public sector unit bank’s investors awareness of mutual fund as on investment
TRANSCRIPT
SUMMER TRAINING PROJECT REPORT
ON
“PUBLIC SECTOR UNIT BANK’S
INVESTORS AWARENESS OF MUTUAL
FUND AS ON INVESTMENT”
Submitted to
U.P. Technical University, Lucknow
For The Partial Fulfillment Of
Master of Business Administration
2010-2012
Project Done at
Reliance mutual fund
Project Supervisor: Submitted By:Mr. Amit Prakash(Assistant manager ) MBA II yr.
Roll No. 1012470022
(AFFILIATED TO U.P. TECHNICAL UNIVERSITY
LUCKNOW)
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DECLARATION
Research report titled “PUBLIC SECTOR UNIT
BANK’S INVESTORS AWARENESS OF MUTUAL
FUND AS ON INVESTMENT” is my original work and
the same has not been submitted for the award of any
other diploma or degree.
Place: LUCKNOW
Date:……………… ASHISH KUMAR TIWARI
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TABLE OF CONTENTS
1. Acknowledgement
2. Abstract
3. Executive summary
4. Objectives of the project
5. Introduction of the Mutual Fund Industry:
6.
7.
8.
What are mutual funds?
Types of mutual fund scheme
Risk Vs Reward9.
10.
Pros & Cons of investing in mutual funds
Recent policy and regulatory initiatives11.
12.
Introduction of the organizationThe Reliance ADA GroupReliance Mutual Fund
13.
14.
NAVs 0f reliance MF Research design and Methodology
15.
16.
Data Collection Technique
Prospects and scope of research17.
18.
Limitation of the Project
Data analysis and interpretation19. SWOT Analysis
20. Conclusion
21. Recommendations and Suggestions
22. Appendix
23. Bibliography
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Acknowledgements
I take this opportunity to express my deep sense of gratitude to all those who
have contributed significantly by sharing their knowledge and experience in
the completion of this project work. I am greatly obliged to, for providing me
with the right kind of opportunity and facilities to complete this venture.
My first word of gratitude is due to– (Assistant Manager Reliance Mutual
Fund) My corporate guide, for his kind help and support and his valuable
guidance throughout my project. I am thankful to him for providing me with
necessary insights and helping me out at every single step. I am highly
thankful to (Assistant Professor) — my internal faculty guide under whose
able guidance this project work was carried out. I thank him for his continuous
support and mentoring during the tenure of the project. Finally, I would also
like to thank all my dear friends for their cooperation, advice and
encouragement during the long and arduous task of carrying out the project
and preparing this report.
ABSTRACT
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I joined RELIANCE MUTUAL FUND for internship program (as a part of
MBA); I only had a theoretical knowledge of related subjects, thanks to my
Faculty Guide and my Company Mentor for giving me an opportunity to
implement my theoretical knowledge in practical aspect.
My Company mentor Mr. Amit Prakash has given me the project to manage
awareness of union bank investors about mutual fund, updating all the
necessary information to them & to empanel new investors by visiting banks
with Reliance Mutual Fund in Lucknow. I started this project by understanding
the concept & technicalities of Mutual Fund. Analysis of Lucknow market
through Primary & Secondary data helped me for further strategy. I have
collected the secondary data of different ratios, portfolios, volatility measures,
NAV’s performance & returns of all the leading AMCs from the net and other
source to make my analysis more effective. For the analysis of services’ &
overall quality of Reliance AMC with other leading AMCs, I collected the
Primary Data through Questionnaire. It helped me a lot to complete my project
on time. Interaction with IFAs (Individual Financial Adviser) also helped me to
understand more the concept & technicalities of mutual funds & also, compare
our AMC with other AMCs because these are the persons who have enough
knowledge about the investment market and investor behavior.
The Final Report includes, the analysis of the whole data (primary and
Secondary) by putting in Graphical Mode. This analysis might be a Value
Addition to RELIANCE Mutual Fund to make a strategy for particular Area
(LUCKNOW).
Executive Summary
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The project involves a study of mutual fund industry and evaluating and
suggesting measures to create the awareness among unit bank investor
about mutual funds of Reliance Mutual fund and also to identify the strong as
well as the weak points so that an appropriate sales pitch could be developed.
The sales pitch highlighted features like Reliance being the pioneer in terms
of AUM, its huge distributor base, returns being independent of the market
ups and downs, etc. Calls were made to all the different channel distributors
(Retail) across all tiers from company’s database and appointments were
sought. Thereafter a brief questionnaire was tilled up by them regarding their
and consumer’s perception about reliance since they get the direct interaction
with investors.
The second part of the project is to study & analyze the comparison of beta,
volatility measures, portfolios and returns of different large Cap, mid cap &
small cap funds because every distributors ask about the different ratios &
beta (risk factor) of Reliance. So I have to provide all the necessary
information to them so as to manage the relationship with them.
A comparative analysis is also done of Reliance Mutual Fund with other
AMC’s in order to find the market position of the company with respect to
services provided by it. It was found that there are many issues on which the
company needs to improve, which are elaborated in future parts of the report.
Objective
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This project aims to identify PUBLIC SECTOR UNIT BANK’S INVESTORS
AWARENESS OF MUTUAL FUND AS ON INVESTMENT for the ‘Reliance
mutual funds’, to know how much people are aware of mutual fund as
investment option specially union banks public sectors investors. A modest
attempt has been made to study and understand the behavior and perception
of the target audience, about mutual funds and their awareness.
Mutual Fund Industry
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Introduction
The mutual fund industry is a lot like the film star of the finance business.
Though it is perhaps the smallest segment of the industry, it is also the most
glamorous – in that it is a young industry where there are changes in the rules
of the game everyday, and there are constant shifts and upheavals. The
mutual fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is
achieved by the pooling of a number of small investments into a large bucket.
Yet it has been the subject of perhaps the most elaborate and prolonged
regulatory effort in the history of the country.
The Indian mutual fund industry is one of the fastest growing sectors in
the Indian capital and financial markets. The mutual fund industry in India has
seen dramatic improvements in quantity as well as quality of product and
service offerings in recent years. Mutual funds assets under management
grew by 96% between the end of 2001 and June 2007 and as a result it rose
from 8% of GDP to 15%. The industry has grown in size and manages total
assets of more than $30351 million. Of the various sectors, the private sector
accounts for nearly 91% of the resources mobilized showing their
overwhelming dominance in the market. Individuals constitute 98.04% of the
total number of investors and contribute US $12062 million, which is 55.16%
of the net assets under management.
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Steady growth of mutual fund business in India in the four decades from 1964, when UTI was set up is given in the table below:
Period (Year)
Aggregate InvestmentIn Crores of
Rupees
Period (Year)
Aggregate Investment In Crores of
Rupees
1964-69 65 1992-93 46988.02
1969-74 172 1993-94 61301.21
1974-79 402 1994-95 75050.21
1979-84 1261 1995-96 81026.52
1986-87 4563.68 1996-97 80539.00
1987-88 6738.81 1997-98 68984.00
1988-89 13455.65 1998-99 63472.00
1989-90 19110.92 1999-00 107966.10
1990-91 23060.45 2000-01 90587.00
1991-92 37480.20 2001-02 94571.00
Mutual Fund Industry in its true spirit rooted in a free market and oriented
towards competitive functioning with the dedicated goal of service to the
investors can be said to have settled in India only in 1993. However the
industry took its roots much earlier with the setting up of the Unit Trust in India
(UTI) in 1964 by the Government of India. During the last 36 years, UTI has
grown to be a dominant player in the industry with assets of over Rs.72,
333.43 Crores as on March 31, 2000. The UTI is governed by a special
legislation, the Unit Trust of India Act, 1963. In 1987 public sector banks and
insurance companies were permitted to set up mutual funds and accordingly
since 1987, 6 public sector banks have set up mutual funds.
Also the two Insurance companies LIC and GIC established mutual funds.
Securities Exchange Board of India (SEBI) formulated the Mutual Fund
(Regulation) 1993, which for the first time established a comprehensive
regulatory framework for the mutual fund industry. Since then several mutual
funds have been set up by the private and joint sectors.
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WHAT ARE MUTUAL FUNDS?
CONCEPT:
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.
DEFINITION:
“Mutual funds are collective savings and investment vehicles where
savings of small (or sometimes big) investors are pooled together to invest for
their mutual benefit and returns distributed proportionately”. Pooling of money
ensures that small investors get the benefit of advice and expertise that is
normally available only to very large investors.
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“A mutual fund is an investment that pools your money with the money of an
unlimited number of other investors. In return, you and the other investors
each own shares of the fund. The fund's assets are invested according to an
investment objective into the fund's portfolio of investments. Aggressive
growth funds seek long-term capital growth by investing primarily in stocks of
fast-growing smaller companies or market segments. Aggressive growth
funds are also called capital appreciation funds”.
“Mutual Funds are investment companies that make investments on behalf of
individuals and institutions that share common financial goals. The suitability
of a particular mutual fund for an individual investor depends on the type and
nature of the fund's investments and amount of diversification. Funds are
rated widely as to risk and return, and such ratings can be used to establish a
match with investor goals and suitability”.
"Mutual Funds schemes are managed by respective Asset Management
Companies sponsored by financial institutions, banks, private companies or
international firms. The biggest Indian AMC is UTI while Alliance, Franklin
Templeton etc are international AMC's.
Growth of Mutual Fund Business in India
The Indian Mutual fund business has passed through three phases. The first
phase was between 1964 and 1987, when the only player was the Unit Trust
of India, which had a total asset of Rs. 6,700/- crores at the end of 1988. The
second phase is between 1987 and 1993 during which period 8 funds were
established (6 by banks and one each by LIC and GIC). The total assets
under management had grown to Rs. 61,028/- crores at the end of 1994 and
the number of schemes were 167. The third phase began with the entry of
private and foreign sectors in the Mutual fund industry in 1993. Kothari
Pioneer Mutual fund was the first fund to be established by the private sector
in association with a foreign fund. The share of the private players has risen
rapidly since then.
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Within a short period of seven years after 1993 the growth statistics of
the business of Mutual Funds in India is given in the table below:
Scope for Development of Mutual Fund Business in India
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. India has a burgeoning population of
middle class now estimated around 300 million.
A typical Indian middle class family can have liquid savings ranging from Rs.2
to Rs.10 Lacs today. Investments in Banks are liquid and safe, but with the
falling rate of interest offered by Banks on Deposits, it is no longer attractive.
At best a part can be saved in bank deposits, but what are the other sources
of investment for the common man? Mutual Fund is the ready answer. Viewed
in this sense globally India is one of the best markets for Mutual Fund
Business, so also for Insurance business.
This is the reason that foreign companies compete with one another in setting
up insurance and mutual fund business units in India. The sheer magnitude of
the population of educated white collar employees provides unlimited scope
for development of Mutual Fund Business in India.
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Amount(Rs Crores)
Percentage (%)
UTI 72,333.43 67.00
Public Sector 10,444.78 9.68
Private Sector 25,167.89 23.32
Total 1,07,946.10 100.00
Mutual funds- A BRIEF history :
The mutual fund industry started in India in a small way with the UTI Act
creating what was effectively a small savings division within the RBI. Over a
period of 25 years this grew fairly successfully and gave investors a good
return, and therefore in 1989, as the next logical step, public sector banks and
financial institutions were allowed to float mutual funds and their success
emboldened the government to allow the private sector to foray into this area.
The initial years of the industry also saw the emerging years of the Indian
equity market, when a number of mistakes were made and hence the mutual
fund schemes, which invested in lesser-known stocks and at very high levels,
became loss leaders for retail investors. From those days to today the retail
investor, for whom the mutual fund is actually intended, has not yet returned
to the industry in a big way. But to be fair, the industry too has focused on
brining in the large investor, so that it can create a significant base corpus,
which can make the retail investor feel more secure. 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 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.
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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 Canbank Mutual Fund
(Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual
Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92).
LIC established its mutual fund in June 1989 while GIC had set up its mutual
fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of
Rs.47, 004 crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund
families. Also, 1993 was the year in which the first Mutual Fund Regulations
came into being, under which all mutual funds, except UTI were to be
registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July
1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry
now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were
33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of
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India with Rs.44, 541 crores of assets under management was way ahead of
other mutual funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI
was bifurcated into two separate entities. One is the Specified Undertaking of
the Unit Trust of India with assets under management of Rs.29, 835 crores as
at the end of January 2003, representing broadly, the assets of US 64
scheme, assured return and certain other schemes.
The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund 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.
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The graph indicates the growth of assets over the years.
2003-2004: A retrospect :
This year was extremely eventful for mutual funds. The aggressive
competition in the business took its toll and two more mutual funds bit the
dust. Alliance decided to remain in the ring after a highly public bidding war
did not yield an acceptable price, while Zurich has been sold to HDFC Mutual.
The growth of the industry continued to be corporate focused barring a few
initiatives by mutual funds to expand the retail base. Large money brought
with it the problems of low retention and consequently low profitability, which
is one of the problems plaguing the business. But at the same time, the
industry did see spectacular growth in assets, particularly among the private
sector players, on the back of the continuing debt bull run. Equity did not find
favor with investors since the market was lack-luster and performances of
funds, barring a few, were quite disappointing for investors. The other aspect
of this issue is that institutional investors do not usually favor equity. It is
largely a retail segment product and without retail depth, most mutual funds
have been unable to tap this market. The tables given below are a snapshot
of the AUM story, for the industry as a whole and for debt and equity
separately.
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TYPES OF MUTUAL FUND SCHEMES
BY STRUCTURE
OPEN-ENDED SCHEME
CLOSE-ENDED SCHEME
INTERVAL SCHEME
BY INVESTMENT OBJECTIVE
GROWTH SCHEME
INCOME SCHEME
BALANCED SCHEME
MONEY MARKET SCHEME
OTHER SCHEMES
TAX SAVING SCHEME
SECTOR SPECIFIC SCHEME
INDEX SCHEME
Risk Vs Reward
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Having understood the basics of mutual funds the next step is to build a
successful investment portfolio. Before you can begin to build a portfolio, one
should understand some other elements of mutual fund investing and how
they can affect the potential value of your investments over the years.
The first thing that has to be kept in mind is that when you invest in mutual
funds, there is no guarantee that you will end up with more money when you
withdraw your investment than what you started out with. That is the potential
of loss is always there. The loss of value in your investment is what is
considered risk in investing.
Even so, the opportunity for investment growth that is possible through
investments in mutual funds far exceeds that concern for most investors.
Here’s why.
At the cornerstone of investing is the basic principal that the greater the risk
you take, the greater the potential reward. Or stated in another way, you get
what you pay for and you get paid a higher return only when you're willing to
accept more volatility.
Risk then, refers to the volatility -- the up and down activity in the markets and
individual issues that occurs constantly over time. This volatility can be
caused by a number of factors -- interest rate changes, inflation or general
economic conditions.
It is this variability, uncertainty and potential for loss, that causes investors to
worry. We all fear the possibility that a stock we invest in will fall substantially.
