Pgdm Finance Project-1

Analytical study of various schemes of Mutual Fund with reference to Reliance Mutual Fund

Analytical study of various schemes of Mutual Fund with reference to Reliance Mutual Fund

CHAPTER-1INTRODUCTION

1.1 Mutual FundA 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, profession -nally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund

Mutual Fund Operation Flow Chart

DEFINITIONMutual 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. 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. ORGANISATION OF A MUTUAL FUNDTherearemanyentitiesinvolvedandthediagrambelowillustratestheorganizational set up of a mutual fund:

STRUCTURE OF A MUTUAL FUNDA mutual fund is set up in the form of a trust, which has sponsor, trustees, asset management company (AMC) and a custodian. The trust is established by a sponsor or more than one sponsor who is like a promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit-holders. The AMC, approved by SEBI, manages the funds by making investments in various types of securities. The custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund

1.2 TYPES OF MUTUAL FUND SCHEMES

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table on the previous page gives an overview into the existing types of schemes in the Industry.

1.21 By StructureOpen-Ended FundsAn open-end fund is one that is available for subscription all through the year. These don't have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.Close-Ended FundsA closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.Interval FundsInterval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.1.22 By Investment ObjectiveGrowth FundsThe aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time.Income FundsThe 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 and Government securities. Income Funds are ideal for capital stability and regular income.Balanced FundsThe aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls These are ideal for investors looking for a combination of income and moderate growth.Money Market FundsThe aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. 1.23 SchemesTax Saving Schemes These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for Investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

Special SchemesIndustry Specific SchemesIndustry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.Index SchemesIndex Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 5 RISK ASSOCIATED WITH MUTUAL FUNDSWhen you are choosing funds; be sure to consider how much risk you are comfortable with and how close you are to retirement. If retirement is around the corner, you may want a portfolio with very little risk. On the other hand, if you are younger, and have the time to weather the markets ups and downs, you may want to choose a more aggressive investment strategy. When you invest in mutual funds, there is no guarantee that your earnings will be higher than the investment you started off with. On the other hand, the opportunity for your money to earn more also moves hand in hand with the risk you are willing to take and other factors like your time horizon etc.Here are various types of risk: Market Risk: There are times when the price of securities in a particular market rise or fall due to certain outside influencing factors. This could affect large as well as small businesses. Inflation Risk: Very often investors that follow the conservative approach consider those investments that seek to preserve their capital. These types of investments however may not protect against inflation. Inflation is nothing but loss of purchasing power. When inflation grows faster than earnings on an investment, one may be able to buy less. One is exposed to inflation risks when prices rise faster than ones income. Credit Risk: The ability of a company to repay investors money or to make interest payments determines the credit risk that investors face. Interest Rate Risk: Interest rates are not predictable and can adversely affect the prices of stocks and bonds. For instance when interest rates rise, bond prices fall and vice-versa. Political environment: The political environment also influences investments in a given period. A favourable environment could boost the investment climate and vice-versa.1.4 Benefits of Investing in Mutual Funds Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. DiversificationMutual 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 Convenient AdministrationInvesting in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. Return PotentialOver 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 CostsMutual 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. LiquidityIn open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. TransparencyYou 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. AffordabilityInvestors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. Choice of SchemesMutual Funds offer a family of schemes to suit your varying needs over a lifetime.

