Professional Documents
Culture Documents
Introduction
1
1.1 PURPOSE OF THE STUDY
1.To choose best company for mutual investment between Reliance and HDFC.
2.To know the risk and return associated with the mutual fund.
2
1.4 RESEARCH METHODOLOGY OF THE STUDY
TYPE OF RESEARCH
Explortory Reserch
Descriptive Reserch
3
1.4.3 Instrument for data collection
Questionnaire.
Survey.
1.4.4 LIMITATIONS
Howsoever impeccable a thing may seem to be there always dwell some possibilities
of failure and incompleteness. The result of this work also subjects to some of
limitations, which are as follows:
The study is confined only to a small segment of the entire population due to
monetary and time constraints and hence the results are applicable only to
Delhi and NCR.
Some respondents were not interested in giving answer and they appeared to
be busy.
Lack of experience.
Company Officials did not revel any information , which my have affected
my study , as the information that was required was internal to the
company.
4
Chapter-2
Review Of Literature
5
Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensen’s
alpha) that estimates how much a manager’s forecasting ability contributes to
fund’s returns. Sharpe, William (1994) suggested the ‘Sharp- Ratio technique for
the measurement for the performance measurement of the MF. Berkowitz et.al,
(1997), supports the argument & states that, past fund performance influences
individual investment decisions along with implying strong incentives for managers
increase the performance of Mutual funds.
Panwar et.al (2005) uses Residual Variance (RV) as the measure of MF portfolio
diversification. RV has a direct impact on shape fund performance measure.
Kacperczyk et.al (2005) demonstrated that unabsorbed information create values
for some funds. Return gap helps to predict future fund performance & investors
6
should use additional measures to evaluate the performance.
Agrawal (2006) analyze the Indian Mutual Fund Industry pricing mechanism with
empirical studies on its valuation. The study reveled that the performance is
affected saving and investment habits of the people.
7
Chapter-3
Company Profile
8
Reliance Mutual Fund
The Reliance Mutual Fund is one of the most popular and leading mutual fund in
India. The Fund is owned by Anil Dhirubhai Ambani Group and with respect to net
worth it ranks among the top three of all the private financial service providers in
India. It is an ISO 9001:2000 certified company, which offers innovative mutual
fund products to a wide pool of customers. The Reliance mutual fund products are
available in hundred and fifteen cities across India. It is one of the fastest growing
mutual fund in India and the main reason of its popularity is that it has a wide
portfolio of products that meets the requirements of each and every type of
investors. The Reliance Mutual Fund is headed by Mr. Vikrant Gugnani - the CEO
of the company.
• The schemes of Reliance Mutual Fund are being managed by Reliance Capital
Asset Management Ltd, which is a subsidiary of Reliance.
• Reliance Capital Ltd holds 93.37% of the paid-up capital of the Reliance Capital
Asset Management Ltd.
• The value of the cumulative assets that are being managed (also called Assets
Under Management (AUM)) amounted to Rs. 80,779 crores, as on Dec 31st
2007.
Equity/Growth Schemes:
9
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.
FUND FACTS
Fund features
PORTFOLIO Attribute
P/E 21.90 as on Jun – 2009
P/B 3.74 as on Jun – 2009
Dividend Yield 1.16 as on Jun – 2009
Market Cap (Rs. in crores) 71,812.69 as on Jun – 2009
Large 55.20 as on Jun – 2009
Mid 18.27 as on Jun – 2009
Small NA
Top 5 Holding (%) 27.60 as on May – 2009
No. of Stocks 21
Expense Ratio (%) 1.87
Asset Alocation
12
24.33 Equity
Debt
C a sh & E q .
75.67
13
HDFC Mutual Fund
The HDFC Asset Management Company Limited conducts the activities carried out
by the HDFC Mutual Fund and manages the assets of various mutual fund schemes.
The August 2006 report states that the fund has assets of Rs. 25,892 crores under
Asset Management Company (AMC).
HDFC Asset Management Company Limited (AMC) entered into an agreement with
Zurich Insurance Company (ZIC) with the aim to develop the asset management
business in India in the year 2003. Following to this, all the mutual fund schemes of
Zurich Mutual Fund in India got transferred to HDFC Mutual Fund and gained the
name of HDFC schemes.
