Submitted in Partial Fulfillment of The Requirement of The Post Graduate Program in Business Management

DISSERTATION
Submitted in partial fulfillment of

the requirement of the
Post Graduate Program in
Business Management
2007 –2009
GUIDE NAME
Prof. Sudeep Chatterjee Sandeep Shukla
PB07176 – 2007-09
International School of Business & Media
CERTIFICATE
This is to certify that the present study on “Comparing the brand

Equity of RELIANCE MUTUAL FUND as effected by
RECESSION” has been carried out by “SANDEEP SHUKLA”, under
direct supervision of “Prof. SUDEEP CHATTERJEE “. I am glad to
forward this for the partial fulfillment for PGPBM.
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ACKNOWLEDGEMENT
The Dissertation is dedicated to my family and friends for their love,

support and encouragement.
I wish to thank Professor Sudeep Chatterjee for all the valuable

comments and dedication to the research.
I am also grateful to Professor Nandita Mishra for all her helpful

suggestions.
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INDEX
1 @ Concept of Mutual Fund ................................................................

2 @ History Of Mutual Fund ................................................................
3 @ Types Of Mutual Fund ................................................................
4 @ Advantages Of Mutual Fund .......................................................
5 @ Disadvantages Of Mutual Fund ...................................................
6 @ RECESSION IN INDIA ............................................................
7 @ Economic Growth : Various Predictions ....................................
8 @ ANALYSIS OF RELIANCE MUTUAL FUND ............................
9 @ A Ray Of Hope .........................................................................
10 @ Conclusion ................................................................................
11 @ References .........................................................................
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Concept of Mutual Fund
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 realised 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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History of Mutual Fund
The origin of mutual fund industry in India is with the introduction of the concept of mutual
fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year
1987 when non-UTI players entered the industry.
In the past decade, Indian mutual fund industry had seen a dramatic imporvements, both
qualitywise as well as quantitywise. Before, the monopoly of the market had seen an ending
phase, the Assets Under Management (AUM) was Rs. 67bn. The private sector entry to the
fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it reached the
height of 1,540 bn.
Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less
than the deposits of SBI alone, constitute less than 11% of the total deposits held by the
Indian banking industry.
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The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the concept.
Hence, it is the prime responsibility of all mutual fund companies, to market the product
correctly abreast of selling.The mutual fund industry can be broadly put into four phases
according to the development of the sector. Each phase is briefly described as under.
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 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)

Entry of non-UTI mutual funds. SBI Mutual Fund was the first 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 in 1989 and GIC in
1990. The end of 1993 marked Rs.47,004 as assets under management.
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 number of mutual fund houses went on
increasing, with many foreign mutual funds setting up funds in India and also the industry has
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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

