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RELIANCE MUTUAL FUND & COMPETITIVE ANALYSIS WITH SBI MUTUAL FUND
Submitted To
PREFACE
The seminar project which is part of our PGDM course would help us a lot in our real life. It was period when I struggled hard to get the project done & learnt. This analysis of financial risks and reward helps us knowing about financial decision making process need so that this can be fulfilled by strong effort.
A lot of new things about analysis financial risks are gained that would help me in future
ACKNOWLEDGEMENT
I sincerely feel that the credit of the project work could not be narrowed down to only one individual. This work is an integrated effort of all those concerned with it, without cooperation & effective guidance I would not achieved its completion. I express my deep felt gratitude to Mr. Kiran Behera, Asst. Manager (Finance), Reliance Communication for giving me the opportunity to undergo my project in their organization, and I am also very grateful to them for their valuable device and encouragement. Words at my command are not adequate to convey my feelings of my internal guide Mr. Ujjwal Chakrabarty, Asst. Manager (F & Ac) Reliance Mutual fund for his professional guidance, his constructive and helpful criticism and inspiration during the entire process of the work. I would like to extend my thanks to the employee of R.com for their kind cooperation. Especially, I would like to give to my thanks to the almighty and my parents for their constant support and encouragement enable me to complete this work.
DECLARATION
I hereby declare that the Summer Internship Project entitled Reliance Mutual Fund & Competitive Analysis with SBI Mutual Fund is record of independent research work carried out by me at Reliance Web Store, Fortune Tower, Bhubaneswar for partial fulfillment of the PGDM programme Approved by AICTE. I further states that this project is authentic and genuine and has not been submitted earlier in this university or other University or Institution. No part of this report has been reproduced earlier elsewhere for any purpose.
He has successfully completed his project report work. This is his original work o its own and has not been carried out by anyone earlier.
Date:
ABSTRACT
This project is to investigate the Reliance Mutual Fund. My goal of this project is to find out the processes by which this was done. For this I have used questionnaire method. Gathering information and finally analyzing the data so for doing this project successfully first I have gathered information about the company from different peoples. After that I have talked personally with the Managers and Senior Executives and have gathered information about the customers and getting feedback from them. For this purpose I have visited customers and have gathered information from them as well to prepare this project. The project given to me is completed after completing the company surveys and I have successfully arrived at conclusion and have also given useful suggestions.
Bikram Kumar Sahoo PGDM (2009-11)
CONTENTS
Objective of the study Introduction of the Project Importance of Study Scope of study Reliance Industry Profile Introduction to Mutual Fund Mutual fund Industry in India Guidelines of the SEBI for Mutual Fund Companies Types of Funds Mutual Fund Classification Advantages of Mutual Fund Disadvantages of Mutual Fund Top 10 Mutual Fund companies in India Reliance Mutual Fund SBI MUTUAL FUND RELIANCE MUTUAL FUND & ITS COMPETITIVE ANALYSIS WITH SBI MUTUAL FUND Research Methodology Analysis & Interpretation of the data Findings Conclusions Suggestions & recommendations Bibliography QUESTIONNIRE FOR THE CUSTOMER
EXECUTIVE SUMMERY
In few years Mutual Fund has emerged as a tool for ensuring ones financial well being. Mutual Funds have not only contributed to the India growth story but have also helped families tap into the success of Indian Industry. As information and awareness is rising more and more people are enjoying the benefits of investing in mutual funds. The main reason the number of retail mutual fund investors remains small is that nine in ten people with incomes in India do not know that mutual funds exist. But once people are aware of mutual fund investment opportunities, the number who decide to invest in mutual funds increases to as many as one in five people. The trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to buy mutual funds and to use the right arguments in the sales process that customers will accept as important and relevant to their decision. This Project gave me a great learning experience and at the same time it gave m enough scope to implement my analytical ability. The analysis and advice presented in this Project Report is based on market research on the saving and investment practices of the investors and preferences of the investors for investment in Mutual Funds. This Report will help to know about the investors Preferences in Mutual Fund means Are they prefer any particular Asset Management Company (AMC), Which type of Product they prefer, Which Option (Growth or Dividend) they prefer or Which Investment Strategy they follow (Systematic Investment Plan or One time Plan). This Project as a Whole can be divided into two parts. The first part gives an insight about Mutual Fund and its various aspects, the Company Profile, Objectives of the study, Research Methodology. One can have a brief knowledge about Mutual Fund and its basics through the Project. The second part of the Project consists of data and its analysis collected through survey done on 200 people. For the collection of Primary data I made a questionnaire and surveyed of 200 people. I also taken interview of many People those who were coming at the Reliance Mutual Fund Office where I done my Project. I visited other AMCs in Bhubaneswar to get some knowledge related to my topic. I studied about the products and strategies of other AMCs in Bhubaneswar to know why people prefer to invest in those AMCs. This Project covers the Topic RELIANCE MUTUAL FUND & COMPETITIVE ANALYSIS WITH SBI MUTUAL FUND. The data collected has been well organized and presented. I hope the research findings and conclusion will be of use.
The trade union/employee to know, the possibility of getting higher wages and bonus security analyst take the help of financial analyst to learn and advice their clients whether it is line to buy to hold or to sale the securities of the company. Analysis of risks and reward of Reliance Mutual Fund involves like measurement of risks, different type of funds/schemes, standard deviation etc. On the other hand, NET ASSET VALUE shows the companys performance, revenues, expenses and profits for a particular period or a day or a month. We selected this topic, Analysis of risk and reward of Reliance mutual fund because of the reason this is one of the leading private company or being a star trading house. It provides ample scope for analysis and interpretation of its financial statement.
IMPORTANCE OF STUDY
With increasing in the size of the organization, it becomes very difficult to manage and also know the earning capacity and real position of the firm. It is only through the analysis of the financial ratio, the true position both of operation and financial position can be known or predicted with a high degree of accuracy. Ratio act as a barometer to show the real position of the firm. Therefore all the students pursuing management studies should go through the project to better equip themselves in finance.
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The Reliance Anil Dhirubhai Ambani Group is among Indias top three private sector business houses on all major financial parameter, with a market capitalization of Rs. 325,000crores (US$ 81 billion), net assets in excess of Rs. 115,000crores (US$ 29 billion) and net worth to the tune of Rs.55,000crores (US$ 14 billion) Across different companies, the group has a customer base of over 100 million the largest in India and a shareholder base of over 12 million, among the largest in the world.RIL features in the Forbes global list of worlds 400 best companies and in FT Global 500 list of worlds largest companies. Through its products and services, the Reliance ADA Group touches the life of 1 in 10 Indians every single day. It has a business presence that extends to over 20000 towns and 4.5lakhs villages in India and 5 continents across the world. The interests of the Group range from communications (Reliance Communications) and financial services (Reliance Capital Ltd.) to generation transmission and distribution of power (Reliance Energy) infrastructure and entertainment. Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration- in polyester, fiber intermediates, plastics, petrochemicals, petroleum refining and oil and gas explorations and production to be fully integrated along the materials and energy value chain. The Groups activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fiber intermediates, plastics and chemicals),textiles, retail and special economic zones. Reliance enjoys global leadership in its businesses, being the largest polyester yarn and fiber producer in the world and among the top five to ten producers in the world in major petrochemical products. Major Group companies are Reliance Industry Limited (including main subsidiary Reliance Retail limited) and Reliance Industrial Infrastructure Limited.
