reduce the market size drastically.

e) Global Standards: As the industry will grow better, India being a global

economy, the MF industry has to match to the global mature MF markets. They

have to give due emphasis on product innovation, cost reduction and penetration .

f) Inflation: price rise affects interest rate and reduces the chances of investment .

Social factors:

g) Consumer behaviour: this is very unpredictable and based on sentiments getschanged very frequently, which sometimes makes selling of products difficult.

h) Income: The rich people are in bigger cities, so the mutual fund industry is

much more concentrated there.

Technological factors: This is the era of information technology and due to net

banking, online transaction, online RTGS, clearing system helps the industry a lot.

HDFC MUTUAL FUND 20 | Page OPPORTUNITIES AND

THREATS:-

a) Real Estate sector boom: The Real estate has always been one of the preferred

investment avenues for the Indian investor. And what better way for the smaller

investors to participate in this boom than to have a real estate mutual fund . AMC

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has to come up with the structured products in this segment and should take

competitive advantage.

b) Penetration to Rural markets: The industry has to take themselves to the localand rural markets to increase the market size. Also, the cost of setting up business

in bigger cities is huge compare to smaller cities. This will reduce the AMC

business cost.

c) Concentration of Corporate Investors: Mutual funds have become overly

attractive to corporate investors because of higher returns than bank deposits

and ability to distribute capital gains tax. Corporate investors account for more

than 55% of the AUM (by value).It is clear that the lack of growth in funds undermanagement in India is because of the absence of long term investors.Corporate

investors take profits frequently resulting in destruction in the compound growth

in funds under management. Distributors are forced to pass on more

commissions to companies, while fund companies are compelled to offer funds

with wafer thin margins.

HDFC MUTUAL FUND 21 | Page

d) Retail investors lose out in the sense that they continue to pay higher

expenses.

e) Higher Returns of Alternative Debt Instruments: Government guaranteed

schemes provide risk free returns at competitive rates of returns. This is why

mutual funds have difficulty competing retail business.

f) Huge scope for expansion: There are only 33 AMC which is very small figure

compared to the mature markets.

g) Distribution: One of the major factors impacting the growth of mutual fund

industry is the absence of any regulation in distribution of mutualfunds.Mutual

fund investors need distributors who are able to inform them about the efficacy

of distribution product for a particular risk profile and stage in life cycle. Lack of

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distributor awareness and the absence of any disclosures from distributors make

misselling of MF products commonplace.

BENEFITS OF MUTUAL FUNDThere are numerous benefits of investing in mutual funds and one of the key

reasons for its phenomenal success in the developed markets like US and UK isthe range of benefits they offer, which are unmatched by most other investment

avenues. We have explained the key benefits in this section. The benefits have

been broadly split into universal benefits, applicable to all schemes and benefits

applicable specifically to open-ended schemes.HDFC MUTUAL FUND 23 |

Page

1. AFFORDABILITY

A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending

upon the investment objective of the scheme. An investor can buy in to aportfolio of equities, which would otherwise be extremely expensive . Each unit

holder thus gets an exposure to such portfolios with an investment as modest as

Rs.500/-. This amount today would get you less than quarter of an Infosys share!

Thus it would be affordable for an investor to build a portfolio of investments

through a mutual fund rather than investing directly in the stock market.

2. DIVERSIFICATION

The nuclear weapon in your arsenal for your fight against Risk. It simply meansthat you must spread your investment across different securities (stocks, bonds,

money market instruments, real estate, fixed deposits etc.) and different sectors

(auto, textile, information technology etc.). This kind of a diversification may add

to the stability of your returns, for example during one period of time equities

might under perform but bonds and money market instruments might do well

enough to offset the effect of a slump in the equity markets . Similarly the

information technology sector might be faring poorly but the auto and textile

sectors might do well and may protect your principal investment as well as help

you meet your return objectives.

3. VARIETY

Mutual funds offer a tremendous variety of schemes. This variety is beneficial in

two ways: first, it offers different types of schemes to HDFC MUTUAL FUND 24

| Page

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investors with different needs and risk appetites; Secondly, it offers an

opportunity to an investor to invest sums across a variety of schemes, both debt

and equity. For example, an investor can invest his money in a Growth Fund

(equity scheme) and Income Fund (debt scheme) depending on his risk appetite

and thus create a balanced portfolio easily or simply just buy a Balanced Scheme .