14
Schemes of HDFC Mutual Fund-
Equity Funds, Balanced Funds, and Debt Funds are the broad categories of mutual
fund schemes offered by HDFC Mutual Fund.
FUND FACTS
OBJECTIVE
FUND FEATURES
Last Dividend NA
15
Declared
Minimum 380053
Investment (Rs)
Purchase Daily
Redemptions
NAV Calculation Daily
Entry Load Amount Bet. 0 to 49999999 then Entry load is 2.25%. and
Amount greater than 50000000 then Entry load is 0%.
Exit Load If redeemed bet. 0 Month to 12 Month; and Amount Bet. 0 to
49999999 then Exit load is 1%. and Amount greater than
50000000 then Exit load is 0%.
Portfolio Attributes
16
Auto & Auto ancillaries 2.87
Banks 18.89
Chemicals 0.41
Computers - Software & Education 9.33
Consumer Durables 4.50
Current Assets 2.97
Electricals & Electrical Equipments 7.18
Engineering & Industrial Machinery 1.18
Entertainment 6.17
Fertilizers, Pesticides & Agrochemicals 0.85
Finance 6.39
Food & Dairy Products 5.74
Housing & Construction 6.10
Oil & Gas, Petroleum & Refinery 4.79
Personal Care 1.32
Pharmaceuticals 13.23
Power Generation, Transmission & Equip 1.68
Printing & Stationary 1.05
Steel 0.47
Telecom 3.11
Textiles 0.77
Transport & Travel 1.02
17
Sector allocation ( %)
Fig. : Sector wise allocatio n of HDFC Equity Growth Fund
Asset Alocation
2.97
Equity
Debt
Cash & Eq.
97.03
18
CHAPTER -4
About Topic
19
INTRODUCTION
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. The flow
chart below describes broadly the working of a Mutual Fund.
A Mutual Fund is a body corporate registered with the Securities and Exchange Board of
India (SEBI) that pools up the money from individual/corporate investors and invests the
same on behalf of the investors/unit holders, in Equity shares, Government securities,
20
Bonds, Call Money Markets etc, and distributes the profits. In the other words, a Mutual
Fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a
mechanism for pooling the resources by issuing units to the investors and investing funds
in securities in accordance with objectives as disclosed in offer document. Investments in
securities are spread among a wide cross-section of industries and sectors thus the risk is
reduced. Diversification reduces the risk because all stocks may not move in the same
direction in the same proportion at same time. Investors of mutual funds are known as
unit holders.
The investors in proportion to their investments share the profits or losses. The mutual
funds normally come out with a number of schemes with different investment objectives
which are launched from time to time. A Mutual Fund is required to be registered with
Securities Exchange Board of India (SEBI) which regulates securities markets before it
can collect funds from the public.
ORGANISATION OF A MUTUAL FUND:- There are many entities involved and the
diagram below illustrates the organizational set up of a Mutual Fund:
Mutual Funds diversify their risk by holding a portfolio of instead of only one asset. This
is because by holding all your money in just one asset, the entire fortunes of your
21
portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk
is substantially reduced. Mutual Fund investments are not totally risk free. In fact,
investing in Mutual Funds contains the same risk as investing in the markets, the only
difference being that due to professional management of funds the controllable risks are
substantially reduced. A very important risk involved in Mutual Fund investments is the
market risk. However, the company specific risks are largely eliminated due to
professional fund management.
A Mutual Fund actually belongs to the investors who have pooled their funds. The
ownership of the mutual fund is in the hands of the Investors.
The investor’s share in the fund is denominated by “units”. The value of the units
changes with change in the portfolio value, every day. The value of one unit of
investment is called net asset value (NAV).
The investment portfolio of the mutual fund is created according to the stated
Investment objectives of the Fund.
22
To Provide an opportunity for lower income groups to acquire without much
difficulty, property in the form of shares.
To Cater mainly of the need of individual investors, whose means are small?
SPONSOR : Sponsor is the person who acting alone or in combination with another
body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net
worth of the Investment managed and meet the eligibility criteria prescribed under the
Securities and Exchange Board of India (Mutual Fund) Regulations, 1996. The sponsor is
not responsible or liable for any loss or shortfall resulting from the operation of the
Schemes beyond the initial contribution made by it towards setting up of the Mutual
Fund.
23
TRUST: The Mutual Fund is constituted as a trust in accordance with the provisions of
the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian
Registration Act, 1908.