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OVERVIEW OF RELIANCE
Reliance Capital
Reliance Capital is one of Indias 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. The company has interest in asset management and mutual funds, life and general insurance private equity and proprietary investments, stock broking and other activities in financial services.
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Reliance Health
In a country where healthcare is fast becoming a booming industry, Reliance Health is a focused healthcare services company enabling the provision of solution to Indians, at affordable prices. The company aims at providing integrated health services that will compete with the best in the world. It also plans to venture into diversified fields like Insurance Administration, Health care Delivery and Integrated Health Informatics and information Management and Consumer Health. Reliance Health aims at revolutionizing healthcare in India by enabling a healthcare environment that is both affordable and accessible through partnership with government and private businesses.
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Before we understand what is mutual fund, its very important to know the area in which mutual funds works, the basic understanding of stocks and bonds. Stocks : Stocks represent shares of ownership in a public company. Examples of public companies include Reliance, ONGC and Infosys. Stocks are considered to be the most common owned investment traded on the market. Bonds : Bonds are basically the money which you lend to the government or a company, and in return you can receive interest on your invested amount, which is back over predetermined amounts of time. Bonds are considered to be the most common lending investment traded on the market. There are many other types of investments other than stocks and bonds (including annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds.
Mutual Fund
A mutual fund is a common pool of money into which investors places their contributions that are to be invested in accordance with a stated objective. The ownership of the fund is thus joint or mutual; the fund belongs to all investors. A single investors ownership of the fund is in the same proportion as the amount of the contribution made by him or her bears to the total amount of the fund. A mutual fund uses the money collected from investors to buy those assets which are specifically permitted by its stated investment objective. Thus, an equity fund would buy mainly equity assets-ordinary shares, preference shares, warrants etc. A bond fund would mainly buy debt instruments such as debentures, bonds, or government securities. It is these assets which are owned by the investors in the same proportion as their contribution bears to the total contributions of all investors put to get. Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them.
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Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries a sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested b them. Investors of mutual funds are known as unit holders. The flow chart below describes broadly the working of a mutual fund.
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When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.
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The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under. First Phase (1964-87) Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management. Second Phase (1987-1993) ---Entry of Public Sector Funds 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by 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 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. As at the end of January 2003, there were 33 Mutual funds with total assets of Rs. 1, 21,805 crores. Fourth Phase (since February 2003) In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes.
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The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. Consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.
The following graph indicated the growth of assets over the year:
When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.
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Step 2- Determine how many mutual funds you will invest in. Three to five funds is
generally considered an adequate amount of diversification.
Step 3- Decide whether you'll deal directly with the fund manager or use a broker.
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Step 4- Diversify the funds you buy in terms of the size of the companies in their portfolios
and the businesses that those companies are in.
We can very well see that mutual funds outperform every other investment option. On three parameters it scores high whereas its moderate at one. comparing it with the other options, we find that equities gives us high returns with high liquidity but its volatility too is high with low safety which doesnt makes it favourite among persons who have low risk- appetite. Even the convenience involved with investing in equities is just moderate. Now looking at bank deposits, it scores better than equities at all fronts but lags badly in the parameter of utmost important ie; it scores low on return , so its not an happening option for person who can afford to take risks for higher return. The other option offering high return is real estate but that even comes with high volatility and moderate safety level, even the liquidity and convenience involved are too low. Gold have always been a favourite among Indians but when we look at it as an investment option then it definitely doesnt gives a very bright picture. Although it ensures high safety but the returns generated and liquidity are moderate. Similarly the other investment options are not at par with mutual funds and serve the needs of only a specific customer group. Straightforward, we can say that mutual fund emerges as a clear winner among all the options available.
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The reasons for this being: Mutual funds combine the advantage of each of the investment products: mutual fund is one such option which can invest in all other investment options. Its principle of diversification allows the investors to taste all the fruits in one plate. just by investing in it, the investor can enjoy the best investment option as per the investment objective. Dispense the shortcomings of the other options: every other investment option has more or les some shortcomings. Such as if some are good at return then they are not safe, if some are safe then either they have low liquidity or low safety or both.likewise, there exists no single option which can fit to the need of everybody. But mutual funds have definitely sorted out this problem. Now everybody can choose their fund according to their investment objectives Returns get adjusted for the market movements: as the mutual funds are managed by experts so they are ready to switch to the profitable option along with the market movement. Suppose they predict that market is going to fall then they can sell some of their shares and book profit and can reinvest the amount again in money market instruments. Flexibility of invested amount: Other then the above mentioned reasons, there exists one more reason which has established mutual funds as one of the largest financial intermediary and that is the flexibility that mutual funds offer regarding the investment amount. One can start investing in mutual funds with amount as low as Rs. 500 through SIPs and even Rs. 100.
