CHAPTER-1

INTRODUCTION

1
1.1 Introduction:

A mutual fund is a type of professionally managed collective investment scheme that pools
money from many investors to purchase securities. While there is no legal definition of the term
"mutual fund", it is most commonly applied only to those collective investment vehicles that are
regulated and sold to the general public. The Indian mutual fund industry, though still small in
comparison to the size of the Indian economy, offers Indian, and in some cases global investors,
both big and small, an avenue to invest safely and securely, at a reduced cost, in a diverse range
of securities, spread across a wide range of industries and sectors. The mutual fund industry is
among the most successful recent financial innovations. Over the past few decades, the mutual
fund industry, both in the US and elsewhere, has exploded. While the US continues to be the
largest market in terms of number of Funds and assets under management, investors and
researchers are generally unaware that US domiciled funds accounted for only 15% of the
number of funds available globally and 60% of the world’s fund assets. They are also not aware
that the nation which is home to the second largest fund industry (measured by fund assets) is
Luxembourg, with 6.5% of world mutual fund assets. Similarly, France and Korea offer the
second largest number of mutual funds available worldwide (13% of the world total for each
country).

In general we can say that 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 funds is thus “Mutual”, i.e. the funds belong 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. 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

2
participates in the gain or loss of fund. Units are issued and can be redeemed as needed. The
fund’s Net Asset Value (NAV) is determined every day.

Definition:

“Mutual Funds are collective savings and investment vehicles where savings of small investors
are pooled together to invest for their mutual benefit and returns distributed proportionately”

“A Mutual Fund is an investment that pools your money with the money of an unlimited
number of other investors. In return, you and the other investors each own shares of the fund.
The fund’s assets are invested according to investment objectives into the fund’s portfolio of
investments. Aggressive growth funds seek long term capital growth by investing primarily in
stocks of fast growing smaller companies or market segments. Aggressive growth funds are also
called capital appreciation funds”.

3
1.2 History of Mutual Fund

The first mutual funds were established in Europe. One researcher credits a Dutch merchant
with creating the first mutual fund in 1774.The first mutual fund outside the Netherlands was
the Foreign & Colonial Government Trust, which was established in London in 1868. It is now
the Foreign & Colonial Investment Trust and trades on the London stock exchange.

Mutual funds were introduced into the United States in the 1890s.They became popular during
the 1920s. These early funds were generally of the closed-end type with a fixed number of
shares which often traded at prices above the value of the portfolio.

The first open-end mutual fund with redeemable shares was established on March 21, 1924.
This fund, the Massachusetts Investors Trust, is now part of the MFS family of funds. However,
closed-end funds remained more popular than open-end funds throughout the 1920s. By 1929,
open-end funds accounted for only 5% of the industry's $27 billion in total assets.

After the stock market crash of 1929, Congress passed a series of acts regulating the securities
markets in general and mutual funds in particular. The Securities Act of 1933 requires that all
investments sold to the public, including mutual funds, be registered with the Securities and
Exchange Commission and that they provide prospective investors with a prospectus that
discloses essential facts about the investment. The Securities and Exchange Act of 1934
requires that issuers of securities, including mutual funds, report regularly to their investors; this
act also created the Securities and Exchange Commission, which is the principal regulator of
mutual funds. The Revenue Act of 1936 established guidelines for the taxation of mutual funds,
while the Investment Company Act of 1940 governs their structure.

When confidence in the stock market returned in the 1950s, the mutual fund industry began to
grow again. By 1970, there were approximately 360 funds with $48 billion in assets. The
introduction of money market funds in the high interest rate environment of the late 1970s
boosted industry growth dramatically. The first retail index fund, First Index Investment Trust,
was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called the

4
Vanguard 500 Index Fund and is one of the world's largest mutual funds, with more than $100
billion in assets as of January 31, 2011.

Fund industry growth continued into the 1980s and 1990s, as a result of three factors: a bull
market for both stocks and bonds, new product introductions (including tax-exempt bond,
sector, international and target date funds) and wider distribution of fund shares. Among the
new distribution channels were retirement plans. Mutual funds are now the preferred investment
option in certain types of fast-growing retirement plans, specifically in 401(k) and other defined
contribution plans and in individual retirement accounts (IRAs), all of which surged in
popularity in the 1980s. Total mutual fund assets fell in 2008 as a result of the credit crisis of
2008.

In 2003, the mutual fund industry was involved in a scandal involving unequal treatment of
fund shareholders. Some fund management companies allowed favored investors to engage in
late trading, which is illegal, or market timing, which is a practice prohibited by fund policy.
The scandal was initially discovered by then-New York State Attorney General Eliot Spitzer
and resulted in significantly increased regulation of the industry.

At the end of 2011, there were over 14,000 mutual funds in the United States with combined
assets of $13 trillion, according to the Investment Company Institute (ICI), a trade association
of investment companies in the United States. The ICI reports that worldwide mutual fund
assets were $23.8 trillion on the same date. Mutual funds play an important role in U.S.
household finances and retirement planning. At the end of 2011, funds accounted for 23% of
household financial assets. Their role in retirement planning is particularly significant. Roughly
half of assets in 401(k) plans and individual retirement accounts were invested in mutual funds.

5
1.3 The Evolution

The mutual fund industry in India started in India in 1963 with the formation of UTI, at the
initiative of the Government of India and RBT. The history of mutual funds in India can be
broadly divided into four distinct phases.

First phase from 1964-1987

Second phase from 1987-1993( entry of public sector funds)
Third phase from 1993-2003 ( entry of Private sector funds)
Forth phase since February 2003

First Phase – 1964-87:

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964.

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 1987 followed by Canra 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 had set
up its mutual fund in December 1990.

Third Phase – 1993-2003 (Entry of Private Sector Funds):

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except

6
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.The number of mutual fund houses went on increasing, with many
foreign mutual funds setting up funds in India and also the industry has witnessed several
mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total
assets of Rs. 1, 21,805 corers.

Fourth Phase – since February 2003:

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with
assets under management of Rs.29,835 crores as at the end of January 2003, representing
broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified
Undertaking of Unit Trust of India, functioning under an administrator and under the rules
framed by Government of India.

7
1.4 Average Assets under Management

Assets under management (AUM) is a financial term denoting the market value of all the funds
being managed by a financial institution (a mutual fund, hedge fund, private equity firm,
venture capital firm, or brokerage house) on behalf of its clients, investors, partners, depositors,
etc.

The average Assets under management of all Mutual funds in India for the quarter Jul-13 to
Sep-13 (in INR billion) is given below:

% change in
Sr No Mutual Fund Name Average AUM
growth

1 HDFC Mutual Fund 1,034.42 12.70%

2 Reliance Mutual Fund 952.28 11.69%

3 ICICI Prudential Mutual Fund 853.03 10.48%

4 Birla Sun Life Mutual Fund 773.44 9.50%

5 UTI Mutual Fund 700.57 8.60%

6 SBI Mutual Fund 595.58 7.31%

7 Franklin Templeton Mutual Fund 448.12 5.50%

8
 % change in
Sr No Mutual Fund Name Average AUM
growth

8 IDFC Mutual Fund 396.65 4.87%

9 Kotak Mahindra Mutual Fund 352.99 4.34%

10 DSP BlackRock Mutual Fund 304.86 3.74%

Table No. 1.4.1

The Indian mutual fund industry, though still small in comparison to the size of the Indian
economy, offers Indian, and in some cases global investors, both big and small, an avenue to
invest safely and securely, at a reduced cost, in a diverse range of securities, spread across a
wide range of industries and sectors.

