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SUMMER INTERNSHIP PROGRAM

2009

INDUSTRY: FINANCE

ORGANISATION: HDFC MUTUAL FUND

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A REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE


REQUIREMENT OF PGDM PROGRAM OF

KOUSTUV BUSINESS SCHOOL

SUBMITTED TO:

FACULTY GUIDE PROJECT GUIDE


PROF. GOPAL PRUSETH SHAILESH KUMAR BANSAL

KOUSTUV BUSINESS SCHOOL HDFC MUTUAL FUND


BHUBANESWAR JAMSHEDPUR

SUBMITTED BY :

GOPAL KUMAR AGARWAL


ND 21 | Page
BENEFITS OF MUTUAL FUND

There 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 is the 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.

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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 a portfolio 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
means that 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

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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
of 10.5%. In case of Individuals and Hindu Undivided Families a
deduction unto Rs. 9,000 from the Total Income will be admissible in
respect of income from investments specified in Section 80L, including

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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
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 of selected 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.

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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:

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Mutual Fund can be classified as follows:-
Based on the Structure:-

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 closed–end Fund is open for sale to investors for a specific period,
after which further sales are closed. Any further 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.

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The asset management 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. EQUITY FUNDS: 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 the long 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.

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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 debt instruments, and are a good
option for investors averse to idea of taking risk 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)

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and call money. Put your money into any of these debt funds depending
on your investment horizon and needs.
i) Liquid funds- 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-term
government 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 of 70%-90% to debt
and an exposure of 10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt papers whose maturity is
in line with that of the fund.

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THE WAY TO INVEST IN MUTUAL FUND

Mutual funds normally come out with an 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 investor’s
Choice. This investment is generally preferred for the business man who
Are able to pay at one time.

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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 to invest 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 year 1992, 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.

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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
can’t sue themselves.
 UTI does not have a separate sponsor and AMC.
 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 services
activities.
 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.

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REGULATORY OF MUTUAL FUND IN INDIA

SEBI
The capital market regulates the mutual funds in India. 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.

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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.

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RISK V/S. RETURN:

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MUTUAL FUNDS IN INDIA AT A GLANCE

The mutual fund industry 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-I Phase-II

Phases of Mutual
Fund Industry in India

Phase-IV Phase-III

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First Phase – 1964-87

Unit 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 of 1988 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
of 1993, the mutual fund industry had assets under management of
Rs.47,004 crores.

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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 private sector 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 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.

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Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified
Undertaking 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 with the 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.

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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 has thereof been executed from the total assets of the industry
as a whole from February 2003 onwards.

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PART B
COMPANY DETAIL

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MAN WITH A MISSION

If 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. The firm 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. There are over 200 published
articles by him...

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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 it’s Chairman till
1993.
He took active interest in the Bombay
Community Public Trust, designed
specifically to serve the needs of the
Mr. H.T. PAREKH is conferred the
city’s underprivileged citizens.
PadmaBhushan by the Government
When Mr. Deepak Parekh took over as
of India in the year 1992.
Chairman from Hasmukhbhai, he said:
“Taking over from H.T. Parekh is a formidable task; his vision… brought
about not only an institution, but an entire concept which has proved
itself to be of lasting importance.”
Today we are the largest residential mortgage finance institution in
India, with a net worth of Rs. 2,703 crores as of March 31, 2006 and an
asset base of over Rs. 22,000 crores. We also aim to increase the flow of
resources to the housing sector by integrating the housing finance sector
with the overall domestic financial markets.
Over a span of 25 years, HDFC has become the pioneer in housing
finance in India and made it possible for over two million Families to
own their homes, through housing loans worth over Rs. 42,000 crores.

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ABOUT COMPANY HDFC :-

VISION STATEMENT :-

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ORGANISATION STRUCTURE:-

The HDFC AMC has the below given organisational structure and the
different functional department are headed by different people.