But it is this very volatility that is the exact reason that you can expect to earn
a higher long-term return from these investments than from a savings
account.
Different types of mutual funds have different levels of volatility or potential
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price change, and those with the greater chance of losing value are also the
funds that can produce the greater returns for you over time. So risk has two
sides: it causes the value of your investments to fluctuate, but it is precisely
the reason you can expect to earn higher returns.
You might find it helpful to remember that all financial investments will
fluctuate. There are very few perfectly safe havens and those simply don't pay
enough to beat inflation over the long run.
Types of risks
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All investments involve some form of risk. Consider these common types of
risk and evaluate them against potential rewards when you select an
investment.
Market Risk At times the prices or yields of all the securities in a particular
market rise or fall due to broad outside influences. When this happens, the
stock prices of both an outstanding, highly profitable company and a fledgling
corporation may be affected. This change in price is due to "market risk". Also
known as systematic risk.
Inflation Risk Sometimes referred to as "loss of purchasing power."
Whenever inflation rises forward faster than the earnings on your investment,
you run the risk that you'll actually be able to buy less, not more. Inflation risk
also occurs when prices rise faster than your returns.
Credit Risk In short, how stable is the company or entity to which you lend
your money when you invest? How certain are you that it will be able to pay
the interest you are promised, or repay your principal when the investment
matures?
Interest Rate Risk Changing interest rates affect both equities and bonds
in many ways. Investors are reminded that "predicting" which way rates will go
is rarely successful. A diversified portfolio can help in offsetting these
changes.
Exchange risk A number of companies generate revenues in foreign
currencies and may have investments or expenses also denominated in
foreign currencies. Changes in exchange rates may, therefore, have a
positive or negative impact on companies which in turn would have an effect
on the investment of the fund.
Investment Risks The sectoral fund schemes, investments will be
predominantly in equities of select companies in the particular sectors.
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Accordingly, the NAV of the schemes are linked to the equity performance of
such companies and may be more volatile than a more diversified portfolio of
equities.
Changes in the Government Policy
Changes in Government policy especially in regard to the tax benefits may
impact the business prospects of the companies leading to an impact on the
investments made by the fund
Effect of loss of key professionals and inability to adapt business to the rapid
technological change.
An industries' key asset is often the personnel who run the business i.e.
intellectual properties of the key employees of the respective companies.
Given the ever-changing complexion of few industries and the high
obsolescence levels, availability of qualified, trained and motivated personnel
is very critical for the success of industries in few sectors. It is, therefore,
necessary to attract key personnel and also to retain them to meet the
changing environment and challenges the sector offers. Failure or inability to
attract/retain such qualified key personnel may impact the prospects of the
companies in the particular sector in which the fund invests.
PROS & CONS OF INVESTING IN MUTUAL
FUNDS:
The Advantages of Investing in a Mutual Fund:
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Professional Management:
The investor avails of the services of experienced and skilled professionals
who are backed by a dedicated investment research team which analyses the
performance and prospects of companies and selects suitable investments to
achieve the objectives of the scheme.
Diversification:
Mutual Funds invest in a number of companies across a broad cross-section
of industries and sectors. This diversification reduces the risk because seldom
do all stocks decline at the same time and in the same proportion. You
achieve this diversification through a Mutual Fund with far less money than
you can do on your own.
Convenient Administration:
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and unnecessary follow
up with brokers and companies. Mutual Funds save your time and make
investing easy and convenient.
Return Potential:
Over a medium to long-term, Mutual Funds have the potential to provide a
higher return as they invest in a diversified basket of selected securities.
Low Costs:
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Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.
Liquidity:
In open-ended schemes, you can get your money back promptly at net asset
value related prices from the Mutual Fund itself. With close-ended schemes,
you can sell your units on a stock exchange at the prevailing market price or
avail of the facility of direct repurchase at NAV related prices which some
close-ended and interval schemes offer you periodically.
Transparency:
You get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the proportion
invested in each class of assets and the fund manager's investment strategy
and outlook.
Flexibility:
Through features such as regular investment plans, regular withdrawal plans
and dividend reinvestment plans, you can systematically invest or withdraw
funds according to your needs and convenience.
Well Regulated:
All Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors.
The operations of Mutual Funds are regularly monitored by SEBI.
Drawbacks of mutual funds
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Fluctuating Returns:
Mutual funds are like many other investments without a guaranteed return:
there is always the possibility that the value of your mutual fund will
depreciate. Unlike fixed-income products, such as bonds and Treasury
bills, mutual funds experience price fluctuations along with the stocks that
make up the fund. When deciding on a particular fund to buy, you need to
research the risks involved just because a professional manager is looking
after the fund, that doesn't mean the performance will be stellar.
Another important thing to know is that mutual funds are not guaranteed
by the U.S. government, so in the case of dissolution, you won't get
anything back. This is especially important for investors in money market
funds. Unlike a bank deposit, a mutual fund will be insured by the Federal
Deposit Insurance Corporation (FDIC).
Diversification
Although diversification is one of the keys to successful investing, many
mutual fund investors tend to overdiversify. The idea of diversification is to
reduce the risks associated with holding a single security;
overdiversification (also known as diworsification) occurs when investors
acquire many funds that are highly related and, as a result, don't get the
risk reducing benefits of diversification.
At the other extreme, just because you own mutual funds doesn't mean
you are automatically diversified. For example, a fund that invests only in a
particular industry or region is still relatively risky.
Cash, Cash and More Cash:
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As you know already, mutual funds pool money from thousands of
investors, so everyday investors are putting money into the fund as well as
withdrawing investments. To maintain liquidity and the capacity to
accommodate withdrawals, funds typically have to keep a large portion of
their portfolios as cash. Having ample cash is great for liquidity, but money
sitting around as cash is not working for you and thus is not very
advantageous.
Costs:
Mutual funds provide investors with professional management, but it
comes at a cost. Funds will typically have a range of different fees that
reduce the overall payout. In mutual funds, the fees are classified into two
categories: shareholder fees and annual operating fees.
The shareholder fees, in the forms of loads and redemption fees are paid
directly by shareholders purchasing or selling the funds. The annual fund
operating fees are charged as an annual percentage usually ranging from
1-3%. These fees are assessed to mutual fund investors regardless of the
performance of the fund. As you can imagine, in years when the fund
doesn't make money, these fees only magnify losses.
Misleading Advertisements:
The misleading advertisements of different funds can guide investors
down the wrong path. Some funds may be incorrectly labeled as growth
funds, while others are classified as small cap or income funds. The
Securities and Exchange Commission (SEC) requires that funds have at
least 80% of assets in the particular type of investment implied in their
names. How the remaining assets are invested is up to the fund manager.
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However, the different categories that qualify for the required 80% of the
assets may be vague and wide-ranging. A fund can therefore manipulate
prospective investors by using names that are attractive and misleading.
Instead of labeling itself a small cap, a fund may be sold as a "growth
fund". Or, the "Congo High-Tech Fund" could be sold with the title
"International High-Tech Fund".
Evaluating Funds:
Another disadvantage of mutual funds is the difficulty they pose for
investors interested in researching and evaluating the different funds.
Unlike stocks, mutual funds do not offer investors the opportunity to
compare the P/E ratio, sales growth, earnings per share, etc. A mutual
fund's net asset value gives investors the total value of the fund's portfolio
less liabilities, but how do you know if one fund is better than another?
Furthermore, advertisements, rankings and ratings issued by fund
companies only describe past performance. Always note that mutual fund
descriptions/advertisements always include the tagline "past results are
not indicative of future returns". Be sure not to pick funds only because
they have performed well in the past - yesterday's big winners may be
today's big losers.
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-gains 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.
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Structure of Investment Companies (Mutual Funds)
- 28 -
ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the organiz
ational set up of a mutual fund:
Organization of a Mutual Fund
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Fund Sponsor :
A 'sponsor' is any person who, acting alone or in combination with another
body corporate, establishes a MF. The sponsor of a fund is similar to the
promoter of a company. In accordance with SEBI Regulations, the sponsor
forms a trust and appoints a Board of Trustees, and 'also generally appoints
an AMC as fund manager. In addition, the sponsor also appoints a custodian
to hold the fund assets. The sponsor must contribute at least 40% of the net
worth of the AMC and possess a sound financial track record over five years
prior to registration.
Mutual Fund :
A MF in India is constituted in the form of a trust under the Indian Trusts Act,
1882. The fund invites investors to contribute their money in the common
pool, by subscribing to 'units' issued by various schemes established by the
trust. The assets of the trust are held by the trustee for the benefit of unit
holders, who are the, beneficiaries of the trust. Under the Indian Trusts Act,
the trust or the fund has no independent legal capacity; it is the trustee(s) who
have the legal capacity.
Custodian:
Often an independent organization, it takes custody of securities and other
assets of mutual funds, its units and segregating assets and settlement
between schemes. Their charges range between .15-1.2 percent of the net
value of holding. Custodian can service more than one find.
Trustees:
- 30 -
The MF or trust can either be managed by the Board of Trustees, which is a
body of individuals, or by a Trust Company, which is a corporate body. Most
of the funds in India are managed by Board of Trustees. The trustees being
the primary; guardians of the unit holders’ funds and assets, a trustee has to
be a person of high repute and integrity. The trustees, however, do not
directly manage the portfolio securities. The portfolio is managed by the AMC
as per the defined objectives, accordance with Trust Deed and SEBI (Mutual
Funds) Regulations.
Asset Management Company :
The AMC, which is appointed by the sponsor or the trustees and approved by
SEBI, acts like the investment manager of the trust. The AMC functions under
the supervision of its own Board of Directors, and also under the direction of
the trustees and SEBI.
AMC in the name of the trust, floats and manages the different investment
'schemes' as per the SEBI Regulations and as per the Investment
Management Agreement signed with the Trustees.
Apart from these, the MF has some other fund constituents, such as
custodians and depositories, banks, transfer agents and distributors. The
custodian is appointed for safe keeping of securities and participating in the
clearing system through approved depository.
The bankers handle the financial dealings of the fund. Transfer agents a
responsible for issue and redemption of units of MF. AMCs appoint
distributors of brokers who sell units on behalf of the Fund, and also serve as
investment advisers.
- 31 -
Besides brokers, independent individuals are also appointed as 'agents' for
the purpose of selling fund schemes to investors. The regulations require
arm's length relationship between the fund sponsors, trustees, custodians and
AMC.
Valuation of Mutual Funds
Since owner is a part owner of a Mutual Fund, it is necessary to establish the
value of his part i.e. each share or unit that an investor holds need to be
assigned a value.
These units held by an investor evidence the ownership of the fund’s assets,
the value of the total assets of the fund when divided by the total number of
units issued by mutual funds gives us the value of one unit.
This is generally called the Net Assets Value (NAV) of one unit or one share.
The value of investor’s part ownership is thus determined by the NAV of the
numbers of units held.
A Mutual Fund is a common investment vehicle to where the assets of the
fund belong directly to the investors. Investor’s subscriptions are accounted
for by the fund not as liabilities or deposits but as Unit Capital.
The investments made on behalf of the investors are refecleted on the assets
side which are the main constituent of the balance sheet and the liabilities of
strictly in short term nature may also be part of the balance sheet.
The funds net assets are therefore defined as the assets- minus liabilities.
- 32 -
As there are many investors in a fund, it is common practice for mutual fund to
complete the share of each investor on the basis of the value of Net Assets
per Share/Unit, commonly known as the Net Asset Value (NAV).
NAV = Net Assets of the scheme /Number of units outstanding, i.e.
Market Value of investment + receivables + other accrued income +
other asset – accrued expenses – other payables – other liabilities/ No. Of
units outstanding as at the NAV date
For the purpose of the NAV calculations, the day on which NAV is
calculated by a fund is known as the Valuation Date.
NAV of all the schemes must be calculated and published at least
weekly for closed –end schemes and daily for open-ended schemes.
NAV’s for a day must also be posted on AMFT’s website by 8:00pm on
that day.
A fund’s NAV is a affected by four sets of factors:
1. Purchase and sale of investment securities.
2. Valuation of all investments securities held
3. Other assets and liabilities, and
4. Units sold or redeemed
“Other Assets” include any income due to the fund but not received
as on the valuation date (for example, dividend announced by the
company yet to be received)
- 33 -
“Other Liabilities” includes expenses payable by the fund, for
example Custodian fees or even the management fees payable to the
AMC.
Types of Investment Companies
Investment companies fall into two general categories:
Open-end; and
Closed-end companies.
Open - end Investment Companies:
These companies raise capital through issue of shares, which are not traded
on stock exchanges, but handled by specified dealer in over-the-counter,
transactions. The money obtained from the sale of share is invested directly in
the shares of other companies. Usually, no level age occurs in the open-end
fund, unless the company can borrow money to invest, as some companies
do. An example of open-end investment company in India is the Unit Trust of
India. It came into existence on 1 February 1964 under the Unit Trust of India
Act, 1963. The actual sales of units were commenced by the UTI from 1 July
1964. The sale is conducted through branches of banks and through
members of recognized stock exchanges. The UTI is declared to be a
balanced fund, investing in both equity and fixed- income securities.
Closed-end Investment Companies
These companies operate in much the same fashion as any industrial
company. It issues a fixed number of shares, which may be listed on a stock
exchange and bought and sold like any company's shares. If the management
desires, it might revise additional equity issues, bonds or preferred stock
issues. Majority of such companies have bonds and preferred stocks
outstanding as apart of their capital structure.
The use of fixed income securities results in financial leverage for equity
shareholders. Such a company will have both asset leverage as well as
- 34 -
earnings leverage. Asset leverage is said to occur when the price of equity
owned by the company (company's assets) increase or decreases.
If the value of the total assets increases, there is greater proportional increase
in the value of the equity shares of the investment company and being fixed
claims, against assets, any increase in assets goes to equity shareholders.
Thus, as the value of investment of an investment company increases the
value of its equity shares increases faster. However, as the asset value
increases without a corresponding increase in debt capital, the leverage effect
is diminished. The interest of debt and the dividends on preference shares
represent a fixed charge on the company's earnings
. Any increase in earnings over the interest payments and dividends goes to
the equity shareholders. As long as company earns more than is needed to
pay the interest and dividends, the owner will benefit owing to the earning
leverage. As earnings increase, the rate of increase of the return to the equity
shareholder increases faster than the rate of increase of the return on the total
assets, but, it may have adverse effects when earnings fall and assets decline
in value. A closed-end company that raises a substantial portion of its capital
by way of debt will be susceptible to wider fluctuations in value, than a
company with a relatively small amount of debt. These leverage effects to
also tend to accentuate the cyclical movement of stock prices.
Closed-end investment companies offer various Advantages to an
investor. Some of these may be listed as follows:
Their investment policies are highly flexible and hence, they provide an
opportunity for greater diversification of investment than open-end
companies.
Due to greater diversification and a higher scope for gearing of capital,
they offer better returns to investors.
They have an additional advantage of ploughing back of profit and, hence
increasing returns to their members. Risk of loss is minimized due to
- 35 -
above reasons. Given that most such companies are listed on the stock
exchange, shareholders face no problems in disposing of their holdings.