1.5 PARAMETERS THAT ARE USED IN ANALYSIS1.5.1 Net Asset Value (NAV) The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit". We also abide by the same convention.Calculation of NAV The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below.Asset value = Sum of market value of shares/debentures + Liquid assets/cash held, if any + Dividends/interest accrued - Amount due on unpaid assets -Expenses accrued but not paid1.5.2 THE BENCHMARK OR THE INDEX All mutual funds have different objectives and therefore their performance would vary. A mutual funds performance should be benchmarked against mutual funds of similar type or India info-line mutual fund index for a particular type. E.g. equity fund index, income fund index or balanced fund index or liquid fund index. One can also benchmark the fund against the Sensex or any other broad based index for the particular asset class.One has to be very careful about choosing the comparison period. Ideally, one should compare the performance of equity or an index fund over a 1-2 year horizon. Any comparison over a shorter period would be distorted by short term, volatile price movements. Comparisons over a longer period need to be interpreted carefully by looking at other factors such as change in individuals managing the fund, one-time investment successes etc. Similarly, the ideal comparison period for a debt fund would be 6-12 months while that for a liquid/money market fund would be 1-3 months. Apart from the entire period, one should also compare the performance in smaller intervals within the same period say intervals of one-month duration.To make comparison meaningful, one has to compare the average annual compounded rate of return. 1.5.3 STANDARD DEVIATION STANDARD DEVIATION is a measure of the degree to which a fund's return varies from the average of all similar funds. STANDARD DEVIATION is probably used more than any other measure to describe the risk of a security (or portfolio of securities). If you read an academic study on investment performance, chances are that STANDARD DEVIATION will be used to gauge risk. It's not just a financial tool, though. STANDARD DEVIATION is one of the most commonly used statistical tools in the sciences and social sciences. It provides a precise measure of the amount of variation in any group of numbers--the returns of a mutual fund, rainfall in Costa Rica, or the weight of professional football players--that make up an average. If you're math-phobic, the equation may seem foreboding, but it's really not that bad. STANDARD DEVIATION is a measure of dispersion. As it relates to investing, it is a measure of how much individual returns varies from the average expected return over a certain period of time. Since the performance history of mutual funds often is reported on the basis of 1-, 3-, 5- or 10-year average annual returns, it is important for investors and fund managers to understand how consistent those returns have been. A high 10-year average annual return may have been achieved by a few outstanding years combined with several mediocre ones. While the average may seem acceptable, the year-to-year swings in performance may not be acceptable to a clients risk tolerance. Two funds may have arrived at the same place by following very different paths. A mid-cap growth fund, can be far more volatile than Mutual Shares or a large-cap value fund that has been a model of consistency, even though these kind of dissimilarity are there in between them, their 3- and 10-year total returns can be similar. Although these dissimilar funds are being compared here with hindsight, historical STANDARD DEVIATION certainly should contribute to future expectations. The lower a clients risk tolerance, the less likely it is he or she will continue to hold the riskier fund long enough to achieve its ultimate returns. When used to measure the volatility of the performance of a security or a portfolio of securities, STANDARD DEVIATION is generally calculated for monthly returns over a specific time period--frequently 36 months. 1.5.4 SHARPE RATIOThe Sharpe Performance IndexThe Sharpe Index is a measure with which you may measure the performance of your portfolio over a given period of time. The important aspect of the Sharpe Index is that this performance indicator takes into consideration the risk of the portfolio. In order to use the Sharpe Index, you must know three things; the portfolio return, the risk-free rate of return, and the Standard Deviation of the portfolio. For the risk-free rate of return, you may use the average return (over the period of time) of some government bond or note. Sharpe = (Portfolio Return - Risk-Free Return) / Standard Deviation It measures the ratio of the portfolio excess return above the risk-free rate to the standard deviation of portfolio returns. A Sharpe index number greater than 1 indicates a good performance in relation to the level of risk taken while a number below 0.1 indicates the opposite. The SHARPE RATIO does not refer to the market portfolio or any other benchmark. Actually, the implicit benchmark is the risk free rate of return. The excess return can be interpreted as a zero-investment strategy. Because the total risk of a portfolio - its standard deviation - is used in the SHARPE RATIO, diversification does not play any role in performance analysis. The SHARPE RATIO is a useful measure for an investor who puts all his money in one fund; in this situation, only total risk matters. The SHARPE RATIO is calculated as follows:For example, assume equity fund 1 returned 20% over the last five years, with a standard deviation of 2%. The risk free rate is generally the interest rate on a government security. Assume that the average return of a risk-free government bond fund over this period was 6%. The SHARPE RATIO would be (the return of the portfolio - the risk free rate)/the standard deviation of the portfolio. In the case of equity fund 1, the SHARPE RATIO is (20%-6%)/2% or 7%. Therefore, for each unit of risk, the fund returned 7% over the risk free rate.Generally, investors evaluating the performance of the fund would compare its SHARPE RATIO to a benchmark. This could include, but is not limited to, the average performance of similar funds, and an equity index. For example assume the S&P 500 was used as a benchmark. Further assume that the return of a S&P 500 index fund over the past five years was 10% with a standard deviation of 2%. The SHARPE RATIO for this index fund is (10%-6%)/2, or 2%. An investor doing a side-by-side comparison between equity fund 1 and the S&P 500 index fund would clearly prefer equity fund 1. This fund provided a higher level of excess return for each unit of risk. Money markets typically have low SHARPE RATIO because they will never outperform the T-bill rate. Remember that a money market will invest in T-bills but when you subtract the management fee, you will always under perform the gross T-bill rate. Significance Sharpe can be better than just looking at performance because it incorporates the issue of risk. For most investors, the Sharpe makes good intuitive sense because they not only hate to lose money but they often compare the returns to risk free investing. Many technical analysts will incorporate the SHARPE RATIO when evaluating mutual funds.

