A Study On Reliance Equity Mutual Fund Scheme And Its Performance

1.1 Introduction:
Summer project is an integral part of the academic curriculum of BHADRA INSTITUTE OF
MANAGEMENT AND INFORMATION SCIENCE STUDIES, Davangere. It is an initiative to bridge the
gap between knowledge and its application through a series of interventions that will enable us to gain
insights and exposure to the industry.

Investors have different mind-set when they decide about investing in a particular avenue every
individual want that his saving must be invest in most secured and liquid avenue however, the decision
changes according to individual and his risk taking ability. The project is titled as A Study on Reliance
Equity Mutual Fund Schemes and its Performance with special reference to Reliance Capital asset
management.

The study was carried on to understand the preference pattern of the investor so as to understand
the perception of the investors towards their investments pattern considering the various factors such as
demographic factors, savings pattern, and opinion and so on. The whole of the research is based on the
response given by the Investors and their suggestions are also taken into consideration for further
improvement of the company.

1.2. LITERATURE REVIEW:

1. Trey nor (1965):

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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

Developed a methodology for evaluating mutual fund performance that is

popular referred to as reward to volatility ratio. Trey nor suggested a new predictor of mutual fund
performance, one that differs from virtually all those used previously by incorporating the volatility of a
funds return in a single yet meaningful manner. The Trey nor ratio is a measurement of the returns earned
in excess of that which could have been earned on a risk less investment (i.e. Treasury Bill) (per each unit
of market risk assumed).The Treynor ratio (sometimes called reward-to-volatility ratio) relates excess
return over the risk-free rate to the additional risk taken; however systematic risk instead of total risk is
used. The higher the Treynor ratio, the better the performance under analysis.Treynor ratio (T) does not
quantify the value added, if any, of active portfolio management. It is a ranking criterion only. A ranking of
portfolios of a border, fully diversified portfolio. If this is not the case, portfolios with identical systematic
risk, but different total risk, will be rated the same. But the portfolio with a higher risk is less diversified
and therefore has a higher unsystematic risk which is not priced in the market.
2. Jatana and Gupta (2003)
Found in their study that different investment avenues are available to investors by doing the
investment in mutual funds but they also carry certain risks. The investors should compare the risk and
expected yields after adjustment of tax in various instruments while taking investment decisions.
3. Mohanan (2006)
Found that Indian mutual fund industry was one of the fastest growing sectors in the Indian capital
and financial markets. The mutual fund industry in India has seen dramatic improvements in quantity as
well as quality of product and services offering in recent years.
4. Parihar, Sharma and Singh (2009)
Revealed that mutual funds are financial intermediaries concerned with mobilizing savings of those
who have surplus and the canalization of these savings in those avenues where there is a demand for funds.
5. Inderjit Kauri (2010)
The study aims at evaluating the performance of Indian equity mutual funds and further to do
attribution analysis of managerial performance on the parameters of diversification, timing and selectivity
for the period 2008-10. Based on the performance for 2008-10, top ten open ended growth funds have been
selected for the study. We have evaluated the performance of funds using Sharpe index, Treynor index and
Jensen alpha. The Treynor-Mazuy model is used to test the timing and Fame measure is used to test the
selectivity skills of mutual fund managers. The research findings show that on an average mutual funds
track their benchmark and an investor is benefitted by the less risky investment. The results have
implications for investors as mutual funds outperform the market and attribution analysis shows that
managerial acumen is present. The results are in contradiction with previous research in developed
markets.

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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