In addition to the above, there are many other types of mutual funds
which may be classified on the basis of their objectives and portfolios.
These mutual funds are:
Equity funds: Those funds which invest only in equity shares and
undertake the associated risk;
Income funds: Those funds which invest in securities which will earn high
income;
Growth funds: Those funds which invest in growth oriented securities so
as to assure appreciation in their value in the long run;
Liquid funds: Those funds which specialize in investing in short- term
money market instruments with emphasis on liquidity with a low rate of
return;
Special funds: Those funds which invest only in specialized channels like
(a) gold and silver, (b) a specific country (Japan Fund, India Fund, etc.),
(c) a specific category of companies (Technology Fund);
Index-Linked funds: Those funds which invest only in those shares which
are included in the market indices and in the same proportion. They move
with the market index;
Leveraged funds: Leveraged funds are those which increase the size of
the value of the portfolio and benefit the shareholders by gains exceeding
the cost of the borrowed funds;
Real Estate fund: Such funds are meant for the real estate ventures.
Balanced funds: Those which divide their investments between equity
shares and bonds in order to meet the objectives of safety, growth, and
regularity of income;
Hedge funds: Funds that buy shares whose prices are likely to go up and
sell short, shares whose prices are expected to go down; and finally
- 36 -
Offshore funds: These specialize in investing in foreign companies.
REGULATION OF MUTUAL FUNDS
The primary authority for regulating Mutual Funds in India is SEBI. SEBI
requires all Mutual Funds to be registered with it. The SEBI (Mutual Funds)
Regulations, 1996 outlined the broad framework of authorization process and
selection criteria. Accordingly, the authorization for the mutual fund will be
granted in two steps.
The first step will involve approval and eligibility of each of the constituents of
the mutual fund viz. sponsors, trustees, asset management company (AMC)
and custodian. For this purpose the interested parties would be required to
submit necessary information only in on prescribed formats).
The second stage will involve formal authorization of the mutual funds for
business. For this purpose the sponsor or the AMC would be required to apply
to SEBI in an application form for authorization along with an application fee
to be specified later.
The authorisation shall be granted subject to conditions as may be considered
necessary by SEBI and payment of auth9risation fee as may be specified.
It shall be SEBI's endeavor to advise an applicant within 10 to 15 working
days of receipt of his letter / application form regarding status of his
application.
The eligibility of the sponsor will be examined with respect to the following:
Sponsor could be a registered company, scheduled bank or all India or
State level financial institution;
More than one registered company can also act as sponsor for a mutual
fund;
- 37 -
Joint sponsorship with any of the entities in (a) above will also be eligible,
and
Sponsoring registered companies could be private or public limited
companies either listed or unlisted.
Sponsor and where there is more than one sponsor, each of the sponsoring
entities, must have a sound track record as evidenced by
Audited balance sheet and profit and loss .account for last five years;
A positive net worth and consistent record of profitability and a good
financial standing during the last five years;
Good credit record with banks and financial institutions;
General reputation in the market;
Organization and management, and
Fairness in business transactions.
Sponsor or more than one sponsor put together should have at least a 40
per cent stake in the paid-up equity of the AMC.
Guidelines for mutual funds as per SEBI
The AMC will be authorized by SEBI on the basis of the criteria indicated in
the guidelines. ,
SEBI regulations clearly state that all funds and schemes operational under
them would be bound by their regulations. SEBI has recently taken following
steps for the regulation of mutual funds:
Formation :
Certain structural changes have also been made in the mutual fund industry,
as part of which, mutual funds are required to set up asset management
companies with fifty percent independent directors, separate board of trustee
companies, consisting of a minimum fifty percent of independent trustees and
- 38 -
to appoint independent custodians. This is to ensure an arm's length
relationship between trustees, fund managers and custodians, and is in
contrast with the situation prevailing earlier in which all three functions were
often performed by one body which was usually the sponsor of the fund or a
subsidiary of the sponsor .
Thus, the process of forming and floating mutual funds has been made a
tripartite exercise by authorities. The trustees, the asset management
companies (AMCs) and the mutual fund shareholders form the three legs.
SEBI guidelines provide for the trustees to maintain an arm's length
relationship with the AMCs and do all those things that would secure the right
of investors.
With funds being managed by AMCs and custody of assets remaining with
trustees, an element of counter-balancing of risks exists as both can keep
tabs on each other.
Registration :
In January 1993, SEBI prescribed registration of mutual funds taking into
account track record of a sponsor, integrity in business transactions and
financial soundness while granting permission.
This will curb excessive growth of the mutual funds and protect investor's
interest by registering only the sound promoters with a proven track record
and financial strength.
In February 1993, SEBI cleared six private sect9r mutual funds viz. 20th
Century Finance Corporation, Industrial Credit& Investment Corporation of
India, Tata Sons, Credit Capital Finance Corporation, Ceat Financial Services
and Apple Industries.
Documents:
- 39 -
The offer documents of schemes launched by mutual funds and the scheme
particulars are required to be vetted by SEBI. A standard format for mutual
fund prospectuses is being formulated.
Code of advertisement :
Mutual funds have been required to adhere to a code of advertisement.
Assurance on returns :
SEBI has introduced a change in the Securities Control and Regulations Act
governing the mutual funds. Now the mutual funds were prevented from
giving any assurance on the land of returns they would be providing.
However, under pressure from the mutual funds, SEBI revised the guidelines
allowing assurances on return subject to certain conditions. Hence, only those
mutual funds which have been in the market for at least live years are allowed
to assure a maximum return of 12 per cent only, for one year. With this, SEBI,
by default, allowed public sector mutual funds an advantage against the newly
set up private mutual funds.
As per basic tenets of investment, it can be justifiably argued that investments
in the capital market carried a certain amount of risk, and any investor
investing in the markets with an aim of making profit from capital appreciation,
or otherwise, should also be prepared to bear the risks of loss.
Minimum corpus :
The current SEBI guidelines on mutual funds prescribe a minimum s art-up
corpus of Rs.50 crore for an open-ended scheme, and Rs.20 crore corpus :or
closed-ended scheme, failing which application money has to be refunded.
The idea behind forwarding such a proposal to SEBI is that in the past, the
minimum corpus requirements have forced AMCs to solicit funds from
corporate bodies, thus, reducing mutual funds into quasi-portfolio
management outfits. In fact, the Association' of Mutual Funds in India (AMFI)
- 40 -
has repeatedly appealed to the regulatory authorities for scrapping the
minimum corpus requirements.
Institutionalization:
The efforts of SEBI have, in the last few years, been to institutionalise the
market by introducing proportionate allotment and increasing the minimum
deposit amount to Rs.5000 etc. These efforts are to channel the investment of
individual investors into the mutual funds.
Investment of funds mobilized :
In November 1992, SEBI increased the time limit from six months to nine
months within which the mutual funds have to invest resources raised from
the latest tax saving schemes. The guideline was issued to protect the mutual
funds from the disadvantage of investing funds in the bullish market at very
high prices and suffering from poor NA V thereafter.
Investment in money market :
SEBI guidelines say that mutual funds can invest a maximum of 25 per cent of
resources mobilised into money-market instruments in the first six months
after closing the funds and a maximum of 15 per cent of the corpus after six
months to meet short term liquidity requirements. Private sector mutual funds,
for the first time, were allowed to invest in the call money market after this
year's budget.
As SEBI regulations limit their exposure to money markets, mutual funds are
not major players in the call money market. Thus, mutual funds do not have a
significant impact on the call money market. SEBI also conclude that mutual
funds were not responsible for the unprecedented shooting up of call money
rates.
- 41 -
Some funds exceeded their limits in an effort to improve their sagging net
asset values (NAVs), usually, funds can early only about 9-12 per cent. Thus,
the prospect of earning more than 40 per cent may have been tempting.
Valuation of investment:
SEBI should work in tandem with the Institute of Chartered Accountants of
India (ICAI) to take up a fresh look at mutual fund regulations enacted in
1993.
The valuation of investments, a key aspect of fund accounting, as on balance
sheet date, needs review, SEBI regulations 1993, give discretionary powers to
the fund managers as far as the valuation of the investment portfolio on the
balance sheet date is concerned.
There are no accounting standards or guidelines prescribed by the ICAI for
the valuation of a mutual fund's investment portfolio.
The mutual funds are clearly taking advantage of this situation and valuing the
portfolio at cost of acquisition. The subsequent depreciation or appreciation in
the investment portfolio is not accounted for.
Thus, the mutual funds may be able to show profits in the balance sheet even
if there is severe erosion in the value of the investment portfolio.
This erosion in the values of the investment portfolios is clearly seen in the net
asset values (NA V) as on the balance sheet date. But the accounts of the
mutual funds do not reveal the same.
The objective of the accounting in case of a mutual fund should be besides
showing details of income, expenses, assets and liabilities, has to reveal the
true value of the fund.
The value of the fund is already reflected in, it’s NAV and the balance sheet is
expected to be in consonance with this value. This requires that the
investment portfolio be calculated at market values, providing for any
depreciation or appreciation. .
- 42 -
The transparent and well understood declaration or Net Asset Values (NAVs)
of mutual fund schemes is an important issue in providing investors with
information as to the performance of the fund.
SEBI had warned some mutual funds earlier of unhealthy market practices,
and is currently working on a common format for calculating the net asset
values (NAVs) of mutual funds, which are done in various ways by them at
present.
Inspection :
SEBI inspect mutual funds every year. A full SEBI inspection of all f the 27
mutual funds were proposed to be done by the March 1996 to streamline their
operations and protect the investor's interests. Mutual funds are monitored
and inspected by SEBI to ensure compliance with the regulations.
Underwriting :
In July 1994, SEBI permitted mutual funds to take up underwriting of primary
issues as apart of their investment activity. This step may assist the mutual
funds in diversifying the business.
Conduct :
In September 1994, it was clarified by SEBI that mutual funds shall not offer
buy back schemes or assured returns to corporate investors. The Regulations
governing Mutual Funds and Portfolio Managers ensure transparency in their
functioning.
Voting rights :
- 43 -
In September 1993, mutual funds were allowed to exercise their voting rights.
Department of Company Affairs has reportedly granted mutual funds the right
to vote as full-fledged shareholders in companies where they have equity
investments.
- 44 -
RECENT POLICY AND REGULATORY
INITIATIVES
The policy and regulatory initiatives since April 2000 include: Investment by
Mutual funds.
SEBI amended regulations to:
Permit investments by Mutual funds in the mortgage-backed securities.
These securities, however, must have a credit rating of not below
investment grade and would represent investments in real estate
mortgages (i.e., loans secured by real estate collateral) and not directly in
real estate. This was expected to augment the availability of funds for
housing sector and provide greater investment flexibility to the MFS.
Allow Mutual Funds to invest in unlisted companies. A MF scheme could
invest upto 5% of its net asset value (NAV) in the unlisted equity shares or
equity related instruments in case of open-ended scheme and up to 10%
of its NAV in case of closed-ended scheme. Within the investment limit of
15% of NAV in debt instruments issued by a single issuer, Mutual Funds
could also invest in mortgage-backed securitized debt, which are rated not
below investment grade by a credit rating agency registered with SEBI.
SEBI Regulations also stipulate that the asset management company
(AMC) shall exercise due diligence and care in all its investment decisions.
For effective implementation and bringing about transparency in the
investment decisions, all the AMCs were advised to maintain records in
support of each investment decisions which would indicate data, facts and
opinion leading to that decision. AMC boards may develop a mechanism
to verify that due diligence is being exercised while making investment
decisions.
Specific attention may be given to investments in unlisted' and privately
placed securities, unrated debt securities, non-performing assets (NP As),
- 45 -
transactions where associates are involved and the instances where there
is poor performance of the schemes.
MF Distribution by NSCCL:
In a move to encourage the MF industry, NSE and NSCCL have
launched the Mutual' Fund Service System (MFSS) to effectively cater to
buying/redemption of units of Mutual Funds by individual investors, which
presently takes place manually. The main objective of MFSS is to provide a
one-stop shop to investors for transacting in financial products. NSE with its
trading terminals across the country offers a mechanism for collection of
orders from the market and NSCCL undertakes the clearing and settlement of
the same. : While a good number of closed-ended schemes are traded on the
exchanges; the facilities for transacting in open-ended schemes of the Mutual
Funds are very limited. Today the entire process of buying and redeeming
open-ended MF scheme units takes place directly between the individual
investor and the AMC.
The salient features of the system are as follows:
Orders for purchase and sale of units from investors are collected using
the on- line order collection system of NSE, which are finally settled using
the clearing and settlement system of NSCCL.
The orders collected on 'T' day would be received by NSCCL by the end of
the day or latest on T +1 morning and conveyed to the MFS to facilitate
computation of the NAV and the corresponding sale/repurchase prices of
the units.
The MF would send the issue/repurchase prices computed by them to the
NSCCL on T+l day. The respective MF would be the counter-party for
each trade.
The orders would be cleared and settled on an order to order basis.
- 46 -
Settlement would be on rolling basis with the orders received on T day
being settled on T+5 day.
The members are required to deliver the securities/ funds due to the
investors within two working days of receiving the pay-out from NSCCL.
No transaction charges will be levied on members.
This will not only boost the Mutual Fund industry but would also enable easy
access for the investors to the industry .Zurich Mutual Fund is the first MF to
go live using this system.
MF Distribution through Post Offices:
Post offices started distributing MF products. IDBI Principal Mutual
Fund has started distributing its index, balanced and income funds through
select post offices branches. Other Mutual Funds like, SBI Mutual, ICICI
Prudential, UTI and Zurich Mutual Fund are also tying up with Department of
Posts to distribute their products. The MF supplies application forms for their
schemes to the post office for sale over the counter and any customer who
wishes to invest in MF can take a form from the counter, fill it in and hand it
back to the officials in the post office which in turn are handed over to the MF
office, This system of distribution is presently operational only in selected post
offices in the 4 cities of Delhi, Mumbai, Patna and Kolkata.
NET ASSET VALUE (NAV)
The share ice of the mutual fund is based on its net asset value (NAV)
per share, which is found by subtracting from the market value of the portfolio
the mutual fun liabilities and the dividing by the number of mutual fund shares
issued. That is:
- 47 -
Market value of portfolio -Liabilities Net asset value per share = Number of mutual fund shares issued
In August 1994, SEBI had formed a six-member committee to suggest
disclosure practices and standardized procedures for computation of net
asset values for mutual fund schemes. The committee finalized its report on
12 December 1995 and the same was released on 1 January 1996.
The major guidelines are discussed below:
There has been a major shift in the valuation of securities used for the
calculation the net asset value (NAV) of the mutual fund scheme. Earlier,
calculation of the NAV was done by valuing the securities at cost.
This has now been changed to marking securities at market value. The
investments which are shown in balance sheet should also be shown at
market value so that this comparable with the net asset value. Further
marking of all investments at market prices also permits inter- scheme
comparison some extent.
It has been recommended that the NAVs of both open-end and close-end
scheme be calculated on a weekly basis, at least.
