Professional Documents
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PROJECT REPORT
ON
By- 1
BONAFIDE CERTIFICATE
This is to certify that the Report on Project Work titled “Risk Return Analysis and
Comparative Study of Reliance Mutual Fund” for Reliance Capital Asset Management
Company Ltd. is a bonafide record of the work done by
By- 2
ACKNOWLEDGEMENT
I would like to express my appreciation and gratitude to various people who have shared
their valuable time and made possible this project, through their direct or indirect
cooperation.
I am also thankful to my respected faculties, dear friend & colleagues, who have helped me
in every possible ways, supported me and encouraged me to explore new dimensions.
By- 3
DECLARATION
Name:
Place: New Delhi
Date: _________
By- 4
TABLE OF CONTENT
4 COMPETITORS OF RELIANCE 58
MUTUAL FUND
5 RESEARCH METHODOLOGY 59
6 DATA ANALYSIS AND 62
INTERPRETATION
7 COMPARATIVE STUDY 85
8 OBSERVATION 94
9 FINDINGS AND SUGGESTIONS 95
10 CONCLUSION 97
11 LIMITATION 61
12 BIBLIOGRAPHY 98
By- 5
PREFACE
This is the age of technical up gradation. Nothing remains same for a long period every thing
change with a certain span of time. So it is must for every organization to put a birds eye
view on it’s over all functioning.
This report has been prepared during practical training of Master of business
administration (M.B.A.) from K.R Mangalam Institute of Management .The student of
M.B.A. essentially required a practical training of 4 to 6 weeks in any organization. It gives
an opportunity to the student to test their acquired knowledge through practical experiences.
The successful completion of this project was a unique experience for me because by visiting
many place and interacting various person, I achieved a better knowledge about sales. The
experience which I gained by doing this project was essential at this turning point of my
carrier this project is being submitted which content detailed analysis of the research under
taken by me.
The research provides an opportunity to the student to devote his/her skills knowledge and
competencies required during the technical session.
The research has been conducted on the topic “Risk Return Analysis And Comparative
Study Of Reliance Mutual Fund”.
PLACE-………..
DATE…………..
By- 6
EXECUTIVE SUMMARY
The performance evaluation of mutual fund is a vital matter of concern to the fund managers,
investors, and researchers alike. The core competence of the company is to meet objectives
and the needs of the investors and to provide optimum return for their risk. This study tries to
find out the risk and return allied with the mutual funds.
This project paper is segmented into three sections to explore the link between conventional
subjective and statistical approach of Mutual Fund analysis. To start with, the first section
deals with the introductory part of the paper by giving an overview of the Mutual fund
industry and company profile.
This section also talks about the theory of portfolio analysis and the different measures of
risk and return used for the comparison.
The second section details on the need, objective, and the limitations of the study. It also
discusses about the sources and the period for the data collection. It also deals with the data
interpretation and analysis part wherein all the key measures related to risk and return are
done with the interpretation of the results.
In the third section, an attempt is made to analyze and compare the performance of the equity
mutual fund. For this purpose β-value, standard deviation, and risk adjusted performance
measures such as Sharpe ratio, Treynor measure, Jenson Alpha, and Fema measure have been
used.
The portfolio analysis of the selected fund has been done by the measure return for the
holding period.
At the end, it illustrates the suggestions and findings based on the analysis done in the
previous sections and finally it deals with conclusion part.
By- 7
MUTUAL FUND OVERVIEW
Mutual fund is an investment company that pools money from small investors and
invests in a variety of securities, such as stocks, bonds and money market instruments. Most
open-end Mutual funds stand ready to buy back (redeem) its shares at their current net asset
value, which depends on the total market value of the fund's investment portfolio at the
time of redemption. Most open-end Mutual funds continuously offer new shares to
investors. It is also known as an open-end investment company, to differentiate it from a
closed-end investment company.
Mutual funds invest pooled cash of many investors to meet the fund's stated investment
objective. Mutual funds stand ready to sell and redeem their shares at any time at the fund’s
current net asset value: total fund assets divided by shares outstanding.
MUTUAL FUND SHEMES
INVEST INVEST IN
MARKET (FLUCTUATIONS)
THEIR VARIETY OF
STOCKS/BONDS
MONEY
INVESTOR
In Simple Words, 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.
By- 8
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 not all stocks
may move in the same direction in the same proportion at the same time. Mutual fund issues
units t o the investors in accordance with quantum of money invested by them.
Investors of Mutual fund are known as unit holders. The profits or losses are shared by the
investors in proportion to their investments. The Mutual funds normally come out with a
number of schemes with different investment objectives which are launched from time to
time.
In India, A Mutual fund is required to be registered with Securities and Exchange Boa
rd of India (SEBI) which regulates securities markets before it can collect funds from the
public.
By- 9
HISTORY OF MUTUAL FUNDS (WORLDWIDE)
When three Boston securities executives pooled their money together in 1924 to
create the first mutual fund, they had no idea how popular mutual funds would become.
The idea of pooling money together for investing purposes started in Europe in the
mid-1800s. The first pooled fund in the U.S. was created in 1893 for the faculty and staff of
Harvard University. On March 21st, 1924 the first official mutual fund was born. It was
called the Massachusetts Investors Trust.
After one year, the Massachusetts Investors Trust grew from $50,000 in assets in
1924 to $392,000 in assets (with around 200 shareholders). In contrast, there are over 10,000
mutual funds in the U.S. today totaling around $7 trillion (with approximately 83 million
individual investors) according to the Investment Company Institute.
The stock market crash of 1929 slowed the growth of mutual funds. In response to the
stock market crash, Congress passed the Securities Act of 1933 and the Securities Exchange
Act of 1934. These laws require that a fund be registered with the SEC and provide
prospective investors with a prospectus. The SEC (U.S. Securities and Exchange
Commission) helped create the Investment Company Act of 1940, which provides the
guidelines that all funds must comply with today.