The first Indian mutual fund was set up in 1963, when the Government of India created the Unit
Trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the Indian mutual fund market and
sold a range of mutual funds through a network of financial intermediaries. At the end of 1988
UTI had Rs. 6,700 crores of assets under management. In 1987, the Government of India
permitted public sector banks and the Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC) to enter the mutual fund industry. The State Bank of
India's SBI Mutual Fund was the first such mutual fund to be established in 1987. Canara Bank
set up Canbank Mutual Fund shortly after in the same year, followed by funds from Punjab
National Bank and Indian Bank in 1989, Bank of India in 1990 and Bank of Baroda in 1992.
The LIC established its mutual fund in 1989 and the GIC in 1990. At the end of 1993, the
mutual fund industry had assets under management of Rs. 47,004 crores. in 1993, with the
creation of SEBI and better regulation, transparency and liberalisation of capital markets (which
included the creation of the NSE and the NSDL), the private sector was allowed to enter the

9
mutual fund industry. Kothari Pioneer Mutual Fund (now merged into Franklin Templeton
Investments) was the first private sector mutual fund to be registered in July 1993.

They are sometimes referred to as "investment companies" or "registered investment

companies." Most mutual funds are "open-ended," meaning stockholders can buy or sell shares
of the fund at any time. Hedge funds are not considered a type of mutual fund.

In the United States, mutual funds must be registered with the Securities and Exchange
Commission, overseen by a board of directors (or board of trustees if organized as a trust rather
than a corporation or partnership) and managed by a registered investment adviser. Mutual
funds, like other registered investment companies, are also subject to an extensive and detailed
regulatory regime set forth in the Investment Company Act of 1940. Mutual funds are not taxed
on their income and profits if they comply with certain requirements under the U.S. Internal
Revenue Code.

Mutual funds have both advantages and disadvantages compared to direct investing in
individual securities. They have a long history in the United States. Today they play an
important role in household finances, most notably in retirement planning.

There are 3 types of U.S. mutual funds: open-end, unit investment trust, and closed-end. The
most common type, the open-end fund, must be willing to buy back shares from investors every
business day. Exchange-traded funds (or "ETFs" for short) are open-end funds or unit
investment trusts that trade on an exchange. Open-end funds are most common, but exchange-
traded funds have been gaining in popularity.

Investors in a mutual fund pay the fund’s expenses, which reduce the fund's
returns/performance. There is controversy about the level of these expenses. A single mutual
fund may give investors a choice of different combinations of expenses (which may include
sales commissions or loads) by offering several different types of share classes.

10
1.5 Concept of Mutual Fund:

Concept of Mutual fund

Many investor with common

financial objectives pool their money

Investors, on a proportionate basis, get

mutual fund units for the sum contributed
to the pool

The money collected from investors is

invested into shares, debentures and other
securities by the fund manager

The fund manager realizes gains or losses and

collect dividend or interest income

Any capital gains or losses from such investments

are passed on to the investors in proportion of the
number of units held by them

Fig. No. 1.5.1

11
1.6 Types of Mutual Fund

There are 3 principal types of mutual funds in the United States: open-end funds, unit
investment trusts (UITs); and closed-end funds. Exchange-traded funds (ETFs) are open-end
funds or unit investment trusts that trade on an exchange; they have gained in popularity
recently. While the term "mutual fund" may refer to all three types of registered investment
companies, it is more commonly used to refer exclusively to the open-end type.

Open-end funds

Open-end mutual funds must be willing to buy back their shares from their investors at the end
of every business day at the net asset value computed that day. Most open-end funds also sell
shares to the public every business day; these shares are also priced at net asset value. A
professional investment manager oversees the portfolio, buying and selling securities as
appropriate. The total investment in the fund will vary based on share purchases, share
redemptions and fluctuation in market valuation. There is no legal limit on the number of shares
that can be issued.

Open-end funds are the most common type of mutual fund. At the end of 2011, there were
7,581 open-end mutual funds in the United States with combined assets of $11.6 trillion.

Closed-end funds

Closed-end funds generally issue shares to the public only once, when they are created through
an initial public offering. Their shares are then listed for trading on a stock exchange. Investors
who no longer wish to invest in the fund cannot sell their shares back to the fund (as they can
with an open-end fund). Instead, they must sell their shares to another investor in the market;
the price they receive may be significantly different from net asset value. It may be at a
"premium" to net asset value (meaning that it is higher than net asset value) or, more
commonly, at a "discount" to net asset value (meaning that it is lower than net asset value). A

12
professional investment manager oversees the portfolio, buying and selling securities as
appropriate.

At the end of 2011, there were 634 closed-end funds in the United States with combined assets
of $239 billion.

Unit investment trusts

Unit investment trusts or UITs issue shares to the public only once, when they are created. UITs
generally have a limited life span, established at creation. Investors can redeem shares directly
with the fund at any time (as with an open-end fund) or wait to redeem upon termination of the
trust. Less commonly, they can sell their shares in the open market. Unit investment trusts do
not have a professional investment manager. Their portfolio of securities is established at the
creation of the UIT and does not change. At the end of 2011, there were 6,022 UITs in the
United States with combined assets of $60 billion.

Exchange-traded funds

A relatively recent innovation, the exchange-traded fund or ETF is often structured as an open-
end investment company, though ETFs may also be structured as unit investment trusts,
partnerships, investments trust, grantor trusts or bonds (as an exchange-traded note). Most ETFs
are index funds that combine characteristics of both closed-end funds and open-end funds.
Ideally, ETFs are traded throughout the day on a stock exchange at a price that is close to net
asset value of the ETF holdings. ETF shares may be created or liquidated during the trading day
by the fund manager working with specialist and institutions that profit from arbitrage trading
the slight differences between the ETF trading price and the price of the ETF holdings. This
arbitrage is supposed keep the ETF market price close to net asset value of its holdings, but
there is no guarantee especially with thinly traded ETFs. As of March 2014, more than half of
ETFs have less than $100 million in assets, and about 20% have assets less than $10 million.

ETFs have been gaining in popularity. As of March 2014, there were over 1,500 ETFs in the
United States with combined assets of in excess of $2.7 trillion.

13
1.7 Investments and classification

Mutual funds are normally classified by their principal investments, as described in the
prospectus and investment objective. The four main categories of funds are money market
funds, bond or fixed income funds, stock or equity funds and hybrid funds. Within these
categories, funds may be sub classified by investment objective, investment approach or
specific focus. The SEC requires that mutual fund names not be inconsistent with a fund's
investments. For example, the "ABC New Jersey Tax-Exempt Bond Fund" would generally
have to invest, under normal circumstances, at least 80% of its assets in bonds that are exempt
from federal income tax, from the alternative minimum tax and from taxes in the state of New
Jersey. Bond, stock and hybrid funds may be classified as either index (passively managed)
funds or actively managed funds.

