Chapter o.

Content List of Tables List of Figures Executive summary

Page o 2 3 4 5 6 9 11 12 13 14 20 39 40 42 43 49 55 61 63-73 74 77 77 79 80


Introduction Overview of mutual fund Objective of study Research methodology Limitation of study


Review of literature Modern portfolio theory How mutual fund operates


Company profile Background of company Management team Core Funds of Mutual Fund Industry Diversified Equity Funds of MF Industry Liquid Funds of Mutual Fund Industry SWOT Analysis of Reliance Mutual Fund Data Interpretation and Data analysis

4. 5.

Findings and conclusion Appendix Copy of questionnaire List of various Bank Branches in Pune Bibliography

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Table o. 2.1 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10

Table Content Mutual Fund Schemes Reliance Capital Limited Company Financial Statement Management Team Reliance Mutual Fund Fund Facts- Birla Sunlife Equity Fund Facts-Tata Pure Equity Fund Facts- Reliance Growth Fund Risk Measurement Trailing Returns Fund Facts- Kotak-30 Fund Facts-Reliance Regular Saving Equity Fund Fund Facts-ICICI Infrastructure Fund Risk Measurement Trailing Returns Fund Facts-LIC Liquid Fund Fund Facts-HDFC Liquid Fund Fund Facts-Reliance Liquid Risk Measurement Trailing Returns Investment of people in current scenario Factors Influencing the Investment Decision of Investors Age of investor How stable your current income Average Investment Period of Investors Preference in Mutual Funds Expected rate of return Risk taken by people Experience in the market Preference in mode of investment

Page o. 33 42 42 44 45 46 47 48 50 51 52 53 54 56 57 58 59 60 64 65 66 67 68 69 70 71 72 73

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Figure o. 1.1 1.2 2.1 2.2 2.3 2.4 2.5 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10

Page o. Growth of assets 08 No. of Mutual Fund Schemes 08 Diversify Away Unsystematic Risk 16 Efficient Frontier of 2 Stocks(Google and Coca Cola) 17 Structure of Mutual Fund Industry 22 Different Types of Risk 30 Types of Mutual Fund 33 Reliance ADAG Structure 40 Relative Performance of Birla Sunlife Equity Fund and its category 44 Relative Performance of Tata Pure Equity Fund and its category 45 Relative Performance of Reliance Growth Fund and its category 46 Relative Performance of Kotak 30 Fund and its category 50 Relative Performance of Reliance Regular Saving Equity and its 51 category Relative Performance of ICICI Infrastructure Fund and its category 52 Relative Performance of LIC Liquid Fund and its category 56 Relative Performance of HDFC Liquid Fund and its category 57 Relative Performance of Reliance Liquid Fund and its category 58 Investment of people in current scenario 64 Factors Influencing the Investment Decision of Investors 65 Age of investor 66 How stable your current income 67 Average Investment Period of Investors 68 Preference in Mutual Funds 69 Expected rate of return 70 Risk taken by people 71 Experience in the market 72 Preference in mode of investment 73


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The Project on Portfolio Management and mutual fund analysis was carried out for Reliance Mutual Fund.

Overview: The project on Portfolio Management and mutual fund analysis was carried out in Reliance Mutual Fund, Pune Branch. The intention behind taking over this project with Reliance Mutual Fund was to primarily understand the role of banks in providing investment solutions and advices to its customers. The project was done by analyzing the different investment options available and to compare them with the mutual fund investments. For the purpose of analyzing the investment pattern and selecting effective and beneficial schemes of mutual funds different available schemes were thoroughly analyzed and then an ideal portfolio of those investment options available was made. Finally the ideal portfolio was created to understand the importance of portfolio management and to ease the selection of different mutual fund schemes and the weightage to be given to them.

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“Mutual fund is vehicle that enables a number of investors to pool their money and have it jointly managed by a professional money manager.” Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions. With an objective to make the investors aware of functioning of mutual funds, an attempt has been made to provide information in question-answer format which may help the investors in taking investment decisions.

Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.

The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time.

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In India, the mutual fund industry started with the setting up of the erstwhile Unit Trust of India in 1963. Public sector banks and financial institutions were allowed to establish mutual funds in 1987. Since 1993, private sector and foreign institutions were permitted to set up mutual funds. In February 2003, following the repeal of the Unit Trust of India Act 1963 the erstwhile UTI was bifurcated into two separate entities viz. The Specified Undertaking of The Unit Trust of India, representing broadly, the assets of US 64 scheme, schemes with assured returns and certain other schemes and UTI Mutual Fund conforming to SEBI Mutual Fund Regulations. As at the end of March 2008, there were 33 mutual funds, which managed assets of Rs. 5, 05,152 crores (US $ 126 Billion)* under 956 schemes. This fast growing industry is regulated by the Securities and Exchange Board of India (SEBI). Worldwide, Mutual Fund or Unit Trust as it is referred to in some parts of the world, has a long and successful history. The popularity of Mutual Funds has increased manifold in developed financial markets, like the United States. As at the end of March 2008, in the US alone there were 8,064 mutual funds with total assets of about US$ 11.734 trillion (Rs.470 lakh crores)*.

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Figure 1.1


Figure 1.2

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RESEARCH OBJECTIVE To evaluate investment performance of selected mutual funds in terms of risk and return.

To evaluate and create an ideal portfolio consisting the best mutual fund schemes which will earn highest possible returns and will minimize the risk.

Also to analyze the performance of mutual fund schemes on the basis of various parameters.

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

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SCOPE OF PROJECT 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. 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.

The funds are selected which are preferred by customers of various banks. The Schemes were categorized and selected on evaluating their performance and relative risk for last 1month to 3 years.

