INTRODUCTION:

This project aims to identify alternate channels of distribution for the

‘Reliance mutual funds’, to increase the sale of the various funds being
offered by it. A modest attempt has been made to study and understand the
behavior and perception of the target audience, about mutual funds and
distribution channels for the same.

Introduction of the Mutual Fund Industry:

The mutual fund industry is a lot like the film star of the finance business.
Though it is perhaps the smallest segment of the industry, it is also the most
glamorous – in that it is a young industry where there are changes in the rules
of the game everyday, and there are constant shifts and upheavals. The
mutual fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is
achieved by the pooling of a number of small investments into a large bucket.
Yet it has been the subject of perhaps the most elaborate and prolonged
regulatory effort in the history of the country.

The Indian mutual fund industry is one of the fastest growing sectors in
the Indian capital and financial markets. The mutual fund industry in India has
seen dramatic improvements in quantity as well as quality of product and
service offerings in recent years. Mutual funds assets under management
grew by 96% between the end of 2001 and June 2007 and as a result it rose
from 8% of GDP to 15%. The industry has grown in size and manages total
assets of more than $30351 million. Of the various sectors, the private sector
accounts for nearly 91% of the resources mobilised showing their
overwhelming dominance in the market. Individuals constitute 98.04% of the
total number of investors and contribute US $12062 million, which is 55.16%
of the net assets under management.

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Steady growth of mutual fund business in India in the four decades
from 1964, when UTI was set up is given in the table below:

Aggregate Aggregate
Period Investment Period Investment
(Year) In Crores of (Year) In Crores of
Rupees Rupees
1964-69 65 1992-93 46988.02
1969-74 172 1993-94 61301.21
1974-79 402 1994-95 75050.21
1979-84 1261 1995-96 81026.52
1986-87 4563.68 1996-97 80539.00
1987-88 6738.81 1997-98 68984.00
1988-89 13455.65 1998-99 63472.00
1989-90 19110.92 1999-00 107966.10
1990-91 23060.45 2000-01 90587.00
1991-92 37480.20 2001-02 94571.00

Mutual Fund Industry in its true spirit rooted in a free market and oriented
towards competitive functioning with the dedicated goal of service to the
investors can be said to have settled in India only in 1993. However the
industry took its roots much earlier with the setting up of the Unit Trust in India
(UTI) in 1964 by the Government of India. During the last 36 years, UTI has
grown to be a dominant player in the industry with assets of over
Rs.72,333.43 Crores as on March 31, 2000. The UTI is governed by a special
legislation, the Unit Trust of India Act, 1963. In 1987 public sector banks and
insurance companies were permitted to set up mutual funds and accordingly
since 1987, 6 public sector banks have set up mutual funds.

Also the two Insurance companies LIC and GIC established mutual funds.
Securities Exchange Board of India (SEBI) formulated the Mutual Fund
(Regulation) 1993, which for the first time established a comprehensive
regulatory framework for the mutual fund industry. Since then several mutual
funds have been set up by the private and joint sectors.

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 WHAT ARE MUTUAL FUNDS?

CONCEPT:

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.

DEFINITION:

“Mutual funds are collective savings and investment vehicles where

savings of small (or sometimes big) investors are pooled together to invest for
their mutual benefit and returns distributed proportionately”. Pooling of money
ensures that small investors get the benefit of advice and expertise that is
normally available only to very large investors.

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“A mutual fund is an investment that pools your money with the money of an
unlimited number of other investors. In return, you and the other investors
each own shares of the fund. The fund's assets are invested according to an
investment objective into the fund's portfolio of investments. Aggressive
growth funds seek long-term capital growth by investing primarily in stocks of
fast-growing smaller companies or market segments. Aggressive growth
funds are also called capital appreciation funds”.

“Mutual Funds are investment companies that make investments on behalf of

individuals and institutions that share common financial goals. The suitability
of a particular mutual fund for an individual investor depends on the type and
nature of the fund's investments and amount of diversification. Funds are
rated widely as to risk and return, and such ratings can be used to establish a
match with investor goals and suitability”.

"Mutual Funds schemes are managed by respective Asset Management

Companies sponsored by financial institutions, banks, private companies or
international firms. The biggest Indian AMC is UTI while Alliance, Franklin
Templeton etc are international AMC's.

Growth of Mutual Fund Business in India

The Indian Mutual fund business has passed through three phases. The first
phase was between 1964 and 1987, when the only player was the Unit Trust
of India, which had a total asset of Rs. 6,700/- crores at the end of 1988. The
second phase is between 1987 and 1993 during which period 8 funds were
established (6 by banks and one each by LIC and GIC). The total assets
under management had grown to Rs. 61,028/- crores at the end of 1994 and
the number of schemes were 167. The third phase began with the entry of
private and foreign sectors in the Mutual fund industry in 1993. Kothari
Pioneer Mutual fund was the first fund to be established by the private sector
in association with a foreign fund. The share of the private players has risen
rapidly since then.

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Within a short period of seven years after 1993 the growth statistics of
the business of Mutual Funds in India is given in the table below:

Amount Percentage
(Rs Crores) (%)

UTI 72,333.43 67.00

Public Sector 10,444.78 9.68

Private Sector 25,167.89 23.32

Total 1,07,946.10 100.00

Scope for Development of Mutual Fund Business in India

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. India has a burgeoning population of
middle class now estimated around 300 million.

A typical Indian middle class family can have liquid savings ranging from Rs.2
to Rs.10 Lacs today. Investments in Banks are liquid and safe, but with the
falling rate of interest offered by Banks on Deposits, it is no longer attractive.
At best a part can be saved in bank deposits, but what are the other sources
of investment for the common man? Mutual Fund is the ready answer.

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Viewed in this sense globally India is one of the best markets for Mutual Fund
Business, so also for Insurance business.

This is the reason that foreign companies compete with one another in setting
up insurance and mutual fund business units in India. The sheer magnitude of
the population of educated white collar employees provides unlimited scope
for development of Mutual Fund Business in India.

Mutual funds- A little history:

The mutual fund industry started in India in a small way with the UTI Act
creating what was effectively a small savings division within the RBI. Over a
period of 25 years this grew fairly successfully and gave investors a good
return, and therefore in 1989, as the next logical step, public sector banks and
financial institutions were allowed to float mutual funds and their success
emboldened the government to allow the private sector to foray into this area.

The initial years of the industry also saw the emerging years of the Indian
equity market, when a number of mistakes were made and hence the mutual
fund schemes, which invested in lesser-known stocks and at very high levels,
became loss leaders for retail investors. From those days to today the retail
investor, for whom the mutual fund is actually intended, has not yet returned
to the industry in a big way. But to be fair, the industry too has focused on
brining in the large investor, so that it can create a significant base corpus,
which can make the retail investor feel more secure.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.

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

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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.

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.

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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.

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.

2003-2004: A retrospect:
This year was extremely eventful for mutual funds. The aggressive
competition in the business took its toll and two more mutual funds bit the
dust. Alliance decided to remain in the ring after a highly public bidding war
did not yield an acceptable price, while Zurich has been sold to HDFC Mutual.
The growth of the industry continued to be corporate focused barring a few
initiatives by mutual funds to expand the retail base. Large money brought
with it the problems of low retention and consequently low profitability, which
is one of the problems plaguing the business. But at the same time, the
industry did see spectacular growth in assets, particularly among the private
sector players, on the back of the continuing debt bull run. Equity did not find
favor with investors since the market was lack-luster and performances of
funds, barring a few, were quite disappointing for investors. The other aspect
of this issue is that institutional investors do not usually favor equity. It is

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largely a retail segment product and without retail depth, most mutual funds
have been unable to tap this market. The tables given below are a snapshot
of the AUM story, for the industry as a whole and for debt and equity
separately.

ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organi
zational set up of a mutual fund:

Organization of a Mutual Fund

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Sponsors

Sponsors initiates the idea to set up mutual fund .it could be registered
company schedule banks or financial institution .a sponsor has to satisfy
certain conditions such as capital record (at least five year operation in
financial market) default free dealings and general reputation of fairness. The
sponsors appoint the trustee AMC and custodian.

Trust Board of Trustee

Trustees hold a fiduciary responsibility towards unit holders by protecting their
interest
Trustees float and market schemes and secure necessary approvals. They
check if the AMC’s investments are within well-defined limits. Whether the
funds assets are protected and also ensure that unit holders get their due
returns.

Fund Manager/Asset Management Company

They are the ones who manages money of investors .an AMC takes
decisions compensates investors through dividends maintains proper
accounting and information for pricing of units, calculates the NAV and
provides information on listed schemes.

Custodian
Often an independent organization, it takes custody of securities and other
assets of mutual funds, its units and segregating assets and settlement

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between schemes. Their charges range between .15-1.2 percent of the net
value of holding. Custodian can service more than one find.

Valuation of Mutual Funds

Since owner is a part owner of a Mutual Fund, it is necessary to establish the

value of his part i.e. each share or unit that an investor holds need to be
assigned a value.

These units held by an investor evidence the ownership of the fund’s assets,
the value of the total assets of the fund when divided by the total number of
units issued by mutual funds gives us the value of one unit.

This is generally called the Net Assets Value (NAV) of one unit or one share.
The value of investor’s part ownership is thus determined by the NAV of the
numbers of units held.

A Mutual Fund is a common investment vehicle to where the assets of the

fund belong directly to the investors. Investor’s subscriptions are accounted
for by the fund not as liabilities or deposits but as Unit Capital.

The investments made on behalf of the investors are refecleted on the assets
side which are the main constituent of the balance sheet and the liabilities of
strictly in short term nature may also be part of the balance sheet.

The funds net assets are therefore defined as the assets- minus liabilities.

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As there are many investors in a fund, it is common practice for mutual fund
to complete the share of each investor on the basis of the value of Net Assets
per Share/Unit, commonly known as the Net Asset Value (NAV).

 NAV = Net Assets of the scheme /Number of units outstanding,

i.e.

Market Value of investment + receivables + other accrued income +

other asset – accrued expenses – other payables – other liabilities/ No. Of
units outstanding as at the NAV date

 For the purpose of the NAV calculations, the day on which NAV is
calculated by a fund is known as the Valuation Date.

 NAV of all the schemes must be calculated and published at least

weekly for closed –end schemes and daily for open-ended schemes.
NAV’ s for a day must also be posted on AMFT’s website by 8:00pm
on that day.

 A fund’s NAV is a affected by four sets of factors:

1. Purchase and sale of investment securities.
2. Valuation of all investments securities held
3. Other assets and liabilities, and
4. Units sold or redeemed

 “Other Assets” include any income due to the fund but not received
as on the valuation date (for example, dividend announced by the
company yet to be received)

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 “Other Liabilities” includes expenses payable by the fund, for
example Custodian fees or even the management fees payable to the
AMC.

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 Article I. TYPES OF MUTUAL FUND SCHEMES

Article II. BY STRUCTURE

 OPEN-ENDED SCHEME
 CLOSE-ENDED SCHEME
 INTERVAL SCHEME

BY INVESTMENT OBJECTIVE
 GROWTH SCHEME
 INCOME SCHEME
 BALANCED SCHEME
 MONEY MARKET SCHEME

OTHER SCHEMES
 TAX SAVING SCHEME
 SECTOR SPECIFIC SCHEME
 INDEX SCHEME

Risk Vs Reward

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Having understood the basics of mutual funds the next step is to build a
successful investment portfolio. Before you can begin to build a portfolio, one
should understand some other elements of mutual fund investing and how
they can affect the potential value of your investments over the years.

The first thing that has to be kept in mind is that when you invest in mutual
funds, there is no guarantee that you will end up with more money when you
withdraw your investment than what you started out with. That is the potential
of loss is always there. The loss of value in your investment is what is
considered risk in investing.

Even so, the opportunity for investment growth that is possible through
investments in mutual funds far exceeds that concern for most investors.
Here’s why.

At the cornerstone of investing is the basic principal that the greater the risk
you take, the greater the potential reward. Or stated in another way, you get
what you pay for and you get paid a higher return only when you're willing to
accept more volatility.

Risk then, refers to the volatility -- the up and down activity in the markets and
individual issues that occurs constantly over time. This volatility can be
caused by a number of factors -- interest rate changes, inflation or general
economic conditions.

It is this variability, uncertainty and potential for loss, that causes investors to
worry. We all fear the possibility that a stock we invest in will fall substantially.
But it is this very volatility that is the exact reason that you can expect to earn
a higher long-term return from these investments than from a savings
account.

Different types of mutual funds have different levels of volatility or potential

price change, and those with the greater chance of losing value are also the

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funds that can produce the greater returns for you over time. So risk has two
sides: it causes the value of your investments to fluctuate, but it is precisely
the reason you can expect to earn higher returns.

You might find it helpful to remember that all financial investments will
fluctuate. There are very few perfectly safe havens and those simply don't pay
enough to beat inflation over the long run.

Types of risks

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All investments involve some form of risk. Consider these common types of
risk and evaluate them against potential rewards when you select an
investment.

Market Risk At times the prices or yields of all the securities in a particular
market rise or fall due to broad outside influences. When this happens, the
stock prices of both an outstanding, highly profitable company and a fledgling
corporation may be affected. This change in price is due to "market risk". Also
known as systematic risk.

Inflation Risk Sometimes referred to as "loss of purchasing power."

Whenever inflation rises forward faster than the earnings on your investment,
you run the risk that you'll actually be able to buy less, not more. Inflation risk
also occurs when prices rise faster than your returns.

Credit Risk In short, how stable is the company or entity to which you lend
your money when you invest? How certain are you that it will be able to pay
the interest you are promised, or repay your principal when the investment
matures?

Interest Rate Risk Changing interest rates affect both equities and bonds
in many ways. Investors are reminded that "predicting" which way rates will
go is rarely successful. A diversified portfolio can help in offseting these
changes.

Exchange risk A number of companies generate revenues in foreign

currencies and may have investments or expenses also denominated in

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foreign currencies. Changes in exchange rates may, therefore, have a
positive or negative impact on companies which in turn would have an effect
on the investment of the fund.

Investment Risks The sectoral fund schemes, investments will be

predominantly in equities of select companies in the particular sectors.
Accordingly, the NAV of the schemes are linked to the equity performance of
such companies and may be more volatile than a more diversified portfolio of
equities.

Changes in the Government Policy

Changes in Government policy especially in regard to the tax benefits may

impact the business prospects of the companies leading to an impact on the
investments made by the fund

Effect of loss of key professionals and inability to adapt business to the rapid
technological change.

An industries' key asset is often the personnel who run the business i.e.
intellectual properties of the key employees of the respective companies.
Given the ever-changing complexion of few industries and the high
obsolescence levels, availability of qualified, trained and motivated personnel
is very critical for the success of industries in few sectors. It is, therefore,
necessary to attract key personnel and also to retain them to meet the
changing environment and challenges the sector offers. Failure or inability to
attract/retain such qualified key personnel may impact the prospects of the
companies in the particular sector in which the fund invests.

