Professional Documents
Culture Documents
Summer Training Report
Summer Training Report
DECLARATION
1
BONAFIDE CERTIFICATE
This is to certify that as per best of my belief the project entitled “ANALYTICAL
COMPARISON OF INSTRUMENTS OF RELIANCE MUTUAL FUND LTD AND
INSTRUMENTS OF RELIANCE LIFE INSURANCE LTD” is the bonafide research
work carried out by vishavdeep singh thakur student of BBA (BNI), AIT,
GURGAON, during June-July 2010, in partial fulfillment of the requirements for the
Summer Training Project.
--------------------
Mr. Navdeep Barwal
(Project Guide (Internal
:Date
2
ACKNOWLEDGEMENT
I would like to take this opportunity to thank Mr. Navdeep Barwal, who poured over
every inch of my project with painstaking attention and helped me throughout the
working of the project. I also acknowledge my deepest sense of gratitude to Karan
Bhasin, CDA, Reliance Life Insurance Limited for his guidance and support which
has helped me immensely. The project could not have taken its present form sans their
endeavor and numerous suggestions. I am extremely grateful to them for all their
support and encouragement in the preparation of the project.
En. No.-0461061808
Index
3
S.No. Contents Page No.
Executive Summary
Chapter-1
1.1 Introduction 08
Chapter-2
2.1 Literature review 24
Chapter-3
Chapter-4
4.1 Data analysis & interpretations 41
Chapter-5
Chapter-6
6.1 bibliography 66
EXECUTIVE SUMMARY
4
Investment decision deals with the selection of appropriate securities for the portfolio.
For the purpose of investment decision making it is necessary to analyze the financial
instruments that are available to the investor. Financial instruments that are available
in India include Mutual funds, life insurance, equity shares, bonds and debentures,
derivatives, CDs etc.The investor can choose from any scheme under these
instruments to design his portfolio. Reliance mutual fund ltd and Reliance life
insurance ltd provide various instruments that serve as good investment option.
This report is based on the comparative analysis of Instruments of Reliance
Mutual fund ltd and Reliance Life Insurance ltd.
The study is based on secondary data. The main objective is to analyze the financial
instruments provided by of Reliance Mutual fund ltd and Reliance Life Insurance ltd.
For analysis of financial instruments, secondary data is used. The study has been
exploratory as it aims at examining the secondary data for analyzing the previous
researches that have been done in the area of comparative analysis of financial
instruments. The knowledge thus gained from this preliminary study forms the basis
for the further detailed Descriptive research. In the exploratory study, the various
technical indicators that are important for analyzing financial instruments were
actually identified and important ones short listed.
The analysis includes the detailed description of the instruments, their features. These
instruments are analyzed on the basis of risk involved, return expected, performance
and growth perspective. Statistical tools used for performance evaluation and risk
assessment are beta, standard deviation, Jensen measure, Treynor’s Ratio and
Sharpe Ratio.
5
• Reliance Diversified Power Sector - Inst (G)
• Equity Fund
• Balanced Fund
The performance of a portfolio is measured by combining the risk and return levels
with single value. The differential return earned by a portfolio may be due to the
difference in the risk exposure from that of say, the stock exchange. The difference
between the required rate of return on a mutual fund investment and the risk free rate
is the risk premium.
6
CHAPTER: 1
INTRODUCTION
1.1INTRODUCTION
7
A financial instrument is either cash; evidence of an ownership interest in an entity;
or a contractual right to receive, or deliver, cash or another financial instrument.
Financial instruments can be categorized by form depending on whether they are cash
instruments or derivative instruments:
8
MUTUAL FUNDS
Mutual fund is a pool of money from many investors who wish to save or make
money. Investing in mutual funds can be a lot easier as compared to buying and
selling individual stocks or bonds on your own. An investor can redeem his/her
holdings partially or fully at any point of time and collect the proceedings on a t +2
basis.
The basic idea behind Mutual Fund is that investors lack time, the inclination and
skills required to manage their own investments. Professional Mutual Fund managers
are highly experienced personnel and act on behalf of the mutual fund company that
manages the investments for the benefit of the investors in return of a management
fees.
9
Tax benefits available by investing in mutual funds
From April 1, 2003 onwards, all dividends, declared by the debt-oriented mutual funds
(mutual funds with less than 50% of assets in equities), are tax-free in hands of the
investor.
