COMPARITIVE ANALYSIS OF RELIANCE MUTUAL FUNDS WITH OTHER EXISTING MUTUAL FUNDS...
Submitted in fulfillment for the award of Master of business administration (G.B.T.U. Lucknow) SESSION: 2010-2012 FOR THE PARTIAL FULFILLMENT OF TWO YEAR DEGREE IN MASTER OF BUSINESS ADMINISTRATION
SUBMITTED
ANSHIKA MBA-Final yr
(AFFILIATED BY GAUTAM BUDDH TECHNICAL UNIVERSITY) APPROVED BY AICTE, MINISTERY OF HRD, GOVT. OF INDIA,
PREFACE
With the growth of rapid industrialization the need of management is felt every where .management, A research report provides the most natural condition under which a student can learn and got success in implementing the theoretically learned in to the practical and current environment of daily practices done by the people (investor) it helps a student to learn, to improve, to improvise, to experiment, to find knowledge in all possible ways and to translate that knowledge into action. MBA is a foundation stone to the management career. The classroom learning needs to practical exposure. To develop concrete managerial and administrative skills of potential manager, it is important that the interaction to the real environment be there. The project is a real life venture for me. It is a great privilege that you have spread your for reading this. In forthcoming pages, an attempt has been made to present the different aspect of my project.
(Anshika Bajpai)
ACKNOWLEDGMENT
If words are considered as a symbol of approval and taken of appreciation then let the words play the heralding role expressing my gratitude. First of all I thank to my Gracie god who blessed me with all kind of facilities that had been provided to me for completion of my report. Im also grateful to my teacher for guiding me to learn and helped me on project on COMPARITIVE ANALYSIS OF RELIANCE MUTUAL FUND WITH OTHER EXISTING MUTUAL FUNDS. My endless appreciation goes to my all respected faculty who has stood by my side and give me moral support whenever I was low and boosted my will power. Finally, I would like to express my solidarity towards the RELIANCE GROUP for providing me with such an opportunity.
Thank You
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TABLE OF CONTENTS
INTRODUCTION HISTORY OF THE RELIANCE COMPANY COMPANY PROFILE RELIANCE MUTUAL FUND PROFILE
Reliance Mutual Fund - Accelerating Growth About the project
HISTORY OF MUTUAL FUND 62 Advantages of mutual funds Disadvantages of mutual funds Risks involved in mutual funds Various mutual fund scheme
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Types of mutual fund Different types of funds Costs involved in mutual fund The values of your fund Some of the existing asset management company Development of mutual fund in India Graphical representation Mutual funds organizations Flow chart Frequently used terms in mutual funds Structure of Indian mutual fund Working of mutual fund OBJECTIVE OF THE STUDY SCOPE OF THE STUDY RESEARCH METHODOLOGY USE OF THE PROJECT IMPORTANCE OF THE STUDY RESEARCH ANALYSIS AND INTERPRETATION
FINDINGS
SWOT ANALYSIS
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Strengths weakness RECOMMENDATIONS CONCLUSION
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ANNEXURE
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BIBLIOGRAPHY 106
Introduction
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There are a lot of investment avenues available today in the financial market for an investor with an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and Bonds where there is low risk but low return. He may invest in Mutual of companies where the risk is high and the returns are also proportionately high. The recent trends in the Mutual Market have shown that an average retail investor always lost with periodic bearish tends. People began opting for portfolio managers with expertise in Mutual markets who would invest on their behalf. Thus we had wealth management services provided by many institutions. However they proved too costly for a small investor. These investors have found a good shelter with the mutual funds. Like most developed and developing countries the mutual fund cult has been catching on in India. The reasons for this interesting occurrence are:
# Mutual funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation.
# Mutual fund brings the benefits of diversification and money management to the individual investor, providing a Opportunity for financial success that was once available only to a select few.
The reliance group founded by Dhirubhai. H. Ambani (1932-2002) is Indias largest private sector enterprise. He is credited to have brought about the equity cult in India in the late seventies and is regarded as an icon for enterprise in India. He epitomized the spirit 'dare to dream and learn to excel. The Reliance Group is a living testimony to his indomitable will, single-minded dedication and an unrelenting commitment to his goals.
Unit Trust of India is the first Mutual Fund set up under a separate act, UTI Act in 1963, and started its operations in 1964 with the issue of units under the scheme US-641. In 1978 UTI was delinked from the RBI and Industrial Development Bank of India (IDBI) took over the Regulatory and administrative control in place of RBI.
In the year 1987 Public Sector banks like State Bank of India, Punjab National Bank, Indian Bank, Bank of India, and Bank of Baroda have set up mutual funds. Apart from these above mentioned banks Life Insurance Corporation [LIC] and General Insurance Corporation [GIC] too have set up mutual fund. LIC established its mutual fund in June 1989.while GIC had set up its mutual fund in December 1990.The mutual fund industry had assets under management of Rs. 47,004 crores. With the entry of Private Sector Funds a new era has started in Mutual Fund Industry .e.g:Principal Mutual Fund.
