Final Project of Nitish

8/3/2019 Final Project of Nitish

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A

SUMMER TRAINING PROJECT REPORT

REPORTON

RELIANCE MUTUAL FUND

Submitted

To

Kurukshetra University, Kurukshetra

In the

Partial fulfillment of the requirement for the degree

Of

MASTERS OF BUSINESS ADMINISTRATIONSESSION (2009-2011)

SUBMITTED TO: - SUBMITTED BY:-KURUKSHETRA UNIVERSITY, NITISH BHARDWAJ

KURUKSHETRA M.B.A 3rd

SEM.

College Roll No. 1014

University Roll No.-

KARNAL INSTITUTE OF TECHNOLOGY & MANAGEMENT, KARNAL(Approved by AICTE, Affiliated to Kurukshetra University, Kurukshetra)


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ACKNOWLEDGEMENT

It is my pleasure to be indebted to various people, who directly or

indirectly contributed in the development of this work and who influenced my

thinking, behavior, and acts during the course of study.

I express my sincere gratitude to Dr. R.B. Sangwan, worthy Principal

for providing me an opportunity to undergo Summer Training Project Report onreliance mutual fund

I am thankful to Mr. sanjeev chouhanfor his support, cooperation, andmotivation provided to me during the training for constant inspiration, presence and

blessings.

I also extend my sincere appreciation to Miss Vidhi bansal who

provided his valuable suggestions and precious time in accomplishing my project

report.

Lastly, I would like to thank the almighty and my parents for their moral

support and my friends with whom I shared my day-to-day experience and received

lots of suggestions that improved my quality of work.

NITISH BHARDWAJ


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DECLARATION

I, Nitish Bhardwaj, student of MBA IIIrd Semester, studying at Karnal Institute of

Technology and Management, Karnal, hereby declare that the Research Report on

RELIANCE MUTUAL FUND submitted to Kurukshetra University, Kurkshetra inpartial fulfillment of Degree of Masters of Business Administration is the original work

conducted by me.

The information and data given in the report is authentic to the best of my

knowledge.

This summer training report is not being submitted to any other University for award of

any other Degree, Diploma and Fellowship.

NITISH BHARDWAJ

PREFACE


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With the regards of my extreme good luck I got an opportunity to work with the one

of the most reputed organization, where I came to know the vitality of savings and its

proper management by investing it in various ways to yield maximum return. In a

developing country like India, where the largest sector is composed of the middle

class, savings act as foundation for the economical support and a financial-crisis-

proof system. Thus studying the various modes and methods of utilizing that savingsso as to gain maximum return is quite nice field to get trained as a management

trainee. Thats why during my training, a comparative study of different methods of

long term investment viz fixed deposits, recurring deposits, long term investment in

shares and bonds and mutual funds, not only captured my attention but also made

me curious about the reliances New Fund Offer (NFO) that is Reliance

Infrastructure Fund.

This study would not only help me as a management student to gain a deep insight of

how an organization works but also to put practical usage of all the management

techniques that I have learnt. This project would also help me analyze the difference

between the organizational realities and the theories that have been taught in my

academic sessions and also gave me a real experience of the corporate world and letme better understand how it function. If the analysis of the report and the

recommendation made by me would be practically feasible to be put to test in real life

situations & this endeavor of mine is able to satisfy all those concerned and proves

useful to anyone, I shall consider all my hard work worthwhile.

CONTENTS


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1. Mutual funds

2. Objective

3. Fixed deposits

4. Recurring deposits5. Shares

6. Bonds

7. Post office deposits

8. Systematic investment plan

9. Reliance mutual fund

10. Reliance infrastructure fund

11. Conclusion

12. Suggestion

13. Bibliography


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CHAPTER-1

INTRODUCTION


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Executive Summary

The entire report is an unforgettable journey of support, knowledge,

experience, dedication, perfection, and patience. For me it is all about to

understand a customer and market of mutual fund industry.

The report is specially oriented to particular area, though it is representing the

strong base of Investment management-which covers different investment

avenues, their handling contribution, strategy, portfolios, and related risk

factors. Mutual funds- how they are formed, history, scenario, types, trends,

myths, distribution, advantages, and even disadvantages of them.

Tips to effectively sell the mutual funds, to be effective agent, some do s and

donts about mutual funds while investing. Company details and its progress

and its interpretation base for analysis, conclusion, findings, and

questionnaire, which helped a lot in consumer, survey analysis. Asset

allocation, accounting, taxation, valuation and necessary information for

generating base for conclusion. And at last but not the least the collected data

from city and their interpretation.

In short all efforts which was made to make this report explains

WORK IS WORSHIP


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THE COMPANY PROFILE

Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Average

Assets Under Management (AAUM) of Rs.1,02,730 Cr (AAUM for 31st May 09 )

and an investor base of over 71.30 Lac.

