Mutual Fund

Awareness about mutual funds
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A REPORT
ON
AWARENESS OF RELIANCE
MUTUAL FUNDS METHODS &
MEDIUMS
By
Swagat Subhadarsi Behera
Enrollment No 13BSPHH010891

Reliance Mutual Fund
Hyderabad

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A REPORT
ON
AWARENESS OF RELIANCE
MUTUAL FUNDS METHODS &
MEDIUMS
by
Enrollment No 13BSPHH010891
at
Hyderabad
A Report Submitted in the partial fulfillment of the
requirements for the Degree of
Master of Business Administration
Of
IBS,Hyderabad
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DECLARATION

I the undersigned solemnly declare that the report of the project work
entitled Awareness of Reliance Mutual funds Methods & Mediums, is
based on my own work carried out during the internship under the supervision
of Asst.Prof.P.V.Muralikrishna and company guide Mr.V.Raghavendra Reddy.

Place : Hyderabad Swagat Subhadarsi Behera
Date : 16/05/2014 Enrollment No : 13BSPHH010891

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CERTIFICATE BY GUIDE

This is to certify that the report of the project submitted is the outcome of the
project work entitled Awareness of Reliance Mutual fund Methods &
Mediums carried out by Swagat Subhadarsi Behera bearing Enroll No
13BSPHH010891 under my guidance and supervision for the award of Degree in
Master of Business Administration of IBS,IFHE University, Hyderabad.
To the best of my knowledge the report
i) Embodies the work of the candidate himself
ii) Has duly been completed,
iii) Fulfils the requirement of the ordinance relating to the MBA degree of
the University and
iv) Is up to the desired standard for the purpose of which is submitted.

_______________________
Name: Asst.Prof.P.V.Muralikrishna
Department: Marketing
ICFAI Business School,Hyderabad

The project work as mentioned above is hereby being recommended and forwarded
for examination and evaluation.

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ACKNOWLEDGEMENT

Anytime we deny the acknowledgement of God we are undermining the entire basis for which
our world exists. Indeed, the acknowledgement of God is not synonymous with religion. I thank
the Almighty God for blessing me with this life full of opportunities to make this world a better
place for each one of us.
I express my heartfelt thanks to Asst.Prof.P.V.Muralikrishna, Faculty of Marketing, ICFAI
Business School, Hyderabad for providing me an opportunity for carrying out this study.
My special thanks to Mr.V.Raghavendra Reddy, Area Manager, Reliance Mutual Fund,
Hyderabad who had been a constant supervision throughout the completion of the study.
My special words of gratitude to Mr.Gourishanker Rao, Relationship Manager, Reliance
Mutual Fund, Hyderabad who had supported me by his vast knowledge, experience and
wisdom.
My sincere and humble thanks to all my faculty members, my beloved parents, my dear
friends and each and everyone who have been never ending source of knowledge, inspiration
and support to me.

Signature of the Student
(13BSPHH010891)

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EXECUTIVE SUMMARY
Reliance Mutual Fund is the third largest Asset Management Company(AMC) in India. It is
doing its business by continuously delivering a diversified products and services that provide
high business value in return to customers.
The main objectives of this project are
To know the awareness of mutual fund amongst the investors.
To know the investors knowledge and perceptions about mutual fund.
To know the investor priority level between different criteria of investment like safety
level, returns, liquidity, tax benefits and maturity etc. of investment.
Find out reason for choice of mutual fund as an investment avenue.
To know how investors got to know about mutual funds.
Savings form an important part of the economy of any nation. With savings invested in various
Assets available to the people like Gold, Debt market, Insurance, Mutual funds, Equity, Bank
deposit etc the money acts as the driver for growth of the country. Indian financial sector avails
multiple avenues to the investors. A basic principle of investing is that the investment avenue
must match the investor's risk profile. Young investors have an edge over others on account of
their age. In other words, a young age investor has a big ratio of disposable income. Now, India
is seen as one of the best and deepest of markets in the world. It has huge potential growth rate in
mutual fund and different financial instruments to provide reasonable options for an ordinary
man to invest his savings and diversify the risk.

This report will seek to cover all the fundamental aspects relating to mutual funds. This report
will also tell us the customer perception about different investment instruments which are
available to them. So basically this project will focus on customer awareness and perception
towards Mutual funds.

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INDEX
Chapter
No
Contents Page No
1
Introduction
07
2
Types of mutual fund schemes

20
3
Advantages, Disadvantages and Risks involved in
mutual funds

28
4 Recent trends in Indian mutual fund industry

34
5
Company Profile
44
6
Swot analysis of reliance mutual fund

56
7
Awareness through distribution channel

58
8
Initiatives taken by RMF and AMFI
66
9
Analysis
& Interpretation
69
10
Measures that can be taken
88
11
Bibliography
91

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CHAPTER 1
INTRODUCTION

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INTRODUCTION TO 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 invested by the fund manager in different types of
securities depending upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned through these investments and the
capital appreciation realized by the scheme is shared by its unit holders in proportion to the
number of units owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally managed
portfolio at a relatively low cost. The small savings of all the investors are put together to
increase the buying power and hire a professional manager to invest and monitor the money.
Anybody with an I surplus of as little as a few thousand rupees can invest in Mutual Funds it pre
specifies the investment objectives of the fund, the risk associated, the costs involved in the
process and the broad rules for entry into and exit from the fund and other areas of operation. In
India, as in most countries, these sponsors need approval from a regulator, SEBI (Securities
exchange Board of India) in our case. SEBI looks at track records of the sponsor and its financial
strength in granting approval to the fund for commencing operations. A sponsor then hires an
asset management company to invest the funds according to the investment objective. It also
hires another entity to be the custodian of the assets of the fund and perhaps a third one to handle
registry work for the unit holders (subscribers) of the fund. In the Indian context, the sponsors
promote the Asset Management Company also, in which it holds a majority stake. In many cases
a sponsor can hold a 100% stake in the Asset Management Company (AMC).
A mutual fund is a company that invests in a diversified portfolio of securities.
People who buy shares of a mutual fund are its owners or shareholders. Their investments
provide the money for a mutual fund to buy securities such as stocks and bonds. A mutual
fund can make money from its securities in two ways: a Security can pay dividends or interest to
the fund or a security can rise in value. A fund can also lose money and drop in value.
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. A
mutual fund pools the money of many investors to invest in a variety of stocks, bonds or other
securities. Each fund has its own investment Objective, with some funds investing more
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aggressively and others Investing more conservatively. When you invest money in a mutual
fund, you receive shares of the fund. Each share represents an interest in the funds portfolio and
the value of your mutual fund shares will raise and fall depending upon the performance of the
securities in the portfolio. While the returns of mutual funds are not guaranteed, they do offer
many advantages, especially for the inexperienced investor. Mutual Funds allow you to invest
in a variety of industries and investments, performance of the securities in the portfolio which
may be difficult to do individually without having large amounts of money to invest. The
purpose of this publication is to help you understand how mutual funds work and assist you in
selecting funds to create a well-balanced Portfolio.
A mutual fund is a professionally managed type of collective investment scheme that
pools money from many investors and invests it in stocks, Bonds, short- term money market
instrument and other securities. Mutual funds have a fund manager who invests the money on
beta. Currently, the value of all mutual funds totals more than RS.9.05 trillion. India has around
1000 mutual fund schemes, but this number has grown exponentially in the last few years. The
Total Assets under Management in India of all Mutual funds put together touched a peak
of Rs. 8,33,795 crores. There are various investment avenues available to an investor such as
real estate, bank deposits, post office deposits, shares, debentures, bonds etc. A mutual fund is
one more type of Investment Avenue available to investors. There are many reasons why
investors prefer mutual funds. Buying shares directly from the market is one way of investing.
But this requires spending time to find out the performance of the company whose share is
being purchased, understanding the future business prospects of the company, finding out
the track record of the promoters and the dividend, bonus issue history of the company etc. An
informed investor needs to do research before investing. However, many investors find it
cumbersome and time consuming to pore over so much of information, get access to so much of
details before investing in the shares. Investors therefore prefer the mutual fund route. They
invest in a mutual fund scheme which in turn takes the responsibility of investing in stocks and
shares after due analysis and research. The investor need not bother with researching hundreds
of stocks. It leaves it to the mutual fund and its professional fund management team. Another
reason why investors prefer mutual funds is because mutual funds offer diversification. An
investors money is invested by the mutual fund in a variety of shares, bonds and other
securities thus diversifying the investors portfolio across different companies and
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sectors. This diversification helps in reducing the overall risk of the portfolio. It is also less
expensive to invest in a mutual fund since the minimum investment amount in mutual fund
units is fairly low (Rs. 500 or so). With Rs. 500 an investor may be able to buy only a few
stocks and not get the desired diversification. These are some of the reasons why mutual funds
have gained in popularity over the years.

HISTORY OF MUTUAL FUNDS
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at
the initiative of the Government of India and Reserve Bank of India. The history of mutual funds
in India can be broadly divided into four distinct phases First Phase 1964-87 Unit Trust of
India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank
of India and functioned under the Regulatory and administrative control of the Reserve Bank of
India. In 1978 UTI was de-linked from the 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
Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004
crores. Third Phase 1993-2003 (Entry of Private Sector Funds) with the entry of private
sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian
investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI were to be registered
and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the
first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund)
Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in
1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The
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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. In February 2003, following the repeal of
the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835
crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured
return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund,
sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the
Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000
more than Rs.76, 000 crores of assets under management and with the setting up of a UTI
Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers
taking place among different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth.
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank of India. The history of mutual funds in
India can be broadly divided into four distinct phases
First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the 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).
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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
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of
Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile
UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with
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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.