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Company Profile
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Reliance Group Holdings has grown from a small office data-processing equipment firm in 1961 into a major insurance and financial-services group in one generation under one chief. Reliance's insurance operations constitute the nation's 27th-largest property and casualty operation. The parent company also includes a development subsidiary in commercial real estate. Reliance's international consulting group contains several energy, environment, and natural resources consulting. A financial arm invests in other businesses, primarily television stations. Reliance Insurance started as the Fire Association of Philadelphia in 1817, organized by 5 hose and 11 engine fire companies. It became the nation's first association of volunteer fire departments. Business got a boost as a result of the Great Chicago Fire of 1871. 12
The association soon developed a field of agents to write policies across the country. For the first two years, shareholders received dividends twice a year of $5 a share, which increased gradually to $10 in 1876. In 1972, the Reliance insurance group divided its pool so that Reliance Insurance Company and its subsidiaries handled most standard lines, while United Pacific Insurance Company handled the nonstandard and other operations. In 1977, the company moved into real estate, forming Continental Cities Corporation, which became Reliance Development Group, Inc. This division handled all real estate operations of the parent company and other subsidiaries. Reliance Capital Group, L.P. constituted the investment branch of the Reliance conglomerate. In December 1989, Reliance Capital sold its investment, Days Corporation, parent company of Days Inn of America, the world's third-largest hotel chain; it had been purchased in 1984. Reliance Industries Limited. The Group's principal activity is to produce and distribute plastic and intermediates, polyester filament yarn, fiber intermediates, polymer intermediates, crackers, chemicals, textiles, oil and gas. The refining segment includes production and marketing operations of the Petroleum refinery. The petrochemicals segment includes production and marketing operations of petrochemical products namely, High and Low density Polyethylene. "Growth has no limit at Reliance. I keep revising my vision. Only when you can dream it, you can do it."
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ABOUT PROJECT
MUTUAL FUND
A mutual fund is nothing more than a collection of Mutuals and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in Mutuals, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund.
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1) Income is earned from dividends on Mutuals and interest on bonds. A fund pays out.
Nearly all income it receives over the year to fund owners in the form of a distribution.
2) If the fund sells securities that have increased in price, the fund have a capital gain. Most funds also pass on these gains to investors in a distribution.
3) If fund holdings increase in price but are not sold by the fund manager, the fund's .Shares increase in price. You can then sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive a check for distributions or to Reinvest the earnings and get more shares.
The competition among funds has led to the launch of newer products, tailor-made to suit the requirements of investors. Mutual funds now offer products for the entire range of needs of investors. The encouraging response to index funds and sector funds shows the growing maturity among investors. Open-end funds, which provide liquidity to investors at daily NAV related prices, are growing in popularity. The funds have be en adopting technology to provide good service to investors and with the proposed introduction of electronic funds
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transfer and the growing trend towards E-Commerce; the efficiency of service will increase even further. In the coming years mutual funds as saving intermediaries will play a greater role in bringing the gap between investors and issuers, especially in the area of equity funds ?At present these funds represents 13% of BSE market capitalization. This is expected to go up with increasing flows into financial savings, especially the mutual fund with the growth and stability in the capital market flows into equity funds are expected to go up. 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 appreciation realized is 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. Mutual funds, also referred to as investment companies, offer an alternative investment choice for individuals with a long-term horizon. The way they operate is that individual investor money are pooled and invested in many different companies. Assets are professionally managed to meet various investment objectives. They issue and sell shares to share holders and also redeem them (buy them back) upon request. Prices of shares are set daily at the close of business, based on the value of all investments in the mutual funds portfolio. Their major advantages are diversification and professional management, which are not readily available to small investors outside the mutual fund arena. Money market mutual
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funds are short-term funds. They invest in short-term cash and cash equivalent instruments, such as Treasury bills, certificates of deposit, and short-term notes. Mutual funds may own Mutual and bonds of many different companies.
A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc.
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In 1924 three Boston securities executives pooled their money together to create the first mutual fund. The idea of pooling money together for investing purposes started in Europe in the mid-1800s. The first pooled fund in the U.S was created in 1893 for the faculty and staff
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of Harvard University on March 21st, 1924 the first official mutual fund was born. It was called the Massachusetts Investors Trust. However in India UTI was the first to introduce mutual funds in the Indian markets and it commenced its operations from July 1964, Government allowed public sector banks and institutions to set up mutual funds.
In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of SEBI are to protect the interest of investors in securities and to promote the development of and to regulate the securities market. As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors. All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. It may be mentioned here that Unit Trust of India (UTI) is not registered with SEBI as a mutual fund (as on January15, 2002. The end of millennium marks 36 years of existence of mutual funds in our country. The ride through
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these 36 years is not been smooth. Investor opinion is still divided. While some are for mutual funds others are against it.
Originally mutual funds were heralded as a way for the little guy to get a piece of the market. Instead of spending all your free time buried in the financial pages of the investment Journal, all you have to do is buy a mutual fund and you'd be set on your way to financial freedom. As
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you might have guessed, it's not that easy. Mutual funds are an excellent idea in theory, but, in reality, they haven't always delivered. Not all mutual funds are created equal, and investing in mutuals isn't as easy as throwing your money at the first salesperson who solicits your business.