With renewed confidence in the stock market, mutual funds began to blossom. By the
end of the 1960s there were around 270 funds with $48 billion in assets.
In 1976, John C. Bogle opened the first retail index fund called the First Index Investment
Trust. It is now called the Vanguard 500 Index fund. In November of 2000 it became the
largest mutual fund ever with $100 billion in assets.
By- 10
History of Indian Mutual Fund Industry
The history of Mutual Funds in India can be broadly divided into 4 Phases:
1 � T he Unit Trust of India (UTI) was established in the year 1963 by passing an
3 �The UTI was setup by the Reserve Bank of India (RBI) and functioned under
5 �The First scheme in the history of mutual funds was UNIT SCHEME-64,
7 �In 1978, UTI was de-linked from RBI. The Industrial Development Bank of
9 �At the end of the year 1988, UTI had Rs.6,700/- Crores of Assets Under
10 Management.
2 �In the year 1987, public sector Mutual Funds setup by public sector banks,
5 �State Bank of India Mutual Fund was the first non-UTI Mutual Fund.
By- 11
11 �Indian Bank Mutual Fund in November 1989.
At the end of 1993, the entire Mutual Fund Industry had Assets under Management of
2 investors.
3 �In 1993, the first Mutual Fund Regulations came into existence, under which
5 �The Erstwhile Kothari Pioneer (now merged with Franklin Templeton) was
7 �In 1996, the 1993 Securities Exchange Board of India (SEBI) Mutual Funds
9 Fund Regulations.
10 �The number of Mutual Fund houses went on increasing, with many foreign
12 �In this time, the Mutual Fund industry has witnessed several Mergers
13 &Acquisitions.
14 �The UTI with Rs.44, 541/- Crores. Of Assets Under management was way
By- 12
The following was the status at end of February 2003:
The diagram below shows the three segments and some players in each segment:
1 �Following the repeal of the UTI Act in February 2003, it was (UTI)
3 �O
ne is the specified undertaking of the UTI with asset under management of
5 �The second is the UTI Mutual Funds Limited, sponsored by State Bank of
6 India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation
7 of India.
8 �UTI is functioning under an Administrator and
under the Rules framed by
16
14
No. of schemes Amount (in crores)
Open-ended schemes 41 1,85,999
4
Close-ended schemes 46 71,500
TOTAL 46 2,57,499
0
S. Advanta
Particulars
No. ge
15
Investors acquire a diversified portfolio of securities
Less even with a small investment in a Mutual Fund. The
3.
Risk risk in a diversified portfolio is lesser than investing in
merely 2 or 3 securities.
Low
Due to the economies of scale (benefits of larger
Transact
4. volumes), mutual funds pay lesser transaction costs.
ion
These benefits are passed on to the investors.
Costs
16
DISADVANTAGE OF INVESTING
THROUGH MUTUAL FUNDS
Table:1.2
S. Disadv
Particulars
No. antage
Costs
Control
Not in Investor has to pay investment management fees and
the fund distribution costs as a percentage of the value of
1.
Hands his investments (as long as he holds the units),
of an irrespective of the performance of the fund.
Investo
r
Difficul
ty in Many investors find it difficult to select one option
Selectin from the plethora of funds/schemes/plans available.
3. g a For this, they may have to take advice from financial
Suitabl planners in order to invest in the right fund to achieve
e Fund their objectives.
Scheme
17
SCHEMES OF MUTUAL FUND
BASED ON THEIR
STURCTURE
18
2. BASED ON INVESTMENT
LEQUID
INDEX FUNDS DEBT
GUILT FUNDS
DEVIDEND EQUITY
INCOME
EQUITY
FMPS FUNDS
THEMANTIC
FLOATING
SECTOR FUND
ARBITAGE
ELSS
19
Mutual funds can be classified as follow:
Open-ended Funds:
An open-end fund is one that is available for subscription all
through the year. These do not have a fixed maturity.
Investors can conveniently buy and sell units at Net Asset
Value ("NAV") related prices. The key feature of open-end
schemes is liquidity.
Closed-ended Funds:
A closed-end fund has a stipulated maturity period which
generally ranging from 3 to 15 years. The fund is open for
20
subscription only during a specified period. Investors can
invest in the scheme at the time of the initial public issue and
thereafter they can buy or sell the units of the scheme on the
stock exchanges where they are listed.
In order to provide an exit route to the investors, some close-
ended funds give an option of selling back the units to the
Mutual Fund through periodic repurchase at NAV related
prices. SEBI Regulations stipulate that at least one of the two
exit routes is provided to the investor.
21
1. Index funds- In this case a key stock market index, like
BSE Sensex or Nifty is tracked. Their portfolio mirrors the
benchmark index in terms of both composition and individual
stock weightages.
2. Equity diversified funds- 100% of the capital is invested
in equities spreading across different sectors and stocks.
3. Dividend yield funds- it is similar to the equity-diversified
funds except that they invest in companies offering high
dividend yields.
4. 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.
5. Sector funds- Invest 100% of the capital in a specific
sector. e.g. - A banking sector fund will invest in banking
stocks.
6. ELSS- Equity Linked Saving Scheme provides tax benefit
to the investors.
22
2 Equity-oriented funds -Invest at least 65% in equities,
remaining in debt.
23
Higher proportion (around 75%) is put in money
markets, in the absence of arbitrage opportunities.
INVESTMENT STRATEGIES
24
made through post-dated cheques or direct debit facilities.
The investor gets fewer units when the NAV is high and
more units when the NAV is low. This is called as the benefit
of Rupee Cost Averaging (RCA)
2. Systematic Transfer Plan: Under this, an investor invest
in debt-oriented fund and give instructions to transfer a fixed
sum, at a fixed interval, to an equity scheme of the same
mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to
withdraw from a mutual fund then he can withdraw a fixed
amount each month.