PROS & CONS OF INVESTING IN MUTUAL

FUNDS:

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The Advantages of Investing in a Mutual Fund:

Professional Management:

The investor avails of the services of experienced and skilled professionals

who are backed by a dedicated investment research team which analyses the
performance and prospects of companies and selects suitable investments to
achieve the objectives of the scheme.

Diversification:

Mutual Funds invest in a number of companies across a broad cross-section

of industries and sectors. This diversification reduces the risk because
seldom do all stocks decline at the same time and in the same proportion.
You achieve this diversification through a Mutual Fund with far less money
than you can do on your own.

Convenient Administration:

Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and unnecessary 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.

Low Costs:

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Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.

Liquidity:

In open-ended schemes, you can get your money back promptly at net asset
value related prices from the Mutual Fund itself. With close-ended schemes,
you can sell your units on a stock exchange at the prevailing market price or
avail of the facility of direct repurchase at NAV related prices which some
close-ended and interval schemes offer you periodically.

Transparency:

You get regular information on the value of your investment in addition to

disclosure on the specific investments made by your scheme, the proportion
invested in each class of assets and the fund manager's investment strategy
and outlook.

Flexibility:

Through features such as regular investment plans, regular withdrawal plans

and dividend reinvestment plans, you can systematically invest or withdraw
funds according to your needs and convenience.

Well Regulated:

All Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors.
The operations of Mutual Funds are regularly monitored by SEBI.

Drawbacks of mutual funds

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Fluctuating Returns:

Mutual funds are like many other investments without a guaranteed return:
there is always the possibility that the value of your mutual fund will
depreciate. Unlike fixed-income products, such as bonds and Treasury
bills, mutual funds experience price fluctuations along with the stocks that
make up the fund. When deciding on a particular fund to buy, you need to
research the risks involved just because a professional manager is looking
after the fund, that doesn't mean the performance will be stellar.

Another important thing to know is that mutual funds are not guaranteed
by the U.S. government, so in the case of dissolution, you won't get
anything back. This is especially important for investors in money market
funds. Unlike a bank deposit, a mutual fund will be insured by the Federal
Deposit Insurance Corporation (FDIC).

Diversification

Although diversification is one of the keys to successful investing, many

mutual fund investors tend to overdiversify. The idea of diversification is to
reduce the risks associated with holding a single security;
overdiversification (also known as diworsification) occurs when investors
acquire many funds that are highly related and, as a result, don't get the
risk reducing benefits of diversification.

At the other extreme, just because you own mutual funds doesn't mean
you are automatically diversified. For example, a fund that invests only in
a particular industry or region is still relatively risky.

Cash, Cash and More Cash:

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As you know already, mutual funds pool money from thousands of
investors, so everyday investors are putting money into the fund as well as
withdrawing investments. To maintain liquidity and the capacity to
accommodate withdrawals, funds typically have to keep a large portion of
their portfolios as cash. Having ample cash is great for liquidity, but money
sitting around as cash is not working for you and thus is not very
advantageous.

Costs:

Mutual funds provide investors with professional management, but it

comes at a cost. Funds will typically have a range of different fees that
reduce the overall payout. In mutual funds, the fees are classified into two
categories: shareholder fees and annual operating fees.

The shareholder fees, in the forms of loads and redemption fees are paid
directly by shareholders purchasing or selling the funds. The annual fund
operating fees are charged as an annual percentage usually ranging from
1-3%. These fees are assessed to mutual fund investors regardless of the
performance of the fund. As you can imagine, in years when the fund
doesn't make money, these fees only magnify losses.

Misleading Advertisements:

The misleading advertisements of different funds can guide investors

down the wrong path. Some funds may be incorrectly labeled as growth
funds, while others are classified as small cap or income funds. The
Securities and Exchange Commission (SEC) requires that funds have at
least 80% of assets in the particular type of investment implied in their
names. How the remaining assets are invested is up to the fund manager.

However, the different categories that qualify for the required 80% of the
assets may be vague and wide-ranging. A fund can therefore manipulate

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prospective investors by using names that are attractive and misleading.
Instead of labeling itself a small cap, a fund may be sold as a "growth
fund". Or, the "Congo High-Tech Fund" could be sold with the title
"International High-Tech Fund".

Evaluating Funds:

Another disadvantage of mutual funds is the difficulty they pose for

investors interested in researching and evaluating the different funds.
Unlike stocks, mutual funds do not offer investors the opportunity to
compare the P/E ratio, sales growth, earnings per share, etc. A mutual
fund's net asset value gives investors the total value of the fund's portfolio
less liabilities, but how do you know if one fund is better than another?

Furthermore, advertisements, rankings and ratings issued by fund

companies only describe past performance. Always note that mutual fund
descriptions/advertisements always include the tagline "past results are
not indicative of future returns". Be sure not to pick funds only because
they have performed well in the past - yesterday's big winners may be
today's big losers.

Taxes:

When making decisions about your money, fund managers don't consider
your personal tax situation. For example, when a fund manager sells a
security, a capital-gains tax is triggered, which affects how profitable the
individual is from the sale. It might have been more advantageous for the
individual to defer the capital gains liability.

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 Structure of Investment Companies (Mutual Funds)

A Typical MF in India has the following constituents:

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Fund Sponsor:

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A 'sponsor' is any person who, acting alone or in combination with another
body corporate, establishes a MF. The sponsor of a fund is similar to the
promoter of a company. In accordance with SEBI Regulations, the sponsor
forms a trust and appoints a Board of Trustees, and 'also generally appoints
an AMC as fund manager. In addition, the sponsor also appoints a custodian
to hold the fund assets. The sponsor must contribute at least 40% of the net
worth of the AMC and possess a sound financial track record over five years
prior to registration.

Mutual Fund:

A MF in India is constituted in the form of a trust under the Indian Trusts Act,
1882. The fund invites investors to contribute their money in the common
pool, by subscribing to 'units' issued by various schemes established by the
trust. The assets of the trust are held by the trustee for the benefit of unit
holders, who are the, beneficiaries of the trust. Under the Indian Trusts Act,
the trust or the fund has no independent legal capacity; it is the trustee(s) who
have the legal capacity.

Trustees:

The MF or trust can either be managed by the Board of Trustees, which is a

body of individuals, or by a Trust Company, which is a corporate body. Most
of the funds in India are managed by Board of Trustees. The trustees being
the primary; guardians of the unit holders’ funds and assets, a trustee has to
be a person of high repute and integrity. The trustees, however, do not
directly manage the portfolio securities. The portfolio is managed by the AMC
as per the defined objectives, accordance with Trust Deed and SEBI (Mutual
Funds) Regulations.

Asset Management Company:

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The AMC, which is appointed by the sponsor or the trustees and approved by
SEBI, acts like the investment manager of the trust. The AMC functions under
the supervision of its own Board of Directors, and also under the direction of
the trustees and SEBI.

AMC in the name of the trust, floats and manages the different investment
'schemes' as per the SEBI Regulations and as per the Investment
Management Agreement signed with the Trustees.

Apart from these, the MF has some other fund constituents, such as
custodians and depositories, banks, transfer agents and distributors. The
custodian is appointed for safe keeping of securities and participating in the
clearing system through approved depository.

The bankers handle the financial dealings of the fund. Transfer agents a
responsible for issue and redemption of units of MF. AMCs appoint
distributors of brokers who sell units on behalf of the Fund, and also serve as
investment advisers.

Besides brokers, independent individuals are also appointed as 'agents' for

the purpose of selling fund schemes to investors. The regulations require
arm's length relationship between the fund sponsors, trustees, custodians and
AMC.

Types of Investment Companies

- 28 -
Investment companies fall into two general categories:

 Open-end; and

 Closed-end companies.

Open - end Investment Companies:

These companies raise capital through issue of shares, which are not traded
on stock exchanges, but handled by specified dealer in over-the-counter,
transactions. The money obtained from the sale of share is invested directly
in the shares of other companies. Usually, no level age occurs in the open-
end fund, unless the company can borrow money to invest, as some
companies do. An example of open-end investment company in India is the
Unit Trust of India. It came into existence on 1 February 1964 under the Unit
Trust of India Act, 1963. The actual sales of units were commenced by the
UTI from 1 July 1964. The sale is conducted through branches of banks and
through members of recognized stock exchanges. The UTI is declared to be a
balanced fund, investing in both equity and fixed- income securities.

Closed-end Investment Companies

These companies operate in much the same fashion as any industrial

company. It issues a fixed number of shares, which may be listed on a stock
exchange and bought and sold like any company's shares. If the
management desires, it might revise additional equity issues, bonds or
preferred stock issues. Majority of such companies have bonds and preferred
stocks outstanding as apart of their capital structure.

The use of fixed income securities results in financial leverage for equity
shareholders. Such a company will have both asset leverage as well as
earnings leverage. Asset leverage is said to occur when the price of equity
owned by the company (company's assets) increase or decreases.

If the value of the total assets increases, there is greater proportional increase
in the value of the equity shares of the investment company and being fixed
claims, against assets, any increase in assets goes to equity shareholders.

- 29 -
Thus, as the value of investment of an investment company increases the
value of its equity shares increases faster. However, as the asset value
increases without a corresponding increase in debt capital, the leverage effect
is diminished. The interest of debt and the dividends on preference shares
represent a fixed charge on the company's earnings

. Any increase in earnings over the interest payments and dividends goes to
the equity shareholders. As long as company earns more than is needed to
pay the interest and dividends, the owner will benefit owing to the earning
leverage. As earnings increase, the rate of increase of the return to the equity
shareholder increases faster than the rate of increase of the return on the
total assets, but, it may have adverse effects when earnings fall and assets
decline in value. A closed-end company that raises a substantial portion of its
capital by way of debt will be susceptible to wider fluctuations in value, than a
company with a relatively small amount of debt. These leverage effects to
also tend to accentuate the cyclical movement of stock prices.

Closed-end investment companies offer various Advantages to an

investor. Some of these may be listed as follows:

 Their investment policies are highly flexible and hence, they provide an
opportunity for greater diversification of investment than open-end
companies.

 Due to greater diversification and a higher scope for gearing of capital,

they offer better returns to investors.

 They have an additional advantage of ploughing back of profit and, hence

increasing returns to their members. Risk of loss is minimized due to
above reasons. Given that most such companies are listed on the stock
exchange, shareholders face no problems in disposing of their holdings.

In addition to the above, there are many other types of mutual funds
which may be classified on the basis of their objectives and portfolios.
These mutual funds are:

 Equity funds: Those funds which invest only in equity shares and
undertake the associated risk;

- 30 -
 Income funds: Those funds which invest in securities which will earn high
income;

 Growth funds: Those funds which invest in growth oriented securities so

as to assure appreciation in their value in the long run;

 Liquid funds: Those funds which specialize in investing in short- term

money market instruments with emphasis on liquidity with a low rate of
return;

 Special funds: Those funds which invest only in specialized channels like
(a) gold and silver, (b) a specific country (Japan Fund, India Fund, etc.),
(c) a specific category of companies (Technology Fund);

 Index-Linked funds: Those funds which invest only in those shares which
are included in the market indices and in the same proportion. They move
with the market index;

 Leveraged funds: Leveraged funds are those which increase the size of
the value of the portfolio and benefit the shareholders by gains exceeding
the cost of the borrowed funds;

 Real Estate fund: Such funds are meant for the real estate ventures.

 Balanced funds: Those which divide their investments between equity

shares and bonds in order to meet the objectives of safety, growth, and
regularity of income;

 Hedge funds: Funds that buy shares whose prices are likely to go up and
sell short, shares whose prices are expected to go down; and finally

 Offshore funds: These specialize in investing in foreign companies.

REGULATION OF MUTUAL FUNDS

The primary authority for regulating Mutual Funds in India is SEBI. SEBI
requires all Mutual Funds to be registered with it. The SEBI (Mutual Funds)
Regulations, 1996 outlined the broad framework of authorization process and

- 31 -
selection criteria. Accordingly, the authorization for the mutual fund will be
granted in two steps.

The first step will involve approval and eligibility of each of the constituents of
the mutual fund viz. sponsors, trustees, asset management company (AMC)
and custodian. For this purpose the interested parties would be required to
submit necessary information only in on prescribed formats).

The second stage will involve formal authorization of the mutual funds for
business. For this purpose the sponsor or the AMC would be required to
apply to SEBI in an application form for authorization along with an
application fee to be specified later.

The authorisation shall be granted subject to conditions as may be

considered necessary by SEBI and payment of auth9risation fee as may be
specified.

It shall be SEBI's endeavor to advise an applicant within 10 to 15 working

days of receipt of his letter / application form regarding status of his
application.

The eligibility of the sponsor will be examined with respect to the following:

 Sponsor could be a registered company, scheduled bank or all India or

State level financial institution;

 More than one registered company can also act as sponsor for a mutual
fund;

 Joint sponsorship with any of the entities in (a) above will also be eligible,
and

 Sponsoring registered companies could be private or public limited

companies either listed or unlisted.

Sponsor and where there is more than one sponsor, each of the sponsoring
entities, must have a sound track record as evidenced by

- 32 -
 Audited balance sheet and profit and loss .account for last five years;

 A positive net worth and consistent record of profitability and a good

financial standing during the last five years;

 Good credit record with banks and financial institutions;

 General reputation in the market;

 Organization and management, and

 Fairness in business transactions.

 Sponsor or more than one sponsor put together should have at least a 40
per cent stake in the paid-up equity of the AMC.

Guidelines for mutual funds as per SEBI

The AMC will be authorized by SEBI on the basis of the criteria indicated in
the guidelines. ,

SEBI regulations clearly state that all funds and schemes operational under
them would be bound by their regulations. SEBI has recently taken following
steps for the regulation of mutual funds:

 Formation:

Certain structural changes have also been made in the mutual fund industry,
as part of which, mutual funds are required to set up asset management
companies with fifty percent independent directors, separate board of trustee
companies, consisting of a minimum fifty percent of independent trustees and
to appoint independent custodians. This is to ensure an arm's length
relationship between trustees, fund managers and custodians, and is in
contrast with the situation prevailing earlier in which all three functions were
often performed by one body which was usually the sponsor of the fund or a
subsidiary of the sponsor .

Thus, the process of forming and floating mutual funds has been made a
tripartite exercise by authorities. The trustees, the asset management
companies (AMCs) and the mutual fund shareholders form the three legs.

- 33 -
SEBI guidelines provide for the trustees to maintain an arm's length
relationship with the AMCs and do all those things that would secure the right
of investors.