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3-Economies of Scale - Because a mutual fund buys and sells large amounts of securities
at a time, its transaction costs are lower than you as an individual would pay.
4-Liquidity - Just like an individual Mutual, a mutual fund allows you to request that your
shares be converted into cash.
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Management is by no means infallible, and, even if the fund loses money, the manager still takes his/her cut. .
2-Costs- Mutual funds don't exist solely to make your life easier--all funds are in it for a
Profit. The mutual fund industry is masterful at burying costs under layers of jargon .Because funds have small holdings in so many different companies, high returns from a few Investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong Success, the manager often has trouble finding a good investment for all the new money
3-Taxes- When making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability
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In short, how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised, or repay your principal when the investment matures?
Inflation risk Changing interest rates affect both equities and bonds in many ways. Investors are reminded that predicting which way rates will go is rarely successful. A diversified portfolio can help in offsetting these changes.
Effect of loss of key professional and inability to adopt An industries key asset is often the personnel who run the business i.e. intellectual properties of the key employees of the respective companies. Given the ever-changing complexion of few industries and the high obsolescence levels, availability of qualified, trained and motivated personnel is very critical for the success of industries in few sectors. It is, therefore, necessary to attract key personnel and also to retain them to meet the changing environment and challenges all investments involve some form of risk, which should be evaluated them potential Rewards when an investment is selected.
Managing risk
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At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the Mutual prices of an out standing, highly profitable company and a fledgling corporation may be affected.
Credit risk
The sector offers. Failure or inability to attract/retain such qualified key personnel may impact the prospects of the companies in the particular sector in which the fund invests. Exchange risks A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative impact on companies which in turn would have an effect on the investment of the fund.
Investment risks 28
The sectoral fund schemes, investments will be predominantly in equities of select companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities.
Changes in government policy Changes in Government policy especially in regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund.
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Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.
By Structure
# # #
By Investment Objective
Growth Schemes Income Schemes Balanced Schemes Money Market Schemes
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Each fund has a predetermined investment objective that tailors the fund's assets, regions of investments, and investment strategies. At the fundamental level, there are three varieties: of mutual funds 1) Equity funds (Mutual) 2)Fixed-income funds (bonds) 3) Money market funds
All mutual funds are variations of these three asset classes. For example, while equity Funds that invest in fast-growing companies are known as growth funds, equity funds that Invest only in companies of the same sector or region is known as specialty funds. Lets go 32
over the many different flavors of funds. We'll start with the safest and then Work through to the more risky.
Bond/Income Funds
Income funds are named appropriately: their purpose is to provide current income on a steady basis. When referring to mutual funds, the terms "fixed-income," "bond," and" income" are synonymous. These terms denote funds that invest primarily in government and corporate debt. While fund holdings may appreciate in value, the primary objective of these funds is to provide a steady cash flow to investors. As such, the audience for these funds consists of conservative investors and retirees.
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Bond funds are likely to pay higher returns than certificates of deposit and money market Investments, but bond funds aren't without risk. Because there are many different types of Bonds, bond funds can vary dramatically depending on where they invest. For example, a fund specializing in high-yield junk bonds is much more risky than a fund that invests in government securities; also, nearly all bond funds are subject to interest rate risk, which means that if rates go up the value of the fund goes down.
Balanced Funds
The objective of these funds is to provide a "balanced" mixture of safety, income, and capital appreciation. The strategy of balanced funds is to invest in a combination of fixed-income and equities. A typical balanced fund might have a weighting of 60% equity and40% fixedincome. The weighting might also be restricted to a specified maximum or minimum for each asset class. A similar type of fund is known as an asset allocation fund. Objectives are similar to those of a balanced fund, but these kinds of funds typically do not have to hold a specified percentage of any asset class. The portfolio manager is therefore given freedom to switch the ratio of asset classes as the economy moves through the business cycle.
Equity Funds
Funds that invest in Mutual represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth with some income. 34
There are, however, many different types of equity funds because there are many different types of equities. A great way to understand the universe of equity funds is to use a style box, an example of which is below. The idea is to classify funds based on both the size of the companies invested in and the investment style of the manager. The term "value" refers to a style of investing that looks for high quality companies that are out of favor with the market. These companies are characterized by low P/E ratios, price-to-book ratios, and high dividend yields, etc. The opposite of value is growth, which refers to companies that have had (and are expected to continue to have) strong growth in earnings, sales, and cash flow, etc. A compromise between value and growth is "blend," which simply refers to companies that are neither value nor growth Mutuals and so are classified as being somewhere in the middle. For example, a mutual fund that invests in large-cap companies who are in strong financial shape but have recently seen their share price fall would be placed in the upper left quadrant of the style box (large and value). The opposite of this would be a fund that invests in startup technology companies with excellent growth prospects. Such a mutual would reside in the bottom right quadrant
Global/International Funds An international fund (or foreign fund) invests only outside your home country. Global funds invest anywhere around the world, including your home country. It's tough to classify these funds as either riskier or safer. On the one hand they tend to be more volatile and have unique country and/or political risks. But, on the flip side, they can, as
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part of a well-balanced portfolio, actually reduce risk by increasing diversification. Although the world's economies are becoming more inter-related, it is Likely that another economy somewhere is outperforming the economy of your home Country.