4. PROFESSIONAL MANAGEMENT

Qualified investment professionals who seek to maximize returns and minimize

risk monitor investor's money. When you buy in to a mutual fund, you are

handing your money to an investment professional that has experience in making

investment decisions. It is the Fund Manager's job to (a) find the best securities

for the fund, given the fund's stated investment objectives; and (b) keep track of

investments and changes in market conditions and adjust the mix of the portfolio,as and when required.

5. TAX BENEFITS

Any income distributed after March 31, 2002 will be subject to tax in the

assessment of all Unit holders. However, as a measure of concession to Unit

holders of open-ended equity-oriented funds, income distributions for the year

ending March 31, 2003, will be taxed at a confessional rate of10.5%. In case of

Individuals and Hindu Undivided Families a deduction unto Rs. 9,000 from theTotal Income will be admissible in respect of income from investments specified

in Section 80L, including HDFC MUTUAL FUND 25 | Page income from Units of

the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-

Tax.

6. REGULATIONS

Securities Exchange Board of India (SEBI), the mutual funds regulator has clearly

defined rules, which govern mutual funds. These rules relate to the formation,administration and management of mutual funds and also prescribe disclosure

and accounting requirements. Such a high level of regulation seeks to protect the

interest of investors.

7. CONVENTIONAL ADMINISTRATION

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Investing in a Mutual Fund reduces paperwork and helps you avoid many

problems such as bad deliveries, delayed payments and follow up with brokers

and companies. Mutual Funds save your time and make investing easy and

convenient. Return Potential Over a medium to long-term; Mutual Funds have the

potential to provide a higher return as they invest in a diversified basket ofselected securities.

8. LIQUIDITY

In open-ended mutual funds, you can redeem all or part of your units any time

you wish. Some schemes do have a lock-in period where an investor cannot

return the units until the completion of such a lock-in period.HDFC MUTUAL

FUND 26 | Page

9. CONVENIENCE

An investor can purchase or sell fund units directly from a fund, through a broker

or a financial planner. The investor may opt for a Systematic Investment Plan

(SIP) or a Systematic Withdrawal Advantage Plan (SWAP). In addition to this

an investor receives account statements and portfolios of the schemes.

CATEGORIES OF MUTUAL FUNDS: HDFC MUTUAL FUND 27 |Page Mutual Fund can be classified as follows:- Based on theStructure:-

1. OPEN-ENDED MUTUAL FUNDS:

The holders of the shares in the Fund can resell them to the issuing Mutual Fund

company at the time. They receive in turn the net assets value (NAV) of the shares

at the time of re-sale. Such Mutual Fund Companies place their funds in the

secondary securities market. They do not participate in new issue market as do

pension funds or life insurance companies. Thus they influence market price of

corporate securities. Open-end investment companies can sell an unlimited

number of Shares and thus keep going larger. The open-end Mutual Fund

Company Buys or sells their shares. These companies sell new shares NAV plus a

Loading or management fees and redeem shares at NAV.In other words, the

target amount and the period both are indefinite in such funds.

2.CLOSED-ENDED MUTUAL FUNDS:- A closedend Fund is open for sale to

investors for a specific period, after which further sales are closed. Any further

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transaction for buying the units or repurchasing them, Happen in the secondary

markets, where closed end Funds are listed. Therefore new investors buy from

the existing investors, and existing investors can liquidate their units by selling

them to other willing buyers. In a closed end Funds, thus the pool of funds can

technically be kept constant.HDFC MUTUAL FUND 28 | Page The assetmanagement company (AMC) however, can buy out the units from the investors,

in the secondary markets, thus reducing the amount of funds held by outside

investors. The price at which units can be sold or redeemed Depends on the

market prices, which are fundamentally linked to the NAV. Investors in closed end

Funds receive either certificates or Depository receipts, for their holdings in a

closed end mutual Fund.Based on their investment objective: 1. EQUITYFUNDS:These funds invest in equities and equity related instruments. With

fluctuating share prices, such funds show volatile performance, even losses.