CONCEPT OF MUTUAL FUNDS

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. When you invest in a mutual fund, your earnings are derived from two potential
sources: any appreciation in the value of your fund shares and any fund distributions. Your total
return is a combination of these two elements. Once you have determined your fund's total
return, you can compare your returns to the market and to mutual funds with similar investment
objectives.
POOL
OF
MONEY
INVESTOR
D
INVESTOR C

INVESTOR
B
CC
INVESTOR
A
POOL OF
MONEY IS
MANAGED
BY AMC
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DEFINITION OF MUTUAL FUNDS

The securities and exchange board of India regulations, 1993 defines a mutual fund as a fund
establish in the form of the trust by a sponsor, to raise monies by the trustees through the sale of
units to the public, under one or more schemes, for investing in securities in accordance with
these regulations. According to Weston j. Fred and Brigham, Eugene f., unit trusts are
corporations which accept dollars from savers and then use this dollar to buy stock, long term
bonds, short term debt instruments issued by business or government units; these corporations
Concept of Mutual Fund
Many investors with common financial
objectives pool their money
Investors, on a proportionate basis get
mutual fund units for the sum
contributed to the pool
The money collected from investors is
invested into shares, debentures and
other securities by the fund manager
The fund manager realizes gains or
losses and dividends or interest
incomes
Any capital gains or losses from such
investments are passed on to the
investors in proportion of the number
of units held by them
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pool funds and thus reduce risk by diversification. 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:

Mutual Fund Operations Flow Chart

REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management
Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor
who is like promoter of a company. The trustees of the mutual fund hold its property for the
benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the
funds by making investments in various types of securities. Custodian, who is registered with
SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested
with the general power of superintendence and direction over AMC. They monitor the
performance and compliance of SEBI Regulations by the mutual fund.
Investors
Fund
Manager
Securities
Returns
Pool their money
with
Invests in
Generates
Passed Back
to
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SEBI Regulations require that at least two thirds of the directors of trustee company or board
of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50%
of the directors of AMC must be independent. All mutual funds are required to be registered
with SEBI before they launch any scheme.
A typical mutual fund in India has the following constituents :

FUND SPONSOR :

A sponsor is a person who, acting alone or in combination with another corporate body,
establishes a MF. In order to register with SEBI as MF, the sponsor should have a sound
financial track record of over five years and general reputation of fairness and integrity in all his
business transaction. The sponsor should contribute at least 40% of the net worth of the
AMC.The sponsor initiates the idea to set up a mutual fund. It could be a registered company,
scheduled bank or financial institution. For Birla Mutual Fund, the sponsor is Birla Growth
Funds. In a joint venture like Sun F&C Mutual Fund, Foreign & Colonial Emerging Markets is
the sponsor and SUN Securities (India) Ltd, the co-sponsor. A sponsor has to satisfy certain
conditions, such as on capital, track record (at least five years' operation in financial services),
default-free dealings and a general reputation of fairness. The sponsor appoints the trustees,
AMC and custodian. Once the AMC is formed, the sponsor is just a stakeholder. However,
sponsors do play a key role in bailing out an AMC during a crisis

MUTUAL FUND :

A MF is established in the form of a trust under the Indian Trusts Act, 1882. The instrument of
trust is executed by the sponsor in favour of trustees and is registered under the Indian
Registration act, 1908. The investor subscribes to the units issued by the Mutual Funds. These
assets are held by the trustee for the benefit of unit holders.

TRUSTEES :

The MF can either be managed by the Board of Trustees, which is the body of individuals, or by
Trust Company, which is the corporate body. Most of the funds in India are managed by a
Board of Trustees. The trustees are appointed with the approval of SEBI. The Trustees, however,
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do not directly manage the portfolio of MF. It is managed by the AMC as per the defined
objectives. Trustees hold a fiduciary responsibility towards unit holders by protecting
their interests. Sometimes, as with Canara Bank, the trustee and the sponsor are the same. For
others, like SBI Funds Management, State Bank of India is the sponsor and SBI Capital
Markets the trustee. Trustees float and market schemes, and secure necessary approvals. They
check if the AMC's investments are within defined limits, whether the fund's assets are
protected, and also ensure that unit holders get their due returns. Trustees also review any due
diligence done by the AMC. For major decisions concerning the fund, they have to take
unit holders' consent. They submit reports every six months to SEBI; investors get an annual
report. Trustees are paid annually out of the fund's assets -- 0.05 per cent of the weekly average
net asset value.

ASSET MANAGEMENT COMPANY(AMC) :

The AMC, appointed by the sponsor or the Trustees and approved by SEBI, acts like the
investment manager of the Trust. The AMC should have at least a net worth of Rs. 10 crore. It
functions under the supervision of its Board of Directors, Trustees and the SEBI. The regulations
require non-interfering relationship between the fund sponsors, trustees, custodians and AMC.
The AMC appoints distributors or brokers to sell units on behalf of the Fund, also serve as
investment advisers. They are the ones who manage your money. An AMC takes investment
decisions, compensates investors through dividends, maintains proper accounting and
information for pricing of units, calculates the NAV, and provides information on listed schemes
and secondary market unit transactions. It also exercises due diligence on investments, and
submits quarterly reports to the trustees. A fund's AMC can neither act for any other fund nor
undertake any business other than asset management. Its net worth should not fall below Rs 10
crore. And, its fee should not exceed 1.25 per cent if collections are below Rs 100 crore and 1
per cent if collections are above Rs 100 crores. SEBI can pull up an AMC if it deviates from
its prescribed role.

CUSTODIAN:

Often an independent organization, it takes custody of securities and other assets of a mutual
fund. Among public sector mutual funds, the sponsor or trustee generally also acts as the
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custodian. A custodian's responsibilities include receipt and delivery of securities, collecting
income, distributing dividends, safekeeping of units and segregating assets and settlements
between schemes. Their charges range between 0.15-0.2 per cent of the net value of the
holding. Custodians can service more than one fund.

The structure of mutual fund in India is governed by SEBI (MUTUAL FUND) regulations 1996.
These regulations make it mandatory for mutual funds to have a three-tier structure of
SPONSOR-TRUSTEE-ASSET.

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FEATURES OF MUTUAL FUND

A mutual fund actually belongs to the investors who have pooled their funds. The
ownership of the mutual fund is in the hand of the investors.
A mutual fund is managed by investment professionals and other service providers who
earn a fee for their services from the fund.
The pool of funds is invested in a portfolio of marketable investments. The value of the
portfolio is updated every day.
The investors share in the fund is denominated by UNIT. The value of the unit
changes with changes in the portfolio value every day the value of the unit of investment
is called as the Net Assets Value or NAV.
The investment portfolio of the fund is created according to the stated investment
objectives of the fund.

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CHAPTER 2

TYPES OF MUTUAL FUND

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TYPES OF MUTUAL FUND SCHEMES

Wide varieties of Mutual Fund Schemes exist to cater to the needs such as financial position, risk
tolerance and return expectations etc. The table below gives an overview into the existing types
of schemes in the Industry.
By structure
Open- Ended schemes
Close- Ended schemes
Interval schemes
By investment objectives
Growth/Equity schemes
Income/Debt scheme
Money market
Guilt funds
Balanced schemes
Other schemes
Tax saving schemes
Special schemes:
o Sector specific schemes
o Index schemes
Open - Ended Schemes:
An open-ended fund or scheme is one that is available for subscription and repurchase on a
continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently
buy and sell units at Net Asset Value (NAV) related prices, which are declared on a daily basis.
The key feature of open-end schemes is liquidity.
Close - Ended Schemes:
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open
for subscription only during a specified period at the time of launch of the scheme. Investors can
invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the
units of the scheme on the stock exchanges where the units are listed. In order to provide an exit
route to the investors, some close-ended funds give an option of selling back the units to the
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mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that
at least one of the two exit routes is provided to the investor i.e. either repurchase facility or
through listing on stock exchanges. These mutual funds schemes disclose NAV generally on
weekly basis.
Interval Scheme:
These combine the feature of open-ended and close ended schemes. They may be traded on the
stock exchange or may be open for sale or redemption during predetermined intervals at NAV
related prices.
BY INVESTMENT OBJECTIVE
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.
Income Schemes:
The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures, Government
securities and money market instruments. Such funds are less risky compared to equity schemes.
These funds are not affected because of fluctuations in equity markets. However, opportunities
of capital appreciation are also limited in such funds. The NAVs of such funds are affected
because of change in interest rates in the country. If the interest rates fall, NAVs of such funds
are likely to increase in the short run and vice versa. However, long term investors may not
bother about these fluctuations.

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

Money Market Schemes:
These funds are also income funds and their aim is to provide easy liquidity, preservation of
capital and moderate income. These schemes invest exclusively in safer short-term instruments
such as treasury bills, certificates of deposit, commercial paper and inter-bank call money,
government securities, etc. Returns on these schemes fluctuate much less compared to other
funds. These funds are appropriate for corporate and individual investors as a means to park their
surplus funds for short periods
Gilt Fund:
These primarily invest in government debts. Hence, the investor usually does not have to worry
about credit risk since government debt is generally credit risk free. Reliance Gilt Securities
Fund - Short Term Gilt Plan & Long Term Gilt Plan are best example of such scheme.

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OTHER SCHEMES
Tax Saving Schemes:
These schemes offer tax rebates to the investors under specific provisions of the Income Tax
Act, 1961 as the Government offers tax incentives for investment in specified avenues. E.g.
Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also
offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities.
Their growth opportunities and risks associated are like any equity-oriented scheme.
SPECIAL SCHEMES
Index Schemes:
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P
NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weight age
comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or
fall in the index, though not exactly by the same percentage due to some factors known as
"tracking error" in technical terms. Necessary disclosures in this regard are made in the offer
document of the mutual fund scheme. There are also exchange traded index funds launched by
the mutual funds which are traded on the stock exchanges.
Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those sectors or industries as
specified in the offer documents. E.g. Pharmaceuticals, Software, Fast Moving Consumer Goods
(FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of
the respective sectors/industries. While these funds may give higher returns, they are more risky
compared to diversified funds. Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.
SOME TERMS RELATED TO MUTUAL FUNDS
NAV
NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund
net of its liabilities. NAV per unit is simply the net value of assets divided by the number of
units outstanding. Buying and selling into funds is done on the basis of NAV-related prices.
NAV is calculated as follows:
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NAV= Market value of the funds investments + Receivables +
Accrued Income Liabilities-Accrued Expenses
Number of Outstanding units
Entry/Exit Load
A Load is a charge, which the AMC may collect on entry and/or exit from a fund. A load is
levied to cover the up-front cost incurred by the AMC for selling the fund. It also covers one
time processing costs. Some funds do not charge any entry or exit load. These funds are
referred to as No Load Fund. Funds usually charge an entry load ranging between 1.00% and
2.00%. Exit loads vary between 0.25% and 2.00%.

E.g. Let us assume an investor invests Rs. 10,000/- and the current NAV is Rs.13/-. If the entry
load levied is 1.00%, the price at which the investor invests is Rs.13.13 per unit. The investor
receives 10000/13.13 = 761.6146 units. (Note that units are allotted to an investor based on the
amount invested and not on the basis of no. of units purchased).
Let us now assume that the same investor decides to redeem his 761.6146 units. Let us also
assume that the NAV is Rs 15/- and the exit load is 0.50%. Therefore the redemption price per
unit works out to Rs. 14.925.
The investor therefore receives 761.6146 x 14.925 = Rs.11367.10