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 118 cities across the country. Reliance Mutual Fund constantly

endeavors 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 Indias leading and fastest growing private sector

financial services companies, and ranks among the top 3 private sector financial

services and banking companies, in terms of net worth. Reliance Capital Ltd. has

interests in asset management, life and general insurance, private equity and

proprietary investments, stock broking and other financial services.

STATUTORY DETAILS:

SPONSOR: Reliance Capital Limited.

TRUSTEE: Reliance Capital Trustee Co. Limited.


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INVESTMENT MANAGER: Reliance Capital Asset Management Limited.

The Sponsor, the Trustee and the Investment Manager are incorporated under the

Companies Act 1956.

GENERAL RISK FACTORS: Mutual Funds and securities investments are

subject to market risks and there is no assurance or guarantee that the objectives of

the Scheme will be achieved. As with any investment in securities, the NAV of the

Units issued under the Scheme can go up or down depending on the factors and

forces affecting the capital markets. Past performance of the Sponsor/AMC/Mutual

Fund is not indicative of the future performance of the Scheme. The Sponsor is not

responsible or liable for any loss resulting from the operation of the Scheme beyond

their initial contribution of Rs.1 lakh towards the setting up of the Mutual Fund and

such other accretions and additions to the corpus. The Mutual Fund is not

guaranteeing or assuring any dividend/ bonus. The Mutual Fund is also not assuring

that it will make periodical dividend/bonus distributions, though it has every

intention of doing so. All dividend/bonus distributions are subject to the availability

of the distributable surplus in the scheme.

From time to time reliance mutual fund has launched various schemes regarding the

best possible deployment of investors money in various high yield fetching plans.

In this series from 1995 to 2009 a wide range of fund offers have been launched,

some of them can be enlisted below-

Reliance Growth Fund- September 1995

Reliance Vision Fund- September 1995

Reliance Banking Fund- May 2003


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Reliance diversified Power Sector Fund- March 2004

Reliance Equity Opportunity Fund- February 2005

Reliance Regular Saving Fund- May 2005

Reliance Tax Saver Fund (ELSS) - July 2005

Reliance Equity Fund- February 2006

Reliance Long Term Equity Fund- November 2006

Reliance Equity Advantage Fund- June 2007

Reliance Natural Resource Fund- Jannuary 2008

Reliance Infrastructure Fund- May 2009 (NFO)

RELIANCE INFRASTRUCTURE FUND

The particulars of the Scheme have been prepared in accordance with the Securities

and Exchange Board of India Regulations 1996,

(I)INVESTMENT OBJECTIVE: The primary investment objective of the

scheme is to generate long term capital appreciation securities by investing

predominantly in equity and equity related instruments of companies engaged in

infrastructure and infrastructure related sectors and which are incorporated or have


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their area of primary activity and the secondary objective is to generate consistent

returns by investing in debt and money market.

(II) LIQUIDITY: The Scheme will offer for Subscription/Switch-in and

Redemption/ Switch-out of Units on every Business Day on an ongoing basis,

commencing not later than 30 days from the closure of New Fund Offer Period.

As per SEBI Regulations, the Mutual Fund shall dispatch redemption proceeds

within 10 Business Days of receiving a valid Redemption request. A penal interest

of 15% or such other rate as may be prescribed by SEBI from time to time, will be

paid in case the redemption proceeds are not made within 10 Business Days of the

date of receipt of a valid redemption request. However, under normal

circumstances, the Mutual Fund will endeavor to dispatch the Redemption cheque

within 3 - 4 Business Days from the acceptance of a valid redemption request.

(III) BENCHMARK:BSE 100

(IV)TRANSPARENCY/NAV DISCLOSURE:

The AMC will calculate and disclose the first NAV not later than 30 days from the

closure of New Fund Offer Period. Subsequently, the NAV will be calculated and

disclosed at the close of every Business Day which shall be published in at least two

daily newspapers and also uploaded on the AMFI site www.amfi india.com and

Reliance Mutual Fund site i.e. www.reliancemutual.com.


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Publication of Abridged Half-yearly Unaudited Financial Results in the

newspapers or as may be prescribed under the Regulations from time to time.

Communication of Portfolio on a half-yearly basis to the Unit holders directly or

through the Publications or as may be prescribed under the Regulations from timeto time.

Dispatch of the Annual Reports of the respective Schemes within the stipulated

period as required under the Regulations.

(V) LOADS:

During the New Fund Offer (NFO) Period & Continuous Offer Period including

SIP Installments

RESEARCH

OBJECTIVE

The primary objective of the research is to find out the general tendency of

investors to invest in different financial products and to invest in Reliance Mutual

fund. Here we also want to know that the investors are aware about Reliance

Infrastructure Fund or not, if yes than what they think about it.


