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Chapter-1
Introduction
1
1.1 PURPOSE OF THE STUDY
1.To choose best company for mutual investment between Reliance and HDFC.
2.To know the risk and return associated with the mutual fund.
1.2 SCOPE OF THE STUDY
1.To make people aware about concept of mutual fund.
2. To advice where to invest or not to invest.
3. To provide information regarding types of mutual fund & which is beneficial for
whom.
1.3 RESEARCH OBJECTIVE OF THE STUDY
1. To make a comparative analysis of equity based mutual fund in India.
2. To analyse the performance of private sector Mutual Funds: Reliance Equity fund
along with HDFC Equity fund.
3. To analyse which provide better returns.
4. To analyse concept and parameters of mutual funds.
5. To know how many people are satisfied by their investment(in reliance or hdfc).
6. To know People behaviour regarding risk factor involved in mutual fund.
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1.4 RESEARCH METHODOLOGY OF THE STUDY
TYPE OF RESEARCH
Explortory Reserch
Descriptive Reserch
1.4.1 RESEARCH DESIGN
Sample Size – 100
Sampling unit – The target population for the research consists of the people
who are in the age group of 25 to 40. This group of population was targeted
because these populations are the potential customers of Mutul Funds.
Area Covering – Delhi and NCR.
Sampling Method – Non Probablity Sampling Method(Judgemental and
convenience sampling)
1.4.2 SOURCES OF DATA COLLECTION
Both primary and secondary data have been collected to meet our objectives. The
research would be conducted from the source of primary data collection. Secondary
data would help us in knowing the trends prevailing in the Mutul Fund market and
would help us in analyzing and interpretation of the primary data.
Primary Data – Questionnaire.
Secondary Data – Internet , Newspaper , books and Business Magazines.
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1.4.3 Instrument for data collection
Questionnaire.
Survey.
1.4.4 LIMITATIONS
Howsoever impeccable a thing may seem to be there always dwell some possibilities
of failure and incompleteness. The result of this work also subjects to some of
limitations, which are as follows:
The study is confined only to a small segment of the entire population due to
monetary and time constraints and hence the results are applicable only to
Delhi and NCR.
Some respondents were not interested in giving answer and they appeared to
be busy.
Lack of experience.
Company Officials did not revel any information , which my have affected
my study , as the information that was required was internal to the company.
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Chapter-2
Review Of Literature
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Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensen’s
alpha) that estimates how much a manager’s forecasting ability contributes to
fund’s returns. Sharpe, William (1994) suggested the ‘Sharp- Ratio technique for
the measurement for the performance measurement of the MF. Berkowitz et.al,
(1997), supports the argument & states that, past fund performance influences
individual investment decisions along with implying strong incentives for managers
increase the performance of Mutual funds.
Mishra, Rehman (2000) measured MF performance using lower partial moment
Risk from the lower partial moment is measured by taking into account only those
states in which return is below a pre-specified “target rate” like risk-free rate.
Brealey and Mayers (2002) supported Quality of Earnings as a key performance
measure. Earnings can be manipulated by adopting different accounting policies.
Further supported by Grahm et al. (2002), analyst rely on the primarily data,
reported cash flows and the use of the accounting conservations in evaluating
companies. Ramasamy et al, (2003), agreed that three elements consistent past
performance, size of funds & cost of transaction effects the performance.
Roy & Deb (2003) used conditional performance evaluation on a sample of 89
Indian MF schemes measuring with both unconditional and conditional form of
CAPM model. The results suggest that the use of conditioning lagged information
variables improves the performance of mutual fund schemes, causing alphas to
shift towards right and reducing the number of negative timing coefficients. Rao,
Ravindran (2003) evaluated performance in a bear market through Relative
Performance Management index & risk – return analysis.
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Panwar et.al (2005) uses Residual Variance (RV) as the measure of MF portfolio
diversification. RV has a direct impact on shape fund performance measure.
Kacperczyk et.al (2005) demonstrated that unabsorbed information create values
for some funds. Return gap helps to predict future fund performance & investors
should use additional measures to evaluate the performance.
Agrawal (2006) analyze the Indian Mutual Fund Industry pricing mechanism with
empirical studies on its valuation. The study reveled that the performance is
affected saving and investment habits of the people.