Sales/Purchase price
Sales/Purchase price is the price paid to purchase a unit of the fund. If the fund has no entry
load, then the sales price is the same as the NAV. If the fund levies an entry load, then the sales
price would be higher than the NAV to the extent of the entry load levied.
Switch
Some Mutual Funds provide the investor with an option to shift his investment from one
scheme to another within that fund. For this option the fund may levy a switching fee.
Switching allows the Investor to alter the allocation of their investment among the schemes in
order to meet their changed investment needs, risk profiles or changing circumstances during
their lifetime.
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Association of Mutual Fund in India (AMFI)
AMFI, the apex body of all the registered Asset Management companies was incorporated on
august 22, 1995 as a non-profit organization. As of now, all the 31Asset Management
Companies that has launched Mutual Fund schemes are its members. AMFI functions under the
supervision and guidance of a Board of Directors. Over the years, AMFI has worked closely with
SEBI in establishing standards that match the best in the world. It has played a significant role in
introducing best practices to reinforce the growth of the industry on healthy lines and protect the
interests of the investors. One of the major initiatives of AMFI has been the introduction of
certification program for agent distributors. SEBE has mandated that all those engaged in sales a
marketing of mutual fund schemes will be AMFI certified and registered. AMFI has brought out
a detailed workbook on mutual funds based on which it conducts computerized testing through
National Stock Exchange test centers. It also organizes written examinations in different
languages. Till date over 31,000 agent distributors have passed the test. AMFI complies and
publishes data on a monthly and quarterly basis. It has a quarterly publication AMFI update
which summarizes major developments in the mutual fund industry and changes in the
regulatory framework.
SEBI REGULATIONS ON MUTUAL FUNDS
SEBI REGULATIONS 1996: Mutual funds in India are comprehensively regulated under the
SEBI (Mutual Funds) Regulation, 1996. Some of the important provisions of this regulation are
as follows:
A mutual fund shall be constituted in the form of a thrust executed by the sponsor in favor
of the trustees.
The sponsor or, if so authorized by the trust deed, the trustees, shall appoint an asset
management company.
The mutual fund shall appoint a custodian.
No scheme shall be launched by the AMC unless it is approved by the trustees an a copy of
the offer document has been filed with SEBI.
The offer document and advertisement materials shall not be misleading.
No guaranteed return shall be provided in a scheme unless such returns are fully guaranteed
by the sponsor or the AMC.
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The moneys collected under any scheme of a mutual fund shall be invested only in
transferable securities.
The moneys collected under any money market scheme of a mutual fund shall be invested
only in money market instruments in accordance with directions issued by the reserve bank
of India.
The mutual funds shall not borrow except to meet temporary liquidity needs.
The net asset value (NAV) and the sale and repurchase price of mutual fund schemes must
be regularly published in daily newspapers.
Every AMC shall keep and maintain proper books of accounts records, and documents for
each scheme.
The investments of a mutual fund are subject to several restrictions relating to exposure to
stocks of individual companies, debt instruments of individual issuers so on and so forth.
Costs associated with mutual fund investing such as initial expenses, loads (entry and exit),
and annual recurring expenses are subject to certain ceilings.
The rights which are available to a Mutual Fund holder: As per SEBI Regulations on Mutual
Funds, an investor is entitled to-
Receive unit certificates or statement of accounts confirming your title within 6 weeks from
the date your request for a unit certificate is received by the Mutual Fund.
Receive information about the investment policies, investment objectives, financial position
and general affairs of the scheme.
Receive dividend within 42 days of their declaration and receive the redemption of
repurchase proceeds within 10 days from the date of redemption or repurchase.
The trustees shall be bound to make such disclosures to the unit holders as they essential in
order to deep them informed about any information which may have an adverse bearing on
their investments.
75% of the unit holders with the prior approval of SEBI can terminate the AMC of the fund.
75% of the unit holders can pass a resolution to wind-up the scheme.

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CHAPTER 3
ADVANTAGES,
DISADVANTAGES AND
RISKS INVOLVED IN
MUTUAL FUNDS

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ADVANTAGES OF MUTUAL FUNDS
Professional expertise
Investing requires skill. It requires a constant study of the dynamics of the markets and of the
various industries and companies within it. Anybody who has surplus capital to be parked as
investments is an investor, but to be a successful investor, you need to have someone managing
your money professionally. Just as people who have money but not have the requisite skills to
run a company (and hence must be content as shareholders) hand over the running of the
operations to a qualified CEO, similarly, investors who lack investing skills need to find a
qualified fund manager. Mutual funds help investors by providing them with a qualified fund
manager. Increasingly, in India, fund managers are acquiring global certifications like CFA and
MBA which help them be at the cutting edge of the knowledge in the investing world.
Diversification
There is an old saying: Don't put all your eggs in one basket. There is a mathematical and
financial basis to this. If you invest most of your savings in a single security (typically happens if
you have ESOPs (employees stock options) from your company, or one investment becomes
very large in your portfolio due to tremendous gains) or a single type of security (like real estate
or equity become disproportionately large due to large gains in the same), you are exposed to any
risk that attaches to those investments. In order to reduce this risk, you need to invest in different
types of securities such that they do not move in a similar fashion. Typically, when equity
markets perform, debt markets do not yield good returns. Note the scenario of low yields on debt
securities over the last three years while equities yielded handsome returns. Similarly, you need
to invest in real estate, or gold, or international securities for you to provide the best
diversification. If you want to do this on your own, it will take you immense amounts of money
and research to do this. However, if you buy mutual funds -- and you can buy mutual funds of
amounts as low as Rs 500 a month! -- you can diversify across asset classes at very low cost.
Within the various asset classes also, mutual funds hold hundreds of different securities (a
diversified equity mutual fund, for example, would typically have around hundred different
shares).

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Low cost of asset management
Since mutual funds collect money from millions of investors, they achieve economies of scale.
The cost of running a mutual fund is divided between a larger pool of money and hence mutual
funds are able to offer you a lower cost alternative of managing your funds. Equity funds in India
typically charge you around 2.25% of your initial money and around 1.5% to 2% of your money
invested every year as charges. Investing in debt funds costs even less. If you had to invest
smaller sums of money on your own, you would have to invest significantly more for the
professional benefits and diversification.
Liquidity
Mutual funds are typically very liquid investments. Unless they have a pre-specified lock-in,
your money will be available to you anytime you want. Typically funds take a couple of days for
returning your money to you. Since they are very well integrated with the banking system, most
funds can send money directly to your banking account.
Ease of process
If you have a bank account and a PAN card, you are ready to invest in a mutual fund: it is as
simple as that! You need to fill in the application form, attach your PAN (typically for
transactions of greater than Rs 50,000) and sign your cheque and you investment in a fund is
made. In the top 8-10 cities, mutual funds have many distributors and collection points, which
make it easy for them to collect and you to send your application to.
Well regulated
India mutual funds are regulated by the Securities and Exchange Board of India, which helps
provide comfort to the investors. Sebi forces transparency on the mutual funds, which helps the
investor make an informed choice. Sebi requires the mutual funds to disclose their portfolios at
least six monthly, which helps you keep track whether the fund is investing in line with its
objectives or not.
DISADVANTAGES OF MUTUAL FUNDS
High expense ratios and expense charges
If you're not paying attention to mutual fund expense ratios and sales charges, they can get out of
hand. Be very cautious when investing in funds with expense ratios higher than 1.20%, as they
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will be considered on the higher cost end. Be weary of 12b-1 advertising fees and sales charges
in general. There are several good fund companies out there that have no sales charges. Fees
reduce overall investment returns.
Management Abuses
Churning, turnover and window dressing may happen if your manager is abusing his or her
authority. This includes unnecessary trading, excessive replacement and selling the losers prior
to quarter-end to fix the books.
Tax Insufficiencies
Like it or not, investors do not have a choice when it comes to capital gain payouts in mutual
funds. Due to the turnover, redemptions, gains and losses in security holdings throughout the
year, investors typically receive distributions from the fund that are an uncontrollable tax event.
Poor Trade Execution
If you place your mutual fund trade anytime before the cut-off time for same-day NAV, you'll
receive the same closing price NAV for your buy or sell on the mutual fund. For investors
looking for faster execution times, maybe because of short investment horizons, day trading, or
timing the market, mutual funds provide a weak execution strategy.
RISKS INVOLVED IN INVESTING IN MUTUAL FUNDS

Mutual Funds do not provide assured returns. Their returns are linked to their performance.
They invest in shares, debentures and deposits. All these investments involve an element of risk.
The unit value may vary depending upon the performance of the company and companies may
default in payment of interest/principal on their debentures/bonds/deposits. Besides this, the
government may come up with new regulation which may affect a particular industry or class of
industries. All these factors influence the performance of Mutual Funds.

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Risk factors in mutual funds

The Risk-Return Trade-off: The most important relationship to understand is the risk-
return trade-off. Higher the risk greater the returns/loss and lower the risk lesser the
returns/loss. Hence it is up to you, the investor to decide how much risk you are willing to take.
In order to do this you must first be aware of the different types of risks involved with your
investment decision.
Market Ri sk: Sometimes prices and yields of all securities rise and fall. Broad outside
influences affecting the market in general lead to this. This is true, may it be big corporations or
smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan
(SIP) that works on the concept of Rupee Cost Averaging (RCA) might help mitigate this
risk.
Credi t Ri sk: The debt servicing ability (May it be interest payments or repayment of
principal) of a company through its cash flows determines the Credit Risk faced by you. This
credit risk is measured by independent rating agencies like CRISIL who rate companies and
their paper. An AAA rating is considered the safest whereas a D rating is considered poor
credit quality. A well-diversified portfolio might help mitigate this risk.
Inflation Ri sk: Things you hear people talk about:
Rs. 100 today is worth more than Rs. 100 tomorrow.
Remember the time when a bus ride costed 50 paise?
Mehangai Ka Jamana Hai.
The root cause of Inflation is the loss of purchasing power over time. A lot of times people
make conservative investment decisions to protect their capital but end up with a sum of money

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that can buy less than what the principal could at the time of the investment. This happens
when inflation grows faster than the return on your investment. A well-diversified portfolio
with some investment in equities might help mitigate this risk.
Interest Rate Risk: In a free market economy interest rates are difficult if not impossible
to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest
rates rise the prices of bonds fall and vice versa. Equity might be negatively affected as well in
a rising interest rate environment. A well-diversified portfolio might help mitigate this risk.
Poli tical/ Government Poli cy Risk: Changes in government policy and political
decision can change the investment environment. They can create a favorable environment for
investment or vice versa.
Liquidity Risk: Liquidity risk arises when it becomes difficult to sell the securities that one
has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of
maturities as well as internal risk controls that lean towards purchase of liquid securities.

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CHAPTER 4
RECENT TRENDS IN
INDIAN MUTUAL FUND
INDUSTRY

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RECENT TRENDS IN INDIAN MUTUAL FUND INDUSTRY
Mutual fund industrys assets under management reached an all-time-high of Rs. 9.45 lakh crore
in April. Mutual fund industrys assets under management went up to Rs. 9.45 lakh crore in
April, up 15 percent from Rs. 8.25 lakh crore in March. Liquid funds received Rs. 1.12 lakh
crore in April. However, except liquid, equity and IDFs, all other categories saw net outflows.
Typically, corporate and banks redeem money from liquid funds during quarter end. In March,
Rs. 1.17 lakh crore went out from liquid funds which made its way back in the industry in
April.
Equity
There was some good news on the equity funds front as well. Gross redemptions slowed down to
Rs. 5,219 crore which helped the industry receive net inflows of Rs. 208 crore in equity funds.
Gold
From close to Rs. 11,000 crore levels some months back, the AUM of Gold ETFs fell to Rs.
8,527 crore in April. Due to grim outlook on gold, investors are continuously moving out from
Gold ETFs which is evident by the closure of folios in the category.
According to India Ratings & Research (Ind-Ra), a part of Fitch group, gold prices are further
expected to decline in FY15 in the range of Rs. 25,500 to Rs. 27,500/10 g. It expects gold prices
to fall due to the gradual winding up of unconventional monetary policy (UMP) in US which
would cause interest rates to go up and consequently discourage investments in gold.
New launches
There were 78 new fund offers, most of them being FMPs, which collectively mopped up Rs.
10,508 crore in April. Franklin India Banking & PSU Debt Fund and Motilal Oswal MOSt
Focused Multi cap 35 Fund collected Rs. 91 crore and Rs. 64 crore respectively. Among ETFs,
Reliance - R*Shares Consumption Fund and R*Shares Dividend Opportunities Fund collected
Rs. 31 crore.
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MAJOR MUTUAL FUND COMPANIES IN INDIA
1. Axis Asset Management Company Ltd.