The scope of the project is mainly concentrated on the different categories of the mutual funds such as equity schemes, debt funds, balanced funds and equity linked savings schemes etc.

The ideal portfolio is created by analyzing the risk pattern of the schemes and distributing the overall risk to earn maximum returns.

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RESEARCH METHODOLOGY Research methodology is a very organized and systematic way through which a particular case or problem can be solved efficiently. It is a step-by-step logical process, which involves:

DATA COLLECTIO There are two types of data:Primary data. Secondary data

The survey is conducted through the following phases:1. Planning the survey:To know the preference of investors the first step was to identify or select the parameter. On the basis of which the questionnaire can be framed and then selecting the customer to be surveyed.

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2. Identification of the parameter:-

The different parameters that were selected for the questionnaire is:Main objective of investment. Capability to handle risk involved in investment. Return on investment. Investor’s requirement Investor’s satisfaction

3. Framing the questionnaire;After identification and selection of the parameter, the next step was frame the Questionnaire. The questionnaire was made up of multiple choice questions. For the purpose of survey, give choice of Yes and No. It also provides options are very good, good, average, and poor.

4. Sampling plane:Period: - 1st June, 08 to 31st Aug.08 Location: - Various branches of ICICI, HDFC, IDBI, DCB and AXIS Bank Pune.

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Modern Portfolio Theory: An Overview
By Ben McClure, Contributor - Investopedia Advisor

If you were to craft the perfect investment, you would probably want its attributes to include high returns coupled with little risk. The reality, of course, is that this kind of investment is next to impossible to find. Not surprisingly, people spend a lot of time developing methods and strategies that come close to the "perfect investment". But none is as popular, or as compelling, as Modern Portfolio Theory (MPT). Here we look at the basic ideas behind MPT, the pros and cons of the theory, and how MPT affects the management of your portfolio.

The Theory
One of the most important and influential economic theories dealing with finance and investment, MPT was developed by Harry Markowitz and published under the title "Portfolio Selection" in the 1952 Journal of Finance. MPT says that it is not enough to look at the expected risk and return of one particular stock. By investing in more than one stock, an investor can reap the benefits of diversification - chief among them, a reduction in the riskiness of the portfolio. MPT quantifies the benefits of diversification, also known as not putting all of your eggs in one basket.

For most investors, the risk they take when they buy a stock is that the return will be lower than expected. In other words, it is the deviation from the average return. Each stock has its own standard deviation from the mean, which MPT calls "risk".
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The risk in a portfolio of diverse individual stocks will be less than the risk inherent in holding any single one of the individual stocks (provided the risks of the various stocks are not directly related). Consider a portfolio that holds two risky stocks: one that pays off when it rains and another that pays off when it doesn't rain. A portfolio that contains both assets will always pay off, regardless of whether it rains or shines. Adding one risky asset to another can reduce the overall risk of an all-weather portfolio.

In other words, Markowitz showed that investment is not just about picking stocks, but about choosing the right combination of stocks among which to distribute one's nest eggs.

Modern portfolio theory states that the risk for individual stock returns has two components:

Systematic Risk - These are market risks that cannot be diversified away. Interest rates, recessions and wars are examples of systematic risks.

Unsystematic Risk - Also known as "specific risk", this risk is specific to individual stocks and can be diversified away as you increase the number of stocks in your portfolio (see Figure 2.1). It represents the component of a stock's return that is not correlated with general market moves.

For a well-diversified portfolio, the risk - or average deviation from the mean - of each stock contributes little to portfolio risk. Instead, it is the difference - or covariance - between individual stocks' levels of risk that determines overall portfolio risk. As a result, investors benefit from holding diversified portfolios instead of individual stocks.
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Figure 2.1

The Efficient Frontier

Now that we understand the benefits of diversification, the question of how to identify the best level of diversification arises. Enter the efficient frontier. For every level of return, there is one portfolio that offers the lowest possible risk, and for every level of risk, there is a portfolio that offers the highest return. These combinations can be plotted on a graph, and the resulting line is the efficient frontier. Figure 2.2 shows the efficient frontier for just two stocks - a high risk/high return technology stock (Google) and a low risk/low return consumer products stock (Coca Cola).

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Figure 2.2

Any portfolio that lies on the upper part of the curve is efficient: it gives the maximum expected return for a given level of risk. A rational investor will only ever hold a portfolio that lies somewhere on the efficient frontier. The maximum level of risk that the investor will take on determines the position of the portfolio on the line.

Modern portfolio theory takes this idea even further. It suggests that combining a stock portfolio that sits on the efficient frontier with a risk-free asset, the purchase of which is funded by borrowing, can actually increase returns beyond the efficient frontier. In other words, if you were to borrow to acquire a risk-free stock, then the remaining stock portfolio could have a riskier profile and, therefore, a higher return than you might otherwise choose.

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What MPT Means to me?

Modern portfolio theory has had a marked impact on how investors perceive risk, return and portfolio management. The theory demonstrates that portfolio diversification can reduce investment risk. In fact, modern money managers routinely follow its precepts.

That being said, MPT has some shortcomings in the real world. For starters, it often requires investors to rethink notions of risk. Sometimes it demands that the investor take on a perceived risky investment (futures, for example) in order to reduce overall risk. That can be a tough sell to an investor not familiar with the benefits of sophisticated portfolio management techniques. Furthermore, MPT assumes that it is possible to select stocks whose individual performance is independent of other investments in the portfolio. But market historians have shown that there are no such instruments; in times of market stress, seemingly independent investments do, in fact, act as though they are related.

Likewise, it is logical to borrow to hold a risk-free asset and increase your portfolio returns, but finding a truly risk-free asset is another matter. Government-backed bonds are presumed to be risk free, but, in reality, they are not. Securities such as gilts and U.S. Treasury bonds are free of default risk, but expectations of higher inflation and interest rate changes can both affect their value.