Managing Director
Mr. Milind Barve

CIO-ED CFO
Mr. Prashant Jain Mr. Rahul Bhandari

Head Operations Head Client Servicing


Mr. Suresh Babu Mr. John Mathews

Head Compliance Head Sales


Mr. Yezdi Khariwala Mr. Kiran Kaushik

Head PMS Head HR


Mr. Pankaj Chopra Mr. Alok Sheopurkar

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LINE OF BUSINESS :

PMS

HDFC AMC
Mutual
Fund

Retail Corporate
Business

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HDFC ASSET MANAGEMENT COMPANY LIMITED (AMC)

Internal Structure & processes:

Management Team:
HDFC Trustee company Limited: a company incorporated under the
Companies Act, 1956 is the Trustee to the Mutual Fund vide the Trust
deed dated June 8, 2000, as amended from time to time. HDFC Trustee
Company Limited is a wholly owned subsidiary of HDFC Limited.

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. The registered office of the AMC is
situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay
Reclamation, Churchgate, Mumbai-400020. In terms of the Investment
Management Agreement, the Trustee has appointed the HDFC Asset
Management Company Limited to manage the Mutual Fund. The paid
up capital of the AMC is Rs. 45.161crore.

The present equity shareholding pattern of the AMC is as follows :

Particulars % of the paid up equity


capital

HDFC Limited 60
Standard Life Investments 40
Limited

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HDFC
Asset
Management
HDFC Ltd. Company Ltd. Standard Life
60.0% Investments
40.0%

HDFC Mutual Fund

HDFC Asset Management Company (AMC) is the first


AMC in India to have been assigned the ‘CRISIL Fund House Level – 1’
rating. This is its highest Fund Governance and Process Quality Rating
which reflects the highest governance levels and fund management
practices at HDFC AMC It is the only fund house to have been assigned
this rating for two years in succession. Over the past, we have won a
number of awards and accolades for our Performance.
HDFC Mutual Fund is one of the largest
mutual funds and well-established fund house in the country with
consistent and above average fund performance across categories since
its incorporation on December 10, 1999.

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While our past experience does make us a veteran, but when it comes to
investments, we have never believed that the experience is enough. The
single most important factor that drives HDFC Mutual Fund is its belief
to give the investor the chance to profitably invest in the financial
market, without constantly worrying about the market swings. To realize
this belief, HDFC Mutual Fund has set up the infrastructure required to
conduct all the fundamental research and back it up with effective
analysis. Our strong emphasis on managing and controlling portfolio risk
avoids chasing the latest “fads” and trends.

INTERNAL ANALYSIS OF HDFC AMC


HDFC has grown in leaps and bounds after taking Zurich in 2003 , now it
is the third largest private company in Asset management company. In
Jamshedpur, HDFC has nearly 20% of the total AUM and according to the
CAMS report, in AUM under CAMS we have 35% market share and we
do gross sales of 70% every month.

Growth
AUM Rate
March.
2003 6482 -------
March.
2004 14985 131.18
March.
2005 15010 0.17
March.
2006 21550 43.57
March.
2007 28358 31.59
March.
2008 46291 63.24
March.
2009 57956 25.19

The below given graph depicts the same.

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DFC AMC has 4% market of the total asset management business.
The pie-chart shows the market share of the other AMCs and of HDFC.

28%

50%

5%

4%

5%

8%

OTHERS (29)
UTI
HDFC Mutual Fund
Prudential ICICI Mutual Fund
Reliance Mutual Fund
Grand Total

HDFC MUTUAL FUND 51


| Page
STRENGTHS AND WEAKNESSES :

STRENGTHS:

a) Wide range of products: The AMC has got good number of


differentiated products in the entire asset class.
b) Consistent performance: The funds have given consistent
performance over 10 years.
c) Experienced team: HDFC has fund managers with rich
experience whose consistent performance has made this
AMC CRISIL level one fund house.
d) Strong Compliance: The AMC has very strong compliance of
industry set rules to protect the interest of the investors.
e) Risk management team: AMC has a separate risk
management team which constantly monitor the risk
exposure related to different fund management.

WEAKNESSES:

a) Restrictive reach: HDFC business is more concentrated on


urban areas. HDFC has very limited offices.
b) Less Aggressive in Marketing and execution: HDFC does
match the aggressiveness required in the industry and are
slow in execution.