1.5.5 BETA RATIO BETA, also known as BETA coefficients or BETA factors, are a popular analytical tool relied on by investors, portfolio managers, and market analysts to measure the volatility or risk of stocks. A BETA measures the extent to which the price of a given stock varies with respect to the market as a whole. The BETA coefficient compares the variability of a funds historical returns to the market as a whole. That is, BETA measures a funds expected change for every percentage change in the benchmark index.BETA is a measure of a fund's sensitivity to market movements. It measures the relationship between a fund's excess return over T-bills (government bonds which give a fixed return) and the excess return of the benchmark index. BETA is computed for the trailing 36-month period. By definition, the BETA of the benchmark index is 1.00. The stock market's BETA is represented by "1.0". Stocks that, on average, rise and fall with the stock market also have a BETA of "1.0". A stock with a BETA greater than 1.0 indicates that if the market rises or falls, the stock fluctuates more than the market (up or down). Accordingly, a fund with a 1.10 BETA is expected to perform 10% better, after deducting the T-bill rate, than the index in up markets and 10% worse in down markets, assuming all other economic factors remain constant. Conversely, a BETA of 0.85 indicates that the fund is expected to perform 15% worse than the index in up markets and 15% better in down markets. A low fund BETA does not imply that the fund has low level of volatility, though; rather, a low BETA means only that the fund's market-related risk is low. A specialty fund that invests primarily in gold, for example, will usually have a low BETA, as its performance is tied more loosely to the price of gold and gold-mining stocks than to the overall stock market. Thus, though the specialty fund might fluctuate wildly because of rapid changes in gold prices, its BETA will remain low.There is one major caveat to drawing any conclusions from BETA. A fund must significantly correspond to the market being benchmarked for the statistic to be meaningful. It is easy to be fooled into believing a fund has below-market volatility when it is being compared with the wrong index. The BETA can be represented by different degrees. Normally a BETA of a portfolio is can be classified as the following: Negative BETA A BETA less than 0 is possible but highly unlikely. People used to think that gold and gold stocks should have negative Betas because they tended to do better when the stock market declined, but this hasn't been true overall. BETA = 0 Basically this is cash (assuming no inflation). BETA between 0 and 1 - Low-volatility investments, such as utilities, are usually in this range BETA = 1 - This is the same as an index, such as the S&P 500 or some other index fund. BETA greater than 1 - This denotes anything more volatile than the broad-based index, like a sector fund. BETA greater than 100 - This is impossible because the stock would be expected go to zero on any decline in the stock market. The BETA never gets higher than two to three. 1.5.6 ALPHA RATIOWhen the market goes up, high beta funds will show better returns than funds with lower beta. When the market turns adverse, the losses would be lover in low beta funds. If the performance of funds depends on market returns and beta, then how do we evaluate the role of fund manager in generating excess return? This can be only done through Jensen alpha for the scheme. This is the gap between the funds expected return (based on its beta, i.e. systematic risk) and its actual returns. Higher the alpha better the fund manager has performed.Suppose the market has gone up from 4000 to 4400, i.e. a growth of 10%, the beta of a scheme is 1.2 and the risk free return is 6%.Expected return from the scheme = Risk free return + (beta* risk premium) = 6% + 1.2*(10% - 6%) = 10.8 %The actual return however may be different, say it is 15%. Then 15%- 10.8% i.e. 4.2% is the alpha. It may be noted that alpha ratio helps in assessing the excess returns generated by the fund manager1.5.7 P/E ratio:A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variationuses the sum of the last two actual quarters and the estimates of the next two quarters. Also sometimes known as "price multiple" or "earnings multiple".In general, a high P/Esuggests that investors are expectinghigher earningsgrowthin the future compared to companies with alower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usuallymore useful to compare the P/E ratios of onecompany to other companies in the same industry, to the market in general or against the company's own historical P/E.It would not be useful for investorsusing the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.The P/E is sometimesreferred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings.If a company were currently trading at a multiple(P/E) of 20, the interpretation is that an investor iswilling to pay $20 for $1 of current earnings.

It is important that investors notean importantproblem that arises with the P/E measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earningsthatis susceptible to forms of manipulation, making thequality of the P/Eonly as good as the quality of the underlying earnings number.A mutual fund P/E Ratio is a combination of the P/E ratios of all the stocks held in a particular mutual fund. This can be calculated as a simple average with the P/E Ratio of each stock weighted equally, or each position weighted by the size relative to the total fund's assets.1.5.8 R-Squared:Astatistical measure that represents the percentage of a fund or security'smovements that can be explained by movements in a benchmark index. For fixed-incomesecurities,the benchmark is the T-bill. For equities, the benchmark is the S&P 500.R-squared values range from 0 to 100. An R-squared of 100 means that all movements of asecurity are completely explained by movements in the index. A high R-squared (between 85 and 100) indicates the fund's performance patterns have been in line with the index. A fund with a low R-squared (70 or less) doesn't act much like the index.