However, short term fluctuations in the market, generally smoothens out in thelong term, thereby offering higher returns at relatively lower volatility. At the

same time, such funds can yield great capital appreciation as, historically, equities

have outperformed all asset classes in the long term. Hence, investment in equity

funds should be considered for a period of at least 3-5 years. It can be further

classified as: i) Index funds-In this case a key stock market index, like BSE

Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in

terms of composition and individual stock weightages.ii) Equity diversified

funds- 100% of the capital is invested in equities spreading across different

sectors and stocks.HDFC MUTUAL FUND 29 | Page

iii) Dividend Yield funds- It is similar to the equity diversified funds except that

they invest in companies offering high yield dividends.iv) Thematic funds-

Invest 100% of the assets in sectors which are related through some theme . e.g. -

An infrastructure fund invests in power, construction, cements sectors etc.v)

Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking

sector fund will invest in banking stocks.vi) ELSS-Equity Linked Saving Scheme

provides tax benefit to the investors.2. BALANCED FUNDS: Their investment

portfolio includes both debt and equity. As a result, on the risk-return ladder, they

fall between equity and debt funds. Balanced funds are the ideal mutual funds

vehicle for investors who prefer spreading their risk across various instruments.

Following are balanced funds classes: i) Debt-oriented funds -Investment

below 65% in equities.ii) Equity-oriented funds -Invest at least 65% in

equities, remaining in debt.3. DEBT FUND: They invest only in debtinstruments, and are a good option for investors averse to idea of taking risk

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associated with equities. Therefore, they invest exclusively in fixed-income

instruments like bonds, debentures, Government of India securities; and money

market instruments such as certificates of deposit (CD), commercial paper (CP)

HDFC MUTUAL FUND 30 | Page and call money. Put your money into any of

these debt funds depending on your investment horizon and needs.i) Liquidfunds- These funds invest 100% in money market instruments, a large portion

being invested in call money market.ii) Gilt funds ST- They invest 100% of their

portfolio in government securities of and T-bills.iii) Floating rate funds - Invest

in short-term debt papers. Floaters invest in debt instruments which have variable

coupon rate.iv) Arbitrage fund- They generate income through arbitrage

opportunities due to mis-pricing between cash market and derivatives market.

Funds are allocated to equities, derivatives and money markets. Higher

proportion (around 75%) is put in money markets, in the absence of arbitrage

opportunities.v) Gilt funds LT- They invest 100% of their portfolio in long-termgovernment securities.vi) Income funds LT- Typically, such funds invest a

major portion of the portfolio in long-term debt papers.vii) MIPs- Monthly

Income Plans have an exposure of70%-90% to debt and an exposure of10%-30%

to equities.viii) FMPs- fixed monthly plans invest in debt papers whose maturity

is in line with that of the fund.HDFC MUTUAL FUND 31 | Page THE WAY

TO INVEST IN MUTUAL FUND Mutual funds normally come out withan advertisement in newspapers publishing the date of launch of the new

schemes. Investors can also contact the agents and distributors of mutual funds

who are spread all over the country for necessary information and application

forms. Forms can be deposited with mutual funds through the agents and

distributors who provide such services. Now days, the post offices and banks also

distribute the units of mutual funds. However, the investors may please note that

the mutual funds schemes being marketed by banks and post offices should not

be taken as their own schemes and no assurance of returns is given by them. The

only role of banks and post offices is to help in. distribution of mutual funds

schemes to the investors. Investors should not be carried away by

commission/gifts given by agents/distributors for investing in a particular scheme.

