sonali project final1
TRANSCRIPT
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ACKNOWLEDGEMENT
In the course of this project I got an insight into the mutual fundindustry, came to know a lot about the basic working of an assetmanagement company, understood how the mutual fund schemesare compared, learnt various computations and overall got a
preview of what a job in the mutual fund industry would entail.
First and foremost I am very proud to be a student of Institute of
Management and Research for Rural Development ,Shrirampurand am most grateful for having been given the chance to workwith a reputed company like Reliance Mutual Fund at the
beginning of my career.
I would like to thanks the Principal Dr.Kamble and guideDr,G.H.Barhate ,Professors S.N Gwali who gave me support and
helped in analytical study of the subject of this project
I would fail to do my duty if I didnt take this opportunity to thankmy faculty guide, Prof.G.H.Barhate and Dr.S.N.Gwali fortheir timely help and guidance. I would say that this projectwouldnt have been the same without his support, guidance,encouragement and constant demand for improvement.
My company guide, Mr. Saiffuddin Shaikh ( Branch Manager) is another person who has played a key role in the development ofme as a person, in the completion of this project and in beingeducated about the mutual fund industry in general. He is truly an
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inspiration for me and drove me towards working harder than myexpectations which simply made me more ready for the corporatelife. He truly gave me the corporate exposure I had thought of.
I acknowledge the staff members of Reliance Mutual Fund and my team mates and constant encouragement and motivationto me.
At last but not the least I would like to give my heartiest gratitudeto my parents, my well wishers and friends for their valuableinsights and suggestions that helped me in preparing the finalreport.
Mahale Sonali Subhash
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EXECUTIVE SUMMARY
The performance evaluation of mutual fund is a vital matter of
concern to the fund managers, investors, and researchers alike. Thecore competence of the company is to meet objectives and theneeds of the investors and to provide optimum return for their risk.This study tries to find out the risk and return allied with themutual funds.
This project paper is segmented into three sections to explore the
link between conventional subjective and statistical approach ofMutual Fund analysis. To start with, the first section deals with theintroductory part of the paper by giving an overview of the Mutualfund industry and company profile.
This section also talks about the Scope, Objectives and Purpose ofthe analysis.
The second section details on the Methodology used for the studyand Theoretical background of the risk and return analysis. It alsodiscusses about the sources and the period for the data collection. Italso deals with the data interpretation and analysis part wherein allthe key measures related to risk and return are done with theinterpretation of the results.
This section also deals with the profile of the Asset ManagementCompany and Indian Mutual Fund Industry.
In the third section, an attempt is made to analyze and compare theperformance of the equity mutual fund. For this purpose -value,
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standard deviation, and risk adjusted performance measures suchas Sharpe ratio, Treynor measure, Jenson Alpha, and Femameasure have been used.
The portfolio analysis of the selected fund has been done by themeasure return for the holding period.
At the end, it illustrates the Findings, Recommendations and theLimitations of the study based on the analysis done in the previoussections and finally it deals with Biblography used for the study.
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A Project ReportOn
RISK RETURN ANALYSIS AND COMPARATIVE STUDY
OF SELECTED MUTUAL FUND SCHEMES
At"Reliance Mutual Fund
By
Mahale Sonali Subhash
Under the guidance of
Dr.G.H.Barhate
Submitted to
"University of Pune"
In partial fulfillment of the requirement for theaward of the
Post Graduate Degree of Business Management
(P..G.D.B.M.)
THROUGH
INSTITUTE OF MANAGEMENT AND RESEARCH FORRURAL DEVELOPMENT , SHRIRAMPUR
( 2010-2011)
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INDEX
SRNO
Particulars PAGENO
1 Introduction to the study 7
2 Scope and Objectives of the Study 17
3 Industry Profile 19
4 Company profile 31
5 Research Methodology 39
6 Theoretical Background 40
7 Data Analysis and Interpretation 46
8 Findings 74
9 Recommendations 78
10 Limitations Of The Study 80
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CHAPTER 1
INTRODUCTION TO MUTUAL FUND
1.1 MUTUAL FUND OVERVIEW
Mutual fund is an investment company that pools money fromsmall investors andInvests in a variety of securities, such as stocks, bonds and money
market instruments. Most open-end Mutual funds stand ready tobuy back (redeem) its shares at their current net asset value, whichdepends on the total market value of the fund's investment
portfolio at the time of redemption. Most open-end Mutual fundscontinuously offer new shares to investors.
The flow chart below describes broadly the working of a
mutual fund:
(Fig. 1.1) Working Of Mutual Fund
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A Mutual Fund is a body corporate registered with the Securitiesand Exchange Board of India (SEBI) that pools up the money fromindividual/corporate investors and invests the same on behalf of
the investors/unit holders, in Equity shares, Government securities,Bonds, Call Money Markets etc, and distributes the profits.
In the other words, a Mutual Fund allows investors toindirectly take a position in a basket of assets. Mutual Fund is amechanism for pooling the resources by issuing units to theinvestors and investing funds in securities in accordance withobjectives as disclosed in offer document. Investments in securitiesare spread among a wide cross-section of industries and sectorsthus the risk is reduced. Diversification reduces the risk because allstocks may not move in the same direction in the same proportionat same time. Investors of mutual funds are known as unit holders.
1.2PURPOSE OF MEASURING AND EVALUATING
Every investor investing in the mutual funds is driven by the mottoof either wealth creation or wealth increment or both. Thereforeits very necessary to continuously evaluate the funds
performance with the help of factsheets and newsletters, websites,newspapers and professional advisors etc. If the investors ignorethe evaluation of funds performance then he can lose hold of itany time. In this ever-changing industry, he can face any of the
following problems:
1.Variation in the funds performance due to change in itsmanagement/ objective.
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2.The funds performance can slip in comparison to similarfunds.
3
.
There may be an increase in the various costs associated withthe fund.
4.The funds ratings may go down in the various lists publishedby independent rating agencies.
5. It can merge into another fund or could be acquired byanother fund house.
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The tabledescribes theefficiency ofmutual fundswith respect
to equity, bonds, debentures, bankdeposits , lifeinsurance
(Table No.2.1) Comparison Of Different FinancialInstruments
Return SafetyVolatility
LiquidityConvinience
Ence
Equity High Low High High
Modera
te
Bonds
Modera
te High
Modera
te
Modera
te High
Co
Debentu
res
Modera
te
Modera
te
Modera
te Low Low
Bank deposits Low High Low High High
LifeModerate High Low
Moderate High
Insuranc
e
Mutual Funds High High
Modera
te High High
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From the above comparison
We can very well see that mutual funds outperform than
every other investment option. On three parameters, it scoreshigh whereas its moderate at one. comparing it with theother options,
we find that equities gives us high returns with high liquidity but its volatility too is high with low safety which doesntmakes it favorite 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 atall fronts but lags badly in the parameter of utmost importanti.e.; it scores low on return , so its not an happening optionfor person who can afford to take risks for higher return.