1. Rupee cost averaging: The investors going for Systematic Investment Plans(SIP) and Systematic Transfer Plans(STP) may enjoy the benefits of RCA (Rupee Cost Averaging). Rupee cost averaging allows an investor to bring down the average cost of buying a scheme by making a fixed investment periodically, like Rs 5,000 a month and nowadays even as low as Rs. 500 or Rs. 100. In this case, the investor is always at a profit, even if the market falls. In case if the NAV of fund falls the investors can get more number of units and vice-versa. This results in the average cost per unit for the investor being lower than the average price per unit over time. The investor needs to decide on the investment amount and the frequency. More frequent the investment interval, greater the chances of benefiting from lower prices. Investors can also benefit by increasing the SIP amount during market downturns, which will result in reducing the average cost and enhancing returns. Whereas STP allows investors who have lump sums to park the funds in a low-risk fund like liquid funds and make periodic transfers to another fund to take advantage of rupee cost averaging. 2. Rebalancing: Rebalancing involves booking profit in the fund class that has gone up and investing in the asset class that is down. Trigger and switching are tools that can be used to rebalance a portfolio. Trigger facilities allow automatic redemption or switch if a specified event occurs. The trigger could be the value of the investment, the net asset value of the scheme, level of capital appreciation, level of the market indices or even a date. The funds redeemed can be switched to other specified schemes within the same fund house. Some fund houses allow such switches without charging an entry load. To use the trigger and switch facility, the investor needs to specify the event, the amount or the number of units to be redeemed and the scheme into which the switch has to be made. This ensures that the investor books some profits and maintains the asset allocation in the portfolio. 3. Diversification: Diversification involves investing the amount into different options. In case of mutual funds, the investor may enjoy it afterwards also through dividend transfer option. Under this, the dividend is reinvested not into the same scheme but into another scheme of the investor's choice. For example, the dividends from debt funds may be transferred to equity schemes. This gives the investor a small exposure to a new asset class without risk to the principal amount. Such transfers may be done with or without entry loads, depending on the MF's policy. 4. Tax efficiency: Tax factor acts as the x-factor for mutual funds. Tax efficiency affects the final decision of any investor before investing. The investors gain through either
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dividends or capital appreciation but if they havent considered the tax factor then they may end loosing. Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and education cess) on dividends paid out. Investors who need a regular stream of income have to choose between the dividend option and a systematic withdrawal plan that allows them to redeem units periodically. SWP implies capital gains for the investor. If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax bracket. Investors in higher tax brackets will end up paying a higher rate as short-term capital gains and should choose the dividend option. If the capital gain is longterm (where the investment has been held for more than one year), the growth option is more tax efficient for all investors. This is because investors can redeem units using the SWP where they will have to pay 10 per cent as longterm capital gains tax against the 12.50 per cent DDT paid by the MF on dividends All the tools discussed over here are used by all the advisors and have helped investors in reducing risk, simplicity and affordability. Even then an investor needs to examine costs, tax implications and minimum applicable investment amounts before com
Since the AMC & Trustee companies are companies, the department of company affairs regulate them. They have to send periodic reports to the ROC (Registrar Of Companies) and the CLB (Company Law Board) is the appellate authority. Investors cant sue the trust, as they are the same as the Trusts & cant sue them. UTI doesnt have a separate sponsor and AMC. UTI is governed by UTI Act, 1963 and is voluntarily under SEBI regulations. UTI can borrow as well as lend also engage in other financial services activities. Only AMFI certified agents can sell Mutual Fund units. Mutual Funds Company is required to update the NAV of the scheme on the AMFI website on a daily basis in case of open-ended scheme. To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody. According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees must be independent. The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework. Its objective is to increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading professional standards and in promoting best industry practices in diverse areas such as valuation, disclosure, transparency etc.
funds will be regulated by SEBI through mutual funds Regulation Act, 1996. RBI RBI, a supervisor of Banks owned mutual funds as banks in India come under the regulatory jurisdiction of RBI, banks owned funds to be under supervision of RBI & SEBI. RBI has supervisory responsibility over all entities that operate in the money markets. MINISTRY OF FINANCE Ministry of Finance ultimately supervises both the RBI and the SBI and plays the role of apex authority for any major disputes over SEBI guidelines. COMPANY LAW BOARD Registrar of companies is called company Law Board. AMC of Mutual Funds is companies registered under the companies Act, 1956 and therefore answerable to regulatory attributes empowered by the companies Act. STOCK EXCHANGE Stock Exchanges are self-regulatory organizations supervised by SEBI. Many closed ended funds of AMCs are listed as stock exchanges and are traded like shares. OFFICE OF THE PUBLIC TRUSTEE Mutual Fund being public trust is governed by the Indian Trust Act, 1882. The Board of Trustee or the Trustees company is accountable to the office of Public trustee, which in turn reports to the charity commissioner.
Offer document: An offer document is issued when the AMCs make New Fund Offer (NFO). Its advisable to every investor to ask for the offer document and read it before investing. An Offer document consists of the following: Standard Offer Document for Mutual Funds (SEBI Format) Summary Information Glossary of Defined Terms Risk Disclosures Legal and Regulatory Compliance Expenses Condensed Financial Information of Schemes Constitution of the Mutual Fund Investment Objectives and Policies Management of the Fund Offer Related Information.
Key Information Memorandum: A key information memorandum, popularly known as KIM, Is attached along with the mutual fund form. And thus every investor gets to read it. Its contents are: 1. Name of the fund. 2. Investment objective 3. Asset allocation pattern of the scheme. 4. Risk profile of the scheme 5. Plans & options 6. Minimum application amount/ no. of units 7. Benchmark index 8. Dividend policy 9. Name of the fund manager(s) 10. Expenses of the scheme: load structure, recurring expenses 11. Performance of the scheme (scheme return v/s. benchmark return) 12. Year- wise return for the last 5 financial years. Tax Benefits of Mutual Fund ELSS (Equity linked saving scheme ) 3 year lock in period Minimum investment of 90% in equity markets at all times So ELSS investment automatically leads to investment in equity shares Open or closed ended
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Eligible under Section 80 C up to Rs.1 Lakh allowed Dividends are tax free Benefit of Long term Capital gain taxation
What are the most lucrative sectors for mutual fund managers? This is a question of utmost interest for all the investors even for those who dont invest in mutual funds. Because the investments done by the MFs acts as trendsetters. The investments made by the fund managers are used for prediction. Huge investments assure liquidity and reflects appositive picture whereas tight investment policy reflects crunch and investors may look forward for a gloomy picture. Their investments show that which sector is hot? And will set the market trends. The expert management of the funds will always look for profitable and high paying sectors. So we can have looked at most lucrative sectors to know about the recent trends:
From the above data collected we can say that engineering & capital goods sector has emerged as the hottest as most of the funds are betting on it. We can
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say that this sector is on boom and presents a bright picture. Other than it other sectors on height are oil & gas, telecom, metals &mining and information technology. Sectors performing average are automotive, cement & construction, chemicals, media & entertainment, manufacturing, miscellaneous, pharmaceuticals and utility. The sectors which are not so favourite are banking & financial services, conglomerates, consumer non- durables, food & beverages, services and tobacco. And the sector which failed to attract the fund managers is consumer durables with just 51 funds betting on it. Thus this analysis not only gives a picture of the mindset of fund managers rather it also reflects the liquidity existing in each of the sectors. It is not only useful for investors of mutual funds rather the investors of equity and debt too could take a hint from it. Asset allocation by fund managers are based on several researches carried on so, it is always advisable for other investors too take a look on it. It can be further presented in the form of a graph as follow:
1. Mutual fund ratings are based on the returns generated, that is, appreciation of net asset value, based on the historical performance. So they rely more on the past, rather than the current scenario. 2. As returns play a key role in deciding the ratings, any change in returns will lead to rerating of the mutual fund. If you choose your mutual fund only on the basis of rating, it will be a nuisance to keep realigning your investment in line with the revision of the ratings. 3. The ratings dont value the investment processes followed by the mutual fund. As a result, a fund following a certain process may lose out to a fund that has given superior returns only because it has a star fund manager. But there is a higher risk associated with a star fund manager that the ratings dont reflect. If the star fund manager quits, it can throw the working of a mutual fund out of gear and thus affect its performance. 4. The ratings dont show the level of ethics followed by the fund. A fund or fund manager that is involved in a scam or financial irregularities wont get poor ratings on the basis of ethics. As the star ratings look at just returns, any wrongdoing carried out by the fund or fund manager will be completely ignored. 5. Ratings also dont consider two very important factors: transparency and keepin investors informed. There are no negative ratings awarded to the fund for being investor-unfriendly. 6. Ratings dont match the investors risk-appetite with their portfolio. As a matter of fact, investments should be done only after considering the risk appetite of the investor. For example, equities may not be the best investment vehicle for a very conservative investor. However ratings fail to take that into account. Ratings should be the starting point for making an investment decision. They are not the be all and end all of mutual fund investments. There are other important factors like portfolio management, age of funds and more, which should be taken into account before making an investment.
