A

PROJECT REPORT
ON

“MUTUAL FUNDS “
REPORT SUBMITTED IN PARTIAL
FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD
OF

POST GRADUATION DIPLOMA IN FINANCIAL SERVICES

UNIVERSITY OF PUNE

Submitted by

VINAY KUMAR MISHRA

MATRIX BUSINESS SCHOOL
PUNE-411041
(2009-11)

ACKNOWLEDGEMENT

This project has been a product of encouragement and motivation from various

sources.I can’t in full measure, reciprocate the kindness shown in contribution made by

various people in Endeavour. I shall remember them with gratitude.

It has been a memorable experience for me to work on this project.I wish to express

my sincere thanks and gratitude to those who have directly or indirectly helped me on

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 this project. I am very thankful to respected Mrs. Komal Deshpande whose timely

and valuable guidance enabled me to reach this stage.

I take this opportunity to express my deep gratitude to our Director Dr. J.N POL for

providing excellent environment and infrastructure at Matrix Business School,Pune.

I acknowledge my parents and almighty who gave me constant support to pass the

process of project work.

I take immense pleasure in completing this project and submitting this final project

report.

CERTIFICATE

This is to certify that project work entitled ‘MUTUAL FUND ‘is a piece of work done by Mr.

VINAY KUMAR MISHRA a student of Matrix Business School, Pune for fulfillment of

PGDFS course of University of Pune ,Pune

He has successfully completed his Yearlong project. He has worked under our guidance and

direction .His work is to be found satisfactory in all respect.

We wish him good luck for his future endeavor.

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Director Project Guide

Dr.J.N Pol

Date Date

Place Place

DECLARATION

I hereby declare that this Project Report entitled “THE MUTUAL FUND” is submitted
in the partial fulfillment of the requirement of POST GRADUATION DIPLOMA IN
FINANCIAL SERVICES of MATRIX BUSINESS SCHOOL,PUNE is based on
primary & secondary data found by me in various departments, books, magazines and
websites & Collected by me in under guidance of Mrs. Komal Deshpande.

DATE: VINAY KUMAR MISHRA

PGDFS

3|Page
 CONTENTS

PAGE NO.

Chapter - 1 INTRODUCTION 9
Chapter - 2 OBJECTIVES OF SCOPE 41
Chapter - 3 COMPANY PROFILE 44
Chapter - 4 RESEARCH METHODOLOGY 64
Chapter - 5 FINDINGS AND CONCLUSIONS 69
Chapter - 6 LIMITATIONS 79
Chapter - 7 SUGGESTIONS & RECOMMENDATIONS 80
COPY OF QUESTIONAIRE 83
BIBLIOGRAPHY 86

EXECUTIVE SUMMARY

In few years Mutual Fund has emerged as a tool for ensuring one’s financial well

being. Mutual Funds have not only contributed to the India growth story but have also

helped families tap into the success of Indian Industry. As information and awareness

is rising more and more people are enjoying the benefits of investing in mutual funds.

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 The main reason the number of retail mutual fund investors remains small is that nine

in ten people with incomes in India do not know that mutual funds exist. But once

people are aware of mutual fund investment opportunities, the number who decide to

invest in mutual funds increases to as many as one in five people. The trick for

converting a person with no knowledge of mutual funds to a new Mutual Fund

customer is to understand which of the potential investors are more likely to buy

mutual funds and to use the right arguments in the sales process that customers will

accept as important and relevant to their decision.

This Project gave me a great learning experience and at the same time it gave me

enough scope to implement my analytical ability. The analysis and advice presented in

this Project Report is based on market research on the saving and investment practices

of the investors and preferences of the investors for investment in Mutual Funds. This

Report will help to know about the investors’ Preferences in Mutual Fund means Are

they prefer any particular Asset Management Company (AMC), Which type of Product

they prefer, Which Option (Growth or Dividend) they prefer or Which Investment

Strategy they follow (Systematic Investment Plan or One time Plan).

Chapter - 1
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 Introduction

MUTUAL FUNDS

ALL ABOUT MUTUAL FUNDS

 WHAT IS MUTUAL FUND

 HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

 TYPES OF FUNDS-BY INVESTMENT OBJECTIVE

 CATEGORIES OF MUTUAL FUNDS

 ADVANTAGES OF INVESTING MUTUAL FUNDS

 DISADVANTAGES OF INVESTING MUTUAL FUNDS

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  MAJOR PLAYERS OF MUTUAL FUNDS IN INDIA

 WORKING OF A MUTUAL FUND

 GUIDELINES OF THE SEBI FOR MUTUAL FUND

 COMPANIES DISTRIBUTION CHANNELS

 PERFORMANCE MEASURES

 CHOOSING FUNDS

INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS

ASPECTS

Mutual fund is a trust that pools the savings of a number of investors who share a

common financial goal. This pool of money is invested in accordance with a stated

objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all

investors. 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 the number of units owned by them. Thus a Mutual Fund is the most

suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost. A

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 Mutual Fund is an investment tool that allows small investors access to a well-

diversified portfolio of equities, bonds and other securities. Each shareholder

participates in the gain or loss of the fund. Units are issued and can be redeemed as

needed. The funds Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks

may not move in the same direction in the same proportion at the same time. Mutual

fund issues units to the investors in accordance with quantum of money invested by

them. Investors of mutual funds are known as unit holders.

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 When an investor subscribes for the units of a mutual fund, he becomes part owner of

the assets of the fund in the same proportion as his contribution amount put up with the

corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual

fund shareholder or a unit holder.

Any change in the value of the investments made into capital market instruments (such

as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme.

NAV is defined as the market value of the Mutual Fund scheme's assets net of its

liabilities. NAV of a scheme is calculated by dividing the market value of scheme's

assets by the total number of units issued to the investors.

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

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. Though the

growth was slow, but it accelerated from the year 1987 when non-UTI players entered

the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both

qualities wise as well as quantity wise. Before, the monopoly of the market had seen an

ending phase; the Assets Under Management (AUM) was Rs67 billion. The private

sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till

April 2004; it reached the height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutual

fund industry can be broadly put into four phases according to the development of the

sector. Each phase is briefly described as under.

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 First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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)

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.

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 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. As at the end of January 2003, there were 33

mutual funds with total assets of Rs. 1,21,805 crores.

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 second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. consolidation

and growth. As at the end of September, 2004, there were 29 funds, which manage

assets of Rs.153108 crores under 421 schemes.

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1. Equity fund:

These funds invest a maximum part of their corpus into equities holdings. The structure of the
fund may vary different for different schemes and the fund manager’s outlook on different stocks.
The Equity Funds are sub-classified depending upon their investment objective, as follows:

• Diversified Equity Funds

• Mid-Cap Funds
• Sector Specific Funds
• Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-
return matrix.

2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private companies,
banks and financial institutions are some of the major issuers of debt papers. By investing in debt
instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are
further classified as:

• Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated with
Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

• Income Funds: Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities.

• MIPs: Invests maximum of their total corpus in debt instruments while they take minimum
exposure in equities. It gets benefit of both equity and debt market. These scheme ranks
slightly high on the risk-return matrix when compared with other debt schemes.

• Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds
primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial
Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

• Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity
and preservation of capital. These schemes invest in short-term instruments like Treasury

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 Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash
management of corporate houses and are meant for an investment horizon of 1day to 3
months. These schemes rank low on risk-return matrix and are considered to be the safest
amongst all categories of mutual funds.

3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest in
both equities and fixed income securities, which are in line with pre-defined investment objective of
the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part
provides growth and the debt part provides stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives
of the fund. The investor can align his own investment needs with the funds objective and invest
accordingly.

BY INVESTMENT OBJECTIVE

• Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These schemes normally
invest a major part of their fund in equities and are willing to bear short-term decline in value
for possible future appreciation.