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Here we had just made an effort to tell the investors about the NFO of

Reliance Infrastructure Fund. We had also tried to make them aware about

the features of Infrastructure Fund and the benefits of investing in

Infrastructure sector

.As well as the objective of my project is to compare the different sources of long

term investment that may be bank fixed deposits, recurring deposits, shares, bonds

and mutual fund.

After a comparison I have to decide and reach at the conclusion that which one

among these sources is better for customer, who is knowledgeable and non

knowledgeable for direct investment and investment through mutual funds.

Apart from these the objective of my study and this report has also been reliances

newly launched fund offer, the reliance infrastructure fund. Its constituents, future-

perceptions regarding the performance and also its various pros and cons should be

studied, discussed and formulated thoroughly.

TYPE OF RESEARCH:

The research is descriptive & a bit of exploratory in nature

because the questionnaire carries close ended questions.

The interviewers were also supposed to anticipate the things,

which they had analyzed on the basis of observations.


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SOURCES OF DATA:

The study is survey based and the primary data was collected

through a structured questionnaire and through personal interaction

with respondents.

UNIVERSE & SAMPLE:

UNIVERSE:

Office of the Reliance & near by work area

SAMPLE UNITS:

Sample units chosen for the project is urban .

SAMPLE DESIGN:

Convenience sampling is used.

SAMPLE SIZE:

A sample of 100 respondents was taken for the purpose of the

study mainly consumers of soft drinks.

The technique of convenient sampling was used. Every care

was taken to select the respondents from different regions so as to make

the study fairly representative


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ANALYSIS TECHNIQUE & FORMULAE:

ANALYSIS TECHNIQUE:

Techniques used for data presentation and analyses are:

Tabulation.

Ranking.

Percentage method.

Weighted average.

Column.

THEORETICAL OVERVIEW

MUTUAL FUND CONCEPT

A mutual fund is just the connecting bridge of a financial intermediary that allows a

group of investors to pool their money together with a predetermined investment

objective. The mutual fund will have a fund manager who is responsible for

investing the gathered money in to specific securities(stocks and bonds).when u


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invest in a mutual fund , your buying units or portion of mutual fund and thus on

investing becomes a shareholder or a unit holder of mutual fund.

A mutual fund enables investors to pool their money and place it under professional

investment management. The portfolio manager trades the fund's underlying

securities, realizing a gain or loss, and collects the dividend or interest income. The

investment proceeds are then passed along to the individual investors. There are

more mutual funds than there are individual stocks.

In other words: - A Mutual Fund is a trust that pools the savings of a number of

investors who share a common financial goal. The money thus collected is invested

by the fund manager in different types of securities depending upon the objective of

the scheme. These could range from shares to debentures to money market

instruments. The income earned through these investments and the capital

appreciations realized by the scheme are shared by its unit holders in proportion to

the number of units owned by them. Thus a Mutual Fund is the most suitable

investment for the common man as it offers an opportunity to invest in a diversified,

professionally managed portfolio at a relatively low cost. The small savings of all

the investors are put together to increase the buying power and hire a professional

manager to invest and monitor the money. Each Mutual Fund scheme has a defined

investment objective and strategy.

WHAT IS THE STRUCTURE OF MUTUAL FUND INDUSTRY?

There are many entities involved in a mutual fund. This is what makes it safer than

other investment avenues. Everyone is accountable for their part in the fund

structure.

SPONSOR: is like the promoter of a company.


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ASSET MANAGEMENT COMPANY (AMC): approved by SEBI, it manages

the funds by making investments in various types of instruments and securities.

TRUSTEES: hold the mutual funds property for the benefit of unit holders. They

are an independent authority set up under the aegis of SEBI.

CUSTODIAN: registered with SEBI, it holds the securities of various schemes of

fund in its custody.

TRANSFER AGENTS: also known as Registrars, transfer the units to the unit

holders accounts.

DISTRIBUTORS/AGENTS: sell units on behalf of funds and are generally

appointed by the AMC.

APPLICABLE NAV: Applicable NAV is the Net Asset Value per Unit at the close

of the Business Day on which the application for purchase or redemption/switch is

received at the designated investor service centre and is considered accepted on that

day. An application is considered accepted on that day, subject to it being complete

in all respects and received prior to the cut-off time on that Business Day.

ASSET MANAGEMENT COMPANY / AMC / INVESTMENT MANAGER:

Reliance Capital Asset Management Limited, the Asset Management Company

incorporated under the Companies Act,1956, and authorized by SEBI to act as the

Investment Manager to the Schemes of Reliance Mutual Fund (RMF).

BONUS UNIT: Bonus Unit means and includes, where the context so requires, a

unit issued as fully paid-up bonus unit by capitalizing a part of the amount standing

to the credit of the account of the reserves formed or otherwise in respect of this

scheme.