The fees paid by the mutual fund to the asset management company should
linked to the performance of the mutual fund schemes as against a flat rate
charge earlier which did not take into account the mutual fund scheme's
performance.
It, now suggested that mutual funds would be paying a basic annual fee to the
AMC computed as a percentage of the average weekly net asset value of the
scheme and an additional fee calculated as a percentage of the net growth of
the scheme.
The AMC will have the discretion of floating no load or load schemes or a
mixture of the two. Presently, mutual funds are permitted to deduct up to 6%
from the net asset value to account for issue expenses.
- 48 -
The report has suggested that repurchase and resale price of open-end
schemes should be linked to the NAV of the scheme. Accordingly, the
repurchase price of an open-end scheme should not be lower than 93 per
cent of the net asset value and the resale price should not be more than 1.07
times the net asset value.
Also, the spread between the repurchase and re-sale price should not exceed
seven percentage points.
It has been suggested that the failure of a mutual fund scheme to give the
minimum assured returns should be met out of the funds of the asset
management company and not the corpus of the mutual fund scheme.
The report has suggested that the AMC should disclose custodian and
registration fees and has done away with the distinction of short term and long
term capital gains.
The committee has suggested the disclosure of ratio of expenses to net
assets and gross income to net assets.
These guidelines would apply to all the mutual fund schemes launched in the
future but it is not yet decided if these guidelines should be made applicable
to existing schemes.
Some members of the committee feel that existing schemes should adhere to
these guidelines with effect from 1 April 1997. Mutual fund shares are quoted
on a bid- offer basis.
The offer price is the price at which the mutual fund will sell the shares. It is
equal to the NAV per share plus any sales commission that the mutual fund
may charge. The sales commission is referred to as a load.
Within a short span of four to five years, mutual funds operation has become
integral part of the Indian financial system. Investors in India look at mutual
funds as a substitute of fixed deposits in banks rather than as a substitute for
investment in securities.
- 49 -
Mutual funds provide an opportunity for the risk-averse investors to share their
risk and yet go in for high return equities in the capital market. The popularity
of mutual funds has soared so have their diversity and complexity.
Despite the many advantages (e.g. diversification, continuous professional
management, low operating costs, shareholder services, liquidity, safety from
loss due to unethical practices etc.), mutual funds are not for everyone.
Critics argue that funds are boring, since shareholders do not have any say as
to which stocks are selected. Some people have been able to strike it rich with
the right stock.
That then is also a danger of getting carried away and ending up with a big
stake in a promising company that is suddenly runs into deep trouble, plunges
in value, and takes the life savings down with it. The chances of that
happening with the mutual funds are much lower since they are diversified
and professionally managed.
The reason most investors do not excel in stock picking is that they succumb
to certain common errors, many of which can be avoided or minimized with
mutual funds.
However, successful investing being a serious business requiring a well
thought- out plan, investors do not need to be familiar with the characteristics
of the different types of mutual funds.
Too many investors do not understand what they are buying, or even what
they are paying. With so many choices, investors make the wrong decisions.
Besides investing in inappropriate and high-cost mutual funds, investors also
buy laggards. There is no shortage of mediocre performers.
- 50 -
Mutual Funds Operations In India
Mutual funds le households an option for portfolio diversification and relative
risk-aversion through collection of funds from the households and make
investments in the stock and debt markets. Resources mobilized by mutual
fund (UTI was the only mutual fund until 1987-88) grew at a steady rate until
1992-93; since then they showed some variations.
Resources mobilized by a mutual fund which was just 0.04 per cent of GDP
(at current market prices) during the period of 1970-71 to 1974-85 increased
to 1.59 per cent during 1990-91 to 1992-93.
Total resources mobilized as proportion of GDP declined to 1.12 per cent by
1994-95 but nevertheless remained positive. During the period from 1995-97,
there was a net outflow of funds form mutual funds, especially UTI, as a result
of which the ratio turned negative. From 1997-98 onwards, the ratio again
turned positive and stood at 1.13 per cent during 1999-2000.
The mutual fund industry registered significant growth in the last few years.
The investible resources of mutual funds rose form Rs. 68,200 crore in 1998-
99 to Rs. 1, 09,114 crore in 1999-2000.
Net resource mobilization by mutual funds declined to Rs. 6,846 crore in April-
December, 2000 from Rs. 12,193 crore in the corresponding previous period.
This was on account of the steep increase in redemption/repurchase during
this period.
The outflow of funds via repurchase/redemption constituted 88.7 per cent of
gross resource mobilization during April-December, 2000 compared with 66.0
per cent in the corresponding previous period.
In the case of public sector mutual funds, redemption/repurchase exceeded
gross resource mobilization, thereby making their net resource mobilization
negative.
- 51 -
The Reliance ADA Group
Introduction
The Reliance group - one of India's largest business houses with revenues of
Rs. 990 billion ($22.6 billion) that is equal to 3.5 percent of the country's gross
domestic product was split into two. The group - which claims to contribute
nearly 10 per cent of the country's indirect tax revenues and over six percent
of India's exports - was divided between Mukesh Ambani and his younger
brother Anil on June 18, 2005. The group's activities span exploration,
production, refining and marketing of oil and natural gas, petrochemicals,
textiles, financial services, insurance, power and telecom. The family also has
interests in advertising agency and life sciences.
Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with
Average Assets Under Management (AAUM) of Rs. 90,938 Crores (AAUM for
Mar 08 ) and an investor base of over 66.87 Lacs. 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 115 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
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financial services. Reliance Mutual fund has largest AUM in India. Reliance
capital asset Management is no. 1 AMC in India but the picture is not the
same in Rajasthan. In Rajasthan they are no. 2 AMC. Management of
Reliance mutual fund wants to expand its feet in Rajasthan, before taking any
step they want to understand market & investor and distributor behavior of
SMEs, so they may plan accordingly to capture Rajasthan Market. In this
research we have to analyze why, how, where, when & how much an investor
invest & according to it, we have to make profile of investors.
In this report I have endeavored to understand the factors affecting
Investment behavior of an investor in Rajasthan. This behavioral study
consists of how any investor invests in CG. What factor they consider, why
these factors they consider, where do they invest, how do they invest,
purpose behind investment, size of investment, timing of investment &
duration of investment. This study gave us basis to profile investors.
Reliance Mutual Fund : Asset under management:
AUM Month Mar 2008
Average AUM Excluding Fund of Funds 9093794.02
Average AUM Fund of Funds 0
Reliance Corporate PROFILE:
- 53 -
Reliance Capital Asset Management Ltd.:
- 54 -
Reliance Capital Asset Management Limited (RCAM), a company registered
under the Companies Act, 1956 was appointed to act as the Investment
Manager of Reliance Mutual Fund. Reliance Capital Asset Management
Limited (RCAM) was approved as the Asset Management Company for the
Mutual Fund by SEBI vide their letter no IIMARP/1264/95 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 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 Asset Management Limited (RCAM) was approved as the
Asset Management Company for the Mutual Fund by SEBI by their letter no.
IIMARP/1264/95 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 March 31, 2005 is Rs.113.59 crores.
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Vision Statement:
“To be a globally respected wealth creator, with an emphasis on customer
care and a culture of good corporate governance”.
Mission Statement:
“To create and nurture a world-class, high performance environment aimed at
delighting their customers”.
Corporate Governance of reliance:
Corporate Governance Policy:
Reliance Capital Asset Management Ltd. has a vision of being a leading
player in the Mutual Fund business and has achieved significant success and
visibility in the market. However, an imperative part of growth and visibility is
- 56 -
adherence to Good Conduct in the marketplace. At Reliance Capital Asset
Management Ltd., the implementation and observance of ethical processes
and policies has helped us in standing up to the scrutiny of our domestic and
international investors.
Management:
The management at Reliance Capital Asset Management Ltd. is committed to
good Corporate Governance, which includes transparency and timely
dissemination of information to its investors and unit holders. The Board of
Directors of RCAM is a professional body, including well-experienced and
knowledgeable Independent Members. Regular Audit Committee meetings
are conducted to review the operations and performance of the company.
Employees:
Reliance Capital Asset Management Ltd. has at present, a code of conduct
for all its officers. It has a clearly defined prohibition on insider trading policy
and regulations. The management believes in the principles of propriety and
utmost care is taken while handling public money, making proper and
adequate disclosures. All personnel at Reliance Capital Asset Management
Ltd are made aware of their rights, obligations and duties as part of the
Dealing Policy laid down in terms of SEBI guidelines. They are taken through
a well-designed HR program, conducted to impart work ethics, the Code of
Conduct, information security, Internet and e-mail usage and a host of other
issues. One of the core objectives of Reliance Capital Asset Management Ltd.
is to identify issues considered sensitive by global corporate standards, and
implement policies/guidelines in conformity with the best practices as an
ongoing process. Reliance Capital Asset Management Ltd. gives top priority
to compliance in true letter and spirit, fully understanding its fiduciary
responsibilities.
Sponsors:
‘‘Reliance Mutual Fund’’ schemes are managed by Reliance Capital Asset
Management Limited., a subsidiary of Reliance Capital Limited, which holds
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93.37% of the paid-up capital of RCAM, the balance paid up capital being
held by minority shareholders.", the sponsor. Reliance Mutual Fund (RMF)
has been sponsored by Reliance Capital Ltd (RCL). The promoter of RCL is
AAA Enterprises Private Limited. Reliance Capital Limited is a Non Banking
Finance Company. Reliance Capital Limited is one of the India’s leading and
fastest growing financial services companies, and ranks among the top three
private sector financial services and banking companies, in terms of net
worth.
Reliance Capital has interests in asset management and mutual funds, life
and non-life insurance, private equity and proprietary investments, stock
broking and other activities in the financial services sector. The net worth of
RCL is Rs. 5,161.23 crores as on March 31, 2007.
Given below is a summary of RCL’s financials:
Particulars
(Rs. in crores)2006-07 2005-06 2004-05 2003-04
Total Income 883.86 652.02 295.69 356.79
Profit Before Tax 733.18 550.61 111.21 105.79
Profit After Tax 646.18 537.61 105.81 105.79
Reserves & Surplus 4915.07 3849.58 1310.08 1271.84
Net Worth 5161.23 4122.46 1437.92 1399.81
Earnings per Share (Rs.) 28.39
(Basic +
Diluted)
29.74
(Basic +
Diluted)
8.31
(Basic +
Diluted)
8.31
(Basic +
Diluted)
Book Value per Share
(Rs.) 210.12 112.95 112.95 109.96
Dividend (%) 35% 30% 30% 29%
Paid up Equity Capital 246.16 223.40 127.84 127.84
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Reliance Capital Ltd. has contributed Rupees One Lac as the initial
contribution to the corpus for the setting up of the Mutual Fund. Reliance
Capital Ltd. is responsible for discharging its functions and responsibilities
towards the Fund in accordance with the Securities and Exchange Board of
India (SEBI) Regulations.
The Sponsor is not responsible or liable for any loss resulting from the
operation of the Scheme beyond the contribution of an amount of Rupees one
Lac made by them towards the initial corpus for setting up the Fund and such
other accretions and additions to the corpus.
The Reliance capital Management Team :
Board of Directors
Mr. Soumen Ghosh
Mr. Kanu Doshi
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Mr. Manu Chadha
Mr. Sushil Tripathi
Management Team
CEO
Mr. Sudeep Sikka
Head Equity Investments
Mr. Sunil B . Singhania
Head Fixed Income
Mr. Amitabh Mohanty
Equity Fund Managers
Mr. Krishan Daga Mr. Ashwani Kumar
Mr. Shailesh Raj Bhan Mr. Govind Agarwal
Mr. Omprakash S. Kuckian
Debt Fund Managers
Mr. Amit Tripathi Ms. Anju Chhajer
Mr. Prashant Pimple
Commodities
Fund Manager Mr. Hiren Chandaria
Head Of Departments
Infrastructure & Admin Mr. Pradeep Andrade
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Chief Financial Officer Mr. Milind Gandhi
Head - HR, Admin & Infrastructure Mr. Rajesh Derhgawen
Information Technology Mr. Vinay Nigudkar
Legal, Secretarial & Compliance Mr. Munish Sud
Operations & Settlement Ms. Geeta Chandran
Head - Service Delivery & Operations Excel Mr. Bhalchandra Joshi
Head - Product Development Mr. Sanjay Kumar Singh
Sales & Distribution Mr. Himanshu Vyapak
Zonal Heads
Northern Zone Head Mr. Gurbir Chopra
Western Zone Head Mr. Aashwin Dugal
Southern Zone Head Mr. Gopal Khaitan
Eastern Zone Head Mr. Vkash Raithe
MUTUAL FUNDS ASSET UNDER
MANAGEMENT: Top 10 companies list:
Mutual Fund Assets Under Management (Rs. cr.)
February-
08
March-
08Change %Change
Reliance Mutual Fund 93,532 90,938 -2,594 -2.77
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ICICI Prudential Mutual Fund 59,278 54,322 -4,956 -8.36
UTI Mutual Fund 52,465 48,983 -3,482 -6.64
HDFC Mutual Fund 46,292 44,773 -1,519 -3.28
Birla Sun Life Mutual Fund 34,704 35,906 1,202 3.46
SBI Mutual Fund 29,493 29,179 -314 -1.06
Franklin Templeton Mutual Fund 29,902 26,842 -3,059 -10.23
Tata Mutual Fund 20,205 19,679 -526 -2.60
Kotak Mahindra Mutual Fund 20,968 18,071 -2,897 -13.82
DSP Merrill Lynch Mutual Fund 19,139 16,675 -2,463 -12.87
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Reliance Mutual Fund:
About Reliance Mutual Fund:
Reliance Mutual Fund (RMF) has been established as a trust under the Indian
Trusts Act, 1882 with Reliance Capital Limited (RCL), as the Settler /Sponsor
and Reliance Capital Trustee Co. Limited (RCTCL), as the Trustee.
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.
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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:
To carry on the activity of a Mutual Fund as may be permitted at law and
formulate and devise various collective Schemes of savings and investments
for people in India and abroad and also ensure liquidity of investments for the
Unit holders;
To deploy Funds thus raised so as to help the Unit holders earn reasonable
returns on their savings and to take such steps as may be necessary from
time to time to realize the effects without any limitation
Social Responsibilities:
“Organizations, like individuals, depend for their survival, sustenance and
growth on the support and goodwill of the communities of which they are an
integral part, and must pay back this generosity in every way they can.”
This ethical standpoint, derived from the vision of the founder, lies at the heart
of the CSR philosophy of the Reliance Group.
While they strongly believe that their primary obligation or duty as corporate
entities is to their shareholders – they are just as mindful of the fact that this
imperative does not exist in isolation; it is part of a much larger compact which
they have with their entire body of stakeholders: From employees, customers
and vendors to business partners, eco-system, local communities, and society
at large.
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They evaluate and assess each critical business decision or choice from the
point of view of diverse stakeholder interest, driven by the need to minimize
risk and to pro-actively address long-term social, economic and environmental
costs and concerns.
For them, being socially responsible is not an occasional act of charity or that
one-time token financial contribution to the local school, hospital or
environmental NGO. It is an ongoing year-round commitment, which is
integrated into the very core of their business objectives and strategy.