A higher R-squared value will indicate a more useful beta figure. For example, if a fund has an R-squared value of close to 100but has a beta below 1, it is most likely offering higher risk-adjusted returns. A low R-squared means you should ignore the beta.

CHAPTER-2OBJECTIVES

OBJECTIVES1:To study the various Mutual fund schemes and their objectives.2:To analyse returns in case of various schemes of Reliance Mutual fund.3:To study the risk parameters and analyse them for finding the risk involved with various schemes of reliance Mutual funds.4:To know about and analyse the various parameters that are involved in portfolio analysis of Reliance Mutual fund.

CHAPTER-3SCOPE

SCOPEThe scope of the project covers returns analysis, risk analysis, and portfolio analysis of mutual funds with reference to Reliance Mutual Fund , along with meaning of mutual fund, benefits of investing in mutual funds and the various parameters involved in measuring risk and portfolio of mutual funds. Returns of mutual funds involve absolute returns and annualized returns. Risk in mutual funds is calculated by standard deviation , alpha , beta , sharpe and r squared. The portfolio is measured by p/e ratio , fund size, no of stocks, turnover ratio. All this concepts are covered under my analysis.

CHAPTER-4RESEARCH METHODOLOGY

RESEARCH METHODOLOGYThe project is based on pure findings of facts.Primary ObjectivesThe main objective of this study is doing an In-depth analysis of Mutual Fund schemes to know about their asset allocation, portfolio ,returns and risksSecondary objectivesEvaluating fund performance.Collection of dataFor the complete study I required data of Mutual Fund and getting from thesecondary data base.Sources of the data collection will be,(1) Internet(2) Various magazines/bulletins(3) News papers(4) Related booksLimitations It is based on Secondary Data. Time Constraint Lack of resources

CHAPTER-5COMPANY PROFILE

About Reliance Money

Reliance money is part of ADA Group. Reliance Money is Launched in 11th April, 2007 but it is working since Oct, 2007. It comes Under Reliance Capita with the Net-worth Rs. 4500 cr., amongst the top 3 banking & financial services companies in the private sector . Reliance Money provides a comprehensive platform, offering an investment avenue for a wide range of asset classes. Its endeavor is to change the way India transacts in financial markets and avails financial services.

Reliance Money offers a single window facility, enabling you to access, amongst others, Equity, Equity & Commodity Derivatives, Offshore Investments, IPOs, Mutual Funds, Portfolio Management services, Life Insurance and General Insurance products. Reliance Money is the most cost-effective, convenient and secure way to transact in a wide range of financial products and services. Reliance Money would offer the brokerage services across 700 cities including Delhi and Mumbai through more than 3,000 outlets. Reliance Money said it has acquired the fastest 2 million customers in the industry and has launched this initiative to commemorate crossing this mark. Reliance Capital, the parent company of Reliance Money, has crossed a total customer base of 14 million as of March 31, which marks a three-fold jump in one year.Reliance money Comprises of-:Reliance Securities LtdReliance Commodities LtdReliance Financial Services LtdOnline Trading Portal for Stocks & Commodities Member of NSE & BSE for Equity Trading. Member of MCX, NCDEX & DGCX for Commodities. Off-line Trading also possible. Unique online Security features for the first time in India. Support activities : Research, PMS, Call Centre. Lowest Brokerage and maximum service & Comfort. Equity Trading Delivery, Margin & Derivatives. Live News available on Portal Reuters & Dow Jones. Setting up kiosks at convenient locations for clients to enter trades.Distribution of Financial Products Investments in Mutual Funds of all AMCs. Purchase of Insurance Policies ( Life & Non-Life). IPO & Margin Funding Off Shore Investments. Online Portal for investments / trading in International markets up to US$ 100,000. Trading in Commodities, International Indices, Equity of Overseas Exchanges.Other Products Precious Metal Retailing - 999.99% Pure Gold Coins, Assay Certified. Foreign Exchange Services Money Changers. Travel Card & Traveller Cheques. Instant Money Transfers from anywhere in the world. Buying of Foreign Currency in Physical form.Other ServicesSMS Service is given for Trade confirmation, Research Calls, Important events / updates, Demat Balance and customers can get all relevant info on equity, commodity, FX & MF.News Service - Online access to world class real time Dow Jones news, User Defined Alerts based on news / happenings, Global commodity coverage by Dow Jones, Market round up by commodities control.Competitors of the Reliance MoneyICICI DirectSHARE KHANKOTAK SECURITIESRELIGARE SECURITIES5PAISA (INDIA INFOLINE)INDIA BULLSSWOT Analysis of the companyStrengths Research wing team. Online as well as off line trading facility. Own trader terminal software. Membership of BSE and NSE. Depository participant of NSDL and CDSL. Brand name Pricing Security and Security key KIOSKs. Under one roof every financial instrument is availableWeaknesses Throat cut competition No customer relationship building spiritOpportunities- Most of the people are illiterate about the share market. Only 12% of the population is investing still big population to be trapped for investing into stock market. Proposed collaborations with PSU banks. Other financial services:- Merchant Banking and Venture Capital etc.Threat- Large number of players. Shift in competition.