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BUSINESS DAY: A business day means any day other than Saturday, Sunday or

a day on which The Stock Exchange, Mumbai or National Stock Exchange Limited

or Reserve Bank of India or Banks in Mumbai are closed or a day on which there is

no RBI clearing/settlement of securities or a day on which the sale and/orredemption and /or switches of Units is suspended by the Trustees /AMC or a day

on which normal business could not be transacted due to storms, floods, bands,

strikes or any other events as the AMC may specify from time to time.

CDSC: Contingent Deferred Sales Charge, a charge imposed when the units are

redeemed within the first four years of unit ownership. The SEBI (Mutual Fund)

Regulations, 1996 provides that a CDSC may be charged only for the first four

years after purchase and mandates the maximum amount that can be charged in

each year.

PORTFOLIO: Combined holdings of many kinds of financial securities like

shares, debentures and bonds. The objective is risk diversification and maximization

of gain of group of assets.

CORPUS: The total amount of money that a fund has at any point of time.

LOAD: A load is a one time sales charge paid by an investor while buying or

selling units of a scheme. An entry load is charged at the time of purchase of units

and an exit load is charged at the time of redemption.

CONCEPT OF MUTUAL FUND


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As the above chart tells that when several investors invest their money, this pool is

invested in different securities by fund manager. The returns generates by this

investment.

THE TRADITIONAL AND DISTINGHUISHING CHARACTERISTICS OF

MUTUAL FUND-

Investors purchase mutual fund shares from the fund itself (or through a broker for

the fund), but are not able to purchase the shares from other investors on a

secondary market, such as the New York Stock Exchange or NASDAQ Stock

Market. The price investors pay for mutual fund shares is the funds per share net

asset value (NAV) plus any shareholder fees that the fund imposes at purchase

(such as sales loads).

Mutual fund shares are "redeemable." This means that when mutual fund investors

want to sell their fund shares, they sell them back to the fund (or to a broker acting

for the fund) at their approximate NAV, minus any fees the fund imposes at that

time (such as deferredsales loads or redemption fees).Mutual funds generally sell
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their shares on a continuous basis, although some funds will stop selling when, for

example, they become too large. The investment portfolios of mutual funds

typically are managed by separate entities known as "investment advisers" that are

registered with the SEBI.Mutual funds come in many varieties. For example, there are index funds, stock

funds, bond funds, money market funds, and more. Each of these may have a

different investment objective and strategy and a different investment portfolio.

Different mutual funds may also be subject to different risks, volatility, and fees and

expenses.

All funds charge management fees for operating the fund. Some also charge for

their distribution and service costs, commonly referred to as "12b-1" fees. Some

funds may also impose sales charge or loads when you purchase or sell fund shares.

In this regard, a fund may offer different "classes" of shares in the same portfolio,

with each class having different fees and expenses.

To figure out how the costs of a mutual fund add up over time and to compare the

costs of different mutual funds, you should use the SECs Mutual Fund Cost

Calculator. Some funds may reduce their sales charges depending on the amount

you invest in the fund. At certain thresholds, known as breakpoints, you may

receive increasingly lower sales charges as your investment increases.

Keep in mind that just because a fund had excellent performance last year does not

necessarily mean that it will duplicate that performance. For example, market

conditions can change and this years winning fund might be next years loser. That

is why the SEC requires funds to tell investors that a funds past performance does

not necessarily predict future results. To understand the factors you should consider

before investing in a mutual fund, read Mutual Fund Investing: Look at More Than

a Mutual Fund's Past Performance. In addition, you should carefully read all of a

funds available information, including its prospectus, or profile if it has one, and

most recent shareholder report.
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There are some investment companies, known as exchange-traded funds or ETFs

which are legally classified as open-end companies or UIT. ETF differ from

traditional open-end companies and UIT, because, pursuant to SEC exceptive

orders, shares issued by ETF trade on a secondary market and are only redeemablein very large blocks (blocks of 50,000 shares for example). ETF are not considered

to be, and are not permitted to call themselves, mutual funds.

Mutual funds are subject to SEC registration and regulation, and are subject to

numerous requirements imposed for the protection of investors. Mutual funds are

regulated primarily under the Investment Company Act of 1940 and the rules and

registration forms adopted under that Act. Mutual funds are also subject to the

Securities Act of 1933 and the Securities Exchange Act of 1934.

HOW TO INVEST IN MUTUALFUND-

STEP ONE - IDENTIFY YOUR INVESTMENT NEED

Your financial goals will vary, based on your age, lifestyle, financial independence,

family commitments, and level of income and expenses among many other factors.

Therefore, the first step is to assess your needs. You can begin by defining your

investment objectives and needs, which could be regular income, buying a home or

finance a wedding or educate your children or a combination of all these needs, the

quantum of risk you are willing to take and your cash flow requirements.