Because they believe that there is no contradiction between doing well and
doing right. Indeed, “doing right is a necessary condition for doing well”.
The 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/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
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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.
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. Eg.
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.
Various Schemes of Reliance Mutual Fund:
Reliance Mutual Fund has launched twenty nine Schemes till
date; some of them are as follows, namely:
Reliance Growth Fund (September 1995) Reliance Vision Fund (September 1995)
Reliance Income Fund (December 1997) Reliance Liquid Fund (March 1998)
Reliance Medium Term Fund (August
2000)
Reliance Short Term Fund (December
2002)
Reliance Gilt Securities Fund (July 2003) Reliance Banking Fund (May 2003)
Reliance Monthly Income Plan
(December 2003)
Reliance Diversified Power Sector Fund
(March 2004)
Reliance Pharma Fund ( May 2004) Reliance Floating Rate Fund (August
2004)
Reliance Media & Entertainment Fund
(September 2004)
Reliance NRI Equity Fund (October
2004)
Reliance Equity Fund (February 2006) Reliance Index Fund (February 2005)
Reliance Equity Opportunities Fund Reliance Regular Savings Fund (May
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(February 2005) 2005)
Reliance Liquidity Fund (June 2005) Reliance Tax Saver (ELSS) Fund (July
2005)
Reliance Long Term Equity Fund (Nov
2006)
Investment Objectives:
Reliance Monthly Income Plan aims to generate regular income in order to
make regular dividend payments to unit holders and the secondary objective
is growth of capital.
Reliance Income Fund aims to generate optimal returns consistent with
moderate levels of risk. This income may be complemented by capital
appreciation of the portfolio. Accordingly, investments shall predominantly be
made in Debt and Money Market Instruments.
Reliance Medium Term Fund aims to generate regular income in order to
make regular dividend payments to unit holders and the secondary objective
is growth of capital.
Reliance Liquid Fund aims 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.
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Reliance Liquidity Fund aims 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 Short Term Fund aims 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 aims to generate optimal credit risk free
returns by investing in a portfolio of securities issued and guaranteed by the
Central Government and State Governments
Reliance Floating Rate Fund aims to generate regular income through
investment in a portfolio comprising substantially of Floating Rate Debt
Securities (including floating rate securitized debt and Money Market
Instruments and Fixed Rate Debt Instruments swapped for floating rate
returns).
Reliance Regular Savings Fund Debt Option: The primary investment
objective of this plan is to generate optimal returns consistent with moderate
level of risk. This income may be complemented by capital appreciation of the
portfolio. Accordingly investments shall predominantly be made in Debt &
Money Market Instruments.
Reliance Regular Savings Fund Equity Option: The primary investment
objective is to seek capital appreciation and or consistent returns by actively
investing in equity / equity related securities.
Reliance Regular Savings Fund Hybrid Option: The primary investment
objective is to generate consistent return by investing a major portion in debt
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& money market securities and a small portion in equity & equity related
instruments.
Reliance Growth Fund aims to achieve long term growth of capital by
investment in equity and equity related securities through a research based
investment approach.
Reliance Vision Fund aims 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 aims to generate capital appreciation &
provide long term growth opportunities by investing in a portfolio constituted of
equity securities & equity related securities
Reliance Banking Fund aims to generate continuous returns by actively
investing in equity / equity related or fixed income securities of banks.
Reliance Diversified Power Sector Fund seek to generate consistent
returns by investing in equity / equity related or fixed income securities of
Power and other associated companies
Reliance Pharma Fund aims generate consistent returns by investing in
equity / equity related or fixed income securities of Pharma and other
associated companies.
Reliance Media & Entertainment Fund to generate consistent returns by
investing in equity / equity related or fixed income securities of media &
entertainment and other associated companies.
Reliance Index Fund-Sensex Plan aims to replicate the composition of the
Sensex, with a view to endeavor to generate returns, which could
approximately be the same as that of Sensex.
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Reliance Index Fund-Nifty Plan aims to replicate the composition of the
Nifty, with a view to endeavor to generate returns, which could approximately
be the same as that of Nifty.
Reliance NRI Equity Fund aims to generate optimal returns by investing in
equity and equity related instruments primarily drawn from the Companies in
the BSE 200 Index.
Reliance Equity Fund: The primary investment objective of the scheme is to
seek to generate capital appreciation & provide long-term growth
opportunities by investing in a portfolio constituted of equity & equity related
securities of top 100 companies by market capitalization & of companies
which are available in the derivatives segment from time to time and the
secondary objective is to generate consistent returns by investing in debt and
money market securities.
Latest NAVs 0f reliance MF
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the Net Asset Value of the scheme divided by the number of units outstanding on the valuation date.
Debt Equity Gold
Scheme Plan NAV Change
% Change
NAV(dd-mm-yy)
InvestOnline
Reliance Index Fund Sensex Plan QUARTERLY - DIVIDEND PLAN 8.1890 -0.10 -1.26 12-08-2011 HALF YEARLY - DIVIDEND PLAN
8.1890 -0.10 -1.26 12-08-2011
GROWTH PLAN - BONUS OPTION 8.1890 -0.10 -1.26 12-08-2011
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GROWTH PLAN 8.1887 -0.10 -1.26 12-08-2011 YEARLY - DIVIDEND PLAN 8.1890 -0.10 -1.26 12-08-2011 Reliance Index Fund Nifty Plan GROWTH PLAN - BONUS OPTION 8.3050 -0.11 -1.26 12-08-2011 GROWTH PLAN 8.3049 -0.11 -1.26 12-08-2011 HALF YEARLY - DIVIDEND PLAN
8.3050 -0.11 -1.26 12-08-2011
YEARLY - DIVIDEND PLAN 8.3047 -0.11 -1.26 12-08-2011 QUARTERLY - DIVIDEND PLAN 8.3050 -0.11 -1.26 12-08-2011 Reliance Quant Plus Fund INSTITUTIONAL PLAN - DIVIDEND PLAN-DIVIDEND OPTION
10.0000 0.00 0.00 6-04-2010
RETAIL PLAN GROWTH PLAN 12.2404 -0.18 -1.43 12-08-2011 Institutional Bonus Plan 10.0000 0.00 0.00 6-04-2010 Retail Bonus Plan 12.2404 -0.18 -1.43 12-08-2011 RETAIL PLAN DIVIDEND PLAN 9.9961 -0.15 -1.43 12-08-2011 INSTITUTIONAL PLAN - GROWTH PLAN
10.9510 -0.01 -0.13 25-04-2011
Reliance NRI Equity Fund GROWTH PLAN - GROWTH OPTION
36.0820 -0.32 -0.88 12-08-2011
Bonus Plan 36.0820 -0.32 -0.88 12-08-2011 DIVIDEND PLAN 19.1347 -0.17 -0.88 12-08-2011 Reliance Vision Fund INSTITUTIONAL PLAN - GROWTH PLAN
251.5812 -2.27 -0.89 12-08-2011
RETAIL PLAN - GROWTH PLAN 251.1850 -2.26 -0.89 12-08-2011 INSTITUTIONAL PLAN - DIVIDEND PLAN
227.0301 -2.04 -0.89 12-08-2011
Institutional Bonus Plan 10.0000 0.00 0.00 6-04-2010 Retail Bonus Plan 42.2777 -0.38 -0.89 12-08-2011 RETAIL PLAN - DIVIDEND PLAN 36.9670 -0.33 -0.89 12-08-2011 Reliance Equity Fund INSTITUTIONAL PLAN - DIVIDEND PLAN
10.0000 0.00 0.00 6-04-2010
RETAIL PLAN - GROWTH PLAN 12.4476 -0.10 -0.81 12-08-2011 Retail Bonus Plan 12.4476 -0.10 -0.81 12-08-2011 Institutional Bonus Plan 10.0000 0.00 0.00 6-04-2010 INSTITUTIONAL PLAN - GROWTH PLAN
10.0000 0.00 0.00 6-04-2010
RETAIL PLAN - DIVIDEND PLAN 12.4477 -0.10 -0.81 12-08-2011 Reliance Equity Advantage Fund INSTITUTIONAL PLAN - DIVIDEND PLAN
11.1748 -0.15 -1.29 12-08-2011
RETAIL PLAN - GROWTH PLAN 11.8950 -0.16 -1.29 12-08-2011 RETAIL PLAN - DIVIDEND PLAN 10.9518 -0.14 -1.30 12-08-2011 Institutional Bonus Plan 12.1183 -0.16 -1.29 12-08-2011
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INSTITUTIONAL PLAN - GROWTH PLAN
12.9474 0.05 0.39 26-08-2010
Retail Bonus Plan 11.8950 -0.16 -1.29 12-08-2011 Reliance Regular Savings Fund - Equity Plan DIVIDEND PLAN 20.0236 -0.18 -0.89 12-08-2011 GROWTH OPTION 28.2184 -0.25 -0.89 12-08-2011 Reliance Equity Opportunities Fund INSTITUTIONAL PLAN - GROWTH PLAN
9.0982 -0.08 -0.90 12-08-2011
INSTITUTIONAL PLAN - DIVIDEND PLAN
32.6126 -0.30 -0.90 12-08-2011
Retail Bonus Plan 34.5702 -0.31 -0.90 12-08-2011 RETAIL PLAN - GROWTH PLAN 34.5694 -0.31 -0.90 12-08-2011 Institutional Bonus Plan 10.0000 0.00 0.00 6-04-2010 RETAIL PLAN - DIVIDEND PLAN 22.3510 -0.20 -0.90 12-08-2011 Reliance Small Cap Fund GROWTH PLAN - BONUS OPTION 9.2672 -0.04 -0.40 12-08-2011 GROWTH PLAN 9.2669 -0.04 -0.40 12-08-2011 DIVIDEND PLAN 9.2672 -0.04 -0.40 12-08-2011 Reliance Long Term Equity Fund GROWTH OPTION 14.6938 -0.04 -0.30 12-08-2011 DIVIDEND OPTION 13.1864 -0.04 -0.30 12-08-2011 Reliance Growth Fund INSTITUTIONAL PLAN - GROWTH PLAN
418.9941 -2.29 -0.54 12-08-2011
RETAIL PLAN - GROWTH PLAN 415.2585 -2.27 -0.54 12-08-2011 RETAIL PLAN - DIVIDEND PLAN 47.1711 -0.26 -0.54 12-08-2011 Institutional Bonus Plan 10.0000 0.00 0.00 6-04-2010 Retail Bonus Plan 68.8648 -0.38 -0.54 12-08-2011 INSTITUTIONAL PLAN - DIVIDEND PLAN
401.6408 -2.19 -0.54 12-08-2011
Reliance Infrastructure Fund INSTITUTIONAL - GROWTH PLAN
7.5599 -0.09 -1.20 12-08-2011
RETAIL - GROWTH PLAN - BONUS OPTION
7.5415 -0.09 -1.20 12-08-2011
RETAIL - DIVIDEND PLAN 7.5415 -0.09 -1.20 12-08-2011 INSTITUTIONAL - GROWTH PLAN - BONUS OPTION
10.0000 0.00 0.00 6-04-2010
INSTITUTIONAL - DIVIDEND PLAN
7.5599 -0.09 -1.20 12-08-2011
RETAIL - GROWTH PLAN 7.5415 -0.09 -1.20 12-08-2011 Reliance Natural Resources Fund INSTITUTIONAL BONUS PLAN 10.0000 0.00 0.00 6-04-2010 DIVIDEND PLAN 9.8946 0.01 0.12 12-08-2011 INSTITUTIONAL GROWTH PLAN 10.0000 0.00 0.00 6-04-2010 INSTITUTIONAL DIVIDEND PLAN
10.0000 0.00 0.00 6-04-2010
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GROWTH PLAN - GROWTH OPTION
9.8946 0.01 0.12 12-08-2011
Bonus Plan 9.8946 0.01 0.12 12-08-2011 Reliance Diversified Power Sector Fund RETAIL DIVIDEND PLAN 33.9852 -0.20 -0.58 12-08-2011 Institutional Bonus Plan 10.0000 0.00 0.00 6-04-2010 INSTITUTIONAL GROWTH PLAN - GROWTH OPTION
68.3532 2.61 3.97 14-02-2011
Retail Bonus Plan 59.8554 -0.35 -0.58 12-08-2011 RETAIL GROWTH PLAN - GROWTH OPTION
59.8552 -0.35 -0.58 12-08-2011
INSTITUTIONAL DIVIDEND PLAN
78.6263 0.02 0.03 6-08-2010
Reliance Pharma Fund GROWTH PLAN - GROWTH OPTION
54.9388 -0.45 -0.82 12-08-2011
Bonus Plan 54.9389 -0.45 -0.82 12-08-2011 DIVIDEND PLAN 38.2087 -0.32 -0.82 12-08-2011 Reliance Media Entertainment Fund DIVIDEND PLAN 16.0970 -0.12 -0.77 12-08-2011 GROWTH PLAN - GROWTH OPTION
26.0198 -0.20 -0.77 12-08-2011
Bonus Plan 26.0199 -0.20 -0.77 12-08-2011 Reliance Banking Fund DIVIDEND PLAN 35.5967 -0.42 -1.16 12-08-2011 INSTITUTIONAL PLAN DIVIDEND PLAN
108.4580 0.55 0.51 20-09-2010
INSTITUTIONAL PLAN BONUS PLAN
10.0000 0.00 0.00 6-04-2010
Bonus Plan 95.2155 -1.12 -1.16 12-08-2011 GROWTH PLAN - GROWTH OPTION
95.2160 -1.12 -1.16 12-08-2011
INSTITUTIONAL PLAN GROWTH PLAN
8.5614 -0.10 -1.16 12-08-2011
Reliance Tax Saver (ELSS) Fund GROWTH PLAN - GROWTH OPTION
20.1288 -0.15 -0.75 12-08-2011
DIVIDEND PLAN 14.1595 -0.11 -0.75 12-08-2011 Reliance Equity Linked Saving Fund Series 1 DIVIDEND PLAN 13.5340 -0.15 -1.13 12-08-2011 GROWTH PLAN 13.5339 -0.15 -1.13 12-08-2011 Reliance Arbitrage Advantage Fund Growth Plan 10.7523 0.01 0.05 12-08-2011 Dividend Plan 10.7523 0.01 0.05 12-08-2011 Reliance Banking Exchange Traded Fund
DIVIDEND PLAN 1054.624
8 -15.76 -1.47 12-08-2011
Reliance Regular Savings Fund - Balanced Plan
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DIVIDEND PLAN 12.7430 -0.12 -0.97 12-08-2011 GROWTH OPTION 20.9666 -0.20 -0.97 12-08-2011
RESEARCH DESIGN and Methodology:
A research design is the detailed blueprint used to guide a research study
toward its objectives.
The process of designing a research study involves many interrelated
decisions. The most significant decision is the choice of research approach,
because it determines how the information will be obtained.
To design something also means to ensure that the pieces fit together. The
achievement of this fit among objective, research approach, and research
- 74 -
tactics is inherently an iterative process in which earlier decisions are
constantly reconsidered in light of subsequent decisions.