The other option offering high return is real estate but thateven comes with high volatility and moderate safety level,even the liquidity and convenience involved are too low.
Gold have always been a favorite among Indians but whenwe look at it as an investment option then it definitely doesntgives 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 withmutual funds and serve the needs of only a specific customergroup.
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Straightforward, we can say that mutual fund emerges as aclear winner among all The Options available.
1.3THE REASON FORBEING THIS
I) Mutual funds combine the advantage of each of the
investment products:
Mutual fund is one such option which can invest in all otherinvestment options. Its principle of diversification allows theinvestors to taste all the fruits in one plate. Just by investing in it,the investor can enjoy the best investment option as per theinvestment objective.
II) Dispense theshortcomings of the other options:
Every other investment option has more or less someshortcomings. Such as if some are good at return then they are notsafe, if some are safe then either they have low liquidity or lowsafety or both.likewise, there exists no single option which canfit to the need of everybody. But mutual funds have definitelysorted out this problem. Now everybody can choose their fundaccording to their investment objectives.
III) Returnsget adjusted for themarket movements:
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As the mutual funds are managed by experts so they are ready toswitch 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 amountagain in money market instruments.
IV) Flexibility ofinvestedamount:
Other then the above mentioned reasons, there exists one morereason which has established mutual funds as one of the largestfinancial intermediary and that is the flexibility that mutual fundsoffer regarding the investment amount. One can start investing inmutual funds with amount as low as Rs. 500 through SIPs andeven Rs. 100 in some cases.
1.4ADVANTAGES OF MUTUAL FUNDS:
y Diversification:
An investor undertakes risk if he invests all his funds in a singlescrip. Mutual funds invest in a number of companies acrossvarious industries and sectors. This diversification reduces the riskof the investment.
y Professional Management:
An investor lacks the knowledge of the capitalMarket operations and does not have large resources to reap the
benefits of investment. Hence, he requires the help of an expert.Mutual funds are managed by professional managers who have the
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requisite skills and experiences to analyze the performance andprospectus of companies.
yRegulatory oversight:Mutual funds are subject to many government regulations that
protect investors from fraud.
y Liquidity:
It's easy to get your money out of a mutual fund. Write a check,make a call, and you've got the cash.
y Convenience:
You can usually buy mutual fund shares by mail, phone, or overthe Internet. It reduces paperwork, saves time and makesinvestment easy.
y Lowcost:
Mutual fund expenses are often no more than 1.5 percent of yourinvestment. Expenses for Index Funds are less than that, becauseindex funds are not actively managed. Instead, they automatically
buy stock in companies that are listed on a specific index
y Transparency:
Mutual funds transparently declare their portfolio every month.Thus, an investor knows where his/her money is being deployedand in case they are not happy with the portfolio they can withdrawat a short notice.
y Flexibility:
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Mutual funds offer a family of schemes, and investors have theoption of transferring their holdings from one scheme to other.
y Tax benefits:
Mutual fund investors now enjoy income tax benefits. Dividendreceived from mutual funds debt schemes are tax exempt to theoverall limit of Rs 9000 allowed under section SOL of the IncomeTax Act.
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1.5 DISADVANTAGES OF MUTUAL FUNDS
y Hiddencosts:
The mutual fund industry tactfully buries costs under layers
of jargon. These costs come despite of negative returns.Examples of such costs include sales charges, annual fees,and other expenses; and depending on the timing of theirinvestment, investors may also have to pay taxes on anycapital gains distribution they receive even if the fundwent on to perform poorly after they bought shares.
y Lack ofcontrol:
Investors typically cannot ascertain the exact make-up of afund's portfolio at any given time, nor can they directlyinfluence which securities the fund manager buys and sells orthe timing of those trades.
y Dilution:Because funds have small holdings in so many different
Companies,y Price Uncertainty:
With an individual stock, one can obtain real-time (or closeto real-time) pricing information with relative ease bychecking financial websites or through a broker, as can oneobserve stock price changes by the hour or minute. Bycontrast, with a mutual fund, the price at which one
purchases or redeems shares will typically depend on thefund's NAV, which the fund might not calculate until many
hours after the order has been placed. In general, mutualfunds must calculate their NAV at least once every businessday, typically after the major U.S. exchanges close.
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CHAPTER2
OBJECTIVES AND SCOPE OF THE STUDY
2.1The objectives of thestudy areas follows:
Primary objective:
y To compare the schemes based on Sharpes ratio,
Treynors ratio, Beta Coefficient, Returnsand show whichscheme is best for the investor based on his risk profile.
y To compare the performance of selected mutual fundsschemes by analyzing the NAV and their respective returns.
y To study whether the growth oriented Mutual Fund schemes
are earning higher returns than the benchmark returns interms of risk.
y To study about the risk factors involved in the Mutual Fundsand How to analyze it?
Secondary objectives:
y To know the advantages and disadvantages of the MutualFunds.
y To understand Mutual Fund, its importance & Risk involved.
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y To study about the factors involved in performance ofMutual Funds.
y To know the different Asset Management Companies which
are providing Mutual Fund Schemes in India.
2.2 SCOPE OF THE STUDY:
I. The study here has been limited to analyze schemes of onlyone company i.e. Reliance Mutual Fund.
II. There are only five schemes of Reliance Mutual Fund aretaken for granted for comparison
a.Reliance Equity Opportunities Fund
b.Reliance Banking Fund
c.Reliance Growth Fund
d.Reliance Vision Fund
e.RelianceRegular Savingequity Fund
III. Each scheme is analyzed according to its performanceagainst theother, based on factors like
a.SharpesRatio,
b.TreynorsRatio,
c. (Beta) Co-efficient,
d.Standerd Deviation
IV. The data for comparison and risk return analysis is taken forthe period ofAUGUST 2009 to JULY, 2010
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CHAPTER3
INDUSTRY PROFILE
3.1Industry Profile
y In 1963, the day the concept of Mutual Fund took birth inIndia. Unit Trust of India invited investors or rather to thosewho believed in savings, to park their money in UTI MutualFund. For30 years it goaled without a single second player.