The mutual fund has to pay a dividend distribution tax of 12.5% (that includes
surcharge on the dividends declared by the fund. Long-term debt funds, monthly
income plans (MIPs), government securities funds (G-sec/gilt funds), are some
examples of debt-oriented funds.
Dividends that are declared by equity-oriented funds (mutual funds with more than
50% investment of assets in equities) are tax-free in the hands of investor. Also, no
dividend distribution tax is applicable on these funds u/s 115R. Sector funds, balanced
funds and diversified equity funds, are examples of equity-oriented funds.
The amount invested in tax-saving funds such as Equity linked savings schemes
(ELSS) is eligible for deduction u/s 80C; but the aggregate amount deductible under
this section cannot exceed Rs 100,000.
10
Mutual Fund Scheme by Structure
• Open-end Funds:
An open-end fund is one that is available for subscription all through the year.
These do not have a fixed maturity. Investors can conveniently buy and sell
units at Net Asset Value (''NAV'') related prices. The key feature of open-end
schemes is liquidity.
• Closed-end Funds:
• Interval Funds:
11
Mutual Fund Scheme by Investment Objective
• Growth Funds:
The aim of growth funds is to provide capital appreciation over the medium to
long term. Such schemes normally invest a majority of their corpus in equities.
It has been proved that returns from stocks, have outperformed most other kind
of investments held over the long term. Growth schemes are ideal for investors
having a long term outlook seeking growth over a period of time.
• Income Funds:
The aim of income funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds,
corporate debentures and Government securities. Income Funds are ideal for
capital stability and regular income.
• Balanced Funds:
The aim of balanced funds is to provide both growth and regular income. Such
schemes periodically distribute a part of their earning and invest both in
equities and fixed income securities in the proportion indicated in their offer
documents. In a rising stock market, the NAV of these schemes may not
normally keep pace, or fall equally when the market falls. These are ideal for
investors looking for a combination of income and moderate growth.
12
Other Schemes:
These schemes offer tax rebates to the investors under specific provisions of the Indian
Income Tax laws as the Government offers tax incentives for investment in specified
avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension
Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also
provides opportunities to investors to save capital gains u/s 54EA and 54EB by
investing in Mutual Funds.
Special Schemes
• Professional Management:
13
• Diversification:
The best mutual funds design their portfolios so individual investments will
react differently to the same economic conditions. For example, economic
conditions like a rise in interest rates may cause certain securities in a
diversified portfolio to decrease in value. Other securities in the portfolio will
respond to the same economic conditions by increasing in value. When a
portfolio is balanced in this way, the value of the overall portfolio should
gradually increase over time, even if some securities lose value.
• Convenient Administration:
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with brokers
and companies. Mutual Funds save your time and make investing easy and
convenient.
• Potential Return:
Mutual Funds have the potential to provide a higher return to an investor than
any other option over a reasonable period of time.
• Liquidity:
In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the Mutual Fund. In closed-end schemes, the units
can be sold on a stock exchange at the prevailing market price or the investor
can avail of the facility of direct repurchase at NAV related prices by the
Mutual Fund.
• Low Costs:
Mutual fund expenses are often no more than 1.5 percent of your investment.
Expenses for Index Funds are less than that, because index funds are not
actively managed. Instead, they automatically buy stock in companies that are
listed on a specific index.
14
• Flexibility:
• Affordability:
Small investors with low investment fund are unable to high-grade or blue chip
stocks. An investor through Mutual Funds can be benefited from a portfolio
including of high priced stock.
• Transparency:
• Well regulated:
All Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors.
The operations of Mutual Funds are regularly monitored by SEBI.
15
Disadvantages
Changing market conditions can create fluctuations in the value of a mutual fund
investment. There are fees and expenses associated with investing in mutual funds that
do not usually occur when purchasing individual securities directly.
As with any type of investment, there are drawbacks associated with mutual funds.
16
LIFE INSURANCE
Life insurance is a contract between the policy owner and the insurer, where the
insurer agrees to pay a sum of money upon the occurrence of the insured
individual's or individuals' death.