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HDFC MUTUAL FUND AT A GLANCE

Name of Unit : HDFC MUTUAL FUND

Address : Gayatri Enclave,


2nd Floor, "K" Road,
Bistupur,
Jamshedpur - 831001.

Form of Organization : Private Sector

Contact Number : Tel. : 18002336767 (Toll-free)


Telefax : 0657 – 2249730/ 2249691

Establishment year : 2007


Sponsors : Housing Development Finance
Corporation Limited (HDFC),
Standard Life Investments Limited.

Management :Trustee.
HDFC Asset Management Company Limited
(AMC).

Working Hours : 9.30 am to 5.30 p.m


Web site : www.hdfcfund.com

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ACHIEVEMENT AND AWARDS

 “HDFC Prudence fund” has been ranked ICRA-MFR 1, and Has Been
awarded the Gold Award for ‘Best Performance’ in the category of
“Open Ended Balanced Scheme” for one year Period Ending Dec 31,
2005.

 “HDFC Tax saver fund” has been ranked ICRA-MFR 1, and Has Been
Silver award for “Second Best Performance” in the category of “Open
Ended Equity Linked Saving Scheme(ELSS)” for Three year Period
Ending Dec 31, 2005.

 “HDFC MIP~LTP” has been ranked ICRA-MFR 1, and Has been


awarded the Gold Award For “Best Performance” in the category of
“Open Ended Marginal Equity Scheme” for one year Period Ending
Dec 31, 2005.

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HDFC PROVIDES:-

Personalized Service
We believe in providing a personalized service enabling individual
attention to achieve your investment goal.

Professional Advice
We provide professional advice on equity and debt portfolio with an
objective to provide consistent long-term return while taking calculated
market risk. Our approach helps you to build a proper mix of portfolio,
not just to promote one individual product. Hence your long term
objectives are best served.

Long-term Relationship
We believe steady wealth creation requires long-term vision, it can’t be
achieved in a short span of time. To achieve this one needs to take
advantage of short-term market opportunity while not loosing sight of
long term objective. Hence we partner all our clients in their objective of
achieving their long-term Vision.

Access to Research Reports


Through us, you will have access to certain research work of CRISIL, so
that you will benefit from the expert knowledge of economists and
analysts of one of the leading financial research and rating company of
India. This third party research gives you a comfort of getting unbiased
advice to make a proper decision for your investment.

HDFC MUTUAL FUND 55 | Page


Transparency & Confidentiality
Through email you will get a regular portfolio statement from us. You
will also be given a web access to view at your convenience the details of
your investments and its performance. Access to your portfolio is
restricted to you and our monitoring system enables us to detect any
unauthorized access to your investments.

Flexibility
To facilitate smooth dealing and consistent attention, all our clients will
be serviced by their respective relationship executive. This allows us to
provide tailor made advice to achieve your investment objective.

Hassle Free Investment


Our relationship person will provide you with a customized service at
your convenience. We take care of all the administrative aspects of your
investments including submission of application forms to fund houses
along with monthly reporting on overall state of your investments and
performance of your portfolio.

Mutual funds are all the rage today simply because people have
realized the symbiotic relationship that an investor shares with the asset
management companies as compared to the ever volatile and ruthless
world of SENSEX.

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COMPETITOR ANALYSIS:-

Tata Mutual Fund :-


Tata Asset Management Private Limited is very old house
and is well placed in the market.
Tata Mutual Fund has AUM of Rs.21304 Crores.

Size and Growth:


Tata MF opened its office in Jamshedpur four years ago. Since than it has
done good business. Tata have brand advantage in Jamshedpur, as
investors trust TATA group. Jamshedpur which is a market of Rs 1300cr,
Tata MF has nearly 10-12% of the market share of Jamshedpur. In
Jharkhand they have four offices.