This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is
the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores
(as on January 2003). 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
AUM 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.
GROWTH IN ASSETS UNDER MANAGEMENT
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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 therefore been excluded from the total
assets of the industry as a whole from February 2003 onwards.
Types of Mutual Fund
Mutual Funds are broadly classified into three categories viz. Equity Funds, Debt Funds
and Balanced Funds.
EQUITY FUNDS
These funds invest a major part of their corpus in equities. The composition of the fund may
vary from scheme to scheme and the fund manager’s outlook on various scrips. The Equity
Funds are sub-classified depending upon their investment objective, as follows:
Diversified Equity Funds
Mid-Cap Funds
Sector Specific Funds
Tax Savings Funds (ELSS)
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Equity investments are meant for a longer time horizon. Equity funds rank high on the risk-
return matrix.
DEBT FUNDS
These Funds invest a major portion of their corpus in debt papers. Government authorities,
private companies, banks and financial institutions are some of the major issuers of debt
papers. By investing in debt instruments, these funds ensure low risk and provide stable
income to the investors. Debt funds are further classified as:
Gilt Funds: Invest their corpus in securities issued by Government, popularly known
as GOI debt papers. These Funds carry zero default risk but are associated with “Interest
Rate” risk. These schemes are safer as they invest in papers backed by Government.
Income Funds: The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such funds are less risky
compared to equity schemes. These funds are not affected because of fluctuations in equity
markets. However, opportunities of capital appreciation are also limited in such funds. The
NAVs of such funds are affected because of change in interest rates in the country. If the
interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa.
However, long term investors may not bother about these fluctuations.
MIPs: Invests around 80% of their total corpus in debt instruments while the rest of
the portion is invested in equities. It gets benefit of both equity and debt market. These
scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.
Short Term Plans (STPs): Meant for investors with an investment horizon of 3-6
months. These funds primarily invest in short term papers like Certificate of Deposits (CDs)
and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate
debentures.
Liquid Funds: Also known as Money Market Schemes, These funds are meant to
provide easy liquidity and preservation of capital. These schemes invest in short-term
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instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are
meant for short-term cash management of corporate houses and are meant for an investment
horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are
considered to be the safest amongst all categories of mutual funds.
BALANCED FUNDS
These funds, as the name suggests, are a mix of both equity and debt funds. They invest in
both equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both the
worlds. Equity part provides growth and the debt part provides stability in returns.
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds
objective and invest accordingly.
Advantages of Mutual Fund
Mutual funds offer several advantages to investors as :
Affordable:
Almost everyone can buy mutual funds. Mutual Funds generally provide a opportunity to
invest with less funds as compared to other avenues in the capital market. Even the ancillary
fee which one has to pay in the form of brokerages, custodian etc is lower than other options
and is directly linked to the performance of the scheme.
Professional Management:
For an average investor, it may be quite difficult to decide what to buy, when to buy, how
much to buy and when to sell. Mutual Funds have a skilled professionals who have years of
experience to manages your money. The fund manager takes these decisions after doing
adequate research on the economy, industries and companies, before buying stocks or bonds.
They use intensive research techniques to analyze each investment option for the potential of
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returns.
Diversification:
Investments are less risky as it is spread across a wide cross-section of industries and sectors.
Diversification reduces the risk because all stocks generally don’t move in the same direction
at the same time. A mutual fund is able to diversify more easily than an average investor
across several companies.
Liquidity:
You can afford to withdraw your money from a mutual fund on immediate basis when
compared with other forms of savings like the public provident fund or National Savings
Scheme. You can withdraw or redeem money at the Net Asset Value related prices in the
open-end schemes. In closed-end schemes, the units can be transacted at the prevailing
market price on a stock exchange.
Tax Benefits:
Mutual funds have historically been more efficient from the tax point of view. A debt fund
pays a dividend distribution tax of 12.5 per cent before distributing dividend to an individual
investor or an HUF, whereas it is 20 per cent for all other entities. There is no dividend tax on
dividends from an equity fund for individual investor.
Potential of returns:
Mutual funds generally offer better than any other option over a given period of time. Though
they are affected by the interest rate risk in general, the returns generated are more.
Well Regulated:
The Mutual Fund industry is very well regulated. All investments have to be accounted for.
SEBI acts as a true watchdog in this case and can impose penalties on the AMCs at fault. The
regulations are also designed to protect the investors’ interests are also implemented
effectively.
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Transparency:
As they are under a regulatory framework, they have to disclose their holdings, investment
pattern and all the information that can be considered as material, before all investors to
ensure transparency which is unlike any other investment option in India where the investor
knows nothing as nothing is disclosed.
Disadvantages of Mutual Fund
Mutual funds have their drawbacks. They are as follows:
No Guarantees :
No investment is risk free. If the entire stock market declines in value, the value of mutual
fund shares will go down as well, no matter how balanced the portfolio. Investors encounter
fewer risks when they invest in mutual funds than when they buy and sell stocks on their
own. However, anyone who invests through a mutual fund runs the risk of losing money.
Fees and commissions :
All funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge sales commissions or "loads" to compensate brokers, financial consultants, or financial
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planners. Even if you don't use a broker or other financial adviser, you will pay a sales
commission if you buy shares in a Load Fund.
Taxes :
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you will
pay taxes on the income you receive, even if you reinvest the money you made.
Management risk :
When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as you had
hoped, you might not make as much money on your investment as you expected. Of course, if
you invest in Index Funds, you forego management risk, because these funds do not employ
managers.
Recession in INDIA…
Nowadays the whole world seems to be revolving around one word ‘Recession’. Everybody
should be aware of the impacts and the ways to recover. In a fully grown economic cycle an
economy which has reached its heights has a tendency to decline. Naturally an economy
shows the growth for six to ten years and then it starts to break down for six to twelve
months. There happens to be a decrease in country’s gross domestic product growth and this
leads to decrease in demand for goods and commodities. The production comes to a low level
and gradually this causes the increase in unemployment. All fields, agriculture, mining, and
industry are vulnerable to this recession
A country’s economy is related to stock markets. Investors are reluctant to spend on stock
markets, since they are on the verge of a crash. Day by day we are seeing the breakdown of
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the stock markets. The US has already seen its biggest crashes. As usual, when US markets
suffer the Indian markets will also be affected. The rise in oil price, which has crossed all the
limits, has slowed down all the economic growth. The US economy has suffered several
recessions after the Second World War, including the great depression of 1930’s. It lasted for
a decade with high losses of employment which resulted in extreme poverty. The whole world
stood still as it had spread the canopy of recession over all the countries.
Though the politicians in India are arguing against recession hitting India, it has already
started to affect Indian economy. The Indian ministers are ruling out recession, saying that
India is a country not fully dependant only on exports, it is not possible to affect India. Even
though the by-products are consumed by the natives, the Indian economy has suffered great