25
Figure:1.4
TRUSTEE
Trustee is usually a company (corporate body) or a Board of
Trustees (body of individuals). The main responsibility of the
26
Trustee is to safeguard the interest of the unit holders and
ensure that the AMC functions in the interest of investors and
in accordance with the Securities and Exchange Board of
India (Mutual Funds) Regulations, 1996, the provisions of the
Trust Deed and the Offer Documents of the respective
Schemes. At least 2/3rd directors of the Trustee are
independent directors who are not associated with the
Sponsor in any manner.
ASSET MANAGEMENT COMPANY (AMC)
The AMC is appointed by the Trustee as the Investment
Manager of the Mutual Fund. The AMC is required to be
approved by the Securities and Exchange Board of India
(SEBI) to act as an asset management company of the Mutual
Fund. At least 50% of the directors of the AMC are
independent directors who are not associated with the
Sponsor in any manner. The AMC must have a net worth of
at least 10 cores at all times.
REGISTRAR AND TRANSFER AGENT
The AMC if so authorized by the Trust Deed appoints the
Registrar and Transfer Agent to the Mutual Fund. The
Registrar processes the application form, redemption requests
and dispatches account statements to the unit holders. The
Registrar and Transfer agent also handles communications
with investors and updates investor records.
27
ASSET UNDER MANAGEMENT:
Table1.4
ASSET UNDER MANAGEMENT OF TOP AMC,S as on Jun 30,
2009
Mutual Fund Name No. of Corpus (Rs.Crores)
schemes
Reliance Mutual Fund 263 108,332.36
HDFC Mutual Fund 202 78,197.90
ICICI Prudential Mutual Fund 325 70,169.46
UTI Mutual Fund 207 67,978.19
Birla Sun Life Mutual Fund 283 56,282.87
SBI Mutual Fund 130 34,061.04
LIC Mutual Fund 70 32,414.92
Kotak Mahindra Mutual Fund 124 30,833.02
Franklin Templeton Mutual Fund 191 25,472.85
IDFC Mutual Fund 164 21,676.29
Tata Mutual Fund 175 21,222.81
28
Figure:1.5
DISTRIBUTION CHANNELS:
29
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:
30
INTRODUCTION
31
stage, then the stock of companies related to that industry
would be affected. Given the background of risk and
uncertainty about investment in mutual fund, present study
tries to find out risk return on Reliance mutual fund in
comparison with BSE-100 index has been under taken.
There are a lot of investment avenues available today in the
financial market for an investor with an invest able surplus.
He can invest in Bank Deposits, Corporate Debentures, and
Bonds where there is low risk but low return. He may invest
in Stock of companies where the risk is high and the returns
are also proportionately high. The recent trends in the Stock
Market have shown that an average retail investor always lost
with periodic bearish tends. People began opting for portfolio
managers with expertise in stock markets who would invest
on their behalf. Thus we had wealth management services
provided by many institutions. However they proved too
costly for a small investor. These investors have found a good
shelter with the mutual funds.
Like most developed and developing countries the mutual
fund cult has been catching on in India. The reasons for this
interesting occurrence are:
32
2. Mutual fund brings the benefits of diversification and
money management to the individual investor, providing a
opportunity for financial success that was once available only
to a select few.
HISTORY
33
� With the entry of Private Sector Funds a new era has
started in Mutual Fund Industry [e.g:- Principal Mutual
Fund.]
34
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.
35
Wide variety of Mutual Fund Schemes exist to cater to the
needs such as financial position, risk tolerance and return
expectations etc. The table below gives an overview into the
existing types of schemes in the Industry.
• By Structure
o Open - Ended Schemes
o Close - Ended Schemes
o Interval Schemes
• By Investment Objective
o Growth Schemes
o Income Schemes
o Balanced Schemes
o Money Market Schemes
• Other Schemes
o Tax Saving Schemes
o Special Schemes
Index Schemes
Sector Specfic
36
Features related mutual funds
37
Mutual Fund Companies in India
38
Mutual Fund Regulations came into existence with re-
registering all mutual funds except UTI. The regulations were
further given a revised shape in 1996.
39
ABN AMRO Mutual Fund was setup on April 15, 2004 with
ABN AMRO Trustee (India) Pvt. Ltd. As the Trustee
Company. The AMC, ABN AMRO Asset Management
(India) Ltd. was incorporated on November 4, 2003.
Deutsche Bank A G is the custodian of ABN AMRO Mutual
Fund.
40
HDFC Mutual Fund was setup on June 30, 2000 with two
sponsorers namely Housing Development Finance
Corporation Limited and Standard Life Investments Limited.
HSBC Mutual Fund HSBC Mutual Fund was setup on May
27, 2002 with HSBC Securities and Capital Markets (India)
Private Limited as the sponsor. Board of Trustees, HSBC
Mutual Fund acts as the Trustee Company of HSBC Mutual
Fund.
41
Management Company Limited Incorporated on 22nd of
June, 1993.
Sahara Mutual Fund was set up on July 18, 1996 with Sahara
India Financial Corporation Ltd. As the sponsor. Sahara
Asset Management Company Private Limited incorporated
on August 31, 1995 works as the AMC of Sahara Mutual
Fund. The paid-up capital of the AMC stands at Rs 25.8
crore.
42
Tata Mutual Fund
43
with the support of UTI Trustee Company Private Limited.
UTI Asset Management.
44
Morgan Stanley is a worldwide financial services company
and it’s leading in the market in securities, investment
management and credit services. Morgan Stanley Investment
Management (MISM) was established in the year 1975. It
provides customized asset management services and products
to governments, corporations, pension funds and non-profit
organizations. Its services are also extended to high net worth
individuals and retail investors. In India it is known as
Morgan Stanley Investment Management Private Limited
(MSIM India) and its AMC is Morgan Stanley Mutual Fund
(MSMF). This is the first close end diversified equity scheme
serving the needs of Indian retail investors focusing on a
long-term capital appreciation.