With funds being managed by AMCs and custody of assets remaining with
trustees, an element of counter-balancing of risks exists as both can keep
tabs on each other.

 Registration:

In January 1993, SEBI prescribed registration of mutual funds taking into

account track record of a sponsor, integrity in business transactions and
financial soundness while granting permission.

This will curb excessive growth of the mutual funds and protect investor's
interest by registering only the sound promoters with a proven track record
and financial strength.

In February 1993, SEBI cleared six private sect9r mutual funds viz. 20th
Century Finance Corporation, Industrial Credit& Investment Corporation of
India, Tata Sons, Credit Capital Finance Corporation, Ceat Financial Services
and Apple Industries.

 Documents:

The offer documents of schemes launched by mutual funds and the scheme
particulars are required to be vetted by SEBI. A standard format for mutual
fund prospectuses is being formulated.

 Code of advertisement:

Mutual funds have been required to adhere to a code of advertisement.

- 34 -
 Assurance on returns:

SEBI has introduced a change in the Securities Control and Regulations Act
governing the mutual funds. Now the mutual funds were prevented from
giving any assurance on the land of returns they would be providing.
However, under pressure from the mutual funds, SEBI revised the guidelines
allowing assurances on return subject to certain conditions. Hence, only those
mutual funds which have been in the market for at least live years are allowed
to assure a maximum return of 12 per cent only, for one year. With this, SEBI,
by default, allowed public sector mutual funds an advantage against the
newly set up private mutual funds.

As per basic tenets of investment, it can be justifiably argued that investments

in the capital market carried a certain amount of risk, and any investor
investing in the markets with an aim of making profit from capital appreciation,
or otherwise, should also be prepared to bear the risks of loss.

 Minimum corpus:

The current SEBI guidelines on mutual funds prescribe a minimum s art-up

corpus of Rs.50 crore for a open-ended scheme, and Rs.20 crore corpus :or
closed-ended scheme, failing which application money has to be refunded.

The idea behind forwarding such a proposal to SEBI is that in the past, the
minimum corpus requirements have forced AMCs to solicit funds from
corporate bodies, thus, reducing mutual funds into quasi-portfolio
management outfits. In fact, the Association' of Mutual Funds in India (AMFI)
has repeatedly appealed to the regulatory authorities for scrapping the
minimum corpus requirements.

 Institutionalization:

The efforts of SEBI have, in the last few years, been to institutionalise the
market by introducing proportionate allotment and increasing the minimum

- 35 -
deposit amount to Rs.5000 etc. These efforts are to channel the investment of
individual investors into the mutual funds.

 Investment of funds mobilized:

In November 1992, SEBI increased the time limit from six months to nine
months within which the mutual funds have to invest resources raised from
the latest tax saving schemes. The guideline was issued to protect the mutual
funds from the disadvantage of investing funds in the bullish market at very
high prices and suffering from poor NA V thereafter.

 Investment in money market:

SEBI guidelines say that mutual funds can invest a maximum of 25 per cent
of resources mobilised into money-market instruments in the first six months
after closing the funds and a maximum of 15 per cent of the corpus after six
months to meet short term liquidity requirements. Private sector mutual funds,
for the first time, were allowed to invest in the call money market after this
year's budget.

As SEBI regulations limit their exposure to money markets, mutual funds are
not major players in the call money market. Thus, mutual funds do not have a
significant impact on the call money market. SEBI also conclude that mutual
funds were not responsible for the unprecedented shooting up of call money
rates.

Some funds exceeded their limits in an effort to improve their sagging net
asset values (NAVs), Usually, funds can early only about 9-12 per cent. Thus,
the prospect of earning more than 40 per cent may have been tempting.

 Valuation of investment:

- 36 -
SEBI should work in tandem with the Institute of Chartered Accountants of
India (ICAI) to take up a fresh look at mutual fund regulations enacted in
1993.

The valuation of investments, a key aspect of fund accounting, as on balance

sheet date, needs review, SEBI regulations 1993, give discretionary powers
to the fund managers as far as the valuation of the investment portfolio on the
balance sheet date is concerned.

There are no accounting standards or guidelines prescribed by the ICAI for

the valuation of a mutual fund's investment portfolio.

The mutual funds are clearly taking advantage of this situation and valuing
the portfolio at cost of acquisition. The subsequent depreciation or
appreciation in the investment portfolio are not accounted for.

Thus, the mutual funds may be able to show profits in the balance sheet even
if there is a severe erosion in the value of the investment portfolio.

This erosion in the values of the investment portfolios is clearly seen in the
net asset values (NA V) as on the balance sheet date. But the accounts of the
mutual funds do not reveal the same.

The objective of the accounting in case of a mutual fund should be besides

showing details of income, expenses, assets and liabilities, has to reveal the
true value of the fund.

The value of the fund is already reflected in, its NAV and the balance sheet is
expected to be in consonance with this value. This requires that the
investment portfolio be calculated at market values, providing for any
depreciation or appreciation. .

The transparent and well understood declaration or Net Asset Values (NAVs)
of mutual fund schemes is an important issue in providing investors with
information as to the performance of the fund.

SEBI had warned some mutual funds earlier of unhealthy market practices,
and is currently working on a common format for calculating the net asset

- 37 -
values (NAVs) of mutual funds, which are done in various ways by them at
present.

 Inspection:

SEBI inspect mutual funds every year. A full SEBI inspection of all f the 27
mutual funds was proposed to be done by the March 1996 to streamline their
operations and protect the investor's interests. Mutual funds are monitored
and inspected by SEBI to ensure compliance with the regulations.

 Underwriting:

In July 1994, SEBI permitted mutual funds to take up underwriting of primary

issues as apart of their investment activity. This step may assist the mutual
funds in diversifying the business.

 Conduct:

In September 1994, it was clarified by SEBI that mutual funds shall not offer
buy back schemes or assured returns to corporate investors. The Regulations
governing Mutual Funds and Portfolio Managers ensure transparency in their
functioning.

 Voting rights:

In September 1993, mutual funds were allowed to exercise their voting rights.
Department of Company Affairs has reportedly granted mutual funds the right
to vote as full-fledged shareholders in companies where they have equity
investments.

- 38 -
 RECENT POLICY AND REGULATORY
INITIATIVES
The policy and regulatory initiatives since April 2000 include: Investment by
Mutual funds.

SEBI amended regulations to:

 Permit investments by Mutual funds in the mortgage-backed securities.

These securities, however, must have a credit rating of not below
investment grade and would represent investments in real estate
mortgages (i.e., loans secured by real estate collateral) and not directly in
real estate. This was expected to augment the availability of funds for
housing sector and provide greater investment flexibility to the MFS.

 Allow Mutual Funds to invest in unlisted companies. A MF scheme could

invest upto 5% of its net asset value (NAV) in the unlisted equity shares or
equity related instruments in case of open-ended scheme and up to 10%
of its NAV in case of closed-ended scheme. Within the investment limit of
15% of NAV in debt instruments issued by a single issuer, Mutual Funds
could also invest in mortgage-backed securitised debt, which are rated not
below investment grade by a credit rating agency registered with SEBI.

 SEBI Regulations also stipulate that the asset management company

(AMC) shall exercise due diligence and care in all its investment
decisions. For effective implementation and bringing about transparency in
the investment decisions, all the AMCs were advised to maintain records
in support of each investment decisions which would indicate data, facts
and opinion leading to that decision. AMC boards may develop a
mechanism to verify that due diligence is being exercised while making
investment decisions.

 Specific attention may be given to investments in unlisted' and privately

placed securities, unrated debt securities, non-performing assets (NP As),
transactions where associates are involved and the instances where there
is poor performance of the schemes.

- 39 -
MF Distribution by NSCCL:

In a move to encourage the MF industry, NSE and NSCCL have

launched the Mutual' Fund Service System (MFSS) to effectively cater to
buying/redemption of units of Mutual Funds by individual investors, which
presently takes place manually. The main objective of MFSS is to provide a
one-stop shop to investors for transacting in financial products. NSE with its
trading terminals across the country offers a mechanism for collection of
orders from the market and NSCCL undertakes the clearing and settlement of
the same. : While a good number of closed-ended schemes are traded on the
exchanges; the facilities for transacting in open-ended schemes of the Mutual
Funds are very limited. Today the entire process of buying and redeeming
open-ended MF scheme units takes place directly between the individual
investor and the AMC.

The salient features of the system are as follows:

 Orders for purchase and sale of units from investors are collected using
the on- line order collection system of NSE, which are finally settled using
the clearing and settlement system of NSCCL.

 The orders collected on 'T' day would be received by NSCCL by the end
of the day or latest on T +1 morning and conveyed to the MFS to facilitate
computation of the NA V and the corresponding sale/repurchase prices of
the units.

 The MF would send the issue/repurchase prices computed by them to the

NSCCL on T+l day. The respective MF would be the counter-party for
each trade.

 The orders would be cleared and settled on an order to order basis.

 Settlement would be on rolling basis with the orders received on T day

being settled on T+5 day.

- 40 -
 The members are required to deliver the securities/ funds due to the
investors within two working days of receiving the pay-out from NSCCL.
No transaction charges will be levied on members.

This will not only boost the Mutual Fund industry but would also enable easy
access for the investors to the industry .Zurich Mutual Fund is the first MF to
go live using this system.

MF Distribution through Post Offices:

Post offices started distributing MF products. IDBI Principal Mutual

Fund has started distributing its index, balanced and income funds through
select post offices branches. Other Mutual Funds like, SBI Mutual, ICICI
Prudential, UTI and Zurich Mutual Fund are also tying up with Department of
Posts to distribute their products. The MF supplies application forms for their
schemes to the post office for sale over the counter and any customer who
wishes to invest in MF can take a form from the counter, fill it in and hand it
back to the officials in the post office which in turn are handed over to the MF
office, This system of distribution is presently operational only in selected post
offices in the 4 cities of Delhi, Mumbai, Patna and Kolkatta.

NET ASSET VALUE (NAV)

The share ice of the mutual fund is based on its net asset value (NAV)
per share, which is found by subtracting from the market value of the portfolio
the mutual fun liabilities and the dividing by the number of mutual fund shares
issued. That is:

Market value of portfolio -Liabilities

Net asset value per share =
Number of mutual fund shares issued

- 41 -
 In August 1994, SEBI had formed a six-member committee to suggest
disclosure practices and standardised procedures for computation of net
asset values for mutual fund schemes. The committee finalised its report on
12 December 1995 and the same was released on 1 January 1996.

The major guidelines are discussed below:

There has been a major shift in the valuation of securities used for the
calculation the net asset value (NAV) of the mutual fund scheme. Earlier,
calculation of the NAV was done by valuing the securities at cost.

This has now been changed to marking securities at market value. The
investments which are shown in balance sheet should also be shown at
market value so that this comparable with the net asset value. Further
marking of all investments at market prices also permits inter- scheme
comparison some extent.

It has been recommended that the NAVs of both open-end and close-end
scheme be calculated on a weekly basis, at least.

The fees paid by the mutual fund to the asset management company should
linked to the performance of the mutual fund schemes as against a flat rate
charge earlier which did not take into account the mutual fund scheme's
performance.

It, now suggested that mutual funds would be paying a basic annual fee to the
AMC computed as a percentage of the average weekly net asset value of the
scheme and an additional fee calculated as a percentage of the net growth of
the scheme.

The AMC will have the discretion of floating no load or load schemes or a
mixture of the two. Presently, mutual funds are permitted to deduct up to 6%
from the net asset value to account for issue expenses.

- 42 -
The report has suggested that repurchase and resale price of open-end
schemes should be linked to the NAV of the scheme. Accordingly, the
repurchase price of an open-end scheme should not be lower than 93 per
cent of the net asset value and the resale price should not be more than 1.07
times the net asset value.

Also, the spread between the repurchase and re-sale price should not exceed
seven percentage points.

It has been suggested that the failure of a mutual fund scheme to give the
minimum assured returns should be met out of the funds of the asset
management company and not the corpus of the mutual fund scheme.

The report has suggested that the AMC should disclose custodian and
registration fees and has done away with the distinction of short term and
long term capital gains.

The committee has suggested the disclosure of ratio of expenses to net

assets and gross income to net assets.

These guidelines would apply to all the mutual fund schemes launched in the
future but it is not yet decided if these guidelines should be made applicable
to existing schemes.

Some members of the committee feel that existing schemes should adhere to
these guidelines with effect from 1 April 1997. Mutual fund shares are quoted
on a bid- offer basis.

The offer price is the price at which the mutual fund will sell the shares. It is
equal to the NAV per share plus any sales commission that the mutual fund
may charge. The sales commission is referred to as a load.

Within a short span of four to five years, mutual funds operation has become
integral part of the Indian financial system. Investors in India look at mutual
funds as a substitute of fixed deposits in banks rather than as a substitute for
investment in securities.

- 43 -
Mutual funds provide an opportunity for the risk-averse investors to share
their risk and yet go in for high return equities in the capital market. The
popularity of mutual funds has soared so have their diversity and complexity.

Despite the many advantages (e.g. diversification, continuous professional

management, low operating costs, shareholder services, liquidity, safety from
loss due to unethical practices etc.), mutual funds are not for everyone.

Critics argue that funds are boring, since shareholders do not have any say
as to which stocks are selected. Some people have been able to strike it rich
with the right stock.

That then is also a danger of getting carried away and ending up with a big
stake in a promising company that is suddenly runs into deep trouble, plunges
in value, and takes the life savings down with it. The chances of that
happening with the mutual funds are much lower since they are diversified
and professionally managed.

The reason most investors do not excel in stock picking is that they succumb
to certain common errors, many of which can be avoided or minimised with
mutual funds.

However, successful investing being a serious business requiring a well

thought- out plan, investors do not need to be familiar with the characteristics
of the different types of mutual funds.

Too many investors do not understand what they are buying, or even what
they are paying. With so many choices, investors make the wrong decisions.

Besides investing in inappropriate and high-cost mutual funds, investors also

buy laggards. There is no shortage of mediocre performers.

- 44 -
 Mutual Funds Operations In India
Mutual funds le households an option for portfolio diversification and relative
risk-aversion through collection of funds from the households and make
investments in the stock and debt markets. Resources mobilised by mutual
fund (UTI was the only mutual fund until 1987-88) grew at a steady rate until
1992-93; since then they showed some variations.

Resources mobilised by mutual funds which was just 0.04 per cent of GDP (at
current market prices) during the period of 1970-71 to 1974-85 increased to
1.59 per cent during 1990-91 to 1992-93.

Total resources mobilised as proportion of GDP declined to 1.12 per cent by

1994-95 but nevertheless remained positive. During the period from 1995-97,
there was a net outflow of funds form mutual funds, especially UTI, as a result
of which the ratio turned negative. From 1997-98 onwards, the ratio again
turned positive and stood at 1.13 per cent during 1999-2000.