losses in business and export orders. The main industrial sectors are suffering job losses, but
it is being kept as a secret by authorities to create an image of shining India. Among this
chaos the Indian ministers tend to claim that the fundamentals of the Indian economy are
strong and there is nothing to worry about a meltdown. It seems that the ruling front wants to
create a false image as the election is nearing. They are claiming of successfully leading the
country by making everybody jubilant. All industries- the textile, automobile, and the IT are
shaken up, though it is kept as a secret.
All the major Global economies are suffering and India is not an exception. Its economy is
not an isolated one. The cautious steps that India has taken might have restricted it from a
disastrous slow down. As all the economies are interlinked, the Indian economy too is facing
break down. The real estate sector is suffering crucially. The demand for houses and flats has
declined and the price of land has been reducing drastically. Banks are ready to give loans
with a low interest, but it finds only a few takers for its services. Things are getting worse as
the exodus from the Gulf countries will surely affect the economy. Since the recession has
reduced the price oil, the Gulf countries are experiencing a reduction in their income and as a
result of that a lot of construction and other related works have called off and a lot of people
are losing their jobs. They are about to return to their native land and it will surely affect the
Indian economy.
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“First if there is a recession (outside India), our exports will be hurt. And the longer the
recession, the deeper the hurt”, the words of the Reserve Bank of India’s governor clearly
state the dirt India is in. But he adds that we will not be fully affected. It seems that he is
covering the fact. The GDP growth is declining, and the value of the Indian currency is
declining day by day. The prices of commodities are increasing. The price of agricultural
products is decreasing. Absolutely the hands of recession have started to clinch Indian
economy. The less affected IT sector is also suffering as the US is thinking about curbing the
practise of out sourcing works through various laws. The major IT companies are about to
stop its fresh recruitments. These are all indications that India is also entering a period of
major recession.
It seems to be foolish to think that the repercussions will not affect India. Any slowdown in
US will have its impacts on the Indian economy. India is a developing country and its
existence is in inter- dependence. The recession in US has created a panic in the Indian
economy. The unorganised sectors are facing layoffs. It seems that the Indian politicians are
covering up the facts and once the election is over the real scenario will come out. Any way
let us hope for the best.
Even so, fears of a US recession led to panic in the Indian stock market. January 21 and 22
saw a meltdown with a mind-boggling US$450 billion in market capitalization being
vaporized. An unprecedented interest cut by the Fed led to a bounce-back on January 23 and
at the time of this writing, the benchmark index (BSE) has gained 2.5%, almost in line with
Hang-Seng, Nikkei, and Kospi.
History might hold a clue here. The last time the bubble burst (2001-2002), the DJIA went
down by 23%, while the Indian Index fell by 15%.
Much has happened between then and now. The Indian economy has shown a robust and
consistent growth trajectory and the projection for 2008 is 9%. Indian exports to the United
States account for just over 3% of GDP. India has a healthy trade surplus with the US.
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The effects of this recession on India may be quite
distinct from those of the past. Here are some areas worth
following:
1. A credit crisis in the United States might lead to a restructuring of asset allocation at
pension funds. It has been suggested that Calipers is likely to shift an additional US$24
billion to its international portfolio. A large portion of this is likely to flow into India and
China. If other funds follow suit, a cascading effect can be expected. Along with the already
significant dollar funds available, the additional funds could be deployed to create
infrastructure--roads, airports, and seaports--and be ready for a rapid takeoff when normalcy
is restored.
2. In terms of specific sectors, the IT Enabled Services sector may be hit since a majority of
Indian IT firms derive 75% or more of their revenues from the US --a classic case of having
put all eggs in one basket. If Fortune 500 companies slash their IT budgets, Indian firms
could be adversely affected. Instead of looking at the scenario as a threat, the sector would do
well to focus on product innovation (as opposed to merely providing services). If this is done,
India can emerge as a major player in the IT products category as well.
3. The manufacturing sector has to ramp up scale economies, and improve productivity
and operational efficiency, thus lowering prices, if it wishes to offset the loss of revenue from
a possible US recession. The demand for appliances, consumer electronics, apparel, and a
host of products is huge and can be exploited to advantage by adopting appropriate pricing
strategies. Although unlikely, a prolonged recession might see the emergence of new regional
groupings--India, China, and Korea?
4. The tourism sector could be affected. Now is the time to aggressively promote health
tourism. Given the availability of talented professionals, and with a distinct cost advantage,
India can be the destination of choice for health tourism.
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5. A recession in the United States may see the loss of some jobs in India. The concept of
Social Security, that has been absent until now, may gain momentum.
6. The Indian Rupee has appreciated in relation to the US dollar. Exporters are pushing for
government intervention and rate cuts. What is conveniently forgotten in this debate is that
a stronger Rupee would reduce the import bill, and narrow the overall trade deficit. The
Indian central bank (Reserve Bank of India) can intervene anytime and cut interest rates,
increasing liquidity in the economy, and catalyzing domestic demand. A strong domestic
demand would also help in competing globally when the recession is over.
In summary, at the macro-level, a recession in the US may bring down GDP growth, but not
by much. At the micro-level, specific sectors could be affected. Innovation now may prove to
be the engine for growth when the next boom occurs.
RISING INFLATION …
WHEN PRICES rose in India, recession erupted worldwide. Unlike most countries in the
world, India, Brazil and China are not facing a very difficult situation. Inflation has risen
although the after-effects of recession haunt the country
Recession is a state of the economy where there is unemployment but it is of short duration
unlike depression, which is characterised by long duration. Inflation is either demand-pull or
cost-push in nature.
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For the last few months, India has been facing uncalled-for inflationary pressures. It touched
a high of seven per cent in March 2008, in terms of the Wholesale Price Index (WPI) (base
year 1993-94) and continued to go up and peaked at double digits. But eventually it started
registering a downward trend. The weeks ending November 1, 2008 and November 8, 2008
recorded a significant decline in inflation under WPI. On November 8, 2008, headline
inflation was ruling at 8.90 per cent. This shows that that the measures initiated to tackle
inflation were bearing fruit.
It had been taken for granted that inflation was driven by demand-pull and the government
tried to tackle it through demand management using fiscal and monetary measures. On the
fiscal side, the government gave up revenues to the extent of Rs 31, 000 crores, post-budget.
This has to be viewed in the context of increased expenditure. While the total expenditure
was placed at Rs 7,50, 884 crores in the budget documents, an additional expenditure of Rs
1,05, 613 crore was approved in the first supplementary demands for grants. In addition to the
fiscal measures, monetary measures were used by the Reserve Bank of India (RBI) for
demand management. These included a gradual increase in the repo rate to 9.0 per cent on
August 30, 2008 and an increase in CRR, in steps, by 400 basis points to 9.0 per cent
effective August 30, 2008. Since then, the direction of policy has changed. The repo has been
brought down to 7.5 per cent effective November 3, 2008 and the CRR reduced to 5.5 per
cent effective November 8, 2008. As of date, repo is ruling at 6.5 percent and CRR is ruling at
5.5 percent. There is no doubt that these measures have helped the economy to reduce
liquidity and thereby the demand for goods and services.
Simultaneous with the price rise in India, there erupted recession worldwide. Most of the
economies are still witnessing a rare instance in history - of a synchronised global recession
in terms of many parameters (like contracting growth prospects, reducing employment
affecting the jobless rate, reducing exports and industrial production, financial crisis and so
on). It is estimated that such a pessimistic scenario will continue until mid-2009.
Let us briefly look at some of the problems that the