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THEORITICAL OVERVIEW:
TYPES OF FUNDS:
There are many types of mutual funds available to the investors. However, these different types of funds can be grouped into certain classifications for better understanding. From the investors perspective, we would follow three basic classifications. Firstly, funds are usually classified in terms of their constitution-as closedend or open-end. The distinction depends upon whether they give the investors the option to redeem and buy units at any time from the fund itself(open end) or whether the investors have to await a given maturity before they can redeem they collect from investors any charges at the time of entry or exit or both, thus reducing the investible amount or the redemption proceeds. Funds that make these charges are classified as load funds, and funds that do not their units to the fund (close end). Funds can also be grouped in terms of whether make any of these charges are termed no-load funds.
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Finally, funds can also be classified as being tax-exempt or non-tax-exempt, depending on whether they invest in securities that give tax-exempt returns or not. Currently in India, this classification may be somewhat less important, given the recent tax exemptions given to investors receiving any dividends from all mutual funds. Under each board classification, we may then distinguish between several types of funds on the basis of the nature of their portfolios, meaning whether they invest in equities or fixed income securities or some combination of both. Every type of fund has a unique risk profile that is determined by its portfolio, for which reason funds are often separated into more or less risk bearing .We first look at the fund classifications and then understand the various types of funds under them.
(A) BY STRUCTURE
Open Ended Schemes An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. Close Ended Schemes A 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
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Regulations stipulate that at least one of the two exit routes is provided to the investor. Interval Schemes Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.
(B) BY NATURE
1. Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows: Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS) Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix. 2. Debt funds: The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as: (a)Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government. (b)Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.
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(c)MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes. (d)Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures. (e) FMPs: Fixed Monthly Plans invest in debt papers whose maturity is in line with that of the fund. (f) Income funds LT: Typically, such funds invest a major portion of the portfolio in long-term debt papers. (g) Gilt funds LT: They invest 100% of their portfolio in long-term government securities. (h) Arbitrage fund: They generate income through arbitrage opportunities due to mispricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities. 2. Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.
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3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns. Further the mutual funds can be broadly classified on the basis of investment parameter viz, Each category of funds is backed by an investment philosophy, which is predefined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly. BY INVESTMENT OBJECTIVE Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation. Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50). Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.
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OTHER SCHEMES Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate. Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index. Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time.
Types of returns
There are three ways, where the total returns provided by mutual funds can be enjoyed by investors: Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earning and get more shares. Pros & cons of investing in mutual funds: For investments in mutual fund, one must keep in mind about the Pros and cons o investments in mutual fund.
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INVESTMENT STRATEGIES
1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.
RISK VS RETURN
investors. A single investors ownership of the fund is in the same proportion as the amount of the contribution made by him or her bears to the total amount of the fund. A mutual fund uses the money collected from investors to buy those assets which are specifically permitted by its stated investment objective. Thus, an equity fund would buy mainly equity assetsordinary shares, preference shares, warrants etc. A bond fund would mainly buy debt instruments such as debentures, bonds, or government securities. It is these assets which are owned by the investors in the same proportion as their contribution bears to the total contributions of all investors put together. ADVANTAGES OF MUTUAL FUND: If mutual funds are emerging as the favorite investment vehicle, it is because of the many advantages they have over other forms and avenues of investing, particularly for the investor who has limited resources available in terms of capital and ability to carry out detailed research and market monitoring. The following are the major advantages offered by mutual funds to all investors: Portfolio diversification: Mutual funds normally invest in a well diversified portfolio or securities. Each investor in a fund is a part owner of all of the funds assets. This enables him to hold a diversified investment portfolio even with a small amount of investment that would otherwise require big capital. Professional management: Even if an investor has a big amount of capital available to him, he benefits from the professional management skills brought in by the fund in the management of the investors portfolio. The investment management skills, along with the needed research into available investment options, ensure a much better return than what an investor can manage on his own. Few investors have the
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skills and resources of their own to succeed in todays fast moving, global and sophisticated markets. Reduction/Diversification of risk: An investor in a mutual fund acquires a diversified portfolio, no matter how small his investment. Diversification reduces the risk of loss, as compared to investing directly in one or two shares or debentures or other instruments. When an investor invests directly, all the risk of potential loss is his own. Fund investors also reduce his risk in another way. While investing in the pool of funds with other investors, any loss on one or two securities is also shared with other investors. This risk reduction is one of the most important benefits of a collective investment vehicle like the mutual fund. Reduction of transaction costs: What is true of risk is also true of the transaction costs. A direct investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund, he has the benefit of economies of scale; the fund pay lesser costs because of larger volumes, a benefit passed on to its investors. Liquidity: Often, investors hold shares or bonds they cannot directly, easily and quickly sell. Investment in a mutual fund, on the other hand, is more liquid. An investor can liquidate the investment, by selling the units to the fund if open end, or selling them in the market if the fund is closed end, and collect funds at the end of a period specified by the mutual fund or the stock market. Convenience and flexibility: Mutual fund management companies offer many investor services that a direct market investor cannot get.
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Investors can easily transfer their holdings from one scheme to the other; get updated market information, and so on.
DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS: While the benefits of investing through mutual funds far outweigh the disadvantages, an investor and his advisor will do well to be aware of a few shortcomings of using the mutual funds as investment vehicles. No control over costs: an investor in a mutual fund has any control over the overall cost of investing. He pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. Fees are usually payable as a percentage of the value of his investments, whether the fund value is rising or declining. A mutual fund investor also pays fund distribution costs, which he would not incur in direct investing. However, this shortcoming only means that there is a cost to obtain benefits of a mutual fund services. However, this cost is often less than the cost of direct investing by the investors. No tailor-made portfolios: Investors who invest on their own can build their own portfolios of shares, bonds and other securities. Investing through funds means he delegates this decision to the fund managers. The very high net worth individuals or large corporate investors may find this to be a constraint in achieving their objectives. However, most mutual funds help investors overcome this constraint by offering families of schemes-a large number of different schemes- within the same fund. An investor can choose from different investment plans and construct a portfolio of his choice. Managing a portfolio of funds: Availability of a large number of funds can actually mean too much choice for the investor .He may again need advice on how to select a fund to achieve his objectives, quite
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similar to the situation when he has to select individual shares or bonds to invest in.