STEP TWO - CHOOSE THE RIGHT MUTUAL FUND
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The important thing is to choose the right mutual fund scheme, which suits your

requirements. The offer document of the scheme tells you its objectives and

provides supplementary details like the track record of other schemes managed by

the same Fund Manager. Some factors to evaluate before choosing a particularMutual Fund are the track record of the performance of the fund over the last few

years in relation to the appropriate yardstick and similar funds in the same category.

Other factors could be the portfolio allocation, the dividend yield and the degree of

transparency as reflected in the frequency and quality of their communications.

STEP THREE - SELECT THE IDEAL MIX OF SCHEMES

Investing in just one Mutual Fund scheme may not meet all your investment needs.

You may consider investing in a combination of schemes to achieve your specific

goals. So one should select the proper group of schemes to invest their funds, so

that their savings should give maximum possible returns in minimum possible time.

STEP FOUR - INVEST REGULARLYThe best approach is to invest a fixed amount at specific intervals, say every

month. By investing a fixed sum each month, you buy fewer units when the price is

higher and more units when the price is low, thus bringing down your average cost

per unit. This is called rupee cost averaging and do investors all over the world

follow a disciplined investment strategy. You can also avail the systematic

investment plan facility offered by many open-end funds.


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STEP FIVE - START EARLY

It is desirable to start investing early and stick to a regular investment plan. If you

start now, you will make more than if you wait and invest later. The power of

compounding lets you earn income on income and your money multiplies at a

compounded rate of return.

BRIEF HISTORY OF MUTUAL FUND-

Mutual funds were introduced in India in July 1964 with the establishment of Unit

Trust of India (UTI 1963). The motive behind the establishment of this formal

institution was the desire to increase the propensity of the middle and the lower

groups to save and to invest. UTI came into existence during a period marked by

great political and economic uncertainty in India. With war on the borders and

economic turmoil that depressed the financial market, entrepreneurs were hesitant

to enter capital market. The already existing companies found it difficult to raise

fresh capital, as investors did not respond adequately to new issues. UTI

commenced its operation from July 1964 with a view to encouraging savings and

investment and participation in the income, profits and gains accruing to the

Corporation from the acquisition, holding, management and disposal of securities.

UTI enjoyed 23 years of monopoly in the mutual fund industry. The industry was

one entity Show till 1987 when the monopoly of UTI was broken when SBI and

Can bank Mutual Fund entered into the arena. This was followed by the entry of

others like LIC, GIC etc sponsored by public sector banks. Amendment to the

Banking Regulation Act in 1983, which empowered the RBI to permit the banks to

carry on non-banking business such as leasing, mutual funds etc. under section 6 of

this Act, was a major factor, which helps in ending of this monopoly. Whereas 1986

was the year for the entry of the other public sector mutual find, 1993 was the year


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for entry of other public sector mutual funds. Starting with an asset base of Rs. 0.25

ban in 1964 the industry has grown at a compounded average growth of approx. 26

% to its current size.

A mutual fund is an investment vehicle, which pools the money of many investors.The funds manager uses the money collected to purchase securities such as stocks

and bonds. The securities purchased are referred as to the funds portfolio.

A professional money manager who is called fund manager manages a mutual

funds portfolio. The managers business is to choose securities, which are best,

suited for the portfolio. Investments in securities are spread across a wide cross-

section of industries and sectors and thus the risk is reduced. Diversification reduces

the risk because all stocks may not move in the same direction in the same

proportion at the same time.

TYPES OF MUTUAL FUND

Mutual fund schemes may be classified on the basis of its structure and its

investment objective.

According to Stricter

(a) OPEN-ENDED SCHEME:- An open-ended fund or scheme is one that is

available for subscription and repurchase on a continuous basis. These schemes do

not have a fixed maturity Period. Investors can conveniently buy and sell units at

Net Asset Value (NAV) Related prices, which are declared on a daily basis. The

key feature of open-end Schemes is liquidity.(B) CLOSEENDED SCHEME:- A closeended fund or scheme has a stipulated

maturity period e.g. 5-7 years. The fund is open for subscription only during a

specified period at the time of Launch of the scheme. Investors can invest in the

scheme at the time of the Initial public issue and thereafter they can buy or sell the


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units of the scheme on the stock exchanges where the units are listed. In order to

provide an exit route to the investors, some close-ended funds give an option of

selling back the Units to the mutual fund through periodic repurchase at NAV

related prices. SEBI Regulations stipulate that at least one of the two exit routes isprovided the investor i.e. either repurchase facility or through listing on stock

exchanges. These mutual fund schemes disclose NAV generally on weekly basis.

(C)INTERVAL SCHEME:- Interval funds combine the features of open-ended

and close ended-schemes. They are open for sale or redemption during pre-

determine at NAV related prices.