Money market funds

Money market funds invest in money market instruments, which are fixed income securities
with a very short time to maturity and high credit quality. Investors often use money market
funds as a substitute for bank savings accounts, though money market funds are not government
insured, unlike bank savings accounts. Money market funds strive to maintain a $1.00 per share
net asset value, meaning that investors earn interest income from the fund but do not experience
capital gains or losses. If a fund fails to maintain that $1.00 per share because its securities have
declined in value, it is said to "break the buck". Only two money market funds have ever broken
the buck: Community Banker's U.S. Government Money Market Fund in 1994 and the Reserve
Primary Fund in 2008.

At the end of 2011, money market funds accounted for 23% of open-end fund assets.

14
Bond funds

Bond funds invest in fixed income or debt securities. Bond funds can be sub-classified
according to the specific types of bonds owned (such as high-yield or junk bonds, investment-
grade corporate bonds, government bonds or municipal bonds) or by the maturity of the bonds
held (short-, intermediate- or long-term). Bond funds may invest in primarily U.S. securities
(domestic or U.S. funds), in both U.S. and foreign securities (global or world funds), or
primarily foreign securities (international funds). At the end of 2011, bond funds accounted for
25% of open-end fund assets.

Stock or equity funds

Stock or equity funds invest in common stocks which represent an ownership share (or equity)
in corporations. Stock funds may invest in primarily U.S. securities (domestic or U.S. funds), in
both U.S. and foreign securities (global or world funds), or primarily foreign securities
(international funds). They may focus on a specific industry or sector.

A stock fund may be sub classified along two dimensions: (1) market capitalization and (2)
investment style (i.e., growth vs. blend/core vs. value). The two dimensions are often displayed
in a grid known as a "style box".

Market capitalization ("cap") indicates the size of the companies in which a fund invests, based
on the value of the company's stock. Each company's market capitalization equals the number of
shares outstanding times the market price of the stock. Market capitalizations are typically
divided into the following categories:

 Micro cap
 Small cap
 Mid cap
 Large cap

15
While the specific definitions of each category vary with market conditions, large cap stocks
generally have market capitalizations of at least $10 billion, small cap stocks have market
capitalizations below $2 billion, and micro cap stocks have market capitalizations below $300
million. Funds are also classified in these categories based on the market caps of the stocks that
it holds.

Stock funds are also sub classified according to their investment style: growth, value or blend
(or core). Growth funds seek to invest in stocks of fast-growing companies. Value funds seek to
invest in stocks that appear cheaply priced. Blend funds are not biased toward either growth or
value. At the end of 2011, stock funds accounted for 46% of the assets in all U.S. mutual funds.

Hybrid funds

Hybrid funds invest in both bonds and stocks or in convertible securities. Balanced funds, asset
allocation funds, target date or target risk funds and lifecycle or lifestyle funds are all types of
hybrid funds.

Hybrid funds may be structured as funds of funds, meaning that they invest by buying shares in
other mutual funds that invest in securities. Most fund of funds invest in affiliated funds
(meaning mutual funds managed by the same fund sponsor), although some invest in
unaffiliated funds (meaning those managed by other fund sponsors) or in a combination of the
two. At the end of 2011, hybrid funds accounted for 7% of the assets in all U.S. mutual funds.

Index (passively managed) versus actively managed

An index fund or passively managed fund seeks to match the performance of a market index,
such as the S&P 500 index, while an actively managed fund seeks to outperform a relevant
index through superior security selection.

16
1.8 Introduction To Reliance Mutual Fund:

The Reliance group – one of India’s largest business houses with revenues of Rs. 990 billion
($22.6 billion) that is equal to 3.5 percent of the country’s gross domestic product was split into
two.

The group – which claims to contribute nearly 10 per cent of the country’s indirect tax revenues
and over six percent of India’s exports – was divided between Mukesh Ambani and his younger
brother Anil on June 18, 2005.

The group’s activities span exploration, production, refining and marketing of oil and natural
gas, petrochemicals, textiles, financial services, insurance, power and telecom. The family also
has interests in advertising agency and life sciences.

Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average Assets
Under Management (AAUM) of Rs. 90,938 Crores (AAUM for Mar 08 ) and an investor base
of over 66.87Lakhs.

Reliance Mutual Fund, a part of the Reliance – Anil Dhirubhai Ambani Group, is one of the
fastest growing mutual funds in the country.

RMF offers investors a well-rounded portfolio of products to meet varying investor

requirements and has presence in 115 cities across the country. Reliance Mutual Fund
constantly endeavours to launch innovative products and customer service initiatives to increase
value to investors.

“Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited.,
a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM,
the balance paid up capital being held by minority shareholders.”

Reliance Capital Ltd. is one of India’s leading and fastest growing private sector financial
services companies, and ranks among the top 3 private sector financial services and banking
companies, in terms of net worth.

17
Reliance Capital Ltd. has interests in asset management, life and general insurance, private
equity and proprietary investments, stock broking and other financial services. Reliance Mutual
fund has largest AUM in India. Reliance capital asset Management is no. 1 AMC in India but
the picture is not the same in Chhattisgarh. In Chhattisgarh they are no. 2 AMC. Management of
Reliance mutual fund wants to expand its feet in Chhattisgarh, before taking any step they want
to understand market & investor and distributor behaviour of SMEs, so they may plan
accordingly to capture Chhattisgarh Market. In this research we have to analyze why, how,
where, when & how much an investor invest & according to it, we have to make profile of
investors. In this report I have endeavoured to understand the factors affecting Investment
behaviour of an investor in Chhattisgarh. This behavioural study consists of how any investor
invests in CG. What factor they consider, why these factors they consider, where do they invest,
how do they invest, purpose behind investment, size of investment, timing of investment &
duration of investment. This study gave us basis to profile investors.

Trustee: Reliance Capital Trustee Co. Limited

VISION STATEMENT

To be a globally respected wealth creator, with an emphasis on customer care and a culture of
good corporate governance.•

MISION STATEMENT

To create and nurture a world-class, high performance environment aimed at delighting

their customers.•.

CORPORATE GOVERNANCE

CORPORATE GOVERNANCE POLICY

Reliance Capital Asset Management Ltd. has a vision of being a leading player in the Mutual
Fund business and has achieved significant success and visibility in the market. However, an

18
imperative part of growth and visibility is adherence to Good Conduct in the marketplace. At
Reliance Capital Asset Management Ltd., the implementation and observance of ethical
processes and policies has helped us in standing up to the scrutiny of our domestic and
international investors.

MANAGEMENT
The management at Reliance Capital Asset Management Ltd. is committed to good Corporate
Governance, which includes transparency and timely dissemination of information to its
investors and unit holders. The Board of Directors of RCAM is a professional body, including
well-experienced and knowledgeable Independent Members. Regular Audit Committee
meetings are conducted to review the operations and performance of the company.