The mutual fund industry registered significant growth in the last few years.
The investible resources of mutual funds rose form Rs. 68,200 crore in 1998-
99 to Rs. 1,09,114 crore in 1999-2000.

Net resource mobilisation by mutual funds declined to Rs. 6,846 crore in

April-December, 2000 from Rs. 12,193 crore in the corresponding previous
period. This was on account of the steep increase in redemption/repurchase
during this period.

The outflow of funds via repurchase/redemption constituted 88.7 per cent of

gross resource mobilisation during April-December, 2000 compared with 66.0
per cent in the corresponding previous period.

In the case of public sector mutual funds, redemption/repurchase exceeded

gross resource mobilisation, thereby making their net resource mobilisation
negative.

- 45 -
 Introduction of the organisation:

The Reliance ADA Group

The Reliance group - one of India's largest business houses with revenues of
Rs. 990 billion ($22.6 billion) that is equal to 3.5 percent of the country's gross
domestic product was split into two. The group - which claims to contribute
nearly 10 per cent of the country's indirect tax revenues and over six percent
of India's exports - was divided between Mukesh Ambani and his younger
brother Anil on June 18, 2005. The group's activities span exploration,
production, refining and marketing of oil and natural gas, petrochemicals,
textiles, financial services, insurance, power and telecom. The family also has
interests in advertising agency and life sciences.

Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with
Average Assets Under Management (AAUM) of Rs. 90,938 Crores (AAUM for
Mar 08 ) and an investor base of over 66.87 Lakhs. Reliance Mutual Fund, a
part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest
growing mutual funds in the country
RMF offers investors a well-rounded portfolio of products to meet varying
investor requirements and has presence in 115 cities across the country.
Reliance Mutual Fund constantly endeavors to launch innovative products
and customer service initiatives to increase value to investors.

"Reliance Mutual Fund schemes are managed by Reliance Capital Asset

Management Limited., a subsidiary of Reliance Capital Limited, which holds
93.37% of the paid-up capital of RCAM, the balance paid up capital being
held by minority shareholders." Reliance Capital Ltd. is one of India’s leading
and fastest growing private sector financial services companies, and ranks
among the top 3 private sector financial services and banking companies, in
terms of net worth.

- 46 -
Reliance Capital Ltd. has interests in asset management, life and general
insurance, private equity and proprietary investments, stock broking and other
financial services. Reliance Mutual fund has largest AUM in India. Reliance
capital asset Management is no. 1 AMC in India but the picture is not the
same in Rajasthan. In Rajasthan they are no. 2 AMC. Management of
Reliance mutual fund wants to expand its feet in Rajasthan, before taking any
step they want to understand market & investor and distributor behavior of
SMEs, so they may plan accordingly to capture Rajasthan Market. In this
research we have to analyze why, how, where, when & how much an investor
invest & according to it, we have to make profile of investors.

In this report I have endeavored to understand the factors affecting

Investment behavior of an investor in Rajasthan. This behavioral study
consists of how any investor invests in CG. What factor they consider, why
these factors they consider, where do they invest, how do they invest,
purpose behind investment, size of investment, timing of investment &
duration of investment. This study gave us basis to profile investors.

Reliance Mutual Fund : Asset under management:

AUM Month Mar 2008

Average AUM Excluding Fund of Funds 9093794.02

Average AUM Fund of Funds 0

- 47 -
Reliance Corporate PROFILE:

- 48 -
 Reliance Capital Asset Management Ltd.:

Reliance Capital Asset Management Limited (RCAM), a company registered

under the Companies Act, 1956 was appointed to act as the Investment
Manager of Reliance Mutual Fund. Reliance Capital Asset Management
Limited (RCAM) was approved as the Asset Management Company for the
Mutual Fund by SEBI vide their letter no IIMARP/1264/95 dated June 30,
1995.

The Mutual Fund has entered into an Investment Management Agreement

(IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997
in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA,
RCAM is authorized to act as Investment Manager of Reliance Mutual Fund.
The net worth of the Asset Management Company including preference
shares as on September 30, 2007 is Rs.152.02 crores.

"Reliance Mutual Fund schemes are managed by Reliance Capital Asset

Management Limited., a subsidiary of Reliance Capital Limited, which holds
93.37% of the paid-up capital of RCAM, the balance paid up capital being
held by minority shareholders".

Reliance Capital Asset Management Limited (RCAM) was approved as the

Asset Management Company for the Mutual Fund by SEBI by their letter no.
IIMARP/1264/95 dated June 30, 1995.

The Mutual Fund has entered into an Investment Management Agreement

(IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997
in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA,
RCAM is authorized to act as Investment Manager of Reliance Mutual Fund.
The net worth of the Asset Management Company including preference
shares as on March 31, 2005 is Rs.113.59 crores.

- 49 -
Vision Statement:

“To be a globally respected wealth creator, with an emphasis on customer

care and a culture of good corporate governance”.

Mission Statement:

“To create and nurture a world-class, high performance environment aimed at

delighting their customers”.

Corporate Governance of reliance:

Corporate Governance Policy:

Reliance Capital Asset Management Ltd. has a vision of being a leading

player in the Mutual Fund business and has achieved significant success and
visibility in the market. However, an imperative part of growth and visibility is
adherence to Good Conduct in the marketplace. At Reliance Capital Asset
Management Ltd., the implementation and observance of ethical processes
and policies has helped us in standing up to the scrutiny of our domestic and
international investors.

Management:
The management at Reliance Capital Asset Management Ltd. is committed to
good Corporate Governance, which includes transparency and timely
dissemination of information to its investors and unit holders. The Board of
Directors of RCAM is a professional body, including well-experienced and
knowledgeable Independent Members. Regular Audit Committee meetings
are conducted to review the operations and performance of the company.

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Employees:
Reliance Capital Asset Management Ltd. has at present, a code of conduct
for all its officers. It has a clearly defined prohibition on insider trading policy
and regulations. The management believes in the principles of propriety and
utmost care is taken while handling public money, making proper and
adequate disclosures. All personnel at Reliance Capital Asset Management
Ltd are made aware of their rights, obligations and duties as part of the
Dealing Policy laid down in terms of SEBI guidelines. They are taken through
a well-designed HR program, conducted to impart work ethics, the Code of
Conduct, information security, Internet and e-mail usage and a host of other
issues. One of the core objectives of Reliance Capital Asset Management
Ltd. is to identify issues considered sensitive by global corporate standards,
and implement policies/guidelines in conformity with the best practices as an
ongoing process. Reliance Capital Asset Management Ltd. gives top priority
to compliance in true letter and spirit, fully understanding its fiduciary
responsibilities.

Sponsors:
‘‘Reliance Mutual Fund’’ schemes are managed by Reliance Capital Asset
Management Limited., a subsidiary of Reliance Capital Limited, which holds
93.37% of the paid-up capital of RCAM, the balance paid up capital being
held by minority shareholders.", the sponsor. Reliance Mutual Fund (RMF)
has been sponsored by Reliance Capital Ltd (RCL). The promoter of RCL is
AAA Enterprises Private Limited. Reliance Capital Limited is a Non Banking
Finance Company. Reliance Capital Limited is one of the India’s leading and
fastest growing financial services companies, and ranks among the top three
private sector financial services and banking companies, in terms of net
worth.

Reliance Capital has interests in asset management and mutual funds, life
and non-life insurance, private equity and proprietary investments, stock
broking and other activities in the financial services sector. The net worth of
RCL is Rs. 5,161.23 crores as on March 31, 2007.

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 Given below is a summary of RCL’s financials:

Particulars
2006-07 2005-06 2004-05 2003-04
(Rs. in crores)
Total Income 883.86 652.02 295.69 356.79
Profit Before Tax 733.18 550.61 111.21 105.79
Profit After Tax 646.18 537.61 105.81 105.79
Reserves & Surplus 4915.07 3849.58 1310.08 1271.84
Net Worth 5161.23 4122.46 1437.92 1399.81
Earnings per Share (Rs.) 28.39 29.74 8.31 8.31
(Basic + Diluted) (Basic + Diluted) (Basic + Diluted) (Basic + Diluted)

Book Value per Share

(Rs.) 210.12 112.95 112.95 109.96
Dividend (%) 35% 30% 30% 29%
Paid up Equity Capital 246.16 223.40 127.84 127.84

Reliance Capital Ltd. has contributed Rupees One Lac as the initial
contribution to the corpus for the setting up of the Mutual Fund. Reliance
Capital Ltd. is responsible for discharging its functions and responsibilities
towards the Fund in accordance with the Securities and Exchange Board of
India (SEBI) Regulations.

The Sponsor is not responsible or liable for any loss resulting from the
operation of the Scheme beyond the contribution of an amount of Rupees one
Lac made by them towards the initial corpus for setting up the Fund and such
other accretions and additions to the corpus.

The Reliance capital Management Team:

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 Board of Directors
Mr. Amitabh Chaturvedi
Mr. Kanu Doshi
Mr. Manu Chadha
Mr. Sushil Tripathi

Management Team
CEO
Mr. Vikrant Gugnani
Deputy CEO
Mr. Sundeep Sikka
Head Equity Investments
Mr. Madhusudan Kela
Head Fixed Income
Mr. Amitabh Mohanty

Equity Fund Managers

Mr. Sunil B. Singhania Mr. Ashwani Kumar
Mr. Shailesh Raj Bhan Mr. Shiv Chanani
Mr. Omprakash S. Kuckian

Debt Fund Managers

Mr. Amit Tripathi Ms. Anju Chhajer
Mr. Arpit Malaviya

Commodities
Head of Commodities Mr Vikram Dhawan

Head Of Departments
Marketing Communication Mr Rajat Johri
Finance and Accounts Mr. Sanjay Wadhwa
Human Resource Development Mr. Rajesh Derhgawen
Information Technology Mr. Vinay Nigudkar

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 Legal & Compliance
Operations & Settlement
R&T Operations & Investor Relations
Risk Management
Sales & Distribution
Zonal Heads
Northern Zone Head
Western Zone Head
Southern Zone Head
Eastern Zone Head
Mr. Balkrishna Kini
Ms. Geeta Chandran
Mr. Milind Nesarikar
Mr. Lav Chaturvedi
Mr Himanshu Vyapak
Mr. Aashwin Dugal
Mr. Sanjiv Gudal
Mr. Gurbir Chopra
Mr. Gopal Khaitan

MUTUAL FUNDS ASSET UNDER

MANAGEMENT: Top 10 companies list:

Mutual Fund Assets Under Management (Rs. cr.)

February- March-
Change %Change
08 08

Reliance Mutual Fund 93,532 90,938 -2,594 -2.77

ICICI Prudential Mutual Fund 59,278 54,322 -4,956 -8.36

UTI Mutual Fund 52,465 48,983 -3,482 -6.64

HDFC Mutual Fund 46,292 44,773 -1,519 -3.28

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 Birla Sun Life Mutual Fund 34,704 35,906 1,202 3.46

SBI Mutual Fund 29,493 29,179 -314 -1.06

Franklin Templeton Mutual Fund 29,902 26,842 -3,059 -10.23

Tata Mutual Fund 20,205 19,679 -526 -2.60

Kotak Mahindra Mutual Fund 20,968 18,071 -2,897 -13.82

DSP Merrill Lynch Mutual Fund 19,139 16,675 -2,463 -12.87

Reliance Mutual Fund:

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About Reliance Mutual Fund:

Reliance Mutual Fund (RMF) has been established as a trust under the Indian
Trusts Act, 1882 with Reliance Capital Limited (RCL), as the Settler /Sponsor
and Reliance Capital Trustee Co. Limited (RCTCL), as the Trustee.
RMF has been registered with the Securities & Exchange Board of India
(SEBI) vide registration number MF/022/95/1 dated June 30, 1995.

The name of Reliance Capital Mutual Fund has been changed to Reliance
Mutual Fund effective 11th. March 2004 vide SEBI's letter no. IMD / PSP /
4958 / 2004 date 11th. March 2004.

Reliance Mutual Fund was formed to launch various schemes under which
units are issued to the Public with a view to contribute to the capital market
and to provide investors the opportunities to make investments in diversified
securities.

The main objectives of the Trust are:

To carry on the activity of a Mutual Fund as may be permitted at law and

formulate and devise various collective Schemes of savings and investments
for people in India and abroad and also ensure liquidity of investments for the
Unit holders;

To deploy Funds thus raised so as to help the Unit holders earn reasonable
returns on their savings and to take such steps as may be necessary from
time to time to realize the effects without any limitation

Social Responsibilities:

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“Organizations, like individuals, depend for their survival, sustenance and
growth on the support and goodwill of the communities of which they are an
integral part, and must pay back this generosity in every way they can.”

This ethical standpoint, derived from the vision of the founder, lies at the heart
of the CSR philosophy of the Reliance Group.

While they strongly believe that their primary obligation or duty as corporate
entities is to their shareholders – they are just as mindful of the fact that this
imperative does not exist in isolation; it is part of a much larger compact
which they have with their entire body of stakeholders: From employees,
customers and vendors to business partners, eco-system, local communities,
and society at large.

They evaluate and assess each critical business decision or choice from the
point of view of diverse stakeholder interest, driven by the need to minimize
risk and to pro-actively address long-term social, economic and
environmental costs and concerns.

For them, being socially responsible is not an occasional act of charity or that
one-time token financial contribution to the local school, hospital or
environmental NGO. It is an ongoing year-round commitment, which is
integrated into the very core of their business objectives and strategy.

Because they believe that there is no contradiction between doing well and
doing right. Indeed, “doing right is a necessary condition for doing well”.

The Schemes:

Equity/Growth Schemes:

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The aim of growth funds is to provide capital appreciation over the medium to
long- term. Such schemes normally invest a major part of their corpus in
equities. Such funds have comparatively high risks. These schemes provide
different options to the investors like dividend option, capital appreciation, etc.
and the investors may choose an option depending on their preferences. The
investors must indicate the option in the application form. The mutual funds
also allow the investors to change the options at a later date. Growth
schemes are good for investors having a long-term outlook seeking
appreciation over a period of time.
Debt/Income Schemes:
The aim of income funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds,
corporate debentures, Government securities and money market instruments.
Such funds are less risky compared to equity schemes. These funds are not
affected because of fluctuations in equity markets. However, opportunities of
capital appreciation are also limited in such funds. The NAVs of such funds
are affected because of change in interest rates in the country. If the interest
rates fall, NAVs of such funds are likely to increase in the short run and vice
versa.
Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those
sectors or industries as specified in the offer documents. Eg.
Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG),
Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors/industries. While these funds may give
higher returns, they are more risky compared to diversified funds. Investors
need to keep a watch on the performance of those sectors/industries and
must exit at an appropriate time.