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Then there is the question of the number of stocks required for diversification. How many is enough? Mutual funds can contain dozens and dozens of stocks. Investment guru William J. Bernstein says that even 100 stocks is not enough to diversify away unsystematic risk.

By contrast, Edwin J. Elton and Martin J. Gruber, in their book "Modern Portfolio Theory And Investment Analysis" (1981), conclude that you would come very close to achieving optimal diversity after adding the twentieth stock.


The gist of MPT is that the market is hard to beat and that the people who beat the market are those who take above-average risk. It is also implied that these risk takers will get their comeuppance when markets turn down.

Then again, investors such as Warren Buffett remind us that portfolio theory is just that theory. At the end of the day, a portfolio's success rests on the investor's skills and the time he or she devotes to it. Sometimes it is better to pick a small number of out-of-favor investments and wait for the market to turn in your favor than to rely on market averages alone.

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The Mutual Funds are structured in two forms. • • Company Form: These forms of mutual funds are more popular in US. Trust Form: In India, mutual funds are organized as Trusts. The Trust is either managed by a Board of Trustees or by a Trustee Company. There must be at least 4 members in the Board of Trustees and at least 2/3 of the members of the board must be independent. Trustee of one mutual fund cannot be a trustee of another mutual fund. Unit Trusts – Constituents: A Mutual Fund is set up in the form of a Trust which has the following constituents:1. Fund Sponsor 2. Mutual Fund as Trust 3. Asset Management Company 4. Other Fund Constituents 4.1. 4.2. 4.3. 4.4. Custodian and Depositor Brokers Transfer Agent Distributors

Figure 2.3

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Fund sponsor:What a promoter is to a company, a sponsor is to a mutual fund. The sponsor initiates the idea to set up a mutual fund. It could be a financial services company, a bank or a financial institution. It could be Indian or foreign. It could do it alone or through a joint venture. In order to run a mutual fund in India, the sponsor has to obtain a license from SEBI. For this, it has to satisfy certain conditions, such as on capital and profits, track record (at least five years in financial services), default-free dealings and a general reputation for fairness. The sponsor must have been profit making in at least 3 years of the above 5 years.

Trust:The Mutual Fund is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908. The Trust appoints the Trustees who are responsible to the investors of the fund.

Trustees:Trustees are like internal regulators in a mutual fund, and their job is to protect the interests of the unit holders. Trustees are appointed by the sponsors, and can be either individuals or corporate bodies. In order to ensure they are impartial and fair, SEBI rules mandate that at least two-thirds of the trustees be independent, i.e., not have any association with the sponsor.

Rights of the Trustees:• Trustees appoint the AMC in consultation with the sponsor and according to the SEBI Regulations. • • All Mutual Fund Schemes floated by the AMC have to be approved by the Trustees. Trustees can seek information from the AMC regarding the operations and compliance of the mutual fund. • • Trustees can seek remedial actions from AMC, and in cases can dismiss the AMC.

Trustees review and ensure that the net worth of the AMC is according to the stipulated norms, every quarter.

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Obligations of the Trustees:• Trustees must ensure that the transactions of the mutual fund are in accordance with the trust deed. • • Trustees must ensure that the AMC has systems and procedures in place. Trustees must ensure due diligence on the part of AMC in the appointment of constituents and business associates. • Trustees must furnish to the SEBI, on half yearly basis a report on the activities of the AMC. • Trustees must ensure compliance with SEBI Regulations.

Asset management company (AMC):An AMC is the legal entity formed by the sponsor to run a mutual fund. The AMC is usually a private limited company in which the sponsors and their associates or joint venture partners are the shareholders. The trustees sign an investment agreement with the AMC, which spells out the functions of the AMC. It is the AMC that employs fund managers and analysts, and other personnel. It is the AMC that handles all operational matters of a mutual fund – from launching schemes to managing them to interacting with investors.

Regulatory requirements for the AMC:• • • • • • Only SEBI registered AMC can be appointed as investment managers of mutual funds. AMC must have a minimum net worth of Rs.10 crores at all times. An AMC cannot be an AMC or Trustee of another Mutual Fund. AMCs cannot indulge in any other business, other than that of asset management At least half of the members of the Board of an AMC have to be independent. The 4th schedule of SEBI Regulations spells out rights and obligations of both trustees and AMCs.

Obligations of the AMC:• Investments have to be according to the investment management agreement and SEBI regulations.
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• •

The actions of its employees and associates have to be as mandated by the trustees. AMCs have to submit detailed quarterly reports on the working and performance of the mutual fund.

AMCs have to make the necessary statutory disclosures on portfolio, NAV and price to the investors.

Restrictions on the AMC:• • AMCs cannot launch a scheme without the prior approval of the trustees. AMCs have to provide full details of the investments by employees and Board members in all cases where the investment exceeds Rs.1 lakh. • AMCs cannot take up any activity that is in conflict with the activities of the mutual fund.

Custodian:A custodian handles the investment back office of a mutual fund. Its responsibilities include receipt and delivery of securities, collection of income, and distribution of dividends and segregation of assets between the schemes. It also track corporate actions like bonus issues, right offers, offer for sale, buy back and open offers for acquisition. The sponsor of a mutual fund cannot act as a custodian to the fund. This condition, formulated in the interest of investors, ensures that the assets of a mutual fund are not in the hands of its sponsor. For example, Deutsche Bank is a custodian, but it cannot service Deutsche Mutual Fund, its mutual fund arm.

Brokers: - Role of Brokers in a Mutual Fund • • • • • They enable the investment managers to buy and sell securities. Brokers are the registered members of the stock exchange. They charge a commission for their services. In some cases, provide investment managers with research reports. Act as an important source of market information.