Research design
Defining the purpose of research
Determining the data required and their resources.
A Questionnaire was designed to get detailed information.
Face to face interviews was taken were conducted to get the required
information.
Analysis of Data
Drawing Conclusions
Suggestions/ Recommendation
Research Methodology:
Title of the Project Study:
A project study conducted for “PUBLIC SECTOR UNIT BANK’S
INVESTORS AWARENESS OF MUTUAL FUND AS ON INVESTMENT”
Project Duration: -- 45 Days
Research Methodology is a way to systematically solve the problem. It
may be understood as a science of studying how research is done
scientifically. In it we study the various steps that are generally adopted by
the researcher in studying his research problem along with logic behind
them. It is necessary for the researcher to know not only the research
- 75 -
methods/techniques but also the methodology used. Researchers not only
need to know how to develop certain indices or tests, how to calculate
mean or median or mode, how to apply particular research techniques but
must also know which of these methods or techniques are relevant and
what would they mean and indicate and why Research process consists of
series of actions or steps necessary to effectively carry out the research.
The project was a unique experience for me for tracking down information
from various types of people and all through it is a vast learning process.
There were several things that I had made out and learnt out of this project
of mine.
OBJECTIVE OF THE PROJECT:
This project is tending to find out that what actually the mutual fund is, history
regarding it, its types and other facts and figures related to it. Some points are
listed below which can be considered as the objective of this project topic:-
To identify activities that has the greatest potential benefits in increasing the network.
To discover what is of most concern to your client, and therefore the greatest risk of loosing them.
To learn the reasons your clients stay to continue and improve in these areas.
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How to improve your organization with the specific feedback from the tool and become more attractive to current and potential clients.
Approach to the problem:
All the objectives were taken into account before preparing the questionnaire.
The questionnaire was prepared on scientific basis, deliberately hidden
questions were asked to get the required information.
Besides this, extensive research was done. Information was extracted from
other sites of different companies and various other mutual fund associations.
Though complete focus was kept, to broaden the horizon of research topic,
attempt was made to know the opportunities and threats related to other
players in mutual funds.
Strategic planning for the Research:
To familiarize with a business organization.
To familiarize with the different departments in the organization and
their functioning.
To enable to understand how the key business process are carried out in
organizations.
Understand how information is used in organization for decision making at
various levels.
To know the history about the company.
To get clear cut idea about the management and administration.
To know about the industrial relation in the company.
To analyze the strength and weakness.
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To get clear cut idea about the various departments and functions.
To give findings and solutions.
To relate theory with practice.
Problem Definition
A problem exists when the decision-maker faces uncertainty regarding
which action to adopt in the situation. If only one action is available (or none at
all) or if there is certainty about the outcomes of the alternatives, there really
is no problem.
Defining a problem is a situation where:
1) The decision-maker has not yet determined how to exploit an
opportunity or
2) There are difficulties that are currently faced or are anticipated.
RESEARCH DESIGN
A research design is the detailed blueprint used to guide a research study
toward its objectives. The process of designing a research study involves
many interrelated decisions. The most significant decision is the choice of
research approach, because it determines how the information will be
obtained. To design something also means to ensure that the pieces fit
together. The achievement of this fit among objective, research approach, and
research tactics is inherently an iterative process in which earlier decisions
are constantly reconsidered in light of subsequent decisions.
The function of research design is to provide for collection of relevant
evidence with minimal expenditure of time effort and money.
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The following methodology was adopted for the study purpose:
Type of research :
Descriptive and qualitative research designs were used while conducting the
project.
Sampling Design was taken by the researcher as the Research design.
The major purpose of the study is to describe the state of affairs as it exists at
present.
Research Method/Technique:
In the project report the researcher used following techniques while
conducting his study:
Analysis of documents
Survey Method: A market survey was done on VARIOUS PUBLIC
BANKS.
Interview (Personal): Both open and closed ended (unstructured)
questions were asked while taking some information from the Investors
of the banks at LUCKNOW.
Questionnaire (Structured): A structured designed comprehensive
questionnaire was framed and Protested for data collection from the customer
of mobile Data collection sources
Research Data
Data is the key activity of marketing research. The design of the data
collecting method is backbone of research design.
Data can be obtained from two important sources, namely:
1. Primary Data
2. Secondary Data
Data Collection Technique:
1. PRIMARY SOURCE
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OBSERVATION:
Definition:
It is the process of recognizing people, objects and occurrences rather
than asking for information.
Instead of asking consumers what brand they buy the researchers arrange
to observe what products are brought.
E.g. a large food retailer tested a new slot-type shelf arrangement for canned foods
by observing shoppers as they used the new shelves.
Advantages of observation method:
When the researcher observes and records events, it is not necessary to
rely on the willingness and ability of respondents to report accurately.
The biasing effects of interviewers or their phrasing of the questions is
either eliminated or reduced.
Data collection by observation is more objective and hence more accurate.
Disadvantages of observation method:
Researchers have recognized the merits of observations opposed to
questioning, yet the vast majority of researchers continue to rely on the
use of a questionnaire.
The most limiting factor in the use of observation is the inability to observe
things such as attitudes, motivation, etc.
Events of more than short-term duration such as a family’s use of leisure
time and personal activities such as brushing of teeth are better discussed
with questionnaires.
METHODS OF OBSERVATION:
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Observational studies can be classified on five bases:
Whether the situation in which the observation is made is natural or
contrived
Whether the observation is obtrusive or unobtrusive.
Whether the observation is structured or unstructured
Whether the factor of interest is observed directly or indirectly
Whether observers or mechanical means makes observations.
Direct observation:
When an observer is stationed in a grocery store to note how many
different brands of canned soup each shopper picks up before
selecting one, there is unobtrusive, direct observation in a natural
situation.
If a camera is positioned to record shopping actions, observation is
by mechanical means
If the observer counts the specific cans picked up, the observation is
structured.
If the observer has to go about observing how shoppers go about
selecting a brand of soup, the situation is unstructured.
Structured direct observation:
It is used when the problem at hand has been formulated precisely
enough to enable researchers to define specifically the observations
to be made
E.g. Observers in a supermarket might note the number of soup cans
picked up by each customer. A form can easily be printed for simple
recordings of such observations.
Not all observations are as simple as the above but experiments
have shown that even observers with a different viewpoint on a given
question tend to make similar observations under structured
conditions.
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Unstructured, direct observation:
Observers are placed in situations and observe whatever they deem
significant.
E.g. In an effort to find ways of improving the service of a store,
observers may mingle with customers in the store and look for
activities that suggest service problems. No one can observe
everything that is going on; hence the observer must select certain
things which he can make a note of. Customers standing at a counter
with annoyed faces may be observed as irritated because of the
service or lack of it.
Contrived observation:
When researchers rely on natural direct observation it results in a lot
of wasted time while they wait for the desired events to take place.
To reduce this, it may be more desirable to contrive situations so that
observations may be made more efficiently.
E.g. To study the bargaining between an automobile salesman and a
customer, the observer can pose as a customer and take various
bargaining attitudes from the most-eager-to-buy to the toughest price
seeking. In each case the observer notes the salesperson’s
response. As long as the sales person believes the researcher to be
a bonafide customer, there is no bias in the observation.
Contrived observations often have a validity and economic
advantage.
Indirect observation:
One type of observation focuses on the physical traces left by the
factors of interest.
These traces are of two types:
Accretions left.
Erosion.
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Accretions involve studies such as the observation of liquor bottles in
the Erosion.
Accretions involve a trash to eliminate the liquor consumption in cities
without liquor stores.
Erosion observations are less frequent. An example would be the
study of a relative readership of different sections of an encyclopedia
by measuring the wear and tear on the pages.
Observation of the results of past actions will not bias the data if done
on a one-time basis.
E.g. Pantry audits determine what purchases have been made in the
past.
Observation of records:
Whenever researchers use data collected for another purpose, they
are employing the observation method in a manner similar in
character to the observation of physical trace
The records of previous activities such as population census are
physical traces of previous periods.
Survey method:
Definition:
Survey research is one of the most important areas of measurement in
applied social research. The broad area of survey research encompasses any
measurement procedures that involve asking questions of respondents.
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Types of surveys:
Surveys can be divided into two broad categories: the questionnaire
and the interview.
Questionnaires are usually paper-and-pencil instruments that the
respondent completes.
The interviewer based on what the respondent says completes
interviews.
Questionnaires:
Mail survey: when a respondent receives a questionnaire by mail it is
known as mail survey.
Advantages:
They are relatively inexpensive to administer.
You can send the exact same instrument to a wide number of people.
They allow the respondent to fill it out at their own convenience.
Disadvantages:
Response rates from mail surveys are often very low.
Mail questionnaires are not the best vehicles for asking for detailed written
responses.
Group-administered questionnaire:
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A sample of respondents is brought together and asked to respond to a
structured sequence of questions.
Traditionally, questionnaires were administered in-group settings for
convenience.
The researcher could give the questionnaire to those who were present
and be fairly sure that there would be a high response rate
If the respondents were unclear about the meaning of a question they
could ask for clarification.
And, there were often organizational settings where it was relatively easy
to assemble the group (in a company or business, for instance).
Interviews:
Interviews are a far more personal form of research than questionnaires
Personal interview:
The interviewer works directly with the respondent
Advantages
The interviewer has the opportunity to probe or ask follow-up questions.
Interviews are generally easier for the respondent, especially if what is
sought is opinions or impressions
Disadvantages:
Interviews can be time consuming and they are resource intensive.
The interviewer is considered as a part of the measurement instrument
and interviewers have to be well trained in how to respond to any
contingency.
Telephone Interview:
Telephone interviews enable a researcher to gather information rapidly.
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Advantages
They allow for personal contact between the interviewer and respondent.
They allow the interviewer to ask follow-up questions
Disadvantages
Many people don't have publicly-listed telephone numbers. Some don't
have telephones.
People often don't like the intrusion of a call to their homes.
Telephone interviews have to be relatively short or people will feel
imposed upon.
Selecting the survey method:
Selecting the type of survey you are going to use is one of the most critical
decisions in many social research contexts. You have to use your judgment to
balance the advantages and disadvantages of different survey types.
Following are the issues that the researcher must look into before conducting
a research.
Sampling issues:
What data is available? What information do you have about your
sample? Do you know their current addresses? Their current phone
numbers? Are your contact lists up to date?
Can your respondents be located?
Who is the respondent in your study? If the specific individual is
unavailable is the researcher willing to interview another?
Are response rates likely to be a problem?
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Questions:
What types of questions can be asked? Are they personal or require a
detailed answer?
Can question sequence be controlled?
Your survey is one where you can construct in advance a
reasonable sequence of questions? Or, are you doing an initial
exploratory study where you may need to ask lots of follow-up
questions that you can't easily anticipate.
Cost is often the major determining factor in selecting survey type.
You might prefer to do personal interviews, but can't justify the high
cost of training and paying for the interviewers. You may prefer to
send out an extensive mailing but can't afford the postage to do so.
Do you have the facilities (or access to them) to process and manage your
study? In phone interviews, do you have well-equipped phone surveying
facilities? For focus groups, do you have a comfortable and accessible
room to host the group? Do you have the equipment needed to record and
transcribe responses
Some types of surveys take longer than others. Do you need
responses immediately (as in an overnight public opinion poll)?
Have you budgeted enough time for your study to send out mail
surveys and follow-up reminders, and to get the responses back by
mail? Have you allowed for enough time to get enough personal
interviews to justify
Types of questions:
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Survey questions can be divided into two broad types: structured and
unstructured
Dichotomous Questions:
When a question has two possible responses, we consider it dichotomous.
Surveys often use dichotomous questions that ask for a Yes/No,
True/False or Agree/Disagree response.
E.g. please enter your gender
Male female
2. SECONDARY SOURCE
SECONDARY DATA:
Secondary data are data that were developed for some purpose other than
helping to solve the problem at hand. Secondary data can be gathered quickly
and is inexpensive as compared to primary data. Even when reports or
publications are ordered, the time involved is generally less than the time
required to collect original data.
A thorough search on secondary data will often provide sufficient information
to resolve the problem. In some cases where the secondary data cannot solve
the problem, they can often help to structure the problem and eliminate some
variables from consideration. Or, it may be possible to utilize the secondary
data in conjunction with primary data.
Secondary data can provide a complete or partial solution to many problems
and help in structuring other problems. They tend to cost substantially less
than primary data and can be collected in less time also.
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Problems Encountered with Secondary Data
Before secondary data are applied to a particular marketing problem, their
relevance and accuracy must be assessed.
Relevancy refers to the extent to which the data fits the information needs of
research problem. Even when the data covers the same general topic as that
required by the research problem, they may not fit the requirements of the
problem.
Three general problems reduce the relevance of data that would otherwise be
useful. They are:
There is often a difference in the units of measurement. E.g. many retail
decisions require detailed information on the characteristics of the
population within their trade area. However, the available population
statistics may focus on countries, cities or census tracts that do not match
the trade area of the retail outlet.
The second general problem that can reduce relevancy of secondary data
is the definition of classes. E.g. a manufacturer may have a product that
appeals to children 8 to 12 years old. If available secondary data are
based on age categories 5 to 9 and 10 to 14, the firm will have a hard time
utilizing it.
The final major factor that is affecting relevancy is time. Generally,
research problems require current, if not future, data. Most secondary
data, on the other hand, have been in existence for some time. E.g.
complete census reports are not available for several years. Data are
frequently collected one to three years prior to its publication.
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Accuracy is the second major concern of the user of secondary data. The
real problem is not inaccuracy; it is the difficulty of determining how
inaccurate the data is likely to be.
While using secondary data, the original source should be used if possible.
This is important because, the original report is generally more complete
than the second or third reports. Secondly using original source allows the
data to be examined in context and may provide a better basis for
assessing the competence and motivation of the collector.
Sources of Secondary Data:
There are two general sources of secondary data – internal sources and
external sources. Internal data are available within the firm whereas external
sources provide data that are developed outside the firm.
Internal Sources:
Internal sources include sales record, sales force reports, operating
statements, budgets, previous research reports and the likes. The most useful
type of internal information is generally sales data. But, unfortunately many
companies do not collect or maintain sales data in the manner that allows the
researcher to tap their full potential. Such records, if properly utilized, allows
the researcher to isolate profitable and unprofitable customers, territories, and
product lines, to identify developing trends and perhaps to measure the
effects of manipulations of marketing mix variables.
Internal data must be collected in a usable format and must be analyzed to be
of value. Many firms have useful but unutilized data. By changing the format
of collection forms (sales invoices, salesman call reports, etc) other useful
data can be often collected. They are available and inexpensive; internal data
are the best information buy.
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External Sources
Numerous sources external to the firm may produce data relevant to the firm’s
requirements. There are four types of general external secondary information,
they are:
Trade associations
Government Agencies
Other published sources, and
Syndicated services.