Though the 1988 year saw some new mutual fundcompanies, but UTI remained in a monopoly position.
y The performance of mutual funds in India in the initial phasewas not even closer to satisfactory level. People rarelyunderstood, and of course investing was out of question. Butyes, some 24 million shareholders were accustomed with
guaranteed high returns by the beginning of liberalization ofthe industry in 1992. This good record of UTI becamemarketing tool for new entrants. The expectations ofinvestors touched the sky in profitability factor. However,
people were miles away from the preparedness of risks factorafter the liberalization.
y The securities and Exchange Board of India (SEBI) came outwith comprehensive regulation in 1993 which defined thestructure of Mutual Fund and Asset Management Companiesfor the first time. The supervisory authority adopted a set ofmeasures to create a transparent and competitive environmentin mutual funds. Some of them were like relaxing investment
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restrictions into the market, introduction of open-endedfunds, and paving the gateway for mutual funds to launch
pension schemes.
y The measure was taken to make mutual funds the keyinstrument for long-term saving. The more the varietyoffered, the quantitative will be investors. Several privatesectors Mutual Funds were launched in 1993 and 1994. Theshare of the private players has risen rapidly since then.Currently there are 34 Mutual Fund organizations in Indiamanaging 1,02,000 crores.
y At last to mention, as long as mutual fund companies areperforming with lower risks and higher profitability within ashort span of time, more and more people will be inclined toinvest until and unless they are fully educated with the dosand donts of mutual funds. Mutual fund industry has seen alot of changes in past few years with multinational companies
coming into the country, bringing in their professionalexpertise in managing funds worldwide.
y In the past few months there has been a consolidation phasegoing on in the mutual fund industry in India. Now investorshave a wide range of Schemes to choose from depending ontheir individual profiles.
y
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3.2HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY
The mutual fund industry in India started in 1963
with theformation of Unit Trust of India, at the initiative of theGovernment of India and Reserve Bank of India. The history ofmutual funds in India can be broadly divided into four distinct
phases
First Phase 1964-87
Unit Trust of India (UTI) was established on 1963 by an Actof Parliament. It was set up by the Reserve Bank of India andfunctioned under the Regulatory and administrative control of theReserve Bank of India. In 1978 UTI was de-linked from the RBIand the Industrial Development Bank of India (IDBI) took over theregulatory and administrative control in place of RBI. The firstscheme 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 mutualfunds set up by public sector banks and Life Insurance Corporationof India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non- UTI Mutual Fund establishedin June 1987 followed by Can bank 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
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had set up its mutual fund in December 1990. At the end of 1993,the mutual fund industry had assets under management of Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new erastarted in the Indian mutual fund industry, giving the Indianinvestors a wider choice of fund families. Also, 1993 was the yearin which the first Mutual Fund Regulations came into being, underwhich all mutual funds, except UTI were to be registered andgoverned. The erstwhile Kothari Pioneer (now merged withFranklin Templeton) was the first private sector mutual fundregistered in July 1993. The 1993 SEBI (Mutual Fund) Regulationswere substituted by a more comprehensive and revised MutualFund Regulations in 1996. The industry now functions under theSEBI (Mutual Fund) Regulations 1996. The number of mutualfund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessedseveral mergers and acquisitions. As at the end of January 2003,there were 33 mutual funds with total assets of Rs. 1, 21,805crores. The Unit Trust of India with Rs.44, 541 crores of assetsunder management was way ahead of other mutual funds.
Fourth Phase since February 2003
In February 2003, following the repeal of the Unit Trust of IndiaAct 1963 UTI was bifurcated into two separate entities. One is theSpecified Undertaking of the Unit Trust of India with assets undermanagement of Rs.29, 835 crores as at the end of January 2003,
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representing broadly, the assets of US 64 scheme, assured returnand certain other schemes. The Specified Undertaking of UnitTrust of India, functioning under an administrator and under the
rules framed by Government of India and does not come under thepurview of the Mutual Fund Regulations.
(Fig. No 1.2) Growth Assets Under Management
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(Table No 2.2) Average Assets under Management As OnJuly-2010
Average Assets under Management (AAUM) for
the month of JUL-2010 (Rs in Lakhs)
Sr
NoMutual Fund Name
Average AUM For The
Month
Excluding
Fund of
Funds -
Domestic but
including
Fund of
Funds -
Overseas
Fund Of
Funds -
Domestic
1 AEGON Mutual Fund N/A N/A
2
AIG Global
Investment Group
Mutual Fund
95329.13 0
3 Axis Mutual Fund 303699.87 0
4Baroda Pioneer
Mutual Fund395472.21 0
5Benchmark Mutual
Fund228484.50 0
6Bharti AXA Mutual
Fund70185.79 0
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7Birla Sun Life Mutual
Fund6153269.16 2851.47
8
Canara Robeco
Mutual Fund 779682.00 0
9Deutsche Mutual
Fund1002704.08 0
10DSP BlackRock
Mutual Fund2189276.48 0
11Edelweiss Mutual
Fund
28541.23 0
12 Escorts Mutual Fund 19764.25 0
13 Fidelity Mutual Fund 806511.75 12612.26
14 Fortis Mutual Fund 535311.51 0
15Franklin Templeton
Mutual Fund3518062.70 96788.56
16 Goldman SachsMutual Fund
N/A N/A
17 HDFC Mutual Fund 8462820.61 0
18 HSBC Mutual Fund 539647.46 0
19ICICI Prudential
Mutual Fund6871511.72 2751.92
20 IDBI Mutual Fund 94076.44 021 IDFC Mutual Fund 1853347.38 56621.57
22 ING Mutual Fund 142229.10 4688.74
23 JM Financial Mutual 595255.14 0
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Fund
24JPMorgan Mutual
Fund631579.00 0
25Kotak Mahindra
Mutual Fund2748984.19 9653.14
26 L&T Mutual Fund 338634.55 0
27 LIC Mutual Fund 2442485.17 0
28Mirae Asset Mutual
Fund27105.04 0
29Morgan Stanley
Mutual Fund226889.33 0
30Motilal Oswal Mutual
Fund3320.99 0
31 Peerless Mutual Fund 107790.80 0
32Pramerica Mutual
FundN/A N/A
33PRINCIPAL Mutual
Fund585493.23 0
34Quantum Mutual
Fund10455.71 146.95
35 Reliance Mutual Fund 10217940.01 0
36 Religare Mutual Fund 1047642.97 037 Sahara Mutual Fund 76094.65 0
38 SBI Mutual Fund 3851277.55 0
39 Shinsei Mutual Fund 35303.43 0
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40Sundaram BNP
Paribas Mutual Fund1259166.50 0
41 Tata Mutual Fund 1817147.04 0
42 Taurus Mutual Fund 223492.65 0
43 UTI Mutual Fund 6220757.10 0
Grand Total 66556742.42 186114.61
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3.3FACTORS IMPACTING THE INDUSTRY:
PEST Analysis:
1. Political Factors:
a)Government Regulation:
SEBI regulates the industry and every decision taken by themimpact the industry very quickly.
b) Stableconstituency:
The mutual fund industry can take long term decision if thegovernment is stable.
c)Fiscal policy:
Tax structure plays a very important role in the growth of theindustry .If the tax structure will be high than there will be less
savings and investment. We have seen the interest rate reducingcontinuously which boost the industry to sell products which are
better than the FDs, PF, NSC and KVPs.
2.Economic factors:
a) Market performance:
The last five years witnessed a sharp rise in the markets.The mutual fund industry basically works parallel with themarkets. Suppose, if the markets always be on downside, thenthe investors will not be so comfortable to invest. This willreduce the market size drastically.
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b) Global Standards:
As the industry will grow better, India being a globaleconomy, the MF industry has to match to the global mature
MF markets. They have to give due emphasis on productinnovation, cost reduction and penetration.
c) Inflation:
price rise affects interest rate and reduces the chances ofinvestment.