Internal Structure & processes:


Tata Mutual Fund has been constituted as a trust on 9th May 1995 in
accordance with the provisions of the Indian Trusts Act, 1882 with Tata
Sons Limited (TSL) and Tata Investment Corporation Limited (TICL) as the
sponsers and the settlers. The Mutual Fund was registered with SEBI on 30th
Tata Mutual Fund (TMF) has been constituted as a Trust in accordance with
the provisions of the Indians Trusts Act, 1882 and is registered as a Trust
under The Indian Registration Act, 1908. TMF was registered with Securities
& Exchange Board of India (SEBI) and commenced operation by launching

HDFC MUTUAL FUND 57 | Page


its first scheme on 30th August 1995. Tata Sons Limited(TSL) and Tata
Investment Corporation Ltd (TICL) are the Sponsers and the Settlors.

Share Holding Pattern Of Tata Asset Management Ltd (TAML)

Tata
Asset
Management
Tata sons Ltd. Tata
Ltd. Investment
67.91% Corporation
Ltd
32.09%

Tata Mutual Fund

Board Of Directors:-

Board Of Tata Trustee Company Private Limited


 Mr. S.M. Datta (Chairman)
 Mr. I. Hussain (Director)
 Mr. J.N. Godrej (Director)
 Mr. Nowroze J.N. Vazifdar (Director)

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Board Of Directors Of Tata Asset Managment Limited:-
 Mr. F.K. Kavarana (Chairman)
 Mr. Ved Prakash Chaturvedi (Managing Director)
 Mr. A.R. Gandhi (Director)
 Mr. M.L. Apte (Director)
 Mr. A. Hasib (Director)

Line of Business:

Tata Mutual Fund

Mutual fund Portfolio


business management

Strengths & Weaknesses:-

Strengths:
a) Trusted Parent company: Tata Asset Management Ltd is a part of
the Tata group, one of India's largest and most respected
industrial groups. Jamshedpur is the home ground for Tata MF
and they enjoy great support and trust.

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b) High payout structure: They pay more incentive and brokerage to
there distributors in comparison of other AMCs, which gives them
some edge to attract the distributors to sell the product.
Weaknesses:
a) Focussed on one product: At Jamshedpur, Tata MF is focussed on
only one product that is Tata Infrastructure Fund which some how
narrows their product diversification.
b) Lack of Aggression: The team in Jamshedpur lack aggression and
activeness, they do not push there products too much in the
markets. Products get sold of there brand presence.
c) Services: The AMC is not giving good service and the response
time is slow.

Projected Future Strategy:


To meet the competition, Tata mutual fund will have to expand there
business and penetration by increasing the number of branches and
manpower.

Distributor/Business model:
The distributor model is divided into two parts that is IFAs and Banks and
national distributors. Then the IFAs are categorised in two categories i.e.
preferred and basic. Preferred gets 2.25% brokerage and basic gets
2.10%. For making preferred partner there is no such set of rule. Also,
Tata has scheme specific brokerage structure like in Tata infrastructure
they pay 3.00%,in some schemes 2.25% and in some 1.75%.

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Products (NFOs/schemes):

Tata has not got so good wide range of products in all categories and
maximum AUM of there is concentrated in debt the maximum part is in
debt.

No. of schemes 98
No. of schemes including 375
options
Equity Schemes 37

Debt Schemes 291

Short term debt Schemes 14

Equity & Debt 7

Money Market 0

Gilt Fund 26

From the there pattern they are more cashing business on the
infrastructure theme. Till now they have two infrastructure based funds
and one NFO is running which is also Infrastructure based fund.
Recently, they had also filed offer document with SEBI for there Tata
small and Mid cap Infrastructure fund.

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Comparative Analysis of HDFC AMC with TATA:-

i) Infrastructure :-

SCHEME HDFC TATA


INFRASTRUCTURE INFRASTRUCTURE
FUND CLASS Equity diversified Equity diversified

Average mkt. cap. 75406.10 21304.00


(in Crores)
Inception date MAY. 2009 MAY. 2009

From the following data we can analyise that HDFC MUTUAL FUND has
fared better than TATA MUTUAL FUND ..

ii) SWOT analysis of HDFC AMC with Tata AMC.