45
Alliance Capital Mutual Fund was setup on December 30,
1994 with Alliance Capital Management Corp. of Delaware
(USA) as sponsored. The Trustee is ACAM Trust Company
Pvt. Ltd. and AMC, the Alliance Capital Asset Management
India (Pvt) Ltd. with the corporate office in Mumbai.
Benchmark Mutual Fund
Benchmark Mutual Fund was setup on June 12, 2001 with
Niche Financial Services Pvt. Ltd. as the sponsored and
Benchmark Trustee Company Pvt. Ltd. as the Trustee
Company. Incorporated on October 16, 2000 and
headquartered in Mumbai, Benchmark Asset Management
Company Pvt. Ltd. is the AMC.
46
LIC Mutual Fund
47
by 2010 March-end, the total assets of all scheduled
commercial banks should be Rs 40, 90,000 crore. The annual
composite rate of growth is expected 13.4% during the rest of
the decade. In the last 5
years we have seen annual growth rate of 9%. According to
the current growth rate, by year 2010, mutual fund assets will
be double.
48
About Reliance Capital Asset Management Ltd.
49
dated June 30, 1995. The Mutual Fund has entered into an
Investment Management Agreement (IMA) with RCAM
dated May 12, 1995 and was amended on August 12, 1997 in
line with SEBI (Mutual Funds) Regulations, 1996. Pursuant
to this IMA, RCAM is authorized to act as Investment
Manager of Reliance Mutual Fund. The net worth of the
Asset Management Company including preference shares as
on September 30, 2007 is Rs.152.02 crores. Reliance Mutual
Fund has launched thirty-five Schemes till date, namely:
50
crores. Reliance Mutual Fund has launched Forty Three
Schemes till date, namely:
51
Reliance mutual fund, promoted by the Anil Dhirubhai
Ambani (ADAG) group, is one of the fastest growing mutual
funds in India having doubled its assets over the last one year.
In March, 2006, the Reliance mutual fund emerged as the
largest private sector fund house in the country, overtaking
Prudential ICICI which has been holding that position for
many years.
52
India's Best Offering: Reliance Mutual Fund
53
Mutual Fund designed a distinct portfolio that is sure to
please potential investors. Reliance Capital Asset
Management Limited manages RMF.
Vision And
Mission
54
VISION STATEMENT
MISSION STATEMENT
55
Types of Reliance Mutual Funds
1) Lump Sum
2) Systematic Investment Plan(SIP)
56
Lump Sum : In Lump sum the investment is only one times
that
is of Rs. 5,000. and if the investment is monthly then the
investment will be 6,000/-.
57
principal global opportunities fund 1000 18.86 30/5/2008
14247.728
DWS investment opportunities fund 1000 35.31 30/5/2008
13791.157
BOB growth fund 1000 42.14 30/5/2008 13769.152
In the above chart we can see how if we start investing Rs
1000 per month then what return we’ll get for the total
investment of Rs. 12000. There is reliance diversified power
sector retail giving the maximum returns of Rs. 2524.07 per
year which comes to 21% roughly. Next we can see if
anybody would have undertaken the SIP in Principal
would have got returns of app. 18%. We can see
reliance regular savings equity, DWS investment
opportunities and BOB growth fund giving returns of
13.20%, 14.92%, and 14.74% respectively which is
greater than any other monthly
investment options. Thus we can easily make out how SIP is
beneficial for us. Its hassle free, it forces the investors to
save and get them into the habit of saving. Also paying a
small amount of Rs. 1000 is easy and convenient for them,
thus putting no pressure on their pockets. Now we will
analyze some of the equity fund SIP s of Birla Sunlife
with BSE 200 and bank fixed deposits In a tabular format
as well as graphical.
58
RELIANCE MUTUAL FUND SCHEMES
Equity/Growth Schemes
The aim of growth funds is to provide capital
appreciation over the medium to long- term. Such schemes
normally invest a major part of their corpus in equities. Such
funds have comparatively high risks. These schemes provide
different options to the investors like dividend option, capital
appreciation, etc. and the investors may choose an option
depending on their preferences. The investors must indicate
the option in the application form. The mutual funds also
allow the investors to change the options at a later date.
Growth schemes are good for investors having a long-term
outlook seeking appreciation over a period of time.
Debt/IncomeSchemes
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
59
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.
EQUITY/GROWTH SCHEMES
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
60
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.
61
opportunities by investing in a portfolio constituted of equity
securities & equity related securities and the secondary
objective is to generate consistent returns by investing in debt
and money market securities.
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.
62
(An open-ended Diversified Equity Scheme.) The
Primary investment objective of the scheme is to generate
optimal returns by investing in equity or equity related
instruments primarily drawn from the Companies in the BSE
200 Index.
63
secondary objective is to generate consistent returns by
investing in debt and money market securities.
DEBT/LIQUID SCHEMES
64
issued and guaranteed by the central Government and State
Government
65
Reliance Liquid Fund :
(Open-ended Liquid Scheme). The primary investment
objective of the Scheme is to generate optimal returns
consistent with moderate levels of risk and high liquidity.
Accordingly, investments shall predominantly be made in
Debt and Money Market Instruments.
66
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.
67
objective of the scheme is to seek to generate regular returns
and growth of capital by investing in a diversified portfolio.
68
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
69
SECTOR SPECIFIC SCHEMES
70
The primary investment objective of the Scheme is to
generate consistent returns by investing in equity / equity
related or fixed income securities of Pharma and other
associated companies.
71
GROWTH OF RELIANCE MUTUAL
FUND THROUGH RECOGNITION
72
Reliance has merited a series of awards and recognitions for
excellence for businesses and operations.
73
• Brand Reliance was conferred the “Bronze Award” at
The Buzziest Brands Awards 2008, organized by
agencyfaqs!