EMPLOYEES
Reliance Capital Asset Management Ltd. has at present, a code of conduct for all its officers. It
has a clearly defined prohibition on insider trading policy and regulations. The management
believes in the principles of propriety and utmost care is taken while handling public money,
making proper and adequate disclosures.

All personnel at Reliance Capital Asset Management Ltd are made aware of their rights,
obligations and duties as part of the Dealing Policy laid down in terms of SEBI guidelines. They
are taken through a well-designed HR program, conducted to impart work ethics, the Code of
Conduct, information security, Internet and e-mail usage and a host of other issues.

One of the core objectives of Reliance Capital Asset Management Ltd. is to identify issues
considered sensitive by global corporate standards, and implement policies/guidelines in
conformity with the best practices as an ongoing process. Reliance Capital Asset Management
Ltd. gives top priority to compliance in true letter and spirit, fully understanding its fiduciary
responsibilities.

19
SPONSORS

Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a
subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM,
the balance paid up capital being held by minority shareholders.”, the sponsor. Reliance Mutual
Fund (RMF) has been sponsored by Reliance Capital Ltd (RCL). The promoter of RCL is
Enterprises Private Limited. Reliance Capital Limited is a Non Banking Finance Company.
Reliance Capital Limited is one of the India’s leading and fastest growing financial services
companies, and ranks among the top three private sector financial services and banking
companies, in terms of net worth.

Reliance Capital has interests in asset management and mutual funds, life and non-life
insurance, private equity and proprietary investments, stock broking and other activities in
the financial services sector. The net worth of RCL is Rs. 5,161.23 crores as on March 31, 2007.

20
1.9 THE AMC

RELIANCE CAPITAL ASSET MANAGEMENT COMPANY

Reliance Capital Asset Management Limited (RCAM), a company registered under the
Companies Act, 1956 was appointed to act as the Investment Manager of Reliance Mutual
Fund.

Reliance Capital Asset Management Limited (RCAM) was approved as the Asset Management
Company for the Mutual Fund by SEBI vide their letter no IIMARP/1264/95 dated June 30,
1995. The Mutual Fund has entered into an Investment Management Agreement (IMA) with
RCAM dated May 12, 1995 and was amended on August 12, 1997 in line with SEBI (Mutual
Funds) Regulations, 1996. Pursuant to this IMA, RCAM is authorized to act as Investment
Manager of Reliance Mutual Fund. The net worth of the Asset Management Company including
preference shares as on September 30, 2007 is Rs.152.02 crores.

“Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited.,
a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM,
the balance paid up capital being held by minority shareholders.”

Reliance Capital Asset Management Limited (RCAM) was approved as the Asset Management
Company for the Mutual Fund by SEBI by their letter no. IIMARP/1264/95 dated June 30,
1995. The Mutual Fund has entered into an Investment Management Agreement (IMA) with
RCAM dated May 12, 1995 and was amended on August 12, 1997 in line with SEBI (Mutual
Funds) Regulations, 1996. Pursuant to this IMA, RCAM is authorized to act as Investment
Manager of Reliance Mutual Fund. The net worth of the Asset Management Company including
preference shares as on March 31, 2005 is Rs.113.59 crores.

21
1.10 FOLLOWING ARE SOME OF THE SCHEMES LAUNCHED BY
RELIANCE MUTUAL FUND:

Some of the schemes launched by Reliance AMC are as follows:

Reliance Growth Fund Reliance Vision Fund

(September 1995) (September 1995)

Reliance Income Fund Reliance Liquid Fund

(December 1997) (March 1998)

Reliance Medium Term Fund Reliance Short Term Fund

(August 2000) (December 2002)

Reliance Gilt Securities Fund Reliance Banking Fund

(July 2003) (May 2003)

Reliance Monthly Income Plan Reliance Diversified Power Sector Fund

(December 2003) (March 2004)

Reliance Pharma Fund Reliance Floating Rate Fund

( May 2004) (August 2004)

22
Reliance Media & Entertainment Fund Reliance NRI Equity Fund

(September 2004) (October 2004)

Reliance NRI Income Fund Reliance Index Fund

(October 2004) (February 2005)

Reliance Equity Opportunities Fund Reliance Regular Savings Fund

(February 2005) (May 2005)

Reliance Liquidity Fund Reliance Tax Saver (ELSS) Fund

(June 2005) (July 2005)

Reliance Fixed Tenor Fund Reliance Equity Fund

(November 2005) (February 2006)

Reliance Fixed Horizon Fund I Reliance Fixed Horizon Fund

(August 2006) (April 2006)

Reliance Fixed Horizon Fund III Reliance Fixed Horizon Fund II

(March 2007) (November 2006)

Reliance Liquid Plus Fund Reliance Long Term Equity Fund

(March 2007) (November 2006)

23
 Reliance Long Term Equity Fund Reliance Interval Fund

(Nov 2006) (March 2007)

Reliance Fixed Horizon Fund – IV Reliance Fixed Horizon Fund – V

(August 2007) (September 2007)

Source: AMFI Table No. 1.10.1

INVESTMENT OBJECTIVES

a) RELIANCE MONTHLY INCOME PLAN

It aims to generate regular income in order to make regular dividend payments to unit holders
and the secondary objective is growth of capital.

b) RELIANCE INCOME FUND

It aims to generate optimal returns consistent with moderate levels of risk. This income may be
complemented by capital appreciation of the portfolio. Accordingly, investments shall
predominantly be made in Debt and Money Market Instruments.

c) RELIANCE MEDIUM TERM FUND

It aims to generate regular income in order to make regular dividend payments to unit holders
and the secondary objective is growth of capital.

d) RELIANCE LIQUID FUND

It aims to generate optimal returns consistent with moderate levels of risk and high liquidity.
Accordingly, investments shall predominantly be made in Debt and Money Market Instruments.

24
e) RELIANCE LIQUIDITY FUND

It aims to generate optimal returns consistent with moderate levels of risk and high liquidity.
Accordingly, investments shall predominantly be made in Debt and Money Market Instruments.

f) RELIANCE SHORT TERM FUND

It aims to generate stable returns for investors with a short term investment horizon by investing
in fixed income securities of a short term maturity.

g) RELIANCE GILT SECURITIES FUND

It aims to generate optimal credit risk free returns by investing in a portfolio of securities issued
and guaranteed by the Central Government and State Governments

h) RELIANCE FLOATING RATE FUND

It aims to generate regular income through investment in a portfolio comprising substantially of

Floating Rate Debt Securities (including floating rate securitized debt and Money Market
Instruments and Fixed Rate Debt Instruments swapped for floating rate returns).

i) RELIANCE REGULAR SAVINGS FUND DEBT OPTION

The primary investment objective of this plan is to generate optimal returns consistent with
moderate level of risk. This income may be complemented by capital appreciation of the
portfolio. Accordingly investments shall predominantly be made in Debt & Money Market
Instruments.

j) RELIANCE REGULAR SAVINGS FUND EQUITY OPTION

The primary investment objective is to seek capital appreciation and or consistent returns by
actively investing in equity / equity related securities.