3.Social factors:
a) Consumer behaviour:
This is very unpredictable and based on sentiments getschanged very frequently, which sometimes makes selling of
products difficult.
b)Income:
The rich people are in bigger cities, so the mutual fundindustry is much more concentrated there.
4.Technological factors:
a.Easy Access:
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With the help of internet investors can easily know the latestNAV, Scheme Information , NFO etc.
b.Online Investment:
Some companies are also providing online investment likeReliance Mutual Fund
c.Saving Of Time
Also technology can save the investors most valuable time.
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CHAPTER4
COMPANY PROFILE
MAN WITH A MISSION
Few men in history have made as dramatic a contribution to theircountrys economic fortunes as did the founder of Reliance, Sh.Dhirubhai H Ambani. Fewer still have left behind a legacy that ismore enduring and timeless. As with all great pioneers, there is morethan one unique way of describing the true genius of Dhirubhai: Thecorporate visionary, the unmatched strategist, the proud patriot, the
leader of men, the architect of Indias capital markets, the championof shareholder interest. But the role Dhirubhai cherished most was perhaps that of Indias greatest wealth creator. In one lifetime, he built, starting from the proverbial scratch, Indias largest privatesector enterprise.
When Dhirubhai embarked on his first business venture, he had aseed capital of barely US$ 300 (around Rs 14,000). Over the nextthree and a half decades, he converted this fledgling enterprise intoan Rs 60,000 crore colossusan achievement which earnedReliance a place on the global Fortune 500 list, the first ever Indian
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private company to do so.
Dhirubhai is widely regarded as the father of Indias capital markets.In 1977, when Reliance Textile Industries Limited first went public,the Indian stock market was a place patronized by a small club ofelite investors which dabbled in a handful of stocks.
Undaunted, Dhirubhai managed to convince a large number of first-time
retail investors to participate in the unfolding Reliance story and puttheir hard-earned money in the Reliance Textile IPO, promising them,in exchange for their trust, substantial return on their investments. It wasto be the start of one of great stories of mutual respect and reciprocalgain in the Indian markets.
Under Dhirubhai extraordinary vision and leadership, Reliance scriptedone of the greatest growth stories in corporate history anywhere in theworld, and went on to become Indias largest private sector enterprise.
.
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4.1ABOUT ADAG GROUP
CHAIRMAN
Regarded as one of the foremost corporate leaders of contemporary India,Shri Anil D. Ambani, 50, is the chairman of all listed companies of the
Reliance ADA Group, namely, Reliance Communications, RelianceCapital, Reliance Energy and Reliance Natural Resources.
He is also the president of the Dhirubhai Ambani Institute of Informationand Communications Technology, Gandhinagar An MBA from theWharton School of the University of Pennsylvania, Shri Ambani iscredited with pioneering several financial innovations in the Indian capitalmarkets.
He spearheaded the countrys first forays into overseas capital marketswith international public offerings of global depositary receipts,convertibles and bonds.
Under his chairmanship, the constituent companies of the Reliance ADAgroup have raised nearly US$ 3 billion from global financial markets in a
period of less than 15 months.
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STRUCTURE OF RELIANCE ADA GROUP
(Fig No. 1.3) STRUCTURE OF RELIANCE ADAG GROUP
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4.2ABOUT RELIANCE MUTUAL FUND
Vision Statement
To be a globally respected wealth creator with anemphasis on customer care and a culture of good corporate
governance.
Mission Statement
To createandnurtureaworld-class, high performanceenvironment aimedat delighting our customers.
Reliance Mutual Fund (RMF) is one of Indias leadingMutual Funds, with Average Assets Under Management (AAUM)of Rs. 1,02,179 Crores and an investor count of over 73 Lakhfolios. (AAUM and investor count as of July 2010)
Reliance Mutual Fund, a part of the Reliance - AnilDhirubhai Ambani Group, is one of the fastest growing mutualfunds in the country. RMF offers investors a well-rounded
portfolio of products to meet varying investor requirements andhas presence in 159 cities across the country. Reliance MutualFund constantly endeavors to launch innovative products and
customer service initiatives to increase value to investors."Reliance Mutual Fund schemes are managed by Reliance CapitalAsset Management Limited., a subsidiary of Reliance CapitalLimited, which holds 93.37% of the paid-up capital of RCAM, the
balance paid up capital being held by minority shareholders.
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Reliance Capital Ltd. is one of Indias leading and fastestgrowing private sector financial services companies, and ranksamong the top 3 private sector financial services and banking
companies, in terms of net worth. Reliance Capital Ltd. hasinterests in asset management, life and general insurance, privateequity and proprietary investments stock broking.Sponsor: Reliance Capital Limited
Trustee: Reliance Capital Trustee Co. Limited
Investment Manager: Reliance Capital Asset ManagementLimited
Statutory Details: The Sponsor, the Trustee and the InvestmentManager are Incorporated under companies act 1956
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4.3AWARDS AND ACHIVEMENTS
CNBC TV18-CRISIL Mutual Fund Of TheYear 2009
Reliance Mutual Fund has won the CNBC TV18 - CRISILMutual Fund of theYear Award in the Category Mutual FundHouse of the Year (Awarded by CRISIL Fund Services, CRISILLimited
2010 CIO 100 Award
Reliance Capital Asset Management Limited has won the prestigious US based, 2010 CIO 100 award. The 2010 CIO 100Awards is presented by the CIO magazine & honors 100companies worldwide that are creating new business value byinnovating with technology.
ASIA MANAGEROF THE YEAR2010
Reliance Capital Asset Management Limited has been awardedAsset Manager for the year 2009 i.e. from July 2008 to July2009 at Asia Risk Awards 2009 by Incisive Media PublishingLimited.
4.5 The Main Objectives Of The Trust:
y To carry on the activity of a Mutual Fund as may bepermitted at law and formulate and devise various collectiveSchemes of savings and investments for people in India and
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abroad and also ensure liquidity of investments for the Unitholders;
y
To deploy Funds thus raised so as to help the Unit holdersearn reasonable returns on their savings and
y To take such steps as may be necessary from time to time torealize the effects without any limitation
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CHAPTER5
RESEARCH METHODOLOGY
Methodology
y Research is an organized activity designed and carried out to provide information for solving a problem. Researchmethodology is a way to systematically solve the research
problem. It may be understood as a science of studying howresearch is done scientifically.
y The Methodology involves the selected Open-Ended equityschemes of Reliance mutual fund for the purpose of riskreturn and comparative analysis the competitive fund
y The data collected for this project is basically from
secondary sources, they are;The monthly fact sheets of Reliance AMC fund house.
y For the Benchmark prices, data has been taken from BSE andNSE sites.