74
AWARDS OF THE COMPANY-
Achievements
75
In two successive joint surveys by The Economic Times’
Brand Equity and AC Nielsen, Reliance was recognized as
India’s Most Trusted Mutual Fund. The company also walked
away with seven other scheme prizes – five of them being
outright winners – in the Gulf 2007 Lipper Awards. These
included the Fund House of the Year by Lipper GCC as well
as ICRA Online and the Most Improved Fund House by Asia
Asset Management. It also received the NDTV Business
Leadership Award 2007 in the mutual fund category and
runners’ up recognition as the Best Fund House in the
Outlook Money-NDTV Profit Awards. In addition, the
company received the coveted CNBC Web18 Genius of the
Web distinction for the Best Mutual Fund Website in the
country. RCAM was awarded the India Onshore Fund House
2008 instituted by the Asian Investor magazine. The
company also won the India Equities award in the 5-
yearPerformance category.
76
• To give a brief idea about the benefits available from
mutual Fund investment.
• To give an idea of different Schemes provided by
Reliance Mutual Fund.
• To study the performance of different schemes of the
Company.
• To study the Monthly Returns with respect to their
Benchmark.
• To analyze reliance mutual fund strategy against its
competitor.
77
RESEARCH METHODOLOGY
DESCRIPTIVE RESEARCH:
In this research an attempt has been made to analyze
the past performance of the Reliance Mutual schemes and to
know the benefits to the investors. The study is to be done on
different schemes provided by the company to know the
company’s performance for the past few months and to know
the risk and returns of the funds.
78
In this project work primary and secondary data has been
used:-
Personal Interviews:
Data has been collected from the personal interviews of
the corporate.
79
• Beta:
• Standard deviation
• Alpha
• Sharpe Ratio
• Treynor Ratio
• Bar chart
• Average& Percentage method
CONCEPTUAL DESIGN:
80
• The study was limited only to Reliance Mutual
Fund schemes.
• Only six schemes have been taken for
analysis.
• The study was limited to the extent of just
finding the risks and returns of each schemes of the
fund.
• The time constraint was one of the major
problems.
81
RISK RETURN ANALYSIS OF
THE SCHEMES
A rational investor before investing his/her money in
stock analysis the risk associated with the particular stock.
The actual returns he receives from the stock may vary from
the expected one and thus an investor is always caution about
the rate of risk associated with particular stock. hence it
becomes very essential on the part of investors to know the
risk as the hard earned money is being invested with the view
to good return on investment.
Risk mainly consists of two components.
• Systematic risk
• unsystematic risk
Systematic risk
The systematic risk affects the entire market. The
economic conditional, political situation, sociological change
affects the entire market in turn affecting the company and
even the stock market. These situations are uncontrollable by
corporate and investeors.
82
Unsystematic risk
The Unsystematic risk is unique to industries. It differs
from industries to industries. Unsystematic risk stems from
managerial inefficiency, technological change in production
process, availability of raw materials, change in the customer
preference and labour problem. The nature and magnitude of
above mentioned factors differ from industry to industry and
company to company.
83
Arithmetic mean
AM=Σy/N
Where y= returns of NAV values
N= number of observation
RETURNS
Investor wants to maximize expected retunes subject to
their tolerance for risk. Returns are the motivating force and
principal reward in investment process and it is the key
method available to investors in comparing alternative the
investments. Measuring the historical returns allows investor
to access the how well the stocks have performed. Investor
get returns either in form of interest, dividend or capital
appreciation. There are two terms, realized term and expected
return. Realized return earned in past.
STANDARD DIVEATION
84
The Standard deviation is measure of the variables around
its mean or it is square root of the sum of the squared root
deviations from the mean divided the number of observation.
S.D=√(y-Y)²
N
Where y= return of portfolio
Y=average return of portfolio
N= number of months
1 Beta = + 0.5
85
volatile compared to the market.
1 Beta = + 2.0
1 Negative Beta
Beta= N*Σxy-(Σx)(Σy)
N*Σ(x)²-(Σx)²
Where
N=No of observation
X=Total of market index value
Y=Total of return to Nav
86
ALPHA:
Alpha represent the forecast of residual return, which
we consider the future return of any portfolio. Alpha
measures the unsystematic risk of a portfolio property
because the portfolio property also consists of both residual
return and future expectation.
Where
87
The performance measure developed by William sharpe
is referred to as the sharpe ratio or the reward to variability
ration. It is the ratio of the reward or risk to the variability of
return or risk measured by the standard deviation of return the
formula for calculating sharpe ratio may be stated as:
Sharpe ratio= Rp-Rf
S.D
Where,
Rp=Realised return on the portfolio.
Rf=Risk free rate of return.
S.D=standard deviation of portfolio return
Sharpe performance index gives a single value to be used for
the performance ranking of various fund or portfolio. sharpe
index measures the risk premium of the portfolio relative to
the total amount of risk in the portfolio. The risk premium is
the difference between the portfolio’s average rate of return
and the risk less rate of return. The standard
Deviation of the portfolio indicates the risk.
Higher the value of sharpe ratio better the fund has
performed. Sharpe ratio can be used to rank the desirability of
fund or portfolio. The fund that has performed well compared
to other will be rank first than others.
Treynor ratio
The performance measure by jack. Treynor is
referred to as Treynor ratio or reward to volatility ratio. It is
the ratio of the reward or risk premium to the volatility of
88
return as measuring by the portfolio beta. The formula for
calculating Treynor ratio may be stated as:
Treynor ratio= Rp-Rf
Beta
Where:
Rp= realized return on the portfolio
Rf= risk free rate of return
Beta=portfolio beta.