On the other hand they must consider the track record of the mutual fund and

should take objective decision.ONE TIME INVESTMENT The amount that has to

be invested in onetime is known as Onetime Investment. The investor has to pay

the whole amount at once. The minimum amount is Rs. 5000 and maximum is as

per the investors Choice. This investment is generally preferred for the business

man who Are able to pay at one time.HDFC MUTUAL FUND 32 | Page

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SYSTEMATIC INVESTMENT PLAN (SIP) The amount that has to be invested

through same monthly installment is known as Systematic Investment Plan. The

investor has to pay the minimum amount Rs.1000 monthly for all equity and

balanced schemes like that for 6months. And Rs.500 monthly for Tax Saver

scheme like that for 12 months. The minimum amount that the investor has toinvest is Rs6000 and maximum as per their choice. This type of investment is

generally preferred for the salaried people.LEGAL FRAME WORK OF

SEBI & AMFI REGULATORY ASPECTS OF MUTUAL FUNDS: In the year1992, Securities and exchange Board of India (SEBI) Act was passed. The

objectives of SEBI are to protect the interest of investors in securities and to

promote the development of and to regulate the securities market. SEBI

formulates policies and regulates the mutual funds to protect the interest of the

investors.HDFC MUTUAL FUND 33 | Page GUIDELINES OF SEBI & AMFI

Mutual funds are regulated by the SEBI (mutual Fund) Regulations, 1996.

SEBI is the regulator of all funds, except offshore funds.

Bank-sponsored mutual funds are jointly regulated by SEBI and RBI .

The bank-sponsored fund cannot provide a guarantee without RBI

Permission.

RBI regulates money and government securities markets, in which mutual

Funds are invested.

Listed mutual funds are subject to the listing regulations of stock exchange .

Since the AMC and Trustee Company are companies, the Department of

Company affairs regulate them. They have to send periodic reports to the ROC

(Register of Companies) and the CLB (Company Law Board) is the appellate

authority.

Investors cannot sue the trust, as they are the same as the trust and cant sue

themselves.

UTI does not have a separate sponsor and AMC.

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UTI is governed by the UTI Act, 1963 and is voluntarily under SEBI

Regulations.

UTI can borrow as well as lend also engage in other financial servicesactivities.

Only AMFI certified agents can sell Mutual Fund units.

Mutual Funds Company is required to update the NAV of the scheme on the

AMFI website on a daily basis in case of open-ended scheme.

HDFC MUTUAL FUND 34 | Page REGULATORY OF MUTUAL

FUND IN INDIA SEBI The capital market regulates the mutual funds inIndia. SEBI requires all mutual funds to be registered with them. SEBI issues

guidelines for all mutual funds operations-investment, accounts, expenses etc.

Recently, it has been decided that Money Market Mutual Funds of registered

mutual funds will be regulated by SEBI through (Mutual Fund) Regulations 1996.

RBI RBI, a supervisor of the Banks owned Mutual Funds-As banks in India come

under the regulatory Jurisdiction of RBI, banks owned funds to be under

supervision of RBI and SEBI. RBI has supervisory responsibility over all entities that

operate in the money markets.MINISTRY OF FINANCE (MOF) Ministry of

Finance ultimately supervises both the RBI and the SEBI and plays the role of apex

authority for any major disputes over SEBI guidelines.HDFC MUTUAL FUND 35

| Page COMPANY LOW BOARD Registrar of companies is called Company Low

Board. AMCs of Mutual Funds are companies registered under the companies Act

1956 and therefore answerable to regulatory authorities empowered by the

Companies Act.STOCK EXCHANGE Stock Exchanges are Self-regulatory

organizations supervised by SEBI. Many closed ended funds of AMCs are listed as

stock exchanges and are traded like shares.OFFICE OF THE PUBLIC TRUSTEE

Mutual Fund being public trust is governed by the Indian Trust Act 1882. The

Board of trustee or the Trustees Company is accountable to the office of public

trustee, which in turn reports to the Charity commissioner.HDFC MUTUAL

FUND 36 | Page RISK V/S. RETURN: HDFC MUTUAL FUND 37 | Page

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MUTUAL FUNDS IN INDIA AT A GLANCE The mutual fundindustry in India started in 1963 with the formation of Unit Trust of India, at the

initiative of the Government of India and Reserve Bank the. The history of mutual

funds in India can be broadly divided into four distinct phases :-

Phase-IIPhase-IPhase-IV

Phase-IIIPhases of Mutual Fund Industry in India HDFC MUTUAL FUND 38 | Page

First Phase 1964-87Unit Trust of India (UTI) was established on 1963 by an

Act of Parliament. It was set up by the Reserve Bank of India and functioned

under the Regulatory and administrative control of the Reserve Bank of India. In

1978 UTI was de-linked from the RBI and the Industrial Development Bank of

India (IDBI) took over the regulatory and administrative control in place of RBI.