• Income Schemes: Income Schemes are also known as debt schemes. The aim of these
schemes is to provide regular and steady income to investors. These schemes generally invest
in fixed income securities such as bonds and corporate debentures. Capital appreciation in
such schemes may be limited.

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 • Balanced Schemes: Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn. These schemes
invest in both shares and fixed income securities, in the proportion indicated in their offer
documents (normally 50:50).

• Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation
of capital and moderate income. These schemes generally invest in safer, short-term
instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank
call money.

OTHER SCHEMES

• Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws
prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any
Equity Linked Savings Scheme (ELSS) are eligible for rebate.

• Index Schemes: Index schemes attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only
those stocks that constitute the index. The percentage of each stock to the total holding will be
identical to the stocks index weightage. And hence, the returns from such schemes would be
more or less equivalent to those of the Index.

• 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.

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 CATEGORIES OF MUTUAL FUND:

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Types of returns:

There are three ways, where the total returns provided by mutual funds can be enjoyed by investors:

• Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all
income it receives over the year to fund owners in the form of a distribution.
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 • If the fund sells securities that have increased in price, the fund has a capital gain. Most funds
also pass on these gains to investors in a distribution.

• If fund holdings increase in price but are not sold by the fund manager, the fund's shares
increase in price. You can then sell your mutual fund shares for a profit. Funds will also
usually give you a choice either to receive a check for distributions or to reinvest the earnings
and get more shares.

PRONS AND CONS OF INVESTING IN MUTUAL FUNDS

For investments in mutual fund, one must keep in mind about the Pros and cons of
investments in mutual fund.

Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they are professional managed,
by well qualified professional. Investors purchase funds because they do not have the time or the
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expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive
way to make and monitor their investments.

2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds,
the investors risk is spread out and minimized up to certain extent. The idea behind diversification is
to invest in a large number of assets so that a loss in any particular investment is minimized by gains
in others.

3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to
reducing transaction costs, and help to bring down the average cost of the unit for their investors.

4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their
holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available

instruments in the market, and the minimum investment is small. Most AMC also have automatic
purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.

Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds doesn’t perform in neither the market, as their
management is not dynamic enough to explore the available opportunity in the market, thus many
investors debate over whether or not the so-called professionals are any better than mutual fund or
investor himself, for picking up stocks.

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2. Costs – The biggest source of AMC income, is generally from the entry & exit load which they
charge from an investors, at the time of purchase. The mutual fund industries are thus charging extra
cost under layers of jargon.

3. Dilution - Because funds have small holdings across different companies, high returns from a few
investments often don't make much difference on the overall return. Dilution is also the result of a
successful fund getting too big. When money pours into funds that have had strong success, the
manager often has trouble finding a good investment for all the new money.

4. Taxes - when making decisions about your money, fund managers don't consider your personal tax
situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which
affects how profitable the individual is from the sale. It might have been more advantageous for the
individual to defer the capital gains liability.

Major Players of Mutual Funds In India

Period (Last&nbsp1 Week)

Rank Scheme Name Date NAV Last 1 Since

(Rs.) Week Inception
1 JM Core 11 Fund - Series 1 - Mar 26 8.45 5.12 -94.64
Growth , 2008
2 Tata Indo-Global Infrastructure Mar 26 8.26 5.05 -40.42
Fund - Growth , 2008
3 Tata Capital Builder Fund - Mar 26 12.44 5.03 15.35
Growth , 2008
4 Standard Chartered Enterprise Mar 26 14.07 5 20.92
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 Equity Fund - Growth , 2008
5 DBS Chola Infrastructure Fund - Mar 26 9.01 4.65 -17.17
Growth , 2008
6 ICICI Prudential Fusion Fund - Mar 26 10.2 4.62 23.69
Series III - Institutional - , 2008
Growth
7 DSP Merrill Lynch Micro Cap Mar 26 9.93 4.56 -0.85
Fund - Regular - Growth , 2008
8 ICICI Prudential Fusion Fund - Mar 26 10.19 4.51 22.39
Series III - Retail - Growth , 2008
9 DBS Chola Small Cap Fund - Mar 26 6.36 3.75 -81.78
Growth , 2008
10 Principal Personal Taxsaver Mar 25 124.66 3.44 29.97
, 2008
11 Benchmark Split Capital Fund - Mar 26 141.51 3.14 13.71
Plan A - Preferred Units , 2008
12 ICICI Prudential FMP - Series Mar 26 9.89 2.91 -7.88
33 - Plan A - Growth , 2008
13 Tata SIP Fund - Series I - Mar 26 10.25 2.38 2.39
Growth , 2008
14 Sahara R.E.A.L Fund - Growth Mar 25 7.64 1.86 -49.52
, 2008
15 Tata SIP Fund - Series II - Mar 26 9.93 1.58 -0.94
Growth , 2008

A mutual fund is a professionally-managed firm of collective investments that pools money from
many investors and invests it in stocks, bonds, short-term money market instruments, and/or other
securities.in other words we can say that A Mutual Fund is a trust registered with the Securities and
Exchange Board of India (SEBI), which pools up the money from individual / corporate investors and
invests the same on behalf of the investors /unit holders, in equity shares, Government securities,
Bonds, Call money markets etc., and distributes the profits.
The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly calculated
daily based on the total value of the fund divided by the number of shares currently issued and
outstanding. The value of all the securities in the portfolio in calculated daily. From this, all expenses
are deducted and the resultant value divided by the number of units in the fund is the fund’s NAV.

NAV = Total value of the fund……………….

No. of shares currently issued and outstanding

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Guidelines of the SEBI for Mutual Fund Companies :

To protect the interest of the investors, SEBI formulates policies and regulates the mutual
funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to
time.

SEBI approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. Custodian, registered with SEBI, holds the securities
of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company or board of
trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual
funds that the mutual funds function within the strict regulatory framework. Its objective is to
increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading
professional standards and in promoting best industry practices in diverse areas such as
valuation, disclosure, transparency etc.

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COMPANY DISTRIBUTION CHANNELS

Mutual funds posses a very strong distribution channel so that the ultimate customers doesn’t
face any difficulty in the final procurement. The various parties involved in distribution of
mutual funds are:

1. Direct marketing by the AMCs: the forms could be obtained from the AMCs directly. The
investors can approach to the AMCs for the forms. some of the top AMCs of India are;
Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, Sundaram, ICICI, Mirae
Assets, Canara Robeco, Lotus India, LIC, UTI etc. whereas foreign AMCs include: Standard
Chartered, Franklin Templeton, Fidelity, JP Morgan, HSBC, DSP Merill Lynch, etc.

2 .Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/sub-broker to
popularize their funds. AMCs can enjoy the advantage of large network of these brokers and
sub brokers.eg: SBI being the top financial intermediary of India has the greatest network. So
the AMCs dealing through SBI has access to most of the investors.

3. Individual agents, Banks, NBFC: investors can procure the funds through individual agents,
independent brokers, banks and several non- banking financial corporations too, whichever he
finds convenient for him.

Costs associated:

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Expenses:
AMCs charge an annual fee, or expense ratio that covers administrative expenses, salaries,
advertising expenses, brokerage fee, etc. A 1.5% expense ratio means the AMC charges
Rs1.50 for every Rs100 in assets under management. A fund's expense ratio is typically to the
size of the funds under management and not to the returns earned. Normally, the costs of
running a fund grow slower than the growth in the fund size - so, the more assets in the fund,
the lower should be its expense ratio

Loads:

Entry Load/Front-End Load (0-2.25%)- its the commission charged at the time of buying
the fund to cover the cost of selling, processing etc.

Exit Load/Back- End Load (0.25-2.25%)- it is the commission or charged paid when an
investor exits from a mutual fund, it is imposed to discourage withdrawals. It may reduce to
zero with increase in holding period.