89
4000 40
3500 35
3000 30
2500 25
index
2000 20
Navs
1500 15
1000 10
500 5
0 0
1 2 3 4 5 6 7 8 9 10 11 12
Analysis:
The above graph shows the movement of NAV of
reliance growth fund and Benchmark index for the period
from Jan 2005 to Dec 2005. From the above graph we can see
there is some correlation between the movement of both
90
Oct 06 42.94 -9.733 -12.706 161.4 4159.59 -8.9134 79.448 86.754
Nov 06 47.74 11.178 8.20513 67.32 4649.87 11.7867 138.93 131.76
Dec 06 48.57 1.7386 -1.2347 1.524 4953.28 6.52513 42.577 11.344
TOTAL 35.679 715.7 TOTAL 35.1422 554.71 509.85
Y=Σy/12 2.9733 X=Σx/12 2.92852
6000 60
5000 50
4000 40
index
3000 30
Navs
2000 20
1000 10
0 0
1 2 3 4 5 6 7 8 9 10 11 12
Analysis:
The above graph shows the movement of NAV of
reliance growth fund and Benchmark index for the period
from Jan 2005 to Dec 2005. From the above graph we can see
there is some correlation between the movement of both
91
Dec 06 48.57 4953.28
Jan 07 52.1 7.2679 5.69572 32.44 5224.97 5.48505 30.086 39.865
Feb 07 52.82 1.382 -0.1902 0.036 5422.67 3.78375 14.317 5.229
Mar 07 51.42 -2.6505 -4.2227 17.83 5904.17 8.87939 78.844 -23.535
Apr 07 55.34 7.6235 6.05135 36.62 6251.39 5.88093 34.585 44.833
May 07 49.36 -10.806 -12.378 153.2 5385.21 -13.856 191.98 149.72
Jun 07 44.66 -9.5219 -11.094 123.1 5382.11 -0.0576 0.0033 0.5481
Jul 07 43.34 -2.9557 -4.5278 20.5 5422.39 0.74841 0.5601 -2.212
Aug 07 48.34 11.537 9.96454 99.29 5933.77 9.4309 88.942 108.8
Sep 07 52.55 8.7091 7.137 50.94 6328.33 6.6494 44.214 57.911
Oct 07 53.08 1.0086 -0.5636 0.318 6603.6 4.3498 18.921 4.3871
Nov 07 55.1 3.8056 2.23343 4.988 6931.05 4.95866 24.588 18.871
Dec 07 57.01 3.4664 1.89428 3.588 6982.58 0.74347 0.5527 2.5772
TOTAL 18.866 542.8 TOTAL 36.9964 527.6 407
Y=Σy/12 1.5721 X=Σx/12 3.08303
6000 60
5000 50
4000 40
index
3000 30 Nav
2000 20
1000 10
0 0
1 2 3 4 5 6 7 8 9 10 11 12
Analysis:
The above graph shows the movement of NAV of
reliance growth fund and Benchmark index for the period
92
from Jan 2005 to Dec 2005. From the above graph we can see
there is some correlation between the movement of both
12000 90
80
10000
70
8000 60
50 index
6000
40 Navs
4000 30
20
2000
10
0 0
1 2 3 4 5 6 7 8 9 10 11 12
93
Analysis:
The above graph shows the movement of NAV of
reliance growth fund and Benchmark index for the period
from Jan 2005 to Dec 2005. From the above graph we can see
there is some correlation between the movement of both
94
10000 80
9000
70
8000
60
7000
6000 50
index
5000 40
Navs
4000 30
3000
20
2000
1000 10
0 0
1 2 3 4 5 6 7 8 9 10 11 12
Analysis:
The above graph shows the movement of NAV of
reliance growth fund and Benchmark index for the period
from Jan 2005 to Dec 2005. From the above graph we can see
there is some correlation between the movement of both
1) STANDARD DEVIATION
S.D= √ (y-Y)
N
STANDARD
DEVIATION
YEAR (y-Y)² y-Y)²/N Square root (S.D)
2005 1102.589 91.88242 9.5855
95
2007 542.8451 45.23709 6.7258
2) BETA
β = N *ΣXY-(ΣX)(ΣY)
NΣX²-(ΣX)²
BETA
YEAR N* Σ XY (ΣX) ( ΣY) NΣx² (ΣX)² β
2005 5286.72 21.69324 7.231404 5286.692 470.5966 0.9878
2006 6118.165 35.14223 35.67909 6656.522 1234.977 0.8972
3) ALPHA
α =Y-β(X)
ALPHA
YEAR Y β X α =Y-β(X)
2005 1.205234 0.9878 1.972113 -0.742819
96
2008 3.397376 1.0644 4.179583 -`1.0513
4)SHARPE RATIO
SR=Rp-Rf/SD
Where;
Rp= (Closing Nav/opening Nav-1)
SHARPE
RATIO
YEAR Rp Rf SD SR
2005 5 9.5855
1.316166 -0.38431
5)TREYNOR RATIO
TR=Rp-Rf/β
97
TREY
NOR RATIO
YEAR Rp Rf β TR
2005 5 0.9878 -3.72933
1.316166
INTERPRETATION
98
2)RELIANCE EQUITY FUND:
99
8000 20
7000 18
16
6000
14
5000
12
index
4000 10
Navs
3000 8
6
2000
4
1000 2
0 0
1 2 3 4 5 6 7 8 9 10 11 12
Analysis:
The above graph shows the movement of NAV of
reliance equity fund and Benchmark index for the period
from Jan 2005 to Dec 2005. From the above graph we can see
there is some correlation between the movement of both
100
Nov 09 9.231 -3.51629 0.98959 0.97928 3379.53 -4.5215 20.4435 15.8987
Dec 09 9.801 6.17951 10.6854 114.178 3635.87 7.58508 57.5334 46.8721
TOTAL -54.0705 755.343 TOTAL -62.317 1686.86 1260.12
Y=Σy/12 -4.50588 X=Σx/12 -5.1931 140.571
7000 18
16
6000
14
5000
12
4000 10 index
8 Navs
3000
6
2000
4
1000
2
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
09 09 09 09 09 09 09 09 09 09 09 09
Analysis:
The above graph shows the movement of NAV of
reliance equity fund and Benchmark index for the period
from Jan 2005 to Dec 2005. From the above graph we can see
there is some correlation between the movement of both
1)STANDARD DEVIATION:
101
S.D= √ (y-Y)
N
2)BETA
β = N *ΣXY-(ΣX)(ΣY)
NΣX²-(ΣX)²
BETA
YEAR N* Σ XY (ΣX) ( ΣY) NΣx² (ΣX)² β
2008 6714.48 45.28385 43.48137 8280.6 2050.62 0.7617
3) ALPHA
α =Y-β(X)
YEAR Y β X α =Y-β(X)
2008 3.952852 0.7617 4.116714 0.81715
102
2009 -4.50588 0.7183 -5.19307 -0.77569
4)SHARPE RATIO
SR=Rp-Rf/SD
Where;
SHARPE
RATIO
YEAR Rp Rf SD SR
2008 50.97706 7 5.0710 8.672265
5)TREYNOR RATIO
TR=Rp-Rf/β
TREY
NOR RATIO
YEAR Rp Rf β TR
2008 50.97706 7 0.7617 57.7354
INTERPRETATION
103
In the year 2009 standard deviation was high at the rate of
7.93380 and in the year 2008 standard deviation was low at
the rate of 5.0710. in the year 2008 β is 0.7617 which is high
risk because β greater than 1 in the year 2009 β value is
0.7183 it is less risky compared to year 2008 . In the year
2008 sharpe index was higher at the rate of 8.672265 and in
the year 2009 sharpe index was lesser at the rate of –
5.56427. In the year 2008 treynor index was higher at the rate
of 57.7354 and treynor index was lesser at the rate of
-61.4587
RETURN OF PORTFOLIO
DATE NAV Rp(y) (y-Y) (y-Y)2
Jan 05 11.1677
Feb 05 11.202 0.307136 -0.02615 0.000684
Jun 05 11.3348 0.303526 -0.02976 0.000886
Jul 05 11.3711 0.320253 -0.01303 0.00017
Aug 05 11.4086 0.329783 -0.0035 1.23E-05
Sep 05 11.4462 0.329576 -0.00371 1.38E-05
Oct 05 11.4878 0.363439 0.030155 0.000909
Nov 05 11.537 0.42828 0.094996 0.009024
Dec 05 11.584 0.407385 0.074101 0.005491
TOTAL 3.666125 0.022968
Y=Σy/12 0.333284
104
Dec 05 11.584
Jan 06 11.6257 0.359979 -0.01823 0.000332
Feb 06 11.6643 0.332023 -0.04618 0.002133
Mar 06 11.7086 0.379791 0.001584 2.51E-06
Apr 06 11.7494 0.348462 -0.02975 0.000885
May 06 11.7964 0.40002 0.021813 0.000476
Jun 06 11.8397 0.367061 -0.01115 0.000124
Jul 06 11.8838 0.372476 -0.00573 3.29E-05
Aug 06 11.924 0.338276 -0.03993 0.001595
Sep 06 11.9632 0.328749 -0.04946 0.002446
Oct 06 12.0086 0.379497 0.001289 1.66E-06
Nov 06 12.0639 0.460503 0.082296 0.006773
Dec 06 12.1208 0.471655 0.093447 0.008732
TOTAL 4.538493 0.023533
Y=Σy/12 0.378208
Dec 06 12.1208
Jan 07 12.1862 0.539568 10.12145 102.4438
Feb 07 12.243 0.466101 10.04798 100.962
Mar 07 12.3054 0.509679 10.09156 101.8396
Apr 07 12.3561 0.412014 9.993898 99.87799
May 07 12.4067 0.409514 9.991398 99.82803
Jun 07 12.459 0.421546 10.00343 100.0686
Jul 07 12.5136 0.438237 10.02012 100.4028
Aug 07 12.5759 0.497858 10.07974 101.6012
Sep 07 12.6371 0.486645 10.06853 101.3753
Oct 07 0 -100
Nov 07 0 0
Dec 07 -- 0
TOTAL -95.8188 908.3993
Y=Σy/12 -9.58188
105
Dec 07 0
Jan 08 12.9355 0
Feb 08 13.0013 0.508678 0.045501 0.00207
Mar 08 13.0952 0.722235 0.259059 0.067112
Apr 08 13.2044 0.833893 0.370717 0.137431
May 08 13.2676 0.478628 0.015452 0.000239
Jun 08 13.2842 0.125117 -0.33806 0.114284
Jul 08 13.2926 0.063233 -0.39994 0.159955
Aug 08 13.3493 0.426553 -0.03662 0.001341
Sep 08 13.4105 0.458451 -0.00473 2.23E-05
Oct 08 13.4662 0.415346 -0.04783 0.002288
Nov 08 13.5369 0.525018 0.061842 0.003824
Dec 08 13.6097 0.537789 0.074613 0.005567
TOTAL 5.094942 0.494134
Y=Σy/12 Y 0.463177
Dec 08 13.6097
Jan 09 13.6668 0.419554 -0.13968 0.01951
Feb 09 13.7314 0.472678 -0.08656 0.007492
Mar 09 13.8034 0.524346 -0.03489 0.001217
Apr 09 13.8604 0.412942 -0.14629 0.021401
May 09 13.9262 0.474734 -0.0845 0.00714
Jun 09 14.0024 0.54717 -0.01206 0.000146
Jul 09 14.0846 0.587042 0.027809 0.000773
Aug 09 14.176 0.648936 0.089702 0.008047
Sep 09 14.2857 0.773843 0.21461 0.046057
106
Oct 09 14.4055 0.838601 0.279367 0.078046
Nov 09 14.4827 0.535906 -0.02333 0.000544
Dec 09 14.5515 0.47505 -0.08418 0.007087
TOTAL 6.710801 0.197461
Y=Σy/12 0.559233
STANDARD DEVIATION
S.D= √ (y-Y)
N
STANDA
RAD
DEVIATION
YEAR (y-Y)2 y-Y)2/N Square root (S.D)
2005 0.022968 1.914 1.1761
INTERPRETATION
107
INTERPRETATION
1)Standard Deviation:
2)Beta:
• βBeta is referred to how much the portfolio is dependent
on the market return so higher the β higher the dependent
hence high risk i.e systematic risk
108
i.e o.5357 which mean 10%decrease in Rm results in 5.3
Rp which is healty sigh i.e the 2006 the scheme has
lowest systematic risk .