2. Baroda Pioneer Asset Management Company Ltd

3. Birla Sun Life Asset Management Company Ltd

4. BNP Paribas Asset Management India Pvt Ltd

5. BOI AXA Investment Managers Pvt Ltd

6. Canara Robeco Asset Management Company Ltd

7. Daiwa Asset Management (India) Pvt Ltd

8. Deutsche Asset Management (India) Pvt. Ltd.

9. DSP BlackRock Investment Managers Pvt. Ltd.

10. Edelweiss Asset Management Ltd

11. Escorts Asset Management Ltd

12. FIL Fund Management Private Ltd

13. Franklin Templeton Asset Management (India) Pvt Ltd.

14. Goldman Sachs Asset Management (India) Pvt Ltd.

15. HDFC Asset Management Company Ltd

16. HSBC Asset Management (India) Pvt. Ltd.

17. ICICI Prudential Asset Management Company Ltd

18. IDBI Asset Management Ltd.

19. IDFC Asset Management Company Ltd

20. India Infoline Asset Management Co. Ltd.

21. Indiabulls Asset Management Company Ltd.

22. ING Investment Management (India) Pvt. Ltd.

23. JM Financial Asset Management Pvt Limited

24. JPMorgan Asset Management India Pvt. Ltd.

25. Kotak Mahindra Asset Management Company Ltd.

26. L&T Investment Management Ltd.

27. LIC NOMURA Mutual Fund Asset Management Company Ltd.

28. Mirae Asset Global Investments (India) Pvt. Ltd.

29. Morgan Stanley Investment Management Pvt.Ltd.

30. Motilal Oswal Asset Management Company Ltd.

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31. Peerless Funds Management Co. Ltd.

32. Pine Bridge Investments Asset Management Company (India) Pvt. Ltd.

33. Pramerica Asset Managers Private Ltd

34. Principal PNB Asset Management Co. Pvt. Ltd.

35. Quantum Asset Management Company Private Ltd.

36. Reliance Capital Asset Management Ltd.

37. Religare Asset Management Company Private Ltd.

38. Sahara Asset Management Company Private Ltd

39. SBI Funds Management Private Ltd.

40. Sundaram Asset Management Company Ltd
41. Tata Asset Management Ltd

42. Taurus Asset Management Company Ltd

43. Union KBC Asset Management Company Pvt Ltd

44. UTI Asset Management Company Ltd

Category
Net inflow/outflow
in April 2014 AUM
Income -9,927 458,009
IDF 188 1,074
Equity 208 166,826
Balanced -108 13,370
Liquid 123,875 259,310
Gilt -373 5,895
ELSS -368 25,420
Gold ETFs -146 8,527
Other ETFs -1,213 3,704
FOFs investing
overseas
-3 3,186
Total 112,133 945,321
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Source : AMFI (Rs. cr)

Assets under management (Rs.Cr)
Mutual Funds December
2004
March
2014
Change % Change
HDFC Mutual Fund 14,262 112,963 98,701 692.05
ICICI Prudential Mutual Fund 17,100 106,822 89,722 524.69
Reliance Mutual Fund 9,048 103,542 94,494 1044.36
Birla Sun Life Mutual Fund 8,925 89,051 80,126 897.77
UTI Mutual Fund 20,976 74,233 53,257 253.90
SBI Mutual Fund 5,426 65,499 60,073 1107.14
Franklin Templeton Mutual
Fund
15,630 45,404 29,774 190.50
IDFC Mutual Fund 8,069 41,349 33,280 412.45
Kotak Mahindra Mutual Fund 5,227 33,079 27,852 532.86
DSP BlackRock Mutual Fund 6,157 31,631 25,474 413.74
Tata Mutual Fund 6,782 21,954 15,172 223.71
Deutsche Mutual Fund 2,240 18,795 16,555 739.06
L&T Mutual Fund 1,060 18,255 17,195 1622.19
Sundaram Mutual Fund 1,786 16,422 14,636 819.48
LIC NOMURA Mutual Fund 3,161 10,584 7,423 234.84
Baroda Pioneer Mutual Fund 181 8,106 7,925 4378.43
HSBC Mutual Fund 7,280 7,659 379 5.20
Canara Robeco Mutual Fund 1,775 6,499 4,724 266.11
JM Financial Mutual Fund 3,148 6,046 2,898 92.06
PRINCIPAL Mutual Fund 5,620 4,134 -1,486 -26.44
Goldman Sachs Mutual Fund 380 3,764 3,384 890.56
Taurus Mutual Fund 169 3,532 3,363 1990.23
BNP Paribas Mutual Fund 1,088 3,446 2,358 216.70
ING Mutual Fund 1,388 564 -824 -59.38
Escorts Mutual Fund 148 269 121 81.95
Sahara Mutual Fund 293 191 -102 -34.95
Total 147,319 833,795 686,476 82.33
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The Indian mutual fund industry finds itself in an economic landscape which has undergone
rapid changes over the past three years. The industry achieved a high water mark when it
doubled its AUM from Rs. 3.6 trillion in FY2007 to Rs. 6.13 trillion in FY2010 clocking an
impressive growth rate of 16.2% per year. Since then the Indian economy (coupled with the
emerging economies) has faced a slowdown the most severe of which are happening as this
report is being written. From an average GDP growth rate of 8-9% during the 2008-2011 years,
the Indian economy is now growing at a lackluster 4.8% growth rate in Q2 2013. Coupled with a
steep decline in the value of the Indian rupee, the mutual fund industry now finds itself in a
capricious global economic environment. However, there is strong reason to believe that the
Indian mutual fund industry has not yet seen its global peak and if proper measures are taken, the
industry could get back on its former growth path. Some of the reasons may be Distribution
channels, Lack in awareness of investors, some loopholes in regulatory frame work.
Distribution channels
Distribution of mutual fund products is one of the critical components in the entire value chain of
the asset management industry. More so, where investment is highly underpenetrated. For
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example, the north eastern region holds tremendous potential on account of its very low
penetration and awareness about investments. The region has 2.5 per cent of total bank branches
which accounts for 1.3 per cent of banking business but only 0.3 per cent of AUM5. People save
their money in banks rather than investing it in the market. The investment advisors could help in
serving this underserved region by making them aware of the financial products. Of all the fund
houses surveyed, 61% of respondents said that finding quality distributors continues to present a
formidable challenge. Fund houses are of the 46 opinion that due to the current regulations that
impose a limit on the incentives, good quality distributors are hard to find. On the other hand a
large majority of respondents says that even if a reasonable commission is offered, it is difficult
to recruit sufficient number of distributors which implies that there is lack of skilled distributors.
Finding quality distributors especially in small towns and rural areas is a major hurdle towards
increasing mutual fund penetration. This problem is more prevalent in case of AMCs with
relatively lower AUM levels. 67% of fund houses opine that distribution, if carried out through
post offices could be a positive step towards increasing the penetration of mutual funds. If this
could be started, this would be a significant step considering the recent push by India Post of the
Post Office Saving Schemes. Since India Post is a loss making enterprise, an introduction of such
mutual fund sales through India Post could also help them in reducing their deficit and this could
be a highly beneficial move for both parties. Furthermore, India Post through its broad network
spread throughout the nation offers a distribution channel that could be leveraged. In January
2001, India Post in association with IDBI-Financial launched a pilot scheme in the Delhi,
Mumbai, Kolkata and Patna. From 15
th
June 2001 onwards, sales of mutual funds by SBI,
Principal, Franklin-Templeton and Reliance Mutual Fund were extended to cover post offices in
all major capital and other cities all across the country. Huge costs when entering new areas
where there are no existing mutual funds are also a barrier for the fund houses to establish the
footprint. AMCs ask for allowing differential incentives for such locations (including, possibly,
upfront fees to distributors) to make it mutual fund distribution financially viable and compete
with the sale of other financial products. The present regulation provides incentive to the
distributors for funds mobilized beyond top 15 cities. However this benefit is effectively
cancelled by the claw-back provision which needs to be revisited. AMCs also demand fiscal
incentives for opening branches beyond top 15 cities as the infrastructure and set-up need to be
incurred by them. At the same time, a large majority of the respondents feel that introducing new
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channels like transactions through ATMs would not boost AUM levels. Smaller fund houses and
those in private sector count misspelling by the distributors as a major factor affecting the
penetration of mutual funds. AMCs suggested making the offence of misspelling more
stringently punishable. An interesting insight obtained from the survey is that the fund houses do
not feel that agents have a clash of interest when they sell other financial products along with
mutual funds. AMCs feel the need of using technology as much as possible to increase the reach.
Facilities like mobile wallet should be introduced which could help accretions of daily SIPs
particularly in small towns and help small investors participate in equity and debt markets. In
order to tackle the shortage of quality distributors, AMCs suggest that the country-wide network
of stock brokers can be effectively utilized. They propose that fund houses should be allowed to
pay commissions to them and their registration with AMFI should not be made compulsory.
AMCs also pointed that restricting the scope of New Cadre Distributors to simple products
affects penetration in non metro locations.
Investor Awareness
When fund houses were asked whether a typical investor was adequately informed about
different mutual fund products, an overwhelming majority (80%) answered in negative. AMCs
are of the opinion that investors in metros are significantly better informed as compared to
investors in non-metro cities. However, the distinction is not as sharp when awareness levels of
investors in T-15 and B-15 cities are compared. Also, within the T-15 cities, awareness levels
about different mutual funds were far higher in the five metro areas than the rest of the T-15
cities. 57% of respondents think that lack of customer information is the biggest challenge they
face in selling mutual fund products. Understandably, this lack of awareness on part of investors
is one of the single largest factors affecting penetration according to the fund houses. AMCs
suggest novel awareness campaigns wherein partnerships with colleges can be established to
inculcate financial knowledge at young age. Involving celebrities to spread financial awareness
regarding mutual funds at category level is also one of the suggestions. One of the interviewed
fund houses suggested opening up of MF education centers in smaller towns could serve as
counseling centers and provide fund updates, NAVs across AMCs.
Regulatory Framework
Fund houses also consider Know Your Customer (KYC) norms, excessive paperwork and the
restrictions impose on transactions by cash as roadblocks to penetration by the. Public AMCs
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consider the regulatory restrictions on advertisements as a reason for under-penetration. AMCs
demand that restrictions on advertisements should be relaxed and the advertising guidelines
should be simplified to enable better communication. They should be allowed to compare their
track record with other competing products so that the investors can better understand the
benefits of investing in mutual funds.

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CHAPTER 5
COMPANY PROFILE
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RELIANCE
MUTUAL FUND

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INTRODUCTION TO RELIANCE MUTUAL FUND
Reliance Mutual fund has the third largest AMC with an AUM of 103542 crores in India.
Reliance capital asset Management is no. 3 AMC in India. Management of Reliance mutual fund
wants to expand its feet all over India, before taking any step they want to understand market &
investor behavior of SMEs, so they may plan accordingly to capture such a huge Market. In this
research we have to analyze why, how, where, when & how much an investor invest &
according to it, we have to make profile of investors.
In this report I have endeavored to understand the factors affecting Investment
behavior of an investor in Hyderabad. This behavioral study consists of how any investor invests
in Hyderabad, What factor they consider, why these factors they consider, where do they invest,
how do they invest, purpose behind investment, size of investment, timing of investment &
duration of investment. This study gave us basis to profile investors.