Measuring and evaluating mutual funds performance:

Every investor investing in the mutual funds is driven by the motto of either wealth creation or
wealth increment or both. Therefore it’s very necessary to continuously evaluate the funds’
performance with the help of factsheets and newsletters, websites, newspapers and
professional advisors like SBI mutual fund services. If the investors ignore the evaluation of
funds’ performance then he can loose hold of it any time. In this ever-changing industry, he
can face any of the following problems:

1. Variation in the funds’ performance due to change in its management/ objective.

2. The funds’ performance can slip in comparison to similar funds.
3. There may be an increase in the various costs associated with the fund.
4 .Beta, a technical measure of the risk associated may also surge.
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5. The funds’ ratings may go down in the various lists published by independent rating
agencies.
6 .It can merge into another fund or could be acquired by another fund house.

Performance measures:

Equity funds: the performance of equity funds can be measured on the basis of: NAV
Growth, Total Return; Total Return with Reinvestment at NAV, Annualized Returns and
Distributions, Computing Total Return (Per Share Income and Expenses, Per Share Capital
Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Turnover Rate, Fund Size,
Transaction Costs, Cash Flow, Leverage.

Debt fund: likewise the performance of debt funds can be measured on the basis of: Peer
Group Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs,
besides NAV Growth, Total Return and Expense Ratio.

Liquid funds: the performance of the highly volatile liquid funds can be measured on the
basis of: Fund Yield, besides NAV Growth, Total Return and Expense Ratio.

Concept of benchmarking for performance evaluation:

Every fund sets its benchmark according to its investment objective. The funds performance is
measured in comparison with the benchmark. If the fund generates a greater return than the
benchmark then it is said that the fund has outperformed benchmark , if it is equal to

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benchmark then the correlation between them is exactly 1. And if in case the return is lower
than the benchmark then the fund is said to be underperformed.

Some of the benchmarks are :

1. Equity funds: market indices such as S&P CNX nifty, BSE100, BSE200, BSE-PSU, BSE
500 index, BSE bankex, and other sectoral indices.
2. Debt funds: Interest Rates on Alternative Investments as Benchmarks, I-Bex Total Return
Index, JPM T-Bill Index Post-Tax Returns on Bank Deposits versus Debt Funds.
3. Liquid funds: Short Term Government Instruments’ Interest Rates as Benchmarks, JPM T-
Bill Index

To measure the fund’s performance, the comparisons are usually done with:
I)with a market index.
ii) Funds from the same peer group.
iii) Other similar products in which investors invest their funds.

Financial planning for investors( ref. to mutual funds):

Investors are required to go for financial planning before making investments in any mutual
fund. The objective of financial planning is to ensure that the right amount of money is
available at the right time to the investor to be able to meet his financial goals. It is more than
mere tax planning.
Steps in financial planning are:

Asset allocation.
Selection of fund.
Studying the features of a scheme.

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In case of mutual funds, financial planning is concerned only with broad asset allocation,
leaving the actual allocation of securities and their management to fund managers. A fund
manager has to closely follow the objectives stated in the offer document, because financial
plans of users are chosen using these objectives.

Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then we can find the
market flooded with a variety of investment options which includes mutual funds, equities,
fixed income bonds, corporate debentures, company fixed deposits, bank deposits, PPF, life
insurance, gold, real estate etc. all these investment options could be judged on the basis of
various parameters such as- return, safety convenience, volatility and liquidity. measuring
these investment options on the basis of the mentioned parameters, we get this in a tabular
form

Return Safety Volatility Liquidity Convenienc

e
Equity High Low High High Moderate

Bonds Moderate High Moderate Moderate High

Co. Moderate Moderate Moderate Low Low

Debentures
Co. FDs Moderate Low Low Low Moderate

Bank Low High Low High High

Deposits
PPF Moderate High Low Moderate High

Life Low High Low Low Moderate

Insurance
Gold Moderate High Moderate Moderate Gold
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 Real Estate High Moderate High Low Low

Mutual High High Moderate High High

Funds

We can very well see that mutual funds outperform every other investment option. On three
parameters it scores high whereas it’s moderate at one. comparing it with the other options, we
find that equities gives us high returns with high liquidity but its volatility too is high with low
safety which doesn’t makes it favourite among persons who have low risk- appetite. Even the
convenience involved with investing in equities is just moderate.

Now looking at bank deposits, it scores better than equities at all

fronts but lags badly in the parameter of utmost important ie; it scores low on return , so it’s
not an happening option for person who can afford to take risks for higher return. The other
option offering high return is real estate but that even comes with high volatility and moderate
safety level, even the liquidity and convenience involved are too low. Gold have always been a
favourite among Indians but when we look at it as an investment option then it definitely
doesn’t gives a very bright picture. Although it ensures high safety but the returns generated
and liquidity are moderate. Similarly the other investment options are not at par with mutual
funds and serve the needs of only a specific customer group. Straightforward, we can say that
mutual fund emerges as a clear winner among all the options available.
The reasons for this being:

I)Mutual funds combine the advantage of each of the investment products: mutual fund is
one such option which can invest in all other investment options. Its principle of diversification
allows the investors to taste all the fruits in one plate. just by investing in it, the investor can
enjoy the best investment option as per the investment objective.

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II)dispense the shortcomings of the other options: every other investment option has more
or les some shortcomings. Such as if some are good at return then they are not safe, if some are
safe then either they have low liquidity or low safety or both….likewise, there exists no single
option which can fit to the need of everybody. But mutual funds have definitely sorted out this
problem. Now everybody can choose their fund according to their investment objectives.

III) Returns get adjusted for the market movements: as the mutual funds are managed by
experts so they are ready to switch to the profitable option along with the market movement.
Suppose they predict that market is going to fall then they can sell some of their shares and
book profit and can reinvest the amount again in money market instruments.

IV) Flexibility of invested amount: Other then the above mentioned reasons, there exists one
more reason which has established mutual funds as one of the largest financial intermediary
and that is the flexibility that mutual funds offer regarding the investment amount. One can
start investing in mutual funds with amount as low as Rs. 500 through SIPs and even Rs. 100
in some cases.

HOW TO CHOOSE BETWEEN FUNDS ?

When the market is flooded with mutual funds, it’s a very tough job for the investors to choose
the best fund for them. Whenever an investor thinks of investing in mutual funds, he must look
at the investment objective of the fund. Then the investors sort out the funds whose investment
objective matches with that of the investor’s. Now the tough task for investors start, they may
carry on the further process themselves or can go for advisors like SBI . Of course the
investors can save their money by going the direct route i.e. through the AMCs directly but it
will only save 1-2.25% (entry load) but could cost the investors in terms of returns if the
investor is not an expert. So it is always advisable to go for MF advisors. The mf advisors’
thoughts go beyond just investment objectives and rate of return. Some of the basic tools
which an investor may ignore but an mf advisor will always look for are as follow:

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1. Rupee cost averaging:

The investors going for Systematic Investment Plans(SIP) and Systematic Transfer Plans(STP)
may enjoy the benefits of RCA (Rupee Cost Averaging). Rupee cost averaging allows an
investor to bring down the average cost of buying a scheme by making a fixed investment
periodically, like Rs 5,000 a month and nowadays even as low as Rs. 500 or Rs. 100. In this
case, the investor is always at a profit, even if the market falls. In case if the NAV of fund falls,
the investors can get more number of units and vice-versa. This results in the average cost per
unit for the investor being lower than the average price per unit over time.
The investor needs to decide on the investment amount and the frequency. More frequent the
investment interval, greater the chances of benefiting from lower prices. Investors can also
benefit by increasing the SIP amount during market downturns, which will result in reducing
the average cost and enhancing returns. Whereas STP allows investors who have lump sums to
park the funds in a low-risk fund like liquid funds and make periodic transfers to another fund
to take advantage of rupee cost averaging.