Index Funds
The last but certainly not the least important are index funds. This type of mutual fund replicates the performance of a broad market index such as the sensex and nifty. An investor in an index fund figures that most managers can't beat the market. An index fund merely replicates the market return and benefits investors in the form of low fees.
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1. Ongoing yearly fees to keep you invested in the fund. 2. Transaction fees paid when you buy or sell shares in a fund (loads)
The cost of hiring the fund manager(s) - Also known as the management fee,
This cost is between 0.5% and 1.0% of assets on average. While it sounds small, This fee ensures that mutual fund managers remain in the countrys top echelon of Earners. Think about it for a Second: 1% of 250 million (a small mutual fund) is 2.5 million--fund managers are definitely not going hungry! Its true that paying Managers is a necessary fee, but dont think that a high fee assures superior Performance.
Administrative costs
These include necessities such as postage, record keeping, customer service, cappuccino machines, etc. Some funds are excellent at minimizing these costs while others (the ones with the cappuccino machines in the office) are not. On the whole, expense ratios range from as
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low as 0.2% (usually for index funds) to as high as 2.0%. The average equity mutual fund charges around 1.3%-1.5%. Youll generally pay more for specialty or international funds, which require more expertise from manager.
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(You can buy some mutual funds no-load) by contacting the fund companies directly. Other funds are sold through brokers, banks financial planners, or insurance agents. If you buy through a third party there is a good chance theyll hit you with a sales charge (load). That being said, more and more funds can be purchased through no-transaction fee programs that offer funds of many companies. Sometimes referred to as a "fund supermarket," this service lets you consolidate your holdings and record keeping, and it still allows you to buy funds without sales charges from many different companies.
Popular examples are Schwabs OneSource, Vanguards Fund Access, and Fidelitys
Funds Network. Many large brokerages have similar offerings. Selling a fund is as easy as purchasing one. All mutual funds will redeem (buy back) your shares on any business day. In the United States companies must send you the payment within seven days.
Net asset value (NAV), which is a fund's assets minus liabilities, is the value of a mutual fund. NAV per share is the value of one share in the mutual fund, and it is the number that is quoted in newspapers. You can basically just think of NAV per share as the price of a mutual fund. It fluctuates everyday as fund holdings and shares outstanding change.
When you buy shares, you pay the current NAV per share plus any sales front-end load. When you sell your shares, the fund will pay you NAV less any back-end load .Moses gave to his follow eternities 10 commandments that were to be followed till: The world of investments too has several ground rules meant for investors who are novices in their own right and wish to enter the myriad world of investments. These come in handy for there is every possibility of losing what one has if due care is not taken.
1. Assess yourself: Self-assessment of ones needs; expectations and risk profile is of prime
importance failing which; one will make more mistakes in putting money in right places than otherwise. One should identify the degree of risk bearing capacity one has and also clearly state the expectations from the investments. Irrational expectations will only bring pain.
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2. Try to understand where the money is going: It is important to identify the nature of
investment and to know if one is compatible with the investment. One can lose substantially if one picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go through the literature such as offer document and fact sheets that mutual fund companies provide on their funds.
3. One first has to decide what he wants the money for and it is this investment goal
that should be the guiding light for all investments done. It is thus important to know the risks associated with the fund and align it with the quantum of risk one is willing to take. One should take a look at the portfolio of the funds for the purpose. Excessive exposure to any specific sector should be avoided, as it will only add to the risk of the entire portfolio .Mutual funds invest with a certain ideology such as the "Value Principle" or "Growth Philosophy". Both have their share of critics but both philosophies work for investors of different kinds. Identifying the proposed investment philosophy of the fund will give an insight into the kind of risks that it shall be taking in future.
4.
. It is thus of key
importance that there is thought given to the process of investment and to the time horizon of the intended investment. One should abstain from speculating which in other words would mean getting out of one fund and investing in another with the intention of making quick money. One would do well to remember that nobody can perfectly time the market so staying invested is the best option unless there are compelling reasons to exit.
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5. This old age adage is of utmost importance. No matter what the risk profile of a
person is, it is always advisable to diversify the risks associated. So putting ones money in different asset classes is generally the best option as it averages the risks in each category. Thus, even investors of equity should be judicious and invest some portion of the investment in debt. Diversification even in any particular asset class (such as equity, debt) is good. Not all fund managers have the same acumen of fund management and with identification of the best man being a tough task; it is good to place money in the hands of several fund managers. This might reduce the maximum return possible, but will also reduce the risks.