country is facing in this context:
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 Exports have declined by around 12 per cent in November, showing a negative trend for the
second month in a row. There is a double-digit decline owing to lack of demand from most of
the buying markets including the US, the UK, Japan and other countries in the Euro zone.
These are India’s major export destinations.
 Indian industry has also shrunk for the first time in 15 years with a 0.4 per cent year-on-year
decline in October this year. The growth was about 12.2 per cent in October last. It has been
partly due to a dip of over 12 per cent in India’s exports.
 The financial crisis in India has been basically triggered by the high stakes involved in the
uncertain financial market contributed by the risk arising from holding assets often
disproportionately high , compared to the realised returns (called the Minskian ‘ponzi’ deals)
and innovations in the de-regulated financial markets.
Asset Quality Concerns
The current financial and economic meltdown that has engulfed the world has affected almost
all sectors and industries. While the magnitude varies from sector to sector, the common
fallout has been the world's acceptance that all good things do come to an end.
One of the most severely affected sectors has been the banking industry. The problems faced
by the banking sector has been aplenty - plummeting stock prices, credit crisis, decline in
consumption, postponement of corporate capex and layoffs. And the combined effect of all of
these problems has been the raised concerns over the asset quality of the Indian banking
system.
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Since the beginning of this decade, the asset quality of Indian banks has improved quite
significantly. The gross non-performing asset (GNPA) as percentage of the gross advances
had come down to a respectable 2.4 per cent (in FY2007) from mind boggling +10 per cent
levels around the time of the tech bubble burst. Notably, the improvement in GNPA has been
both on relative as well as absolute terms. This is despite the fact that the NPA recognition
norms have been tightened. However, considering the aggressive credit growth seen in recent
years, coupled with an anticipated slowdown in economic growth, asset quality concerns have
raised head yet again.
Let's try and size up the threat...
The Causes
The current threat to the asset quality is thanks to an undesirable confluence between the
ongoing slowdown in economic activity and the potential after-effects of high interest rates
and the liquidity crunch. Over the recent past, the prime lending rates have increased
significantly, in line with the Reserve Bank of India's (RBI) tight monetary policy. This in
turn has resulted in a higher interest outgo on existing debt and a slowdown in capital
expenditure. And in all probability, banks will have to bear the brunt of higher interest rates
on their asset quality.
What started as a moderation in economic activity (due to tight monetary conditions) has
snowballed into a slowdown and worldwide credit crisis that has accentuated to the domestic
problems. With major economies like USA, UK and Germany officially in a recession, a
global recession looks imminent as well. This has impacted the growth prospects in India
despite zero direct exposure to US mortgage, contrary to the earlier expectation of marginal
effect on the Indian economy. Consensus expectations point towards a significant decline in
the gross domestic product (GDP) growth to 7.7 per cent in CY2008 and 6 per cent in
CY2009, which is bound to affect the asset quality.
The Implications
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So then, what is the size of the problem? Well, if the lending rates are any indication, the
problem is quite immense. The quantum of risky loans is very high with 10 per cent of
advances carrying a rate of above 15 per cent.
Approaching the asset quality threat from a sectoral perspective, it becomes evident that
about 16 per cent of the total outstanding exposure (as of FY2008) is towards small and
medium enterprises (SMEs), real estate, non-banking financial companies (NBFCs) and
unsecured personal loans. These sectors have been hit severely by heightened-risk aversion-
led liquidity crunch and macro headwinds. Housing credit, which forms 11.6 per cent, is a
segment demanding attention in view of the job cuts and salary cuts announced by the
corporates in the recent past as well.
The value at risk, based on our calculations, is around Rs 2,86,000 crore. This amount is the
aggregate exposure to small and medium sized corporate borrowers from risky sectors, which
represents 13 per cent of the total non-food credit.
The Solutions
As has traditionally been the case, many of the risky loans are restructured to ease liquidity
problems. In all likelihood, banks will exercise the option of restructuring here as well, albeit
on a case-to-case basis. Furthermore, the RBI has announced exceptional treatment for
restructured commercial real estate exposures as part of its economic revival efforts. In
addition to this, second time restructuring of exposures (other than commercial real estate,
capital markets and personal/consumer loans) are eligible for exceptional treatment as well.
However, one should keep in mind that while restructuring can be effective in avoiding
delinquencies to an extent, it results in understatement of deterioration in asset quality. From
a sectoral perspective, FY2010 is likely to be more crucial for the banking sector as the year
will see advances growth tapering off with further slowdown in economic activity.
Furthermore, delinquency rates will lag the turn in economic growth by three to six months.
The impact of individual banks will depend on the composition of exposure to lending
segments, current and targeted provisioning coverage as well as the effectiveness of
restructuring and recovery mechanism.
In analysis terms
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While the asset quality concerns are definitely worrisome, the capital adequacy levels of
Indian banks should provide significant cushion in absorbing the losses arising from the
deterioration in credit quality. A large majority of Indian banks maintain a capital adequacy
ratio of above 10 per cent as at the end of FY2007. Furthermore, the leading banks have been
actively raising capital (through rights issue, follow-on offer and bonds) to shore up their
capital during FY2008, thereby increasing the capital adequacy ratios.
Besides the healthy cushion provided by comfortable capital adequacy position of most of the
Indian banks, the easing off in g-sec yields should help mitigate the pressure of additional
provisioning to an extent. For the current fiscal, the southward trend of bond yields should
translate into complete/partial write-back of MTM losses incurred by the banks during
Q1FY2009. Clearly the domestic banks are much better placed than many of their emerging
market (EM) peers. In fact, this has been the case since 2003. As at the end of FY2007, NPAs
of Indian banks formed just 2.5 per cent of their total loans as per the World Bank's data,
which is +6 per cent for banks in China, Malaysia and Thailand.
Hence, while we have been cautious on the banking stocks due to asset quality concerns, a
further slide in bond yields, easing in corporate spreads and rapid rate cuts warrant easing in
the extent of asset quality concerns, thereby turning their current valuation attractive. Large
PSBs (Bank of India, Punjab National Bank and Union Bank) and HDFC Bank in the private
sector space therefore seem attractive investments from a long-term perspective.
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Exposure in Real Estate
FY 2008 FY 2007
Bank % yoy chg % of adv (08)
(in RsCr). (in RsCr)
Axis Bank 5,914 3,885 52.2 9.9
HDFC Bank 5,902 3,553 66.1 9.3
Corp Bank 2,391 2,464 -3 6.1
ICICI Bank 13,734 14,251 -3.6 6.1
PNB 5,994 4,001 49.8 5
BOI 5,185 2,570 101.8 4.6
Allahabad
2,192 1,740 26 4.4
Bank
BOB 4,030 1,968 104.8 3.8
Canara Bank 3,717 2,909 27.8 3.5
UBI 2,401 1,630 47.3 3.2
SBI 11,958 6,265 90.9 2.9
Andhra Bank 720 618 16.5 2.1
ECONOMIC GROWTH : Various