2. Rebalancing:

Rebalancing involves booking profit in the fund class that has gone up and investing in the
asset class that is down. Trigger and switching are tools that can be used to rebalance a
portfolio. Trigger facilities allow automatic redemption or switch if a specified event occurs.
The trigger could be the value of the investment, the net asset value of the scheme, level of
capital appreciation, level of the market indices or even a date. The funds redeemed can be
switched to other specified schemes within the same fund house. Some fund houses allow such
switches without charging an entry load.
To use the trigger and switch facility, the investor needs to specify the event, the amount or the
number of units to be redeemed and the scheme into which the switch has to be made. This
ensures that the investor books some profits and maintains the asset allocation in the portfolio.

3. Diversification:

Diversification involves investing the amount into different options. In case of mutual funds,

32 | P a g e
the investor may enjoy it afterwards also through dividend transfer option. Under this, the
dividend is reinvested not into the same scheme but into another scheme of the investor's
choice.
For example, the dividends from debt funds may be transferred to equity schemes. This gives
the investor a small exposure to a new asset class without risk to the principal amount. Such
transfers may be done with or without entry loads, depending on the MF's policy.

4. Tax efficiency:

Tax factor acts as the “x-factor” for mutual funds. Tax efficiency affects the final decision of
any investor before investing. The investors gain through either dividends or capital
appreciation but if they haven’t considered the tax factor then they may end loosing.
Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and
education cess) on dividends paid out. Investors who need a regular stream of income have to
choose between the dividend option and a systematic withdrawal plan that allows them to
redeem units periodically. SWP implies capital gains for the investor.
If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax bracket.
Investors in higher tax brackets will end up paying a higher rate as short-term capital gains and
should choose the dividend option.

If the capital gain is long-term (where the investment has been held for more than one year),
the growth option is more tax efficient for all investors. This is because investors can redeem
units using the SWP where they will have to pay 10 per cent as long-term capital gains tax
against the 12.50 per cent DDT paid by the MF on dividends.
All the tools discussed over here are used by all the advisors and have helped investors in
reducing risk, simplicity and affordability. Even then an investor needs to examine costs, tax
implications and minimum applicable investment amounts before committing to a service.

What are the most lucrative sectors for mutual fund managers?

This is a question of utmost interest for all the investors even for those who don’t invest in
mutual funds. Because the investments done by the MFs acts as trendsetters. The investments

33 | P a g e
made by the fund managers are used for prediction. Huge investments assure liquidity and
reflects appositive picture whereas tight investment policy reflects crunch and investors may
look forward for a gloomy picture.
Their investments show that which sector is hot? And will set the market trends. The expert
management of the funds will always look for profitable and high paying sectors. So we can
have a look at most lucrative sectors to know about the recent trends:

Sector name No. of MFs betting on it

automotive 255
banking & financial 196
services
cement & construction 237
consumer durables 51
conglomerates 218
chemicals 259
consumer non durables 146
engineering & capital 317
goods
food & beverages 175
information technology 284
media & entertainment 218
Manufacturing 259
metals& mining 275
Miscellaneous 250
oil & gas 290
Pharmaceuticals 250
Services 200
Telecom 264
Tobacco 150
Utility 225

From the above data collected we can say that engineering & capital goods sector has emerged
as the hottest as most of the funds are betting on it. We can say that this sector is on boom and
presents a bright picture. Other than it other sectors on height are oil & gas, telecom, metals &
mining and information technology. Sectors performing average are automotive, cement &
construction, chemicals, media & entertainment, manufacturing, miscellaneous,
pharmaceuticals and utility. The sectors which are not so favourite are banking & financial
services, conglomerates, consumer non- durables, food & beverages, services and tobacco.

34 | P a g e
And the sector which failed to attract the fund managers is consumer durables with just 51
funds betting on it.

Thus this analysis not only gives a picture of the mindset of fund managers rather it also
reflects the liquidity existing in each of the sectors. It is not only useful for investors of mutual
funds rather the investors of equity and debt too could take a hint from it. Asset allocation by
fund managers are based on several researches carried on so, it is always advisable for other
investors too take a look on it. It can be further presented in the form of a graph as follow :

RISK V/S. RETURN

35 | P a g e
 Chapter - 3
36 | P a g e
 Objectives and scope

OBJECTIVES OF THE STUDY

• To make a comparative analysis between investment through Equity and Mutual fund routes.

• Analyzing rationale behind choosing some Mutual funds and their attractiveness to individual
investors.

37 | P a g e
 Scope of the study

A big boom has been witnessed in Mutual Fund Industry in recent times. A large

number of new players have entered the market and trying to gain market share in this

rapidly improving market.

The study will help to know the preferences of the customers, which company,

portfolio, mode of investment, option for getting return and so on they prefer. This

project report may help the company to make further planning and strategy.

38 | P a g e
 Chapter – 3
Company Profile

INTRODUCTION TO RELIANCE MUTUAL FUND

39 | P a g e
Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average Assets
Under Management (AAUM) of Rs. 1,19,981 Crores and an investor base of over 71.60 Lacs.
(AAUM and investor count as of December(2009)AAUM .

Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the
fastest growing mutual funds in the country. RMF offers investors a well-rounded portfolio of
products to meet varying investor requirements and has presence in 159 cities across the
country. Reliance Mutual Fund constantly endeavors to launch innovative products and
customer service initiatives to increase value to investors. "Reliance Mutual Fund schemes are
managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital
Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being
held by minority shareholders."

Reliance Capital Ltd. is one of India’s 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.

Sponsor:,Reliance,Capital,Limited
Trustee:,Reliance,Capital,Trustee,Co.,Limited
Investment,Manager:,Reliance,Capital,Asset,Management,Limited
Statutory Details: The Sponsor, the Trustee and the Investment Manager are incorporated
under the Companies Act 1956.

Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882 with

Reliance Capital Limited (RCL), as the Settlor/Sponsor and Reliance Capital Trustee Co. Limited

(RCTCL), as the Trustee.

40 | P a g e
RMF has been registered with the Securities & Exchange Board of India (SEBI) vide registration

number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual Fund has been

changed to Reliance Mutual Fund effective 11th. March 2004 vide SEBI's letter no.

IMD/PSP/4958/2004 date 11th. March 2004. Reliance Mutual Fund was formed to launch various

schemes under which units are issued to the Public with a view to contribute to the capital market and

to provide investors the opportunities to make investments in diversified securities.

The main objectives of the Trust are :

1. To carry on the activity of a Mutual Fund as may be permitted at law and formulate and
devise various collective.

2. Schemes of savings and investments for people in India and abroad and also ensure liquidity
of investments for the Unit holders;

3. To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on their
savings and

4. To take such steps as may be necessary from time to time to realize the effects without any
limitation.

SCHEMES OF RMF

Equity/Growth Schemes

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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.

Debt/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.

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

42 | P a g e
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.

Exchange Traded Funds (ETFs)

Exchange Traded Funds (ETFs) are usually passively managed mutual fund schemes tracking a

benchmark index and reflect the performance of that index. These schemes are listed on the stock

exchange and therefore have the flexibility of trading like a share on the stock exchange. It can

also be looked as a security that tracks an index, a commodity or a basket of assets like an index

fund, but trades like a stock on an exchange, thus experiencing price changes throughout the day

as it is bought and sold.

Fixed Maturity Plans (FMPs)

Fixed Maturity Plans (FMPs) are basically debt oriented investment schemes with a pre-specified

tenure offered by mutual funds. FMPs invest in a portfolio of debt instruments whose maturity

coincides with the maturity of the concerned FMP. The primary objective of a FMP is to

generate income while aiming to protect the capital by investing in a portfolio of debt and money

market securities. Since FMPs are available with several maturity options, one can invest in the

relevant plan depending upon his investment horizon and the requirement of cash flows.