Various Schemes of Reliance Mutual Fund:

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Reliance Mutual Fund has launched thirty-two Schemes till
date, namely:

Reliance Growth Fund (September 1995) Reliance Vision Fund (September 1995)
Reliance Income Fund (December 1997) Reliance Liquid Fund (March 1998)
Reliance Medium Term Fund (August 2000) Reliance Short Term Fund (December 2002)
Reliance Gilt Securities Fund (July 2003) Reliance Banking Fund (May 2003)
Reliance Monthly Income Plan (DecemberReliance Diversified Power Sector Fund
2003) (March 2004)
Reliance Pharma Fund ( May 2004) Reliance Floating Rate Fund (August 2004)
Reliance Media & Entertainment FundReliance NRI Equity Fund (October 2004)
(September 2004)
Reliance NRI Income Fund (October 2004) Reliance Index Fund (February 2005)
Reliance Equity Opportunities Fund (FebruaryReliance Regular Savings Fund (May 2005)
2005)
Reliance Liquidity Fund (June 2005) Reliance Tax Saver (ELSS) Fund (July 2005)
Reliance Fixed Tenor Fund (November 2005) Reliance Equity Fund (February 2006)
Reliance Fixed Horizon Fund I (August 2006) Reliance Fixed Horizon Fund (April 2006)
Reliance Fixed Horizon Fund III (March 2007) Reliance Fixed Horizon Fund II (November
2006)
Reliance Liquid Plus Fund (March 2007) Reliance Long Term Equity Fund (November
2006)
Reliance Long Term Equity Fund (Nov 2006) Reliance Interval Fund (March 2007)
Reliance Fixed Horizon Fund - IV (AugustReliance Fixed Horizon Fund - V (September
2007) 2007)

Investment Objectives:

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Reliance Monthly Income Plan aims to generate regular income in order to
make regular dividend payments to unit holders and the secondary objective
is growth of capital.

Reliance Income Fund aims to generate optimal returns consistent with

moderate levels of risk. This income may be complemented by capital
appreciation of the portfolio. Accordingly, investments shall predominantly be
made in Debt and Money Market Instruments.

Reliance Medium Term Fund aims to generate regular income in order to

make regular dividend payments to unit holders and the secondary objective
is growth of capital.

Reliance Liquid Fund aims to generate optimal returns consistent with

moderate levels of risk and high liquidity. Accordingly, investments shall
predominantly be made in Debt and Money Market Instruments.

Reliance Liquidity Fund aims to generate optimal returns consistent with

moderate levels of risk and high liquidity. Accordingly, investments shall
predominantly be made in Debt and Money Market Instruments

Reliance Short Term Fund aims to generate stable returns for investors with
a short term investment horizon by investing in fixed income securities of a
short term maturity.

Reliance Gilt Securities Fund aims to generate optimal credit risk free
returns by investing in a portfolio of securities issued and guaranteed by the
Central Government and State Governments

Reliance Floating Rate Fund aims to generate regular income through

investment in a portfolio comprising substantially of Floating Rate Debt
Securities (including floating rate securitized debt and Money Market

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Instruments and Fixed Rate Debt Instruments swapped for floating rate
returns).

Reliance Regular Savings Fund Debt Option: The primary investment

objective of this plan is to generate optimal returns consistent with moderate
level of risk. This income may be complemented by capital appreciation of the
portfolio. Accordingly investments shall predominantly be made in Debt &
Money Market Instruments.

Reliance Regular Savings Fund Equity Option: The primary investment

objective is to seek capital appreciation and or consistent returns by actively
investing in equity / equity related securities.

Reliance Regular Savings Fund Hybrid Option: The primary investment

objective is to generate consistent return by investing a major portion in debt
& money market securities and a small portion in equity & equity related
instruments.

Reliance Growth Fund aims to achieve long term growth of capital by

investment in equity and equity related securities through a research based
investment approach.

Reliance Vision Fund aims to achieve long term growth of capital by

investment in equity and equity related securities through a research based
investment approach.

Reliance Equity Opportunities Fund aims to generate capital appreciation

& provide long term growth opportunities by investing in a portfolio constituted
of equity securities & equity related securities

Reliance Banking Fund aims to generate continuous returns by actively

investing in equity / equity related or fixed income securities of banks.

Reliance Diversified Power Sector Fund seek to generate consistent

returns by investing in equity / equity related or fixed income securities of
Power and other associated companies

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Reliance Pharma Fund aims generate consistent returns by investing in
equity / equity related or fixed income securities of Pharma and other
associated companies.

Reliance Media & Entertainment Fund to generate consistent returns by

investing in equity / equity related or fixed income securities of media &
entertainment and other associated companies.

Reliance Index Fund-Sensex Plan aims to replicate the composition of the

Sensex, with a view to endeavor to generate returns, which could
approximately be the same as that of Sensex.

Reliance Index Fund-Nifty Plan aims to replicate the composition of the

Nifty, with a view to endeavor to generate returns, which could approximately
be the same as that of Nifty.

Reliance NRI Equity Fund aims to generate optimal returns by investing in

equity and equity related instruments primarily drawn from the Companies in
the BSE 200 Index.

Reliance Equity Fund: The primary investment objective of the scheme is to

seek to generate capital appreciation & provide long-term growth
opportunities by investing in a portfolio constituted of equity & equity related
securities of top 100 companies by market capitalization & of companies
which are available in the derivatives segment from time to time and the
secondary objective is to generate consistent returns by investing in debt and
money market securities.

RESEARCH DESIGN and Methodology:

A research design is the detailed blueprint used to guide a research study
toward its objectives.

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The process of designing a research study involves many interrelated
decisions. The most significant decision is the choice of research approach,
because it determines how the information will be obtained.

To design something also means to ensure that the pieces fit together. The
achievement of this fit among objective, research approach, and research
tactics is inherently an iterative process in which earlier decisions are
constantly reconsidered in light of subsequent decisions.

Research design

 Defining the purpose of research

 Determining the data required and their resources.

 A Questionnaire was designed to get detailed information.

 Face to face interviews was taken were conducted to get the

required information.

 Analysis of Data

 Drawing Conclusions

 Suggestions/ Recommendation

Research Methodology:

Title of the Project Study:

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A project study conducted for “Identifying alternate channels of distribution for
the Reliance mutual funds”.

Project Duration: -- 2 Months

 In the first two weeks of my project I had gone through the existing
work which has been done in this field. I thoroughly studied the published
literature in different magazines & journals I had also referred many books
and browsed the internet to collect secondary data. In this period I started
preparing for the field work and started identifying my target audience.

 In the next five weeks time period I started my field work and I
moved around the market and collected data from the targeted
audience by making them, fill-up the questionnaire made for them with
the help of my Project Guide. This field work had taken around 4-5 weeks
time as my Sample Size was 200.

 In the last week of my project I completed my project report with the

help of my Project Guide.

The project was a unique experience for me for tracking down information
from various types of people and all through it is a vast learning process.
There were several things that I had made out and learnt out of this
project of mine.

OBJECTIVE OF THE PROJECT:

This project is an attempt to deep and thorough approach toward

development of channel relationship for “Reliance Mutual Funds”.

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As in the present scenario of business world, the companies need to develop
a wide network of its distributors and need to have a smooth relationship with
them.

So this project is tending to find out that what actually the mutual fund is,
history regarding it, its types and other facts and figures related to it. Some
points are listed below which can be considered as the objective of this
project topic:-

 To identify activities that has the greatest potential benefits in increasing

the network.

 To discover what is of most concern to your client, and therefore the

greatest risk of loosing them.

 To learn the reasons your clients stay to continue and improve in these
areas.

 How to improve your organization with the specific feedback from the tool
and become more attractive to current and potential clients.

Problem Analysis:

This project aims to identify alternate channels of distribution for the

‘Reliance mutual funds’, to increase the sale of the various funds being
offered by it. A modest attempt has been made to study and understand the
behavior and perception of the target audience, about mutual funds and
distribution channels for the same.

Approach to the problem:

All the objectives were taken into account before preparing the questionnaire.
The questionnaire was prepared on scientific basis, deliberately hidden
questions were asked to get the required information.

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Besides this, extensive research was done. Information was extracted from
other sites of different companies and various other mutual fund associations.

Though complete focus was kept, to broaden the horizon of research topic,
attempt was made to know the opportunities and threats related to other
players in mutual funds.

Strategic planning for the Research:

 To familiarize with a business organization.

 To familiarize with the different departments in the organization and
their functioning.
 To enable to understand how the key business process are carried out in
organizations.
 Understand how information is used in organization for decision making at
various levels.
 To know the history about the company.
 To get clear cut idea about the management and administration.
 To know about the industrial relation in the company.
 To analyze the strength and weakness.
 To get clear cut idea about the various departments and functions.
 To give findings and solutions.
 To relate theory with practice.

Problem Definition

A problem exists when the decision-maker faces uncertainty regarding

which action to adopt in the situation. If only one action is available (or none

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at all) or if there is certainty about the outcomes of the alternatives, there

really is no problem.

Defining a problem is a situation where:

1) The decision-maker has not yet determined how to exploit an

opportunity or

2) There are difficulties that are currently faced or are anticipated.

For instance the marketing manager may state that sales of a product have
fallen by 25% because its price is too high & hence may ask the researcher to
throw more light on “what is a more effective price”? Actually the decline in
sales may be due to any other factor or factor like poor product quality,
competitor’s action, poor salesmanship etc. The research dealing solely with
the price may be able to solve the problem correctly.

The existence of a disorder or a problem is the reason why the research is

needed. Once the problem is identified/disorder is located, the researcher
may set the projects objectives. The project’s objectives are the specific
purpose or goal of the research, since the objective flow from the disorder
must precede the selection of the objectives.

Type of Research:

The different research designs can be categorized into research design in

case of:

 Exploratory Research Studies.

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  Descriptive And Diagnostic Research Studies
 Hypothesis- Testing Research Studies (Experimental Studies)

Exploratory Research Studies:

 Also termed as formulative research studies.
 Purpose of such studies is formulating a problem for more precise
investigation.
 Major emphasis is on the discovery of ideas and insights.
 Research design has to be flexible enough to provide opportunity for
considering different aspects of a problem under study.
 Inbuilt flexibility is essential.

Following are three methods in the context of research design for

studies:
 The survey of concerning literature
 The experience survey
 The analysis of insight –stimulating examples.

The survey of concerning literature:

This happens to be the most simple and fruitful method of formulating the
research problem. Hypothesis stated by earlier workers may be reviewed and
their usefulness be evaluated as a basis for further research. In this way
researcher should review and build upon the work already done by others, but
in cases where hypothesis has not been formulated hi task is to review the
available material for deriving the relevant hypothesis from it.

Experience Survey:
It is the survey of people who have had practical experience with the survey
to be studied. The object is to obtain insight into the relationship between
variables and new ideas relating to the research problem. For such a survey
people who are competent and can contribute new ideas may be carefully

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selected as respondents to ensure representation of different of experience.
The respondents selected can be interviewed by the investigator. An
interview schedule is prepared by the researcher for systematic questioning
of informants. The interview must ensure flexibility in the sense that the
respondents should be allowed to raise issues and questions which the
investigator has not previously considered. The interview may last for few
hours.

Hence, it its often considered desirable to send a copy of the questions to be

discussed to the respondents well in advance. This gives an opportunity to
the respondents for doing some advance thinking over various issues
involved so that, at the time of interview they may be able to contribute
effectively. Thus, an experience survey may enable the researcher to define
the problem more concisely and help in formulation of research hypothesis.
This survey may as well provide information about the practical possibilities
for doing different types of research.

Analysis of insight stimulating examples:

This is a fruitful method for suggesting hypothesis for research. It is

particularly suitable in areas where there is little experience to serve as a
guide. It consists of the intensive study of the selected instances of the
phenomenon in which on is interested. For this purpose the existing records
may be examined the unstructured interviewing may take place or some other
approach may be adopted. Attitude of the investigator, the intensity of the
study and the ability of the researcher to draw together diverse information
into a unified interpretation are the main features which make this method an
appropriate procedure for evoking insights.

Descriptive And Diagnostic Research Studies

Descriptive research studies are concerned with describing the characteristics

of certain individuals or a group. E.g. studies concerning whether certain
variables are associated.

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Diagnostic research studies determine the frequency of with which something
occurs or its association with something else. E.g. studies concerned with
specific predictions, with narration of facts and characteristics concerning
individual, group or situation.
The descriptive as well as diagnostic research studies share common
requirements. In both the studies, the researcher must be able to define
clearly, what he wants to measure and must find adequate methods of
measuring it.

The aim is to obtain complete and accurate information, hence, the procedure
to be used must be carefully planned. It should make enough provision for
protection against bias and must maximize reliability. The design must be
rigid and not flexible.

Following should be focused:

 Formulating the objective of the study (what is the study about and
why is it being made).
 Designing the methods of data collection (what techniques of
gathering data will be adopted).
 Selecting the sample (how much material will be needed).
 Collecting the data (where can the required data be found and with
what time period should the data be related).
 Processing and analyzing the data.
 Reporting the findings.

Following are the steps involved in both the studies:

Step 1.Specify the objectives with sufficient precision to ensure that ht data
collected is relevant.

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Step 2.Select the methods by which the data are to be obtained. E.g.
techniques of collecting the data must be devised.

In most studies researcher takes down samples and then wishes to make
statements about the population on the basis of the sample analyses.

 The problem of designing samples should be tackled in such a form

that the samples may yield accurate information with a minimum
amount of research effort.
 To obtain data free from errors, it is necessary to supervise closely
the staff of field workers, as they collect and record information.
 As data are collected, they should be examined for completeness,
comprehensibility, consistency and reliability.
 The data collected must be processed and analysed.
 This includes steps like coding the interview replies, observations,
etc.; tabulating the data; and performing several statistical
computations.
 The processing and analyzing procedure should be planned in detail
before actual work is started.
 To avoid error in coding, the reliability of coders needs to be
checked.
 Similarly, the accuracy of tabulation may be checked by having a
sample of tables re-done.
 Last of all comes the task of reporting the findings, i.e.
communicating the findings to others and the researcher must do it in
an efficient manner.
 The layout of the report needs to be well planned so that all things
relating to the research study may be well presented in a simple and
effective style.
 Thus, the research design in the case of descriptive/diagnostic
studies is a comparative design and must be prepared keeping the
objective(s) of the study and the resources available.

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  However, it must ensure the minimization of bias and maximisation of
reliability of the evidence collected.
 It can be referred to as a survey design since it takes into account all
the steps involved in a survey concerning a phenomenon to be
studied.