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+Principal Index (21.88 Cr) +Principal personal Tax Saver (332.53 Cr)
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EQUITY SCHEMES:-
(An open-ended diversified Equity Scheme.) The primary investment objective of the scheme is to seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity & equity related securities of top 100 companies by market capitalization & of companies which are available in the derivatives segment from time to time and the secondary objective is to generate consistent returns by investing in debt and money market securities. RELIANCE TAX SAVER (ELSS) FUND (An Open-ended Equity Linked Savings Scheme.) The primary objective of the scheme is to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments. RELIANCE EQUITY OPPORTUNITIES FUND (An Open-Ended Diversified Equity Scheme.) The primary investment objective of the scheme is to seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity securities & equity related securities and the secondary objective is to generate consistent returns by investing in debt and money market securities. RELIANCE VISION FUND (An Open-ended Equity Growth Scheme.) The primary investment objective of the Scheme is to achieve long-term growth of capital by investment in equity and equity related securities through a research based investment approach.
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RELIANCE GROWTH FUND (An Open-ended Equity Growth Scheme.) The primary investment objective of the Scheme is to achieve long-term growth of capital by investment in equity and equity related securities through a research based investment approach. RELIANCE INDEX FUND (An Open Ended Index Linked Scheme.) The Investment Objective under the Nifty Plan is 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. The Investment Objective under the Sensex plan is 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. RELIANCE NRI EQUITY FUND (An open-ended Diversified Equity Scheme.) The Primary investment objective of the scheme is to generate optimal returns by investing in equity or equity related instruments primarily drawn from the Companies in the BSE 200 Index. DEBT SCHEMES: RELIANCE MONTHLY INCOME PLAN (An Open Ended Fund. Monthly Income is not assured & is subject to the availability of distributable surplus) The Primary investment objective of the Scheme is to generate regular income in order to make regular dividend payments to unit holders and the secondary objective is growth of capital. Primarily the investment shall be made in debt and money market securities (i.e. 80%) with a small exposure (i.e. up to 20%) in equity. RELIANCE GILT SECURITIES FUND (Short Term Gilt Plan & Long Term Gilt Plan Open-ended Government Securities Scheme) - The primary objective of the Scheme is to generate
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Optimal credit risk-free returns by investing in a portfolio of securities issued and guaranteed by the central Government and State Government RELIANCE INCOME FUND (An Open-ended Income Scheme) The primary objective of the scheme is 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 & Money Instruments. RELIANCE MEDIUM TERM FUND (An Open End Income Scheme with no assured returns.) The primary investment objective of the Scheme is to generate regular income in order to make regular dividend payments to unit holders and the secondary objective is growth of capital RELIANCE SHORT TERM FUND (An Open End Income Scheme) The primary investment objective of the scheme is to generate stable returns for investors with a short investment horizon by investing in Fixed Income Securities of short term maturity. RELIANCE LIQUID FUND (Open-ended Liquid Scheme). The primary investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and high liquidity. Accordingly, investments shall predominantly be made in Debt and Money Market Instruments. RELIANCE FIXED TERM SCHEME (Close-ended Income Scheme) The primary objective of the Scheme is to seek to achieve regular returns / growth of capital by investing in a portfolio of fixed income securities normally maturing in line with the time profile of the plan with the objective of limiting interest rate volatility.
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RELIANCE FLOATING RATE FUND (An Open End Income Scheme) The primary objective of the scheme is to generate regular income through investment in a portfolio comprising substantially of Floating Rate Debt Securities (including floating rate securitised debt and Money Market Instruments and Fixed Rate Debt Instruments swapped for floating rate returns). The scheme shall also invest in Fixed rate debt Securities (including fixed rate securitised debt, Money Market Instruments and Floating Rate Debt Instruments swapped for fixed returns RELIANCE NRI INCOME FUND (An Open-ended Income scheme) The primary investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risks. This income may be complimented by capital appreciation of the portfolio. Accordingly, investments shall predominantly be made in debt Instruments. RELIANCE FIXED MATURITY FUND - SERIES I (A Close Ended Income Scheme)The primary investment objective of the Scheme is to seek to achieve regular returns / growth of capital by investing in a portfolio of fixed income securities normally maturing in line with the time profile of the Plan with the objective of limiting interest rate volatility. RELIANCE FIXED MATURITY FUND - SERIES II (A closed ended Income Scheme) The primary investment objective of the Scheme is to seek to achieve growth of capital by investing in a portfolio of fixed income securities normally maturing in line with the time profile of the respective plans. RELIANCE LIQUIDITY FUND (An Open - ended Liquid Scheme) The investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and high
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liquidity. Accordingly, investments shall predominantly be made in Debt and Money Market Instruments. THE INVESTMENT OBJECTIVES:
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. Equity Option: The primary investment objective is to seek capital appreciation and or consistent returns by actively investing in equity / equity related securities. Hybrid Option: The primary investment objective is to generate consistent return by investing a major portion in debt & money market securities and a small portion in equity & equity related instruments. SECTOR SPECIFIC SCHEMES:Sector Funds are specialty funds that invest in stocks falling into a certain sector of the economy. Here the portfolio is dispersed or spread across the stocks in that particular sector. This type of scheme is ideal for investors who have already made up their mind to confine risk and return to a particular sector.
RELIANCE BANKING FUND Reliance Mutual Fund has an Open-Ended Banking Sector Scheme which has the primary investment objective to generate continuous returns by actively investing in equity/equity related or fixed income securities of banks.
RELIANCE DIVERSIFIED POWER SECTOR FUND Reliance Diversified Power Sector Scheme is an Open-ended Power Sector Scheme - The primary investment objective of the Scheme is to seek to generate consistent returns by actively investing in equity / equity related or fixed
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RELIANCE PHARMA FUND (Reliance Pharma Fund is an Open-ended Pharma Sector Scheme) The primary investment objective of the Scheme is to generate consistent returns by investing in equity / equity related or fixed income securities of Pharma and other associated companies. RELIANCE MEDIA & ENTERTAINMENT FUND (Reliance Media & Entertainment Fund is an Open-ended Media & Entertainment sector scheme). The primary investment objective of the Scheme is to generate consistent returns by investing in equity / equity related or fixed income securities of media & entertainment and other associated companies.