7
Chapter-3
Company Profile
8
Reliance Mutual Fund
The Reliance Mutual Fund is one of the most popular and leading mutual fund in
India. The Fund is owned by Anil Dhirubhai Ambani Group and with respect to net
worth it ranks among the top three of all the private financial service providers in
India. It is an ISO 9001:2000 certified company, which offers innovative mutual
fund products to a wide pool of customers. The Reliance mutual fund products are
available in hundred and fifteen cities across India. It is one of the fastest growing
mutual fund in India and the main reason of its popularity is that it has a wide
portfolio of products that meets the requirements of each and every type of
investors. The Reliance Mutual Fund is headed by Mr. Vikrant Gugnani - the CEO
of the company.
Details of Reliance Mutual Fund:
• The schemes of Reliance Mutual Fund are being managed by Reliance Capital
Asset Management Ltd, which is a subsidiary of Reliance.
• Reliance Capital Ltd holds 93.37% of the paid-up capital of the Reliance Capital
Asset Management Ltd.
• The value of the cumulative assets that are being managed (also called Assets
Under Management (AUM)) amounted to Rs. 80,779 crores, as on Dec 31st
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2007.
• The investor base of Reliance Mutual Fund is over 43.67 lakh.
Equity/Growth Schemes:
The aim of growth funds is to provide capital appreciation over the medium to long-
term. Such schemes normally invest a major part of their corpus in equities. Such
funds have comparatively high risks. These schemes provide different options to the
investors like dividend option, capital appreciation, etc. and the investors may choose
an option depending on their preferences. The investors must indicate the option in
the application form. The mutual funds also allow the investors to change the options
at a later date. Growth schemes are good for investors having a long-term outlook
seeking appreciation over a period of time.
Reliance Equity Fund – Growth(3-Star Fund ICRA Online MF Rank3 Year-March 2009)
FUND FACTS
Objectives of the Fund
The primary investment objective of the scheme is to seek to generate capital
appreciation & provide long-term growth opportunities by investing in a
portfolio constituted of equity & equity related securities of top 100 companies by
market capitalization & of companies which are available in the derivatives segment
from time to time and the secondary objective is to generate consistent returns by
investing in debt and money market securities.
Fund features
Type of Scheme Open Ended Fund Manager Sunil Singhania.
Nature Equity SIP
Option Growth STP
Inception Date Mar 28, 2006 SWP
Face Value 10 Expense ratio(%) 1.87(Rs/Unit)
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Portfolio Turnover 114Fund Size in Rs. Cr. 2232.02 as on Jun Ratio (%)
30, 2009
Last Dividend -NA-DeclaredMinimum Investment 380053(Rs)Purchase DailyRedemptionsNAV Calculation DailyEntry Load Amount Bet. 0 to 19999999 then Entry load is 2.25%. and
Amount Bet. 20000000 to 49999999 then Entry load is 1.25%.and Amount greater than 50000000 then Entry load is 0%.
Exit Load If redeemed bet. 0 Year to 1 Year; and Amount Bet. 0 to49999999 then Exit load is 1%. and Amount greater than50000000 then Exit load is 0%.
Net Asset Value (NAV)Latest NAV 12.76 as on Jul 15, 2009Benchmark Index - S&P Nifty 4,233.50 as on Jul 15, 200952 - Week High 13.54 as on Jun 10, 200952 - Week Low 8.21 as on Mar 9, 2009
PORTFOLIO Attribute
P/E 21.90 as on Jun – 2009P/B 3.74 as on Jun – 2009Dividend Yield 1.16 as on Jun – 2009Market Cap (Rs. in crores) 71,812.69 as on Jun – 2009Large 55.20 as on Jun – 2009Mid 18.27 as on Jun – 2009Small NATop 5 Holding (%) 27.60 as on May – 2009No. of Stocks 21Expense Ratio (%) 1.87
Fig: STYLE BOX
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Sector Allocation (%)
Auto & Auto ancillaries 3.89Banks 10.75Computers - Software & Education 10.11Current Assets 24.33Diversified 1.20Entertainment 3.72Housing & Construction 4.70Metals 1.45Miscellaneous 2.20Oil & Gas, Petroleum & Refinery 9.88Pharmaceuticals 8.81Power Generation, Transmission & Equip 4.85Steel 2.96Telecom 9.52Textiles 1.63
Fig.: Sector wise allocation of Reliance Equity Growth Fund
Figure 5: Asset Allocation (%)
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Asset Alocation
Asset Allocation (%)
Equity Debt Cash & Equivalent75.67 0.00 24.33
24.33 Equity
Debt
Cash & Eq.