24
the benefits of better returns with added benefits of anytime liquidity by investing in
open-ended debt funds at lower risk, this risk of default by any company that one has
chosen to invest in, can be minimized by investing in Mutual Funds as the fund managers
analyze the companies financials more minutely than an individual can do as they have
the expertise to do so. Moving up the risk spectrum, there are people who would like to
take some risk and invest in equity funds/capital market. However, since their appetite for
risk is also limited, they would rather have some exposure to debt as well. For these
investors, balanced funds provide an easy route of investment, armed with expertise of
investment techniques, they can invest in equity as well as good quality debt thereby
reducing risks and providing the investor with better returns than he could otherwise
manage. Since they can reshuffle their portfolio as per market conditions, they are likely
to generate moderate returns even in pessimistic market conditions.
Next comes the risk takers, risk takers by their nature, would not be averse to investing in
high-risk avenues. Capital markets find their fancy more often than not, because they
have historically generated better returns than any other avenue, provided, the money was
judiciously invested. Though the risk associated is generally on the higher side of the
spectrum, the return-potential compensates for the risk attached.
Political Factors:
a) Government Regulation: SEBI regulates the industry and every decision taken by them
impact the industry very quickly.
b) Stable constituency: The mutual fund industry can take long term decision if the
government is stable.
c) Fiscal policy: tax structure plays a very important role in the growth of the industry .If
the tax structure will be high than there will be less savings and investment. We have
seen the interest rate reducing continuously which boost the industry to sell products
which are better than the FDs, PF, NSC and KVPs.
25
Economic factors:
d) Market performance: The last five years witnessed a sharp rise in the markets. The
mutual fund industry basically works parallel with the markets. Suppose, if the markets
always be on downside, then the investors will not be so comfortable to invest. This will
reduce the market size drastically.
e) Global Standards: As the industry will grow better, India being a global economy, the
MF industry has to match to the global mature MF markets. They have to give due
emphasis on product innovation, cost reduction and penetration.
f) Inflation: price rise affects interest rate and reduces the chances of investment.
Social factors:
g) Consumer behaviour: this is very unpredictable and based on sentiments gets changed
very frequently, which sometimes makes selling of products difficult.
h) Income: The rich people are in bigger cities, so the mutual fund industry is much more
concentrated there.
Technological factors:
This is the era of information technology and due to net banking, online transaction,
online RTGS, clearing system helps the industry a lot.
There are numerous benefits of investing in mutual funds and one of the key reasons for
its phenomenal success in the developed markets like US and UK is the range of benefits
they offer, which are unmatched by most other investment avenues. We have explained
the key benefits in this section. The benefits have been broadly split into universal
26
benefits, applicable to all schemes and benefits applicable specifically to open-ended
schemes.
27
The holders of the shares in the Fund can resell them to the issuing Mutual Fund
company at the time. They receive in turn the net assets value (NAV) of the shares at the
time of re-sale. Such Mutual Fund Companies place their funds in the secondary
securities market. They do not participate in new issue market as do pension funds or life
insurance companies. Thus they influence market price of corporate securities. Open-end
investment companies can sell an unlimited number of Shares and thus keep going larger.
The open-end Mutual Fund Company Buys or sells their shares. These companies sell
new shares NAV plus a Loading or management fees and redeem shares at NAV.In other
words, the target amount and the period both are indefinite in such funds.
The asset management company (AMC) however, can buy out the units from the
investors, in the secondary markets, thus reducing the amount of funds held by outside
investors. The price at which units can be sold or redeemed Depends on the market
prices, which are fundamentally linked to the NAV. Investors in closed end Funds
receive either certificates or Depository receipts, for their holdings in a closed end mutual
Fund.
1)EQUITY FUNDS:-
28
These funds invest in equities and equity related instruments. With fluctuating share
prices, such funds show volatile performance, even losses. However, short term
fluctuations in the market, generally smoothens out in the long term, thereby offering
higher returns at relatively lower volatility. At the same time, such funds can yield great
capital appreciation as, historically, equities have outperformed all asset classes in the
long term. Hence, investment in equity funds should be considered for a period of at least
3-5 years. It can be further classified as:
i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their portfolio mirrors the benchmark index both in terms of composition and
individual stock weightages.
ii) Equity diversified funds- 100% of the capital is invested in equities spreading across
different sectors and stocks.
iii) Dividend Yield funds- It is similar to the equity diversified funds except that they
invest in companies offering high yield dividends.
iv) Thematic funds- Invest 100% of the assets in sectors which are related through some
theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc
. v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector
fund will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
2. BALANCED FUNDS:
Their investment portfolio includes both debt and equity. As a result, on the risk-return
ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual
funds vehicle for investors who prefer spreading their risk across various instruments.