Hypothesis: Testing Research Studies (Experimental

Studies):

 Hypothesis-tested research studies (experimental studies) are those

where the researcher tests the hypothesis of casual relationship
between variables.
 Such studies require procedures that will not only reduce bias and
increase reliability, but will permit drawing inferences about casuality.
 Professor R.A. Fisher begun such designs when he was working at
Rothamsted Experimental Station (Centre for Agricultural Research
in England).
 Professor Fischer found that by dividing agricultural fields or plots
into different blocks and then by conducting experiments in each of
these blocks, the information collected and inferences drawn happen
to be more reliable.

Discussion of the Information Needs:

The sources of information are young students, office goers, chartered
accountants and tax consultants with reasonable amount of internet usage
and awareness. The targeted audience was easily available and information
asked for was easily available. The main information needed was which types
of funds they preferred , reasons for opting those funds and what drives there
inclination towards particular types of funds .

Sampling Process And Design:

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Sampling Size: -- 200

I had conducted In-depth interviews under which 210 CAs and Tax
Consultants were interviewed to get insights about investment patterns. As far
as this research is concerned secondary data is not required & will be of no
relevance because no such research is conducted in Jaipur and other State’s
data will be of no use. Hence, we have not taken them into account

Data Collection Technique:

Data is collected through primary research conducted in the city among CAs
and tax consultants. The survey was conducted in the city malls where people
usually have free time, to interact. The majority of the respondents were
young students, businessmen and office goers. A questionnaire of 14
questions was used to gather their opinion.

OBSERVATION:

Definition:

 It is the process of recognizing people, objects and occurrences rather

than asking for information.
 Instead of asking consumers what brand they buy the researchers arrange
to observe what products are brought.
 E.g. a large food retailer tested a new slot-type shelf arrangement for canned
foods by observing shoppers as they used the new shelves.

Advantages of observation method:

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 When the researcher observes and records events, it is not necessary to
rely on the willingness and ability of respondents to report accurately.
 The biasing effects of interviewers or their phrasing of the questions is
either eliminated or reduced.
 Data collection by observation is more objective and hence more
accurate.

Disadvantages of observation method:

 Researchers have recognized the merits of observations opposed to

questioning, yet the vast majority of researchers continue to rely on the
use of a questionnaire.
 The most limiting factor in the use of observation is the inability to observe
things such as attitudes, motivation, etc.
 Events of more than short-term duration such as a family’s use of leisure
time and personal activities such as brushing of teeth are better discussed
with questionnaires.

METHODS OF OBSERVATION:

Observational studies can be classified on five bases:

 Whether the situation in which the observation is made is natural or

contrived
 Whether the observation is obtrusive or unobtrusive.
 Whether the observation is structured or unstructured
 Whether the factor of interest is observed directly or indirectly
 Whether observers or mechanical means makes observations.

Direct observation:

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  When an observer is stationed in a grocery store to note how many
different brands of canned soup each shopper picks up before
selecting one, there is unobtrusive, direct observation in a natural
situation.
 If a camera is positioned to record shopping actions, observation is
by mechanical means
 If the observer counts the specific cans picked up, the observation is
structured.
 If the observer has to go about observing how shoppers go about
selecting a brand of soup, the situation is unstructured.

Structured direct observation:

 It is used when the problem at hand has been formulated precisely
enough to enable researchers to define specifically the observations
to be made
 E.g. Observers in a supermarket might note the number of soup
cans picked up by each customer. A form can easily be printed for
simple recordings of such observations.
 Not all observations are as simple as the above but experiments
have shown that even observers with a different viewpoint on a given
question tend to make similar observations under structured
conditions.

Unstructured, direct observation:

 Observers are placed in situations and observe whatever they deem
significant.
 E.g. In an effort to find ways of improving the service of a store,
observers may mingle with customers in the store and look for
activities that suggest service problems. No one can observe
everything that is going on, hence the observer must select certain
things which he can make a note of. Customers standing at a
counter with annoyed faces may be observed as irritated because of
the service or lack of it.

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Contrived observation:
 When researchers rely on natural direct observation it results in a lot
of wasted time while they wait for the desired events to take place.
To reduce this, it may be more desirable to contrive situations so that
observations may be made more efficiently.
 E.g. To study the bargaining between an automobile salesman and a
customer, the observer can pose as a customer and take various
bargaining attitudes from the most-eager-to-buy to the toughest price
seeking. In each case the observer notes the salesperson’s
response. As long as the sales person believes the researcher to be
a bonafide customer, there is no bias in the observation.
 Contrived observations often have a validity and economic
advantage.

Indirect observation:
One type of observation focuses on the physical traces left by the
factors of interest.
These traces are of two types:
 Accretions left.
 Erosion.
Accretions involve studies such as the observation of liquor bottles in
the Erosion.
 Accretions involve a trash to eliminate the liquor consumption in
cities without liquor stores.
 Erosion observations are less frequent. An example would be the
study of a relative readership of different sections of an encyclopedia
by measuring the wear and tear on the pages.
 Observation of the results of past actions will not bias the data if
done on a one-time basis.
 E.g. Pantry audits determine what purchases have been made in the
past.

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Observation of records:

 Whenever researchers use data collected for another purpose, they

are employing the observation method in a manner similar in
character to the observation of physical trace
 The records of previous activities such as population census are
physical traces of previous periods.

Survey method:

Definition:

Survey research is one of the most important areas of measurement in

applied social research. The broad area of survey research encompasses any
measurement procedures that involve asking questions of respondents.

Types of surveys:

 Surveys can be divided into two broad categories: the questionnaire

and the interview.
 Questionnaires are usually paper-and-pencil instruments that the
respondent completes.
 The interviewer based on what the respondent says completes
interviews.

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 Questionnaires:

Mail survey: when a respondent receives a questionnaire by mail it is

known as mail survey.

Advantages:
 They are relatively inexpensive to administer.
 You can send the exact same instrument to a wide number of people.
 They allow the respondent to fill it out at their own convenience.

Disadvantages:
 Response rates from mail surveys are often very low.
 Mail questionnaires are not the best vehicles for asking for detailed written
responses.

Group-administered questionnaire:

 A sample of respondents is brought together and asked to respond to a

structured sequence of questions.
 Traditionally, questionnaires were administered in-group settings for
convenience.
 The researcher could give the questionnaire to those who were present
and be fairly sure that there would be a high response rate
 If the respondents were unclear about the meaning of a question they
could ask for clarification.
 And, there were often organizational settings where it was relatively easy
to assemble the group (in a company or business, for instance).

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 Interviews:
Interviews are a far more personal form of research than questionnaires

Personal interview:
The interviewer works directly with the respondent

Advantages
 The interviewer has the opportunity to probe or ask follow-up questions.
 Interviews are generally easier for the respondent, especially if what is
sought is opinions or impressions

Disadvantages:
 Interviews can be time consuming and they are resource intensive.
 The interviewer is considered as a part of the measurement instrument
and interviewers have to be well trained in how to respond to any
contingency.

Telephone Interview:
Telephone interviews enable a researcher to gather information rapidly.

Advantages
 They allow for personal contact between the interviewer and
respondent.
 They allow the interviewer to ask follow-up questions

Disadvantages

- 79 -
 Many people don't have publicly-listed telephone numbers. Some don't
have telephones.
 People often don't like the intrusion of a call to their homes.
 Telephone interviews have to be relatively short or people will feel
imposed upon.

Selecting the survey method:

Selecting the type of survey you are going to use is one of the most critical
decisions in many social research contexts. You have to use your judgment to
balance the advantages and disadvantages of different survey types.

Following are the issues that the researcher must look into before conducting
a research.

Sampling issues:

 What data is available? What information do you have about your

sample? Do you know their current addresses? Their current phone
numbers? Are your contact lists up to date?
 Can your respondents be located?
 Who is the respondent in your study? If the specific individual is
unavailable is the researcher willing to interview another?
 Are response rates likely to be a problem?

Questions:

 What types of questions can be asked? Are they personal or require a

detailed answer?
 Can question sequence be controlled?

- 80 -
 Your survey is one where you can construct in advance a
reasonable sequence of questions? Or, are you doing an initial
exploratory study where you may need to ask lots of follow-up
questions that you can't easily anticipate.
 Cost is often the major determining factor in selecting survey type.
You might prefer to do personal interviews, but can't justify the high
cost of training and paying for the interviewers. You may prefer to send
out an extensive mailing but can't afford the postage to do so.
 Do you have the facilities (or access to them) to process and manage your
study? In phone interviews, do you have well-equipped phone surveying
facilities? For focus groups, do you have a comfortable and accessible
room to host the group? Do you have the equipment needed to record and
transcribe responses
 Some types of surveys take longer than others. Do you need
responses immediately (as in an overnight public opinion poll)? Have
you budgeted enough time for your study to send out mail surveys and
follow-up reminders, and to get the responses back by mail? Have you
allowed for enough time to get enough personal interviews to justify

Types of questions:

Survey questions can be divided into two broad types: structured and
unstructured

Dichotomous Questions:
When a question has two possible responses, we consider it dichotomous.
 Surveys often use dichotomous questions that ask for a Yes/No,
True/False or Agree/Disagree response.

E.g. please enter your gender

Male female

- 81 -
 SECONDARY DATA:
Secondary data are data that were developed for some purpose other than
helping to solve the problem at hand. Secondary data can be gathered
quickly and is inexpensive as compared to primary data. Even when reports
or publications are ordered, the time involved is generally less than the time
required to collect original data.

A thorough search on secondary data will often provide sufficient information

to resolve the problem. In some cases where the secondary data cannot
solve the problem, they can often help to structure the problem and eliminate
some variables from consideration. Or, it may be possible to utilize the
secondary data in conjunction with primary data.

Secondary data can provide a complete or partial solution to many problems

and help in structuring other problems. They tend to cost substantially less
than primary data and can be collected in less time also.

Problems Encountered with Secondary Data

Before secondary data are applied to a particular marketing problem, their

relevance and accuracy must be assessed.

Relevancy refers to the extent to which the data fits the information needs of
research problem. Even when the data covers the same general topic as that

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required by the research problem, they may not fit the requirements of the
problem.

Three general problems reduce the relevance of data that would otherwise be
useful. They are:

 There is often a difference in the units of measurement. E.g. many retail

decisions require detailed information on the characteristics of the
population within their trade area. However, the available population
statistics may focus on countries, cities or census tracts that do not match
the trade area of the retail outlet.
 The second general problem that can reduce relevancy of secondary data
is the definition of classes. E.g. a manufacturer may have a product that
appeals to children 8 to 12 years old. If available secondary data are
based on age categories 5 to 9 and 10 to 14, the firm will have a hard time
utilizing it.
 The final major factor that is affecting relevancy is time. Generally,
research problems require current, if not future, data. Most secondary
data, on the other hand, have been in existence for some time. E.g.
complete census reports are not available for several years. Data are
frequently collected one to three years prior to its publication.

 Accuracy is the second major concern of the user of secondary data. The
real problem is not inaccuracy; it is the difficulty of determining how
inaccurate the data is likely to be.

 While using secondary data, the original source should be used if

possible. This is important because, the original report is generally more
complete than the second or third reports. Secondly using original source

- 83 -
 allows the data to be examined in context and may provide a better basis
for assessing the competence and motivation of the collector.

Sources of Secondary Data:

There are two general sources of secondary data – internal sources and
external sources. Internal data are available within the firm whereas external
sources provide data that are developed outside the firm.

Internal Sources:
Internal sources include sales record, sales force reports, operating
statements, budgets, previous research reports and the likes. The most useful
type of internal information is generally sales data. But, unfortunately many
companies do not collect or maintain sales data in the manner that allows the
researcher to tap their full potential. Such records, if properly utilized, allows
the researcher to isolate profitable and unprofitable customers, territories, and
product lines, to identify developing trends and perhaps to measure the
effects of manipulations of marketing mix variables.
Internal data must be collected in a usable format and must be analyzed to be
of value. Many firms have useful but unutilized data. By changing the format
of collection forms (sales invoices, salesman call reports, etc) other useful
data can be often collected. They are available and inexpensive; internal data
are the best information buy.

External Sources
Numerous sources external to the firm may produce data relevant to the
firm’s requirements. There are four types of general external secondary
information, they are:
 Trade associations
 Government Agencies
 Other published sources, and
 Syndicated services.

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Trade Associations:

Trade associations frequently publish or maintain detailed information on

industry sales, operating characteristics, growth patterns and the like. They
may also conduct special studies of factors relevant to their industry. Since
trade associations have good reputation for not revealing data on individual
firms as well as good working relationships with the firms in the industry, they
may be able to secure information that may be unavailable to other
researchers. These materials may be published in the form of annual reports
or as special reports.

Government agencies:

Federal, state and local government agencies produce a massive amount of

data that is of relevance to marketers. The federal government maintains five
major agencies whose primary function is the collection and dissemination of
statistical data, they are:

 Bureau of Census
 Bureau of Labor Statistics
 National Center for Educational Statistics
 National Center for Health Statistics, and
 Statistical Reporting Service, Department of Agriculture

There are also a number of specialized analytic and research agencies,

numerous administrative and regulatory agencies.

These sources produce two types of data:

 Statistics focused on people are produced. These include
demographics, vital and health statistics, labor and social conditions.

- 85 -
  The second broad category focuses on economic activity: commerce,
finance, agriculture and the like.

Both types of data are widely used by business firms as an aid in decision-
making. The data available may be standardized, such as census data, or it
may be in the form of special reports. Census publications are one of the
most widely used sources of secondary data.

Other published Sources

There is virtually endless array of periodicals, books, dissertations,

newspapers and the like, that contain information relevant to marketing
decisions.

Syndicated Services

A number of firms regularly collect data of relevance to marketers that they

sell on a subscription basis. Two types of syndicated services are widely used
by marketing researchers – channel information and omnibus surveys.

Channel information is available to the firm at four levels – manufacturers,

intermediaries, retailers and consumers. A manufacturers sales and shipment
are generally available only through the firms own internal records. Therefore,
although a firm can monitor its own activities at this level, it can only infer the
output of other manufacturing firms.
At the intermediary or wholesale level, several syndicated firms provide
information on the flow of products and brands to retail outlets. Store audits
provide data on the movement of brands through retail outlets.

Omnibus surveys collect data that are useful to a number of subscribers

from a series of independent samples.

- 86 -
 Prospects and scope of research:

Area wise Identifying Potential Prospective distributors, which leads to

increase the business.