75.67
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HDFC Mutual Fund
HDFC Mutual Fund is governed by HDFC Asset Management Company Limited
(AMC). The HDFC mutual fund was approved by SEBI in June 2000. Equity Funds,
Balanced Funds, and Debt Funds are the mutual fund schemes offered by HDFC
Mutual Fund.
An Overview of HDFC Mutual Fund-
HDFC Mutual Fund has witnessed significant growth in the past few years. It is
regulated by HDFC Asset Management Company Limited (AMC) which works as an
Asset Management Company (AMC) for HDFC Mutual Fund. HDFC Asset
Management Company Limited (AMC) is a Joint Venture concern between the large-
scale housing finance company HDFC and British investment firm Standard Life
Investments Limited.
The HDFC Asset Management Company Limited conducts the activities carried out
by the HDFC Mutual Fund and manages the assets of various mutual fund schemes.
The August 2006 report states that the fund has assets of Rs. 25,892 crores under
Asset Management Company (AMC).
HDFC Asset Management Company Limited (AMC) entered into an agreement with
Zurich Insurance Company (ZIC) with the aim to develop the asset management
business in India in the year 2003. Following to this, all the mutual fund schemes of
Zurich Mutual Fund in India got transferred to HDFC Mutual Fund and gained the
name of HDFC schemes.
Details of HDFC Mutual Fund-
HDFC Asset Management Company Ltd (AMC) was set up on December 10, 1999
under the Companies Act, 1956. It got the approval to function as an Asset
Management Company for the HDFC Mutual Fund by SEBI on June 30, 2000. AMC
was appointed in order manage the HDFC Mutual Fund. The registered office of
HDFC Asset Management Company Limited (AMC) is located at Ramon House, 3rd
Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020.
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Schemes of HDFC Mutual Fund-
• HDFC Equity Fund
• HDFC Prudence Fund
• HDFC Capital Builder Fund
• HDFC Tax Saver
• HDFC Top 200 Fund
• HDFC High Interest Fund
• HDFC Cash Management Fund
• HDFC Sovereign Gilt Fund
Equity Funds, Balanced Funds, and Debt Funds are the broad categories of mutual
fund schemes offered by HDFC Mutual Fund.
HDFC EQUITY FUND – GROWTH(3-STAR FUND ICRA Online MF Rank3 Year-March 2009)
FUND FACTS
OBJECTIVE
Aims at providing capital appreciation through investments predominantly in
equity oriented securities
FUND FEATURES
Type of Scheme Open Ended Fund Manager Anand LaddhaNature Equity SIP
Option Growth STPInception Date Jan 1, 1995 SWP
Expense ratio (%) 1.86Face Value 10(Rs/Unit) Portfolio 80.18Fund Size in Rs. 3870.79 as on Jun TurnoverCr. 30, 2009 Ratio(%)
Last Dividend NADeclaredMinimum 380053Investment (Rs)Purchase DailyRedemptions
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NAV Calculation Daily
Entry Load Amount Bet. 0 to 49999999 then Entry load is 2.25%. andAmount greater than 50000000 then Entry load is 0%.
Exit Load If redeemed bet. 0 Month to 12 Month; and Amount Bet. 0 to49999999 then Exit load is 1%. and Amount greater than50000000 then Exit load is 0%.
NET ASSET VALUE (NAV)
Latest NAV 176.82 as on Jul 17, 2009
Benchmark Index - CNX500 3,542.20 as on Jul 17, 2009
52 - Week High 178.02 as on Jun 10, 2009
52 - Week Low 91.23 as on Mar 9, 2009
Portfolio Attributes
P/E 21.00 as on Jun - 2009P/B 3.90 as on Jun - 2009Dividend Yield 1.57 as on Jun - 2009Market Cap (Rs. in crores) 38,760.36 as on Jun - 2009Large 53.56 as on Jun - 2009Mid 40.49 as on Jun - 2009Small 2.98 as on Jun - 2009Top 5 Holding (%) 21.96 as on May - 2009No. of Stocks 50Expense Ratio (%) 1.86
Fig: Style Box
Auto & Auto ancillaries 2.87
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Banks 18.89Chemicals 0.41Computers - Software & Education 9.33Consumer Durables 4.50Current Assets 2.97Electricals & Electrical Equipments 7.18Engineering & Industrial Machinery 1.18Entertainment 6.17Fertilizers, Pesticides & Agrochemicals 0.85Finance 6.39Food & Dairy Products 5.74Housing & Construction 6.10Oil & Gas, Petroleum & Refinery 4.79Personal Care 1.32Pharmaceuticals 13.23Power Generation, Transmission & Equip 1.68Printing & Stationary 1.05Steel 0.47Telecom 3.11Textiles 0.77Transport & Travel 1.02
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Sector allocation ( %)Fig. : Sector wise allocatio n of HDFC Equity Growth Fund
Asset Allocation (%)
Equity Debt Cash & Equivalent
97.03 0.00 2.97
Figure 7: Asset Allocation %
Asset Alocation
2.97
Equity
Debt
Cash & Eq.