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7. Do your homework:
It is important for all investors to research the avenues available to them irrespective of the investor category they belong to. This is important because an informed investor is in a better decision to make right decisions. Having identified the risks associated with the investment is important and so one should try to know all aspects associated with it. Asking the intermediaries is one of the ways to take care of the problem.
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investors of equity too will benefit by switching to debt funds as the losses can be minimized. One can always switch back to equity if the equity market starts to show some buoyancy.
Investments in mutual funds too are not risk-free and so investments warrant some caution and careful attention of the investor. Investing in mutual funds can be a dicey business for people who do not remember to follow these rules diligently, as people are likely to commit mistakes by being ignorant or adventurous enough to take risks more than what they can absorb. This is the reason why people would do well to remember these rules before they set out to invest their hard-earned money.
Alliance Mutual Fund Birla Mutual Fund BOB Mutual Fund BOI Mutual Fund 45
DSP Merrill Lynch Mutual Fund HDFC Mutual Fund IDBI Principal Mutual Fund Indian Bank Mutual Fund ING Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Morgan Stanley Mutual Fund Pioneer ITI Mutual Fund PNB Mutual Fund Prudential ICICI Mutual FundReliance Capital Mutual FundSBI Mutual Fund Standard Chartered Mutual Fund Sundaram Mutual Fund Tata TD Waterhouse Mutual Fun Taurus Mutual Fund
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FIRST PHASE :
1964 87
THIRD PHASE
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the 47
RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of nonUTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canara bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds) with the entry of private sector
funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many 48
foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds.
Fourth Phase since February 2003 In February 2003, following the repeal of the Unit
Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.
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GRAPHICAL REPRESENTATION
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There are many entities involved and the diagram below illustrates the 51
REGULATORY BODIES
Financial System is basically responsible for the major up and downs in the 52
Economy. So, there are some regulatory bodies on it which ensures effectiveness In the management of Fund of the investors and transparency in the transactions.
FLOW CHART
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SALE PRICE The price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
REPURCHASE PRICE
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The price at which units under open-ended schemes are repurchased by the Mutual Fund. Such prices are NAV related.
REDEMPTION PRICE The price at which close-ended schemes redeem their units on maturity. Such prices are NAV related.
SALES LOAD A charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load schemes.
REPURCHASE OR BACK END LOAD A charge collected by a scheme when it buys back the units from the Unit holders.
The rising Indian mutual funds industry probably never had it better, as far as the entry of individual or retail investors is concerned. The industrys total AUM in December 2006 stood at a hefty Rs 3, 23,597 crore, with a total of2.79 crore depositor folios, of which 2.31 crore depositor folios had invested inequity schemes. The share of direct investors, on the other hand, has been dropping, stating that more retail investors see mutual funds as a preferred route for investing in the markets. Existing and new market players as well as Exchange Traded Funds are likely to hit the market in the coming months with a flurry of new Mutual Funds schemes. An action packed first quarter of 2007 was forecasted to witness at Least 20 new schemes which are waiting on the sidelines to be launched.
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PERFORMANCE SNAPSHOT!!!
The year 2006 scored high in terms of both returns and volatility. The rising Indian mutual funds industry saw its best, as far as the entry of individual or retail investors is concerned. In 2006, out of the 159 diversified equity funds (includes diversified equity, midcap, and equity tax saving schemes): 20 funds (13%) out-performed the Sensex 50 funds (37%) out-performed the Nifty 58
The best returns generated were up to 58.3% (Tata Infrastructure Fund) Equity Diversified funds churned out an average 33.2% return, which Comprise of 72 funds in this category comprising of total 135 funds
Infrastructure funds stole the limelight this year with the top three Performers being Infrastructure Fund.
The amount of assets managed by AMCs varies every year. Following is the table that depicts the total amount of asset managed by the well known AMCs in India. It also shows the ranking of AMCs for the year 2007, based on the above mentioned parameter.
FUND HOUSE
JAN 2009
JAN 2008
DEC 2008
Reliance MF UTI MF Prudential ICICI HDFC MF Franklin Templeton Birla Sun Life SBI MF DSP Merrill Lynch TATA MF Standard Chartered Kotak Mahindra LIC MF HSBC Principal Figures in Rs crores
39,020 37,535 34,746 31,425 23,908 21,190 17,552 13,440 13,222 12,746 12,674 12,237 12,140 10,333
16,702 25,617 22,635 18,591 18,153 13,797 10,839 8,976 8,649 9,480 7,397 6,386 6,288 6,789
36,928 38,109 33,305 29,635 23,403 17,054 15,086 13,517 12,177 12,629 12,062 11,599 10,450 10,522
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1)
Birla Sun life was the best performer in January 2007 and Rs4, 136 crore to its assets
2)
Reliance MF has become the top mutual fund house in the country by adding a very Impressive Rs2, 092 crore to assets under management
3)
Previous Top Fund House UTI MF declined by Rs574 crore and position to Reliance
4) 5)
SBI MF was able to acquire 7th position by an addition of Rs2, 466 crore Tata MF gained Rs1, 045 crore and able to secure its position in top 10.