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Registrar or transfer agents:Registrars, also known as the transfer agents, are responsible for the investor servicing functions. This includes issuing and redeeming units, sending fact sheets and annual reports. Some fund houses handle such functions in-house. Others outsource it to the Registrars; Karvy and CAMS are the more popular ones. It doesn’t really matter which model your mutual fund opt for, as long as it is prompt and efficient in servicing you. Most mutual funds, in addition to registrars, also have investor service centers of their own in some cities. Some of the investor – related services are:• • • • • • Processing investor applications. Recording details of the investors. Sending information to the investors. Processing dividend payout. Incorporating changes in the investor information. Keeping investor information up to date.

Distributors: - Distribution channels in the mutual fund industry The Direct Channels:In the direct channel, customers invest in the schemes directly through AMC. In most cases, the company does not provide any investment advice, so these investors have to carry out their own research and select schemes themselves

The banking channel:The large customer base of banks, in developed countries, has played an important role in the selling MFs. In the recent years, this channel has also opened up in India. Banks operating in India , including public sector, private and foreign banks have established tie-up with various fund companies for providing distribution and servicing.

The retail channel:A customer can deal with directly with a sub broker belonging to a distribution company, instead of taking trouble of dealing with several agents. Distribution companies sell the
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schemes of several fund houses simultaneously and brokerage is paid by the AMC whose funds they sell. The retail channel offers the benefits of specialist knowledge and established client contact and, therefore private fund houses are generally prefer this channel.

The corporate channel:The corporate channel includes a variety of institutions that invest in shares on the company’s name. These are businesses, trust, and even state and local governments. For institutional investors, fund managers prefer to create special funds and share classes. Corporate can either invest directly in mutual funds, or through an intermediary such as a distribution house or a bank.

Individual Financial Advisors (IFA) or Agents:The IFA channel is the oldest channel for distribution and was widely employed at the time when UTI monopoly in the market. In recent times with the emergence significantly decreased. An agent who basically acts as an interface between the customer and the fund house there is a unique systems in place in India , wherein several sub-brokers are working under one main broker. The huge network of sub-brokers, thus ensure larger market penetration and geographic coverage. As per AMFI, over one lakh agents are registered to sell mutual funds and other financial products such as insurance across the country.

Benefits of investing in mutual funds:-

Professional Management:Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.


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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 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: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-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

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.
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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.

Affordability:Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

Choice of Schemes:Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

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.

The risks associated with investment of mutual fund:The most important relationship to understand is the risk-return trade-off. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Hence it is up to you, the investor to decide how much risk you are willing to take. In order to do this you must first be aware of the different types of risks involved with your investment decision. Market risk:Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (“SIP”) that works on the concept of Rupee Cost Averaging (“RCA”) might help mitigate this risk.
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Figure 2.4

Credit risk:The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cash flows determines the Credit Risk faced by you. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. An ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poor credit quality. A well-diversified portfolio might help mitigate this risk.

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Inflation risk:Things you hear people talk about: “Rs. 100 today is worth more than Rs. 100 tomorrow.” “Remember the time when a bus ride coasted 50 paisa?” “Mehangai Ka Jamana Hai.” The root cause is inflation. Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A well-diversified portfolio with some investment in equities might help mitigate this risk.

Interest rate risk:In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified portfolio might help mitigate this risk.

Political risk:Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa.

Liquidity risk:Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities.

Risk measures of mutual fund:Beta ratio:A high beta is good or bad depending on the state of the market. If the market sentiments are bullish, i.e., the market is seeing a rise in general, then a high beta stock is better and if the market sentiment is bearish then low beta is preferred.
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A beta of 1 indicates that the security's price will move with the market. A beta less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security's price will be more volatile than the market.

R_squared:A statistical measure that represents the percentage of a fund's or security's movements that are explained by movements in a benchmark index. R-squared values range from 0 to 100. An R-squared of 100 means that all movements of a security are completely explained by movements in index. A higher R-squared value will indicate a more useful beta figure.

Sharpe ratio:High returns are generally associated with a high degree of volatility. The Sharpe ratio represents this tradeoff between risk and returns. At the same time it also factors in the desire to generate returns, which are higher than those from risk free returns. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance is. Sharpe Index = (Ri – Rf) / Si Where, Ri = Return on Fund. Rf = Risk free rate of Return. Si = Standard Deviation of the fund. Expense ratio:The percentage of total fund assets that is used to cover expenses associated with the operation of a mutual fund. This amount is taken out of the fund's assets and lowers the return that fund holders achieve. These expenses include management fees and operating expenses So lesser the expense ratio the better it is for the investors

Types of mutual fund schemes:-

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Figure 2.5
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Table 2.1 Mutual Type Fund Objective Risk Investment Portfolio Who should Investment invest horizon

Liquidity + Moderate Income Negligible Money Market + Reservation of Capital

Treasury Bills, who park Certificate of their funds in Deposits, current 2 days - 3 Commercial accounts or weeks Call short-term Papers, bank deposit Money

Short-term Call Money, Those with Funds (Floating Commercial Liquidity + Little Interest surplus 3 weeks - short-term) Papers, Treasury short-term Moderate Income Rate 3 months Bills, CDs, Shortfunds term G-sec Predominantly Credit Risk Salaried & Debentures, More than 9 & Interest conservative - 12 months G-sec , Corporate Rate Risk investors Bonds Interest Rate Government Risk securities Salaried & 12 months conservative & more investors Aggressive investors 3 years plus with long term vision

Bond Funds (Floating - Regular Income Long-term)

Gilt Funds

Security & Income

Long-term Capital High Risk Equity Funds Appreciation


Index Funds

To generate returns that are NAV varies Portfolio indices Aggressive commensurate with index like BSE, NIFTY investors. with returns of performance etc respective indices

3 years plus

Balanced Funds

Balanced ratio of Capital equity and debt Growth & Regular Market Risk Moderate & 2 years plus funds to ensure Income and Interest Aggressive higher returns at Rate Risk lower risk
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Schemes according to Maturity Period:A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open-ended Fund/ Scheme:An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-ended schemes is liquidity. Close-ended Fund/ Scheme:A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. Schemes according to Investment Objective:A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows: Growth / Equity Oriented Scheme:The aim of growth funds is to provide capital appreciation over the medium to longterm. 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. Income / Debt Oriented Scheme: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.