97.03
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CHAPTER -4
About Topic
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INTRODUCTION
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. The flow
chart below describes broadly the working of a Mutual Fund.
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A Mutual Fund is a body corporate registered with the Securities and Exchange Board of
India (SEBI) that pools up the money from individual/corporate investors and invests the
same on behalf of the investors/unit holders, in Equity shares, Government securities,
Bonds, Call Money Markets etc, and distributes the profits. In the other words, a Mutual
Fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a
mechanism for pooling the resources by issuing units to the investors and investing funds
in securities in accordance with objectives as disclosed in offer document. Investments in
securities are spread among a wide cross-section of industries and sectors thus the risk is
reduced. Diversification reduces the risk because all stocks may not move in the same
direction in the same proportion at same time. Investors of mutual funds are known as
unit holders.
The investors in proportion to their investments share the profits or losses. The mutual
funds normally come out with a number of schemes with different investment objectives
which are launched from time to time. A Mutual Fund is required to be registered with
Securities Exchange Board of India (SEBI) which regulates securities markets before it
can collect funds from the public.
ORGANISATION OF A MUTUAL FUND:- There are many entities involved and the
diagram below illustrates the organizational set up of a Mutual Fund:
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Mutual Funds diversify their risk by holding a portfolio of instead of only one asset. This
is because by holding all your money in just one asset, the entire fortunes of your
portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk
is substantially reduced. Mutual Fund investments are not totally risk free. In fact,
investing in Mutual Funds contains the same risk as investing in the markets, the only
difference being that due to professional management of funds the controllable risks are
substantially reduced. A very important risk involved in Mutual Fund investments is the
market risk. However, the company specific risks are largely eliminated due to
professional fund management.
CHARACTERISTICS OF A MUTUAL FUND:-
A Mutual Fund actually belongs to the investors who have pooled their funds. The
ownership of the mutual fund is in the hands of the Investors.
A Mutual Fund is managed by investment professional and other Service
providers, who earns a fee for their services, from the funds.
The pool of Funds is invested in a portfolio of marketable investments.
The value of the portfolio is updated every day.
The investor’s share in the fund is denominated by “units”. The value of the units
changes with change in the portfolio value, every day. The value of one unit of
investment is called net asset value (NAV).
The investment portfolio of the mutual fund is created according to the stated
Investment objectives of the Fund.
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OBJECTIVES OF A MUTUAL FUND:-
To Provide an opportunity for lower income groups to acquire without much
difficulty, property in the form of shares.
To Cater mainly of the need of individual investors, whose means are small?
To Manage investors portfolio that provides regular income, growth, Safety,
liquidity, tax advantage, professional management and diversification.
STRUCTURE OF A MUTUAL FUND:-
THE STRUCTURE CONSISTS OF :-
SPONSOR : Sponsor is the person who acting alone or in combination with another
body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net
worth of the Investment managed and meet the eligibility criteria prescribed under the
Securities and Exchange Board of India (Mutual Fund) Regulations, 1996. The sponsor is
not responsible or liable for any loss or shortfall resulting from the operation of the
23
Schemes beyond the initial contribution made by it towards setting up of the Mutual
Fund.
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.
TRUSTEE: Trustee is usually a company (corporate body) or a Board of Trustees (body
of individuals). The main responsibility of the Trustee is to safeguard the interest of the
unit holders and ensure that the AMC functions in the interest of investors and in
accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations,
1996, the provisions of the Trust Deed and the Offer Documents of the respective
Schemes. At least 2/3rd directors of the Trustee are independent directors who are not
associated with the Sponsor in any manner.