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 PRODUCTS OF RELIANCE MUTUAL FUND

Equity schemes

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 investing in equity and

equity related securities through a research based investment approach.

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 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

44 | P a g e
securities & equity related securities and the secondary objective is to generate consistent

returns by investing in debt and money market securities.

Reliance Quant Plus Fund (An Open-ended Equity Scheme): The investment objective of

the Scheme is to generate capital appreciation through investment in equity and equity related

instruments. The Scheme will seek to generate capital appreciation by investing in an active

portfolio of stocks selected from S & P CNX Nifty on the basis of a mathematical model.

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 and

equity related instruments primarily drawn from the Companies in the BSE 200 Index.

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 Regular Savings Fund (An open ended Scheme) Equity Option: The primary

investment objective of this Option is to seek capital appreciation and/or to generate consistent

returns by actively investing in equity / equity related securities. Balanced Option: The primary

investment objective of this Option is to generate consistent return and appreciation of capital

by investing in mix of securities comprising of Equity, Equity related Instruments & Fixed

income instruments.

Reliance Equity Fund (An open-ended Diversified Equity Scheme): The primary investment

45 | P a g e
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 Equity Advantage 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 predominately of equity &

equity related instruments with investments generally in S & P CNX Nifty stocks and the

secondary objective is to generate consistent returns by investing in debt and money market

securities.

Reliance Long Term Equity Fund(An open ended Diversified Equity Scheme): The

primary investment objective of the scheme is to seek to generate long term capital appreciation

& provide long-term growth opportunities by investing in a portfolio constituted of equity &

equity related securities and Derivatives and the secondary objective is to generate consistent

returns by investing in debt and money market securities.

Reliance Equity Linked Saving Fund – Series I (A 10 year close-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 equities along with income tax

benefit.

46 | P a g e
Reliance Natural Resources Fund (An Open Ended Equity Scheme): The primary

investment objective of the scheme is to seek to generate capital appreciation & provide long-

term growth opportunities by investing in companies principally engaged in the discovery,

development, production, or distribution of natural resources and the secondary objective is to

generate consistent returns by investing in debt and money market securities.

Reliance Infrastructure Fund (An open ended Equity Scheme): The primary investment

objective of the scheme is to generate long term capital appreciation by investing predominantly

in equity and equity related instruments of companies engaged in infrastructure and

infrastructure related sectors and which are incorporated or have their area of primary activity,

in India and the secondary objective is to generate consistent returns by investing in debt and

money market securities.

Debt schemes

Reliance Income Fund (An Open-ended Income Scheme): The primary investment objective of the

scheme 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.

Reliance Liquid Fund (An 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 Medium Term Fund (An Open-ended Income Scheme with no assured returns): The

47 | P a g e
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-ended Income Scheme): The primary investment objective

of the scheme is to generate stable returns for investors with a short term investment horizon by

investing in fixed income securities of a short term maturity.

Reliance Gilt Securities Fund (An Open-ended Govt. Securities Scheme): The primary

investment 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 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 unitholders and

the secondary objective is growth of capital.

Reliance Floating Rate Fund (An Open-ended Liquid Scheme): The primary investment objective

of the scheme is to generate regular income through investment in a portfolio comprising

substantially of Floating Rate Debt Securities (including floating rate securitised debt, 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 securitised debt, Money Market

Instruments and Fixed 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 risk. This income may

48 | P a g e
be complemented by capital appreciation of the portfolio. Accordingly, investments shall

predominantly be made in Debt Instruments.

Reliance Money Manager Fund (Open ended income scheme): The investment objective of the

Scheme is to generate optimal returns consistent with moderate levels of risk and liquidity by

investing in debt securities and money market securities.

Reliance Liquidity Fund (An Open-ended liquid scheme): The 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 Regular Savings Fund (An open ended Scheme) Debt Option: The primary investment

objective of this Option 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. Balanced Option: The primary

investment objective of this Option is to generate consistent return and appreciation of capital by

investing in mix of securities comprising of Equity, Equity related Instruments & Fixed income

instruments.

49 | P a g e
SECTOR SPECIFIC SCHEMES

Reliance Pharma Fund (An Open-ended Pharma Sector Scheme): The primary investment

objective of the scheme is to seek to generate consistent returns by investing in equity and

equity related securities

Or fixed income securities of Pharma and other associated companies.

Reliance Diversified Power Sector Fund (An Open-ended Power Sector Scheme): The

primary investment objective of the scheme is to seek to generate continuous returns by actively

investing in equity and equity related or fixed income securities of Power and other associated

companies.

Reliance Media & Entertainment Fund (An Open-ended Media & Entertainment Sector

Scheme): The primary investment objective of the scheme is to generate continuous returns by

investing in equity and equity related or fixed income securities of Media & Entertainment and

other associated companies.

Reliance Banking Fund (An Open-ended Banking Sector Scheme): The primary investment

objective of the scheme is to generate continuous returns by actively investing in equity and

equity related or fixed income securities of Banks.

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Interval Fund / Fixed Maturity Plan

Reliance Interval Fund (A Debt Oriented Interval Scheme): The investment objective of the

scheme is to seek to generate regular returns and growth of capital by investing in a diversified

portfolio of Central and State Government securities and other fixed income/ debt securities normally

maturing in line with the time profile of the plan with the objective of limiting interest rate volatility.

Reliance Fixed Horizon Fund Plan C (A close-ended scheme): The primary investment objective

of the scheme is to seek to generate regular returns and growth of capital by investing in a diversified

portfolio of Central and State Government securities and other fixed income/ debt securities normally

maturing in line with the time profile of the scheme with the objective of limiting interest rate

volatility.

Reliance Fixed Horizon Fund - IV (A close–ended income scheme): The primary investment

objective of the scheme is to seek to generate regular returns and growth of capital by investing in a

diversified portfolio of Central and State Government securities and other fixed income/ debt

securities normally maturing in line with the time profile of the scheme with the objective of limiting

interest rate volatility.

Reliance Fixed Horizon Fund - V (A closed-ended income scheme): The primary investment

objective of the scheme is to seek to generate regular returns and growth of capital by investing in a

diversified portfolio of Central and State Government securities and other fixed income/ debt

51 | P a g e
securities normally maturing in line with the time profile of the plan with the objective of limiting

interest rate volatility.

Reliance Fixed Horizon Fund - VII (A closed-ended income scheme): The primary investment

objective of the scheme is to seek to generate regular returns and growth of capital by investing in a

diversified portfolio of Central and State Government securities and other fixed income/ debt

securities normally maturing in line with the time profile of the plan with the objective of limiting

interest rate volatility.

Reliance Fixed Horizon Fund - VIII (A closed-ended income scheme): The primary investment

objective of the scheme is to seek to generate regular returns and growth of capital by investing in a

diversified portfolio of Central and State Government securities and other fixed income/ debt

securities normally maturing in line with the time profile of the plan with the objective of limiting

interest rate volatility.

Reliance Fixed Horizon Fund - IX (A closed-ended income scheme): The primary investment

objective of the scheme is to seek to generate regular returns and growth of capital by investing in a

diversified portfolio of Central and State Government securities and other fixed income/ debt

securities normally maturing in line with the time profile of the plan with the objective of limiting

interest rate volatility.

Reliance Fixed Horizon Fund – X (A closed-ended income scheme): The primary investment

objective of the scheme is to seek to generate regular returns and growth of capital by investing in a

diversified portfolio of Central and State Government securities and other fixed income/ debt

52 | P a g e
securities normally maturing in line with the time profile of the plan with the objective of limiting

interest rate volatility.

Reliance Fixed Horizon Fund – XII (A closed-ended income scheme): The primary investment

objective of the scheme is to seek to generate regular returns and growth of capital by investing in a

diversified portfolio of Central and State Government securities and other fixed income/ debt

securities normally maturing in line with the time profile of the plan with the objective of limiting

interest rate volatility.