In return, the policy owner (or policy payer) agrees to pay a stipulated amount called
a premium at regular intervals or in lump sums (so-called "paid up" insurance). There
may be designs in some countries where: (Assets, Bills, and death expenses plus
catering for after funeral expenses should be included in Policy Premium. Anyone
whose assets equal more than the value of their primary residence should not be
compensated beyond that value in case they cannot sell their house.
As with most insurance policies, life insurance is a contract between the insurer and
the policy owner (policyholder) whereby a benefit is paid to the designated
Beneficiary (or Beneficiaries) if an insured event occurs which is covered by the
policy. To be a life policy the insured event must be based upon life (or lives) of the
people named in the policy. Insured events that may be covered include:
• death
• accidental death
• sickness
17
Life Insurance in India
Life insurance made its debut in India well over 100 years ago. Its salient features are
not as widely understood in our country as they ought to be. What follows is an
attempt to acquaint readers with some of the concepts of life insurance, with special
reference to life insurance. It should, however, be clearly understood that the
following narration is by no means an exhaustive description of the terms and
conditions of a life insurance policy or its benefits or privileges. For more details,
please contact our Branch or Divisional Office. Any life insurance Agent will be glad
to help you choose the life insurance plan to meet your needs and render policy
servicing.
Life Insurance sector is the fastest growing sector in India since 2000 when the
Government allowed Private players and FDI [Foreign Direct Investment] up to 26%.
Life Insurance in India was nationalized by incorporating Life Insurance Corporation
(LIC) in 1956. All private life insurance companies at that time were taken over by
LIC.
In 2000, the legislation amending the Insurance Act of 1938 and legislating the
Insurance Regulatory and Development Authority Act of 2000 was passed, where in
the newly appointed insurance regulator - Insurance Regulatory and Development
Authority [IRDA] started to issue licenses to private life insurers.
18
1) Nomination: -
When one makes a nomination, as the policyholder you continue to be the owner of
the policy and the nominee does not have any right under the policy so long as you are
alive. The nominee has only the right to receive the policy monies in case of your
death within the term of the policy.
2) Assignment: -
If your intention is that your policy monies should go only to a particular person, you
need to assign the policy in favor of that person.
3) Death Benefit: -
The primary feature of a life insurance policy is the death benefit it provides.
Permanent policies provide a death benefit that is guaranteed for the life of the
insured, provided the premiums have been paid and the policy has not been
surrendered.
4) Cash Value: -
The cash value of a permanent life insurance policy is accumulated throughout the life
of the policy. It equals the amount a policy owner would receive, after any applicable
surrender charges, if the policy were surrendered before the insured's death.
5) Dividends: -
Many life insurance companies issue life insurance policies that entitle the policy
owner to share in the company's divisible surplus.
6) Paid-Up Additions: -
Dividends paid to a policy owner of a participating policy can be used in numerous
ways, one of which is toward the purchase of additional coverage, called paid-up
additions.
7) Policy Loans: -
19
Some life insurance policies allow a policy owner to apply for a loan against the value
of their policy. Either a fixed or variable rate of interest is charged. This feature allows
the policy owner an easily accessible loan in times of need or opportunity.
20
BENEFITS OF LIFE INSURANCE OVER OTHER FINANCIAL
INSTRUMENTS:
• Protection
Savings through life insurance guarantee full protection against risk of death of
the saver. Also, in case of demise, life insurance assures payment of the entire
amount assured (with bonuses wherever applicable) whereas in other savings
schemes, only the amount saved (with interest) is payable.
• Aid to threat
Life insurance encourages 'thrift'. It allows long-term savings since payments
can be made effortlessly because of the 'easy installment' facility built into the
scheme. (Premium payment for insurance is either monthly, quarterly, half
yearly or yearly).
• Liquidity:
In case of insurance, it is easy to acquire loans on the sole security of any
policy that has acquired loan value. Besides, a life insurance policy is also
generally accepted as security, even for a commercial loan.
• Tax Relief:
Life Insurance is the best way to enjoy tax deductions on income tax and
wealth tax. This is available for amounts paid by way of premium for life
insurance subject to income tax rates in force.
Assesses can also avail of provisions in the law for tax relief. In such cases the
assured in effect pays a lower premium for insurance than otherwise.