CHAPTER-6DATA ANALYSIS AND INTERPRETATION

6.1 Reliance Equity Opportunities Fund - Retail Plan (G):A open ended diversified equity scheme. The primary investment objective of the scheme is to seek to generate capital appreciation and provide long-term growth opportunities by investing in portfolio conatituted of equity securities and equity related securities and secondary objective is to generate consistent returns by investing in debt and money market securitiesReturns:The below table gives the returns of the fund as on 31 dec 2012. The returns upto one year are absolute returns and more than one year are annualized returns.PeriodReturns (%)

1 mth4.7

3 mths16.8

6 mths25.3

1 year58.4

2 year32.7

3 year15.4

5 year23.8

Graphical representation of returns of mutual fund

Top holdings(31dec2012):The top ten holdings of fund in various companies are given in the below table along with the sector they belong.EquitySectorValue(Rs cr)Asset%

SBIBanking/Finance115.385.58

Divis LabsPharmaceuticals114.115.53

TCSTechnology112.965.43

TrentReal Estate106.595.24

Aventis PharmaPharmaceuticals104.495.14

Indian Metals &Metals & Mining84.563.76

LarsenEngineering78.363.48

Torrent PowerUtilities76.873.41

HCL TechTechnology76.133.38

Cox & KingsMiscellaneous75.123.34

Sector Allocation(jul30,10):The below table provides the information regarding the sector in which fund has invested and the highest and lowest percentage fund has in that sector in the last one year.Sector%-- 1-Year --

HighLow

Pharmaceuticals12.9017.9512.90

Technology11.0616.838.72

Banking/Finance9.5412.819.46

Real Estate8.0511.097.89

Automotive7.377.373.99

Engineering5.958.393.22

Asset allocation (jul30,10):The fund has invested in equity as it is equity diversified mutual fund and its asset allocation is given below.Equity85.84

Others8.11

Debt0.00

Mutual FundsN.A

Money Market0.00

Cash / Call6.05

6.2 Reliance Tax Saver (ELSS) Fund (G):An open ended equity linked saving scheme. The primary investment objective of the scheme is to seek to generate capital appreciation and provide long-term growth opportunities by investing in portfolio conatituted of equity securities and equity related securities.Returns:The below table gives the returns of the fund as on sep 01,10. The returns upto one year are absolute returns and more than one year are annualized returns.PeriodReturns (%)

1 mth4.9

3 mths16.0

6 mths21.0

1 year41.4

2 year27.4

3 year11.0

5 year16.7

Graphical representation of returnsTop holdings(may 31,11):The top ten holdings of fund in various companies are given in the below table along with the sector they belong.EquitySectorValue(Rs cr)Asset%


HDFC BankBanking/Finance106.344.67

Eicher MotorsAutomotive98.414.32

NTPCUtilities97.734.29

Indian Metals &Metals & Mining87.613.85

Oil IndiaOil & Gas70.593.10

CumminsEngineering65.662.88

SiemensTelecom64.702.84


TCSTechnology58.792.58

Sector allocation (may31,11):The below table provides the information regarding the sector in which fund has invested and the highest and lowest percentage fund has in that sector in the last one year.Sector%-- 1-Year --

HighLow





Utilities6.416.731.80

Oil & Gas6.2910.313.90

Asset allocation(may31,11):The fund has invested in equity as it is equity linked saving scheme and its asset allocation is given below.Equity87.83

Others7.18

Debt0.00

Mutual FundsN.A

Money Market0.00

Cash / Call4.99

6.3 Reliance Growth Fund - Retail Plan (G)The primary investment objective of the scheme is to seek to generate capital appreciation and provide long-term growth opportunities by investing in portfolio conatituted of equity securities and equity related securities through a research based investment approach.Returns:The below table gives the returns of the fund as on sep 01,10. The returns upto one year are absolute returns and more than one year are annualized returns.PeriodReturns (%)