ASSET MANAGEMENT COMPANY (AMC): The AMC is appointed by the Trustee
as the Investment Manager of the Mutual Fund. The AMC is required to be approved by
the Securities and Exchange Board of India (SEBI) to act as an asset management
company of the Mutual Fund. At least 50% of the directors of the AMC are independent
directors who are not associated with the Sponsor in any manner. The AMC must have a
net worth of at least 10 cores at all times.
REGISTRAR AND TRANSFER AGENT: The AMC if so authorized by the Trust
Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar
processes the application form, redemption requests and dispatches account statements to
the unit holders. The Registrar and Transfer agent also handles communications with
investors and updates investor records.
INVESTORS PROFILE: An investor normally prioritizes his investment needs before
undertaking an investment. So different goals will be allocated to different proportions of
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the total disposable amount. Investments for specific goals normally find their way into
the debt market as risk reduction is of prime importance, this is the area for the risk-
averse investors and here, Mutual Funds are generally the best option. One can avail of
the benefits of better returns with added benefits of anytime liquidity by investing in
open-ended debt funds at lower risk, this risk of default by any company that one has
chosen to invest in, can be minimized by investing in Mutual Funds as the fund managers
analyze the companies financials more minutely than an individual can do as they have
the expertise to do so. Moving up the risk spectrum, there are people who would like to
take some risk and invest in equity funds/capital market. However, since their appetite for
risk is also limited, they would rather have some exposure to debt as well. For these
investors, balanced funds provide an easy route of investment, armed with expertise of
investment techniques, they can invest in equity as well as good quality debt thereby
reducing risks and providing the investor with better returns than he could otherwise
manage. Since they can reshuffle their portfolio as per market conditions, they are likely
to generate moderate returns even in pessimistic market conditions.
Next comes the risk takers, risk takers by their nature, would not be averse to investing in
high-risk avenues. Capital markets find their fancy more often than not, because they
have historically generated better returns than any other avenue, provided, the money was
judiciously invested. Though the risk associated is generally on the higher side of the
spectrum, the return-potential compensates for the risk attached.
FACTORS IMPACTING THE INDUSTRY (PEST Analysis) : -
Political Factors: a) Government Regulation: SEBI regulates the industry and every decision taken by them impact the industry very quickly. b) Stable constituency: The mutual fund industry can take long term decision if the government is stable. c) Fiscal policy: tax structure plays a very important role in the growth of the industry .If the tax structure will be high than there will be less savings and investment. We have
25
seen the interest rate reducing continuously which boost the industry to sell products which are better than the FDs, PF, NSC and KVPs.
Economic factors: d) Market performance: The last five years witnessed a sharp rise in the markets. The mutual fund industry basically works parallel with the markets. Suppose, if the markets always be on downside, then the investors will not be so comfortable to invest. This will reduce the market size drastically.
e) Global Standards: As the industry will grow better, India being a global economy, the MF industry has to match to the global mature MF markets. They have to give due emphasis on product innovation, cost reduction and penetration.
f) Inflation: price rise affects interest rate and reduces the chances of investment.
Social factors: g) Consumer behaviour: this is very unpredictable and based on sentiments gets changed very frequently, which sometimes makes selling of products difficult.
h) Income: The rich people are in bigger cities, so the mutual fund industry is much more concentrated there.
Technological factors: This is the era of information technology and due to net banking, online transaction, online RTGS, clearing system helps the industry a lot.
BENEFITS OF MUTUAL FUND
26
There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK is the range of benefits they offer, which are unmatched by most other investment avenues. We have explained the key benefits in this section. The benefits have been broadly split into universal benefits, applicable to all schemes and benefits applicable specifically to open-ended schemes.
CATEGORIES OF MUTUAL FUNDS:
Mutual Fund can be classified as follows:-
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Based on the Structure:-
1. OPEN-ENDED MUTUAL FUNDS:
The holders of the shares in the Fund can resell them to the issuing Mutual Fund
company at the time. They receive in turn the net assets value (NAV) of the shares at the
time of re-sale. Such Mutual Fund Companies place their funds in the secondary
securities market. They do not participate in new issue market as do pension funds or life
insurance companies. Thus they influence market price of corporate securities. Open-end
investment companies can sell an unlimited number of Shares and thus keep going larger.