21
1.2OBJECTIVES
Primary Objective:
Sub-Objectives:
22
1.3 SCOPE OF THE STUDY
RLI Ltd is going through an expansion process under which a lot of new branches are
being introduced across the country. A lot of research work is also going on side by
side at various levels to provide a feed back for the formulation of new policies as well
evaluate the achievements. The present research project is also a part of this research
to see how successful are the efforts which are made by the company to make RLI Ltd
popular among the Mass. This study focuses on the analytical comparison of mutual
fund and life insurance instruments offered by Reliance to draw conclusions about the
performance of life insurance as compared to mutual fund instruments.
23
Chapter-2
LITERATURE REVIEW
24
Sahadevan and Thiripalraju, in their research paper titled “Mutual Funds - Data
Interpretations And Analysis” (1997), analyzed the performance of private sector
funds they compiled and analyzed the monthly average return and standard deviation
of 10-selected private sector funds. The investigation reveals that in terms of the rate
of return, 5 funds viz., Alliance 95, ICICI Power, Kothari Prima, Kothari Pioneer Blue
Chip and Morgan Stanley Growth Fund outperformed the market, during the period of
comparison. The analysis also shows that, by and large, performance of a fund is not
closely associated with its size.
Gupta & Sehgal, in their research paper “Investment Performance of Mutual Funds:
The Indian Experience” (1998), tried to find out the investment performance of 80
schemes managed by 25 mutual funds, 15 in private sector and 10 in public sector for
the time period of June 1992-1996. The study has examined the performance in terms
of fund diversification and consistency of performance. The paper concludes that
mutual fund industry’s portfolio diversification has performed well. But it supported
the consistency of performance.
Turan and Bodla, in the paper “Performance Appraisal of Mutual funds” (2001)
examined the growth of mutual funds in India in terms of resource mobilization,
promotion of various types of schemes and NAV based risk and return. The study
reveals that mutual fund industry has registered a sharp rise in term of resource
mobilization during the period 1990-1991 to 1997- 1998.
Matthew and Hrishikesh, in their paper named “Estimation Risk in Mutual Fund
Ratings: The Case of Morningstar” (May 17, 2001) examined estimation risk in the
well-known Morningstar mutual fund star rating system. As a result, investors can be
somewhat less confident that the ratings of young funds are truly what they are
estimated to be.
25
among the various factors, psychological and sociological factors dominated the
economic factors in share investment decisions.
Sujit Sikidar and Amrit Pal Singh (1996) carried out a survey with an objective
to understand the behavioural aspects of the investors of the North Eastern region
towards equity and mutual funds investment portfolio. The survey revealed that the
salaried and self employed formed the major investors in mutural fund primarily due
to tax concessions. UTI and SBI schemes were popular in that part of the country then
and other funds had not proved to be a big hit during the time when survey was done.
26
Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd.of the
Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of India’s leading
private sector financial services companies, and ranks among the top 3 private sector
financial services and banking companies, in terms of net worth. Reliance Capital has
interests in asset management and mutual funds, stock broking, life and general
insurance, proprietary investments, private equity and other activities in financial
services.Reliance Capital Limited (RCL) is a Non-Banking Financial Company
(NBFC) registered with the Reserve Bank of India under section 45-IA of the Reserve
Bank of India Act, 1934. Reliance Capital sees immense potential in the rapidly
growing financial services sector in India and aims to become a dominant player in
this industry and offer fully integrated financial services. Reliance Life Insurance is
another steps forward for Reliance Capital Limited to offer need based Life Insurance
solutions to individuals and Corporate.
27
HISTORY
28
Reliance Capital Limited announced the launch of its life insurance business on
February 1, 2006. This was after obtaining the required regulatory approvals from the
Registrar Of Companies and the Insurance Regulatory and Development Authority.
It was in August 2005 that the ball was set rolling when Reliance Capital Limited, the
financial arm of Reliance – Anil Dhirubhai Ambani Group (ADAG) – announced the
requisition of 100% shareholding in AMP anmar Life Insurance Company Limited;
and the formal transfer of shares took place in October 2005. The company will issue
all policy contracts under the Reliance Life Insurance Company limited name. All the
existing policy contracts also stand transferred to the Reliance Life Insurance entity
with all the original contractual terms and commitments intact.
JOURNEY SO FAR
�2005
August: Anil Dhirubhai Ambani Group (ADAG) announces the acquisition of 100
percent shareholding in AMP Sanmar Life Insurance Co Ltd.