1 mth2.4

3 mths10.1

6 mths14.9

1 year33.9

2 year22.1

3 year15.2

5 year23.6

Graphical representation of returns:

Top Holdings(may31,11):The top ten holdings of fund in various companies are given in the below table along with the sector they belong.EquitySectorValue(Rs cr)Asset%


LupinPharmaceuticals325.834.24

Bank of BarodaBanking/Finance297.673.87

Jindal SawMetals & Mining241.863.15


EID ParryFood & Beverage177.882.32

ONGCOil & Gas177.312.31


InfosysTechnology161.932.11

Jindal SteelMetals & Mining161.792.11

Sector Allocation(may31,11):The below table provides the information regarding the sector in which fund has invested and the highest and lowest percentage fund has in that sector in the last one year.Sector%-- 1-Year --

HighLow




Metals & Mining6.629.256.62

Food & Beverage4.996.204.99

Conglomerates4.495.443.79

Asset Allocation (may 31, 11):The fund has invested in equity as it is equity scheme and its asset allocation is given belowEquity71.30

Others22.33

Debt0.00

Mutual FundsN.A

Money Market0.00

Cash / Call6.37

6.4 Reliance Pharma Fund (G)An open ended pharma sectors scheme. The primary objective of the scheme heme is to generate consistent returns by investing in equity and equity related or fixed income securities of pharma and other associated companiesReturns:The below table gives the returns of the fund as on sep 01,10. The returns upto one year are absolute returns and more than one year are annualized returns.PeriodReturns (%)

1 mth-0.8

3 mths3.4

6 mths17.5

1 year62.4

2 year44.9

3 year27.4

5 year26.6

Graphical representation of returns

Top Holdings(may 31, 11):The top ten holdings of fund in various companies are given in the below table along with the sector they belong.EquitySectorValue(Rs cr)Asset%

Sun PharmaPharmaceuticals44.818.90

WyethPharmaceuticals39.637.87


Indoco RemediesPharmaceuticals33.846.72

CiplaPharmaceuticals32.646.48


LupinPharmaceuticals28.175.59

AstraZenecaPharmaceuticals25.575.08

Zydus WellnessFood & Beverage25.215.01

Torrent PharmaPharmaceuticals22.724.51

Sector Allocation(Jul 30, 10):The below table provides the information regarding the sector in which fund has invested and the highest and lowest percentage fund has in that sector in the last one year.Sector%-- 1-Year --

HighLow


Food & Beverage5.018.895.01

Services2.432.831.31

Asset Allocation (%)(Jul 30, 10):The fund has invested in equity as it is equity scheme and its asset allocation is given belowEquity88.90

Others1.85

Debt0.00

Mutual FundsN.A

Money Market0.00

Cash / Call9.25

Concentration:The below table provides diversification in portfolio of mutual fund.Holdings%

Top 536.87

Top 1063.01

Sector%

Top 388.90

6.5 Reliance Banking Fund (G):An open ended banking sectors scheme. The primary objective of the scheme is to generate consistent returns by investing in equity and equity related or fixed income securities of banks.Returns:The below table gives the returns of the fund as on may 31,11. The returns upto one year are absolute returns and more than one year are annualized returns.PeriodReturns (%)

6 mth4.01

1 year19.33

3 year24.97

5 year28.7

Graphical representation of returns of fund:Top Holdings(MAY 31, 11):The top ten holdings of fund in various companies are given in the below table along with the sector they belong.EquitySectorAsset%

SBIBanking/Finance12.70

ICICI BankBanking/Finance15.78

Canara BankBanking/Finance5.92

Bank of BarodaBanking/Finance 7.90

Oriental BankBanking/Finance4.86

Corporation BanBanking/Finance5.60

Bajaj Auto FinBanking/Finance5.18

HDFC BankBanking/Finance7.49

ING Vysya BankBanking/Finance2.29

Federal BankBanking/Finance6.21

6.6 Reliance Monthly Income Plan (G):An open ended fund. The primary investment objective of the scheme is to generate regular income in order to make regular dividend payments to unit holders and secondary objective is growth of capitalReturns:The below table gives the returns of the fund as on sep 01,10. The returns upto one year are absolute returns and more than one year are annualized returns.periodReturns

6 month6.1

1 year13.6

3 year14.9

5 year12.4

Graphical representation of returns of mutual fund:

Top holdings(jul 30,10):The top ten holdings of fund in various companies are given in the below table.DebtRatingValue(Rs cr)Asset%

PUNJAB NATIONAL BANKPR1+593.9110.04

IDBI BANK LTDA1+336.845.69

7.80% GOI (MD 03/05/2020).Sovereign304.915.15

INFRASTRUCTURE DEVELOPMENT FINANCE COMPANY LTD.LAAA236.403.99

7.17% GOI (MD 14/06/2015)Sovereign220.413.72

CANARA BANKP1+216.673.66

TATA POWER CO. LTD.AA198.473.35

ORIENTAL BANK OF COMMERCEP1+168.742.85

BANK OF INDIAP1+160.792.72

Sector Allocation(Jul 30, 10):The below table provides the information regarding the sector in which fund has invested and the highest and lowest percentage fund has in that sector in the last one year.Sector%-- 1-Year --

HighLow

Oil & Gas3.023.461.04





Media0.970.980.30

Asset Allocation (%)(may 31, 11):The fund has invested mostly in debt as it is debt instrument and rest asset allocation is given below.Equity17.39

Others1.50

Debt79.79

Mutual FundsN.A

Money Market0.00

Cash / Call1.32

6.7 Reliance Regular Savings Fund - Balanced Option (G):An open ended scheme. The primary objective of this option is to generate consistent return and appreciation of capital by investing in a mix of securities comprising of equity , equity related instruments and fixed income instrumentsReturns:The below table gives the returns of the fund as on sep 01,10. The returns upto one year are absolute returns and more than one year are annualized returns.PeriodReturns (%)

1 mth3.8

3 mths12.2

6 mths17.0

1 year33.2

2 year29.9

3 year19.9

5 year17.8

Graphical representation of returns of fund

Top Holdings(Jul 30, 10):The top ten holdings of fund in various companies are given in the below table along with the sector they belong.EquitySectorValue(Rs cr)Asset%


ICICI BankBanking/Finance21.543.63


Ackruti CityReal Estate18.893.18

ONGCOil & Gas18.613.13

Power FinanceBanking/Finance18.313.08

BHELEngineering18.283.08

Reliance InfraUtilities16.632.80

Jindal SawMetals & Mining15.532.62

Bharti AirtelTelecom15.342.58

Sector Allocation(Jul 30, 10):The below table provides the information regarding the sector in which fund has invested and the highest and lowest percentage fund has in that sector in the last one year.

Sector%-- 1-Year --

HighLow


Oil & Gas6.4914.695.02


Cement5.305.571.60

Utilities5.036.301.90


Asset Allocation (%)(Jul 30, 10):The fund has its allocation both in equity and debt instruments as shown in table below.Equity63.65

Others3.50

Debt24.22

Mutual FundsN.A

Money Market0.00

Cash / Call8.63

Concentration:The below table provides diversification in portfolio of mutual fund.Holdings%

Top 518.16

Top 1032.33

Sector%

Top331.78

6.8 Reliance Money Manager Fund - Retail Plan (G)An open ended income scheme. The investment objective of the scheme is to generate optimal returns consistent with moderate level of risks and liquidity by investing in debt securities and money market securities.Returns:The below table gives the returns of the fund as on sep 01,10. The returns upto one year are absolute returns and more than one year are annualized returns.PeriodReturns (%)

1 mth0.4

3 mths1.2

6 mths2.4

1 year4.7

2 year6.1

3 year6.9

5 year-

Graphical representation of returns of fund:

Top Holdings(may31, 11):The top ten holdings of fund in various debt instruments of companies are given in the below table.DebtRatingValue(Rs cr)Asset%

CANARA BANKP1+171.406.74

CENTRAL BANK OF INDIAPR1+142.715.62

IDBI BANK LTDP1+113.244.46

CORPORATION BANKP1+111.014.37

ANDHRA BANK LTDF1+(IND)101.463.99

ALLAHABAD BANKA1+88.853.50

RURAL ELECTRIFICATION CORP LTDPR1+88.793.49

UNION BANK OF INDIAP1+69.222.72

UNITED BANK OF INDIA LTD.A1+66.672.62

PUNJAB NATIONAL BANKPR1+66.162.60

Asset Allocation (%)(Jul 30, 10):The asset allocation of fund is shown in fallowing table.Equity0.00

Others0.00

Debt89.26

Mutual FundsN.A

Money Market0.00

Cash / Call10.7

CHAPTER-7FINDINGS

7.1 GRAPHICAL REPRESENTATION OF RETURNS OF VARIOUS SCHEMES OF RELIANCE MUTUAL FUND

The above graph shows the returns of various schemes of Reliance Mutual fund. The reliance equity oppor fund,tax saver,growth fund, banking fund , pharma fund are equity oriented schemes and among them from six month period RELIANCE BANKING FUND HAS MAXIMUM RETURNS fallowed by equity opportunity fund and RELIANCE GROWTH FUND HAS LEAST RETURNS. Similarly for five year period banking fund and pharma fund have maximum returns. Reliance MIP is a debt scheme and its returns are not as high as of equity schemes but have more returns than money manager which is a money market mutual fund.