The open-end Mutual Fund Company Buys or sells their shares. These companies sell
new shares NAV plus a Loading or management fees and redeem shares at NAV.In other
words, the target amount and the period both are indefinite in such funds.
2. CLOSED-ENDED MUTUAL FUNDS:-
A closed–end Fund is open for sale to investors for a specific period, after which further
sales are closed. Any further transaction for buying the units or repurchasing them,
Happen in the secondary markets, where closed end Funds are listed. Therefore new
investors buy from the existing investors, and existing investors can liquidate their units
by selling them to other willing buyers. In a closed end Funds, thus the pool of funds can
technically be kept constant.
The asset management company (AMC) however, can buy out the units from the
investors, in the secondary markets, thus reducing the amount of funds held by outside
investors. The price at which units can be sold or redeemed Depends on the market
prices, which are fundamentally linked to the NAV. Investors in closed end Funds
receive either certificates or Depository receipts, for their holdings in a closed end mutual
Fund.
Based on their investment objective:
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1)EQUITY FUNDS:-
These funds invest in equities and equity related instruments. With fluctuating share
prices, such funds show volatile performance, even losses. However, short term
fluctuations in the market, generally smoothens out in the long term, thereby offering
higher returns at relatively lower volatility. At the same time, such funds can yield great
capital appreciation as, historically, equities have outperformed all asset classes in the
long term. Hence, investment in equity funds should be considered for a period of at least
3-5 years. It can be further classified as:
i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their portfolio mirrors the benchmark index both in terms of composition and
individual stock weightages.
ii) Equity diversified funds- 100% of the capital is invested in equities spreading across
different sectors and stocks.
iii) Dividend Yield funds- It is similar to the equity diversified funds except that they
invest in companies offering high yield dividends.
iv) Thematic funds- Invest 100% of the assets in sectors which are related through some
theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc
. v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector
fund will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
2. BALANCED FUNDS:
Their investment portfolio includes both debt and equity. As a result, on the risk-return
ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual
funds vehicle for investors who prefer spreading their risk across various instruments.
Following are balanced funds classes:
i) Debt-oriented funds -Investment below 65% in equities.
29
ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.
3. DEBT FUND:
They invest only in debt instruments, and are a good option for investors averse to idea of
taking risk associated with equities. Therefore, they invest exclusively in fixed-income
instruments like bonds, debentures, Government of India securities; and money market
instruments such as certificates of deposit (CD), commercial paper (CP) and call money.
Put your money into any of these debt funds depending on your investment horizon and
needs.
i) Liquid funds- These funds invest 100% in money market instruments, a large portion
being invested in call money market.
ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-
bills.
iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-
pricing between cash market and derivatives market. Funds are allocated to equities,
derivatives and money markets. Higher proportion (around 75%) is put in money
markets, in the absence of arbitrage opportunities.
v) Gilt funds LT- They invest 100% of their portfolio in long-term government
securities.
vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in
long-term debt papers.
vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure
of 10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that
of the fund.
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THE WAY TO INVEST IN MUTUAL FUND
Mutual funds normally come out with an advertisement in newspapers publishing the
date of launch of the new schemes. Investors can also contact the agents and distributors
of mutual funds who are spread all over the country for necessary information and
application forms. Forms can be deposited with mutual funds through the agents and
distributors who provide such services. Now days, the post offices and banks also
distribute the units of mutual funds. However, the investors may please note that the
mutual funds schemes being marketed by banks and post offices should not be taken as
their own schemes and no assurance of returns is given by them. The only role of banks
and post offices is to help in. distribution of mutual funds schemes to the investors.
Investors should not be carried away by commission/gifts given by agents/distributors for
investing in a particular scheme. On the other hand they must consider the track record of
the mutual fund and should take objective decision.
LEGAL FRAME WORK OF SEBI & AMFI
REGULATORY ASPECTS OF MUTUAL FUNDS: In the year 1992, Securities and
exchange Board of India (SEBI) Act was passed. The objectives of SEBI are – to protect
the interest of investors in securities and to promote the development of and to regulate
the securities market. SEBI formulates policies and regulates the mutual funds to protect
the interest of the investors.
GUIDELINES OF SEBI & AMFI
Mutual funds are regulated by the SEBI (mutual Fund) Regulations, 1996.