Following are balanced funds classes:
29
3. DEBT FUND:
They invest only in debt instruments, and are a good option for investors averse to idea of
taking risk associated with equities. Therefore, they invest exclusively in fixed-income
instruments like bonds, debentures, Government of India securities; and money market
instruments such as certificates of deposit (CD), commercial paper (CP) and call money.
Put your money into any of these debt funds depending on your investment horizon and
needs.
i) Liquid funds- These funds invest 100% in money market instruments, a large portion
being invested in call money market.
ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-
bills.
iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-
pricing between cash market and derivatives market. Funds are allocated to equities,
derivatives and money markets. Higher proportion (around 75%) is put in money
markets, in the absence of arbitrage opportunities.
v) Gilt funds LT- They invest 100% of their portfolio in long-term government
securities.
vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in
long-term debt papers.
vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure
of 10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that
of the fund.
30
THE WAY TO INVEST IN MUTUAL FUND
Mutual funds normally come out with an advertisement in newspapers publishing the
date of launch of the new schemes. Investors can also contact the agents and distributors
of mutual funds who are spread all over the country for necessary information and
application forms. Forms can be deposited with mutual funds through the agents and
distributors who provide such services. Now days, the post offices and banks also
distribute the units of mutual funds. However, the investors may please note that the
mutual funds schemes being marketed by banks and post offices should not be taken as
their own schemes and no assurance of returns is given by them. The only role of banks
and post offices is to help in. distribution of mutual funds schemes to the investors.
Investors should not be carried away by commission/gifts given by agents/distributors for
investing in a particular scheme. On the other hand they must consider the track record of
the mutual fund and should take objective decision.
Mutual funds are regulated by the SEBI (mutual Fund) Regulations, 1996.
31
The bank-sponsored fund cannot provide a guarantee without RBI Permission.
RBI regulates money and government securities markets, in which mutual Funds are
invested.
Listed mutual funds are subject to the listing regulations of stock exchange.
Since the AMC and Trustee Company are companies, the Department of Company
affairs regulate them. They have to send periodic reports to the ROC (Register of
Companies) and the CLB (Company Law Board) is the appellate authority.
Investors cannot sue the trust, as they are the same as the trust and can’t sue
themselves.
UTI is governed by the UTI Act, 1963 and is voluntarily under SEBI Regulations.
UTI can borrow as well as lend also engage in other financial services activities.
Mutual Funds Company is required to update the NAV of the scheme on the AMFI
website on a daily basis in case of open-ended scheme.
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank the. The history of
mutual funds in India can be broadly divided into four distinct phases :-
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
32
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.
33
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with assets under management of Rs.29,835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and certain other
schemes. The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund
Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions
under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had
in March 2000 more than Rs.76,000 crores of assets under management and with the
setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund
industry has entered its current phase of consolidation and growth. As at the end of
September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under
421 schemes.
34
Note - Erstwhile UTI was bifurcated into UTI Mutual fund and the Specified
Undertaking of the Unit Trust of India effective from February 2003. The Assets under
management of the Specified Undertaking of the Unit Trust of India has thereof been
executed from the total assets of the industry as a whole from February 2003 onwards.
35
CHAPTER -5
Analysis
36
1 Do you know, what is mutual fund?
Yes 95
No 5
5%
Yes
No
95%
From the above Pie Chart, it is clear that everyone is not aware about mutual
fund
. 95% people known what is mutual fund because they aware about share
market.
Yes 60
No 35
37
37%
Yes
No
63%
We know that mutual fund is not always risk free. According to the customers
who know
what is mutual fund, they also know it is not always risk free. Problem has
that some
people are not aware about mutual fund.37% people don’t know it is risk free
or not.
Yes 78
No 17
38
ChartTitle
100
80 Yes, 78
60
40
20 No, 17
0
0 0.5 1 1.5 2 2.5
As shown above chart 82% people want to invest money into the mutual fund
because they have interest in mutual fund, maximum customers want to
invest their money into the mutual fund because their interest decreased in
equity market as they know that in this field, risk is low compare to share
market.