ACHIEVEMENTS
The two successive joints surveys by the Economic Times Brand equity and A C Nielsen, Reliance were recognized as Indias most trusted Mutual Fund. The company also worked away with seven other scheme prizes- five of them being outright winners- in the Gulf 2007 Lipper Awards. These included the Fund House of the Year by Lipper GCC as well as ICRA online and the most improved Fund House by Asia Asset management. It also received the NDTV Business leadership Award 2007 in the mutual fund category and runners up recognition as the Best Fund House in the Outlook Money- NDTV profit Awards. In addition. The company the company received the coveted CNBC Web 18 Genius of the Web distinction for the Best Mutual Fund Website in the country. RCAM was awarded the India onshore Fund House 2008instituted by the Asian Investor magazine. The company also won the India Equities award in the 5-year performance category.
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SWOT Analysis of Reliance Mutual Fund I. 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 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.
II. 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 doesnt 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 doesnt make money, these fees only magnify losses.
III. 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.
IV. 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. 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.
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SCHEMES OF SBI MUTUAL FUND Equity schemes The investments of these schemes will predominantly be in the stock markets and endeavor will be to provide investors the opportunity to benefit from the higher returns which stock markets can provide. However they are also exposed to the volatility and attendant risks of stock markets and hence should be chosen only by such investors who have high risk taking capacities and are willing to think long term. Equity Funds include diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds invest in various stocks across different sectors while sectoral funds which are specialized Equity Funds restrict their investments only to shares of a particular sector and hence, are riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a particular index and the performance of such funds move with the movements of the index. Magnum COMMA Fund
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Magnum Equity Fund Magnum Global Fund Magnum Index Fund Magnum Midcap Fund Magnum Multicap Fund Magnum Multiplier plus 1993 Magnum Sectoral Funds Umbrella MSFU- Emerging Business Fund MSFU- IT Fund MSFU- Pharma Fund MSFU- Contra Fund MSFU- FMCG Fund SBI Arbitrage Opportunities Fund SBI Blue chip Fund SBI Infrastructure Fund - Series I SBI Magnum Taxgain Scheme 1993 SBI ONE India Fund SBI TAX ADVANTAGE FUND - SERIES I Debt schemes Debt Funds invest only in debt instruments such as Corporate Bonds, Government Securities and Money Market instruments either completely avoiding any investments in the stock markets as in Income Funds or Gilt Funds or having a small exposure to equities as in Monthly Income Plans or Children's Plan. Hence they are safer than equity funds. At the same time the expected returns from debt funds would be lower. Such investments are advisable for the Risk-averse investor and as a part of the investment portfolio for other investors. Magnum Childrens benefit Plan Magnum Gilt Fund Magnum Income Fund Magnum Insta Cash Fund Magnum Income Fund- Floating Rate Plan Magnum Income Plus Fund Magnum Insta Cash Fund -Liquid Floater Plan Magnum Monthly Income Plan Magnum Monthly Income Plan - Floater Magnum NRI Investment Fund SBI Premier Liquid Fund
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Balanced Schemes Magnum Balanced Fund invests in a mix of equity and debt investments. Hence they are less risky than equity funds, but at the same time provide commensurately lower returns. They provide a good investment opportunity to investors who do not wish to be completely exposed to equity markets, but is looking for higher returns than those provided by debt funds. Magnum Balanced Fund
SBI Mutual Fund offers clear and non over lapping positioning of different funds. Winner of IRCA Mutual Fund Awards 2009(Magnum Taxgain Schemes) Winner of Lipper Fund Awards 2009 Winner of Outlook Money NDTV Profit Awards 2008 Weakness Lack of promotional material, dispensers, banners Proper training not being provided to bank officials Opprotunitities Untapped rural market offers huge potentials More focus on PSUs may enhance business Training provided to investors may lead to more investments Threats Competitors like Reliance AMC, ICICI Prudential are catching up fast on the market share Share market slump may see downfall in investments Ongoing recession may impose adverse effects
RESEARCH METHODOLOGY
This report is based on primary as well secondary data, however primary data Collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones. Data sources: Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary
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data has been collected by interacting with various people. The secondary data has been collected through various journals and websites.
Duration of Study: The study was carried out for a period of one & half months, from 15th of June to 30th of July. The activities and information regarding this project were carried out in the Reliance Communication located at Fortune tower, Bhubaneswar. There are 2 types of data were required for our consumer research.
Primary Data
The data from the customer or public relating to the investment schemes of the Bank were collected with the help of direct interview schedule or direct interaction with people. Apart from this primary data and information were collected by the way of specially designed questionnaire. After that many relevant information were collected through filling up of questionnaires contained ten questions.
Secondary Data
These were the data collected from existing sources of from those sources, or from those sources, which were already developed, organized and collected previously. Secondary data were collected from Company Website-www.ucobank.com o Articles o Leaflets o Journal o Newspaper o Company
Both primary and secondary data were acquired for the successful and smooth completion of this study. The primary data were collected from the
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Finance Department of Reliance Communication were full freedom and cooperation was extended to me. On the other hand, the secondary data were collected from the annual report of Reliance mutual fund for analyzing the data comparative financial statement, funds flow analysis and ratio analysis which are most useful and common methods are adopted. DATA PROCESSING After the completion of the interview and questionnaire schedule a through check-up data was made. The missing data were collected immediately. The data were processed with the help of some statistical tools like percentage, graphs, charts and tables. RESEARCH DESIGN It includes data on the characteristics, profile and perception of the consumer in accessing the credit to the Bank. Market research defined as a function that links the customer and the public to market through information to identify and define market opportunities problems to generate, define and enable marketing action monitor marketing process. Marketing research specifies the information needed to address marketing issues. Research design is a method for collecting, managing and implementing the data collection process, analyses the result and communicated the findings and their implication. The research is based on the customers i.e. an extension of marketing research. This research is conducted with a view to understand prospective customers better, to introduce and modify the products and services of carrier. Some of the activities in carrying this research are-: To form a basis of sale Planning, promotion & advertisement.
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It enables to identify the customer needs in relation to the product category and develop potential markets. To help the management to determine persuasive advertisement appeals and identify appropriate media choices to reach selected targeted markets. To determine market characteristics, potentials and share of its competitors.
SAMPLING:
Sampling procedure: The sample was selected of them who are the customers/visitors of Reliance Mutual Fund Office, Bhubaneswar, irrespective of them being investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool. Sample size: The sample size of my project is limited to 200 people only. Out of which only 120 people had invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund. Sample design: Data has been presented with the help of bar graph, pie charts, line graphs etc. Limitation: Some of the persons were not so responsive. Possibility of error in data collection because many of investors may have not given actual answers of my questionnaire. Sample size is limited to 200 visitors of Reliance Mutual Fund; Bhubaneswar out of these only 120 had invested in Mutual Fund. The sample Size may not adequately represent the whole market. Some respondents were reluctant to divulge personal information which can affect the validity of all responses. The research is confined to a certain part of Bhubaneswar.