SEBI is the regulator of all funds, except offshore funds.
31
Bank-sponsored mutual funds are jointly regulated by SEBI and RBI.
The bank-sponsored fund cannot provide a guarantee without RBI Permission.
RBI regulates money and government securities markets, in which mutual Funds
are invested.
Listed mutual funds are subject to the listing regulations of stock exchange.
Since the AMC and Trustee Company are companies, the Department of Company
affairs regulate them. They have to send periodic reports to the ROC (Register of
Companies) and the CLB (Company Law Board) is the appellate authority.
Investors cannot sue the trust, as they are the same as the trust and can’t sue
themselves.
UTI does not have a separate sponsor and AMC.
UTI is governed by the UTI Act, 1963 and is voluntarily under SEBI Regulations.
UTI can borrow as well as lend also engage in other financial services activities.
Only AMFI certified agents can sell Mutual Fund units.
Mutual Funds Company is required to update the NAV of the scheme on the AMFI
website on a daily basis in case of open-ended scheme.
MUTUAL FUNDS IN INDIA AT A GLANCE
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank the. The history of
mutual funds in India can be broadly divided into four distinct phases :-
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
32
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6,700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June
1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set
up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had
assets under management of Rs.47,004 crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund registered
in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund
houses went on increasing, with many foreign mutual funds setting up funds in India and
also the industry has witnessed several mergers and acquisitions. As at the end of January
2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust
of India with Rs.44,541 crores of assets under management was way ahead of other
mutual funds.
Fourth Phase – since February 2003
33
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with assets under management of Rs.29,835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and certain other
schemes. The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund
Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions
under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had
in March 2000 more than Rs.76,000 crores of assets under management and with the
setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund
industry has entered its current phase of consolidation and growth. As at the end of
September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under
421 schemes.
The graph indicates the growth of assets over the years.
34
Note - Erstwhile UTI was bifurcated into UTI Mutual fund and the Specified
Undertaking of the Unit Trust of India effective from February 2003. The Assets under
management of the Specified Undertaking of the Unit Trust of India has thereof been
executed from the total assets of the industry as a whole from February 2003 onwards.
35
CHAPTER -5
Analysis
36
1 Do you know, what is mutual fund?
Yes 95
No 5
95%
5%
Yes
No
From the above Pie Chart, it is clear that everyone is not aware about mutual
fund
. 95% people known what is mutual fund because they aware about share
market.
2 Is Mutual fund always risk free?
Yes 60
37
No 35
We know that mutual fund is not always risk free. According to the customers
who know
what is mutual fund, they also know it is not always risk free. Problem has
that some
people are not aware about mutual fund.37% people don’t know it is risk free
or not.
3 Do you want to invest your money into the mutual fund?
Yes 78
No 17
38
As shown above chart 82% people want to invest money into the mutual fund
because they have interest in mutual fund, maximum customers want to
invest their money into the mutual fund because their interest decreased in
equity market as they know that in this field, risk is low compare to share
market.
4 . If yes, Which AMC (asset Management Company) will you prefer?
Reliance Mutual fund
42
HDFC Mutual fund
25
Others 11
39
From the above Pie chart, which is according to the primary data collected,
clearly shows that “Preference of investors are based on high return, liquidity
and growth of fund”i.e. investors give their preferences to that fund which
gives them high return. 54% customers like to the Reliance mutual fund. 32%
customer’s belief HDFC mutual fund &
other’s mutual fund having 14% preferred.
5 among the following which mutual fund house is the better fund house in the
terms of products?
Reliance Mutual fund
43
HDFC Mutual fund
27
Others 8
40
55% people think that reliance mutul fund is the best option when it comes to the
diversified products , followed by 35% for HDFC & 10% others.
6 Which fund house is better in terms of fund performance in long and short run?
Reliance Mutual fund
41
HDFC Mutual fund
26
Others 11
41
53% people think that reliance mutul fund provides best return in short % Long run
period , followed by 33% for HDFC & 14% others.
7 How many AMC’s mutual fund do you have?
One 42
Two 25
More Than Two 11
42
investors have more than two types mutual fund, it is 14%. They want earn
maximum profit from mutual fund. These customer want to increase number
of units and also invest other plan like saving plan.
8 Which AMC provides better service?
Reliance Mutual fund
44
HDFC Mutual fund
26
Others 8
43
57% respondents feels that Reliance Provides better services as compared to others.
