Summer Training Project

Presented By:

Deepak Bansal

“Comparative Study of Various Schemes of HDFC Mutual Fund through Sharpe Ratios

and Treynor Index”

Presented To:

INTRODUCTION

What is a Mutual Fund????

History of INDIAN Mutual Fund Industry

www.amfiindia.com

Phases of INDIAN MUTUAL FUND

First Phase(1964-87)

Second Phase(1987-93)

Third Phase1993-2003

Fourth Phase(Since 2003)

Categories of Mutual Fund

Categories

Based on Structure Based on Investment

Open-Ended

Close-Ended

Equity Fund

Debt Fund

Balanced (Hybrid) Fund

INVESTMENT Strategies

Systematic Investment Plan Systematic Transfer Plan Systematic Withdrawal Plan

About HDFC

HDFC was incorporated in 1977 with an objective “To promote home ownership” without any government assistance.

HDFC is currently operational in India with Five different sectors.

www.hdfc.com

HDFC and Associate Companies

HDFCMutual Fund

HDFCSTANDARD

Life Insurance

HDFCSecurities

HDFCERGO

General Insurance

HDFCBank

HDFC

About HDFC Mutual Fund

HDFC Mutual Fund is one of the largest mutual funds incorporated on December 10, 1999.

Presently, HDFC Mutual Fund is managing: 28 Open-Ended Schemes 8 Close-Ended Schemes

www.hdfcfund.com

Sponsors of HDFC Mutual Fund

Housing Development Finance Corporation Limited with 60% paid up equity capital

Standard Life Investments Limited with 40% equity paid up capital

www.hdfcfund.com

VISION Statement of HDFC Mutual Fund

“To be a dominant player in the Indian Mutual Fund space recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.”

www.hdfcfund.com

SWOT Analysis of HDFC Mutual Fund

STRENGTH

Brand Name Large Product Portfolio Good Return Generating Products More Assets

WEAKNESS

High Employee Turnover Rate

OPPORTUNITY

Awareness about Mutual Fund amongst Investor Penetration to Rural Market Huge Scope for Expansion

THREAT

More Competition

FINANCIAL ANALYSIS

Current Ratio

Mar-09 Mar-08 Mar-07 Mar-06Current Assets 7864681806 2538104991 1161991967 750492808

Current Liabilities 2722491728 3702926152 1278978456 844119206

Current Ratio 2.88878079 0.685432247 0.908531306 0.889083915

Absolute Liquid Ratio

Mar-09 Mar-08 Mar-07 Mar-06Absolute Liquid Assets 10480631 20012741 8389134 11477426

Current Liabilities 2722491728 3702926152 1278978456 844119206

Absolute Liquid Ratio 0.003849647 0.005404575 0.006559246 0.013596926

Proprietary Ratio

Mar-09 Mar-08 Mar-07 Mar-06Shareholder Funds 2846353653 1922551817 1455877094 1097042963

Total Assets 9398845381 5625477969 2734855550 1941162169

Properitory Ratio 30.2840779 34.175795 53.2341496 56.5147508

Solvency Ratio

Mar-09 Mar-08 Mar-07 Mar-06Total Debt 6552491728 3702926152 1278978456 844119206

Total Assets 9398845381 5625477969 2734855550 1941162169

Solvency Ratio 69.7159221 65.824205 46.7658504 43.4852492

Return on Shareholder Funds

Mar-09 Mar-08 Mar-07 Mar-06Net Profit after tax 1291080902 1177364978 675381581 454763990

Shareholder Funds 2846353653 1922551817 1455877094 1097042963

ROSF 45.35912 61.2397 46.39 41.45361

Trend Analysis of Management Fee

Years Management Fee Percentage 2003-2004 938533655 100 2004-2005 965056908 102.83 2005-2006 1336974621 142.45 2006-2007 1825440546 194.5 2007-2008 3061970010 326.25 2008-2009 4039846215 430.44