predictions
THE RATE of economic growth in the economy had fallen to 5.3 per cent in December, 2008
from a high of about 9.2 per cent during the FY 2007-08, but what is going to happen in time
to come, especially during the FY 2008-09 and then later in the FY 2009-10 is not even
approximately known. The future indeed is very hazy.
Recently, there have been many projections/predictions for the rate of economic growth
in the country. Let us look at some of these:
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 According to the Centre for Monitoring Indian Economy (CMIE), India’s real GDP is
projected to grow by 7 per cent in FY 2009-10. It will climb slowly from around 6 per
cent in the first half of the FY 2009-10 to about 8 per cent in the second half;
 Another projection by the International Monetary Fund (IMF) indicates that India’s
growth rate is likely to slowdown to 6.25 per cent in 2008-09 because of falling
corporate investment and deteriorating global outlook. It will fall to 5.25 per cent in
FY 2009-10.
 The Reserve Bank of India (RBI) has recently cautioned that more challenging times
lie ahead for the domestic economy in FY 2009-10 in the face of the on-going global
financial crisis, which has already hit the exports and consumptions. After announcing
the third quarter review of the monetary policy, The RBI Governor D. Subbarao had
said that the year 2009-10 is going to be more challenging than 2008-09, and that the
global crisis is still unfolding. He further said that the indications are there that more
bad news will come and domestically also we have already seen some downturn, and
urban consumption will also be hit and that exports would also be impacted. The RBI
has revised downwards the GDP growth at 7 per cent for FY 2008-09 from its earlier
projections of 7.5 to 8 per cent in the mid-term policy review in October.
 Noting that a low demand and lagged impact of aggressive monetary tightening of
Reserve Bank could slow down the GDP growth, the ING Vysya Bank fears that the
country’s GDP is expected to grow at 6.5 per cent in FY 2008-09 as compared to
Government’s projection of 7.1 per cent. According to this Bank GDP growth in 2009-
10 is likely to be in the range of 5.3-5.5 per cent.
There is no end to these predictions, but the uncertainty surrounding these forecasts is
unusually large, with significant downside risks. Looking at all these predictions with
different outcomes, the whole country seems to be in a fix in terms of the economic scenario
in time to come. But no matter what the ultimate rate of economic growth would be in time to
come, the fact remains that nothing much would reach the masses through percolation (trickle
down) process both via direct and indirect means to enhance the well-being of the people in
terms of economic and social provisions.
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ANALYSIS
OF
DIFFERENT
EQUITY DIVERSIFIED FUND
UNDER
RELIANCE MUTUAL FUND
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Reliance Vision is living in the memories of a once-glorious past. This 12-year old fund's
history of trying to deliver benchmark-beating returns can be divided into three distinct
phases-five mediocre years, then two fabulous ones and now, five more years when it has
barely managed to cope. Since the beginning of 2004, it has outperformed the benchmark at
an annualised rate of just 1.1 per cent.
How did a fund that perform so wonderfully in 2002 and 2003 suddenly lose its mojo? A
careful look at the data shows that this was a very different fund in those days. In 2002, the
fund outran the BSE 100 by 68 per cent and its category by 57 per cent. In 2003, the
outperformance grew to 70 and 48 per cent respectively. During that time, this was a small
(Average--Rs 112 crore) fund that dabbled in small and mid-caps a lot. During those years,
large caps were a minority in the portfolio at an average of 26 per cent, on occasion falling to
the vicinity of 10 per cent. This adventurous approach worked wonderfully.
However, as the market took off from 2003 onwards the fund's great track record attracted
huge investments and its size ballooned. From Rs 67 crore in January 2003, it grew to Rs 624
crore by the end of that year. The large size meant that the fund manager's time of living
dangerously was gone and with that, its days of beating its benchmark were became a thing of
the past.
Still, since investors only really look at absolute profits, they didn't mind the total return of
219 per cent that it generated from 2004 to 2007. However, like most average funds, all those
profits have now been wiped out in the crash of 2008.
During 2008, the fund fell more than BSE 100 in the first half of the year. During the second
half, a large pile of cash (average-29 per cent) ensured that it fell less than the benchmark. For
the year as a whole, the fall was just three per cent less than BSE 100.
Unless Reliance Vision turns a new leaf in the future, there's no particular reason for investors
to be attracted to it.
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Reliance Regular Savings Equity often takes a contrarian stand but has the ability to
protect the downside as well
Launched in the middle of the bull run, this fund has delivered impressively. It was streets
ahead of the competition with a return of 56 per cent and 93 per cent in 2006 and 2007,
respectively. And in the market downturn, from January 8, 2008 to July 15, 2008, the fund did
not fall too hard and displayed an average performance with a 41 per cent fall (its peers came
up with -42 per cent).
What's unique about this fund is the manager's tendency to go against the herd. When the
category average sector allocation to basic-engineering was around 12 per cent in the first
half of 2006, the fund had no investment in this sector. Last year, when funds were betting on
the energy sector, the fund manager took an exposure to this sector only from July onwards
and maintained an average exposure of just 4 per cent for the rest of the year. Of course, this
contrarian stand is not always a positive factor. For instance, the BSE Oil & Gas and Power
indices delivered 115 per cent and 122 per cent in 2007, respectively. The fund missed out on
this rally but still delivered an impressive performance on the back on astute stock picking.
Technology has always been dominant in the fund's portfolio and has accounted for 12 per
cent since launch and currently stands at 10 per cent.
Although the portfolio of 37 stocks is diversified across sectors, the fund manager doesn't