� 2006
January 17: Mr. Nandgopal participates in a one-day conference on ‘Optimising
growth opportunities through Distribution Matrix: ‘Emerging Bancassurance’
organized by the Asia Insurance Post at the Taj President, Mumbai.
February 1: Rliance Life Insurance officially launched.
February 16, 17, 18: Strategy meet at the Reliance Management Institute. Amongst
those who participate are the CEO, COO, Functional Heads, Regional Managers and
Regional Sales Managers.
February 26: A Puja held at the Churchgate office situated in Express Building, 4th
Floor, 14 ‘E’ Road, Mumbai.
March 1: Churchgate office inaugurated by Mr. Amitabh Jhunjhunwala, Mr. Amitabh
Chaturvedi and Mr. Nandgopal.
March 6: Shifting to the new premises at Churchgate commences.
March 7: The new office at Chennai, at the Trapezium, First Floor, # 39, Nelson
Manickam Road, inaugurated by their CEO Mr. Nandgopal, Mr. KV Srinivasan and
Mr. Sureshbabu also graced the occasion.
29
MISSION
The mission of Reliance Life Insurance Company Limited is to be the best in every
sphere- business results, customer care and employee focus. The aim of the company
is to Think Bigger and Think Better.
CORE VALUES
Reliance Life Insurance Company Limited has some core values which are listed as
follows:
1) Result Oriented
2) Performance Driven
3) Customer Focused
5) Employee Centric
30
MARKET SHARE OF RIL Ltd IN INSURANCE SECTOR
LIC 79
SBI 4
ICICI 6
BIRLA 2
RLI 3
BHRT I AXA 2
OTHE RS 6
MARKET SHARES
LIC
SBI
ICICI
BIRLA
RLI
BH AXA
OTHERS
31
Achievements
• 3rd largest private player in a span of just 4 years, moved from 11th position
to 3rd
• RLIC has achieved a growth rate of 21% while the private industry has grown
at 13%
• The Company has also won the DL Shah Quality Council of India
Commendation Award in the services category in feb 2008 for its work on
promoting 'self help channels for service'
32
PRODUCT MIX
Protection Plans
In today’s uncertain world, there could be calamity at every step of the life. It is up to
you to ensure that your family stays protected always. Reliance Protection Plans helps
you do exactly the same. You have a wide range of options to choose a plan from.
Right from limited period plans to lifetime protection plans, you can opt for the one
that suits your lifestyle. While we understand that nothing can compensate for the loss
of a life, we intend to provide you the peace of mind. Investing in Reliance Protection
Plans would mean your family’s future is in safe hands.
33
had paid for your basic policy. The Reliance Special Term Plan offers that and much
more.
In life, you have always given your family whatever they have wanted. Yet, there are
some promises you have to fulfill, such as taking your family for a vacation, or buying
that dream house.
Set aside some money to achieve these specific goals with the help of Reliance
Savings & Investment Plans. The plan allows you to experience the joys of life and
provide for your family’s needs.
FUTURE PLANS
34
• Forty-four new branches to be opened across the country in the coming
months; and a pan India presence with 162 branches in the coming year.
35
:Strengths of RIL Ltd
Threats
36
Chapter-3
RESEARCH METHODOLOGY
37
3.1 RESEARCH METHODOLOGY
Project is based on secondary data. Project is mainly focused on the detail study of
.the Financial Instruments
Data collection:
Data has been largely collected from secondary sources like – websites of Reliance
mutual fund, Reliance life insurance, Reliance money, annual reports, business
newspapers, and financial text etc.
Data Analysis: The data collected from various sources is edited, tabulated and
analyzed using various techniques like beta, sharpe ratio, standard deviation, trenyor
.ratio and Jensen Measure using MS EXCEL
38
TOOLS USED FOR ANALYSIS
Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above
risk free rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and systematic
risk associated with it (beta). Symbolically, it can be represented as:
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is 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 of a fund, a low and
negative Treynor's Index is an indication of unfavorable performance.
In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which
is a ratio of returns generated by the fund over and above risk free rate of return and
the total risk associated with it. According to Sharpe, it is the total risk of the fund that
the investors are concerned about. So, the model evaluates funds on the basis of
reward per unit of total risk. Symbolically, it can be written as:
While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of
a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.