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Portfolio analysis tools: With the increasing number of mutual fund schemes, it becomes very difficult for an investor to choose the type of funds for investment. By using some of the portfolio analysis tools, he can become more equipped to make a well informed choice. There are many financial tools to analyze mutual funds. Each has their unique strengths and limitations as well. Therefore, one needs to use a combination of these tools to make a thorough analysis of the funds. The present market has become very volatile and buoyant, so it is getting difficult for the investors to take right investing decision. so the easiest available option for investors is to choose the best performing funds in terms of returns which have yielded maximum returns. But if we look deeply to it, we can find that the returns are important but it is also important to look at the quality of the returns. Quality determines how much risk a fund is taking to generate those returns. One can make a judgment on the quality of a fund from various ratios such as standard deviation, sharpe ratio, beta, treynor measure, R-squared, alpha, portfolio turnover ratio, total expense ratio etc. Now I have compared two funds of SBI on the basis of standard deviation, beta, R-squared, sharpe ratio, portfolio turnover ratio and total expense ratio. So before going into details, lets have a look at these ratios: Standard deviation: In simple terms standard deviation is one of the commonly used statistical parameter to measure risk, which determines the volatility of a fund. Deviation is defined as any variation from a mean value (upward & downward). Since the markets are volatile, the returns fluctuate everyday. High standard deviation of a fund implies high volatility and a low standard deviation implies low volatility. Beta analysis: Beta is used to measure the risk. It basically indicates the level of volatility associated with the fund as compared to the market. In case of funds, as compared to the market. In case of funds, beta would indicate the volatility against the benchmark index. It is used as a short term decision making tool. A beta that is greater than 1 means that the fund is more volatile than the benchmark index, while a beta of less than 1 means that the fund is more volatile than the benchmark index. A fund with a beta very close to 1 means the funds performance closely matches the index or benchmark. The success of beta is heavily dependent on the correlation between correlation between a fund and its benchmark. Thus, if the funds portfolio doesnt have a relevant benchmark index then a beta would be grossly inappropriate. For example if we are considering a banking fund, we should look at the beta against a bank index.
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R-Squared (R2): R squared is the square of R (i.e.; coefficient of correlation). It describes the level of association between the funs market volatility and market risk. The value of R- squared ranges from0 to1. A high R- squared (more than 0.80) indicates that beta can be used as a reliable measure to analyze the performance of a fund. Beta should be ignored when the r-squared is low as it indicates that the fund performance is affected by factors other than the markets.
Result:From the above graph, it is clear, peoples are not aware about mutual fund because they were not educated. According to business men, 72% people known what is mutual fund because they aware about share market. According to government employees, 40% peoples know what is mutual fund; they dont intrastate in share market. Youngsters have so aware about mutual fund. 80% youngsters known, what is mutual fund? Now, we talk about private Employees, maximum people known, what is mutual fund, it is 60%.
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Result: As shown above chart 60% business men want to invest money into the mutual fund because they have interest in mutual fund, maximum customers want to invest our money into the mutual fund because their interest decreased in equity market they know that in this field, risk is low compare to share market. 40% government employees want to invest your money into the mutual fund, 56% youngsters and 40% private employees want to invest money into the mutual fund.
Result:
We know that mutual fund is not always risk free. According to the customers who know what is mutual fund, they also know it is not always risk free. Problem has that maximum people are not aware about mutual fund.28%
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business men dont know, 60% government employees, 20% youngsters and private employees dont know it is risk free or not.
Result: From the above graph, mostly customers want to invest your money into the gold, the purchased gold, according to customers, price of gold always increase and this is always profitable in future. Youngsters and business men have interest in mutual fund; they like to take risk because they know that, if risk is high then return may be high. 28% business men,16% government employees, 40% youngsters, 20% private employees like to invest money into the mutual fund.
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Result: From the above graph, which is according to the primary data collected, clearly shows that Preference of investors are based on high return, liquidity and growth of fund i.e. investors give their preferences to that fund which gives them high return. 26% customers like to the Reliance Mutual Fund. 14% Customers belief HDFC Mutual Fund. Birla Sun life Mutual Fund having 15% preferred. Kotak Mahindra mutual fund having 17% preferred, others mutual fund having 28% preferred.
Result: From the above graph, which is according to the primary data collected, clearly shows that investors have two types mutual fund, it is 18%. They want earn maximum profit from mutual fund. These customers want to increase number of units and also invest other plan like saving plan.
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Result:
The result of the primary data shows that investors of reliance mutual fund who invested in other mutual fund having the higher percentage prudential ICICI Mutual fund but it may be right or wrong. As reliance is the brand name in India, the company has good reputation in the market, almost everyone heard about the reliance and their companies. Brand management is also required to increase the product perceived value to the customer. Thats the reason behind 37% of the people choosing reliance.
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Result:
From the above graph, which is according to the primary data collection, clearly shows that the investors are satisfy with the services providing by the reliance AMC. 37% belief on Reliance Mutual Fund. It is fine compare to others.
Result: 74% customers of reliance are satisfied with the services provided by Reliance Mutual fund and the rest 26% are not satisfied. Customers of today are better educated, better informed, more discriminating, more sophisticated and are more individualistic. What they value in a mutual fund transaction has dramatically changed.
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Interpretation:
According to this chart out of 120 Mutual Fund investors of Bhubaneswar the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs.
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Interpretation:
Out of 120 Mutual Fund investors 71% of the investors in Bhubaneswar are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under HSC).
Interpretation: In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in Others.
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Interpretation: In the Income Group of the investors of Bhubaneswar, out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000. (2) Investors invested in different kind of investments. Kind of Investments Saving A/C Fixed deposits Insurance Mutual Fund Post office (NSC) Shares/Debentures Gold/Silver Real Estate No. of Respondents 195 148 152 120 75 50 30 65
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Interpretation: From the above graph it can be inferred that out of 200 people, 97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate.
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Interpretation: Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust. 4. Awareness about Mutual Fund and its Operations Response No. of Respondents Yes 135 No 65
Interpretation: From the above chart it is inferred that 67% People are aware of Mutual Fund and its operations and 33% are not aware of Mutual Fund and its operations. 5. Source of information for customers about Mutual Fund Source of information Advertisement Peer Group Bank Financial Advisors No. of Respondents 18 25 30 62
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Interpretation: From the above chart it can be inferred that the Financial Advisor is the most important source of information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund Through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement. 6. Investors invested in Mutual Fund
Response YES NO TOTAL
No. of Respondents
120 80 200
Interpretation: Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested in Mutual Fund.