hesitate in taking aggressive bets for the short term. The portfolio is frequently churned and a
number of stocks are held for less than six months. The short-term bets in companies like
Jindal Steel & Power, Ashok Leyland, Cummins India and Eicher Motors proved fruitful.
What is worth noting is the consistent increase in allocation to cash. From 6.19 per cent
February 2008, it is moved to 26.56 per cent in June. The fund manager obviously picked up
on some good buys after the market fall and it has now been lowered to 15.23 per cent (July).
Its aggressive investment style and high mid-cap allocation make it a bold offering. But its
ability to outperform its peers and protect the downside well makes the nervy investors feel
right at home too.
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Reliance Growth delivered 76% last year, but a huge asset base does reduce flexibility
Reliance Growth has not only emerged as the largest mid cap fund but is also the largest
equity diversified fund with AUM of over Rs 5,600 crore. The fund has been able to generate
investor interest due to its impressive performance by beating its peers by an impressive
margin for the past so many years. After the 2001 dotcom crash, the fund made a smart
comeback in 2002 with a return of 55.75 per cent, the second-best among the 59 funds. Since
then it maintained a top quartile position for the next four calendar years. However, in 2006
the fund was ranked 53 among 145 funds with a return of 41 per cent.
In 2007, the fund's investors had a reason to cheer since the fund gave them a high return of
over 76 per cent in the year consequently taking the fund's rank to 25 among the 162 funds.
While the fund's allocation to large-, mid- and small-caps keep oscillating, during the past six
months, the exposure to mid-cap stocks has increased from 43 per cent to over 50 per cent. In
the past, the fund followed a strategy of buy-and-hold for some stocks, while in some it has
gone for a quick profit taking. It is well known for its smart moves. In February 2006, the
fund maintained highest exposure to technology and basic/engineering. Now energy and
financial services sectors command the highest exposure of the fund Over the past one year
the fund has also pared its exposure to auto and basic/ engineering sectors also.
However, being a mid-cap fund, fund's huge asset size can be a matter of concern. As of now,
the fund boasts of one of the most enviable performance records even with its swelling size.
But it remains to be seen whether it can continue to do so.
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Reliance Equity Fund ( REF) works with the objective of maximising returns for the investor
across stock market levels. As funds are managed today, it becomes relatively simpler to
maximise growth for the investor at lower stock market levels, when well-managed
companies are available at attractive prices. However, rising stock markets prove to be
something of a challenge for the fund manager when attractive investment opportunities dry
up and there are fewer stocks at reasonable valuations.
This is where REF's flexible investment mandate comes in. To begin with, REF can go short
in the derivatives market. This flexibility will prove particularly useful during a bearish phase
or during a stock market rally like the one that was witnessed in the early part of year 2000
REF has the flexibility to hedge its portfolio in line with the stock market level. At a higher
stock market level, the fund can hedge a higher proportion of its portfolio, with the option of
hedging upto 100% of its equity assets.
While some equity funds do hedge their holdings, REF is probably the first fund to quantify
the amount of hedging it will do as per a defined criterion. This feature will ensure that as the
market valuations rise, the fund will gradually 'lock' in the gains by increasing the hedging
component. While this seems to be a good strategy, investors need to take note of the fact that
to the extent the portfolio is hedged, further upside is limited (a 100% hedged portfolio will
not deliver any return - positive or negative).
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A RAY OF HOPE :
Indian Industry Sectors to Perform Well in Current Global Recession
As every business sector is affected by present global crisis and everybody is talking of slow
down in business, still in India there are few sectors which will grow in this adverse situation.
Lets have a look.
1. Food
No one can survive without basic food material like milk, vegetables and drinking
water. Food processing companies will not be affected much and rather will earn
profits by increasing the prices. These are the basic needs which we as a common man
can not produce by our self.
According to MFPI, the food processing industry in India was seeing growth even as
the world was facing economic recession. According to the minister, the industry is
presently growing at 14 per cent against 6-7 per cent growth in 2003-04.The Indian
food market is estimated at over US$ 182 billion, and accounts for about two thirds of
the total Indian retail market. Further, the retail food sector in India is likely to grow
from around US$ 70 billion in 2008 to US$ 150 billion by 2025
2. Railway
As the aviation sector has been affect much badly and resulting in sharp rise in the air
ticket rates the frequent travelers will prefer railways to cut the cost of traveling and
this will result in increased traffic in railways and long queues at railway booking
counters. The freight traffic of Indian Railways has continued to grow in the last few
months, albeit at slow pace, indicating only marginal impact of the global recession on
the Indian economy. The Railways registered 13.87% growth in revenue to Rs
57,863.90 crore in the first nine months ended December 31, 2008. While total
earnings from freight increased by 14.53% at Rs 39,085.22 crore during the period,
passenger revenue earnings were up 11.81% at Rs 16,242.44 crore. The Railways
have enhanced freight revenue by increasing its axle loading, improving customer
services and adopting an innovative pricing strategy.
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3. PSU Banks
As seen in the private sector much of the job cuts due to global slowdown, its the PSU
sector Banks which gained much confidence due to job safety and security. More and
more people are likely to turn towards government institutions, particularly banks in
the quest for safety and security.
A report "Opportunities in Indian Banking Sector", by market research company,