39
Comparison of Sharpe and Treynor
Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well-diversified portfolios. On the other
hand, the systematic risk is the relevant measure of risk when we are evaluating less
than fully diversified portfolios or individual stocks. For a well-diversified portfolio
the total risk is equal to systematic risk. Rankings based on total risk (Sharpe measure)
and systematic risk (Treynor measure) should be identical for a well-diversified
portfolio, as the total risk is reduced to systematic risk. Therefore, a poorly diversified
fund that ranks higher on Treynor measure, compared with another fund that is highly
diversified, will rank lower on Sharpe Measure.
Jenson Model
Jenson's model proposes another risk adjusted performance measure. This measure
was developed by Michael Jenson and is sometimes referred to as the Differential
Return Method. This measure involves evaluation of the returns that the fund has
generated vs. the returns actually expected out of the fund given the level of its
systematic risk. The surplus between the two returns is called Alpha, which measures
the performance of a fund compared with the actual returns over the period. Required
return of a fund at a given level of risk (Bi) can be calculated as:
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it,
alpha can be obtained by subtracting required return from the actual return of the fund.
Higher alpha represents superior performance of the fund and vice versa. Limitation of
this model is that it considers only systematic risk not the entire risk associated with
the fund and an ordinary investor can not mitigate unsystematic risk, as his knowledge
of market is primitive.
40
CHAPTER: 4
DATA INTERPRETATION &
ANALYSIS
41
This Chapter includes Data analysis and data
interpretation.
Reliance Vision Fund was launched in October 1995, with an objective to achieve
long term growth of capital. One of the flagship schemes of Reliance Mutual Fund,
Reliance Vision Fund focuses on companies with Large size capitalization with a
small exposure to companies with a Mid size capitalization.
Table-1
42
Absolute Returns for each financial year for the last 5 years
Table-2
Performance as on 30/07/2010
Absolute Compound Annualized
6 months 1 Year 3 Years 5 Years Since Inception
Reliance Vision Fund - Retail Plan - Growth 18.63 25.65 8.26 21.17 25.44
BSE100 14.09 19.00 5.81 18.39 13.28
43
Volatility Measures
Beta 0.8515
Standard Deviation 4.2691
Sharpe Ratio 0.0411
Portfolio Turnover Ratio 1.53
INTERPRETATION:
• The returns of reliance vision fund were decent upto s years of its inception.
The returns of this fund raised substantially during 2001-2002 to 26%(approx).
• Returns of the fund are more than the benchmark return.performance of the
fund i.e its annualised compounded since its inception is 25%.
• The fund is not very risky, the volatality of the fund to market condition is
0.85%.
44
The primary investment objective of the Scheme is to achieve long-term growth of
capital by investment in equity and equity related securities through a research based
investment approach.
Asset Allocation:
Table-3
Indicative asset
Instrument allocation Risk Profile
(% of total assets)
Maximum Minimum
Equity and Equity related Instruments 100% 65% High
Debt Instruments & Money Market 35% 0% Medium to Low
Instruments
45
Performance of the scheme
Performance as on 30/06/2010
Absolute Compound Annualized
6 months 1 Year 3 Years 5 Years Since Inception
Reliance Growth Fund - Retail Plan - Growth 16.11 29.54 13.53 23.92 29.99
BSE100 14.09 19.00 5.81 18.39 13.28
SCHEME RETURN
Table-5
46
Returns for the last 1 30.20 17.05
year
Returns for the last 3 15.16 7.00
years
Returns for the last 5 23.23 18.12
years
Returns since inception 29.59 12.61
(October 8, 1995)
Absolute Returns for each financial year for the last 5 years
Table-6
RELIANCE
GROWTH FUND BSE100
FY05-06 92.28 69.57
FY06-07 12.96 11.57
FY07-08 28.59 24.98
FY08-09 -37.97 -39.97
FY09-10 112.06 88.17
47
Table-7
Volatility Measures
Beta 0.7666
Standard Deviation 3.8432
Sharpe Ratio 0.0268
Portfolio Turnover Ratio 1.53
INTERPRETATION:
• The returns of reliance vision fund were decent upto 5 years of its inception.
The returns of this fund raised substantially during 2001-2002 to 30%(approx).
• Returns of the fund are more than the benchmark return. Performance of the
fund i.e its annualised compounded since its inception is 25%.
• The fund is not very risky, the volatality of the fund to market condition is
0.76%.