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CHAPTER6
THEORETICAL BACKGROUND
6.1MEASURES OF RISK AND RETURN:
y Risk is variability in future cash flows. It is also known asuncertainty in the distribution of possible outcomes. A riskysituation is one, which has some probability of loss orunexpected results. The higher the probability of loss orunexpected results is, the greater the risk.
y It is the uncertainty that an investment will earn its expectedrate of return. For an investor, evaluating a future investmentalternative expects or anticipates a certain rate of return isvery important.
y Portfolio risk management includes processes that identify,analyze, respond, to track, and control any risk that would
prevent the portfolio from achieving its business objectives.
y These processes should include reviews of project level riskswith negative implications for the portfolio, ensuring that the
project manager has a responsible risk mitigation plan.Additionally, it is important to do a consolidated riskassessment for the portfolio overall to determine whether it is
within the already specified limits. Since portfolio and theirenvironments are dynamic, managers should review andupdate their portfolio risk management plans on a regular
basis through the fund life cycle.
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6.2MEASURE OF RISK
Investors are interested not only in funds return but also in risktaken to achieve those returns. So risk can be thought as theuncertainty of the expected return, and uncertainty is generallyequated with variability. Variability and the risk are correlated;hence high returns will tend to high variability.
6.3 Thecomparison between theschemesismade based on the
following factors
6.3.1STANDERD DEVIATION (d )
In simple terms standard deviation is one of the commonly used
statistical parameter to measure risk, which determines thevolatility of a fund. Deviation is defined as any variation from amean value (upward & downward). Since the markets are volatile,the returns fluctuate every day.
Highstandarddeviation ofa fund implieshighvolatility
and
Lowstandarddeviationimplieslowvolatility.
y Calculation For Standerd Deviation ( )
= [Rp Avg Rp]2 / N - [ Rp - Avg Rp ] / N
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Where,Rp- Portfolio Returns Of The Fund
Avg Rp- Average Portfolio Returns Of The Fund
N- No. Of Periods
- Standerd Deviation
6.3.2. BETA COEFFICIENT ()
Systematic risk is measured in terms of Beta, whichrepresents fluctuations in the NAV of the fund vis-a-vis market.The more responsive the NAV of a Mutual Fund is to the changesin the market; higher will be its beta. Beta is calculated by relatingthe returns on a Mutual Fund
with the returns in the market. While unsystematic risk can bediversified through investments in a number of instruments,systematic risk cannot. By using the risk return relationship, we tryto assess the competitive strength of the Mutual Funds vis-a-visone another in a better way.
(Beta) iscalculatedas:
() = [ N (X Y) - X. Y]/ N (X2)- (X)2 ]
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Beta is used to measure the risk.It basically indicates the level of volatility associated with the fundas compared to the market.
In case of funds, as compared to the market. In case of funds, betawould indicate the volatility against the benchmark index. It isused as a short term decision making tool.
A beta that isgreater than 1 means that the fundismore
volatile than the benchmarkindex,
While a beta of less than 1 means that the fund is less
volatile than the benchmarkindex.
A fund with a beta very close to 1 means the funds
performanceclosely matches theindex or benchmark.
6.3.3. THE TREYNORMEASURE
Developed by Jack Treynor, this performance measureevaluates funds on the basis of Treynor's Index. This Index is aratio of return generated by the fund over and above risk free rate
of return (generally taken to be the return onsecurities backedby thegovernment, as thereisno credit riskassociated), duringa given period and systematic risk associated with it (beta).Symbolically, it can be represented as:
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Treynor's Index (Ti) = (Rp - Rf)/
Where, Rp - return on fund,
Rf- risk free rate of return and
- Beta of the fund.
All risk-averse investors would like to maximize this value.
While a high and positive Treynor's Index shows a
superior risk-adjusted performance ofa fund,
Anda lowandnegative Treynor's Index isan indication
of unfavorable performance.
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6.3.4.THE SHARP MEASURE
In this model, performance of a fund is evaluated on the
basis of Sharpe Ratio, which is a ratio of returns generated by thefund over and above risk free rate of return and the total riskassociated with it. According to Sharpe, it is the total risk of thefund that the investors are concerned about. So, the modelevaluates funds on the basis of reward per unit of total risk.Symbolically, it can be written as:
(Si) = (Rp - Rf)/
Where,Si - Sharp IndexRp -Portfolio average returnRf -Risk free rate of return -Standerd Deviation
Whileahighand positive SharpeRatio showsasuperior
risk-adjusted performance ofa fund
Anda lowandnegative SharpeRatio isan indication of
unfavorable performance.
6.3.5Returns:
Returns for the last one-year of five schemes are taken for thecomparison and analysis part
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CHAPTER7
DATA ANALYSIS AND INTERPRETATION
7.1 For Performance Comparisonwe take Five Mutual Fund
Schemes ofReliance:
1. Reliance Equity Oppournities Fund2. Reliance Banking Fund3. Reliance Growth Fund4. Reliance Vision Fund5. Reliance Regular Saving Fund
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7.1.1. Reliance Equity Opportunities Fund
Investment objective
The primary investment objective of the scheme is to seek togenerate capital appreciation & provide long-term growthopportunities by investing in a portfolio constituted of equitysecurities & equity-related securities and the secondary objective isto generate consistent returns by investing in debt and money
market securities.
Fund Data
y Structure . . . . Open-ended DiversifiedEquity Scheme
y
Date of allotment . . . . . . . . . . . . March2
8,2005
y Inception Date . . . . . . . . . . . . . . March 31, 2005
y Corpus . . . . . . . . . Rs. 2319.71 crore
y Minimum Investment . . . Retail Plan- Rs 5,000
Institutional Plan (IP)- Rs5
cr
y Fund Manager . . . . . . . . . . . . . . . Shailesh Raj Bhan
y Entry Load* . . . . . . . . . . . . . . . . . . . Retail Plan : NilInstitutional Plan : Nil
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y Exit Load ( August 24, 2009)RELIANCE EQUITY OPPORTUNITIES FUND
PERFORMANCE (Table No 2.3)
Year Rp Rm Rf
Rm-
Rf
Rp-
Rf X2 XY
X Y
LAST
1 5.53 0.88 6.5
-
5.62
-
0.97 31.584 5.4514
MONT
H
LAST
3 16.67 6.67 6.5 0.17 16.5 0.0289 2.805
MONT
H
LAST6 25.39
10.88 6.5 4.38
18.89
19.1844 82.7382
MONT
H
LAST
1 60.35
19.1
3 6.5
12.6
3
53.8
5 159.51
680.125
5
YEAR
Total 107.4
11.5
6
88.2
7
210.307
3
771.120
1
Averag
e
26.98
5
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Where,
Rp - Portfolio Return
Rm - Market Return
Rf - Risk free rate of return (On the basis of one year TreasuryBills 6.48 % 6.5 %)
(Fig1.4) GRAPH SHOWING RELIANCE EQUITY
OPPOURNITIES FUND PERFORMANCE:-
1. Calculation for Standerd Deviation ()
= [Rp Avg Rp] 2 / N - [Rp - Avg Rp] / N
0
10
20
30
40
50
60
70
Rp
Rm
Rf
R
E
TU
R
N
S
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= [107.4 - 26.985 ]2 / 4-[107.4 -26.985]/4
=20.1038
2. CALCULATIONS FOR BETA- () CO-EFFICIENT;-
= N [ X .Y]- X . Y / N X2 [ X]2
=4 [ 771.12 ] - [ 11.56 ] [ 88.27 ] / 4 [ 210.30 ] - 133.63
=2.9170
3. CALCULATIONS FORSHARP RATIO-(Si)
Si=Rp-Rf/
=88.27/20.1038
=4.3907
4. CALCULATIONS FORTREYNORS RATIO: -
= Rp Rf /
=88.27 / 2.9170
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=30.2605 /100
=0
.3026
Interpretation:-
y Last 1 Month: It reveals that Reliance Equity OpportunitiesReturns are 5.53.As compare to Funds Benchmark Returnsare 0.88, and The Risk Free Rate is considered as 6.5%
y Last 3 Months : It reveals that Reliance EquityOpportunities Returns are 16.67 As compare to FundsBenchmark Returns are 6.67 andThe Risk Free Rate is considered as 6.5 %
y Last 6 Months : It reveals that Reliance EquityOpportunities Returns are 25.39.As compare to Funds
Benchmark Returns are 10.88, andThe Risk Free Rate is considered as 6.5 %
y Last 1 Year : It reveals that Reliance Equity OpportunitiesReturns are 60.35, As compare to Funds Benchmark Returnsare 19.13. The Risk Free Rate is considered as 6.5 %
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7.1.2. Reliance Banking Fund
Investment objective
The primary investment objective of the scheme is to seek togenerate continuous returns by actively investing in equity andequity related or fixed income securities of companies in theBanking Sector
Fund Data
y Structure. Open-endedBanking Sector Scheme
y Date of allotment. ... May 26, 2003
y Inception Date. May 28, 2003
y Corpus: 1145.86 crore(31/05/2010)
y Minimum Investment Retail Plan-Rs 5000
y Institutional Plan- Rs 5 cr
y Fund Manager.SunilSinghania
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y Entry Load* . . . . . . . . . . . . . . . . . . . . . . . . Retail Plan Nil
InstitutionalPlan Nil
y Exit Load (w.e.f24th Aug 09) . . . . .