Reliance Mutual 42
fund
HDFC Mutual 25
fund
Others 11
39
14%
From the above Pie chart, which is according to the primary data collected,
clearly shows that “Preference of investors are based on high return, liquidity
and growth of fund”i.e. investors give their preferences to that fund which
gives them high return. 54% customers like to the Reliance mutual fund. 32%
customer’s belief HDFC mutual fund &
other’s mutual fund having 14% preferred.
5 among the following which mutual fund house is the better fund house in the
terms of products?
Reliance Mutual 43
fund
HDFC Mutual 27
fund
Others 8
40
10%
55% people think that reliance mutul fund is the best option when it comes to the
diversified products , followed by 35% for HDFC & 10% others.
6 Which fund house is better in terms of fund performance in long and short run?
Reliance Mutual 41
fund
HDFC Mutual 26
fund
Others 11
41
14%
53% people think that reliance mutul fund provides best return in short % Long run
period , followed by 33% for HDFC & 14% others.
One 42
Two 25
42
14%
One
Two
54%
32% More Than Two
investors have more than two types mutual fund, it is 14%. They want earn
maximum profit from mutual fund. These customer want to increase number
Reliance Mutual 44
fund
HDFC Mutual 26
fund
Others 8
43
10%
57% respondents feels that Reliance Provides better services as compared to others.
Yes 45
No 38
44
46%
54% Yes
No
Yes 43
No 2
45
4%
Yes
No
96%
46
CHAPTER-6
Findings
47
1)A lot of people know about mutual fund as they take it as Equities in stock market.
2) Some of the Respondents are not willing to invest their money in mutual funds ,
because they don’t know the difference between horizon of risk in share market and
mutual funds.
3) Most of Respondents are willing to Invest their funds in mutual funds because they
know that Mutual funds are less risky as compared to equities.
4)Most of respondents buy Mutual Funds of those companies which provide them better
returns, products , flexibility and Liquidity. This shows that todays buyers are rationale
buyers.
5) Most of respondents believe that Reliance Mutual fund’s performance is much better
as compared to other players in market in both long and short run.
48
CHAPTER-7
Suggestion
49
SUGGESTIONS TO RELIANCE MUTUAL FUND:-
2. As some of the people think that mutual fund is risky so the company
should show people the advantages of the mutual fund and how it is better
than the other investment avenues.
3.There is a great potential for the mutual fund because the people are ready
to invest in the mutual fund as there is a positive responses.
5.People are preferred to invest in the long term savings when only they
have enough of surplus. They are least concerned about the other’s advice.
6.Reliance MF is doing comparatively very less marketing in MF industry
in compare to other players. Due to this other player are getting the
advantage. Thus it should try to increase the marketing and advertising
related activities time to time or at least at the time of new NFO’s, at the
time when they are declaring dividends or at the peak time (i.e. January -
March) last quarter of financial year when people are searching for
investing instruments.
7.A very small part market has been cover by Reliance MF. It can increase
the circle of its business in small and rural areas of every state and cities of
India where they an find a huge business.
8.To uproot the investment level the company should give training
programme to financial agents who approach the investor for the
investments. And they should be aware of all the benefits of the mutual
50
Funds.
51
CHAPTER-8
Conclusion
52
Reliance Equity Fund has a ability to spot the sector trends & it has
delivered handsomely. In Current status it emerged as the third best-
performing diversified equity fund.
53
REFERENCES
AND
BIBLIOGRAPHY
54
Books:-
Websites:-
• www.mutualfundsindia.com
• www.valueresearchonline.com
• www.amfi.com
• www.hdfcfund.com
• www.reliancefund.com
55
ANNEXURE
56
QUESTIONNAIRE
Yes
No
Yes
No
Yes
No
I don’t know
c) other
57
5. among the following which mutual fund house is the better fund house in the
terms of products?
e) Others
6. Which fund house is better in terms of fund performance in long and short run?
c) other
a) One
b) Two
d) None
58
c) Others
a) Yes
b) No
10. Are you satisfied by the services provided by reliance mutual fund?
a) Yes
b) No
________________________________________________________________
___
_________________________________________________________.
Signature__________________
59