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7. Reason for not invested in Mutual Fund Reason Not Aware Higher Risk Not any Specific Reason No. of Respondents 65 5 10
Interpretation: Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any specific reason. 8. Investors invested in different Assets Management Co. (AMC) Name of AMC
SBIMF
UTI HDFC Reliance ICICI Prudential Kotak Others
No. of Investors
55 75 30 75 56 45 70
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Interpretation: In Bhubaneswar most of the Investors preferred UTI and Reliance Mutual Fund. Out of 120 Investors 62.5% have invested in each of them, only 46% have invested in SBIMF, 47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC. 9. Reason for invested in Reliance Mutual Fund
Reasons Associated with SBI Better Return Agents Advice No. of Respondents
35 5 15
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Interpretation: Out of 55 investors of Reliance Mutual Fund, 64% have invested because of its association with Brand Reliance, 27% invested on Agents Advice, 9% invested because of better return. 10. Reason for not invested in SBIMF Reasons Not Aware Less return Agents Advice No. of Respondents 25 18 22
Interpretation: Out of 65 people who have not invested in Reliance Mutual Fund, 38% were not aware with Reliance Mutual Fund, 28% do not have invested due to less return and 34% due to Agents Advice. 11. Preference of Investors for future investment in Mutual Fund Name of AMC SBIMF UTI HDFC Reliance ICICI Prudential Kotak Others No. of Investors 76 45 35 82 80 60 75
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Interpretation: Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63% in SBIMF, 62.5% in others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual Fund.
12. Channel Preferred by the Investors for Mutual Fund Investment Channel No. of Respondents Financial Advisor 72 Bank 18 AMC 30
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Interpretation: Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through AMC and 15% through Bank. 13. Mode of Investment Preferred by the Investors Mode of Investment No. of Respondents One time Investment 78 Systematic Investment Plan (SIP) 42
Interpretation: Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through Systematic Investment Plan. 14. Preferred Portfolios by the Investors Portfolio Equity Debt Balanced No. of Investors 56 20 44
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Interpretation: From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17% preferred Debt portfolio. 15. Option for getting Return Preferred by the Investors Option No. of Respondents Dividend payout 25 Dividend Reinvestment 10 Growth 85
Interpretation: From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout and 8% preferred Dividend Reinvestment Option. 16. Preference of Investors whether to invest in Sectoral Funds Response Yes No No. of Respondents 25 95
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Interpretation: Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because there is maximum risk and 21% prefer to invest in Sectoral Fund.
FINIDINGS
In Bhubaneswar in the Age Group of 36-40 years were more in numbers. The second most Investors were in the age group of 41-45 years and the least were in the age group of below 30 years. In Bhubaneswar most of the Investors were Graduate or Post Graduate and below HSC there were very few in numbers. In Occupation group most of the Investors were Govt. employees, the second most Investors were Private employees and the least were associated with Agriculture. In family Income group, between Rs. 20,001- 30,000 were more in numbers, the second most were in the Income group of more than Rs.30,000 and the least were in the group of below Rs. 10,000. About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits, Only 60% Respondents invested in Mutual fund. Mostly Respondents preferred High Return while investment, the second most preferred Low Risk then liquidity and the least preferred Trust. Only 67% Respondents were aware about Mutual fund and its operations and 33% were not. Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not have invested in Mutual fund. Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is not any specific reason for not invested in Mutual Fund and 6% told there is likely to be higher risk in Mutual Fund. Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI Prudential has also good Brand Position among investors, SBIMF places after ICICI Prudential according to the Respondents. Out of 55 investors of Reliance Mutual Fund 64% have invested due to its
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Association with the Brand Reliance, 27% Invested because of Advisors Advice and 9% due to better return. Most of the investors who did not invested in Reliance Mutual Fund due to not Aware of Reliance Mutual Fund, the second most due to Agents advice and rest due to Less Return. For Future investment the maximum Respondents preferred Reliance Mutual Fund, the second most preferred ICICI Prudential, SBIMF has been preferred after them. 60% Investors preferred to invest through Financial Advisors, 25% through AMC (means Direct Investment) and 15% through Bank. 65% preferred One Time Investment and 35% preferred SIP out of both type of Mode of Investment. The most preferred Portfolio was Equity, the second most was Balance (mixture of both equity and debt), and the least preferred Portfolio was Debt portfolio. Maximum Number of Investors Preferred Growth Option for returns, the second most preferred Dividend Payout and then Dividend reinvestment. Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted to invest in Sectoral Fund.
CONCLUSION
The analysis done for Reliance Mutual fund ltd. reflects the strong performance of the company over the past 3 years, in terms of returns on and of the investment and financial performance. And this too is midst of the scenario where most of the other firms in this industry are suffering huge losses and trying to cope with the challenges ahead with this sector. The investors have shown tremendous faith in the company over the years and Reliance mutual fund has responded with the kind of performances, which is fueling the growth and increasing economic growth of the country. From the net profit, we see that Reliance mutual fund has been growing, and becoming stronger. It reflects on the policies the company has, and the transactions it has been making over the years.
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The mutual fund sector has its share of opportunities and challenges lying ahead and with the present scenario, Reliance mutual fund (R.M.F) looks all set to break paths and catapult itself to a position of leadership in the market. The current scenario and the expansion plans it has, and adds to it the efficient selling and distribution channel it commands; it makes R.M.F a big force in the reckoning and in the near future, a market leader and trend setter in the Mutual fund sector.
Customers with graduate level education are easier to sell to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality. Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons. Asset management companies need to proper educate the investor to increase the awareness and break the myths about mutual fund. Mutual und distributors like Reliance Mutual Fund should start a campaign to educate the investors: there is a need of advertisement also to attract the investor. AMCs should target rural market as a potential hub of customer. In rural area people are getting wealth gradually and need a guidance to shift their portfolio from old sources to new and modern sources. Sales force should be well educated about every aspect of mutual fund so that they can solve the queries of the investors.
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BIBLIOGRAPHY
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NEWS PAPERS OUTLOOK MONEY TELEVISION CHANNEL (CNBC AAWAJ) MUTUAL FUND HAND BOOK FACT SHEET AND STATEMENT
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7. According to you which company has more demand in the market? a) Reliance mutual fund b) HDFC mutual fund c) Birla sun life mutual fund d) SBI Mutual Fund e) Other 8. Which AMC provides better service? a) Reliance mutual fund b) HDFC mutual fund c) SBI Mutual Fund d) Other 9. Are you satisfied by the services provided by Reliance Mutual fund? a) Yes b) No 10. What is your view about reliance mutual fund? ___________________________________________________________ ________ _________________________________________________________. Signature__________________
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