ACCORDING TO INVESTMENT OBJECTIVE

(A) GROWTH/EQUITY ORIENTED SCHEME:-

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 proven that returns from stocks, have outperformed most other

kind of investment held over the long term. Growth schemes are ideal for investors

having a long-term outlook seeking growth over a period of time.

(B) INCOME/DEBT ORIENTED SCHEME:-

The aim of the income fund is to provide regular and steady income to investors.

Such schemes generally invest in fixed income securities such as bonds, Corporate,

debentures, Government securities and money market instruments. Such funds are

less risky compared to equity schemes. These funds are not affected because of

fluctuation in equity markets. However, opportunities of Capital appreciations are

also limited in such funds. The NAV of such funds are affected because of change

in interest rates in the country. If the interest rates fall, NAV of such funds are likely

to increase in the short run and vice versa. However, long-term investors may not

bother about these fluctuations.


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(C) BALANCED SCHEME:-

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.

(D) MONEY MARKET/ LIQUID SCHEME:-

The aim of money market fund is to provide easy liquidity, preservation of Capital

and moderate income. These schemes are generally invest in short term

Instruments such as treasury bills, certificates of deposits, commercial paper and

Inter bank call money. Return on these schemes may fluctuate depending upon the

Interest rates prevailing in the market. These are ideal for Corporate and Individual

investors as a means to park their surplus funds for shorter periods.

OTHER SCHEMES:-

(A) TAX SAVING SCHEMES:-

These schemes offer tax rebate to the investors under specific provision of the

Indian Income Tax laws as the Government offers tax incentives for investment in

specified avenues. Investment made in Equity Linked Saving Schemes (ELSS) and

Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The

Act also provides opportunities to investors to save capital gains u/s 54EA and

54EB by investing in Mutual Funds, provided the capital asset has been sold prior

to April 1, 2000 and the amount is invested before September 30, 2000.

(B) INDEX SCHEME:-


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Index funds replicate the portfolio of particular index such as the BSE Sensitive

index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the

same weight age comprising of an index. NAVs of such schemes would rise or fall

in accordance with the rise or fall in the index, though not exactly by the samepercentage due to some factors known as tracking error in technical terms.

Necessary disclosures in this regard are made in the offer document of the mutual

fund scheme.

(C) SECTOR SPECIFIC SCHEME:-

These are the funds/ schemes, which invest in the securities of only those sectors or

industries as specified in the offer documents. E.g. Pharmaceuticals, Software, Fast

Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these

funds are dependent on the performance of the respective sectors/ industries. While

these funds may give higher returns, they are more risky compared to diversified

funds.

DIFFERENT PLANS IN MUTUAL INVESTMENT-

GROWTH: Where the income generated by way of capital appreciation stays in

the fund and is reflected by rise in NAV.

BONUS: Where the unit holder receives additional units as bonus when the value

of the fund appreciates.

DIVIDEND PAYOUT: Where the capital appreciation is passed on to the unit

holder by way of dividends.

DIVIDEND REINVESTMENT: Where he dividends are reinvested into the fund

by buying additional units on the request of unit holders.

In addition there are a host of investor-friendly features, which can be given below-

SYSTEMATIC WITHDRAWL PLAN (SWP)- It enables one to withdraw a

fixed amount according to a predetermined frequency that you specify to the fund.


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SYSTEMATIC INVESTMENT PLAN (SIP)- An SIP lets one to invest in parts

instead of one single lump sum amount. All you have to do is to issue post-dated

cheques to the fund, which will be presented to your bank on the specified dates.

Nowadays, SIP come with another convenient feature, an auto debit facility. Theauto debit facility does away with post-dated cheques. The fund debits the money

directly.

SWITCH BETWEEN SCHEMES- A switch between schemes lets one to exit

from one scheme and enter into another scheme without filling in the redemption

request and issuing a cheque.

SYSTEMATIC TRANSFER PLAN (STP)- An STP allows one to transfer a fixed

amount of money from one scheme to the other.

SYSTEMATIC INVESTMENT PLAN

The Systematic Investment Plan (SIP) is a simple and time honored investment

strategy for accumulation of wealth in a disciplined manner over long term period.

The plan aims at a better future for its investors as an SIP investor gets good rate of

returns compared to a one time investor.

WHAT IS SYSTEMATIC INVESTMENT PLAN?


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A specific amount should be invested for a continuous period at regular

intervals under this plan.

SIP is similar to a regular saving scheme like a recurring deposit. It is a

method of investing a fixed sum regularly in a mutual fund. SIP allows the investor to buy units on a given date every month. The

investor decides the amount and also the mutual fund scheme.

While the investor's investment remains the same, more number of units can

be bought in a declining market and less number of units in a rising market.