25
k) RELIANCE REGULAR SAVINGS FUND 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.

l) RELIANCE GROWTH FUND

It aims to achieve long term growth of capital by investment in equity and equity related
securities through a research based investment approach.

m) RELIANCE VISION FUND

It aims to achieve long term growth of capital by investment in equity and equity related
securities through a research based investment approach.

n) RELIANCE EQUITY OPPORTUNITIES FUND

It aims to generate capital appreciation & provide long term growth opportunities by investing
in a portfolio constituted of equity securities & equity related securities.

o) RELIANCE BANKING FUND

It aims to generate continuous returns by actively investing in equity / equity related or fixed
income securities of banks.

p) RELIANCE DIVERSIFIED POWER SECTOR FUND

It seek to generate consistent returns by investing in equity / equity related or fixed income
securities of Power and other associated companies.

q) RELIANCE PHARMA FUND

It aims generate consistent returns by investing in equity / equity related or fixed income
securities of Pharma and other associated companies.

26
r) RELIANCE MEDIA & ENTERTAINMENT FUND

It aims to generate consistent returns by investing in equity / equity related or fixed income
securities of media & entertainment and other associated companies.

s) RELIANCE INDEX FUND-SENSEX PLAN

It aims to replicate the composition of the Sensex, with a view to endeavour to generate returns,
which could approximately be the same as that of Sensex.

t) RELIANCE INDEX FUND-NIFTY PLAN

It aims to replicate the composition of the Nifty, with a view to endeavour to generate returns,
which could approximately be the same as that of Nifty.

u) RELIANCE NRI EQUITY FUND AIMS

It to generate optimal returns by investing in equity and equity related instruments primarily
drawn from the Companies in the BSE 200 Index.

v) RELIANCE EQUITY FUND

The primary investment objective of the scheme is to seek to generate capital appreciation &
provide long-term growth opportunities by investing in a portfolio constituted of equity &
equity related securities of top 100 companies by market capitalization & of companies which
are available in the derivatives segment from time to time and the secondary objective is to
generate consistent returns by investing in debt and money market securities.

w) THE MUTUAL FUND

ABOUT RELIANCE MUTUAL FUND

Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882
with Reliance Capital Limited (RCL), as the Settler /Sponsor and Reliance Capital Trustee Co.
Limited (RCTCL), as the Trustee.

27
RMF has been registered with the Securities & Exchange Board of India (SEBI) vide
registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual
Fund has been changed to Reliance Mutual Fund effective 11th. March 2004 vide SEBI’s letter
no. IMD / PSP / 4958 / 2004 date 11th. March 2004. Reliance Mutual Fund was formed to
launch various schemes under which units are issued to the Public with a view to contribute to
the capital market and to provide investors the opportunities to make investments in diversified
securities.

MAIN OBJECTIVE OF THE TRUST:

 To carry on the activity of a Mutual Fund as may be permitted at law and

formulate and devise various collective Schemes of savings and investments for
people in India and abroad and also ensure liquidity of investments for the Unit
holders.
 To deploy Funds thus raised so as to help the Unit holders earn reasonable
returns on their savings.
 To take such steps as may be necessary from time to time to realize the effects
without any limitation.

SOCIAL RESPONSIBILITIES

Organizations, like individuals, depend for their survival, sustenance and growth on the support
and goodwill of the communities of which they are an integral part, and must pay back this
generosity in every way they can. This ethical standpoint, derived from the vision of the
founder, lies at the heart of the CSR philosophy of the Reliance Group.

While they strongly believe that their primary obligation or duty as corporate entities is to their
shareholders they are just as mindful of the fact that this imperative does not exist in isolation; it
is part of a much larger compact which they have with their entire body of stakeholders: From
employees, customers and vendors to business partners, eco-system, local communities, and
society at large.

28
They evaluate and assess each critical business decision or choice from the point of view of
diverse stakeholder interest, driven by the need to minimize risk and to pro-actively address
long-term social, economic and environmental costs and concerns. For them, being socially
responsible is not an occasional act of charity or that one-time token financial contribution to
the local school, hospital or environmental NGO. It is an ongoing year-round commitment,
which is integrated into the very core of their business objectives and strategy.

Because they believe that there is no contradiction between doing well and doing right.
Indeed, doing right is a necessary condition for doing well.

29
 CHAPTER-2

REVIEW OF LITRATURE

30
2.0 Review of literature:

Grinblatt and Titman assume that managers can risklessly capture the value of any implicit in
their payoff structure by hedging in their personal portfolios. This enables the use of results
from option pricing theory in characterizing the optimal. Among the other things, Grinblatt and
Titman show that for certain classes of portfolio strategies, adverse risk sharing incentives are
avoided when the penalties for poor performance outweigh the rewards for good performance.

Heinkel and Stoughton aim to explain the predominance of fraction of funds fee arrangement
in the asset-management industry (including but not only, mutual funds). They employ a two
period model with heterogeneous types of managers, in which moral hazard is also present.
Under some assumptions, the authors show that the optimal initial set of contracts features a
smaller performance based fee in the first period than in a first best contract. They suggest that
this reduced emphasis on the performance component in the first period is analogous to the lack
of a performance-based fee in many parts of the asset management industry.

Article given by Sneha Padiyath on April 29, 2014 , Mumbai “ NRI’s India MF play to get
thin as US Facta kicks in”.

The Economist “The decoupling debate” Mar 2013 India. This article defined what
decoupling, meaning of decoupling. It also showed the different aspects of the research topic.

David F, Swensen “Unconventional Success” A fundamental approach to personal

investment of the year 2012. Broadly defined, the endowment model seeks higher investment
returns over long period of time on a more consistent basis by allocating significant portions of
a portfolio to non- public illiquid market. Typically fixed income allocations are minimized in
favour of market neutral hedge fund.

A module of NCFM, Provides all the investment information related to the stock market.
Taking into account an internal experience of Indian financial market, NSE introduce in 1998. It
also gives knowledge about equity market.

31
 CHAPTER-3

RESEARCH METHODOLOGY

32
3.1 RESEARCH METHODOLOGY

The procedure adopted for conducting the research requires a lot of attention as it has direct
bearing on accuracy, reliability and adequacy of results obtained. It is due due to this reason that
research methodology, which we used at the time of conducting the research, needs to be
elaborated upon. It may be understood as a science of studying how research is done
scientifically. So, the research methodology not only talks about the research method but also
considers the logic behind the method used in the context of research study.

Research Methodology is a way to systematically study and solve the research problems. If a
researcher wants to claim his/ her study as a good study, he/she must clearly state the
methodology adapted in conducting the research the research so that it may be judged by the
reader whether the methodology of work done is sound or not.

The Research Methodology here includes:

 Meaning of the research

 Research problem
 Data collection method
 Limitations of the study
 Objectives of the study
 Scope of the study
 Limitations of the study

Meaning of research: Most common meaning of research is to a search for knowledge.