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Balanced Fund:- The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.

Money Market or Liquid Fund:-

These funds are also income funds and their aim is to

provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.

Gilt Fund:- These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.

Index Funds:- Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme.

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Figure 3.1

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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 Mr. Mukesh Ambani and his younger brother Mr. Anil Ambani 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.

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Given below is a summary of RCL’s financials:
Particulars (Rs. in Crores) Total Income Profit Before Tax Profit After Tax Reserves & Surplus et Worth Earnings per Share (Rs.) (Basic + Diluted) Book Value per Share (Rs.) Dividend (%) Paid up Equity Capital 2006-07 883.86 733.18 646.18 4915.07 5161.23 28.39 210.12 35% 246.16 2005-06 652.02 550.61 537.61 3849.58 4122.46 29.74 112.95 30% 223.4 2004-05 295.69 111.21 105.81 1310.08 1437.92 8.31 112.95 30% 127.84 2003-04 356.79 105.79 105.79 1271.84 1399.81 8.31 109.96 29% 127.84

Table 3.1

Board of Director 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 Invest.: - Mr. Madhusudan Kela Head Fixed Income: - Mr. Amitabh Mohanty

Table 3.2

Statutory Details:Sponsor: - Reliance Capital Limited. Trustee: - Reliance Capital Trustee Co. Limited. Investment Manager: - Reliance Capital Asset Management Limited. The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956. Custodian: - Deutsche Bank, AG Registrar: - M/s. Karvy Computershare Pvt. Limited

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OBJECTIVE: - Aims to provide long term capital appreciation through a portfolio with target allocation of 90 percent in equity.

Table 3.3

Type of scheme ature Date of inception

Open Equity Aug 27, 1998

Fund size Expense ratio Portfolio turnover

946.82 as on Sep 30, 2008 1.98 138

Relative Performance (Fund Vs Category Average) as on Sep 30, 2008 Figure 3.2


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OBJECTIVE: - Aims to invest primarily in equity related securities for high capital appreciation. Table 3.4 Type of scheme ature Date of inception Open Equity May 7, 1998 Fund size Expense ratio Portfolio turnover 291.56 as on Sep 30, 2008 2.33 69.63

Relative Performance (Fund Vs Category Average) Figure 3.3


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OBJECTIVE: - The primary investment objective of the Scheme is to achieve long-term growth of capital by investment in equity and equity related securities through a research based investment approach.

Fund Facts-Table 3.5 Type of scheme ature Date of inception Open Equity Oct 7, 1995 Fund size Expense ratio Portfolio turnover 4337.02 as on Sep 30, 2008 1.81 48


Relative Performance (Fund Vs Category Average) as on Sep 30, 2008 Figure 3.4


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Table 3.6- Risk Measurement Birla Sunlife Mean Standard Deviation Sharpe Beta Treynor 1.15 3.43 0.31 0.88 1.19 R Growth 1.23 3.19 0.35 0.8 1.49 Tata pure equity 1.03 3.54 0.26 0.94 0.99


Interpretation:1. Beta: - In this category all the funds has almost the same Beta value. In the bearish market condition the fund which has least value of beta is considered as good Beta value. We can evaluate the performances by comparing the beta values. R. Growth fund is least volatile in bearish market and T. Pure Equity fund is more volatile than other two funds. 2. Mean: - It indicates the average return of mutual fund schemes .In this case R. Growth has highest value of mean and T. Pure Equity has least value. 3. Standard Deviation:-For a better return deviation should be zero with respect to mean value. R. Growth fund has highest value of mean but at the same time it has least value of Standard Deviation. Birla Sun life is slightly more than the Mean value but Tata Pure equity is more deviate from its daily average return. 4. Sharpe ratio: - The Sharpe Ratio is a measure of excess return per unit of total risk. Higher the Sharpe Ratio, the better. R. growth Fund has highest Sharpe ratio value because the value is its standard deviation is less than other two funds schemes. Birla is comparably good than Tata Pure. 5. Treynor ratio: - It is a measure of excess return per unit of systematic risk. Tata pure equity has least value of treynor ratio it indicates that return is less than risk but at the same time R. Growth fund has highest value. It means that performance of Reliance is much better than other two.

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Table 3.7-Trailing Returns:-

As of 30/9/2008 Year-to-Date 1-Week 1-Month 3-Month 1-Year 2-Year 3-Year 5-Year

Category Return -51.88 -5.94 -21.35 -17.43 -44.10 -9.11 15.46 27.12

Tata Pure Equity -39.65 2.58 -5.22 -4.54 -41.94 14.48 26.62 --

R. Growth Fund -50.78 -5.78 -22.03 -19.88 -39.25 -1.92 21.59 31.85

Birla Sunlife -55.91 -3.71 -21.32 -20.87 -47.3 -8.57 16.89 28.37


Interpretation: - In the worst condition of market all the funds are giving negative return but these funds are core fund of Indian Mutual fund industry. Investor should have long vision for these funds not the short term. As reliance growth fund and Birla sunlife equity are very old fund of mutual fund industry as compare to Tata infra. In 3 year return Tata Infra is better with 26.62% return as compare to category and reliance growth fund and Birla sunlife fund. Conclusion:The last two years have been marvelous for Reliance Growth. After gaining 55.75 per cent in 2002 Reliance Growth is up another 117.78 per cent this year till December 1 2003. Though a major part of Reliance Growth s portfolio consists of quality stocks it hardly sticks to anything for long. The other thing about this fund is that it does not hesitate to be the only mutual fund to own a new stock. It is also more partial to mid-caps than other diversified equity funds. And in fact this bias towards mid-caps since August 2002 till date has been the biggest contributing factor for the fund s excellent performance. All in all Reliance Growth has a well-diversified portfolio but it is not a conventional diversified equity fund due to a mid-cap bias high turnover and the high cash component.