The investor automatically participates in the market swings once the option

for SIP is made.

SIP ensures averaging of rupee cost as consistent investment ensures that average

cost per unit fits in the lower range of average market price. An investor can either

give post dated cheques or ECS instruction and the investment will be made

regularly in the mutual fund desired for the required amount. SIP generally starts at

minimum amounts of Rs.1000/- per month and upper limit for using an ECS is

Rs.25000/- per instruction. For instance, if one wishes to invest Rs.1, 00,000/- per

month, then they need to do it on four different dates.

SIP INVESTORS

It is easy to become a systematic investor. One need to plan the saving effectively

and set aside some amount of money every month for investment purposes in a fund

that is ideally a diversified equity fund or balanced fund. Post dated cheques can be

given to the fund house. The investor is at liberty to exit from the scheme depending

on the market conditions.

BENEFITS OF SYSTEMATIC INVESTMENT PLAN


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POWER OF COMPOUNDING: The power of compounding underlines the

essence of making money work if only invested at an early age. The longer one

delays in investing, the greater the financial burden to meet desired goals. Saving asmall sum of money regularly at an early age makes money work with greater

power of compounding with significant impact on wealth accumulation.

Rupee cost averaging: Timing the market consistency is a difficult task. Rupee

cost averaging is an automatic market timing mechanism that eliminates the need to

time one's investments. Here one need not worry about where share prices or

interest are headed as investment of a regular sum is done at regular intervals; with

fewer units being bought in a declining market and more units in a rising market.

Although SIP does not guarantee profit, it can go a long way in minimizing the

effects of investing in volatile markets.

Convenience: SIP can be operated by simply providing post dated cheques with

the completed enrolment form or give ECS instructions. The cheques can be

banked on the specified dates and the units credited into the investor's account. The

SIP facility is available in the Principal Income Fund, Monthly Income Plan, Child

Benefit Fund, Balanced Fund, Index Fund, Growth Fund, Equity fund and Tax

Savings Fund.

SIP FEATURES: Disciplined investing is vital to earning good returns over alonger time frame. Investors are saved the bother of identifying the ideal entry and

exit points from volatile markets. SIP options such as equity, debt and balanced

schemes offer a range of investment


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plans. While there is no entry load on SIP, investors face an exit load if the units

are redeemed within a stipulated time frame. The success of your SIP hinges on the

performance of your selected scheme.

ADVANTAGES OF MUTUAL FUND-

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.

PROFESSIONAL MANAGEMENT: Most mutual funds pay topflight

professionals to manage their investments. These managers decide what securities

the fund will buy and sell.

REGULATORY OVERSIGHT: Mutual funds are subject to many government

regulations that protect investors from fraud.

LIQUIDITY: It's easy to get your money out of a mutual fund. Write a check,

make a call, and you've got the cash.


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CONVENIENCE: You can usually buy mutual fund shares by mail, phone, or over

the Internet.

LOW COST: 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

Besides above mentioned advantages of the mutual fund some other benefits can be

presented as the following sub-heads

Transparency

Flexibility

Choice of schemes

Tax benefits

Well regulated

Higher risk

Lower return


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DRAWBACKS OF MUTUAL FUNDS-

Equity

Postal Savings

Bank FD

Invest in mutual funds

Higher risk

Higher return

Lower risk

Lower return

Lower risk

Higher return


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NO GUARANTEES: No investment is risk free. If the entire stock market declines

in value, the value of mutual fund shares will go down as well, no matter how

balanced the portfolio. Investors encounter fewer risks when they invest in mutual

funds than when they buy and sell stocks on their own. However, anyone whoinvests through a mutual fund runs the risk of losing money.

FEES AND COMMISSIONS: All funds charge administrative fees to cover their

day-to-day expenses. Some funds also charge sales commissions or "loads" to

compensate brokers, financial consultants, or financial planners. Even if you don't

use a broker or other financial adviser, you will pay a sales commission if you buy

shares in a Load Fund.

TAXES: During a typical year, most actively managed mutual funds sell anywhere

from 20 to 70 percent of the securities in their portfolios. If your fund makes a

profit on its sales, you will pay taxes on the income you receive, even if you

reinvest the money you made.

MANAGEMENT RISK: When you invest in a mutual fund, you depend on the

fund's manager to make the right decisions regarding the fund's portfolio. If the

manager does not perform as well as you had hoped, you might not make as much

money on your investment as you expected. Of course, if you invest in Index Funds,

you forego management risk, because these funds do not employ managers.

MUTUAL FUNDS INVESTMENT VERSUS DIRECT INVESTMENT


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Investors have the option to invest directly through the stock market instead of

investing through mutual funds. However a practical evaluation reveals that mutual

funds are indeed a more recommended option for the individual investors. Here is

the comparison between two options: Identifying stocks that have growth potential is a difficult process involving

detailed research and monitoring of the market. Mutual funds specialize in

this

area and possess the requisite resources to carry out research and continuous

market monitoring.