(Table No 2.4)RELIANCE BANKING FUND
PERFORMANCE;
Year Rp Rm Rf
Rm-
Rf
Rp-
Rf X2 XY
X Y
LAST
1 5.59 5.6 6.5 -0.9 -0.91 0.81 0.819
MONT
H
LAST
3 19.81 14.7 6.5 8.2
13.3
1 67.24 109.142
MONT
H
LAST
6 33.71 21.2 6.5 14.7
27.2
1 216.09 399.98
MONT
H
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Where,
Rp - Portfolio Return
Rm - Market Return
Rf - Risk free rate of return (On the basis of one year Treasury
Bills 6.48 % 6.5 %)
(Fig1.5)GRAPH SHOWING RELIANCE BANKING FUND
PERFORMANCE:-
LAST
1 62.27 40.6 6.5 34.1
55.7
7
1162.8
1 1901.75
YEARTotal
121.3
8 56.1
95.3
8
1446.9
5
2411.69
1
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1.Calculation For Standerd Deviation ( )
= [Rp Avg Rp]2 / N - [ Rp - Avg Rp ] / N
= [ 121.38 30.34 ]2 /4 - [ 121.38 30.34 ] / 4
= 45.52 -22.76
=22.76
2. CALCULATIONS FOR BETA CO-EFFICIENT;-
= N [ X .Y]- X . Y / N X2 [ X]2
=4 [2411.69 ] - [56.1 ] [95.38] / 4 [1446.95] [56.1]2
0
10
20
30
40
50
60
70
Rp
Rm
Rf
R
E
T
U
R
N
S
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=1.6273
3
. CALCULATIONS FORSHARP RATIO-=Rp-Rf/
=95.38 / 22.76
=4.1906
4.CALCULATIONS FORTREYNORS RATIO : -
= Rp Rf /
=95.38 /1.6273
=58.6124/100
=0.5861
Interpretation:-
y Last 1 Month: It reveals that Reliance Banking Returnsare 5.59 As compare to Funds Benchmark Returns are 5.6%
The Risk Free Rate is considered as 6.5 %
y Last 3 Months : It reveals that Reliance Banking Returnsare 19.81%As compare to Funds Benchmark Returns are14.7%, and The Risk Free Rate is considered as 6.5%
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y Last 6 Months : It reveals that Reliance Banking Returnsare 33.71% As compare to Funds Benchmark Returns are2
1.2
% and The Risk Free Rate is considered as6
.5
%
y Last 1 Year : It reveals that Reliance Banking Returnsare 60.27% As compare to Funds Benchmark Returns are40.6 % and The Risk Free Rate is considered as 6.5%
7.1.3. Reliance Growth Fund
Investment objective
The primary investment objective of the scheme is toachieve long-term growth of capital by investing in equity and
equity related securities through a research based investmentapproach.
Fund Data
y Structure . . . . . . Open-ended EquityGrowth Scheme
y Date of allotment . . . . . . . . . . . . . October 8, 1995
y Inception Date . . . . . . . . . . . . . . . October 8, 1995
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y Corpus: . . . . . . . . . 7428.96 crores(31/05/2010)
y
Minimum Investment . . . Retail Plan- Rs5
,000
Institutional Plan (IP) -Rs 5 cr
y Fund Manager . . . . . . . . . . . . . . . . . Sunil Singhania
y
Entry Load* . . . . . . . . . . . . . . . . . . Retail Plan: NilInstitutional Plan: Nil
y Exit Load (w.e.f24th Aug 09) . . . . . . . . . . . . . . . .
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RELIANCE GROWTH FUND PERFORMANCE; (Table No
2.5)
PERIOD Rp Rm Rf
Rm-Rf
Rp-Rf X2 XY
X Y
LAST
1 3.23 0.88 6.5 -5.62 -3.27 31.584 18.377
MONT
H
LAST
3 9.97 6.67 6.5 0.17 3.47 0.0289 0.589
MONT
H
LAST
6
14.5
1
10.8
8 6.5 4.38 8.01 19.18 35.083MONT
H
LAST
1
35.2
9
19.1
3 6.5
12.6
3
28.7
9 159.51
363.61
7
YEAR
63
11.5
6 37
210.302
9
417.66
6
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Where,
Rp - Portfolio Return
Rm - Market Return
Rf - Risk free rate of return (On the basis of one year TreasuryBills 6.48 % 6.5 %)
GRAPH SHOWING RELIANCE GROWTH FUND
PERFORMANCE:- (Fig 1.6)
1.Calculation For Standerd Deviation ()
= [Rp Avg Rp]2 / N - [ Rp - Avg Rp ] / N
0
5
1015
20
25
30
35
40
Rp
RmRm
R
E
T
UR
N
S
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= [63 -15.75 ]2 / 4-[63 15.75]/4
= 11.81
2. CALCULATIONS FOR BETA CO-EFFICIENT;-
= N [ X .Y]- X . Y / N X2 [ X]2
=4 [417.66 ] - [11.56 ] [37 ] / 4 [210.30 ] [11.56 ]2
=1.7565
3. CALCULATIONS FORSHARP RATIO-
=Rp-Rf/
=37 / 11.81
=3.13
4.CALCULATIONS FORTREYNORS RATIO : -
= Rp Rf /
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=37 / 1.1765
=3
1.44
=0.3144
Interpretation:-
y Last 1 Month: It reveals that Reliance Growth Returns are3.23% As compare to Funds Benchmark Returns are 0.88 ,and The Risk Free Rate is considered as 6.5%
y Last 3 Months:It reveals that Reliance Growth Returns are9.97 % As compare to Funds Benchmark Returns are 6.67%,and The Risk Free Rate is considered as 6.5%
y Last 6 Months: It reveals that Reliance Growth Returns arecompare to Funds Benchmark Returns are 30.14, and
The Risk Free Rate is considered as 6.5 %
y Last 1 Year :It reveals that Reliance Growth Returns are35.29% As compare to Funds Benchmark Returns are19.13% , and The Risk Free Rate is considered as 6.5 %
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7.1.4. Reliance Vision Fund
Investment Objective
The primary investment objective of the scheme is to achievelong-term growth of capital by investment in equity and equityrelated securities through a research based investment approach.