Reliance Fixed Horizon Fund – XIII (A closed-ended income scheme): The primary investment

objective of the scheme is to seek to generate regular returns and growth of capital by investing in a

diversified portfolio of Central and State Government securities and other fixed income/ debt

securities normally maturing in line with the time profile of the plan with the objective of limiting

interest rate volatility

Exchange Traded Fund

Reliance Banking Exchange Traded Fund (An Open-ended, exchange listed, index linked

Scheme {tracking CNX Bank Index} )::The investment objective of Reliance Banking

Exchange Traded Fund (RBETF) is to provide returns that, before expenses, closely correspond

to the total returns of the securities as represented by the CNX Bank Index. However, the

performance of Scheme may differ from that of the underlying index due to tracking error.

Reliance Gold Exchange Traded Fund (An open ended Gold Exchange Traded Fund that

tracks the domestic prices of gold through investments in physical gold.) : The investment

objective is to seek to provide returns that closely correspond to returns provided by price of gold

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through investment in physical Gold (and Gold related securities as permitted by Regulators

from time to time). However, the performance of the scheme may differ from that of the

domestic prices of Gold due to expenses and or other related factors.

Awards and Achievements

• Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average

Assets Under Management (AAUM) of Rs. 1,19,981 Crores (AAUM as of December

54 | P a g e
 2009) and an investor base of over 71.60 Lacs.

• Rapid growth in Assets Under Management (AUM), 87.7% growth in AUM year on

year. AUM of over Rs.46,306 crore ($10.62 billion) as on March 30, 2007 from Rs.

24,669 crore ($5.53 billion) as on March 31, 2006.

• Accelerated growth in investor base – 66.89% growth in investor base year on year. Over

3.38 million investors as on March 31, 2007 from over 2.02 million investors as on

March 31, 2006.

• Reliance Mutual Fund has over 10 years of extensive market experience, over 26

schemes combined with a strong performance track record.

• Reliance Equity Fund NFO (6th Feb -7th March 2006), the largest ever collection of

Rs.5,759 crore ($1.29 billion) in the history of the Indian Mutual Fund industry.

• Footprint in over 100 cities in India

• Wide network of 130 collection points

• Wide portfolio of 26 well-rounded products to meet varying investor requirements.

• Reliance Mutual Fund is amongst the few mutual funds in the industry to offer

Subscription, Redemption and Switch through Online Transactions.

• Lipper Fund Award India 2007 :

○ Reliance Gilt Securities Fund-Long Term Plan-Growth was declared the best fund

55 | P a g e
 over 3 years in the Bond INR Government category, out of 52 eligible schemes.

○ Reliance Growth Fund-Growth Plan was declared the best fund over 5 years in the

Equity India category, out of 81 eligible schemes

○ .

• Lipper Fund Award Gulf 2007 :

○ Reliance Banking Fund-Growth Plan-Growth Option was declared the best fund

over 3 years in Equity Sector Banks and Other Financials

○ Reliance Growth Fund-Growth Plan was declared the best fund over 3 years in the

Equity India category

○ Reliance Growth Fund-Growth Plan was declared the best fund over 5 years in the

Equity India category

○ Reliance Income Fund-Growth Plan-Growth Option was declared the best fund

over 5 years in Bond Indian Rupee – General category

○ Reliance Gilt Securities Fund-Long Term Plan-Growth was declared the best fund

over 3 years in the Bond INR Government category

○ Reliance Short Term Fund-Growth Plan was declared the best fund over 3 years

in Bond Indian Rupee

• CNBC TV18 - CRISIL Mutual Fund of the Year Awards 2006 :

• Reliance Gilt Securities Fund - Long Term Plan was awarded CNBC TV18 - CRISIL

56 | P a g e
 Mutual Fund of the Year Awards 2006, in the Open End Long Term Gilt Category

○ Reliance Short Term Fund was awarded CNBC TV18 - CRISIL Mutual Fund of

the Year Awards 2006, in the Open End Debt Short Term Category

• ICRA Mutual Funds Awards 2007 :

• Reliance Short Term Fund has been ranked ICRA MFR 1 by ICRA Mutual Funds

Awards 2007 in the category Open Ended Debt – Short Term for its 1 year performance

till December 31, 2006. The rank indicates performance within the top 10% of the stated

category.

○ Reliance Gilt Securities Fund - Long Term Retail Plan has been ranked ICRA

MFR 1 by ICRA Mutual Funds Awards 2007 in the category Open Ended Gilt -

Long Term for its 3 year performance till December 31, 2006. The rank indicates

performance within the top 10% of the stated category.

○ Reliance Liquidity Fund has been ranked ICRA MFR 1 by ICRA Mutual Funds

Awards 2007 in the category Open Ended Liquid Scheme for its 1 year

performance till December 31, 2006. The rank indicates performance within the

top 10% of the stated category.

• The first mutual fund in India to offer instant cash withdrawal facility on investments.

Reliance Mutual Fund offers the Reliance Any Time Money (ATM) Card with select

schemes. The card is a boon for retail investors as it enables them to withdraw their

investment any time.

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 •

COMPETITORS OF RELAINCE MUTUAL FUND

Some of the main competitors of SBI Mutual Fund are as Follows:

i. ICICI Mutual Fund

ii.SBI Mutual Fund

iii.UTI Mutual Fund

iv.Birla Sun Life Mutual Fund

v.Kotak Mutual Fund

vi.HDFC Mutual Fund

vii.Sundaram Mutual Fund

viii.LIC Mutual Fund

ix.Principal

x.Franklin Templeton

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 Chapter – 4

Research Methodology

RESEARCH METHODOLOGY

Data Collection

Secondary Data
Secondary data was collected from various sources such as internet and financial magazines.

Primary Data

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In Primary data, structured questionnaire was made and the target respondents were asked to fill the
questionnaire.

Questionnaire Design

Objective was to make respondents little familiar with the context of the questions. This was also
aimed at collecting data about the sample profile that’ll be subsequently analyzed so that the scope of
the project is fully explored.

Question 1: was aimed to check the awareness level of the respondent about various investment
avenues.?
Question 2: was an open ended question intended to find out some more factors which people
consider important while investing?
Question 3: was aimed to understand the most preferred mode of investment?
Question 4: was designed to understand the types of mutual fund where people have invested?
Question 5: was designed to understand the importance of past returns in making decisions about
various investment schemes?
Question 6: was designed to understand if returns were the only criteria for evaluating the
performance?
Question 7: was designed to understand the approach of people in making investment?
Question 8: was designed to find out what factors are considered important by people who invest
different investments?
Question 9: was formulated to know the period of portfolio review done by people?
Question 10: was put to find out the long term and short term investors?
Question 11: was asked to find out how actively investors change their portfolio?
Question :12 was asked to compare the equity diversified mutual funds and direct equity?
Question 13 & 15: were asked to judge the factors why people prefer to invest in Mutual Funds and
Direct Equity?
Question 14: was asked to find out the availability of information sources for various schemes?

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Sampling

• Sample Framework
The sample framework consists of a people who have invested in any funds or investment
schemes.

• Sample Design
The sample was taken using convenient sampling.

• Sample size
The sample size was around 120 respondents.

Procedure for data collection

For the purpose of primary data collection the target population was administered with a
questionnaire which had both structured as well as unstructured questions.

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 Limitation:

➢ Some of the persons were not so responsive.

➢ Possibility of error in data collection because many of investors may have not
given actual answers of my questionnaire. .

➢ Some respondents were reluctant to divulge personal information which can

affect the validity of all responses.