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Following is the ranking of the best mutual funds and their NAVs as on 27thApril, 2009. The rankings are based on 1 year returns of the Equity Mutual Funds available in the market.
S.NO.
SCHEME NAME
1 2 3 4 5 6 7
DSPML Technology.com fund-growth UTI Banking sector fund-growth Magnum IT Birla Sun life New Millennium-Growth Banking Bees Prudential ICICI Technology Growth
8 9 10 11 12 13 14 15
UTI Software Growth Reliance Media & Entertainment Growth Birla Sun life Frontline Equity Growth Reliance Banking Growth Reliance NRI Equity Fund Growth Franklin InfoTech Growth DBS Chola Opportunity Reliance Diversified Power Sector Growth
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Formula:
Net asset scheme / No. of unit outstanding
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NNNNN
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To study the mutual fund industry in detail. To study the investment procedure in detail. To find out the market risk of sip plan. To aware the client about mutual fund investment. To suggest better investment option according to market behavior to the client. Expansion of mutual fund investment. To remove the past image of mutual fund from the mind of investors. To show the beneficiary aspect of mutual fund. To give the updated information to the investors about the high return and less risk fund.
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Scope of Mutual Funds has grown enormously over the years. In the first age of mutual funds, when the investment management companies started to offer mutual funds, choices were few. Even though people invested their money in mutual funds as these funds offered them diversified investment option for the first time. By investing in these funds they were able to diversify their investment in common Mutuals, preferred Mutuals, bonds and other financial securities. At the same time they also enjoyed the advantage of liquidity. With Mutual Funds, they got the scope of easy access to their invested funds on requirement.
But, in todays world, Scope of Mutual Funds has become so wide, that people sometimes take long time to decide the mutual fund type, they are going to invest in. Several Investment Management Companies have emerged over the years, who offer various types of Mutual Funds, Each type carrying unique characteristics and different beneficial features.
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Research Methodology
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1. Research Design:
A research design is a pattern or an outline of a research projects working. It is a statement of only the essential element of a study, those that provide the basic guidelines for the details of the project. It comprises a series of prior decision that taken together provide master plans for executing a research projects. A research design serves as a bridge between what has been established i.e., the research objectives and what is to be done, in conduct of the study to relish those objectives. If there were no research design, the research would have only foggy notions as about what is to be done.
I have used of Exploratory Type. The research is of both qualitative as well as quantitative type.
2. Unit of Analysis:
Investors
Characteristics of interest:
Clients knowledge about Mutual Fund. 72
Clients knowledge about Reliance. Clients interest in getting knowledge of Mutual Fund. Clients willingness to deal in Mutual Fund with Reliance. Clients preference in selecting tax saving instrument of investment. Clients preference in selecting dealer.
3. Sources of Data:
Primary Source: The primary data is collected using sampling method and by survey using questionnaire. Secondary Source: Secondary data includes information regarding present market scenario, Information regarding Mutual Funds and competitors are collected by internet, Magazines and Newspaper and books.
4. Sample Planning:
Sample Size: 50 units. Sample Extent: Kanpur city.
5. Sample design:
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A sample design is a definite plan for obtaining a sample from a given population. It refers to the technique or method the researcher would adopt in selecting items for the sample. I have used convenience sampling method
7. Type of information:
I have collected facts, awareness, attitude, future action plan and reason using questionnaire.
8. Type of questions:
Close ended questions for dichotomous. Multiple choice type
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We can know that how many investors are aware about the mutual fund. We can know that in which type of securities, people want to invest and why. We can know that if investors dont want to invest in mutual fund so what the reason behind that is. We can aware the investors about mutual funds beneficiary schemes. We can know about the market potential. By this project we can know that, which fund is growing up and which fund is going down. By this we can know about the co.s that provide the mutual fund investment facilities. We can know about the Reliance Mutual fund co. and its working. We can know about the mutual fund AMC (Asset Management Company)
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Mutual funds offer inexperienced and experienced investors---who may not have a lot of money to invest---the ability to invest in more than just one investment tool without having to monitor or manage that investment personally and at a reduced risk.
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Every person who have no more knowledge about investment and he want to invest anywhere so he can invest easily in mutual fund.
One of the mode to invest mutual fund thats SIP (Systematic Investment Plan) is less risky to invest and every investor want to invest in less price.
Mutual fund is totally depend upon the NAV value (Net Assets Value) By purchasing a combination of Mutuals, bonds and other securities--rather than just one single Mutual purchase--their risk is spread out over many fields and companies, instead of just one.
Purchasing into a mutual fund automatically provides the investor with an experienced investment manager to oversee their investment. This is because the mutual fund is composed of different investment securities and requires a competent professional to oversee it from the onset.
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INTERPRETATION:
Mutual fund advisor will suggest the investors to invest in mutual fund investment more because it is les risky than any investment. In mutual fund the investor can invest in sip (systematic investment plan) which is depend upon NAV (net asset value) which is less risky and whenever investors want to close that scheme they can. And it is profitable because its profit is based on average basis.