THE PROSPECTS:
The Starting point is every one who might conceivably buy the
product that is called suspects and from these the company determines the
most likely prospects which it hopes to convert into first time customers then
repeat customers and then clients.
Reliance Mutual fund is targeting the Charted accountants and
Tax Advisors to increase its’ channel of distribution, in this process of
expansion new prospects are needed to be tapped.
Following figure shows the main steps of attracting and keeping
customers.
Suspects

Prospects Disqualified Prospects

First Time Customers

Repeat Customers

Clients
Inactive or ex customers

Members

Advocates

Partners

- 87 -
 Marketing
Marketing planning
planning and
and information
information system
system
Planning
Planning system
system Information
Information system
system
Strategic
Strategic plans
plans Database
Database
Tactical
Tactical plans
plans DSS
DSS

1.
RESEARCH
1. Agree
Agree on
on Research
Research Purpose
Purpose
PROCESS:
Problems
Problems or
or opportunities
opportunities STEPS:
Decision
Decision alternatives
alternatives
Research
Research users
users

2.
2. Establish
Establish Research
Research Objectives
Objectives

Research
Research questions
questions
Hypotheses
Hypotheses
Boundaries
Boundaries of
of study
study

ESTIMATE
THE VALUE
OF
INFORMATIO DO
DO NOT
NOT
N CONDUCT
CONDUCT MR
MR
Is benefit >
cost?

4.
4. Design
Design the
the research
research

Choose
Choose among
among alternative
alternative research
research approaches
approaches
Specify
Specify the
the sampling
sampling plan
plan
Design
Design the
the experiment
experiment
Design
Design the questionnaire
the questionnaire

5.
5. Collect
Collect the
the data
data

6.
6. Prepare
Prepare and
and analyze
analyze the
the data
data

7.
7. Report
Report the
the research
research results
results and
and provide
provide strategic
strategic
recommendations.
recommendations.

- 88 -
 LIMITATION OF THE Project:

Many constraints were involved in doing this study. Some of them are:-

 The most signified limitation has been the individuals involved in this
study had a little experience.

 The sample size selected for the survey was too small as compared
to large population.

 The project was carried out only in the Jaipur city so findings on data
gathered can be best true for Jaipur only and not applicable to other
parts of state and country.

 Our reliance was made on the primary data.

 Time and money are critical factors limiting this study.

 The data provided by the prospects may not be 100% correct as they
too have their limitations.

 Finding and suggestion have been given from personal point of view.

 Due to work pressure, detailed interaction with the chartered

accountants and tax consultants was not possible.

 Some people were not willing to disclose the investment profile.

 The biased ness was being taken care of.

 The area of sample was decided after taking into consideration the
major factors like:
 Availability of investors
 Approachability.
 Time available with investor for interaction, etc.

- 89 -
 Data analysis ana interpretation:

Now after exploratory research we have given following weight to

different variables:

Variables Weights
Total no. of CAs 104
Interested 45
Not interested 38
Already a distributor 21

No. of tax Consultants 96

Interested 54
Not interested 21
Already a distributor 21

Not interested already distributors intere sted

RESPONSES
Not
interested,
interested, 59, 33%
99, 47%

already
distributors
42, 20%

- 90 -
 Distributors Not interested Interested

Responses

60

40

Interest ed 20
Not interest ed

Distribut ors

CA's TC's
0
Distributors 21 21
Not interested 38 21
Interested 45 54

Results of The Questionnaire: Data Score Sheet Total

This is the score sheet generated after collecting the required data by the way
questionnaire. There were 200 participants who have filled the questionnaire.
In this questionnaire there were 14 multiple choice questions and there were
no open ended questions because to make questionnaire a bit easy for the
respondents. No personal information was taken from the participants as to
make this whole survey anonymous.

Ans\Qu
1 2 3 4 5 6 7 8 9 10 11 12 13 14
es
10 15 17 17
A 70 77 61 44 91 45 46 44 64 88
4 7 2 7
12
B 96 71 79 29 95 71 43 98 79 49 28 23 89
5
C - 36 44 14 27 14 29 - 13 27 27 - - -
D - 23 - - 20 - 55 - - 20 20 - - -
E - - - - 60 - - - - 30 40 - - -
F - - - - 20 - - - - - - - - -
20 20 20 20 20 20 20 20 15 20 20 20 20 17
TOTAL
0 0 0 0 0 0 0 0 7 0 0 0 0 7

- 91 -
 Data Interpretation of Questionnaire:

1. First question was to determine whether the participant is a practicing C.A.

or, whether is he involved in tax consulting business. Here 104
participants declared that they were a practicing Chartered Accountant
and 96 declared that they were involved in tax consulting business.

2. Second question was to determine which segment of people they deal

with in their business out of which majority of the respondents declared
they mainly deal with “Corporate Clients” and the “Individual
Entrepreneurs”.

3. Third question was to determine the profile of the clients whether they are
risk taker or risk averse so in this questions the majority of the response
was for the risk taker so we can say that the general number of corporate
and business class people are risk takers.

4. Fourth questions was to determine the average age group of their clients
so the majority of the response was for the 35-45 age group of people.

5. Fifth question was to determine the most important factor which they
consider while advising there clients so the majority of respondents have
mentioned the good service and risk factor which was mostly used by
them while giving advice.

- 92 -
6. Sixth questions was to check whether Mutual Funds is a good option for
investment or not so almost fifty percent of respondents have consider
that mutual funds are better and safe for making investments.

7. This questions was to determine whether they advice their clients to invest
in mutual funds so majority of respondents mentioned that they sometimes
advice them about Mutual Funds.

8. This question was to determine whether they get queries from their
customers about the tax saving mutual funds or not so the almost all of the
respondents agreed to the fact that they receive various queries about
mutual funds.

9. This questions was to determine whether their response to there clients

was positive, negative or neutral so majority of the respondents have
shown their positive response to their clients about the mutual funds.

10. This question was to determine which investment instruments was

suggested to their clients for tax planning purposes so the majority of
response was for the Mutual Fund ELSS.

11. This question was to determine the best investment instrument for
financial planning on the basis of risk adjusted return so the majority of the
response was for the tax saving mutual funds.

- 93 -
12. This question was to check whether the respondents are aware of AMFI
certification or not so majority was the participants were already aware of
AMFI certification.

13. This question was to determine whether they like if they are associated
with mutual fund industry or not so some of them were already associated
with mutual fund industry and majority of them were interested and wanted
to be a part of Mutual Fund industry.

14. This question was to determine in which way they would appreciate if the
AMC approaches them so half of the participants liked if they are
personally visited and the other like if they are approached by telephone.

Factor Analysis:

Now we have taken 7 attributes that were having significant impact on

distributors’ behavior. We tried to group these attributes into major groups.
Through factor analysis, we have grouped these attributes. Factor analysis
has grouped attributes into three groups.

1 2 3
Profit Parking 0.8 0.37 -0.25
Risk 0.08 0.08 0.85
Motive 0.72 0.3 0.04
Tax Benefit 0.24 0.91 0.48
Liquidity -0.58 0.13 0.91
Flexibility 0.48 -0.06 0.77
Awareness 0.91 0.41 0.13

- 94 -
Compone Attributes Label
nt
1 Profit Parking, Motive, Awareness Value For Money

2 Tax Saving, Economy

3 Risk, Liquidity, Flexibility Features

From factor analysis we can say that there seven factors which have impact
on distributors’ Behavior while deciding about any selling Option. Below
diagram shows factors according to their importance.

- 95 -
There are some special characteristics shown by above categories of
Prospective CAs and Tax consultants:

Name Of The Profile Characteristics

Young, Vital, Enthusiastic,
Experiencers Impulsive, Invest comparatively
High Proportion of Income in
new things.
Believers Conservative, Conventional,
Traditional, & Favor familiar
options.
Strivers Uncertain, Insecure, Approval
seeking, & Resource
Constrained.

Cluster Analysis

The following table shows the result of clustering. We stopped at three

clusters as after that no major differences can be seen in the attribute-profile
being generated for the distributors.

Cluster Cluster Cluster

1 2 3
Profit Parking 2.21 2.78 2.31
Motive 2.59 2.21 3.21
Tax Saving 2.93 2.75 1.84
Risk 2.17 2.94 1.8
Liquidity 1.54 2.39 2.55
Flexibility 1.09 1.87 2.03
Awareness 3.33 2 2.36
No. of Respondents 69 42 99

- 96 -
 SWOT Analysis

A type of fundamental analysis of the health of a company by

examining its strengths(S), weakness (W), business opportunity (O),

and any threat (T) or dangers it might be exposed to.

STRENGTHS:

 Brand strategy: as opposed to some of its competitors (e.g. HSBC),

Reliance ADAG operates a multi-brand strategy. The company operates
under numerous well-known brand names, which allows the company to
appeal to many different segments of the market.

 Distribution channel strategy: Reliance is continuously improving the

distribution of its products. Its online and Internet-based access offers a
combination of excellent growth prospects and its retail direct business
also saw growth of 27% in 2002 and 15% in 2003.

 Various sources of income: Reliance has many sources of income

throughout the group, and this diversity within the group makes the
company more flexible and resistant to economic and environmental
changes.

 Large pool of installed capacities.

 Experienced managers for large number of Generics.

 Large pool of skilled and knowledgeable manpower.

 Increasing liberalization of government policies.

- 97 -
WEAKNESS:

 Emerging markets: since there is more investment demand in the United

States, Japan and the rest of Asia, Reliance should concentrate on these
markets, especially in view of low global interest rates.

 Mutual funds are like many other investments without a guaranteed

return: there is always the possibility that the value of your mutual fund
will depreciate. Unlike fixed-income products, such as bonds and Treasury
bills, mutual funds experience price fluctuations along with the stocks that
make up the fund. When deciding on a particular fund to buy, you need to
research the risks involved - just because a professional manager is
looking after the fund, that doesn't mean the performance will be stellar.

 Fees: In mutual funds, the fees are classified into two categories:
shareholder fees and annual operating fees. The shareholder fees, in the
forms of loads and redemption fees are paid directly by shareholders
purchasing or selling the funds. The annual fund operating fees are
charged as an annual percentage - usually ranging from 1-3%. These fees
are assessed to mutual fund investors regardless of the performance of
the fund. As you can imagine, in years when the fund doesn't make
money, these fees only magnify losses.

- 98 -
OPPORTUNITIES:

 Potential markets: The Indian rural market has great potential. All the
major market leaders consider the segments and real markets for their
products. A senior official in a one of the leading company says foray into
rural India already started and there has been realization that the rural
market is both price and quantity conscious.

 Entry of MNCs: Due to multinationals are entering into market job

opportunities are increasing day by day. Also India Mutual Fund majors
are tie up with other financial institutions.

THREATS:

 Increased Competition: With intense competition by so many local

players causing headache to the current marketers. In addition to this
though multinational brands are not yet established but still they will soon
hit the mark. Almost 60 to 70% of the revenue is spending on the
management and services.

 Hedge funds: sometimes referred to as ‘hot money’, are also causing a

threat for mutual funds have gained worldwide notoriety for bringing
the markets down. Be it a crash in the currency, stock or bond
market, usually a hedge fund prominently figures somewhere in the
picture.

- 99 -
 Conclusion:

 Jaipur has huge untapped market as far as MF is concerned.

 Mutual Funds are more of an investment option than the speculative

avenue. People tend to gain through long investments rather than
through short term.

 Income funds and ELSS are among the few top funds.

 People are not willing to take much risk and bear loss.

 Broker’s advice matters to as many of the people. Major part of

people preferred self-evaluation as best.

 Most of the people look at the returns that are given by funds some
are in this favour and some people are those who consider Fund
name and current NAV of the fund before investing into a Mutual
Fund.

 Experience was the main factor that made a person invest in mutual
funds

Recommendations and Suggestions

 Brand Equity of Reliance is very high just, so go & hit the market.

 Remove the differences in perception of audience about Private

Company & PSU.

 Create Awareness about Mutual Fund.

 Literate audience about MF as better investment option.

 Run some program to bring MF in final decision set while prospects

decide about distributorship.

- 100 -
 Appendix:

Glossary: Some terms related with Mutual Funds:

ACCOUNT STATEMENT: A document issued by the mutual fund, giving

details of transactions and holdings of an investor.

ADJUSTED NAV (TOTAL RETURN): The net asset value of a unit assuming
reinvestment of distributions made to the investors in any form.

ADVISOR: Your financial consultant who gives professional advice on the

fund's investments and who supervise the management of its assets.

ANNUAL RETURN: The percentage of change in net asset value over a

year's time, assuming reinvestment of distribution such as dividend payment
and bonuses.

APPRECIATION: When an investment increases in value, it appreciates. For

example, a equity share whose price goes from Rs. 20/- to Rs. 25/- has
appreciated by Rs. 5/-.

APPLICATION FORM: Form prescribed for investors to make applications for

subscribing to the units of a fund

ASSET: Property and resources, such as cash and investments, comprise a

person's assets; i.e., anything that has value and can be traded. Examples
include stocks, bonds, real estate, bank accounts, and jewellery.

ASSET ALLOCATION: When you divide your money among various types of
investments, such as stocks, bonds, and short-term investments (also known
as "instruments"), you are allocating your assets. The way in which your
money is divided is called your asset allocation.

- 101 -
ASSET MANAGEMENT COMPANY / AMC / INVESTMENT MANAGER /
Reliance Capital Asset Management Ltd.: It is the investment manager for
the mutual fund. It is a company set up primarily for managing the investment
of mutual funds and makes investment decisions in accordance with the
scheme objectives, deed of Trust and other provisions of the Investment
Management Agreement.

AUTOMATIC INVESTMENT PLAN: Under these plans, the investor

mandates the mutual fund to allot fresh units at specified intervals (monthly,
quarterly, etc.) against which the investor provides post-dated cheques. On
the specified dates, the cheques are realized by the mutual fund and on
realization, additional units are allotted to the investor at the prevailing NAV.

BACK END LOAD: The difference between the NAV of the units of a scheme
and the price at which they are redeemed. The difference is charged by the
fund.

BALANCE SHEET: A financial statement showing the nature and amount of

a company's assets, liabilities and shareholders' equity.

BALANCED FUND: A mutual fund that maintains a balanced portfolio,

generally 40% bonds and 60% equity.

BALANCE MATURITY TENURE OF A SCHEME: In the case of close-ended

schemes, the balance period till the redemption of the scheme.

BENCHMARK: A parameter with which a scheme can be compared. For

example, the performance of a scheme can be benchmarked against an
appropriate index.

BOND: An interest-bearing promise to pay a specified sum of money -- the

principal amount -- due on a specific date.

BOND FUNDS: Registered investment companies whose assets are invested

in diversified portfolios of bonds primarily fixed income securities.

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BROKER: One who guides the investors on one or more investments and
facilitates the process of investment. A broker is a member of a recognized
stock exchange who buys and sells or otherwise deals in securities.

BROKERAGE: The fee payable to a broker for acting as an intermediary in a

transaction. For example, brokerage is payable by a fund for getting fresh
investments from investors.

BULL MARKET: Period during which the prices of stocks in the stock market
keep continuously rising for a significant period of time on the back of
sustained demand for the stocks.