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Objective: - The investment objective of the scheme is to generate capital appreciation from a portfolio of predominantly equity and equity related securities. The portfolio will generally comprise of equity and equity related instruments of around 30companies which may go up to 39 companies, and that these companies may or may not be the same which constitute the BSE Sensitive Index or NSE Fifty (S&P CNX Nifty) Index

Fund Facts-Table 3.8 Type of scheme ature Date of inception Open Equity 22 dec,1998 Fund size Expense ratio Portfolio turnover Ratio 710.65 as on Sep 30, 2008 2.18 138.47


Relative Performance (Fund Vs Category Average) as on Sep 30, 2008 Figure 3.5


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Objective: - The primary investment objective is to seek capital appreciation and or consistent returns by actively investing in equity / equity related securities.

Fund Facts-Table 3.9 Type of scheme ature Date of inception Open Equity 10th May,2005 Fund size Expense ratio 779.74 Cr as on Sep 30, 2008 2.19

Portfolio turnover 83 Ratio


Relative Performance (Fund Vs Category Average) as on Sep 30, 2008 Figure 3.6


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Objective- To provide capital appreciation and income distribution to unit holders by investing predominantly in equity/equity related securities of the companies belonging to infrastructure development and the balance in debt securities and money market instruments including call money.

Fund Facts-Table 3.10 Type of scheme ature Date of inception Open Equity Aug 16, 2005 Fund size Expense ratio Portfolio turnover Ratio 3438.39 as on 30/9/08 1.82 140


Figure 3.7


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Table 3.11- Risk Measurement:-

Volatile Ratios Mean Standard Deviation Sharpe Beta Treynor Source-

RRSEF 1.4 3.63 0.36 0.83 1.57

KOTAK 30 1.12 3.56 0.28 0.96 1.05

ICICI Infra 1.39 3.55 0.36 0.93 1.38

Interpretation:1. Beta: - In the bearish market condition the fund which has least value of beta is considered as good Beta value. We can evaluate the performances by comparing the beta values. RRSEF is least volatile in bearish market. Kotak 30 and ICICI Infra have almost the same market volatility measurement. 2. Mean: - It indicates the average return of mutual fund schemes .In this case RRSEF and ICICI Infra have almost same value of mean measurement but Kotak 30 has least value 3. Standard Deviation:-For a better return deviation should b zero with respect to mean value. ICICI Infra has highest value of mean but at the same time it has least value of Standard Deviation. Kotak 30 has slightly more deviation than ICICI but it has least value of mean at the same time RRSEF has average value of both mean and deviation. 4. Sharpe ratio: - The Sharpe Ratio is a measure of excess return per unit of total risk. Higher the Sharpe Ratio, the better. RRSEF and ICICI infra have same and highest Sharpe ratio value but ICICI has deviation of 3.55 but RRSEF has 3.63 so it is clear that returns of RRSEF are more than ICICI. Kotak 30 has least value of Sharpe so returns are less than other two funds. 5. Treynor ratio: - It is a measure of excess return per unit of systematic risk. Kotak 30 has least value of Treynor ratio it indicates that return is less than risk but at the same time RRSEF has highest value. It means that performance of Reliance is much better than other two.
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Table 3.12-Trailing Returns:-

Period 1-Week 1-Month 3-Month 1-Year 2-Year 3-Year 5-Year

KOTAK 30 -4.8 -17.6 -13.92 -12.98 8.85 14.28 27.37

ICICI Infra 4.15 -4.72 1.64 -7.92 22.4 31.77

RRSEF 2.39 -5.57 -2.09 -2.53 16.64 23.49 --

Category Return 1.71 -5.46 -4.28 -21.3 4.89 14.32 29.12

Interpretation:For last 1 week to 1 year all the stocks are not performing well due to global financial crisis. In the worst condition like that RRSEF was able to perform well within category though it has negative return .ICICI Infra is also performing good as compare to category return and Kotak 30. It is clear that ICICI Infra is better among all these three with 3 year return of 31.77 but Treynor ratio is very low that means systematic risk is more as compared RRSEF.

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OBJECTIVE: - To generate reasonable returns with low risk and high liquidity through investments primarily in money market securities.

Table 3.13 Type of scheme ature Date of inception Open Equity 13 March2002 Fund size Expense ratio Portfolio turnover Ratio 4758.13 as on 31/9/08 0.44% NA

Relative Performance (Fund Vs Category Average) Figure 3.8

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Objective: - The primary objective of the Scheme is to enhance income consistent with a high level of liquidity, through a judicious portfolio mix comprising of money market and debt instruments.

Table 3.14 Type of scheme ature Date of inception Open Short Term Debt 17 Oct 2000 Fund size Expense ratio Portfolio Ratio 4758.13 as on Aug 31, 2008 0.61%

turnover NA

Relative Performance (Fund Vs Category Average) Figure 3.9

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Objective: - Aims to generate optimal returns consistent with moderate risk and high liquidity.