6. Dr. Singh Shiv Kumar (2012)

The Indian Mutual Funds Industry has witnessed a sea change since UTI was first established in
1964. From a single player the number of players has increased to 29 and the number of schemes has
spiraled to more than 600 with managed assets of about Rs.5L cores. Investors need to know how risky
individual schemes are and what would be its contribution to the total risk of a portfolio. Before investing
investors would want to know which funds gives more return, which fund is performing well, which fund is
more risky etc. The present study aims to answer these using certain key statistics. With the help of these key
statistics an investor can analyze different mutual funds and put his/her money in a fund which suits his/her risk
perception. A sample of 10 open ended balanced funds have been taken for the analysis. These selected funds
were compared using Arithmetic mean, Compounded Annual growth rate for returns for returns generated on
the investment. For the analysis of risk of these funds Standard deviation and Beta is used. For the performance
on Risk-Return Coefficient of variance has been used along with key ratios such as Sharpe ratio and Treynor
ratio. Also, the sample funds are compared with a benchmark and industry average to find out how well they
are performing with respect to the market. Based on the quantitative study conducted, the study shows that all
the funds except one have outperformed the benchmark in terms of compounded annualized growth rate.
7. Ms. Shweta Goel
Over the past few decades, mutual funds are playing a vital role in the economic development and
this industry has flourished worldwide. In the light of these developments, the objective of this review is to
identify the performance indicators of mutual funds and to analyse the impact of these performance
indicators on mutual funds performance. The study also draws attention to the contradictions in the
literature in the area of examining these performance indicators which have been identified as per the
available literature as performance persistence, turnover, expense ratio, asset size, load fee, investment
style, mutual fund managers and the ownership style of the mutual funds. This paper elaborates the impact
of these performance indicators. It has been found that each performance indicator affect the return of the
mutual fund independently. This paper also discusses contradictions and the gap present in the literature
regarding these performance indicators.
8. Afiruzzaman, S. M. (2015)
Mutual Fund is a Capital Market Investment Vehicle. In Bangladesh there are 48 Mutual Funds
under 17 Asset Management Companies. This paper focused on evaluating the performance of 48 growth
oriented mutual funds on the basis of weekly returns compared to market returns. Risk adjusted
performance measures suggested by Jenson, Treynor, Sharpe and statistical models are employed. It is
found that, most of the mutual funds have performed better according to Jenson and Treynor measures but
not up to the benchmark on the basis of Sharpe ratio. However, most of the mutual funds are diversified
and have reduced its unique risk. The growth oriented funds have performed better in terms of total risk

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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

and the funds are offering advantages of diversification and professionalism to the
investors. So, mutual funds perform better with their expertise.
9. Dr. S Narayan Rao (1998)
In this paper the performance evaluation of Indian mutual funds in a bear market is carried out
through relative performance index, risk-return analysis, Treynors ratio, Sharps ratio, Sharps measure,
Jensens measure, and Famas measure .The data used is monthly closing NAVs. The source of data is
website of Association of Mutual Funds in India (AMFI). Study period is September 98-April 02(bear
period). We started with a sample of 269 open ended schemes (out of total schemes of 433) for computing
relative performance index. Then after excluding the funds whose returns are less than risk-free returns, 58
schemes were used for further analysis

1.3. AIMS AND OBJECTIVES OF STUDY:

1. The study and analysis the performance of growth scheme of a selected mutual funds.

2. To compare the risk return of selected equity schemes of reliance mutual fund

3. To know which scheme of equity of reliance mutual fund is most preferred by the investors and factors

that they consider while investing in reliance mutual fund.

4. To understand the concept of Mutual Fund is working, mechanism and types traded in India.

5. To evaluate the performance Sharpes and Treynors index are used.

1.4. SCOPE OF THE STUDY:

Mutual Funds provide the much need fund requirements for the corporate sector. In the present day
scenario, most of the corporate have been reportedly tapping the mutual fund route as a reliable source of
finance. This decisive shift by the corporate towards the mutual route is due to the fact that there is a
minimum or reasonable but assured rate of return which would be sufficient in the case of mutual funds to
satisfy the investors.

1.5. RESEARCH DESIGN AND METHODOLOGY:

DESIGN OF STUDY:
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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

In this project I have considered five equity growth scheme (open ended) as
directed by organization for inter comparison.

RELIANCE VISION FUND

RELIANCE GROWTH FUND

RELIANCE MEDIUM TERM FUND

RELIANCE TAX SAVER FUND

RELIANCE SMALL CAP FUND

METODOLOGY:

The methodology which I have chosen for this topic is Descriptive research.

DATA COLLECTION:

The data will be collected through secondary research. It includes:

Fact Sheet.

NAV

Index Values

The above secondary data will be analyzed using various tools including

Arithmetic mean

BETA

Standard Deviation

For risk calculation and upcoming financial models

SAMPLE SIZE:

The sample is not required for this research.

Year:

From 2014-2016

1.6. STATEMENT OF THE PROBLEM:

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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

Tools used to calculate Risk & Return:

Standard Deviation:
The standard deviation of a random variable, statistical population, data set, or probability
distribution is the root of its variance. It is algebraically simpler, though in practice less robust, than the
average absolute deviation.[2][3] A useful property of the standard deviation is that, unlike the variance, it
is expressed in the same units as the data. There are also other measures of deviation from the norm,
including mean absolute deviation, which provide different mathematical properties from standard
deviation.

BETA: Beta
measures non diversifiable risk. Beta shows how the price of a security respond to market forces. In the
effect, the more responsive the price of a security is change in the market, the higher will be its beta. Beta
is calculated by relating the return on a security with the returns for the market. It can be positive or
negative.

= NXY- (X) (Y)

NX2 - (X) 2

Where,

X= (index value) 2-(index value) 1 x 100

(Index value) 1

Y= (NAV2- NAV1) X 100

NAV1

N= number of observation.