9 Do you have Reliance Mutual fund?
Yes 45
No 38
44
45 respondents owns Reliance Mutul fund(54%).
10 Are you satisfied by the services provided by reliance mutual fund?
Yes 43
No 2
45
96% customers of reliance are satisfied with the services provided by
Reliance Mutual fund and the rest 4% are not satisfied. Customers of today
are better educated, better informed , more discriminating, more
sophisticated and are more individualistic. What they value in a mutual fund
transaction has dramatically changed.
46
CHAPTER-6
Findings
47
1)A lot of people know about mutual fund as they take it as Equities in stock market.
2) Some of the Respondents are not willing to invest their money in mutual funds ,
because they don’t know the difference between horizon of risk in share market and
mutual funds.
3) Most of Respondents are willing to Invest their funds in mutual funds because they
know that Mutual funds are less risky as compared to equities.
4)Most of respondents buy Mutual Funds of those companies which provide them better
returns, products , flexibility and Liquidity. This shows that todays buyers are rationale
buyers.
5) Most of respondents believe that Reliance Mutual fund’s performance is much better
as compared to other players in market in both long and short run.
48
CHAPTER-7
Suggestion
49
SUGGESTIONS TO RELI A NCE MUTU A L FUND:-
1.An aggressive advertising campaigning should be there to encourage
more people to invest.
2. As some of the people think that mutual fund is risky so the company
should show people the advantages of the mutual fund and how it is better
than the other investment avenues.
3.There is a great potential for the mutual fund because the people are ready
to invest in the mutual fund as there is a positive responses.
4.Now a days people are investing in more of an equity fund because it
gives high return as compare to other mutual fund schemes.
5.People are preferred to invest in the long term savings when only they
have enough of surplus. They are least concerned about the other’s advice.
6.Reliance MF is doing comparatively very less marketing in MF industry
in compare to other players. Due to this other player are getting the
advantage. Thus it should try to increase the marketing and advertising
related activities time to time or at least at the time of new NFO’s, at the
time when they are declaring dividends or at the peak time (i.e. January -
March) last quarter of financial year when people are searching for
investing instruments.
7.A very small part market has been cover by Reliance MF. It can increase
the circle of its business in small and rural areas of every state and cities of
India where they an find a huge business.
8.To uproot the investment level the company should give training
programme to financial agents who approach the investor for the
investments. And they should be aware of all the benefits of the mutual
50
Funds.
9.Company should undertake the Campaign, Road shows, Advertisement
and other type of Publicity for the effective awareness of different schemes
that are available in the market.
10.The company should arrange seminars and presentations, giving detail
idea about securities and benefits of investment in mutual fund.
51
CHAPTER-8
Conclusion
52
Reliance Equity Fund has a ability to spot the sector trends & it has
delivered handsomely. In Current status it emerged as the third best-
performing diversified equity fund.
53
REFERENCES
AND
BIBLIOGRAPHY
54
Books:-
C.R Kothari,Research Methodology.New Delhi,Vikas Publishing House pvt. Ltd.2009.
Websites:-
www.mutualfundsindia.com
www.valueresearchonline.com
www.amfi.com
www.hdfcfund.com
www.reliancefund.com
55
ANNEXURE
56
QUESTIONNAIRE
1. Do you know, what is mutual fund?
Yes
No
2. Do you want to invest your money into the mutual fund?
Yes
No
3. Is Mutual fund always risk free?
Yes
No
I don’t know
4. If yes, Which AMC (asset Management Company) will you prefer?
57
a) Reliance mutual fund
b) HDFC mutual fund
c) other
5. among the following which mutual fund house is the better fund house in the
terms of products?
c) Reliance mutual fund
d) HDFC mutual fund
e) Others
6. Which fund house is better in terms of fund performance in long and short run?
a) Reliance mutual fund
b) HDFC mutual fund
c) other
7. How many AMC’s mutual fund do you have?
a) One
b) Two
c) More than two
d) None
8. Which AMC provides better service?
58
a) Reliance Mutual Fund
b) HDFC Mutual Fund
c) Others
9. Do you hve Relince Mutul fund?
a) Yes
b) No
10. Are you satisfied by the services provided by reliance mutual fund?
a) Yes
b) No
11. What is your view about reliance mutual fund?
________________________________________________________________
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_________________________________________________________.
Signature__________________
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