48
Minimum Application Amount
Retail Plan : Rs. 5000 and in multiples of Re. 1 thereafter
Asset Allocation
Table-8
Indicative asset
Instrument allocation Risk Profile
(% of total assets)
Maximum Minimum
Equity and Equity Related Instruments 100% 75% Medium to
High
Debt and Money Market Instruments up to 25% Low to
(including investments in Securitized Debt) Medium
SCHEME PERFORMANCE
Table-9
Compounded Annualized Scheme Returns % Benchmark Returns %
Returns as on JUNE 31 2010
Returns for the last 1 year 7.23 15.88
Returns for the last 3 years 4.68 6.56
Returns for the last 5 years NA NA
Returns since inception ( 30 9.32 10.89
March2006)
Absolute Returns for each financial year for the last 5 years
Table-10
49
FUND(%)
FY05-06 0.1 -0.48
FY06-07 8.66 12.31
FY07-08 20.29 23.89
FY08-09 -30.06 -36.19
FY09-10 59.63 73.76
Table-11
Performance
Absolute Compound Annualized
Since
6 months 1 Year 3 Year 5 Years Inception
Reliance Equity Fund - Retail 4.54 2.61 N.A 10.06
Plan - Growth 5.24
S & P CNX Nifty 14.58 18.61 6.27 N.A 13
Table-12
Volatility Measures
Beta 0.9046
50
Standard Deviation 4.4757
Sharpe Ratio 0.0412
Portfolio Turnover Ratio 0.84
INTERPRETATION:
• The returns of reliance vision fund were low calculated since its inception.
The returns of this fund raised substantially during 2001-2002 to 9.32%
(approx).
• Returns of the fund are more than the benchmark return. Performance of the
fund i.e its annualised compounded since its inception is 10.06%.
• The fund is slightly risky, the volatality of the fund to market condition is
0.90%.
(An Open-ended Equity Linked Savings Scheme.) The primary objective of the
scheme is to generate long-term capital appreciation from a portfolio that is invested
predominantly in equity and equity related instruments.
ASSET ALLOCATION
Indicative asset
Instrument allocation Risk Profile
(% of total assets)
Maximum Minimum
Equity and Equity related Instruments 1000% 80% High
51
Debt Instruments & Money Market Upto 20% Medium to Low
Instruments
Scheme Features
Type: An Open-ended Equity Linked Savings Scheme.
Investment Objective:
The primary objective of the scheme is to generate long-term capital appreciation from
a portfolio that is invested predominantly in equity and equity related instruments.
Min. Additional Investment: Minimum additional purchases of Rs. 500.
SCHEME PERFORMANCE
TABLE-13
Compounded Annualised Scheme Returns % Benchmark Returns
Returns as on August 31 2010 %
Returns for the last 1 year 38.11 17.05
Returns for the last 3 years 10.92 7.00
Returns for the last 5 years N.A N.A
Returns since inception 16.70 17.43
( September 22 2005)
Absolute Returns for each financial year for the last 5 years
TABLE-14
52
FUND
FY05-06 56.19 34.07
FY06-07 11.57 -0.37
FY07-08 24.98 5.49
FY08-09 -39.97 -30.71
FY09-10 88.17 92.75
Volatility Measures
Beta 0.8407
Standard Deviation 4.3766
R Squared 0.7864
Sharpe Ratio -0.0223
Portfolio Turnover Ratio 2.09
INTERPRETATION:
53
• The returns of reliance vision fund were low calculated during early phases of
its inception. The returns of this fund raised substantially during 2001-2002 to
38.11%(approx).
• Returns of the fund are more than the benchmark return. Performance of the
fund i.e its annualised compounded for FY 2008-09 is 88.17%.
• The fund is slightly risky, the volatality of the fund to market condition is
0.84%.
EQUITY FUND
Fund objective: Provide high real rate of return in the long-term through high
exposure to equity investments, while recognizing that there is significant probability
of negative returns in the short term. The risk appetite is ‘high’.