Trade Associations:
Trade associations frequently publish or maintain detailed information on
industry sales, operating characteristics, growth patterns and the like. They
may also conduct special studies of factors relevant to their industry. Since
trade associations have good reputation for not revealing data on individual
firms as well as good working relationships with the firms in the industry, they
may be able to secure information that may be unavailable to other
researchers. These materials may be published in the form of annual reports
or as special reports.
Government agencies:
Federal, state and local government agencies produce a massive amount of
data that is of relevance to marketers. The federal government maintains five
major agencies whose primary function is the collection and dissemination of
statistical data, they are:
Bureau of Census
Bureau of Labor Statistics
National Center for Educational Statistics
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National Center for Health Statistics, and
Statistical Reporting Service, Department of Agriculture
There are also a number of specialized analytic and research agencies,
numerous administrative and regulatory agencies.
These sources produce two types of data:
Statistics focused on people are produced. These include
demographics, vital and health statistics, labor and social conditions.
The second broad category focuses on economic activity: commerce,
finance, agriculture and the like.
Both types of data are widely used by business firms as an aid in decision-
making. The data available may be standardized, such as census data, or it
may be in the form of special reports. Census publications are one of the most
widely used sources of secondary data.
Other published Sources
There is virtually endless array of periodicals, books, dissertations,
newspapers and the like, that contain information relevant to marketing
decisions.
Syndicated Services
A number of firms regularly collect data of relevance to marketers that they
sell on a subscription basis. Two types of syndicated services are widely used
by marketing researchers – channel information and omnibus surveys.
Channel information is available to the firm at four levels – manufacturers,
intermediaries, retailers and consumers. A manufacturers sales and shipment
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are generally available only through the firms own internal records. Therefore,
although a firm can monitor its own activities at this level, it can only infer the
output of other manufacturing firms.
At the intermediary or wholesale level, several syndicated firms provide
information on the flow of products and brands to retail outlets. Store audits
provide data on the movement of brands through retail outlets.
Omnibus surveys collect data that are useful to a number of subscribers
from a series of independent samples.
Prospects and scope of research:
Area wise Identifying Potential Prospective distributors, which leads to
increase the business.
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THE PROSPECTS:
The Starting point is everyone who might conceivably buy the
product that is called suspects and from these the company determines the
most likely prospects which it hopes to convert into first time customers then
repeat customers and then clients.
Following figure shows the main steps of attracting and keeping
customers
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Suspects
Prospects
First Time Customers
Repeat Customers
Clients
Disqualified Prospects
Members
Advocates
Partners
Inactive or ex customers
Marketing planning and information systemMarketing planning and information system
Planning systemStrategic plansTactical plans
Planning systemStrategic plansTactical plans
Information systemDatabase
DSS
Information systemDatabase
DSS
1. Agree on Research Purpose1. Agree on Research Purpose
Problems or opportunitiesDecision alternativesResearch users
Problems or opportunitiesDecision alternativesResearch users
2. Establish Research Objectives2. Establish Research Objectives
Research questions HypothesesBoundaries of study
Research questions HypothesesBoundaries of study
ESTIMATETHE VALUE OF INFORMATIONIs benefit > cost?
ESTIMATETHE VALUE OF INFORMATIONIs benefit > cost?
DO NOT CONDUCT MRDO NOT CONDUCT MR
4. Design the research4. Design the research
Choose among alternative research approachesSpecify the sampling planDesign the experimentDesign the questionnaire
Choose among alternative research approachesSpecify the sampling planDesign the experimentDesign the questionnaire
5. Collect the data5. Collect the data
6. Prepare and analyze the data 6. Prepare and analyze the data
7. Report the research results and provide strategic recommendations.7. Report the research results and provide strategic recommendations.
RESEARCH PROCESS: STEPS:
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LIMITATION OF THE Project:
Many constraints were involved in doing this study. Some of them are:-
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The most signified limitation has been the individuals involved in this study had a little experience.
The sample size selected for the survey was too small as compared to large population.
The project was carried out only in the Jaipur city so findings on data gathered can be best true for Jaipur only and not applicable to other parts of state and country.
Our reliance was made on the primary data.
Time and money are critical factors limiting this study.
The data provided by the prospects may not be 100% correct as they too have their limitations.
Finding and suggestion have been given from personal point of view.
Due to work pressure, detailed interaction with the chartered accountants and tax consultants was not possible.
Some people were not willing to disclose the investment profile.
The baseness was being taken care of.
The area of sample was decided after taking into consideration the
major factors like:
Availability of investors
Approachability.
Time available with investor for interaction, etc.
Area of Sample:
The areas covered up in this survey was LUCKNOW
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Selection of units under study:
Article I. AREA OF LUCKNOW WHERE SURVEY IS DONE
1) Gomti nagar
2) Kapoorthala
3) Indira nagar
4) Hajaratganj
5) Aliganj
Source list (Sampling Frame):
GOVERNMENT EMPLOYEES: 28
NON GOVT EMPLOYEES: 62
BUSINESS MAN: 47
OTHERS: 13
Sample size: 150
Sampling Procedure: Probability Sampling (Simple Random Sampling
Data analysis and interpretation:
1. Personal Details:
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(a). Name:- (b). Add: - (c). Contact No:-(d). Age:-(e). Qualification:-(f). Occupation. Pl tick (√) Govt. Sec Pvt. Sec Business Agriculture Others
2. What is your education qualification?
a. under graduate
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b. Graduatec. PGd. any other
3. What is your monthly family income approximately? Pl tick (√).
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Up to Rs.10, 000 Rs. 10,001 to 15,000 Rs. 15,001 to 20,000 Rs. 20,001 to 30,000 Rs. 30,001 and above
4. What kind of investments you prefer most? Pl tick (√). All applicable.
a. Saving account b. Fixed deposits
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c. Insurance d. Mutual Fund e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver h. Real Estate I. PPF j. PF
5. While investing your money, which factor you prefer most?
a. Company reputationb. Liquidity
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c. Low Risk d. High Return e. Any one
6. Have you ever invested your money in mutual fund?
a. Yes b .No
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7. Where do you find yourself as a mutual fund investor?
a. Totally ignorant [ ] b. Partial knowledge of mutual funds [ ]c. Aware only of any specific scheme in which you invested [ ] d. Fully aware [ ]
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8. In which kind of mutual you would like to invest?
a. Public [ ] b. Private [ ]
- 105 -
9. How do you come to know about Mutual Fund?
a. Advertisement b. Peer Group c. Banks d. Financial Advisors
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10. Which mutual fund scheme have you used?
a. Open-ended b. Close-ended c. Liquid fund d. Growth fund
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11. if not invested in Mutual Fund then why?
a. Not aware of MF b. Higher risk c. Not any specific reason
- 108 -
12. Which feature of the mutual funds allure you most?
a. Diversification [ ] b. Better return and safety [ ] c. Reduction in risk and transaction cost [ ] d. Regular Income [ ] e. Tax benefit [ ]
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13. In which Mutual Fund you have invested? Please tick (√). All applicable.
a. SBIMF
b. UTI
c. HDFC
d. Reliance
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e. ICICI prudential funds
f. JM mutual fund
g. other. Specify
14. When you invest in Mutual Funds which mode of
investment Will you prefer?
a. One Time Investment b. Systematic Investment Plan (SIP)
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15. Where from you purchase mutual funds?
a. Directly from the AMCs [ ] b. Brokers only [ ] c. Brokers/ sub-brokers [ ] d. Other sources [ ]
- 112 -
16. Which AMC will you prefer to invest? Assets Management Co.
a. SBIMF b. UTI c. Reliance d. HDFC e. Kotak f. ICICI g. JM finance
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17. Which sector are you investing in mutual fund sector?
i. General 1st ii. Oil and petroleum iii. Gold fund iv. Diversified equity fund v. Debt fund vi. Banking fund vii. Real estate fund
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18. How would you like to receive the returns every year?
a. Dividend payout b. Dividend re-investment c. Growth in NAV
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Data Interpretation of Questionnaire:
1. First question was to determine 28 participants were in govt sector, 62
participants were in pvt sector, 47 participants were in business and 13
participants were in agriculture.
2. Second question was to determine the educational qualification of 150
participants, in which 32 participants were under graduate, 57 were
graduate, 38 participants were post graduate and 23 were other degree
holder.
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3. Third question was to determine monthly family income of participants
among which 23% participants monthly family income is upto rs. 10,000,
35% participants monthly family income is 10,001 to 15,000, 25%
participants monthly family income is 15,001 to 30,000 and 17%
participants monthly family income is 30,000 & above. That’s shows
maximum participants belong 10,000 to 15,000.
4. Fourth question was to determine the investments preference o
participants so on the basis of graph we can say that maximum people
prefer to invest in saving account and fixed deposit because in these
investment there are less risk in comparison to other.
5. Fifth question was to determine that during the investment what the things
that participants consider are high return, low risk, liquidity, company
reputation and other. On the basis of research we can say that first
preference is high return, second one is liquidity and third one is low risk.
6. Sixth questions was to check that how many participants have invested
their money in mutual fund and how many have not, among 150
participants 40% participants have invested and 60% have not. That
shows many people are not aware about mutual fund.
7. This questions was to determine the awareness of mutual fund among
participants that shows 46% are partially aware about mutual fund and rest
are totally ignorant, aware only of any specific scheme and fully aware.
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8. This question was to determine whether the participants invest their
money in public sector or in private sector. 63% participants are like to
invest in private sector and only 37% participants like to invest in public
sector.
9. This question was to determine what are the sources of information about
mutual fund among participants on the basis of graph 33 participants was
aware by advertisement, 42 participants by peer group, 48 participants by
banks and 27 by financial advisors.
10.This question was to determine which mutual fund scheme have
participants used. On the basis of questionnaires 49 participants use
open-ended and 21 participants use close-ended, 42 participants use
liquid fund and 38 participants use growth fund.
11.This question was to determine that if participants not invested in Mutual
fund then why? 0n the basis of primary data 61 participants not invested in
mutual fund due to unawareness of mutual fund, 49 participants not
invested in mutual fund due to high risk and 49 participants not invested in
mutual fund because of not any specific reason.
12.This question was to check that which feature of the mutual funds allure
the participants most and 25 participants invest in mutual fund due to
diversification, 32 invest due to better return, 44 invest invested due to
reduction in risk and transaction costs. 36 participants invested due to
regular income and 13 invested because of tax benefit.
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13.This question was to determine that how many participants among 150
have invested in which mutual fund and on the basis of the questionnaire
we can say that 26 participants have invested in SBI mutual fund, 19
participants have invested in UTI, 25 participants have invested in HDFC,
30 participants have invested in RELIANCE, 24 participants have invested
in ICICI, 15 participants have invested in JM mutual fund and 11
participants have invested in other mutual fund.
14.This question was to determine how many people like to invest in one time
investment plan and how many like to invest in systematic investment plan
(SIP) on the basis of graph we can say that in 150 participants 42.66% like
to invest in one time plan and 57.34% like to invest in SIP.
15.On the basis of this question we can say that among 150 participants 55
participants purchase mutual fund directly from the AMCs, 36 participants
purchase from broker only, 40 participants purchase from brokers & sub
brokers and 19 participants purchase from other sources.
16.This question was to determine that how many people will prefer to invest
in which Assets Management Company (AMC). The chart shows that 18%
will invest in SBI mutual fund, 15% will invest in UTI, 23% will invest in
RELIANCE, 13% will invest in HDFC, 19% will invest in ICICI and 12% will
invest in KOTAK & JM finance.
17.On the basis of this question we can say that among 150 participants 28
participants are investing in general 1st sector, 18 participants are investing
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in Oil & petroleum sector, 27 participants are investing in gold sector, 38
participants are investing in Diversified equity fund sector, 25 participants
are investing in banking fund and 14 participants are investing in real
estate fund.
18.This question was to determine that how would participants like to receive
the returns every year? On the basis on questionnaire we can analyze that
among 150 participants 26% participants like to receive the returns every
year as dividend payout, 32% participants like to receive the returns every
year as dividend re-investment and 58% participants like to receive the
returns every year as growth in NAV.
SWOT Analysis
A type of fundamental analysis of the health of a company by
examining its strengths(S), weakness (W), business opportunity (O), and
any threat (T) or dangers it might be exposed to.
STRENGTHS:
Brand strategy: as opposed to some of its competitors (e.g. HSBC),
Reliance ADAG operates a multi-brand strategy. The company operates
under numerous well-known brand names, which allows the company to
appeal to many different segments of the market.
Distribution channel strategy: Reliance is continuously improving the
distribution of its products. Its online and Internet-based access offers a
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combination of excellent growth prospects and its retail direct business
also saw growth of 27% in 2002 and 15% in 2003.
Various sources of income: Reliance has many sources of income
throughout the group, and this diversity within the group makes the
company more flexible and resistant to economic and environmental
changes.
Large pool of installed capacities.
Experienced managers for large number of Generics.
Large pool of skilled and knowledgeable manpower.
Increasing liberalization of government policies.
WEAKNESS:
Emerging markets: since there is more investment demand in the United
States, Japan and the rest of Asia, Reliance should concentrate on these
markets, especially in view of low global interest rates.
Mutual funds are like many other investments without a guaranteed
return: there is always the possibility that the value of your mutual fund
will depreciate. Unlike fixed-income products, such as bonds and Treasury
bills, mutual funds experience price fluctuations along with the stocks that
make up the fund. When deciding on a particular fund to buy, you need to
research the risks involved - just because a professional manager is
looking after the fund, that doesn't mean the performance will be stellar.
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Fees: In mutual funds, the fees are classified into two categories:
shareholder fees and annual operating fees. The shareholder fees, in the
forms of loads and redemption fees are paid directly by shareholders
purchasing or selling the funds. The annual fund operating fees are
charged as an annual percentage - usually ranging from 1-3%. These fees
are assessed to mutual fund investors regardless of the performance of
the fund. As you can imagine, in years when the fund doesn't make
money, these fees only magnify losses.
OPPORTUNITIES :
Potential markets: The Indian rural market has great potential. All the
major market leaders consider the segments and real markets for their
products. A senior official in a one of the leading company says foray into
rural India already started and there has been realization that the rural
market is both price and quantity conscious.
Entry of MNCs: Due to multinationals are entering into market job
opportunities are increasing day by day. Also India Mutual Fund majors
are tie up with other financial institutions.
THREATS:
Increased Competition: With intense competition by so many local
players causing headache to the current marketers. In addition to this
though multinational brands are not yet established but still they will soon
hit the mark. Almost 60 to 70% of the revenue is spending on the
management and services.
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Hedge funds: sometimes referred to as ‘hot money’, are also causing a
threat for mutual funds have gained worldwide notoriety for bringing
the markets down. Be it a crash in the currency, stock or bond
market, usually a hedge fund prominently figures somewhere in the
picture.
Conclusion:
Lucknow has huge untapped market as far as MF is concerned.
Mutual Funds are more of an investment option than the speculative
avenue. People tend to gain through long investments rather than
through short term.
Income funds and ELSS are among the few top funds.
Broker’s advice matters to as many of the people. Major part of people
preferred self-evaluation as best.