Reliance regular saving fund is a balanced scheme and as in balance scheme equity investment is around 65% so it has shown good results as compared to MIP which has invested in debt instruments only.

Reliance money manager is a liquid fund and its retrurns are less than all the schemes of mutual fund.

7.2 GRAPHICAL REPRESENTATION OF RISK ASSOCIATED WITH VARIOUS SCHEMES OF RELIANCE MUTUAL FUND

The above graph shows the various parameters measuring the risk of mutual fund.

From the above graph it is clear that returns of equity oriented schemes have highest standard deviation , regular saving fund which is a balanced scheme has less deviating returns, debt scheme ie MIP has very less standard deviation and money market scheme has least deviation.This shows equity schemes are more risky fallowed by balanced then debt and in the last money market scheme has the least risk.

In case of sharpe ratio money market fund has highest ratio fallowed by debt fund ie MIP as the risk factor represented by standard deviation is very less in these funds and also among the equity schemes Reliance pharma fund has highest sharpe ratio means for each unit of risk taken the returns are the highest.

Beta shows the volatility of fund . Among the equity schemes Reliance growth fund has beta of one means returns of fund varies accordingly with benchmark whereas banking fund has least market risk and pharma fund has highest market risk.

The alpha of pharma fund is highest means the fund manager has done his job well in case of pharma fund than other equity schemes. Also regular saving fund has high value of alpha shows the performance of fund manager where as money manager fund has least .

From the r-squared values Growth fund , regular saving fund and banking fund are rightly benchmarked and monthly income plan is not properly benchmarked

7.3 GRAPHICAL REPRESENTATION OF PORTFOLIO ANALYSIS OF VARIOUS SCHEMES OF RELIANCE MUTUAL FUND

The above graph shows the parameters used for portfolio analysis

From the equity scheme we can see p/e ratio of Reliance growth fund is highest so people have more faith in that particular scheme than any other equity scheme and reliance banking fund has least p/e ratio means people are not willing to spend more on this fund as they are not satisfied with its performance.

Portfolio Turnover measures the extent to which the fund is active in terms of dealings in the market. However, high turnover also implies that high transaction costs are charged to funds. In this category Tax saver has lowest turnover ratio (1.2) suggesting that Fund Manager managing the Fund without much changing in the portfolio and saving the transaction cost. On the other hand MIP is having the highest portfolio turnover ratio of (357) thus incurring the highest transaction cost.

As per the fund size Reliance Growth fund managing the highest fund of (7,758.41 crores) indicating its brand name and penetration in the market

Concentration Level: As per this criterion, banking fund is having highest Top five holdings and least no of stocks (49.48%,19) indicating that it is the least diversified fund in the category. Growth fund is having lowest top five holdings and highest number of stocks (18.53%,40) indicating that is the most diversified fund in the category thus taking advantage of diversification.

CHAPTER-8CONCLUSION

CONCLUSIONThe idea of mutual funds came into existence for the layman to get a piece of the market. For this purpose, they were created by professionals who built a portfolio of stocks based on their understanding of the market, so that its investors need not spend time buried in financial pages of Wall Street Journal or any other financial daily. The underlying benefit was risk diversification without having the need to dedicate any time to studying and following the markets.The conclusion that I draw from my project is as fallows: The equity mutual funds shows high returns than balanced fund where as balanced fund has high returns than debt and money market fund has the least returns. The risk associated with equity schemes is highest than balanced which inturn has higher risks than debt and least risk among them is of money market fund.A fund with low beta and high sharp is best because it has less risk and more risk free returns. High value of alpha and r-squared is required. Less portfolio turnover ratio is desired as it means less expense incurred by fund. Among same category funds a fund with high p/e is desired

CHAPTER-9BIBLOGRAPHY

BIBLOGRAPHYWebsites: www.myiris.comwww.ndtvprofit.comwww.mutualfundindia.comwww.valueresearchonline.comwww.mf.appuonline.comwww.moneycontrol.com

Books:Mutual Funds Products and Services (Indian institute of banking and finance)

Cyber College, Kolhapur Page 54

Pgdm Finance Project-1

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