Professional Documents
Culture Documents
Vims
Vims
Organization
Study:
INTRODUCTION:
This project
aims
INDUSTRY PROFILE
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 1997 and June 2003 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.
Aggregate
Investment
In Crores of
Rupees
Period
(Year)
Aggregate
Investment
In Crores of
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.
COMPANY PROFILE:
Introduction:
5
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 Indias 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 Indias 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.
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 Chhattisgarh. In Chhattisgarh they are no. 2 AMC.
Management of Reliance mutual fund wants to expand its feet in
Chhattisgarh, before taking any step they want to understand market &
investor and distributor behavior of SMEs, so they may plan accordingly to
capture Chhattisgarh 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 Chhattisgarh. 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.
AUM Month
Mar 2008
9093794.02
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:
Corporate Governance Policy:
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.
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
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 Indias
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.
10
Particulars
2006-07
2005-06
2004-05
2003-04
Total Income
883.86
652.02
295.69
356.79
733.18
550.61
111.21
105.79
646.18
537.61
105.81
105.79
4915.07
3849.58
1310.08
1271.84
Net Worth
5161.23
4122.46
1437.92
1399.81
Share28.39
29.74
8.31
8.31
(Basic
+(Basic
+(Basic
+(Basic
(Rs. in crores)
Earnings
per
(Rs.)
Diluted)
Book Value per Share
Diluted)
Diluted)
Diluted)
(Rs.)
Dividend (%)
210.12
35%
112.95
30%
112.95
30%
109.96
29%
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 AMC:
About Reliance Capital Asset Management Ltd.:
Reliance Capital Asset Management Limited (RCAM), a company
11
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.
The Schemes:
Equity/Growth Schemes:
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
12
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. However, long term investors may not bother
about these fluctuations.
13
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. They may also seek advice of an expert.
Product Profile:
Monthly
Income
(December 2003)
Reliance Pharma Fund ( May 2004)
2004)
Reliance Media & Entertainment FundReliance NRI Equity Fund (October
(September 2004)
2004)
Reliance NRI Income Fund (OctoberReliance Index Fund (February 2005)
2004)
Reliance
Equity
Opportunities
(February 2005)
Reliance Liquidity Fund (June 2005)
2005)
Reliance Fixed Tenor Fund (NovemberReliance Equity Fund (February 2006)
2005)
Reliance Fixed Horizon Fund I (AugustReliance Fixed Horizon Fund (April
2006)
2006)
Reliance Fixed Horizon Fund III (MarchReliance
Fixed
Horizon
2007)
(November 2006)
Reliance Liquid Plus Fund (March 2007) Reliance Long Term
14
Fund
Equity
II
Fund
(November 2006)
Reliance Long Term Equity Fund (Nov Reliance Interval Fund (March 2007)
2006)
Reliance Fixed Horizon Fund - IVReliance Fixed Horizon Fund - V
(August 2007)
(September 2007)
Investment Objectives:
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.
15
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
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.
16
17
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.
Social Responsibilities:
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
19
20
Mr Vikram Dhawan
Head Of Departments
Marketing Communication
Mr Rajat Johri
Information Technology
Risk Management
Mr Himanshu Vyapak
Zonal Heads
Northern Zone Head
Change %Change
08
08
93,532
90,938
-2,594
-2.77
59,278
54,322
-4,956
-8.36
52,465
48,983
-3,482
-6.64
46,292
44,773
-1,519
-3.28
34,704
35,906
1,202
3.46
29,493
29,179
-314
-1.06
29,902
26,842
-3,059
-10.23
20,205
19,679
-526
-2.60
20,968
18,071
-2,897
-13.82
22
19,139
16,675
-2,463
Analysis of Data
23
-12.87
Drawing Conclusions
Suggestions/ Recommendation
24
25
26
merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry
now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were
33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of
India with Rs.44, 541 crores of assets under management was way ahead of
other mutual funds.
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.
28
2003-2004: A retrospect:
29
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 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.
30
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:
31
32
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.
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
(Rs Crores)
Percentage
(%)
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
33
34
Low Costs:
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
35
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.
37
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
38
However, the different categories that qualify for the required 80% of
the assets may be vague and wide-ranging. A fund can therefore
manipulate 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.
39
40
41
42
43
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.
44
45
46
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 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;
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;
47
48
49
Sponsor and where there is more than one sponsor, each of the
sponsoring entities, must have a sound track record as evidenced by
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 .
50
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.
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.
51
Code of advertisement:
Mutual funds have been required to adhere to a code of advertisement.
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,
52
Institutionalisation:
The efforts of SEBI have, in the last few years, been to institutionalise the
market by introducing proportionate allotment and increasing the minimum
deposit amount to Rs.5000 etc. These efforts are to channel the investment
of individual investors into the mutual funds.
Investment of funds mobilised:
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,
53
Valuation of investment:
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
54
on a common format for calculating the net asset 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.
55
56
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.
57
58
It has been recommended that the NAVs of both open-end and close-end
scheme be calculated on a weekly basis, at least.
59
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.
The report has suggested that repurchase and resale price of open-end
schemes should be linked to the NA V 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 resale 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.