One can also define research as a scientific and systematic search for pertinent information on a
specific topic. In fact, researches are an art of scientific investigation it means “Systematize
effort to gain new knowledge.”

33
“Research means an original contribution to the existing stock of knowledge.”

The research methodology means the way in which we would complete our prospected task.
Before undertaking any task it becomes very essential for anyone to determine the problem of
study.

Research Design :

The research design used in the study is descriptive study.

Descriptive research can be either quantitative or qualitative. It can involve collections of

quantitative information that can be tabulated along a continuum in numerical form, such as
scores on a test or the number of times a person chooses to use a certain feature of a multimedia
program, or it can describe categories of information such as gender or patterns of interaction
when using technology in a group situation.

Descriptive research involves gathering data that describe events and then organizes, tabulates,
depicts, and describes the data collection (Glass & Hopkins, 1984). It often uses visual aids such
as graphs and charts to aid reader in understanding the data distribution. Because the human
mind cannot extract the full import of a large mass of raw data, descriptive statistics are very
important in reducing the data to manageable form. When in-depth, narrative descriptions of
small numbers of cases are involved, the research uses description as a tool to organize data into
patterns that emerge during analysis. Those patterns aid the mind in comprehending a
qualitative study and its implications.

34
3.2 SOURCES OF DATA:

SOURCES

Primary Secondary

The primary data are those data which are used for the first time in the study. However such
data take place much time and are also expensive.

The secondary data are those data which are already available in the market. These data are
easy to search and are not expensive for my study. I have utilized totally the secondary data.

Secondary data has used in this project. Descriptive research is used.

Research design used in research:

Descriptive research design is used in this study because it will ensure the minimisation of bias
and maximization of reliability of data collected. Descriptive study is based on some previous
understanding of the topic. Research has got a very specific objective and clear cut data
requirements.

Period of analysis: 5 years (2007-12)

Statistical Tool

 Correlation: This analysis tool and its formulas measure the relationship between two
data sets that are scaled to be independent of the unit of measurement. The population
correlation calculation returns the covariance of two data sets divided by the product of

35
their standard deviations. We can use the Correlation tool to determine whether two
ranges of data move together-that i , whether la(positive correlation), whether( negative
correlation), or whether values in both sets are unrelated( correlation near zero).

 Graphs
 Bar Diagrams
 Hypothesis

36
3.3 Objectives of the study:

Objectives are the ends that states specifically how goal be achieved. Every study must have an
objectives for which all the efforts have been done. Without objective no research can be
conducted and no result can be obtained. On the basis of objective all the research process is
followed. Objectives are the main aspect of every study.

The objective of the study gives direction to go through the research problem. It guides the
researcher and keeps him/her on track. I have three objectives regarding my research project.

These are shown below:

 To study the growth and origin of mutual fund industries in India.

 To study the recent trends of Mutual Fund industry in India.
 To study the mutual fund performance and various schemes regarding Reliance MF.
 To study the relationship between Investment made by FII’s in Mutual Fund and BSE.

Hypothesis

Null Hypothesis: (Ho) There is no relationship between FII’s investment in Mutual Fund and
BSE.

Alternative Hypothesis: ) (Ha) There is relationship between FII’s investment in Mutual Fund
and BSE.

37
3.4 Scope of the study:

The main purpose of doing this project was to know about mutual fund and its functioning. This
helps to know in details about mutual fund industry right from its inception stage, growth and
future prospects.

It also helps in understanding different schemes of mutual funds. Because my study depends
upon prominent funds in India and their schemes like equity, growth, guilt, balance as well as
returns associates with those schemes.

3.5 Limitations of the study:

 The study is limited only to the analysis of different schemes.

 The study is based on secondary data available from monthly fact sheets,
websites another books, as primary data was not accessible.

38
 CHAPTER – 4

DATA ANALYSIS AND

INTERPRETATION

39
4.1 Recent trends of Mutual Funds Industry:

The mutual fund in India has grown fast in the recent period. The performance is encouraging
especially because the emphasis in India has been on individual investors rather in contrast to
advanced countries where mutual fund depend largely on institutional investors. In general, it
appears that the mutual funds in India have given a good account of themselves so far. Numbers
of foreign AMC’s are in the queue to enter the Indian markets like Fidlelity Investments, US
based assets under management worldwide. Opening of the mutual fund industry to the public
sector banks and insurance companies, led to the launching of more and more of new schemes.
For Example, LICMF has concentrated on funds which includes life and accident cover.
GICMF provide home insurance policy. The bank sponsored mutual fund gloated regular
income, growth and tax incentives schemes. Especially since early 1991 there has been a steady
increase in the number of equity oriented growth funds. With the boom of June 1990 and then
again 1991 due to implementation of new economic policies towards structure of change the
price of securities in the stock market appreciated considerably. The finance ministry notified
that ELSS is eligible for tax exemption up to Rs. 10,000. This exemption was increased to Rs.
1, 00,000 after introduction section 80 C in the year 2006. This was done to encourage new as
well as existing small investors to invest their hard earned money in stock market through
mutual funds. All this shows that there’s growth in Mutual Fund Industry. But there are some
short comings in its growth like the most important and noticeable shortcoming is there are
approximately 29 mutual funds which are less than US having more than 800. At present, the
investors in India prefer to invest in mutual fund as a substitute of fixed deposits in Banks.
About 75 % of the investors are not willing to invest in mutual funds unless there was a promise
of minimum return. Unlimited fund raised by schemes can create severe imbalance in the
market.

Hence there is huge scope for expansion.

40
Latest Trends of Mutual fund Industry:

1. Foreigners allowed investing directly in equities:

The Government has announced a new scheme under which a foreign individual, a foreign
pension fund or even a foreign trust will be able to invest directly in Indian equity market.
These investors will be called ‘Qualified Foreign Investors’ (QFIs). At present, FII’s or
foreigners, through sub accounts with registered FII’s can invest in the equity market.

2. Gold funds beat bonds, stocks in returns trip:

Mutual funds that invest in gold have squarely beaten the more popular equity and funds in
terms of returns. While equity funds continues to pine away under weak market conditions and
bond funds were caught in a flux amid changes in interest rates, gold funds ended the year
generating more than 30 % return for investors.

3. Fund houses revise their KYC process:

With a view to bring uniformity in KYC process, SEBI has introduced a common Know Your
Customer (KYC) application for all the SEBI registered intermediaries viz. Mutual funds,
Portfolio Managers, Depositories participants, Stock Brokers, Venture Capital funds, collective
Investment Schemes etc.

41
4.2 GROWTH OF MUTUAL FUND INDUSTRY:

4.2 Open Ended Schemes:

Year Sales

2007-2008 4337041

2008-2009 5261429

2009-2010 9976363

2010-2011 8665727

2011-2012 6670526

Table No. 4.2.1

Source: Handbook of statistics

Sales
12000000

10000000

8000000

6000000
Sales

4000000

2000000

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Fig No. 4.2.1

42
Table No.4.2.1 and Fig No. 4.2.1, Interpret the behavior pattern of sales of MUTUAL FUNDS
in Open ended Schemes for the period of study from 2007-2012. From the above table we
analyses that there is decrease in the sales in 2007-2008 and in proceeding year, there is positive
inflow in sales. In the year 2009-2010 we analyze that there is increase in sale, this was the best
period in the mutual fund industry. But there was decrease in sales in proceeding years due to
increase in stock prices.