SELECTION CRITERIA FOR SCHEMES:

Selection of equity diversified funds are done here on the basis of their Return, risk , liquidity,
affordability, entry-exit load, and performance over the years. Also,

1. Only open ended funds are considered while choosing best equity related mutual funds.

2. Among growth and dividend schemes, only growth scheme has been taken so as to avoid
repetition (as portfolio remains same for both the options)

3. Selection has been done on the basis of last 5 year performance.

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 Chapter – 6

Findings and analysis

Findings and analysis

In this chapter the findings of the performance evaluation of the various equity diversified mutual
funds and direct equity with respect to benchmarks is listed. The mutual funds and stocks have been
chosen on the basis of their returns over past five years. The benchmark chosen is BSE Sensex for the
comparison. The mutual funds chosen are:

1. SBI Magnum Global Fund (G)

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 2. ICICI Prudential Services Indus.(G)
3. ICICI Prudential Dynamic Plan (G)
4. Reliance Growth Fund (G)
5. Birla Frontline Equity (G)

Direct Equity chosen for purpose are:

1. Reliance Industries
2. Tata Motors
3. State Bank of India
4. Infosys Technologies

Reliance Diversified Power Sector Fund - Retail Plan (G)

Absolute Returns (as on Jan 22, Absolute Returns (in %)
10)
Period Returns (%) Rank # Year Qtr 1 Qtr 2 Qtr 3 Qtr 4 Annual
1 mth -0.1 8 2009 -2.5 55.0 16.4 -0.2 89.7
3 mths -0.2 9 2008 -23.6 -16.5 1.0 -21.2 -50.7
6 mths 17.4 8 2007 -6.5 31.7 25.7 43.6 122.6
1 year 104.7 6 2006 31.0 -21.4 21.6 22.8 58.8
2 year 4.8 4 2005 13.0 6.3 30.4 11.4 81.4
3 year 109.5 1
5 year 543.9 1

Investment information
Fund Type Open-Ended
Investment Plan Growth
Asset Size (Rs cr) 5,785.43 (Dec-31-2009)
Minimum Investment Rs.5000
Last Dividend N.A. V
Bonus N.A.

Launch Date Apr 15, 2004

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Benchmark N.A.
Fund Manager Sunil Singhania

Notes N.A.

Entry Load N.A.

Exit Load 1.00%
Load Comments Exit load - 1% if redeemed/switched out on or before completion of
1 yrs from the date of allotment.
Portfolio
Top Holdings (Dec 31, 09)
Equity Sector Value Asset
(Rs cr) %
Torrent power Utilities 401.07 6.93
Jindal Steel Metals & Mining 279.50 4.83
Reliance Infra Utilities 267.31 4.62
ICICI Bank Banking/Finance 255.98 4.42
Cummins Engineering 236.92 4.10
Tata Power Utilities 236.81 4.09
Jaiprakash Asso Cement 209.40 3.62
ONGC Oil & Gas 199.93 3.46
PTC India Services 177.89 3.07
Larsen Engineering 160.57 2.78

Sector Allocation (Dec 31, 09)

Sector % -- 1-Year --
High Low
Engineering 21.84 13.79 13.79
Utilities 17.91 10.32 10.32
Banking/Finance 10.09 8.27 8.27
Metals & Mining 8.05 4.15 4.15
Oil & Gas 6.49 6.04 6.04
Telecom 4.27 0.00 0.00

Asset Allocation (%) (Dec 31,

09) Concentration
Equity 76.78 Holdings %
Others 10.91 Top 5 24.90
Debt 0.00 Top 10 41.92
Mutual Funds N.A
Money Market 0.00 Sector %
Cash / Call 12.31 Top 3 49.84

Portfolio-holdings

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Portfolio (As on Dec 31, 2009)

Equity Value Qty %

(Rs in cr.)
Torrent Power 401.07 12,441,937.006.93
Jindal Steel & Power 279.50 3,970,387.00 4.83
Reliance Infrastructure 267.31 2,330,698.00 4.62
ICICI Bank 255.98 2,923,199.00 4.42
Cummins India 236.92 5,530,906.00 4.10
Tata Power Company 236.81 1,718,554.00 4.09
Jaiprakash Associates 209.40 14,254,572.003.62
Oil and Natural Gas Corporation 199.93 1,697,882.00 3.46
PTC India 177.89 15,756,207.003.07
Larsen and Toubro 160.57 956,116.00 2.78
Siemens 136.65 2,347,376.00 2.36
KEC International 134.37 2,291,286.00 2.32
Crompton Greaves 134.20 3,151,264.00 2.32
Rural Electrification Corporation 132.10 5,424,906.00 2.28
NTPC 131.24 5,568,055.00 2.27
Sterlite Industries (India) 127.48 1,479,483.00 2.20
ABB 122.73 1,599,554.00 2.12
State Bank of India 122.58 540,118.00 2.12
Sterlite Technologies 110.10 2,977,741.00 1.90
Punj Lloyd 103.57 5,050,890.00 1.79
Kirloskar Brothers 98.28 3,756,816.00 1.70
Hindustan Petroleum Corporation 88.56 2,266,817.00 1.53
Reliance Industries 87.00 798,643.00 1.50
BGR Energy Systems 84.16 1,709,111.00 1.45
Bajaj Electricals 83.26 1,018,581.00 1.44
Infrastructure Development Finance Company 73.20 4,748,746.00 1.27
Thermax 68.72 1,129,583.00 1.19
Alstom Projects 60.15 1,053,436.00 1.04
Jyoti Structures 59.80 3,460,646.00 1.03
JSL 58.66 4,750,051.00 1.01

Others / Unlisted Value Rating %

(Rs in cr.)
Equity Less Than 1% of Corpus 631.29 10.91

Cash / Call Value Rating %

(Rs in cr.)
Derivatives,Cash and Other Receivables 711.97 12.31

Portfolio-sector allocation
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Sectoral Allocation (Dec 31,2009)
Sector %
21.8
Engineering & Capital Goods
4
Cummins India 4.10
Larsen and Toubro 2.78
KEC International 2.32
Crompton Greaves 2.32
ABB 2.12
Punj Lloyd 1.79
Kirloskar Brothers 1.70
BGR Energy Systems 1.45
Thermax 1.19
Alstom Projects 1.04
Jyoti Structures 1.03

17.9
Utilities
1
Torrent Power 6.93
Reliance Infrastructure 4.62
Tata Power Company 4.09
NTPC 2.27

10.0
Banking & Financial Services
9
ICICI Bank 4.42
Rural Electrification Corporation 2.28
State Bank of India 2.12
Infrastructure Development Finance Company 1.27

Metals & Mining 8.05

Jindal Steel & Power 4.83
Sterlite Industries (India) 2.20
JSL 1.01

Oil & Gas 6.49

Oil and Natural Gas Corporation 3.46
Hindustan Petroleum Corporation 1.53
Reliance Industries 1.50

Telecommunication 4.27
Siemens 2.36
Sterlite Technologies 1.90

Cement & Construction 3.62

Jaiprakash Associates 3.62

Services 3.07
PTC India 3.07

Consumer Durables 1.44

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Bajaj Electricals 1.44

12.3
Cash / Call
1
Bajaj Electricals 1.44

10.9
Others / Unlisted
1
Bajaj Electricals 1.44

Portfolio-asset break-up

Asset Breakdown (Dec-31-2009)

Class %
Equity 76.78
Others / Unlisted 10.91
Debt N.A
Mutual Funds N.A
Money Market N.A
Cash / Call 12.31
Net Receivable / Payable N.A

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Competition

Equity Others Rating Assets Abs. Returns in % (as on Jan 22, 10)
(Rs.cr)
3mth 6mth 1yr 3yr 5yr
Reliance Diver. Power - RP (G) Not Rated 5,785.43 -0.2 17.4 104.7 109.5 543.9
Sundaram Energy Oppor. (G) Not Rated 1,958.68 -0.7 17.0 95.8 -- --
UTI Energy Fund (G) Not Rated 723.74 2.2 18.8 81.8 1.9 62.9
JM Basic Fund (G) Not Rated 627.48 2.2 16.0 136.5 -5.5 85.7
UTI Services Industries (G) Not Rated 358.25 5.8 26.0 105.3 6.2 131.7
Religare PSU Equity Fund (G) Not Rated 235.18 -- -- -- -- --