RNCOS, forecasts that the Indian banking sector will grow at a healthy compound
annual growth rate (CAGR) of around 23.3 per cent till 2011.
4. Education
As Education is considered as the basic necessity and in India it is seen as a long term
investment by parents and with respect to the demand still there is a huge supply gap.
The craze to study in foreign university among the Indian youth still alive which will
prompt foreign education institute to target India provided vast young population
willing to join. We will see more and more foreign educational institutions to come up
in India in recent coming years.Huge government as well as private investment is
likely to flow into the Indian educational system. D E Shaw, a US$ 36 billion, global
private equity firm is planning to invest around US$ 200 million in the Indian
education sector.
5. Telecom
People will not stop to communicate with each other due to global crises rather it has
been seen that it will increase much particularly with mobile communication. With
cheap cell phones available in the Indian market and cheaper call rates, the sector has
become the necessity and primary need of everyday life.
Telecom sector, according to industry estimates, year 2008 started with a subscriber
base of 228 million and will likely to end with a subscriber base of 332 million - a full
century ! The Telecom industry expects to add at least another 90 million subscribers
in 2009 despite of recession. The Indian telecommunications industry is one of the
fastest growing in the world and India is projected to become the second largest
telecom market globally by 2010.
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6. IT
Recent news shown that Indian IT sector will grow 30-40% next year. And on the
other side to survive in current slowdown, industries have to decrease the cost and for
that they will resort to customized IT solutions which will further boost up the
software solution demand.
India is fast becoming a hot destination for outsourced e-publishing work. As per a
Confederation of Indian Industry (CII) report, the industry is growing at an annual rate
of 35 per cent and India's outsourcing opportunities in the value-added and core
services such as copy editing, project management, indexing, media services and
content deployment will help make the publishing BPO industry worth US$ 1.46
billion by 2010.
7. Healthcare
India in case of health care facilities still lakes the adequate supply. In Health care
sector also there is huge gape between demand and supply at all the levels of society.
Still there are so many urban areas were you could hardly find any multi specialty
hospital. And in case of metros the market sentiments itself created a need of
psychological consultation.
Healthcare, which is a US$ 35 billion industry in India, is expected to reach over US$
75 billion by 2012 and US$ 150 billion by 2017. The healthcare industry is
interestingly poised as it strives to emerge as a global hub due to the distinct
advantages it enjoys in clinical excellence and low costs.
8. Luxury products
The high and affluent class of society will not be affected much by this global crises
even if their worth is reduced significantly. They will not change their life style and
will not stop spending on luxurious goods. So luxurious product market will not be
affected and in fact to maintain the lifestyle those affluent will spend more for it.
Luxury car makers are pouring in to woo the nouveau riche (Audi, BMW are the most
recent entrants).
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According to recent research on luxury trends, the number of families with annual
incomes of more than $230,000 will have more than doubled from 20,000 in 2002 to
53,000 by the end of 2005 and will grow to 140,000 by 2010.
9. M&A & Marketing Consultants