100.00 102.83142.45

194.50

326.25

430.44

0

50

100

150

200

250

300

350

400

450

500

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Years

Tren

d of

Man

agem

ent F

ee

Trend Analysis of Expenses

Years Expenses Percentage

2003-2004 484304790 100

2004-2005 448610547 92.63

2005-2006 595172300 122.89

2006-2007 782285609 161.53

2007-2008 1335434290 275.74

2008-2009 2050492801 423.39

100.00 92.63122.89

161.53

275.74

423.39

0

50

100

150

200

250

300

350

400

450

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Years

Tre

nd

of

Exp

ense

s

Trend Analysis of Net Profit

Years Net Profit Percentage 2003-2004 285372862 100 2004-2005 316143458 110.783 2005-2006 454763990 159.358 2006-2007 675381581 236.666 2007-2008 1177364978 412.571 2008-2009 1291080902 452.419

100.00 110.78

159.36

236.67

412.57452.42

0

50

100

150

200

250

300

350

400

450

500

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Years

Tren

d of

Net

Pro

fit

Trend Analysis of Earning Per Share

Years E.P.S Percentage 2003-2004 10.02 100 2004-2005 10.78 107.58 2005-2006 16.94 169.06 2006-2007 25.78 257.29 2007-2008 45.83 457.39 2008-2009 51.12 510.18

100.00 107.58

169.06

257.29

457.39510.18

0

100

200

300

400

500

600

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Years

Tre

nd

of

Ear

nin

g p

er S

har

e

Organization Chart

Branch and Cluster Head

Relationship Manager Client Services Head Sales Manager

Executive Client Representative 1

Client Representative 2

Area Executive 1

Area Executive 2

Title of the Project

“Comparative Study of Various schemes of HDFC Mutual Fund through Sharpe Ratios and Treynor Index”

Objectives of Research

Significance of Indices like Sharpe Ratio and Treynor Index for various type of schemes i.e. Equity, Liquid & Hybrid

Study of Effect of time on the quantitative analysis of Sharpe Ratio and Treynor Index

Research Design Descriptive Design

Data Collection Primary Data- Interview Secondary Data- Company Website

- Annual Reports

Sampling Technique Convenience

Research Methodology

Contd….

Universe– All funds of HDFC Mutual Fund

Population– All growth funds of HDFC Mutual Fund

Sample Unit– One Single growth fund of HDFC Mutual Fund

Sample Size– 13 Growth funds of HDFC Mutual Fund

Introduction to Project

Sharpe Ratios

A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance. The Sharpe ratio or Sharpe index or Sharpe measure or reward-to-variability ratio is a measure of the excess return (or Risk Premium) per unit of risk in an investment asset