Table 3.15 Type of scheme ature Date of inception Open Short Term Debt 18 March 1998 Fund size Expense ratio Portfolio turnover Ratio 2457.13 as on 30/9/08 0.80% NA

Relative Performance (Fund Vs Category Average) Figure 3.10

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Risk and return of liquid funds Table 3.16 LIC Mean Standard Deviation Sharpe Beta Treynor 0.15 0.02 2.14 0.12 0.34 HDFC 0.15 0.02 2.09 0.14 0.31 RELIA CE 0.14 0.02 2.16 0.13 0.26

Interpretation:1. Mean: - As all these are liquid funds probably they should have same value of mean and all the three funds have almost same value of Mean. 2. Standard Deviation: - All the three funds have same value of Standard Deviation. It means they are performing consistently with good returns. 3. Sharpe Ratio: -The Sharpe Ratio is a measure of excess return per unit of total risk. Higher the Sharpe Ratio, the better. Reliance liquid fund has highest Sharpe ratio value of 2.16 that means return is more as compared to total risk. HDFC liquid fund has least value and having more risk in it. LIC liquid fund has also better return with low risk. 4. Beta: - In the bearish market condition lower beta is considered as a good for fund. As on comparing LIC has least and HDFC has highest value but Reliance has average value. So LIC is less volatile than HDFC and Reliance liquid fund. 5. Treynor: - It is a measure of excess return per unit of systematic risk. It is clear that LIC has more return per unit of risk than other two. HDFC is just slightly less than LIC but Reliance has least value. It means Reliance is not capable to minimize its systematic risk and to generate returns.

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TRAILI G RETUR as on 30 Sept 2008 Table 3.16 Period 1-Week 1-Month 3-Month Year-to-Date 5-Year 3-Year 2-Year 1-Year RELIA CE 0.26 0.8 2.05 5.02 5.38 6.11 6.34 6.56 HDFC 0.18 0.76 2.3 6.6 6.4 7.55 8.3 8.71 LIC MF 0.18 0.79 2.37 6.82 6.78 7.83 8.43 8.98 Category Return 0.19 0.74 2.18 6.03 6.19 7.08 7.68 8.01

Interpretation:Reliance liquid fund is performing well in worst condition of market with highest returns. In the case of LIC and HDFC, both are just matching with category returns. If we look in good time of market LIC was performing well at that time with highest returns. HDFC was also good at that time but returns were less than LIC.

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STRE GTHS: 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. Large pool of installed capacities. Experienced managers for large number of Generics. Large pool of skilled and knowledgeable manpower. Increasing liberalization of government policies.

WEAK ESS: 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 fixedincome products, such as bonds and Treasury bills, mutual funds experience price fluctuations along with the stocks that make up the fund.

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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. OPPORTU ITIES: 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 M Cs: 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.

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Table 4.1 -Investment of people in current scenario Investment Mutual Fund Stock Govt. Bonds & securities Fixed Deposits Insurance o. of People 84 52 17 28 22 Percentage 42 % 26 % 07 % 14 % 11 %

Figure 4.1 Interpretation: - There are various investment avenues available for investor. But in survey I found that mutual funds have a significant market share. In crisis of market people are investing more in mutual funds. Although mutual fund has a tremendous scope of growth. Some people are investing in insurance & G-sec. because of purpose of security. The major part of the sample taken has invested in the Mutual Funds. Still there are few who are not investing in MF.

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Table 4.2- Factors Influencing the Investment Decision of Investors: -

Influencing factor Broker Friend Self Magazine News Others

o of people 64 40 60 12 20 4

percentage 32 20 30 6 10 2

Figure 4.2 Interpretation: - There are many factors which influence the investment decision of the investors. It may be the current news (political, technological, financial, etc.), Magazines, friends, etc. in the study it proved that many people trust the brokers most for the investment decisions. These are the ones who have less experience. The “Self-Evaluation” is the next major factor. The experienced person trust himself thereafter he/she invests. Magazines and current News also matters. Any bad news can make a person change his/her decision.
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Table 4.3 -Age of investor

Age Under 30 30-40 40-60 60 and above

o. of People 58 84 46 12

Percentage 29 % 42 % 23 % 6%

Figure 4.3 I TERPRETATIO : - It is clear from above data that 42% of investor is belonging to age group of 30-40 who are predominantly private employees.

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Table 4.4 -How stable your current income

Income Very unstable Moderately unstable Moderately stable Very stable

o. of People 02 24 106 68

Percentage 01 % 12 % 53 % 34 %

Figure 4.4

Interpretation: - From above data it is clear that majority of investors have moderately stable income. It means that they invest from their saving. And invest frequently. Only 1% has very unstable income so it is a healthy sign for mutual fund industry.

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Table-4.5 Average Investment Period of Investors:-

Investment Period Less than 6 months 6 months to 1 year 1 year to 3 year More than 3 year

o. of people 14 20 62 84

percentage 7% 10% 31% 42%

Figure 4.5 Interpretation: - The investment period is very important to increase the profits. The timing must be right enough to benefit from fluctuations. The smart investor decides it in advance for how much time he would be keeping his money in the market and when he should leave squaring-up. Many people consider the investment for 9 months – 2 years as a right option. Still some want to be invested for over 2 years. The least responded to the 3-9 months period.

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Table 4.6 Preference in Mutual Funds:-

Sector Equity-normal ELSS Balanced Debt other

o. of people 58 52 32 54 4

Percentage 29 26 16 27 2

Figure 4.5

Interpretation: - There are different types of mutual funds available in the market according to the needs of the investors. There are Equity funds, ELSS, Income Funds, Balanced Funds, etc. The highest sought after fund is the Income fund which offers a regular income through investments in the Govt. Bonds. The risk is also low in this. It was followed by the Equity Fund which offers higher returns but it is riskier also. Some people would like to have Equity Linked Saving Schemes (ELSS). This provides some exemption in the Tax also.