Reliance Capital Asset Management Ltd.

Reliance Capital, a constituent of CNX Nifty Junior and MSCI India, is a part of the Reliance
Group. It is one of India's leading and amongst most valuable financial services companies in the
private sector. Reliance Capital has interests in asset management and mutual funds; life and
general insurance; commercial finance; equities and commodities broking; wealth management
services; distribution of financial products; private equity; asset reconstruction; proprietary
investments and other activities in financial services.
Reliance Mutual Fund is amongst top three Mutual Funds in India with six million investor
folios. Reliance Life Insurance and Reliance General Insurance are amongst the leading private
sector insurers in India. Reliance Securities is one of Indias leading retail broking houses.
Reliance Money is one of Indias leading distributors of financial products and services.
Reliance Capital has a net worth of Rs. 12,563 crore (US$ 2.0 billion) and total assets of Rs.
44,048 crore (US$ 7.1 billion) as on December 31, 2013.

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Business mix of Reliance Capital
Asset Management Mutual Fund, Offshore Fund, Pension fund, Portfolio Management
Insurance Life Insurance, General Insurance
Commercial Finance Mortgages, Loans against Property , SME Loans, Loans for
Vehicles, Loans for Construction Equipment, Business Loans,
Infrastructure financing
Broking and
Distribution
Equities, Commodities and Derivatives, Wealth Management
Services, Portfolio Management Services, Foreign Exchange, Third
Party Products
Other Businesses Private Equity, Asset Reconstruction, Venture Capital

Reliance Capital Limited (RCL) was incorporated in year 1986 at Ahmadabad in Gujarat as
Reliance Capital & Finance Trust Limited. The name RCL came into effect from January 5,
1995. In 2002, RCL shifted its registered office to Jamnagar in Gujarat before it finally moved to
Mumbai in Maharashtra, in 2006.In 2006, Reliance Capital Ventures Limited merged with RCL
and with this merger the shareholder base of RCL rose from 0.15 million shareholders to 1.3
million.RCL entered the Capital Market with a maiden public issue in 1990 and in subsequent
years further tapped the capital market through rights issue and public issues. The equity shares
were initially listed on the Ahmadabad Stock Exchange and The Stock Exchange Mumbai.
Presently the shares are listed on The Stock Exchange Mumbai and the National Stock Exchange
of India.RCL in the initial years engaged itself in steady annuity yielding businesses such as
leasing, bill discounting, and inter-corporate deposits. Later, in 1993 diversified its business in
the areas of portfolio investment, lending against securities, custodial services, money market
operations, project finance advisory services, and investment banking.RCL was accredited a
Category 1 Merchant banker by the Securities Exchange Board of India (SEBI). It had lead
managed/co-managed 15 issues of an aggregate value of Rs. 400 crore and had underwritten 33
issues for an aggregate value of Rs. 550 crore. All these companies were listed on various
exchanges.RCL obtained its registration as a Non-banking Finance Company (NBFC) in
December 1998. In view of the regulatory requirements RCL surrendered its Merchant Banking
License.RCL has since diversified its activities in the areas of asset management and mutual
fund; life and general insurance; consumer finance and industrial finance; stock broking;
depository services; private equity and proprietary investments; exchanges, asset reconstruction;
distribution of financial products and other activities in financial services.
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Reliance Mutual Fund ('RMF'/ 'Mutual Fund') is one of Indias leading Mutual Funds, with
Average Assets Under Management (AAUM) of Rs. 1,03,542 Crores (Jan to Mar '14 Quarter)
and 55.08 Lakh folios. (31st Mar 14) Reliance Mutual Fund, a part of the Reliance Group, is one
of the fastest growing mutual funds in India. RMF offers investors a well-rounded portfolio of
products to meet varying investor requirements and has presence in 179 cities across the country.
Reliance Mutual Fund constantly endeavors to launch innovative products and customer service
initiatives to increase value to investors. Reliance Capital Asset Management Limited (RCAM)
is the asset manager of Reliance Mutual Fund. RCAM is a subsidiary of Reliance Capital
Limited (RCL). Presently, RCL holds 65.23% of its total issued and paid-up equity share capital
and the balance of its issued and paid up equity share capital is held by other shareholders which
includes Nippon Life Insurance Company (NLI), holding 26% of RCAMs total issued and
paid up equity share capital. NLI acquired the said 26% share holding in RCAM on August 17,
2012. Reliance Capital Ltd. is one of Indias leading and fastest growing private sector financial
services companies, and ranks among the top 3 private sector financial services and banking
companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management, life
and general insurance, private equity and proprietary investments, stock broking and other
financial services.
Vision Statement
To be a globally respected wealth creator with an emphasis on customer care and a culture of
good corporate governance.

Mission Statement
To create and nurture a world-class, high performance environment aimed at delighting our
customers.
Corporate Governance Policy

Reliance Capital Asset Management Limited has a vision of being a leading player in the mutual
fund business and has achieved significant success and visibility in the market.
However, an imperative part of growth and visibility is adherence to good conduct in the
marketplace. At Reliance Capital Asset Management Limited, the implementation and
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observance of ethical processes and policies has helped us in standing up to the scrutiny of our
domestic and international investors.
Management

The management at Reliance Capital Asset Management Limited is committed to good corporate
governance, which includes transparency and timely dissemination of information to its investors
and unit holders. The Board of Directors of RCAM is a professional body constituting inter-alia
of, well-experienced and knowledgeable independent members. Regular audit committee
meetings are conducted to review the operations and performance of the company.
PERFORMANCE OF RELIANCE MUTUAL FUND
AUM REPORT FOR THE QUARTER ENDED (30/06/2013)
Asset class wise disclosure of AUM & AAUM

Category

AUM as on last day of quarter
Average AUM for quarter
(in lakhs)
Income 4867295.97 4767801
Equity(Other than ELSS) 2079492.89 2135022
Balanced 376122.47 403392
Liquid 1681795.51 1977741
Gilt 29513.12 29045
Equity(ELSS) 197553.03 207082.64
GOLD ETF 231669.43 255039
Other ETF 1810.92 2013
Fund of fund investing
overseas

0.00

0
Total 9465253.33 9777136
Fund of fund investing
overseas(Domestic)

178475.72

196499
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AUM REPORT FOR THE QUARTER ENDED (30/06/2013)
Disclosure of percentage of AUM by geography

Geographical Spread

% of total AUM as on last day of quarter
Top 5 cities 61.49
Next 10 cities 21.60
Next 20 cities 4.36
Next 75 cities 9.43
Others 3.12
Total 100.00

PRODUCT PROFILE OF RELIANCE MUTUAL FUND
EQUITY SCHEMES:
Reliance Equity Fund: (An open-ended diversified Equity Scheme.)
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.
Reliance Tax Saver (ELSS) Fund: (An Open-ended Equity Linked Savings Scheme.)
The primary objective of the scheme is to generate long-term capital appreciation from a
portfolio that is invested predominantly in equity and equity related instruments.
Reliance Equity Opportunities Fund: (An Open-Ended Diversified Equity Scheme.)
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 securities
& equity related securities and the secondary objective is to generate consistent returns by
investing in debt and money market securities.

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Reliance Vision Fund: (An Open-ended Equity Growth Scheme.)
The primary investment objective of the Scheme is to achieve long term growth of capital by
investment in equity and equity related securities through a research based investment approach.
Reliance Growth Fund: (An Open-ended Equity Growth Scheme.)
The primary investment objective of the Scheme is to achieve long term growth of capital by
investment in equity and equity related securities through a research based investment approach.
Reliance Index Fund: (An Open Ended Index Linked Scheme.)
The Investment Objective under the Nifty Plan is to replicate the composition of the Nifty, with a
view to Endeavour to generate returns, which could approximately be the same as that of Nifty.
The Investment Objective under the Sensex plan is to replicate the composition of the Sensex,
with a view to Endeavour to generate returns, which could approximately be the same as that of
Sensex.
Reliance NRI Equity Fund: (An open-ended Diversified Equity Scheme.)
The Primary investment objective of the scheme is to generate optimal returns by investing in
equity or equity related instruments primarily drawn from the Companies in the BSE 200 Index.
DEBT SCHEMES:
Reliance Monthly Income Plan:
(An Open Ended Fund. Monthly Income is not assured & is subject to the availability of
distributable surplus ) The Primary investment objective of the Scheme is to generate regular
income in order to make regular dividend payments to unit holders and the secondary objective
is growth of capital. Primarily the investment shall be made in debt and money market securities
(i.e. 80%) with a small exposure (i.e. up to 20%) in equity.
Reliance Gilt Securities Fund - Short Term Gilt Plan & Long Term Gilt Plan:
(Open-ended Government Securities Scheme) the primary objective of the Scheme is to generate
optimal credit risk-free returns by investing in a portfolio of securities issued and guaranteed by
the central Government and State Government
Reliance Income Fund: (An Open-ended Income Scheme)
The primary objective of the scheme is to generate optimal returns consistent with moderate
levels of risk. This income may be complemented by capital appreciation of the portfolio.
Accordingly, investments shall predominantly be made in Debt & Money Instruments.

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Reliance Medium Term Fund: (An Open End Income Scheme with no assured returns.)
The primary investment objective of the Scheme is to generate regular income in order to make
regular dividend payments to unit holders and the secondary objective is growth of capital
Reliance Short Term Fund: (An Open End Income Scheme)
The primary investment objective of the scheme is to generate stable returns for investors with a
short investment horizon by investing in Fixed Income Securities of short term maturity.
Reliance Liquid Fund: (Open-ended Liquid Scheme).
The primary investment objective of the Scheme is to generate optimal returns consistent with
moderate levels of risk and high liquidity. Accordingly, investments shall predominantly be
made in Debt and Money Market Instruments.
Reliance Fixed Term Scheme: (Close-ended Income Scheme)
The primary objective of the Scheme is to seek to achieve regular returns / growth of capital by
investing in a portfolio of fixed income securities normally maturing in line with the time profile
of the plan with the objective of limiting interest rate volatility.
Reliance Floating Rate Fund: (An Open End Income Scheme)
The primary objective of the scheme is to generate regular income through investment in a
portfolio comprising substantially of Floating Rate Debt Securities (including floating rate
securitized debt and Money Market Instruments and Fixed Rate Debt Instruments swapped for
floating rate returns). The scheme shall also invest in fixed rate debt Securities (including fixed
rate securitized debt, Money Market Instruments and Floating Rate Debt Instruments swapped
for fixed returns.
Reliance NRI Income Fund: (An Open-ended Income scheme)
The primary investment objective of the Scheme is to generate optimal returns consistent with
moderate levels of risks. This income may be complimented by capital appreciation of the
portfolio. Accordingly, investments shall predominantly be made in debt Instruments.
Fixed Maturity Fund - Series I: Reliance(A Close Ended Income Scheme)
The primary investment objective of the Scheme is to seek to achieve regular returns / growth of
capital by investing in a portfolio of fixed income securities normally maturing in line with the
time profile of the Plan with the objective of limiting interest rate volatility.