The first scheme launched by UTI was Unit Scheme 1964. At the end of1988 UTI

had Rs.6,700 crores of assets under management.Second Phase 1987-1993

(Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public

sector mutual funds set up by public sector banks and Life Insurance Corporation

of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund

was the first non- UTI Mutual Fund established in June 1987 followed by Canbank

Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank

Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct

92). LIC established its mutual fund in June 1989 while GIC had set up its mutual

fund in December 1990. At the end of1993, the mutual fund industry had assets

under management of Rs.47,004 crores.HDFC MUTUAL FUND 39 | Page

Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of

private sector funds in 1993, a new era started in the Indian mutual fund industry,

giving the Indian investors a wider choice of fund families. Also, 1993 was the year

in which the first Mutual Fund Regulations came into being, under which all

mutual funds, except UTI were to be registered and governed. The erstwhile

Kothari Pioneer (now merged with Franklin Templeton) was the first privatesector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund)

Regulations were substituted by a more comprehensive and revised Mutual Fund

Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)

Regulations 1996. The number of mutual fund houses went on increasing, with

many foreign mutual funds setting up funds in India and also the industry has

witnessed several mergers and acquisitions. As at the end of January 2003, there

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were 33 mutual funds with total assets of Rs.1,21,805 crores. The Unit Trust of

India with Rs.44,541 crores of assets under management was way ahead of other

mutual funds.HDFC MUTUAL FUND 40 | Page Fourth Phase since

February 2003In February 2003, following the repeal of the Unit Trust of India

Act 1963 UTI was bifurcated into two separate entities. One is the SpecifiedUndertaking of the Unit Trust of India with assets under management of

Rs.29,835 crores as at the end of January 2003, representing broadly, the assets

of US 64 scheme, assured return and certain other schemes. The Specified

Undertaking of Unit Trust of India, functioning under an administrator and under

the rules framed by Government of India and does not come under the purview

of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd,

sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under

the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had

in March 2000 more than Rs.76,000 crores of assets under management and withthe setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund

Regulations, and with recent mergers taking place among different private sector

funds, the mutual fund industry has entered its current phase of consolidation

and growth. As at the end of September, 2004, there were 29 funds, which

manage assets of Rs.153108 crores under 421 schemes.HDFC MUTUAL FUND

41 | Page The graph indicates the growth of assets over the years .

Note Erstwhile UTI was bifurcated into UTI Mutual fund and the Specified

Undertaking of the Unit Trust of India effective from February 2003. The Assets

under management of the Specified Undertaking of the Unit Trust of India hasthereof been executed from the total assets of the industry as a whole from

February 2003 onwards.HDFC MUTUAL FUND 42 | Page

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PART B COMPANY DETAILHDFC MUTUAL FUND 43 | Page

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MAN WITH A MISSIONIf ever there was a man with a mission it was Hasmukhbhai Parekh, Founder and

Chairman-Emeritus, of HDFC Group who left this earthly abode on November 18,

1994. Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his

financial career at Harkisandass Lukhmidass a leading stock broking firm. Thefirm closed down in the late seventies, but, long before that, he went on to

become a towering figure on the Indian financial scene. In 1956 he began his

lifelong financial affair with the economic world, as General . Manager of the

newly-formed Industrial Credit and Investment Corporation of India (ICICI). He

rose to become Chairman and continued so till his retirement in 1972. At the ripe

age of 60, Hasmukhbhai started his second dynamic life, even more illustrious

than his first. His vision for mortgage finance for housing gave birth to the

Housing Development Finance Corporation it was a trend-setter for housing

finance in the whole Asian continent. He was also a writer in his own right. Thereare over 200 published articles by him...HDFC MUTUAL FUND 44 | Page

In 1992, the Government of India honoured him with the Padma Bhushan Award.

The London School of Economics & Political Science conferred on him an

Honorary Fellowship.

He was one of the Founder Members of the Centre for Advancement of

Philanthropy, and its Chairman till 1993.Mr. H.T. PAREKH is conferred the

PadmaBhushan by the

Government of India in the year1992.