60
The offer price is the price at which the mutual fund will sell the shares. It is
equal to the NA V 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. Mutual funds provide an opportunity for the riskaverse 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 0 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.
61
62
OBJECTIVES:
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.
Following figure shows the main steps of attracting and keeping
customers.
Suspects
Prospects
Disqualified Prospects
Repeat Customers
Clients
Inactive or ex customers
Members
Advocates
Partners
63
64
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.
65
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.
Problem Analysis:
66
Title:
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.
67
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.
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.
Problem Definition
68
Components of Problem
69
b)
c)
d)
e)
70
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
71
Reactions of strangers
research
studies
are
concerned
with
describing
the
73
74
75
76
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.
77
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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79
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 salespersons
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.
80
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.
Observation of records:
81
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.
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.
82
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).
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
83
Disadvantages:
Interviews can be very 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 some personal contact between the interviewer and
the respondent.
They allow the interviewer to ask follow-up questions
Disadvantages
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.
84
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?
Your survey is one where you can construct in advance a
reasonable sequence of questions? Or, are you doing an initial
85
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.
86
female
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.
87
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
allows the data to be examined in context and may provide a better basis
for assessing the competence and motivation of the collector.
88
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
firms requirements. There are four types of general external secondary
information, they are:
Trade associations
Government Agencies
Other published sources, and
Syndicated services.
Trade Associations:
89
90
may be in the form of special reports. Census publications are one of the
most widely used sources of secondary data.
91
Information
Information system
system
Database
Database
DSS
DSS
1.
1. Agree
Agree on
on Research
Research Purpose
Purpose
Problems
Problems or
or opportunities
opportunities
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
ESTIMATE
THE
THE VALUE
VALUE OF
OF
INFORMATION
INFORMATION
Is
Is benefit
benefit >>
cost?
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
the questionnaire
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.
92
DO
DO NOT
NOT
CONDUCT
CONDUCT MR
MR
Project Undertaken:
RESEARCH OBJECTIVES:
Primary Research Objective:
To develop the channel relationship for reliance mutual fund,
Chhattisgarh.
94
o Life insurance.
o Mutual funds ELSS.
o Post office schemes.
o NSC
o PPf.
o Any other, specify ___________.
Q. 9. Do you get queries from your clients regarding mutual funds/ Tax
saving mutual funds?
o Yes
o No
Q. 10. What is your response to their queries?
o Positive
o Neutral
o Negative
Q. 11. If neutral/ negative, then why? ______________________________.
Q.12. How will you rank the below investment instruments for your
clients financial planning on the basis of risk adjusted return?
o Mutual funds
o Fixes deposits
o Post office deposits
o Life insurance policy
o Bank share trading.
Q.13. Would you like yourself to be associated with the mutual fund
industry?
o Yes
o No
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Q.14. If yes, then in what way you would appreciate the AMC to
approach you?
o Telephone
o Personal visit.
Q. 15. Are you aware of AMFI certification?
o Yes
o No
Thank you for your precious time.
Variables
Weights
38
Interested
15
96
Not interested
16
Already a distributor
32
Interested
18
Not interested
Already a distributor
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
97
Compone
nt
1
Attributes
Label
Tax Saving,
Economy
Features
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.
98
Cluster
Cluster
Cluster
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
2.36
No. of Respondents
23
14
33
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Characteristics
Young, Vital, Enthusiastic,
Impulsive, Invest comparatively
High Proportion of Income in
new things.
Believers
Conservative, Conventional,
Traditional, & Favor familiar
options.
Strivers
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Many constraints were involved in doing this study. Some of them are
as follows.
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 Raipur city, so findings on
data gathered can be best true for Raipur 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.
Recommendations:
Chhattisgarh has huge untapped market as far as MF is concerned.
Create Awareness about Mutual Fund.
Remove the differences in perception of audience about Private
Company & PSU.
Literate audience about MF as better investment option.
Run some program to bring MF in final decision set while prospects
decide about distributorship.
Brand Equity of Reliance is very high just, go & hit the market.
101
102
103
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.
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
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105
CURRENT INCOME:
Monies paid during the period an investment is held. Examples include
bond interest and stock dividends.
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.
106
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.
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 sche
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 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.
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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.
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.
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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.
MUTUAL FUNDS:
An investment company that pools money from its unitholders and invests
that money into a variety of securities, including stocks, bonds, and moneymarket 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:
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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. The NAV will be computed upto four
decimal places. NAV Formula :
Market / Fair Value of Scheme's investments (+) Receivables (+) Accrued
Income (+) Other Assets (-)
Accrued Expenses (-) Payables (-) Other Liabilities
---------------------------------------------------------------------------------------------------------------------------------Number of Units Outstanding
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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REDEMPTION FEE:
A fee charged by a limited number of funds for redeeming, or buying back,
fund units.
REDEMPTION PRICE:
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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
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):
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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.
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
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BIBLIOGRAPHY:
www.reliancemutual.com
www.amfiindia.com
www.moneycontrol.com
www.valueresearch.com
www.geocities.com/kstability/index.html
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www.writing.colostate.edu
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