HDFC MUTUAL FUND 62 | Page


SWOT Analysis of HDFC Asset Management Company Ltd.

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HDFC MUTUAL FUND 63 | Page


SWOT Analysis of Tata Asset Management Ltd

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document without a watermark .
Visit www.smartdraw.com or call 1-800-768-3729.

HDFC MUTUAL FUND 64 | Page


iii) Additional Services Offered By HDFC Mutual Funds:-

 HDFCMFOnline, which enables you to transact online on


https://investor.hdfcfund.com/mfonline/ 24 hours a day, 7
days a week, 365 days a year. On HDFCMFOnline, you can
 Purchase.
 Redeem.
 Switch.
 View Account Details.
 View Port Folio Valuation.
 Download Account Statements........Online !!

The Services offered in HDFCMF Online:-


 eDocs : HDFC Mutual Fund Offers you the
convenience of recieving documents by email at no
additional cost to you.
 ePayouts: Save your time and experience the
convenience of receiving your dividend and
redemption payout(s), if any, directly into your
bank account. This facility can be opted by selecting
RBI's National Electronic Fund Transfer (NEFT) or
Electronic Clearing Service (ECS*). NEFT and ECS
facilitates faster, reliable and trouble free credit of
redemption/dividend into your bank account. It is
also one of the safest mode of payment as it
eliminates possibilities of fraudulent encashment of
redemption / dividend instruments or any possible
loss while in postal transit to you.

 HDFCMF Mobile, Now transacting with mobile can also be


done. HDFC offer the facility transacting using the mobile
phone anywhere and anytime. On HDFCMF Mobile, you can
 Purchase.
 Redeem.
 Switch.

HDFC MUTUAL FUND 65 | Page


 View Account Details.
 View Port Folio Valuation.
 Request for Account Statements.
 Check NAV.

 NEFT Facility (National Electronic Fund Transfer) : This is a


facility introduced by the Reserve Bank of India (RBI). NEFT is
a nation wide electronic funds transfer system to move funds
from any bank branch in any part of country to any other bank
branch in another part of the country.

Who will benefit from this service?

This payout channel will be particularly beneficial to all such


investors whose mandated bank account is not in the list of
banks with whom we presently have a direct credit
arrangement for crediting their dividend / redemption
proceeds. This service will also benefit all such investors at
locations where a HDFC Mutual Fund Investor Service Centre
(ISC) / a HDFC Bank branch, is not present and such locations
are covered by the RBI for payments through the NEFT mode.

What are the advantages of NEFT over the current payout


mode?
Investors whose current payments are settled through a
demand draft (DD) / Pay Order (PO) for their dividend /
redemption payouts are the prime beneficiaries. Such DD’s /
PO’s are then dispatched to the investor, which would take a
couple of days to reach. In comparison, through NEFT the
beneficiary gets the credit usually on the same day or the next
day depending on the time of settlement. This makes
payment settlement faster, safer and risk free.

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iv) NAV Performance:

NAV OF HDFC GROWTH FUND is Rs. NAV 58.91 ,


Date is 2nd July, 2009.
NAV OF TATA GROWTH FUND is Rs. 31.4833,
Date is 2nd July, 2009.
&
NAV OF HDFC EQUITY FUND is Rs. NAV 177.86 ,
Date is 2nd July, 2009.
NAV OF TATA PURE GROWTH FUND is Rs. 72.34
Date is 2nd July, 2009.

v) Dividend History:

HDFC GROWTH FUND current dividend is 25.02


TATA GROWTH FUND current dividend is 14.04
&
HDFC EQUITY FUND current dividend is 35.702
TATA EQUITY FUND current dividend is 28.6397

So by above data we can analyise that HDFC GROWTH


FUND is better for investor who look for high dividends.

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THE FUTURE GROWTH DRIVERS:-

 Higher GDP Growth.

 India's huge financial spread Investment System.

 Systematic investment planning ratio which is projected to double


by 2009– 2010.

 Fast paced urbanization rise from 28 to 40% by 2020.