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Reliance Fixed Maturity Fund - Series II: (A closed ended Income Scheme)
The primary investment objective of the Scheme is to seek to achieve growth of capital by
investing in a portfolio of fixed income securities normally maturing in line with the time profile
of the respective plans.
RELIANCE REGULAR SAVINGS FUND: (An Open - ended scheme)
The Investment Objectives:
Debt Option: The primary investment objective of this plan is to generate optimal returns
consistent with moderate level of risk. This income may be complemented by capital
appreciation of the portfolio. Accordingly investments shall predominantly be made in Debt &
Money Market Instruments.
Equity Option: The primary investment objective is to seek capital appreciation and or
consistent returns by actively investing in equity / equity related securities.
Hybrid Option: The primary investment objective is to generate consistent return by investing a
major portion in debt & money market securities and a small portion in equity & equity related
instruments.
Sector Specific Schemes
Sector Funds are specialty funds that invest in stocks falling into a certain sector of the economy.
Here the portfolio is dispersed or spread across the stocks in that particular sector. This type of
scheme is ideal for investors who have already made up their mind to confine risk and return to a
particular sector.
Reliance Banking Fund
Reliance Mutual Fund has an Open-Ended Banking Sector Scheme which has the primary
investment objective to generate continuous returns by actively investing in equity / equity
related or fixed income securities of banks.
Reliance Diversified Power Sector Fund
Reliance Diversified Power Sector Scheme is an Open-ended Power Sector Scheme. The
primary investment objective of the Scheme is to seek to generate consistent returns by actively
investing in equity / equity related or fixed income securities of Power and other associated
companies.

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Reliance Pharma Fund
Reliance Pharma Fund is an Open-ended Pharma Sector Scheme. The primary investment
objective of the Scheme is to generate consistent returns by investing in equity / equity related or
fixed income securities of Pharma and other associated companies.
Reliance Media & Entertainment Fund
Reliance Media & Entertainment Fund is an Open-ended Media & Entertainment sector scheme.
The primary investment objective of the Scheme is to generate consistent returns by investing in
equity / equity related or fixed income securities of media & entertainment and other associated
companies.

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CHAPTER 6
SWOT ANALYSIS OF
RELIANCE MUTUAL
FUND

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SWOT ANALYSIS OF RELIANCE MUTUAL FUND
STRENGTHS

Brand strategy: as opposed to some of its competitors (e.g. HSBC), Reliance ADAG
operates a multi-brand strategy. The company operates under numerous well-known brand
names, which allows the company to appeal to many different segments of the market.
Distribution channel strategy: Reliance is continuously improving the distribution of its
products. Its online and Internet-based access offers a combination of excellent growth
prospects and its retail direct business also saw growth of 27% in 2002 and 15% in 2003.
Various sources of income: Reliance has many sources of income throughout the group, and
this diversity within the group makes the company more flexible and resistant to economic
and environmental changes.
Large pool of installed capacities.
Experienced managers for large number of Generics.
Large pool of skilled and knowledgeable manpower.
Increasing liberalization of government policies.

WEAKNESS

Emerging markets: since there is more investment demand in the United States, Japan and
the rest of Asia, Reliance should concentrate on these markets, especially in view of low
global interest rates.
Mutual funds are like many other investments without a guaranteed return: there is always
the possibility that the value of your mutual fund will depreciate. Unlike fixed-income
products, such as bonds and Treasury bills, mutual funds experience price fluctuations along
with the stocks that make up the fund. When deciding on a particular fund to buy, you need to
research the risks involved just because a professional manager is looking after the fund,
that doesnt mean the performance will be stellar.
Fees: In mutual funds, the fees are classified into two categories: shareholder fees and annual
operating fees. The shareholder fees, in the forms of loads and redemption fees are paid
directly by shareholders purchasing or selling the funds. The annual fund operating fees are
charged as an annual percentage usually ranging from 1-3%. These fees are assessed to
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mutual fund investors regardless of the performance of the fund. As you can imagine, in years
when the fund doesnt make money, these fees only magnify losses.

OPPORTUNITIES
Potential markets: The Indian rural market has great potential. All the major market leaders
consider the segments and real markets for their products. A senior official in a one of the
leading company says foray into rural India already started and there has been realization that
the rural market is both price and quantity conscious.
Entry of MNCs: Due to multinationals are entering into market job opportunities are
increasing day by day. Also India Mutual Fund majors are tie up with other financial
institutions.
THREATS
Increased Competition: With intense competition by so many local players causing
headache to the current marketers. In addition to this though multinational brands are not yet
established but still they will soon hit the mark. Almost 60 to 70% of the revenue is spending
on the management and services.
Hedge funds: sometimes referred to as hot money , are also causing a threat for
mutual funds have gained worldwide notoriety for bringing the markets down. Be it a
crash in the currency, stock or bond market, usually a hedge fund prominently figures
somewhere in the picture.

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CHAPTER 7
AWARENESS THROUGH
DISTRIBUTION CHANNEL
OF RELIANCE MUTUAL
FUND

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AWARENESS OF RELIANCE MUTUAL FUND THROUGH
DISTRIBUTION CHANNEL
Reliance understands that investments in mutual funds are a function of knowledge
dissemination and awareness of products amongst potential investors. In building its own base of
assets under management, it will necessarily have to carry the entire mutual fund industry.
Towards this end, Reliance Mutual Fund has launched a two-pronged initiative. In the first
pincer it has created a formidable network of 33,000 distributors including the whos who of the
financial industry: Citibank, Standard Chartered, HSBC, ICICI, AXIS, Bank of Baroda, and
Central Bank of India, Allahabad Bank and fund houses such as JM, DSP Merrill Lynch and
Karvy in addition to a massive infrastructure of direct financial investment officers. This
prodigious effort is supplemented by the brands captive network of 156 branch offices and 70
financial centers. In the second prong, it has created a series of information-packed presentations
which help dispel misinformation and paint a realistic picture of the potential benefits of
investing in mutual funds. Reliance Mutual Fund goes to great lengths to explain that mutual
funds allow small investors to reap the benefit of a surging stock market and gain from the rise of
indices. The Reliance Mutual Fund credo is to discover, innovate and execute novel product
distribution channels. In order to reach the towns where the company has no offices, Reliance
Mutual Fund has trained and deployed 200 business foot-soldiers to rally and serve investors.
Employees work from home and report to the nearest branch office. This network, assisted with
modern technology, provides primed information, instant service and anytime access, investors
may want for their investments.
Mainly Reliance Mutual Fund has five levels of Distributors in order to tap the potential
customers.


IFA

PSU Banks
Private
Banking

Corporate
National
Distributions
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Independent Financial Advisors (IFAs)
IndependentFinancialAdvisers or IFAs are professionals whoofferindependent advice on financi
al matters to their clients and recommend suitable financial products from the whole of the
market. The term was developed to reflect a UK regulatory position and has a specific UK
meaning, although it has been adopted in other parts of the world, such as Hong Kong. Reliance
Mutual Fund believes in tying up with IFAs who share the same conviction for mutual funds.
They have held 1750 such programs in various parts of the country. They also held seminars,
which usually increase the penetration level for IFAs and also help investors to know more about
our products. Investor education is one of the major challenges for the mutual fund industry
because only 7 per cent of Indian households invest in mutual funds. So fund houses in India are
getting on to a bandwagon to spread awareness among the masses.
Reliance Mutual Fund has launched a Client Relationship Management (CRM) platform called
Business Easy for IFAs. Business Easy integrates all aspects of CRM which is built on four
pillars, each providing a host of features and in a simplified workflow. In this volatile and
dynamic market conditions, speed of communication is key, both from AMC to distributors and
distributors to investors. Moreover, the future clearly demands documented advice. The platform
provides the ability to service customers as well. Plus, a key feature is the capability to receive,
monitor and fulfill leads. This has been a collaborative effort. Multiple stakeholders, not least our
partners, have contributed towards making this a reality.
Given below are the features of this CRM:
View & manage Reliance Mutual Fund investor database with ease.
Maintain a "Diary" providing information about various activities schedule for your
existing customers & prospects
Engage on birthdays & anniversaries with your investors and enhance business
relationship.
Run various marketing initiatives with your branding for your existing and new investors
via Email and SMS mode thereby increasing your share with Reliance Mutual Fund.