Fund Data
y Type . . . . . . . . An Open Ended EquityGrowth Scheme
y Date of allotment . . . . . . . . . . . October 8, 1995
y Inception Date . . . . . . . . . . . . . October 8, 1995
y Corpus: ..3653.99 crores (July 31,2010)
y Minimum Investment Retail Plan - Rs 5,000 andInstitutional Plan - Rs 5 cr
and
y Fund Manager . . . . . . . . . . . . . Ashwani Kumar
y Entry Load* . . . . . . . . . . . . . . . Retail Plan: NilInstitutional Plan: Nil
y Exit Load (w.e.f August 24, 2009)
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RELIANCE VISION FUND PERFORMANCE (Table No 2.6)
PERIOD Rp Rm Rf
Rm-Rf
Rp-Rf X2 XY
X Y
LAST
1 2.64 0.88 6.5 -5.62 -3.86 31.58 21.69
MONT
H
LAST
3 9.68 6.67 6.5 0.17 3.01 0.0289 0.0086
MONT
H
LAST
6
12.2
3
10.8
8 6.5 4.38 1.35 19.18 5.913MONT
H
LAST
1
29.8
3
19.1
3 6.5
12.6
3
23.3
3 159.5 294.65
YEAR
TOTAL
54.3
8
11.5
6
23.8
3
210.288
9
322.261
6
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Where,
Rp - Portfolio Return
Rm - Market Return
Rf - Risk free rate of return (On the basis of one year TreasuryBills 6.48 % 6.5 %)
GRAPH SHOWING RELIANCE VISION FUND
PERFORMANCE (Fig No 1.7)
1.Calculation For Standerd Deviation ()
= [Rp Avg Rp]2 / N - [ Rp - Avg Rp ] / N
0
5
10
15
20
25
30
Rp
Rm
Rf
R
E
T
U
RN
S
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= [ 54.38 13.59 ]2 / 4-[54.38 13.59] / 4
=10.198
2. CALCULATIONS FOR BETA CO-EFFICIENT;-
= N [ X .Y]- X . Y / N X2 [ X]2
=4 [322.2616 ] - [11.56 ] [23.83 ] / 4 [210.2889 ] [11.56]2
=1.43
3. CALCULATIONS FORSHARP RATIO-
=Rp-Rf/
=23.83/10.198
=2.33
4. CALCULATIONS FORTREYNORS RATIO: -
= Rp Rf /
=23.83 / 1.43
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=16.66 /100=0.1666
Interpretation:-
y Last 1 Month: It reveals the Reliance Vision Returns are2.64% As compare to Funds Benchmark Returns are 0.88%,and The Risk Free Rate is considered as 6.5%
y Last 3 Months:It reveals that Reliance Vision Returns are9.68% As compare to Funds Benchmark Returns are 6.67%,andThe Risk Free Rate is considered as 6.5%
y Last 6 Months: It reveals that Reliance Vision Returns are12.23%As compare to Funds Benchmark Returns are10.88%, and The Risk Free Rate is considered as 6.5%
y Last 1 year : It reveals that Reliance Vision Returns29.83% As compare to Funds Benchmark Returns are19.13% The Risk Free Rate is considered as 6.5%
7.1.5. RelianceRegular Saving (Equity) Fund
Investment Objective
The scheme aims to generate consistent returns by activelyinvesting in equity or equity related securities. It will invest at least
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80 per cent of its assets in equity and equity related securities. Upto 20 per cent of its assets will be invested in debt and moneymarket instruments with an average maturity of5 to10 years.
Fund Data
y Type An Open EndedScheme
y Date of allotment June 8, 2005
y Inception Date June 9, 2005
y Corpus.. Rs. 2983.07 crore(July 31, 2010)
y Minimum Investment .Rs 500
y Fund Manager . OmprakashKuckian
y Entry Load* . . . . . . . . . . . . . . . . . . . . . . . Nil
y Exit Load (w.e.f August 24, 2009)
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RELIANCE RSF EQUITY FUND PERFORMANCE (Table
No 2.7)
.
YEAR Rp Rm Rf
Rm-
Rf
Rp-
Rf X2 XY
X Y
LAST
1 3.69 1.39 6.5 -5.11 -2.81 26.11 14.35
MONT
H
LAST
3 12.02 7.35 6.5 0.85 5.52 0.7225 4.69
MONT
H
LAST
6 13.89 9.93 6.5 3.43 7.39 11.76 25.34
MONT
H
LAST 1 34.91 15.88 6.5 9.38 28.41 87.98 266.4
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8
YEAR
TOTAL 64.51 8.55 38.51
126.572
5
310.8
6
Where,
Rp - Portfolio Return
Rm - Market Return
Rf - Risk free rate of return (On the basis of one year TreasuryBills 6.48 % 6.5 %)
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GRAPH SHOWING RELIANCE RSF EQUITY FUND
PERFORMANCE (Fig1.8)
0
5
10
15
20
25
30
35
Rp
Rm
Rf
R
E
T
U
R
N
S
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=1.Calculation For Standerd Deviation ()
= [Rp Avg Rp]2
/ N - [ Rp - Avg Rp ] / N
= [64.51 16.12 ]2 / 4 - [ 64.51 16.12 ] / 4
=12.09
2. CALCULATIONS FOR BETA CO-EFFICIENT;-
= N [ X .Y]- X . Y / N X2 [ X]2
=4 [ 310.86 ] - [8.55 ] [38.51 ] / 4 [126.5725 ] [9.38]2
=2.188
3. CALCULATIONS FORSHARP RATIO-
=Rp-Rf/
=38.51 / 12.09
=3.18
4. CALCULATIONS FORTREYNORS RATIO: -
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= Rp Rf /
=38.51 / 2.188
=17.60/100
=0.1760
Interpretation:-
y Last 1 Month: It reveals that Reliance RSF Equity Returnsare 3.69% As compare to Funds Benchmark Returns are1.39%, and The Risk Free Rate is considered as 6.5%
y Last 3 Months:It reveals that Reliance RSF Equity Returnsare 12.02 % As compare to Funds Benchmark Returns are
7.35%, and The Risk Free Rate is considered as 6.5%
y Last 6 Months: It reveals that Reliance RSF Equity Returnsare 13.89% As compare to Funds Benchmark Returns are9.93%, and The Risk Free Rate is considered as 6.5%
y Last 1 Year :It reveals that Reliance RSF Equity Returns
are 34.91% As compare to Funds Benchmark Returns are15.88%, and The Risk Free Rate is considered as 6.5%
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CHAPTER8
FINDINGSFINDINGS:
y The mutual funds performance is evaluated easily with thehelp of Sharpe Index Model. The fund having low Si(SharpIndex Ratio) value performs weakly and form high Si
performs comparatively well. It also shows effectiveness of
Sharpe Index Method.