Most of the people look at the returns that are given by funds some are
in this favor and some people are those who consider Fund name and
current NAV of the fund before investing into a Mutual Fund.
Experience was the main factor that made a person invest in mutual
funds
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Limitation
People are not willing to take much risk and bear loss.
For proper evaluation it was insufficient time.
On the basis of particular area we cannot conclude whole.
Information provided by respondents may be false.
Lack of awareness about MF in public.
Lack of interest.
Lack of cooperation from the respondents.
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Recommendations and Suggestions
Brand Equity of Reliance is very high just, so go & hit the market.
Remove the differences in perception of audience about Private Company & PSU.
Create Awareness about Mutual Fund.
Literate audience about MF as better investment option.
Run some program to bring MF in final decision set while prospects
decide about distributorship.
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
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Appendix:
Glossary: Some terms related with Mutual Funds:
ACCOUNT STATEMENT: A document issued by the mutual fund, giving
details of transactions and holdings of an investor.
ADJUSTED NAV (TOTAL RETURN): The net asset value of a unit assuming
reinvestment of distributions made to the investors in any form.
ADVISOR: Your financial consultant who gives professional advice on the
fund's investments and who supervise the management of its assets.
ANNUAL RETURN: The percentage of change in net asset value over a
year's time, assuming reinvestment of distribution such as dividend payment
and bonuses.
APPRECIATION: When an investment increases in value, it appreciates. For
example, an equity share whose price goes from Rs. 20/- to Rs. 25/- has
appreciated by Rs. 5/-.
APPLICATION FORM: Form prescribed for investors to make applications for
subscribing to the units of a fund
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ASSET: Property and resources, such as cash and investments, comprise a
person's assets; i.e., anything that has value and can be traded. Examples
include stocks, bonds, real estate, bank accounts, and jewellery.
ASSET ALLOCATION: When you divide your money among various types of
investments, such as stocks, bonds, and short-term investments (also known
as "instruments"), you are allocating your assets. The way in which your
money is divided is called your asset allocation.
ASSET MANAGEMENT COMPANY / AMC / INVESTMENT MANAGER /
Reliance Capital Asset Management Ltd.: It is the investment manager for
the mutual fund. It is a company set up primarily for managing the investment
of mutual funds and makes investment decisions in accordance with the
scheme objectives, deed of Trust and other provisions of the Investment
Management Agreement.
AUTOMATIC INVESTMENT PLAN: Under these plans, the investor
mandates the mutual fund to allot fresh units at specified intervals (monthly,
quarterly, etc.) against which the investor provides post-dated cheques. On
the specified dates, the cheques are realized by the mutual fund and on
realization; additional units are allotted to the investor at the prevailing NAV.
BACK END LOAD: The difference between the NAV of the units of a scheme
and the price at which they are redeemed. The difference is charged by the
fund.
BALANCE SHEET: A financial statement showing the nature and amount of
a company's assets, liabilities and shareholders' equity.
BALANCED FUND: A mutual fund that maintains a balanced portfolio,
generally 40% bonds and 60% equity.
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BALANCE MATURITY TENURE OF A SCHEME: In the case of close-ended
schemes, the balance period till the redemption of the scheme.
BENCHMARK: A parameter with which a scheme can be compared. For
example, the performance of a scheme can be benchmarked against an
appropriate index.
BOND: An interest-bearing promise to pay a specified sum of money -- the
principal amount -- due on a specific date.
BOND FUNDS: Registered investment companies whose assets are invested
in diversified portfolios of bonds primarily fixed income securities.
BROKER: One who guides the investors on one or more investments and
facilitates the process of investment. A broker is a member of a recognized
stock exchange who buys and sells or otherwise deals in securities.
BROKERAGE: The fee payable to a broker for acting as an intermediary in a
transaction. For example, brokerage is payable by a fund for getting fresh
investments from investors.
BULL MARKET: Period during which the prices of stocks in the stock market
keep continuously rising for a significant period of time on the back of
sustained demand for the stocks.
CAPITAL: This is the amount of money you have invested. When your
investing objective is capital preservation, your priority is trying not to lose any
money. When your investing objective is capital growth, your priority is trying
to make your initial investment grow in value.
CAPITAL APPRECIATION: As the value of the securities in a portfolio
increases, a fund's Net Asset Value (NAV) increases, meaning that the value
of your investment rises.
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If you sell units at a higher price than you paid for them, you make a profit, or
capital gain. If you sell units at a lower price than you paid for them, you'll
have a capital loss.
CAPITAL GAINS: The difference between an asset's purchased price and
selling price, when the difference is positive. A capital loss would be when the
difference between an asset's purchase price and selling price is negative.
CAPITAL GROWTH: A rise in market value of a mutual fund's securities,
reflected in its NAV per share. This is a specific long-term objective of many
mutual funds. Capital Loss realized when an instrument or asset is sold at a
price below its cost.
CAPITAL MARKET: The market where capital funds, debt (bonds) and equity
(stocks) are traded.
CASH & OTHER CATEGORY: A mutual fund asset allocation theory that
includes net cash, short-term securities, and any other securities (such as
options) not included in other asset allocation categories.
CLOSED-ENDED MUTUAL FUND: They are schemes that have a pre-
specified maturity period generally ranging from 2 to 15 years. One can invest
directly in the scheme at the time for the initial issue and thereafter transact
(buy or sell) the units of the scheme on the stock exchanges where they are
listed.
The market price at the stock exchanges could vary from the scheme's net
asset value (NAV) on account of demand and supply situation, unit holders'
expectations and other market factors.
Some close-ended schemes provide an additional option of selling the units
directly to the Mutual Fund through periodic repurchase at NAV related prices.
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SEBI Regulations ensure that at least one of the two exit routes is provided to
the investor.
COMMISSION: The broker's or agent's fee for buying or selling securities for
a client. The fee is usually based on a percentage of the transaction's market
value.
CONVERTIBLE BOND: A corporate bond, usually a junior subordinated
debenture, which can be exchanged for shares of the issuer's common stock.
CORPUS: The total amount of money invested by all the investors in a
scheme.
CURRENT INCOME: Monies paid during the period an investment is held.
Examples include bond interest and stock dividends.
CURRENT LOAD: Load structure applicable currently. Funds keep revising
the load structures from time to time.
CURRENT MARKET VALUE: The amount a willing buyer will pay for a bond
today, which may be at a premium (above face value) or a discount (below
face value).
DEBT /INCOME FUNDS: Funds that invest in income bearing instruments
such as corporate debentures, PSU bonds, gilts, treasury bills, certificates of
deposit and commercial papers. These funds are the least risky and are
generally preferred by risk-averse investors.
DIVERSIFICATION: Diversification is the concept of spreading your money
across different types of investments and/or issuers to potentially moderate
your investment risk.
DIVIDEND: Income distributed by the Scheme on the Units
DIVIDEND PLAN: In a dividend plan, the fund pays dividend from time to time
as and when the dividend is declared.
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DIVIDEND REINVESTMENT: In a dividend reinvestment plan, the dividend is
reinvested in the scheme itself. Hence instead of receiving dividend, the unit
holders receive units.
Thus the number of units allotted under the dividend reinvestment plan would
be the dividend declared divided by the ex-dividend NAV.
ENTRY LOAD: It is the load charged by the fund when one invests into the
fund. It increases the price of the units to more than the NAV and is
expressed as a percentage of NAV.
EQUITY SCHEMES: Schemes where more than 50% of the investments are
done in equity shares of various companies. The objective is to provide capital
appreciation over a period of time.
EXPENSE RATIO: Annual percentage of fund's assets that is paid out in
expenses. Expenses include management fees and all the fees associated
with the fund's daily operations.
EXIT LOAD: It is the load charged by the fund when one redeems the units
from the fund. It reduces the price of the units to less than the NAV and is
expressed as a percentage of NAV.
FACE VALUE: The original issue price of one unit of a scheme
FII: Foreign Institutional Investors, registered with SEBI under the Securities
and Exchange Board of India (Foreign Institutional Investors) Regulations,
1995.
FUND MANAGER: Appointed by the AMC, he is the person who makes all
the final decisions regarding investments of a scheme
GROWTH FUND: A mutual fund whose primary investment objective is long-
term growth of capital. It invests principally in common stocks with significant
growth potential. Growth Stocks of companies that have shown or are
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expected to show rapid earnings and revenue growth. Growth stocks have
relatively more risk than other conventional forms of investment.
INCOME FUND: A mutual fund that primarily seeks current income rather
than growth of capital. It will tend to invest in stocks and bonds that normally
pay high dividends and interest.
INDEX FUND: A type of mutual fund in which the portfolios are constructed to
mirror a specific market index. Index funds are expected to provide a rate of
return over time that will approximate or match, but not exceed, that of the
market, which they are mirroring.
INITIAL OFFER/INITIAL ISSUE: Offer of Reliance Income Fund units during
the initial offer period.
INITIAL OFFER PRICE: The price at which units of a scheme are offered in
its Initial Public Offer (IPO).
ISSUED SHARE CAPITAL: This is the total number of shares a company has
made publicly available multiplied by the total nominal value of the shares.
A company may have 10 million shares in issue, each with a nominal value of
Re. 1. So the issued share capital is Rs. 10 million.
LIQUIDITY: The ability to buy or sell an asset quickly or the ability to convert
to cash quickly
LIQUID FUNDS /MONEY MARKET FUNDS: Funds investing only in short-
term money market instruments including treasury bills, commercial paper
and certificates of deposit. The objective is to provide liquidity and preserve
the capital
LOAD: A charge that may be levied as a percentage of NAV at the time of
entry into the Scheme/Plans or at the time of exiting from the Scheme/Plans.
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LOCK IN PERIOD: The period after investment in fresh units during which the
investor cannot redeem the units.
MANAGEMENT FEE: Money paid by a mutual fund to its investment
manager or advisor for overseeing the portfolio. A management fee is usually
between one-half and one percent of the fund's net asset value.
MATURITY OR MATURITY DATE: The date upon which the principal of a
security becomes due and payable to the security holder.
MATURITY VALUE: The amount (other than periodic interest payment) that
will be received at the time a security is redeemed at its maturity. On most
securities the maturity value equals the par value.
MUTUAL FUNDS: An investment company that pools money from its unit
holders and invests that money into a variety of securities, including stocks,
bonds, and money-market instruments.
This represents a way of investing money into a professionally managed and
diversified pool of securities that hopefully will provide a good return on unit
holders' money.
MUTUAL FUND REGULATIONS: Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996 as amended up to date and such other
Regulations, as may be in force from time to time, to regulate the activities of
the Mutual Fund.
NAV: Net Asset Value of the Units in each plan of the Scheme is calculated in
the manner provided in this Offer Document or as may be prescribed by
Regulations from time to time.
NAV Change: The difference between today's closing net asset value (NAV)
and the previous day's closing net asset value (NAV).
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NAV Change %: The percentage change between today's closing net asset
value (NAV) and the previous day's closing net asset value (NAV)
NET WORTH: A person's net worth is equal to the total value of all
possessions, such as a house, stocks, bonds, and other securities, minus all
outstanding debts, such as mortgage and revolving credit lines.
NET YIELD: Rate of return on a security net of out-of-pocket costs associated
with its purchase, such as commissions or markups.
NON PERFORMING INVESTMENTS: Part of the portfolio investment of a
debt fund which is not making interest payment or principal amount
repayments in time.
OFFER DOCUMENT OR PROSPECTUS: The official document issued by
mutual funds prior to the launch of a fund describing the characteristics of the
proposed fund to all its prospective investors.
It contains information required by the Securities and Exchange Board of
India, such as investment objective and policies, services, and fees. Individual
investors are encouraged to read and understand the fund's prospectus
OPEN-ENDED SCHEMES/ FUNDS: Scheme of a mutual fund where
purchase or sale of units is allowed on a continued basis. Funds that do not
have any fixed maturity and are continuously open for subscription and
redemption.
The key feature is liquidity. One can conveniently buy and sell the units held
at the NAV related price.
OPENING NAV: The NAV disclosed by the fund for the first time after the
closure of an NFO.
PORTFOLIO: It refers to the total investment holdings of the fund.
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PORTFOLIO CHURNING: It refers to the changes made to the portfolio
keeping in view the market conditions. It includes both buying and selling of
holdings and is aimed at giving a better yield to the investor.
REDEMPTION: The paying off or buying back of units of a mutual fund / bond
by the issuer.
REDEMPTION FEE: A fee charged by a limited number of funds for
redeeming, or buying back, fund units.
REDEMPTION PRICE: The price at which a mutual fund's units are
redeemed (bought back) by the fund. The redemption price is usually equal to
the current NAV per unit.
RETURNS: The dividend and capital appreciation accruing to the investor on
the investment held by him
SCHEME: A mutual fund can launch more than one scheme. With different
schemes, in spite of there being a common trust, the assets contributed by
the unit holders of a particular scheme are maintained and managed
separately from other schemes and any profit/loss from the assets accrue
only to the unit holders of that scheme
SYSTEMATIC INVESTMENT PLAN (SIP): A program that allows an investor
to provide post-dated cheques to the mutual fund to allot fresh units at
specified intervals (usually monthly or quarterly).
On the specified dates, the cheques are realized by the mutual fund and
additional units at the prevailing NAV are allotted to the investor. This enables
him to invest as little as Rs 1000 a month and take advantage of rupee cost
averaging.
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SYSTEMATIC WITHDRAWAL PLANS (SWP): A plan offered with some
schemes under which post-dated cheques for fixed amounts (as may be fixed
by the fund) are issued to the investors for monthly, bi-monthly or quarterly
withdrawals.
The withdrawals are as per the requirements of the investor specified by him/
her at the time of investment.
TRANSACTION SLIP: A brief form to be filled at the time of additional
purchases or redemption.
TRUST FUND: The corpus of the Trust, unit capital and all property belonging
to and I or vested in the Trustee
UNIT: A Unit represents one undivided share in the assets of the Schemes.
UNIT HOLDER: A person who holds Unit(s) under any plan of the Scheme.
VALUATION: Calculation of the market value of the assets of a mutual fund
scheme at any point of time
VOLATILITY: In investing, volatility refers to the ups and downs of the price of
an investment. The greater the ups and downs, the more volatile the
investment
52 WEEK HIGH: The highest market value of a unit (in terms of NAV) during
the immediately preceding 52 weeks.
WEEK LOW: The lowest value of a unit (in terms of NAV) during the
immediately preceding 52 weeks owns, the more volatile the investment.
YIELD: Distributions form investment income, usually expressed as a
percentage of net asset value or market price.
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Unlike total return, yield has the single component of investment income and
does not include capital gains distributions or capital appreciation of
underlying shares.
ZERO-COUPON BOND: A bond where no periodic interest payments are
made. The investor purchases the bond at a discounted price and receives
one payment at maturity.
The maturity value an investor receives is equal to the principal invested plus
interest earned compounded semi-annually at the original rate to maturity.
Bibliography
Annual report of the Company.
Kotare Philip., “Marketing Management”, Pearson Education, India,
2004.
Kothari. C.R., “Research Methodology”, New Age Publication, India, 2006.
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