3 Alpha
4) Sharpe ratio :
109
Since sharpe ratio is one of the most popular method of
knowing the risk associated with the particulars scheme the
higher the ratio better is the performance
5) Treynor’s Ratio:
110
controllable & uncontrollable risk i.e systematic as well as
unsystematic.
• In case of Reliance growth fund the ratio is high in
the year 2006 i.e 3.25708 compared to other four
years 2005.e 1.16950,2007 i.e 1.79626, 2008
i.e3.12612 and 2009 i.e – 12.9086.so we say the
scheme performed very well in year 2006 compared
to other four years but in 2009 it has lower
performance.
• In case of Reliance equity fund the ratio is high in the
year 2008 i.e 5.09761 compared to last year 2009 i.e
-6.37737. so we can say the scheme performed very
well in year 2008 compared to last year.
111
COMPARATIVE STUDY OF
MUTUAL FUND
Major competitor of Reliance Mutual Fund
112
Features & Benefits
113
HDFC Bank Ltd provides convenient facility called 'SPEED-
e' (Internet based transaction) whereby account holder can
submit delivery instructions electronically through SPEED-e
website (https://speed-e.nsdl.com). SPEED-e offers secured
means of transaction processing eliminating preparation of
instruction slips and submission of the same across the
counter to the depository participant. The 'IDEAS' facility
helps in viewing the current transactions and balances
(holdings) of Demat account on Internet on real time basis.
1. Investment Account
114
Online Mutual funds investment allows investor to
invest on-line in around 19 Mutual Fund companies.
ICICI Direct offers various options while investing in
Mutual Funds like Purchase Mutual Fund,
Redemption and switch between different schemes,
Systematic Investment plans, Systematic withdrawal
plan and transferring existing Mutual Funds in to
electronic mode. This account also provides facility to
invest in Government of India Bonds and ICICI
Bank Tax Saving Bonds.
ICICIDirect.com website is the primary tool to invest
in Mutual Funds, IPOs, Bonds and stock trading.
115
Fund) from Reliance Mutual Fund have emerged as top
performers in their segment across time horizons. However
investors should note that these funds are managed
aggressively; also they have displayed an opportunistic streak
by moving fluidly across market segments (large caps, mid
caps) to clock superior growth. RTSF is likely to be a similar
(high risk - high return) investment proposition within the
tax-saving funds segment.
116
pattern of investing. There are various kinds of mutual funds.
There are equity funds and debt funds. Further equity funds
can be divided into equity diversified mutual fund where
funds are invested in shares of different companies , sectoral
funds where investment is made in shares of some particular
sector like FMCG, IT, Auto, Oil & Gas, Banking etc. Every
fund has a NAV (net asset value) which is the value per unit.
It is calculated as the total asset is divided by the number of
outstanding units. As the value of asset changes, nav also
changes.
117
DATA ANALYSIS AND
INTERPRETATION
25
20
15
10
0
Reliance HDFC ICICI
118
INTERPRETATION: 50% of
respondent have Reliance Money , 30%
of respondent says that other%.
119
25
20
15
10
0
RELIANCE HDFC ICICI
INTERPRETATION:
44% respondent for Reliance,32
%forHdfc,14% for ICICI
120
ICICI 15
20
15
10
0
Reliance HDFC ICICI
INTERPRETATION:
40% respondent for Reliance,30
%forHdfc,30% for ICICI
121
Q.4 Which banking mutual fund offer
you a large number of product &
services?
Company Name Percentage of respondent
Reliance 18
HDFC 16
ICICI 16
18
17.5
17
16.5
16
15.5
15
Reliance HDFC ICICI
INTERPRETATION:
36% respondent for
Reliance,32%forHdfc,32% for ICICI
122
Q.5 Which banking mutual fund offer
you a good e-mail facility ?
Company Name Percentage of respondent
Reliance 22
HDFC 15
ICICI 13
25
20
15
10
0
Reliance HDFC ICICI
INTERPRETATION:
44% respondent for
Reliance,30%forHdfc,26% for ICICI
123
Represent by pie chart
ICICI
29%
Reliance
41%
HDFC
30%
OBSERVATION
124
44% respondent for Reliance,32
%forHdfc,14% for ICICI.
125
In Dedt scheme we have taken Reliance money Manager
Fund and Reliance Liquidty Fund .In it boths schemes are
open ended but reliance money manager is more beneficial
for reliance mutual fund .In sector specific scheme we have
taken Reliance media and entertainment fund and Reliance
Pharma fund scheme both is more efficient for Reliance
Mutual Fund.
126
SUGGESTION
• Reliance Money have to add some extra features in it
with aggressive marketing promotional strategy.
• Advertisement on television is the main source of
attraction so the company must advertise its products
heavily.
• Product must be improved .
• There should be provision of complain suggestion
boxes at each branch.
127
CONCLUSION
Mutual Fund investment is better than other raising fund .
Reliance Mutual Fund have good returns in investment .
128
BIBLIOGRAPHY
Books:
129
3. Security Analysis and Portfolio Management
by Khan and Jain.
Magazines:
• Money Outlook (May &June 2009)
Websites:
• www.Reliancemutualfund.com
• www.amfiindia.com
• www.moneycontrol.com
• www.sebi.gov.in
• www.bseindia.com
• www.nseindia.com
• www.mutualfundsindia.com
• www.indiainfoline.com
• www.in.finance.yahoo.com
• www.investing.businessweek.com
QUESTIONNAIR
130
Q.1 Which banking mutual fund do you
prefer for mutual
Fund ?
• Reliance Money
• HDFC
• ICICI
131
Q.5 Which banking mutual fund offer
you a good e-mail facility ?
• Reliance Money
• HDFC
• ICICI
DOCUMENT CAREFULLY
BEFORE INVESTING”
132