 Growing working class population and Middle class expanding by


30 – 40 million every year.

 Upward migration of household income levels.

 Fast economic Development.

 Increasing disposable Income with the service sector.

 Cheaper (declining interest rates) & easier finance Schemes.

 Increasing dispensable income of rural agriculture sector.

 Govt. policy promotes tax investment & planning Sec 80 C.

 Increasing level of FDI in country.

 Emergence of India as BPO and IT hub.

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Equity markets have been buoyant over the past few months
primarily on the back of expected good corporate performance, strong
global liquidity and strong flows to emerging markets. The rush of
players into the mutual fund industry during the last decade could be
attributed to low entry barriers, both regulatory and competitive, and
the desire of the existing financial players to broad-base their activities
in the financial sector. The last few years also highlights the emergence
of the mutual fund industry as a major force in Indian financial markets.
With the total Assets Under Management (AUM) increasing from
Rs.1,13,005 cr in March 2000 to Rs. 565469 Cr in Feb. 2008, the
industry's growth has been nothing but exceptional. And if size is the
measure of dominance, the Indian mutual fund industry can now boast
of that.
So lets now take a look at the overall growth of the mutual fund
industry in the last decade.

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To sum it up, we can enumerate that the host of
things which suggest that the mutual fund industry is all set to enter a
period of high growth are:

 A robust economy,
 fledgling stock market,
 increasing awareness and acceptance of mutual funds among
investors,
 strong domestic currency,
 and healthy corporate performances.

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FINANCIAL ANALYSIS

Objective of the study-


The primary objective of this study is to analyze the financial
performance of the two leading Sectorial Mutual Fund schemes of HDFC
and TATA on the basis of various financial parameters, which will be
discussed later in the following sections of the report. This will help in
the following ways:
 A complete and comprehensive financial analysis can be made
before making a decision to invest in a particular Mutual Fund
scheme.
 An in-depth and complete approach towards managing a portfolio
of investments can be made by analyzing the funds on the basis of
these financial parameters.
 This study will also give us a brief overview of the quality and
consistency of the fund management in keeping up with the
various expectations and hopes that the mutual fund investors
have in the Asset Management Company (AMC).
 It also helps us to compare the individual fund performance with
the performance of the overall market, including the Bombay
Stock Exchange (BSE), and National Stock Exchange (NSE).
 It also helps us to study the risk-return trade-off i.e. whether the
hand-in-hand relationship between Risk and Return holds true in
case of Mutual funds or not.

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Rationale of choosing these funds-
The above chosen funds have had a market presence of at least three
years. Also the government of India has a large interest in Indian growth
story which is in complete without have a much impetus in
infrastructure sector. Hence, with this fact we can have a fair idea of
their acceptability in the market. The basic rationale of choosing these
funds is to have and present a brief idea of the current mutual funds
market and to understand the latest trends in the market.

Data Collection -
All the data used for the study was secondary data. This data was
collected from the following sources:

 Funds Fact Sheets


 Magazines
 Journal
 Internet
 Key information memorandum of various schemes

Methodology

The project report is made precisely keeping in mind the Asset


management business in Jamshedpur. Therefore, I had done primary
as well as secondary data collection to facilitate my findings. In
primary data collection, I have made a questionnaire relating to sales,
services and distribution services of the Asset management company.
The sample size is 40 persons which include individual ARNs,

HDFC MUTUAL FUND 72 | Page


Distribution house RMs, Banking staffs and some customers. The data
was collected and the collated to give a brief idea about which AMC is
good in products, sales and services. The questionnaire also shows
some traits like dependability, trust and suitability of the AMCs in
context to the various requirements of the distributors. The
secondary data was collected from the abyss of different websites
and online articles of experts. The raw data was then compiled and
analysed using different tools.

Primary Data collection:

The primary data is basically consisting of Products (offerings,


innovation and fund performance), Services (response time,
reliability, premium services) and Distribution (brokerages and
incentives).

Secondary data collection:


It is collected from different websites; this project is made of more of
secondary data collection.