CAPITAL: This is the amount of money you have invested. When your
investing objective is capital preservation, your priority is trying not to lose any
money. When your investing objective is capital growth, your priority is trying
to make your initial investment grow in value.

CAPITAL APPRECIATION: As the value of the securities in a portfolio

increases, a fund's Net Asset Value (NAV) increases, meaning that the value
of your investment rises.

If you sell units at a higher price than you paid for them, you make a profit, or
capital gain. If you sell units at a lower price than you paid for them, you'll
have a capital loss.

CAPITAL GAINS: The difference between an asset's purchased price and

selling price, when the difference is positive. A capital loss would be when the
difference between an asset's purchase price and selling price is negative.

CAPITAL GROWTH: A rise in market value of a mutual fund's securities,

reflected in its NAV per share. This is a specific long-term objective of many
mutual funds. Capital Loss realized when an instrument or asset is sold at a
price below its cost.

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CAPITAL MARKET: The market where capital funds, debt (bonds) and
equity ( stocks) are traded.

CASH & OTHER CATEGORY: A mutual fund asset allocation theory that
includes net cash, short-term securities, and any other securities (such as
options) not included in other asset allocation categories.

CLOSED-ENDED MUTUAL FUND: They are schemes that have a pre-

specified maturity period generally ranging from 2 to 15 years. One can invest
directly in the scheme at the time for the initial issue and thereafter transact
(buy or sell) the units of the scheme on the stock exchanges where they are
listed.

The market price at the stock exchanges could vary from the scheme's net
asset value (NAV) on account of demand and supply situation, unitholders'
expectations and other market factors.

Some close-ended schemes provide an additional option of selling the units

directly to the Mutual Fund through periodic repurchase at NAV related
prices. SEBI Regulations ensure that at least one of the two exit routes are
provided to the investor.

COMMISSION: The broker's or agent's fee for buying or selling securities for
a client. The fee is usually based on a percentage of the transaction's market
value.

CONVERTIBLE BOND: A corporate bond, usually a junior subordinated

debenture, which can be exchanged for shares of the issuer's common stock.

CORPUS: The total amount of money invested by all the investors in a

scheme.

CURRENT INCOME: Monies paid during the period an investment is held.

Examples include bond interest and stock dividends.

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CURRENT LOAD: Load structure applicable currently. Funds keep revising
the load structures from time to time.

CURRENT MARKET VALUE: The amount a willing buyer will pay for a bond
today, which may be at a premium (above face value) or a discount (below
face value).

DEBT /INCOME FUNDS: Funds that invest in income bearing instruments

such as corporate debentures, PSU bonds, gilts, treasury bills, certificates of
deposit and commercial papers. These funds are the least risky and are
generally preferred by risk-averse investors.

DIVERSIFICATION: Diversification is the concept of spreading your money

across different types of investments and/or issuers to potentially moderate
your investment risk.

DIVIDEND: Income distributed by the Scheme on the Units

DIVIDEND PLAN: In a dividend plan, the fund pays dividend from time to
time as and when the dividend is declared.

DIVIDEND REINVESTMENT: In a dividend reinvestment plan, the dividend is

reinvested in the scheme itself. Hence instead of receiving dividend, the unit
holders receive units.

Thus the number of units allotted under the dividend reinvestment plan would
be the dividend declared divided by the ex-dividend NAV.

ENTRY LOAD: It is the load charged by the fund when one invests into the
fund. It increases the price of the units to more than the NAV and is
expressed as a percentage of NAV.

EQUITY SCHEMES: Schemes where more than 50% of the investments are
done in equity shares of various companies. The objective is to provide
capital appreciation over a period of time.

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EXPENSE RATIO: Annual percentage of fund's assets that is paid out in
expenses. Expenses include management fees and all the fees associated
with the fund's daily operations.

EXIT LOAD: It is the load charged by the fund when one redeems the units
from the fund. It reduces the price of the units to less than the NAV and is
expressed as a percentage of NAV.

FACE VALUE: The original issue price of one unit of a scheme

FII: Foreign Institutional Investors, registered with SEBI under the Securities
and Exchange Board of India (Foreign Institutional Investors) Regulations,
1995.

FUND MANAGER: Appointed by the AMC, he is the person who makes all
the final decisions regarding investments of a scheme

GROWTH FUND: A mutual fund whose primary investment objective is long-

term growth of capital. It invests principally in common stocks with significant
growth potential. Growth Stocks of companies that have shown or are
expected to show rapid earnings and revenue growth. Growth stocks have
relatively more risk than other conventional forms of investment.

INCOME FUND: A mutual fund that primarily seeks current income rather
than growth of capital. It will tend to invest in stocks and bonds that normally
pay high dividends and interest.

INDEX FUND: A type of mutual fund in which the portfolios are constructed to
mirror a specific market index. Index funds are expected to provide a rate of
return over time that will approximate or match, but not exceed, that of the
market, which they are mirroring.

INITIAL OFFER/INITIAL ISSUE: Offer of Reliance Income Fund units during

the initial offer period.

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INITIAL OFFER PRICE: The price at which units of a scheme are offered in
its Initial Public Offer (IPO).

ISSUED SHARE CAPITAL: This is the total number of shares a company

has made publicly available multiplied by the total nominal value of the
shares.

A company may have 10 million shares in issue, each with a nominal value
of Re. 1. So the issued share capital is Rs. 10 million.

LIQUIDITY: The ability to buy or sell an asset quickly or the ability to convert
to cash quickly

LIQUID FUNDS /MONEY MARKET FUNDS : Funds investing only in short-

term money market instruments including treasury bills, commercial paper
and certificates of deposit. The objective is to provide liquidity and preserve
the capital

LOAD: A charge that may be levied as a percentage of NAV at the time of

entry into the Scheme/Plans or at the time of exiting from the Scheme/Plans.

LOCK IN PERIOD: The period after investment in fresh units during which
the investor cannot redeem the units.

MANAGEMENT FEE: Money paid by a mutual fund to its investment

manager or advisor for overseeing the portfolio. A management fee is usually
between one-half and one percent of the fund's net asset value.

MATURITY OR MATURITY DATE: The date upon which the principal of a

security becomes due and payable to the security holder.

MATURITY VALUE: The amount (other than periodic interest payment) that
will be received at the time a security is redeemed at its maturity. On most
securities the maturity value equals the par value.

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MUTUAL FUNDS: An investment company that pools money from its
unitholders and invests that money into a variety of securities, including
stocks, bonds, and money-market instruments.

This represents a way of investing money into a professionally managed and

diversified pool of securities that hopefully will provide a good return on
unitholders' money.

MUTUAL FUND REGULATIONS: Securities and Exchange Board of India

(Mutual Funds) Regulations, 1996 as amended up to date and such other
Regulations, as may be in force from time to time, to regulate the activities of
the Mutual Fund.

NAV: Net Asset Value of the Units in each plan of the Scheme is calculated in
the manner provided in this Offer Document or as may be prescribed by
Regulations from time to time.

NAV Change: The difference between today's closing net asset value (NAV)
and the previous day's closing net asset value (NAV).

NAV Change %: The percentage change between today's closing net asset
value (NAV) and the previous day's closing net asset value (NAV)

NET WORTH: A person's net worth is equal to the total value of all
possessions, such as a house, stocks, bonds, and other securities, minus all
outstanding debts, such as mortgage and revolving credit lines.

NET YIELD: Rate of return on a security net of out-of-pocket costs associated

with its purchase, such as commissions or markups.

NON PERFORMING INVESTMENTS: Part of the portfolio investment of a

debt fund which is not making interest payment or principal amount
repayments in time.

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OFFER DOCUMENT OR PROSPECTUS: The official document issued by
mutual funds prior to the launch of a fund describing the characteristics of the
proposed fund to all its prospective investors.

It contains information required by the Securities and Exchange Board of

India, such as investment objective and policies, services, and fees. Individual
investors are encouraged to read and understand the fund's prospectus

OPEN-ENDED SCHEMES/ FUNDS: Scheme of a mutual fund where

purchase or sale of units is allowed on a continued basis. Funds that do not
have any fixed maturity and are continuously open for subscription and
redemption.

The key feature is liquidity. One can conveniently buy and sell the units held
at the NAV related price.

OPENING NAV: The NAV disclosed by the fund for the first time after the
closure of an NFO.

PORTFOLIO: It refers to the total investment holdings of the fund.

PORTFOLIO CHURNING: It refers to the changes made to the portfolio

keeping in view the market conditions. It includes both buying and selling of
holdings and is aimed at giving a better yield to the investor.

REDEMPTION: The paying off or buying back of units of a mutual fund / bond
by the issuer.

REDEMPTION FEE: A fee charged by a limited number of funds for

redeeming, or buying back, fund units.

REDEMPTION PRICE: The price at which a mutual fund's units are

redeemed (bought back) by the fund. The redemption price is usually equal to
the current NAV per unit.

RETURNS: The dividend and capital appreciation accruing to the investor on

the investment held by him

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SCHEME: A mutual fund can launch more than one scheme. With different
schemes, in spite of there being a common trust, the assets contributed by
the unit holders of a particular scheme are maintained and managed
separately from other schemes and any profit/loss from the assets accrue
only to the unit holders of that scheme

SYSTEMATIC INVESTMENT PLAN (SIP): A program that allows an investor

to provide post-dated cheques to the mutual fund to allot fresh units at
specified intervals (usually monthly or quarterly).

On the specified dates, the cheques are realized by the mutual fund and
additional units at the prevailing NAV are allotted to the investor. This enables
him to invest as little as Rs 1000 a month and take advantage of rupee cost
averaging.

SYSTEMATIC WITHDRAWAL PLANS (SWP): A plan offered with some

schemes under which post-dated cheques for fixed amounts (as may be fixed
by the fund) are issued to the investors for monthly, bi-monthly or quarterly
withdrawals.

The withdrawals are as per the requirements of the investor specified by him/
her at the time of investment.

TRANSACTION SLIP: A brief form to be filled at the time of additional

purchases or redemption.

TRUST FUND: The corpus of the Trust, unit capital and all property belonging
to and i or vested in the Trustee

UNIT: A Unit represents one undivided share in the assets of the Schemes.

UNIT HOLDER: A person who holds Unit(s) under any plan of the Scheme.

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VALUATION: Calculation of the market value of the assets of a mutual fund
scheme at any point of time

VOLATILITY: In investing, volatility refers to the ups and downs of the price
of an investment. The greater the ups and downs, the more volatile the
investment

52 WEEK HIGH: The highest market value of a unit (in terms of NAV) during
the immediately preceding 52 weeks.

WEEK LOW: The lowest value of a unit (in terms of NAV) during the
immediately preceding 52 weeks owns, the more volatile the investment.

YIELD: Distributions form investment income, usually expressed as a

percentage of net asset value or market price.

Unlike total return, yield has the single component of investment income and
does not include capital gains distributions or capital appreciation of
underlying shares.

ZERO-COUPON BOND: A bond where no periodic interest payments are

made. The investor purchases the bond at a discounted price and receives
one payment at maturity.

The maturity value an investor receives is equal to the principal invested plus
interest earned compounded semi-annually at the original rate to maturity.

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 Questionnaire for CA’s and Tax Consultants

Name_________________ Age______ Contact

No._____________

Dear Sir/Madam,

“I am a student of MBA 4 th semester. Pursuing my

academic project on mutual funds. I would appreciate if you could
spend some time in filling this questionnaire:”

Q.1. Are you practicing C.A., or are you a tax consultant?

(A)Yes (B) No

Q.2.Which segment of people/ client you deal with?

(A) HNI (B) Corporate (C) Individuals (D) Society, HUF,

Trust

Q.3. What is the profile of your clients who come for investment?

(A) Risk Averse (B) Risk Taker (C) Risk Neutral

Q.4. What is the average age of your clients?

(A) Less than 35 (B) 35-40 (C) 50 Above

Q.5. Which factor do you think is important while you advice your
clients for financial plans?

(A) Risk (B) Tax Benefit (C) Time Period (D) Good Returns.

(E) Good Service (F) All of above

Q.6. Do you think Mutual Fund is a good option for investment?

(A) Yes. (B) No (C) Can’t say.

Q.7. How Often you suggest your clients to invest in mutual funds?

(A) Always (B) Sometimes (C) Rarely (D) Never

Q. 8. Do you get queries from your clients regarding mutual funds/ Tax
saving mutual funds?

(A) Yes (B) No

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Q. 9. What is your response to their queries?

(A). Positive
(B). Neutral
(C). Negative

Q. 10. What are the investment instruments you suggest to your clients
for tax planning purpose?

(A). Life insurance.

(B). Mutual funds ELSS.
(C). Post office schemes.
(D). NSC
(E). PPF.

Q.11. How will you rank the below investment instruments for your
clients financial planning on the basis of risk adjusted return?

(A). Mutual funds

(B). Fixes deposits
(C). Post office deposits
(D). Life insurance policy
(E). Bank share trading.

Q. 12. Are you aware of AMFI certification?

(A). Yes
(B). No

Q.13. Would you like yourself to be associated with the mutual fund
industry?

(A). Yes
(B). No

Q.14. If yes, then in what way you would appreciate the AMC to
approach you?

(A). Telephone
(B). Personal visit.

Thank you for your precious time.

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 Bibliography and Webliography:

Bibliography:

 Annual report of the Company.

 Saxena. Rajan, ″ Marketing Management”, Tata Mcgraw Hill, 2004.
 Kotlar Philip., “Marketing Management”, Pearson Education, India, 2004.
 R.S. Sharma, Business Management, First India Print, India, 2004.
 Portfolio organizer, ICFAI journal.
 Kumar and Day, Marketing research, 9th Edition, John Willy & sons,
2003.
 Insurance Chronicle, ICFAI publications.
 ICFAI Journal of Banking, Mar 2008 Edition.
 Kothari. C.R., “Research Methodology”, New Age Publication, India, 2006.
 Namakumari. Ramaswamy., “Marketing Management” , Macmillan Business
Book, 2007.

Webliography:
 http://www.amfiindia.com
 http://en.wikipedia.org/wiki/Mutual_fund
 http://reliancemutualfund.co.in/
 http://finance.indiamart.com/markets/mutual_funds/
 http://www.mutualfundsnavtindia.com/getfundsmajor.php?
key=Reliance
 http://www.getpaidindia.com/category/mutual-funds/fund-
houses/reliance-mf/
 http://www.investopedia.com
 http://finance.indiamart.com/markets/mutual_funds/
 http://mutualfundsindia.com/fund_portfolio.asp
 http://www.topnews.in/reliance-mutual-fund-plans-nfos-2910

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 http://www.iloveindia.com/finance/mutual-funds/index.html
 http://connect.in.com/profile/Reliance_Mutual_Fund/393400
 http://business.mapsofindia.com/mutual-funds/firms/reliance.html

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