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Reliance Media & Entertain (G) Not Rated 143.64 13.9 38.0 97.3 8.5 161.0
Birla SL Basic Industries (G) Not Rated 130.67 7.6 24.4 117.1 38.7 183.2
Tata Life Sc & Tech Fund (G) Not Rated 55.07 3.6 30.6 140.9 24.6 185.7
Birla Sun Life Buy India (G) Not Rated 52.13 4.9 26.2 103.2 27.7 179.1
UTI Transport & Logistics (G) Not Rated 50.07 10.0 40.6 146.3 17.1 106.1
JM Financial Services Fund (G) Not Rated 27.38 -6.8 2.4 28.4 -12.9 --
JM Telecom Sector Fund (G) Not Rated 6.97 -1.7 -10.9 57.1 -23.6 --

Performance

1 week
FROM 29-MARCH-2004 TO 4-APRIL 2004

Response
From Date NAV(Rs.) To Date NAV(Rs.)
29-Mar-2004 10.000 04-Apr-2004 10.000

Absolute Returns = 0%

1 month
FROM 29-MARCH-2004 TO 29-APRIL-2004
Response
From Date NAV(Rs.) To Date NAV(Rs.)
29-Mar-2004 10.000 29-Apr-2004 10.000

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Absolute Returns = 0%

6 months
FROM 29-MARCH-2004 TO 29-SEPTEMBER-2004
Response
From Date NAV(Rs.) To Date NAV(Rs.)
29-Mar-2004 10.000 29-Sep-2004 10.790

Absolute Returns = 7.9%

1 Year

FROM 29-MARCH-2004 TO 29-MARCH-2005

Response
From Date NAV(Rs.) To Date NAV(Rs.)
29-Mar-2004 10.000 29-Mar-2005 14.055

Absolute Returns= 40.6%

2 YEARS
Response
From Date NAV(Rs.) To Date NAV(Rs.)
29-Mar-2004 10.000 29-Mar-2006 29.529

Absolute Returns= 195.3%

3 YEARS
Response
From Date NAV(Rs.) To Date NAV(Rs.)
29-Mar-2004 10.000 29-Mar-2007 33.895

Absolute Returns=239%
4 YEARS
Response
From Date NAV(Rs.) To Date NAV(Rs.)
29-Mar-2004 10.000 29-Mar-2008 64.568

Absolute Returns=545.7%
5 YEARS
Response
From Date NAV(Rs.) To Date NAV(Rs.)
29-Mar-2004 10.000 29-Mar-2009 40.833

Absolute Returns=308.3%

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5 YEARS +
FROM 29-MARCH-2004 TO 22-JANUARY-2010
Response
From Date NAV(Rs.) To Date NAV(Rs.)
29-Mar-2004 10.000 22-Jan-2010 76.938

Absolute Returns=669.4

LIMITATIONS

• Paucity of time as we have to do this project with our course curriculum doing all other
assignments, exams etc.

• Indian stock market is semi-efficient market, where sentiments play a major role in price;
hence 100% accurate predictions cannot be made about its future path.

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 Chapter – 7

Suggestions
And
Recommendations

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 Suggestions and Recommendations

➢ The most vital problem spotted is of ignorance. Investors should be made

aware of the benefits. Nobody will invest until and unless he is fully

convinced. Investors should be made to realize that ignorance is no longer

bliss and what they are losing by not investing.

➢ Mutual funds offer a lot of benefit which no other single option could offer.

But most of the people are not even aware of what actually a mutual fund is?

They only see it as just another investment option. So the advisors should try

to change their mindsets. The advisors should target for more and more young

investors. Young investors as well as persons at the height of their career

would like to go for advisors due to lack of expertise and time.

➢ Mutual Fund Company needs to give the training of the Individual Financial

Advisors about the Fund/Scheme and its objective, because they are the main

source to influence the investors.

➢ Before making any investment Financial Advisors should first enquire about

the risk tolerance of the investors/customers, their need and time (how long

they want to invest). By considering these three things they can take the

customers into consideration.

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 ➢ Younger people aged under 35 will be a key new customer group into the

future, so making greater efforts with younger customers who show some

interest in investing should pay off.

➢ Customers with graduate level education are easier to sell to and there is a

large untapped market there. To succeed however, advisors must provide sound

advice and high quality.

➢ Systematic Investment Plan (SIP) is one the innovative products launched by

Assets Management companies very recently in the industry. SIP is easy for

monthly salaried person as it provides the facility of do the investment in EMI.

Though most of the prospects and potential investors are not aware about the

SIP. There is a large scope for the companies to tap the salaried persons.

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QUESTIONNAIRE

A study of preferences of the investors for investment in mutual funds.

1. Personal Details:

(a). Name:-

(b). Add: - Phone:-

(c). Age:-

(d). Qualification:-

Graduation/PG Under Graduate Others

(e). Occupation. Pl tick (√)

Govt. Ser Pvt. Ser Business Agriculture Others

(g). What is your monthly family income approximately? Pl tick (√).

Up to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001

Rs.10,000 15000 20,000 30,000 and above

2. What kind of investments you have made so far? Pl tick (√). All applicable.

a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund

e. Post Office-NSC, f. g. Gold/ Silver h. Real Estate
etc Shares/Debentures

3. While investing your money, which factor will you prefer?

.
(a) Liquidity (b) Low Risk (c) High Return (d) Trust

4. Are you aware about Mutual Funds and their operations? Pl tick (√). Yes No

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 5. If yes, how did you know about Mutual Fund?

a. Advertisement b. Peer Group c. Banks d. Financial Advisors

6. Have you ever invested in Mutual Fund? Pl tick (√). Yes No

7. If not invested in Mutual Fund then why?

(a) Not aware of MF (b) Higher risk (c) Not any specific reason

8. If yes, in which Mutual Fund you have invested? Pl. tick (√). All applicable.

a. SBIMF b. UTI c. d. Reliance e. Kotak f. Other. Specify

HDFC

9. If invested in SBIMF, you do so because (Pl. tick (√), all applicable).

a. SBIMF is associated with State Bank of India.

b. They have a record of giving good returns year after year.
c. Agent’ Advice

10. If NOT invested in SBIMF, you do so because (Pl. tick (√) all applicable).

a. You are not aware of SBIMF.

b. SBIMF gives less return compared to the others.
c. Agent’ Advice

11. When you plan to invest your money in asset management co. which AMC will you prefer?

Assets Management Co.

a. SBIMF
b. UTI
c. Reliance
d. HDFC
e. Kotak
f. ICICI

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12. Which Channel will you prefer while investing in Mutual Fund?

(a) Financial Advisor (b) Bank (c) AMC

13. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick (√).

a. One Time Investment b. Systematic Investment Plan (SIP)

14. When you want to invest which type of funds would you choose?

a. Having only debt b. Having debt & equity c. Only equity portfolio.
portfolio portfolio.

15. How would you like to receive the returns every year? Pl. tick (√).

a. Dividend payout b. Dividend re- c. Growth in NAV

investment

16. Instead of general Mutual Funds, would you like to invest in sectorial funds?
Please tick (√). Yes No

BIBLIOGRAPHY

• NEWS PAPERS

• OUTLOOK MONEY

• TELEVISION CHANNEL (CNBC AAWAJ)

• MUTUAL FUND HAND BOOK

• FACT SHEET AND STATEMENT

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 • WWW.RELIANCEMUTUALFUND.COM

• WWW.MONEYCONTROL.COM

• WWW.AMFIINDIA.COM

• WWW.ONLINERESEARCHONLINE.COM

• WWW. MUTUALFUNDSINDIA.COM

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