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INTERPRETATION:
After analysis we have got that lots of investors want to invest just for security purpose. because most of the investors want to secure or their money, so for holding the money they want to invest in somewhere so that they can safe their money for future .and a persons who have no knowledge about security market, they can also be invest in mutual funds.
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INVESTORS WHO KNOW ABOUT THE MUTUAL FUND SERVICES PROVIDED BY RELIANCE
INTERPRETATION:
After analysis we have known that most of the investors dont know about the mutual fund services which has been provided by Reliance just because of publicity, Reliance doesnt show that it provides mutual fund services along with other services such as: pan card services, d.p. services, share trading services, IPOs services etc. thats why most of the peoples are unknown about the Reliance mutual fund services.
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INTERPRETATION:
After analysis we have seen that most of the investors are not interested to invest in mutual fund just because of: Past image of mutual fund. Because of unawareness. They are unaware about the mutual fund benefits.
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INTERPRETATION:
After analysis we have got the result that most of the investors want to invest in any securities on the basis of rate of return, when they invest in any believable security so they expected or anticipated that they will got the expected rate of return ,
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Some people invest on the basis of safety purpose , some small investors mostly invest their money for saving and for getting into near future
Businessman mostly invests their money on securities just for saving the tax because invested money always is tax free
INTERPRETATION:
By above analysis we can know that most of the clients, Persons or investors want to know about the mutual fund benefits, schemes, and 85
Each and every information, because now a days every persons or investors want to Get information about everything so that on time he can utilize optimum utilization Of resources in a right way and could get profit.
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INTERPRETATION:
After analysis we got that investors dont want to do the job in Reliance because: Because lots of persons have no time for joining that and there is lack of management in each dept. of Reliance that is also be reason that persons dont want to do job in Reliance Some persons dont want just because of lack of knowledge about investment. Some persons dont want to do the job in Reliance because they dont want to expand their business. Some persons gave no answers on such issues.
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INTERPRETATION:
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By above evaluation we can see that some investors are interested to join the seminar on mutual fund which has been organized by Reliance because they actually want to know the actual situation of mutual fund that : benefits ,why this investment exist, why they should invest over there.
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INTERPRETATION:
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We all know that most of the investors or persons are interested to invest in public co. or government co. in which there is less chance to drop out the invested money while on the other hand less of the persons are not interested to invest in private sector because there is more risk than public sectors. Same as we can see in the above chart that most of the investors want to invest in reliance co. because investors has made the mind set that we will get always the profit in investing over there while only small investors who invest very small amount in security invest in private co. such as: hdfc , icici. Other.
INTERPRETATION:
Most of the investors or clients want to invest in public co. because most of the clients think that/; It is risk free means to say there is less risk to invest in that type of funds, that is a trustworthy co. Some investors invest just because of good return, peoples perception towards that co. is that it will never incurred loss and it will not cheat the investors. Reliance is one of the most powerful and reputed co. even we can say MNC co. so just because of good positioned in the market investors want to invest over there.
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INTERPRETATION:
Investors who have already invested in mutual fund they all want advisory services from Reliance, in advisory services; we can know NAV (net assets value) of each fund on daily basis. So investors want to get those services so that they can take right decision on right time, if he sees that he is getting loss in investing fund so by this services he can switch from loss fund to profitable fund. So all the investors want to get that type of services from Reliance.
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CLIENTS ATTITUDE TOWARDS DSP BLACK ROCK FUND WHICH PROVIDE 100% RETURN NOW A DAYS
INTERPRETATION:
We have seen that most of the investors dont want to invest in dsp black rock fund, which is international co. , they dont want to invest because they know that now a days the NAV of this fund is very low approx. (14 -15 rs.) so on this the 100% return is not so hectic for the org. and market is totally based upon uncertainty and always be fluctuating so he thinks that may be dspblack rock will not provide same return in future so the investors may get lost, so they dont want to invest in this. Only those investors would like to invest in this fund who invests for short term.
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INTERPRETATION:
We can see that most if the investors want to invest in debt funds because there is a solid reason behind this is that the debt funds provide the fixed rate of interest to the investors, there is no risk in that type of funds for the investors. While only big investors want to invest in equity market because equity fund provide the dividend according to performance of the org. if there will be profit in org so investors will get the dividend otherwise they will have to face loss Thats why investors want to invest in debt funds rather than equity market.
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INTERPRETATION:
Now a days most of the investors want to invest in others funds such as: FDs INSURANCE Etc.
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After that the investors mostly focus on to invest in debt market just for reducing the risk. After that they want to invest in equity market for getting more profit. Then investors want to invest in commodity market just for saving money in near future.