Comparative Analysis through Sharpe Ratios

HDFC Top 200 Fund

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Sharp Ratios

HDFC Equity Fund

0.005.00

10.0015.0020.0025.00

30.0035.0040.00

45.0050.00

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Sharp Ratios

HDFC Capital Builder Fund

0.00

10.00

20.00

30.00

40.00

50.00

60.00

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Sharp Ratios

HDFC Core & Satelite Fund

-10

0

10

20

30

40

50

60

Time Period

Va

lue

s

Return (Annualised)-

Sharp Ratios

HDFC Premier Multi-Cap Fund

-5.000.005.00

10.0015.0020.0025.0030.0035.0040.0045.0050.00

Time Period

Valu

es

Return (Annualised)-

Sharp Ratios

HDFC Prudence Fund

05

101520253035404550

Time Period

Valu

es

Return (Annualised)-

Sharp Ratios

HDFC Tax Saver Fund

0.005.00

10.0015.0020.0025.00

30.0035.0040.00

45.0050.00

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Sharp Ratios

HDFC MIP-LTP Fund

0.00

100.00

200.00

300.00

400.00

500.00

600.00

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Sharp Ratios

HDFC MIP-STP Fund

0

100

200

300

400

500

600

700

800

7 Day

s

14 D

ays

30 D

ays

45 D

ays

60 D

ays

90 D

ays

180 D

ays

270 D

ays

I Yea

r

Time Period

Va

lue Return (Annualised)-

Sharp Ratios

HDFC High Interest Fund

-1200

-1000

-800

-600

-400

-200

0

200

400

Time Period

Valu

es

Return (Annualised)-

Sharp Ratios

HDFC High Interest-STP Fund

-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time period

Val

ues Return (Annualised)-

Sharp Ratios

HDFC Cash Management-Retail Fund

0

100

200

300

400

500

600

700

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Valu

es

Return (Annualised)-

Sharp Ratios

HDFC Cash Management-Wholesale Fund

0

100

200

300

400

500

600

700

Time Period

Valu

es

Return (Annualised)-

Sharp Ratios

Treynor Index

Treynor Index is a measure used to calculate the portfolio's excess return per unit of risk. This is a similar ratio to the Sharpe ratio, except that the portfolio's beta is considered the measure of risk as opposed to the variance of portfolio returns.

Comparative Analysis through Treynor Index

HDFC Top 200 Fund

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

7 Days

14 D

ays

30 D

ays

45 D

ays

60 D

ays

90 D

ays

180 D

ays

270 D

ays

I Yea

r

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC Equity Fund

0.00

10.00

20.00

30.00

40.00

50.00

60.00

7 Days

14 D

ays

30 D

ays

45 D

ays

60 D

ays

90 D

ays

180 D

ays

270 D

ays

I Yea

r

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC Capital Builder Fund

0.00

10.00

20.00

30.00

40.00

50.00

60.00

7 Days

14 D

ays

30 D

ays

45 D

ays

60 D

ays

90 D

ays

180 D

ays

270 D

ays

I Yea

r

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC Core & Satelite Fund

-10

0

10

20

30

40

50

60

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Valu

es

Return (Annualised)-

Treynor Index

HDFC Premier Multi-Cap Fund

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

7 Days

14 D

ays

30 D

ays

45 D

ays

60 D

ays

90 D

ays

180 D

ays

270 D

ays

I Yea

r

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC Prudence Fund

-40

-30

-20

-10

0

10

20

30

40

50

60

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC Tax Saver Fund

0.00

10.00

20.00

30.00

40.00

50.00

60.00

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC MIP-LTP Fund

-50.00

0.00

50.00

100.00

150.00

200.00

250.00

7 Days

14 D

ays

30 D

ays

45 D

ays

60 D

ays

90 D

ays

180 D

ays

270 D

ays

I Yea

r

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC MIP-STP Fund

-50

0

50

100

150

200

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC High Interest Fund

-50

0

50

100

150

200

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC High Interest-STP Fund

-20

-10

0

10

20

30

40

50

60

70

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Val

ues Return (Annualised)-

Treynor Index

HDFC Cash Management-Retail Fund

-60

-40

-20

0

20

40

60

80

100

7Days

14Days

30Days

45Days

60Days

90Days

180Days

270Days

I Year

Time Period

Valu

es

Return (Annualised)-

Treynor Index

HDFC Cash Management-Wholesale Fund

-60

-40

-20

0

20

40

60

80

100

Time Period

Valu

es

Return (Annualised)-

Treynor Index

Facts and Findings

Schemes with more volatility ratio i.e. high standard deviation are the true top performers in the market

Equity diversified funds are more volatile as compared to Debt funds and Hybrid Funds

Volatility and Returns have a direct relationship

Returns in case of equity fund is very high for long term period

Contd…

Debt funds are having no correlation with the market i.e. SENSEX

Annualized return for Balanced Fund is the highest for HDFC Prudence Fund amongst all Balanced fund of all mutual fund Companies (www.amfiindia.com)

Conclusion

Returns are only reward of risk and funds performing well in the markets are those who has more variations in their returns.

With the time period returns as well as their effect on Sharpe Ratio and Treynor Index is changing because portfolio of a scheme differs from fund to fund.