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CONCLUSION:-

HDFC Equity Fund has a ability to spot the sector trends & it has
delivered handsomely. In Current status it emerged as the third best-
performing diversified equity fund.

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SUGGESTIONS TO HDFC MUTUAL FUND:

1. An aggressive advertising campaigning should be there to


encourage more people to invest.
2. As some of the people think that mutual fund is risky so the
company should show people the advantages of the mutual fund
and how it is better than the other investment avenues.
3. There is a great potential for the mutual fund because the people
are ready to invest in the mutual fund as there is a positive
responses.
4. Now a days people are investing in more of an equity fund because
it gives high return as compare to other mutual fund schemes.
5. People are preferred to invest in the long term savings when only
they have enough of surplus. They are least concerned about the
other’s advice.
6. The people of Rajkot have enough purchasing power supported by
N.R.I. Mutual Fund Companies should take this fact positively at the
time of designing promotional scheme.
7. HDFC MF is doing comparatively very less marketing in MF industry
in compare to other players. Due to this other player are getting the
advantage. Thus it should try to increase the marketing
and advertising related activities time to time or at least at the time
of new NFO’s, at the time when they are declaring dividends or at
the peak time (i.e. January - March) last quarter of financial year
when people are searching for investing instruments.

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8. A very small part market has been cover by HDFC MF. It can
increase the circle of its business in small and rural areas of every
state and cities of India where they an find a huge business.

9. To uproot the investment level the company should give training


programme to financial agents who approach the investor for the
investments. And they should be aware of all the benefits of the
mutual Funds.
10. Company should undertake the Campaign, Road shows,
Advertisement and other type of Publicity for the effective
awareness of different schemes that are available in the market.
11. The company should arrange seminars and presentations, giving
detail idea about securities and benefits of investment in mutual
fund.

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GLOSSARY
SHORT FORMS
AMC – Asset Management Company.
AMFI – Association of Mutual Fund of India.
AUM – Asset under Management.
BSE – Bombay Stock Exchange.
FII – Foreign Institute of Investor. FII can invest in Mutual
Funds.They invest through the Non-resident rupeeaccount.
GILT – Government of India Linked Treasury. These Funds are
those that invest only in government securities.
IPO – Initial Public Offer.
IRP – Investor Risk Profile.
MIP – Monthly Investment Plan.
MTM – Market to Market.
NAR – Net Amount at Risk.
NAV – Net Asset Value.
NSE – National Stock Exchange.
OD – Offer Document is the most important source of information
for the investors. Abridged version of the OD is called as
Key Information Memorandum (KIM).
PAR VALUE –It is said as face value.
SAR – Sum at Risk
SIP – Systematic Investment Plan
SWP – Systematic Withdrawal Plan
WDM – Wholesale Debt Market

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BIBLIOGRAPHY

1. www.investsmartindia.com

2. www.amfiindia.com

3. www.mutualfundsindia.com

4. www.valueresearchonline.com

5. www.investopedia.com

6. www.bcg.com

7. www.tatamutual.com

8. www.google.com

9. www.hdfcfund.com

10.www.wikepedia.org

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QUESTIONAIRE

Q 1) : Among the following which mutual fund house is the better fund house in the
terms of products?

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

Q 2) : Out of the following which fund house gives you and your customer better
satisfaction in the terms of sales support?

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

Q 3): Among the following which mutual fund house gives you premium services and
after sales services ?

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

Q 4): Which mutual fund is having more effective strategy regarding the
distribution
services in terms of brokerage and incentives?

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

Q 5): Which mutual fund is more aggressive & innovative in terms of marketing and
sales i.e. coming with the NFO and new products ?

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

Q 6) Which fund house is better in the terms of fund performance in long and short
run?

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

Q 7) Which fund house’s employee you feel more comfortable discussing your sales
activities?

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

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Q 8) Which fund house is more reliable to work with:

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

Q 9): Which of the following fund house gives you quick response to your queries?

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

Q 10): Which of the following fund house you feel overall good to work with?

a)Tata Mutual Fund b)HDFC Mutual Fund c) Others ( )

Any Suggestions:

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