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Service Support
Instant Service offering access to trigger of E-statement to you and your investors
registered email id. Also send information about account balance, last five transaction
and Net Asset Value (NAV) via SMS.
End-to-end service request management.
Knowledge
Critical insights like "Market for you", "News you can use", "What we are reading",
"Product notes" etc.
View market outlook from our fund managements desk.
Instant access to investor awareness related newsletters.
Access ongoing campaigns, addendums, application forms etc
MIS/Sales support
View asset-class-wise AUM & investor base along with instant access to "Business
Snapshot Report".
Manage your core business and service related data by getting instant access to various
reports.
Business opportunities with the uniquely designed "Lead Management Module".
Evaluate AUM trend, payment mode & details of monthly brokerage along with the
brokerage structure.
How to register?
Log on to the Business Easy URL www.rmfpartners.com
Sign up by filling up a simple registration form. Upon successful registration, an email
confirmation with a link will be sent to your registered email-id. Click on the link provided to
validate your registration request. On successful validation, you will receive an email from RMF
containing your Business Easy login details.
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RMF plans to add the following tools in the CRM platform soon:
1. On-line certification and training programs through our unique Edge Academy.
2. Integration with FinNet platform
3. Avail benefit of Forever Together- partner Recognition Program
4. Ability to generate and send pre filled-forms
5. Brokerage Statement
Reliance Mutual Fund announced the launch of its investor awareness program (IAP) for
students across India. The program is exclusively designed for students in colleges and
educational institutes. The initiative aims to educate youth about savings and investments.
The education system primarily focuses on developing students for getting employment,
working with good companies and earning. There is a big gap that does not educate students
about various investment avenues and promote financial advisory as a career option. IAP
initiative is aimed at bridging this gap. The fund house targets to reach out to over 25,000
students in the first phase through these IAPs. The program will be conducted across 200
colleges and educational institutes across metros, Tier-I and Tier-II in 10 states within the
next one year. They would be holding these programs in batches across various regions and
plan to reach out to over 25000 students in the first year across ten states itself. The intention
would be to give equal emphasis on the importance of investing, as is given to earning, and
educate them about the concepts of SIPs, benefits of starting investing early, savings and
investment options available for students and young professionals, and various avenues of
investment available today. RCAM will provide three-day training to aspiring students
choosing to become financial advisors. Qualifying students will be also be helped by the
company to appear and get the National Institute of Securities Markets (NISM-VA)
certification. The program will also provide deserving students an opportunity to undergo a
one-month internship with Reliance Mutual Fund. They are planning to support the student
by handholding them to get duly certified. Further, deserving students will also be provided
internship with RCAM that will give them real-time perspective of working on the ground
with the largest asset managers in the country. RCAM has conducted more than 10,000 IAPs
since 2010 covering 2 lakh individuals. Over 80% of these programs were conducted in B-15
cities, covering nearly 1.7 lakh individuals.
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Along with Reliance Mutual Fund, AMFI also had taken many steps in order to empower
Independent Financial Advisors. AMFI has announced the launch of its investor awareness
campaign called District Adoption Program (DAP). The initiative will involve voluntary
participation of AMCs. District Adoption Program (DAP) also aims to create employment for
nearly 2000 youths in Tier II and III cities by inducting new cadre of Independent Financial
Advisors (IFAs). This District adoption program will boost the financial literacy among the
investors. Investor awareness is one of the key strategic issues of the industry and it is important
to transform the perception of people about the mutual fund Industry.200 districts across the
country will be a part of this program. The allocation of the district will be basis on the MF
players strong presence in each district. The main objective is to expand the overall reach of the
industry in Tier II and III cities. This initiative is a voluntary exercise with a common vision for
all AMCs to enhance the retail participation in mutual fund. AMFI aims to conduct 5000
Investor Awareness Programs by the end of FY 2014. Also, the District Adoption Program
(DAP) aims to create employment for nearly 2000 youths in Tier II and III cities, by inducting
them as new cadre of Independent Financial Advisors (IFAs) in the mutual fund industry.
PSU Banks
Private and foreign banks today dominate the distribution of mutual funds. The entities catered to
are mostly HNI and Institutional investors. The retail investor up till now was also hesitant to
invest in mutual funds given the poor performance of earlier mutual fund products and scars of
previous market scams. The situation is, however, changing since the past couple of years. The
stock markets are booming, and unlike previous times, this boom has been driven by a
fundamentally strong economy. The decline in interest rates on savings deposits has left the
middle class clamoring for higher returns and given the savings rate in India, which is one of the
highest in the world, Mutual Funds are looking at a "customer-oriented" rather than "distributor-
oriented" strategy to grow its mutual fund business and to increase the Assets under management
(AUM). They hope to route a larger proportion of their mutual fund sales through Public Sector
Banks, who with their vast reach across India, provide a distribution channel that is just about to
explode. Fee Based income through hybrid product and service offerings has already emerged as
a profitable business model in the retail bank-scape, and mutual fund (MF) distribution has
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become a fashion statement among all banks. With the projected growth rate of 30 per cent in the
retail banking space, fee-based income is also expected to grow at a rapid pace.
MF distribution by banks is emerging a key element that is fuelling this growth. Alliances
between banks and mutual funds have become a daily occurrence. Alliances are arranged (bank
and MF belonging to the same group), between families (bank and MF are standalone entities),
and also multiple (one bank ties up with more than one MF). A new concept mutual banking
has emerged offering new product and service innovations for the customers who avail of
mutual fund products through banks. Reliance Mutual Fund had been in tie up with 15 public
Sector banks in order to sell its products like Saraswat Co-operative Bank Ltd, Union Bank of
India, Oriental Bank Of Commerce, Andhra Bank etc.
Opportunities and Challenges for PSU Bank Distribution Channel
Given the benefits that this channel provides both to Banks in terms of an enhanced fee based
income, deeper customer relationships, and to AMCs ready access to a large and loyal
customer base, the trajectory of the mutual fund distribution through the bank channel could only
be northwards. Some of the positives that will further the success of this initiative in India, is the
lack of professional financial planners, which have led Bank Branch Managers to act as the
informal investment advisors to their customers, especially in smaller towns and cities. The other
big positive is the brick and mortar model of banking followed in India, wherein most of the
banking transactions (more than 80%) are conducted inside a Bank branch, resulting in face-to-
face contact with the customer, which is very important in a mutual fund sale. AMCs Companies
are now expanding their reach through Co-operative Banks and Regional Rural Banks to reach
non-urban towns. With the booming rural economy and rising non-urban income across the
country, there is a growing need for mutual fund coverage in these areas. AMCs have just
touched the tip of the iceberg in terms of penetration. Mutual fund distribution through banks can
act as a catalyst for growth of mutual fund industry in the huge untapped non-metro markets on
two accounts. Firstly, setting up of their own distribution channels in rural areas for AMCs could
be very costly and secondly, bank staff-client relationships in smaller towns is very strong, which
can be leveraged. In the next 3-4 years this channel would contribute as much business for
AMCs as their other channels.
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While the opportunities are huge for this channel in India there are also some on-going
challenges, which need to be tackled. One of them is training and motivating the Bank staff to
facilitate/sell mutual funds and ensuring the same quality of service/advise on mutual fund
products in different parts of the Bank. The other challenges are setting up the processes and
integrating the IT systems in both, the AMC and banks, to deliver the same quality of services
for mutual funds sales that a customer is used to while buying a banking product.
National Distribution Channel
National Distributors include all the financial horses like Bluechip, Anand Rathi Securities etc,
which tap customers for Reliance Mutual Fund. These Financial corporations have already huge
customer base and good loyal customers. So they help in tapping the right potential customers.
Besides these, MFIs have encountered success in reaching out to customers at the bottom of the
pyramid. MFIs have focused on increased access to savings and credit in rural areas and have
demonstrated the feasibility of providing customized banking services to customers through self-
help groups (SHGs).
Corporate Channel
Reliance Mutual Fund has also in official tie up with Large Corporate like TCS, Infosys, ITC etc
in order to facilitate mutual fund sales. For example, sometimes large corporate have a huge
amount of running capital in their hand. So at that time they invest their capital in Reliance
Mutual Fund in order to get a handsome amount of return.
Private Banking
Like PSU Banks, Reliance Mutual Fund is in tie up with several Private sector banks like HSBC,
HDFC etc for mutual fund sales. These Private players have already a huge potential customer
base, which helps RMF to tap some good number of capable customers. Basically Reliance
Mutual Fund uses the distribution channel of private banks.

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CHAPTER 8
INITIATIVES TAKEN BY
RMF AND AMFI TO
CREATE AWARENESS
AMONG INVESTORS

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INITIATIVES TAKEN BY RELIANCE MUTUAL FUND AND AMFI TO
CREATE AWARENESS
Investor awareness continues to be the mantra for asset management companies to reach out to
investors across the length and breadth of the country. According to AMFI, Reliance Mutual
Fund has planned to conduct 220 investor awareness camps across India. Reliance MF is going
to hold the largest number of investor camps. Reliance MF will conduct awareness camps in as
many as 187 cities and towns across India, expecting to draw 5,610 numbers of participants.
They are planning to add 100 branches over the next three years in these locations. They are also
trying to deepen their relation with our existing distributors in these areas. For enhancing their
relationship, its learning partner - EDGE is trying to connect with these distributors in a
meaningful manner to re-energize them. They will be providing them technical, soft skill and
market based training. 35 percent of our AUM comes from these cities. They will be providing
CPFA training to these distributors. NISM will be providing CPE training. However, they are
also designing their own program along with a technical training on simplified products for this
set of distributors.
Reliance Mutual Fund too allows its investors to invest up to Rs 50,000, redeem, switch units,
view account details, transaction details, NAV and request for account statement. They can
access this service through m.reliancemf.com on their mobile phones. In order to opt for this
service, investors have to first register for online transactions facility on Reliance Mutual Fund
website. Only registered users having internet PIN can utilize this service. Reliance gets 4000 -
5000 SMS transactions in a month and around 30,000 investors have registered for this facility.
Along with Reliance Mutual Fund, AMFI has also taken many major steps to spread awareness.
AMFI is once again running its advertisement campaign Savings Ka Naya Tareeka to spread
awareness about the benefits of investing in mutual funds. AMFI had run the first campaign in
September 2011. It is a 360 degree campaign. There are also plans to do some on-ground events.
The response on these commercials has been positive. The first campaign went on air in
September 2011 with a budget of around Rs 10 crore. The campaign had received over 30,000
sms from people. AMFI had also sent mutual fund booklets to those people who had sent an
SMS <SAVING> to 56070. It had also set up a call center to answer peoples queries. Parallely,
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AMCs have been running ground level events to create a higher grass roots level awareness.
According to AMFI, 36 AMCs had conducted 11402 programs in 405 cities covering 318,991
participants in 2011-2012.
AMFI has started a multi-city radio campaign called Savings Ka Naya Tareeka in 20 Tier I &
II cities. The radio campaign urges individuals primarily in the age group of 25-44 to use the
mutual fund route for regular savings on a long term basis, said a press release issued by AMFI.
The radio commercials will be played at top FM stations in the metros, Tier I and Tier II cities.
The radio campaign seeks to increase retail participation in mutual funds. The radio investor
awareness program is part of the earlier campaign by AMFI, Savings Ka Naya Tareeka. The
radio campaign covers cities like Ludhiana, Nagpur, Bhubaneswar, Cochin, Patna, Guwahati,
Indore, Rajkot, Nashik, Coimbatore, Jamshedpur, Varanasi, Bhopal, Mangalore, Jalandhar,
Jodhpur, Dehradun, Agra, Raipur, Ranchi along with Mumbai and Delhi. Besides these
campaigns, the mutual fund industry has initiated a District Adoption Program launched
recently; in the first phase 178 cities have been adopted by 32 mutual fund companies. The
selection of districts was based on the savings potential seen in the districts. Speaking on this
initiative, Sundeep Sikka, Chairman AMFI and CEO, Reliance Mutual Fund said, Financial
awareness is the core aspect to ensure the upward trend in the economy. Although the mutual
fund industry has guaranteed a niche` place in the finance sector, there is still a long way to go
for the awareness to take shape among the working class. The radio investor education is a very
efficient way to reach out to the masses. V Ramesh, Deputy CEO, AMFI, said, Investor
awareness is a generation game and does not happen overnight. After a successful campaign on
TV, we are now looking to leverage the reach of radio to make the campaign more effective.
Jaideep Bhattacharya, Chairman, AMFI committee on Financial Literacy and MD, Baroda
Pioneer AMC said, The primary goal of the radio campaign is to spread awareness and reach
potential investors in underserved markets. In our country, where over 50% of domestic savings
go into fixed deposits, the mutual fund industry has a huge scope for growth. We are confident,
that through this campaign we will be able to alter how mutual fund is perceived in Tier I & II
cities and channelize savings through mutual fund route.
The revolution in mobile banking is well equipped to penetrate rural markets, and bring a larger
number of people under the umbrella of financial services. Mobile banking has the potential to
68 | P a g e

be a game changer for the financial services industry, because it can utilize already existing
infrastructure to reach out to the un-banked population in rural areas. Additionally, new
distribution channels can be explored for cash transactions beyond the POS and ATM networks
of banks. Some fund houses are also riding on the mobile wave and using this route to make the
operational procedure simpler and hassle free for investors. They can either opt for application
based or SMS based investing. SMS based investing is simpler and does not require the user to
have a smart phone or high internet connectivity, whereas application based services require a
smart phone with GPRS connectivity.
The Department of Posts has been involved in rural development for the last 150 years. With
over 139,000 post offices in rural areas, it provides support in various critical functions through
communication, financial services, life insurance products and other retail services. The small
savings scheme which is operated through post offices helps in mobilizing the savings of rural
people. The Department is also contributing to the efforts in financial inclusion by payment of
benefits under various social security pension schemes viz. Indira Gandhi National Old Age
Pension Scheme (IGNOAS), Indira Gandhi National Disability Pension Scheme (IGNDPS) and
Indira Gandhi Matritva Sahyog Yojana (IGMSY Scheme), a Conditional Cash Transfer (CCT)
Maternity Benefit Scheme. Such payments are being effected either through money orders or
post office saving bank account. The mutual fund industry can assess the strategies enumerated
above and adapt best practices to penetrate the rural markets better and increase reach.

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CHAPTER 9
ANALYSIS
&
INTERPRETATION

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RESEARCH METHODOLOGY

I decided to do the project in two parts. The first part of the project is comprised of the study of
Mutual Funds as a whole and the second part deals with the investors awareness regarding their
investment preferences about investment in Mutual Funds.