Asset Allocation
54
Growth of initial investment of Rs. 10,000
Fund Performance
Table-15
Interpretation:
• Return of the fund is 23.36% for last year i.e. FY 2009-10 and the average
return since inception is 22.08
55
• Sharpe ratio was highest in the FY2009-10
ASSET ALLOCATION
Fund characteristics:
YTM of debt portfolio: 6.82%
56
Portfolio
Fund Performance
Table-16
57
Date of Feb 2003
inception
Interpretation:
• Return of the fund is 6.73% for last year i.e. FY 2009-10 and the average
return since inception is 7.04%.
Benchmark Construction
CRISIL Liquid Bond Index: 100%
ASSET ALLOCATION
58
FUND CHARACTERISTICS:
Fund Performance
Table-17
59
last 2 year 8.83% 5.42% 0.54% 0.81% 7.12% 0.52%
(*(CAGR
Interpretation:
• Return of the fund is 7.17% for last year i.e. FY 2009-10 and the average
return since inception is 9.00%
Balanced Fund
Fund Objective: The investment objective of the fund is to provide investment returns
that exceed the rate of inflation in the long -term while maintaining a low probability
of negative returns in the short term. The risk appetite is defined as ‘low to moderate’.
Benchmark construction:
CRISIL ST Bond Index: 80% S&P CNX Nifty: 20%
60
Fund characteristics:
Fund Performance
Table-18
61
(*(CAGR
Date of February
inception 2003
Interpretation:
• Return of the fund is 23.36% for last year i.e. FY 2009-10 and the average
return since inception is 22.08.
62
Chapter-5
FINDINGS
• The volatility of life insurance instruments i.e. the average beta of the
instruments is 0.9 whereas the average beta of mutual fund instruments is 0.85.
Thus the life insurance instruments are more volatile as compared to mutual
fund instruments.
63
instruments. This makes life insurance instruments more risky as compared to
mutual fund instruments.
• The growth rate of mutual funds is quite higher as compared to life insurance
instruments.
CONCLUSION
This study concludes that the life insurance instruments are more volatile to market
conditions as compared to mutual funds. Mutual fund instruments of Reliance mutual
fund offer a high rate of return as compared Reliance life insurance instruments and
the growth rate is high in mutual fund. Reliance life insurance instruments are more
risky when compared to reliance mutual fund instruments. Thus as an investment
option Reliance mutual fund instruments are more attractive.
64
RECOMMENDATION
Large segment of Indian consumer market is unaware of the investment options like
mutual funds and ULIP plans so company need to operate a advertising campaign or
promotion activities to increase awareness about investments.
Company need to give higher quality of services and satisfaction to the customer for
having higher market share and growth.
65
The rural and lower middle class population of India still believes in traditional
patrons of investments. So it gives them fewer returns at higher risk so to change the
mind of large potential consumer market bank should plane something solid steps.
66
67
Chapter-6
Bibliography
BIBLIOGRAPHY
BOOKS:
68
• Sundaran Shanka, Indian Mutual Funds, 2008
• Amitabh Gupta, Mutual Funds in India, Anmol Pub.,2008
• Sahadevan, K.G. and Thiripalraju (2007), “Mutual Funds - Data Interpretations
And Analysis”, Prentice Hall of India Private Limited, New Delhi, 20077).
• Gupta O.P. and Sehgal Sanjay (2006), “Investment Performance of Mutual
Funds: The Indian Experience”, ICFAI Journal of Applied Finance, Vol. No 2.
WEBSITES:
• www.reliancelife.com
• www.capitalmarket.com
• www.indobase.com/markets
• www.wikipedia.com
• www.business-standard.com
• www.sebi.gov.in
• www.reliancecapital.com
• www.indiainfoline.com
• www.bimaonline.com
ANNEXURES
69
31/05/20
08 10.8702 30/11/2009 12.5756
31/07/20
08 10.7825 31/12/2009 12.6054
30/08/20
08 10.8469 1/1/2010 12.6161
30/09/20
08 10.9057 31/01/2010 12.7035
31/10/20
08 10.9276 1/2/2010 12.7034
4/5/2009 12.1243 28/02/2010 12.6953
29/05/20
09 12.0586 2/3/2010 12.6833
31/05/20
09 12.0636 31/03/2010 12.8166
1/6/2009 12.0661 1/4/2010 12.8189
30/06/20
09 12.2325 30/04/2010 12.9906
1/7/2009 12.2527 3/5/2010 12.989
2/7/2009 12.2732 31/05/2010 13.0379
30/06/20
10 13.1136 1/6/2010 13.0333
70