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Table 4.7-Expected rate of return

Rate of return 0-10% 10-20% 20-30% 30 & above

o. of People 24 52 108 16

Percentage 12 % 26 % 54 % 8%

Figure 4.7

Interpretation: From above data I found that in current scenario of financial market nobody can expect return of more than 10%. There are 54% investors expect the return of 20-30% in a period for 1year to 3 year.

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Table 4.8-Risk taken by people

Rate of return High Medium Low

o. of People 26 142 32

Percentage 13 % 71 % 16 %

Figure 4.8

I TERPRETATIO : - People invest in mutual fund always seeks high return with low risk. But in this case 71% people want to go beyond the low risk level and to achieve high growth. There are still 13% people who can bear high risk in this financial crisis.

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Table 4.9- Experience in the market:-

Experience Less than 1 year 1 to 4 year More than 4 year

o. of people 52 42 106

Percentage 26 21 53

Figure 4.9 Interpretation: - The experience in the market was the factor which influenced the investments. There are some people who have experience of less than a year. These are those investors who entered into the market after noticing the rise in the market. The achievement of 21,000 marks by SENSEX was motivational force in this. Major part was having vast experience that is of more than 4 years. These are the ones who have been in the market and saw it rising to conquer the 10.000 to 21000 peak

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Table 4.10- Preference in mode of investment:-

Mode of investment Lump sum SIP Both

o. of people 46 68 76

Percentage 23 34 38

Figure 4.10 Interpretation: - The investor of mutual fund follows the different mode of investment. In such a volatile market majority of people invest by SIP because this there is no need to time the market. SIP also has an advantage of rupee cost averaging. So people invest lump sum when market is stable and they keep continues investment through SIP.

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After studying & analyzing different mutual fund schemes the following conclusions can be made: Winning with stocks means performing at least as well as a major market index over the long haul. If one can sidestep the common investor mistakes, then one has taken the first and biggest step in the right direction. The most important consideration while making investment decision was Return aspect followed by Safety, Liquidity and Taxability Diversified stock portfolios have offered superior long term inflation Protection. Equities are especially important today with people living longer and retiring early. To understand stock funds, one needs to be familiar with the characteristics of the different types of companies they hold. Portfolio managers have done a fairly good job in generating positive returns. It may lead to gain investors confidence. On the basis of the analysis the performance of the schemes during the study period can be concluded to be good. Those who want to eliminate the risk element but still want to reap a better then it would be advisable to go for debt or arbitrage schemes which ensure both safety and returns.

So the future of mutual funds in India is bright, because it meets investor s needs perfectly. This will give boost to Indian investors and will attract foreign investors also. It will lead to the growth of strong institutional framework that can support the capital markets in the long run.

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1. To build a successful investment strategy you should carefully structure your investment plan to achieve your goals without taking more risk than you can afford you are comfortable with. You also need to consider how much time you have to reach various goals and your personal circumstances

2. No single asset is appropriate for all your goals at any given point of the in life you will probably want to keep apart your money secure and accessible invested for growth but the proportions of safety income and growth will change as prepare for and then move past successive investment objectives

3. Asset allocation which means combining different types of assets in varying amounts depending on your goals is the key to successful investment strategy

4. The key to building wealth is to start investing early and regularly these regular amounts of saving however small can grow into a substantial amount of wealth over the long term

5. A wise investment strategy may be to have an investment portfolio that also consists of more than just granted return shames. That way one is protected against the impact of future inflation. Furthermore unlike in the past when the interest rate was flat rate were flat and administered today interest rates are market driven and volatile.

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ame Address

: :


: :

Contact o

1. Where you will invest your money in current scenario? A. Mutual Fund C. Fixed deposit E. Govt. bonds and securities B. Insurance D. Stock market

2. Which factor influences your investment decision? A. Broker C. Self E. News B. Friend D. Magazine F. Others

3. What is your age? A. Under 30 C. 44-59 B. 30-40 D. 60 and over

4. How stable is your current income source? A. Very unstable C. Moderately stable B. Moderately unstable D. Very Stable
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5. How much long do you prefer your investment? A. < 6 Months C. 1- 3 Years B. 6 Months -1 Year D. > 3 years

6. Which scheme of mutual fund do you prefer for investment? A. Equity C. Balanced E. Other B.ELSS D. Debt

7. Your expected rate of return? A.0-10% C.20-30% B.10-20% D.30& above

8. How much you can take risk? A. High B. Medium C. Low

9. How experienced are you at investing in bonds or bond mutual funds? A. < 1 Year B. 1 – 4 Years C. > 4 Year

10. Which mode of investment do you prefer most? A. Lump sum B. SIP C. Both

11. Do you influences by brand name of AMC. A. High B. Low C. Not at all

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Banking channel to distribute mutual fund schemes ICICI BA K Bund garden Bhandarkar Rd Apte Road Aundh Kothrud Karve road

HDFC BA K F.C. Road Aundh rd ana Peth ShankarSeth Rd East Street Kalyani agar Bhandarkar Rd, Aundh

IDBI BA K PU E Laxmi Road Hinjewadi FC Road Model Colony Ghole Road Aundh

AXIS BA K JM Road Baner East Street DP Road Kalyani agar Senapati Bapat Road

DCB BA K Deccan Sharda Arcade Sadhu Vasvani Road

Institute Of Business Studies & Research, Pune

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1. Websites:

2. from Reliance Mutual Fund Reliance fund Reckoned

3. Books and magazines Security analysis & Portfolio management by Prasanna Chandra Dalaal street

Institute Of Business Studies & Research, Pune

80 | P a g e

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