Purchases for Open ended Scheme

Year Purchase

2007-2008 4203588

2008-2009 5233301

2009-2010 9869736

2010-2011 8788945

2011-2012 6685523

Table No.4.2.2

Source: Handbook of statistics

43
 purchases
12000000
10000000
8000000
6000000
purchases
4000000
2000000
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Fig. No. 4.2.2

Fig. No. 4.2.2, interpret that there is slight increase in the purchases in the year 2009-2010.
After this it starts to decrease till 2011-2012.

Net Income for open ended scheme

Year Net Income

2007-2008 133453

2008-2009 28128

2009-2010 106627

2010-2011 (-123218)

2011-2012 (-14997)

Table. No. 4.2.3

Source: Handbook of statistics

44
 150000

100000

50000
year
0
1 2 3 4 5 6 net incom
-50000

-100000

-150000

Fig. No.4.2.3

Fig.No.4.2.3, Interpret that there is increase in net income in year1 i.e., 2007-2008. It decreases
in 2nd year and further increased in 3rd year i.e., 2009-2010. Then it further interpret that net
income again decrease to large extent.

45
Sales, purchases and net income for open ended scheme:

Year Sales Purchases Net Income

2007-2008 4337041 4203588 133453

2008-2009 5261429 5233301 28128

2009-2010 9976373 9869736 106627

2010-2011 8665727 8788945 -123218

2011-2012 6670526 6685523 -14997

Table No.4.2.4

Source: Handbook of statistics

12000000

10000000

8000000
Sales
6000000
Purchases
4000000
Net incom
2000000

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
-2000000

Fig. No.4.2.4

Fig. No.4.2.4, Interpret that there was minimum increase in sales, purchases and income in
years 2007-2009. Again it shows that it leads the sales, purchases at peak, but income earned is
very low. Then further it shows the decreasing of sales, purchases and net income.

46
4.3 Close Ended Scheme:

Sales for Close ended scheme:

Year Sales

2007-2008 127334

2008-2009 111008

2009-2010 25551

2010-2011 128874

2011-2012 135513

Table No.4.3.1

Source: Handbook of statistics

sales
160000
140000
120000
100000
80000
sales
60000
40000
20000
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Fig. No. 4.3.1

Fig. No.4.3.1, Interpret that sales were good in 2007-2008 in close ended scheme. but it start to
decrease from 2008-2009 to till 2009-2010. Then further it start to increase from 2010-2012.

47
Purchases for Close ended scheme:

Year Puchase

2007-2008 106987

2008-2009 145198

2009-2010 61683

2010-2011 57216

2011-2012 132072

Table No. 4.3.2

Source: Handbook of Statistics

purchases
12000000

10000000

8000000

6000000
purchases
4000000

2000000

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Fig. No. 4.3.2

Fig. No.4.3.2, Interpret that purchases in close ended scheme were less in 2007-2008 than 2008-
2010. They start to decrease again from 2010 to till 2012.

48
Net Income for close ended scheme:

Year Net Income

2007-2008 106987

2008-2009 145198

2009-2010 61683

2010-2011 57216

2011-2011 132072

Table No. 4.3.3

Source: Handbook of statistics

net income
80000

60000

40000

20000
net income
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
-20000

-40000

-60000

Fig. No.4.3.3

Fig. No. 4.3.3, Interprets that net income for close ended schemes are much greater in year
2010-2011 than others. In 2011-2012 net income from close ended schemes depreciate again.

49
Sales, purchases and income:

Year Sales Purchases Net Income

2007-2008 127334 106987 20348

2008-2009 111008 145198 -34191

2009-2010 25551 61683 -36132

2010-2011 128874 57216 71658

2011-2012 135513 132072 3441

Table No. 4.3.4

160000
140000
120000
100000
80000 sales
60000
purchases
40000
20000 net income
0
-20000 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
-40000
-60000

Fig. No. 4.3.4

Fig. No.4.3.4, depicts that in the year 2007-2008 sales and purchases were higher than net
income. In 2008-2010 net income again start to fall. But in the year 2010-2011 three of them
start to perform well. But net income again started to decrease.

50
4.4 Scheme wise resource mobilisation by Mutual Funds:

Total sales, purchases and net income:

Year Total Sales Total Purchases Net Income

2007-2008 4464375 4310575 153801

2008-2009 5426354 5454650 -28296

2009-2010 10019023 9935942 83880

2010-2011 8859515 8908921 -49406

2011-2012 6819679 6841702 -22024

Table No. 4.4.1

Source: Handbook of statistics

12000000

10000000

8000000

total sales
6000000
total purchases
4000000
total income

2000000

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
-2000000

Fig. No. 4.4.1

51
Fig. No. 4.4.1, shows that in 2007-2008 total sales and purchases were balanced but net income
was not hold good as comparison to sales and purchases. In the year 2008-2009 sales and
purchases were performing good but net income was not giving good results. This was due to
some economic crises like recession.

52
4.5 Performance of schemes of Reliance Mutual Fund:

Reliance Growth Fund:

Year Absolute annual return(%)

2009 93.5

2010 16.1

2011 -27.9

2012 37.5

2013 -3.3

Table No. 4.5.1

Source: Moneycontrol.com

2500
2009 2010 2011 2012 2013
2000

1500
year
1000 absolute annual return(%)

500
93.5 16.1 37.5
0
1 2 3-27.9 4 5-3.3
-500

Fig. No. 4.5.1

53
Fig. No. 4.5.1, indicates that reliance growth fund was performing good in the year 2009. It
started to return poor in the year 2010-2011. But in the year 2012 it again start to perform well.
In 2013 it again decreased to the value -3.3.

Reliance Guilt securities Fund – Retail plan(G):

Year Absolute annual report (%)

2009 -9.8

2010 3.1

2011 4.8

2012 11.8

2013 2.7

Table No. 4.5.2

Source: Moneycontrol.com

2500
2009 2010 2011 2012 2013
2000

1500
Year
1000 Absolute annual return

500
3.1 4.8 11.8 2.7
0
1-9.8 2 3 4 5 6
-500

Fig. No. 4.5.2

54
Fig. No. 4.5.2, shows that performance of Reliance Guilt fund was very poor in year 2009. But
it started to increase in the year 2010 till the year 2011. In year 2013 it again started to
depreciate.

Reliance Equity Fund:

Year Absolute annual return (%)

2009 103

2010 30.2

2011 -21.9

2012 47.5

2013 3.8

Table No. 4.5.3

Source: Moneycontrol.com

2500
2009 2010 2011 2012 2013
2000

1500
year
1000 Absolute annual return
500 103.8 30.2 47.5 3.8
0
1 2 3-21.9 4 5
-500

Fig. No. 4.5.3

55
This figure 4.5.3 indicates that Reliance Equity Funds Perform very well in the year 2009. But it
started to decrease from 2010- 2011. In the year 2012 it starts to cover the loss which arises in
last year’s. It reached at 47.5 from -21.9. In year 2013 the annual return again depreciated.