y With a number of mutual funds scheme existing in themarket, it is very difficult by an investor to choose the bestamong them. This paper provides a necessary and sufficientresult to help to choose the best portfolio to get maximumreturn with minimum risk.
y Standard deviation proves to be very useful statistical tool inorder to reach to some valuable result. Without help ofstandard deviation one cannot apply Sharpe Index Method.
y The best performing and worst-performing funds can beeasily identified. The above table is in a good support of this
study. By studying this table one can easily interpret it.
y
The findingcan bedecided on the basis ofabove table:-
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Reliance
Equity
Opportuniti
esFund
Relianc
e
Bankin
gFund
Relianc
e
Growt
hFund
Relianc
e
Vision
Fund
Relianc
e
Regula
rSaving
Equity
Fund
Monthly
Returns
5.53 5.59 3.23 2.64 3.69
Sharps
Ratio (Si)
4.3907 4.1906 3.13 2.33 3.18
Treynors
Ratio (Tr)
0.3026 0.5861 0.3144 0.1666 0.1760
Beta
Coefficient(
2.9170 1.6273 1.7565 1.43 2.188
Standerd(
d)
Deviation
20.1038 22.76 11.81 10.198 12.09
(Table No 2.8) Comparison ofselectedschemes
1. Reliance Equity Opportunities Fund
It is open ended Equity Diversified SchemeThe Monthly Returns Of this Scheme are relatively higher
than the other schemes
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As Sharp Ratio is High Risk associated with this scheme ismore than the other schemes.
As Beta Ratio is more than 1 the Scheme shows the greater
than the Benchmark index.
2. Reliance Banking Fund
It is open ended Banking Sector Scheme.The Monthly Returns Of this Scheme are higher than the all
other schemesThe Higher Returns of the Scheme are associated with the
High Risk because Sharp and Treynor Ratio are higher thanthe other schemes.
As Beta Ratio is more than 1 the Scheme shows the greaterperformance than the Benchmark index.
3. Reliance Growth Fund:
It is open ended Equity Growth SchemeThe Monthly Returns Of this Scheme are lower than the
Banking, Equity Opportunities and Regular Saving EquityScheme.
As Sharp Ratio is less it is less Risky Fund.As Beta Ratio is more than 1 the Scheme shows the greater
Performance than the Benchmark index.
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4. Reliance Vision Fund:
It is open ended Equity Growth Scheme.
The Monthly Returns Of this Scheme are relatively lowerthan the other schemes.As Sharp Ratio is low Risk associated with this scheme is
less than the other schemes.As Beta Ratio is more than 1 the Scheme shows the greater
Performance than the Benchmark index.
5. RelianceRegular Saving Equity Fund:
It is open ended SchemeThe Monthly Returns Of this Scheme are relatively Lower
than the other schemesAs Sharp Ratio is Low Risk associated with this scheme is
less than the other schemes.As Beta Ratio is more than 1 the Scheme shows the greater
Performance than the Benchmark index
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CHAPTER 9
RECOMMENDATIONS
Thisstudy caneasily suggest andhelp to aninvestor inmany
ways. Some of thesuggestionsare below-
y It is not only fund or companys goodwill which can betaken into consideration while choosing a portfolio, the
market factors like government policies, economies of salesand the trend in a particular sector so the fund Managershould also consider the above factors while framing the
portfolio of any scheme.
y Today investor is having enough funds to invest in a numberof schemes. He is always in search of such statistical tools
which can provide him better information about risk andreturns of any scheme. So the Fund Manager tries to framethe portfolio which gives maximum returns with lower risk.
y Growth oriented mutual funds are expected to offer theadvantages of Diversification, Market timing and Selectivity.In the sample, Reliance Growth Fund and Reliance Vision
fund are found to be diversified fund and because of highdiversification, it has reduced total risk of the portfolio.Whereas, others are low diversified and because of lowdiversification their total risk is found to be very high.Further, the fund managers of these under performing funds
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are found to be poor in terms of their ability of market timingand selectivity.
y
The Asset Management Company must manage the Fundefficiently and with dedication to earn the goodwill of the public. The Asset Management Company must dedicateitself, because it motivates the investors and potentialinvestors to invest in Mutual Funds.
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CHAPTER10
LIMITATIONS OF THE STUDY
LIMITATIONS OF THE STUDY
y Due to shortage of time and money, There are only 5mutualfundsschemes are selected which include the Top 5 schemesof Reliance Asset Management Company. The data have
been collected for the period of AUGUST 2009 to JULY,
2010.
y The study is limited only to the Risk and Return analysis ofselected schemes and its suitability to different investorsaccording to their risk-taking ability.
y The Risk is calculated on the basis of only Sharp Ratio, Beta
Ratio, and Treynor Ratio And the Returns are taken only forthe period of 1 Month, 3 Months, 6 Months, and 1year
y The study is based on secondary data available from monthlyfact sheets, websites Other books, as primary data wasnot accessible.
y The Study is limited with the only Equity Schemes OfReliance Asset Management Company, it never providesinformation about the Fixed income Schemes andExchangeTraded Fund Schemes
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BIBLIOGRAPHY
y Workbook for Mutual Fund Distributors Certification
Examination by Mr. Sundar Sankaran Published by-National Institute of Securities MarketsWorkbook Version:- May 2010 , Page No-17-21, 269
,278-280
y http://www.amfiindia.com/showhtml.aspx?page=aum
y http://www.amfiindia.com/NavHistoryReport_Frm.aspx
y http://www.mutualfundsindia.com/images/pdf/RiskAdjustedPerformance.pdf
y http://www.reliancemutual.com/CMT/Upload/FactSheet/Fundamentals2010.pdf
http://www.reliancemutual.com/Downloads/SchemeInformationDocuments.aspx
http://www.reliancemutual.com/AboutUs/AboutUs.aspx
http://www.reliancemutual.com/Downloads/AnnualHalfYearlyReport.aspx
y http://www.nseindia.com/content/indices/mir.csv
y www.rbi.org.in/home.aspx/Market Trends/GovernmentSecurities Market
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