The first part of the project i.e. descriptive study is comprising an overall study of Mutual funds
as what it is , risk factor associated with it that is an overview of whole Mutual fund industry.

The second part of the project that is related to investors perception about investment in Mutual
funds available in market. Indian Stock market has undergone tremendous changes over the
years. Investment in Mutual Funds has become a major alternative among Investors. The project
has been carried out to understand investors perception about Mutual Funds in the context of
their trading preference and explore investors risk perception.

The first part of the project relating the study of Mutual funds is collected through secondary
data obtained from internet & books whereas the second part relating the Investors perception
about investment in Mutual Funds is covered using primary data.

SOURCE OF DATA COLLECTION

Primary data is the first hand information collected directly from the respondents. The tool used
here is questionnaire. Primary Data is collected through survey among existing clients along with
the other investors.

Secondary data is collected through internet, books. I had prepared a questionnaire for
collecting information about second part of the project.

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Question No .1
Age

Question No .2
Marital Status

In the research made in 155 samples,about 40 people are single and rest 115 people are married.
Below 30, 51, 33%
30-40, 73, 47%
Above 40, 31, 20%
Below 30
30-40
Above 40
40, 26%
115, 74%
single
married
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Question No .3
What is your monthly family income approximately?

Out of the 155 samples,10 people have monthly income of below 20,000,83 people have
monthly income between 20,000 to 40,000 and rest 62 people have monthly income above
40,000.
10
83
62
0
10
20
30
40
50
60
70
80
90
below 20,000 20,000-40,000 above 40,000
Series1
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Question No .4
What kind of investments you have made so far?

+
In all the samples only 2 people have insurance,1 has had mutual fund,3 people had fixed
deposites and rest 149 people had savings account.

0
20
40
60
80
100
120
140
160
insurance mutual fund fixed deposite savings account
2
1
3
149
Series1
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Question No .5
While investing your money, which factor will you prefer?

From the survey ,it is evident that most of the people that is about 79% of people concern about
high return.Next is about 15% of people care about low risk,then about 4% people care about
trust and lastly about 2% people take care of liquidity while investing their money.

trust, 6, 4%
low risk, 24, 15%
liquidity, 3, 2%
high return, 122, 79%
trust
low risk
liquidity
high return
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Question No .6
Do you have any idea about mutual funds ?

In the survey of around 155 samples 74% of people dont have any idea about mutual
funds,while around 26% have got ideas about mutual funds.

Yes, 41, 26%
No, 114, 74%
Yes
No
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Question No .7
Have you ever invested in mutual funds?

From the 155 people around 140 people that is around 90% have not invested and rest 15 people
that is around 10% have invested in mutual funds.

Yes, 15, 10%
No, 140, 90%
Yes
No
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Question No .8
Reasons of investing in mutual fund ?

For the reasons of investing in mutual fund,47% people have invested as they think mutual fund
concerns about proffesional fund management.About 27% investors think that risk is diversified
and rest think that returns are reasonable.

Risk diversified, 41,
27%
Returns are
reasonable, 41, 26%
Proffesional Fund
Management, 73,
47%
Risk diversified
Returns are reasonable
Proffesional Fund Management
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Question No .9
Purpose of taking mutual fund ?

People have taken mutual funds for different needs.As from the survey it is clear that about 78%
people have invested to cater emergency needs.10% for wealth creation,8% for accumulating
funds,3% for tax saving and the rest 1% for good retirement life.

wealth creation,
15, 10%
To accumulate
funds, 13, 8%
Tax Saving, 5, 3%
Good Retirement
Life, 1, 1%
Emergency Needs,
121, 78%
wealth creation
To accumulate funds
Tax Saving
Good Retirement Life
Emergency Needs
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Question No .10
Why people will opt for reliance mutual fund ?

From the survey conducted it has been concluded that about 67% of people will choose Reliance
Mutual Fund for its brand name,18% for good service,7% for past performance,6% for
availability and rest 2% for verities of funds.
Availability, 9, 6%
Brand Name, 104,
67%
Good Service, 28,
18%
Past
Performance, 11,
7%
Verities, 3, 2%
Availability
Brand Name
Good Service
Past Performance
Verities
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Question No .10
How do you prioritize the reason for investment?
Savings for future

In the prioritization of savings for future 54% of people have marked significant and rest 46% of
people have expressed it as moderately significant.
1, 0, 0%
2,
0,
0%
3, 71, 46%
4, 84, 54%
5, 0, 0%
1
2
3
4
5
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Question No .11
Tax Incentives

In the prioritization of tax incentives 59% of people have expressed it as significant and rest 41%
people have marked it as moderately significant.

1, 0, 0%
2, 0, 0%
3, 63, 41%
4, 92, 59%
5, 0, 0%
1
2
3
4
5
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Question No .12
Returns

In the prioritization of Tax incentives of mutual funds 54% of people have prioritized it as most
significant,23% have expressed it as significant and rest 23% have marked it as moderately
significant.
1, 0, 0% 2, 0, 0%
3, 36, 23%
4, 36, 23%
5, 83, 54%
1
2
3
4
5
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Question No .13
Future Outlook

In the prioritization of future outlook of mutual funds 74% of people have prioritized it as
significant and rest 26% have expressed it as moderately significant.

1, 0, 0%
2, 0, 0%
3, 41, 26%
4, 114, 74%
5, 0, 0%
1
2
3
4
5
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Question No .14
Brand Value

In the prioritization of the brand value of the mutual fund company 77% have marked it as
significant,22% have marked it as moderately significant and rest 1% have marked it as less
significant.

1, 0, 0%
2, 1, 1%
3, 35, 22%
4, 119, 77%
5, 0, 0%
1
2
3
4
5
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Question No .14
Risk Factor

In the prioritization of risk factor involved in mutual funds 1% have expressed it as most
significant,71% have marked it as significant,26% have expressed it as moderately significant
and rest 2% have marked it as less significant.
1, 0, 0%
2, 3, 2%
3, 40, 26%
4, 111, 71%
5, 1, 1%
1
2
3
4
5
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Question No .14
From which medium you got to know about mutual funds?

Here a large portion of people that is around 87% have got to know about mutual funds from
friends or relatives,4% from TV,4% from magazines,3% from print media,1% from Radio and
rest 1% from news paper.
TV, 6,
4%
Radio, 2, 1% Print Media, 4, 3%
News Paper, 1, 1%
Magazines, 7, 4%
Friends or Relatives,
135, 87%
TV
Radio
Print Media
News Paper
Magazines
Friends or Relatives
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CHAPTER 10
MEASURES THAT CAN BE
TAKEN TO INCREASE
AWARENESS OF MUTUAL
FUNDS

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MEASURES THAT CAN BE TAKEN TO INCREASE AWARENESS OF
MUTUAL FUNDS
India is one of the top five economies in the world in terms of market potential and is placed
above countries like France, Italy, Russia and the United Kingdom. India is also ranked as the
third biggest economy in Asia in terms of gross domestic product (GDP). All these make
investment in India a lucrative option for the world. The investment market in India offers many
possibilities for the investors as the level of purchasing power is improving over time. The
investors stand to gain in each and every areas of business in India Indias financial system is
considered to be sound and stable as compared to many other Asian countries where the financial
market is facing many crises. During last one decade or so, role of Indian mutual fund industry
as a significant financial service in financial market has really been noteworthy. In fact, mutual
funds have important segment of financial market of India, especially as a result of the initiatives
taken by Govt. of India for resolving problems relating to UTIs US-64 and liberalize tax
liabilities on the incomes earned by the mutual funds. They now play a very significant role in
channelizing the saving of millions of individuals into the investment in equity and debt
instruments. This paper aims at making a critical study of the mutual funds as a financial service
in Indian financial market.
To increase penetration of mutual fund products and to energize the distribution network while
protecting the interest of investors, SEBI held a series of meetings with various stakeholders in
the mutual fund industry. Mutual Fund Advisory Committee (MFAC) also offered its
recommendations on issues confronted by the industry. Pursuant to SEBI Boards approval to
various recommendations, it has been decided to implement the following:
Additional TER (total expense ratio) can be charged up to 30 basis points (bps) on daily net
assets of the scheme, if the new inflows from beyond top 15 cities are at least 30% of gross
new inflows in the scheme or 15% of the average assets under management (year to date) of
the scheme, whichever is higher.
AMCs (asset management companies) shall make complete disclosures in the half yearly
report of trustees to SEBI regarding the efforts undertaken by them to increase geographical
penetration of mutual funds and the details of opening of new branches, especially at
locations beyond top 15 cities.
89 | P a g e

AMCs may charge service tax on investment and advisory fees to the scheme in addition to
the maximum limit of TER. Service tax on other than investment and advisory fees, if any,
shall be borne by the scheme within the maximum limit of TER.
Service tax on exit load, if any, shall be paid out of the exit load proceeds. Service tax on
brokerage and transaction cost paid for asset purchases, if any, shall be within the limit
prescribed under regulation 52 of the Regulations.
AMCs shall launch schemes under a single plan and ensure that all new investors are subject
to single expense structure. Existing schemes with multiple plans based on the amount of
investment (i.e. retail, institutional, etc) shall accept fresh subscriptions only under one plan.
Other plans will continue till the existing investors remain invested in the plan.
AMCs shall provide a separate plan for direct investments, i.e., investments not routed
through a distributor, in existing as well as new schemes. Such separate plan shall have a
lower expense ratio excluding distribution expenses, commission, etc., and no commission
shall be paid from such plans. The plan shall also have a separate NAV.
Distributors of mutual fund units are required to obtain certification from the National
Institute of Securities Markets (NISM) and registration from AMFI. A new cadre of
distributors, such as postal agents, retired government and semi-government officials, with a
service of at least 10 years shall be allowed to sell units of simple and performing mutual
fund schemes.
Simple and performing mutual fund schemes shall comprise diversified equity schemes,
fixed maturity plans (FMPs) and index schemes and should have returns equal to or better
than their scheme benchmark returns during each of the last three years.
These new cadre of distributors would require a simplified form of NISM certification and
AMFI Registration. AMFI shall create a unique identity number of the sales person of the
distributor interacting with the investor for the sale of mutual fund products, in addition to
the AMFI Registration Number (ARN) of the distributor.
The application form for mutual fund schemes shall have provision for disclosing the unique
identity number of such sales personnel along with the ARN of the distributor.
AMCs shall annually set apart at least 2 bps on daily net assets within the maximum limit of
TER for investor education and awareness initiatives. Mutual Funds shall make complete
90 | P a g e

disclosures in the half yearly trustee report to SEBI regarding the investor education and
awareness initiatives undertaken.
AMCs shall disclose portfolio (along with ISIN) as on the last day of the month for all their
schemes on their websites on or before the 10th day of the succeeding month in a user-
friendly and downloadable format.
AMCs shall ensure that total exposure of debt schemes of mutual funds in a particular sector
(excluding investments in Bank CDs, CBLO, G-Secs, T-Bills and AAA rated securities
issued by Public Financial Institutions) shall not exceed 30% of the net assets of the scheme.
The minimum ticket size for Systematic Investment Plan (SIP) is now 1000.If It can again be
reduced to 500 then the penetration in the rural untapped market can be more and ultimately the
awareness will be more.

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CHAPTER 11

BIBLIOGRAPHY

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REFERENCES :

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