Reliance Regular Saving Fund-Balanced Option (G):

Year Absolute annual return (%)

2009 71.9

2010 21.6

2011 -19.5

2012 33.7

2013 2.5

Table No. 4.5.4

Source: Moneycontrol.com

2500
2009 2010 2011 2012 2013
2000

1500

Year
1000
Absolute annual return

500
71.9 21.6 33.7 2.5
0
1 2 -19.5
3 4 5
-500

Fig No. 4.5.4

56
Fig. No.4.5.4, Interpret that absolute annual return for Reliance Regular saving Fund- balanced
option (G) Fund was doing well in year 2009. After this year it starts to depreciate day by day.
And in year 2011 it reached at -19.5. Again it starts to cover the incurred loss to some extent.

57
4.6 Relationship Between Investment Made By Mutual Fund Industry and
FII’s:

Year Investment by FII’s Investment by MF

2007-2008 66179 90095

2008-2009 45811 88787

2009-2010 142658 170076

2010-2011 146438 228879

2011-2012 93726 333462.9

Table No. 4.6.1

Source: SEBI

400000
350000
300000
250000
200000
Investment By FII's
150000
Investment by MF
100000
50000
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
-50000
-100000

Fig. No. 4.6.1

58
Fig. No. 4.6.1, Interpret that in the year 2007-2008 MF industry have made large investment
than FII’s. In the next year FII’s decreases in their investment as compares to Mutual
Fund.2009-2010 was the best year for FII’s as they made greater investment than before. In the
year 2011-2012 Mutual Fund Industry made greater investment in debts and equities as
compare to FII’s.

59
4.7 Relationship Between Investment by FII’s in Mutual Fund and BSE
(SENSEX).

Years FII’s Investment in MF Investment in BSE(SENSEX)

2007-2008 66179 16569

2008-2009 45811 12366

2009-2010 142658 155585

2010-2011 146438 18605

2011-2012 93726 17506

Table No. 4.7.1

Source: SEBI

Correlations

FII BSE
FII Pearson Correlation 1 .827
Sig. (2-tailed) .084
N 5 5
BSE Pearson Correlation .827 1
Sig. (2-tailed) .084
N
5 5

*Correlation is highly significant (2-tailed)

60
FII’s have been investing on financial instruments in India and providing incentives for
financial innovations in the country. Recently they becomes the movers and shakers of the
market.

Interpretation:

The value of the karl Pearson correlation(r) is found to be +.827. It means that there is high
degree of positive correlation between FII’s and BSE (Sensex).

Above table (two tailed test) clearly analysis that there is high degree of positive relation
between the variables. It is highly significant to +.827 level. This high degree of positive
correlation shows that null hypothesis is rejected (Ho), and Alternate hypothesis is accepted
which shows that both the variables are correlated with each other.

61
CHAPTER-5

CONCLUSION

62
Conclusion

Mutual fund investment activity has provided crucial liquidity support in the Indian money
market, but equity mutual funds collectively do not seem to play a significant role in deepening
the Indian stock market. Retail investors account for most of the equity mutual fund investment
in India and individual risk perceptions play an important role in fund flows to and from mutual
funds, which in turn determine their investment strategies in the market. Superior returns
Performance by equity mutual funds are found to be accompanied by net withdrawals from
these funds (on aggregate) and net disinvestments by mutual funds in the stock market. This
indicates that investors may prefer to book profits continuously, thereby pulling down mutual
funds’ investments in the market during periods of uptrend in the stock markets.
Running a successful Mutual Fund requires complete understanding of the peculiarties of the
Indian Stock market and also the psyche of the small investors. This study has made an attempt
to understand the Mutual Fund industry its trends and performance. It tell about Reliance
Mutual Fund schemes and relationship between FII’s investment and Mutual Fund investment.
I observed that many of the people have fear of Mutual Fund. They think that their money will
not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms
Newspaper and financial advisors are the most preferred channel for the investment in Mutual
Fund.

63
CHAPTER- 6

FINDINGS

64
Findings:

 It is found that sales and purchases in Mutual Fund schemes are at same level, which
leads to generate less income.
 Most of the people prefer Open ended schemes.
 From the study of latest trends of Reliance Mutual Fund, it is found that People want to
invest in equity and debt funds.
 In latest trends foreigners allowed to invest directly.
 From the study of Reliance Mutual Fund, it is found that people prefer to invest in
Reliance MF because of its Portfolio and brand name.
 It is found that FII’s should have to make more investments in MF as it is positively
correlated with BSE.

65
CHAPTER- 7

SUGGESTIONS

66
SUGGESTIONS:

 The record of performance and the standards of services are the strengths of Mutual
Fund Industry and on the basis of these strengths the industry needs to build its
household customers.
 Reliance money has to add some extra features in it with aggressive marketing
promotional strategy.
 Advertisements on television are the main source of attraction so the company must
advertise its products heavily.
 Production must be improved. There should be provision of complain subsection boxes
at each branch.
 The Mutual Fund industry has to now take the more difficult but long term sustained
route of gathering assets from individual investors by providing them value added,
financial planning services and ensuring that Mutual Fund are an integral part of their
overall portfolio.
 Number of FII’s gets registered in nature of procedure. Simplifyinf procedure and
relaxing entry barriers for business activities and providing investors help them to come
and invest in India.
 Encourage MF industry to grow to make FII’s an alternative junction to invest.

67
 CHAPTER –8

BIBLIOGRAPHY

68
BIBLIOGRAPHY

Books Referred:

 Fisher & Jorden, Security Analysis And Portfolio Management, 6TH edition, 2011,
Pearson.
 Khan M.Y. Indian Financial System, 3rd edition, 2009, Vikas Publishing House Pvt. Ltd,
New Delhi.
 Singh, Preeti, Investment Management (SAPM), 4th edition, 2012, Himalaya Publishing
Pvt. Ltd.
 Kothari, C.R, Research Methodology, 3rd edition, 1997, Vikas Publishing House Pvt.
Ltd.
 Bhole, L.M., Financial Markets and Institutions, 5th edition, 2011, The McGraw Hill Co.

Internet websites:

 http://www.moneycontrol.com/planning_desk/investinginmf.php?step1=1
 http://en.wikipedia.org/wiki/Mutual_funds/
 http://www.sebi.gov.in/sebiwb/investment/statistics.jsp?s=mf
 http://www.amfiindia.com/showhtml.aspx?page=mfindustry
 http://www.icfaipress.org/Books/MutualFundIndusryinIndia_cont.asp
 http://www.kotak.com/Kotak_BankSite/wealthmgmt/mutualfunds.htm
 http://www.marketwatch.com/tools/mutualfunds/overview
 http://www.bobshermancredit.com/mutual.fund.overview.htm
 http://www.crisil.com/financial-news/financial-news-crisil-marketwire overview.jsp

69