As in the current business slow down survival will be the main focus, marketing and
management consultants will be called for to reduce the costs and to show the ways to
survive and stay in market. Others may join hands to fight with this situation together
will call for the Marketing & M&A consultants. In a booming market there are growth
strategies and M&A opportunities to advise on. When businesses are cutting back,
consultancies will be right there to help clients decide where to wield the axe.
According to Ministry of Commerce and Industry's estimation, the current size of

consulting industry in India is about Rs.10000/- crores including exports and is
expected to grow further at a CAGR of aprox. 25% in next few years
10. Media and Entertainment
In current bad times, where people are losing jobs and getting enough time to watch
TV, they will seek entertainment at home and hence advertising revenues will increase
for the commercial channels. Also businesses like production of religious texts and
religious materials, religious channels will do well. The TRP of religious channels will
increase compare to the other entertaining/commercial channels.
According to a report published by the Federation of Indian Chambers of Commerce

and Industry (FICCI), the Indian M&E industry is expected to grow at a compound
annual growth rate (CAGR) of 18 per cent to reach US$ 23.81 billion by 2012.
According to the PWC report, the television industry was worth US$ 5. 48 billion in
2007, recording a growth of 18 per cent over 2006. It is further likely to grow by 22
per cent over the next five years and be worth US$ 12. 34 billion by 2012.
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CONCLUSION
We have seen the downward trend in the Indian Market, this is preferably said as Recession
which is a significant decline in economic activity spread across the economy, lasting more
than a few months." A recession may involve simultaneous declines in coincident measures of
overall economic activity such as employment, investment, and corporate profits. Recessions
may be associated with falling prices (deflation), or, alternatively, sharply rising prices
(inflation) in a process known as stagflation. A severe or long recession is referred to as an
economic depression.
We talked about Mutual Fund i.e. 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. And also Mutual Funds are broadly classified into
three categories viz. Equity Funds, Debt Funds and Balanced Funds.
And as all the sectors of the economy are suffering the loss, the stock market is crashing.
A country’s economy is related to stock markets. Investors are reluctant to spend on stock
markets, since they are on the verge of a crash. The rise in oil price, which has crossed all the
limits, has slowed down all the economic growth.
The asset quality concerns are definitely worrisome, the capital adequacy levels of Indian
banks should provide significant cushion in absorbing the losses arising from the
deterioration in credit quality. A large majority of Indian banks maintain a capital adequacy
ratio of above 10 per cent as at the end of FY2007. Furthermore, the leading banks have been
actively raising capital (through rights issue, follow-on offer and bonds) to shore up their
capital during FY2008, thereby increasing the capital adequacy ratios.
Whereas considering the economic view of Mutual Fund Industry that have suffered a loss of
approx 100,000 Cr $. The falling NAV of different Equity Diversified Mutual Funds of
Reliance as per the Market movement signify that the Brand Equity Of RELIANCE
MUTUAL FUND is directly hampered but not solely, all other Mutual Fund are facing the
same consequences instead the DEBT FUNDS of Reliance are doing quite well as the
investor seeks a guaranteed return . The Investor is very selective; they do not want to take
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risk with the current situation going on. If they want to invest they prefer Debt or
Government securities to minimize the risk and assured return.
The Funds Like RELIANCE VISION FUND ,
RELIANCE GROWTH FUND,
RELIANCE REGULAR SAVING FUND,
RELIANCE EQUITY FUND
Are doing well when the market is
BULLISH, share price of the industries are soaring to attain higher values.
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REFERENCE
ONLINE
www.nseindia.com
www.bseindia.com
www.l&tfinance.com
www.currencyfutures.com
BOOKS
FINANCIAL MANAGEMENT
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DISSERTATION

Submitted in partial fulfillment of

This is to certify that the present study on “Comparing the brand

The Dissertation is dedicated to my family and friends for their love,

I wish to thank Professor Sudeep Chatterjee for all the valuable

I am also grateful to Professor Nandita Mishra for all her helpful

1 @ Concept of Mutual Fund ................................................................

Concept of Mutual Fund

History of Mutual Fund

First Phase - 1964-87

Second Phase - 1987-1993 (Entry of Public Sector Funds)

Third Phase - 1993-2003 (Entry of Private Sector Funds)

Fourth Phase - since February 2003

GROWTH IN ASSETS UNDER MANAGEMENT

Types of Mutual Fund

Advantages of Mutual Fund

Mutual funds offer several advantages to investors as :

Disadvantages of Mutual Fund

Mutual funds have their drawbacks. They are as follows:

Let us briefly look at some of the problems that the

Asset Quality Concerns

Let's try and size up the threat...

ECONOMIC GROWTH : Various

Indian Industry Sectors to Perform Well in Current Global Recession

A report "Opportunities in Indian Banking Sector", by market research company,

9. M&A & Marketing Consultants

According to Ministry of Commerce and Industry's estimation, the current size of

10. Media and Entertainment

According to a report published by the Federation of Indian Chambers of Commerce

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