Beta =+1.0

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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

One percent in market Index return causes exactly one percent change in
security return. It indicates that the security moves in random with the market.

Beta = + 0.5

One percent change in the market Index return causes 0.5 percent change in the security return. The
security is less volatile compared to the market.

Beta = +2.0

One percent change in the market Index return causes 2 percent change in the security return. The
return is more volatile. When there is a declaim of 10% in the market return, the security with beta of 2
would give a negative return of 20%. The security with more than 1 beta value is considered to be risky.

Negative beta

Negative beta value indicates that the security return moves in the opposite direction to the market
return. A security with a negative beta of -1 would provide a return of 10%, if the market return declines by
10% and vice versa.

ACTUAL RETURN:

AR= (ending value beginning value)/ beginning value

PORTFOLIO RETURN (CAGR) :

The monetary return experienced by a holder of a portfolio return can be calculated on a daily or
long- terms basis to serve as a method of assessing a particular investment strategy. Dividend and capital
apportion are the main components of portfolio returns.

R= [(B end)/ (B start)] 1/y-1

Where,

Y is the elapsed time, in years.

SHARPES PERFORMANCE INDEX:

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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

The Sharpe Index measures the risk premium of the relative to the total
number of risk in the portfolio. The Sharpe, measure should only be used for portfolio but not for single
securities. The Sharpe ratio tells us whether the return of a portfolio are because of smart investment
decision or a result of excess risk. This risk premium is difference between the portfolio average rate of
return & the risk free rate of interest dividing the result by the standard deviation of the portfolio return.

Higher the Sharpe index better is the performance of the fund.

Where,

S= Sharpe Index

Rp =Return of portfolio

Rf = risk free rate of interest.

p = Standard deviation of return of portfolio.

Or

TREYNOR PERFORMANCE MEASURES:

Jack Trey nor found the formula for the Trey nor Ratio. It is the ratio that measures returns earned
in surplus of which could have been earned on a risk free speculation per each unit of market risk. The
excess return is the difference between a groups return and the risk-free rate of return of the same period
of time.

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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

This means that it is the ratio that helps us ascertain the risk-adjusted
measure based on methodical risk. Trey nor Ratio is similar to Sharpe Ratio, the only difference being that
Treynor Ratio uses beta to measure unpredictability.

Where:

Rp = average return of portfolio

Rf = risk-free rate, generally accepted as the yield on short-term U.S. Treasury bills in the
United States.

Bp = beta of the portfolio.

Or

JENSON PERFORMANCE INDEX:

It is mentioned as a measure of absolute performance because performance is measured against a

definite standard. This standard is based on the managers predictive ability. Successful prediction of a
security price enables a mangers to earn higher return than the ordinary investor expects to earn for a given
level of risk.

JENSON = RETURN PORTFOLIO-[RISK FREE RATE+BETA

PORTFOLIO*(MARKET RETURN ACTUAL RETURN)]

1.7. LIMITATIONS:
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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

No single work is an expectation to the limitation every work has got its
limitation the data collection here in this project is strictly confined to the secondary.

No primary data was associated with the project. Collecting historical NAV is very difficult.

Selection of the scheme for the study is also a very difficult task because of the wide variety of
schemes.

The results of the study are subjected to inconsistencies arising out of the assumptions made to
make the portfolios comparable viz., sample selection procedure, portfolio assumption etc.

1.8. CHAPTER SCHEME:

1. INTRODUCTION:

This chapter provides the theoretical background of the topic under study. This chapter provides a
brief introduction to the subject under the study including the work and types of Mutual Fund.

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A Study On Reliance Equity Mutual Fund Scheme And Its Performance

2. INDUSTRY PROFILE:

This chapter contains the information about mutual funds industry in India, different phases,
evolution and some concepts of mutual fund industry.

3. COMPANY PROFILE:

This chapter briefs about the different types of mutual funds that are offered under Reliance mutual
funds. It contains information about the management, vision, mission, quality policy of the company.

4. RESEARCH METHODOLOGY:

This chapter provides details such as the Purpose, Aim of the study, Statement of the problem,
Scope of the study, Objective of the study, Research tools of the study, Limitations of the study and an
overview of the chapter scheme.

5. ANALYSIS AND INTERPRETATION:

This chapter contains an analysis of the primary data in line with the objectives of the study. Tables
and graphs drawn from the data collected would support the analysis.

6. FINDINGS, SUGGESTIONS AND CONCLUSION:

This chapter provides a summary of findings, conclusions drawn from findings and also
suggestions would be made based on the analysis giving an overview of the research.

ANNEXURES:

Calculations

Bibliography

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