Findings
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1) After getting in depth research study of Reliance, I came to know that Reliance is not much popular as other brands operating in Kanpur city. Bajaj Allianz, HDFC, ICICI are having much higher tapped market in respect to mutual funds. 2) Reliance as an investment option in Mutual Fund does not possess much proficiency and potential customers in Kanpur city. Though the financial advisors advise their clients to go for Mutual Fund as an investment option. About 42% of advisors advise their clients to invest in Mutual Funds, followed by investing in Insurance sector. 3) The advisors after having a deep thought says that it is the Returns that make them convince their clients to go for investment in mutual funds. 36% of advisors said that it is the Returns which make a person to invest in Mutual Fund. Followed by Risk which is quite lesser in other investment options. 4) A huge lot of advisors showed a positive response in dealing of for Mutual Fund. About 60% of them said that they are interested in dealing for Mutual Funds, because that results in higher brokerage. 5) As far as Reliance is concerned about 91% of the advisors said that they are not aware of the services provided by Reliance, including Mutual Fund.
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6) When asked, 53% of advisors said that they are not interested to work with Reliance Securities, to the contrary with they dont have any such expansion plans and they have little knowledge about Reliance. 7) In Kanpur city advisors dont have an appropriate knowledge about Reliance as an Investment hub.
Swot Analysis
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A type of fundamental analysis of the health of a company by examining its strengths(S), weakness (W), business opportunity (O), and any threat (T) or dangers it might be exposed to.
# I. STRENGTHS
Brand strategy:
ADAG operates a multi-brand strategy. The company operates under numerous wellknown brand names, which allows the company to appeal to many different segments of the market.
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.
group, and this diversity within the group makes the company more flexible and resistant to economic and environmental changes. 100
Large pool of installed capacities. Experienced managers for large number of Generics. Large pool of skilled and knowledgeable manpower . An increasing liberalization of government policies.
II. 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 fixedincome 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 doesnt mean the performance will be stellar.
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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. As you can imagine, in years when the fund doesnt make money, these fees only magnify losses.
III. 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.
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IV. THREATS Hedge funds: sometimes referred to as 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, A stock or A bond market, A usually a hedge fund prominently figures somewhere in the picture.
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Recommendations
There is high potential market. For mutual fund investors Kanpur city but this market need to bed explored as investors are still hesitated to invest their money in mutual fund. In Kanpur city, investor has inadequate knowledge of mutual fund, so proper marketing of various scheme is required, co. should arrange more and more seminar about mutual fund. Co. should also provide the knowledge of growth rate and expected growth rate of mutual fund in India. Reliance must be concentrate on the management of the co. so that every work can be done in a proper way.
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Reliance must be advertising its tie up co. fund along with their features that the investors can invest in that type of fund in Reliance. Reliance must be provided the advice to investors about mutual fund growing fund.
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Conclusion
The awareness level of investors is low who are interested in dealing in mutual fund:
Most of investors are totally unaware about this investment. Very less people knows about the service of Reliance. Past image of mutual fund is not good. 106
Reliance can promote the investors by advertising, hording, and by interviews to invest in this fund. Most of the investors want to invest in public co.s fund just because of safety purpose. Most of the investors want to safer side in investment. Most of the investors want to invest in debt funds because those are the risk free funds; it gives the interest on investment. Most of the investors dont know about the mutual funds so they want advisory services from reliance which could provide them whole information about the market situation of mutual fund.
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Annexure
We assure you that all the information that will be collected from you will remain fully confidential and use only for study purpose.
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1) As a financial advisor which investment options you will suggest your customers: a) Shares ( ) b) Insurance ( ) c) Mutual fund ( ) d) Fixed deposit ( )
2) Please indicate reason for choosing above : a) Return ( ) b) Risk ( ) c) Safety ( ) d) Tax benefit ( ) e) Others ( )
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3) Do you know about the mutual fund services provided by the Reliance : a) Yes ( ) b) No ( ) 4) Are you interested to invest in mutual fund : a) Yes ( ) b) No ( )
5) Do you invest your money on which basis : a) Return ( ) b) Safety ( ) c) Tax saving ( ) d) Others ( )
6) Do you want to collect information about mutual fund investment: a) Yes ( ) b) No ( ) 110
7) Will you like to work in Reliance Mutual Fund Ltd. , which deals with mutual fund : a) Yes ( ) b) No ( )
8) In future will you attend the seminar arranged by Reliance to guide the investors about mutual fund : a) Yes ( ) b) No ( ) 9) In which co. you believe more : a) Hdfc b) Icici c) Reliance d) Dsp black rock e) Any other fund _________________________
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10) Why you believe only such kind of fund : a) Return ( ) b) Good market position ( ) c) Risk free ( ) d) Any other reason ( )
12) Now a days DSP black rock fund provides the 100 % return so do you want to invest in this fund : a) Yes ( ) b) No ( ) c) If yes/no why ______________________
13) If you have Rs. 100 , in which of these assets classes would you like to invest : 112
14) Which type of instrument are currently invested in : a) Mutual fund (equities) ( ) b) Debt funds ( ) c) Currency & Commodities ( ) d) Others_____________________
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Bibliography
WEBSITE:
http://www.moneycontrol.com http://www.amfi.com http://www.Reliance .com//v2/ www.amfiindia.com
MAGAZINES:
S.Gopichand, the finapolis , Reliance Mutual Fund Ltd..,volume 4 , 2010 PunithavathyPandian , Security Analysis And Portfolio Management , Vikas Publishing House , 2001
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Thank you
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