Another critical element towards successful direct investing is

diversification. A diversified portfolio serves to minimize risk by ensuring

that a downtrend in some securities/security is offset by an upswing in the

others. Clearly diversification requires substantial investment that may be

beyond the means of most individual investors.

Mutual fund pool the resources of many investors and thus have the funds

necessary to build a diversified portfolio, and by investing even a small

amount in a mutual fund, an investor can, though his proportionate share,

reap the benefits of diversification.

Mutual funds specialize in the business of investment management, and

therefore employ professional management for carting out the activities.

Professional management ensures that the best investment avenues are taped

with the aid of comprehensive information and detailed research. It also

ensures that expenses are kept under tight control and market opportunities

are fully utilized. Investors who opts for direct investment loses out on these

benefits.

Mutual funds focus their investment activities based on investment

objectives such as income, growth or tax savings. An investor can choose a

fund that has investment objectives in line with his objectives. Therefore,


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funds provide the investor with a vehicle to attain his objectives in a planned

manner.

Mutual funds offer liquidity through listing on stock exchange (for close end

funds) and repurchase option (for open end schemes). In case of directinvesting, several stacks are often not traded for long periods. While some

closed-end funds may not be traded frequently, they are nevertheless more

liquid than many stocks. In any case, all funds provide one of the two

avenues for liquidity.

Direct investing involves a high level of transaction costs per rupee invested

in form of brokerage, commission, stamp duty etc. while mutual funds

charge a management fee; they succeed in keeping transaction costs under

control because of the scale they enjoy.

In terms of convenience, mutual funds score over direct investing. Funds

serve investors not only through their investors service networks, but also

through associates such as banks and other distributors. Many funds allow

investors the flexibility to switch between schemes within a family of fund.

They also offer facilities such as cheque writing and accumulation plans.

These benefits are not matched by directly equity investing.

The points mentioned above show the advantages of mutual funds over direct

investment in equity.


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CHAPTER-2FIXED DEPOSITE


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OTHER INVESTMENT SERVICES

FIXED DEPOSIT

A fixed deposit is meant for those investors who want to deposit a lump sum of money for

a fixed period; say for a minimum period of 15 days to five years and above, thereby

earning a higher rate of interest in return. Investor gets a lump sum (principal + interest) at

the maturity of the deposit.

Bank fixed deposits are one of the most common savings scheme open to an

average investor. Fixed deposits also give a higher rate of interest than a savings

bank account. The facilities vary from bank to bank. Some of the facilities offered

by banks are overdraft (loan) facility on the amount deposited, premature

withdrawal before maturity period (which involves a loss of interest) etc. Bank

deposits are fairly safer because banks are subject to control of the Reserve Bank of

India.


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FEATURES

Bank deposits are fairly safe because banks are subject to control of the Reserve

Bank of India (RBI) with regard to several policy and operational parameters. The

banks are free to offer varying interests in fixed deposits of different maturities.

Interest is compounded once a quarter, leading to a somewhat higher effective rate.

The minimum deposit amount varies with each bank. It can range from as low as

Rs.100 to an unlimited amount with some banks. Deposits can be made in multiples

of Rs.100/

Before opening a FD account, try to check the rates of interest for different banks

for different periods. It is advisable to keep the amount in five or ten small deposits

instead of making one big deposit. In case of any premature withdrawal of partial

amount, then only one or two deposit need be prematurely enchased. The loss

sustained in interest will, thus, be less than if one big deposit were to be

enchased. Check deposit receipts carefully to see that all particulars

have been properly and accurately filled in. The thing to consider before investing

in an FD is the rate of interest and the inflation rate. A high inflation rate can simply

chip away your real returns.


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RETURNS

The rate of interest for Bank Fixed Deposits varies between 4 and 11 per cent,

depending on the maturity period (duration) of the FD and the amount invested.

Interest rate also varies between each bank. A Bank FD does not provide regular

interest income, but a lump-sum amount on its maturity. Some banks have facility

to pay interest every quarter or every month, but the interest paid may be at a

discounted rate in case of monthly interest. The Interest payable on Fixed Deposit

can also be transferred to Savings Bank or Current Account of the customer. The

deposit period can vary from 15, 30 or 45 days to 3, 6 months, 1 year, 1.5 years to

10 years.

Duration Interest rate (%) per annum

15-30 days 4 -5 %

30-45 days 4.25-5 %

46-90 days 4.75--5.5 %

91-180 days 5.5-6.5 %

181-365 days 5.75-6.5 %

1-2 years 6-8 %

2-3 years 6.25-8

3-5 years 6.75-8


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ADVANTAGES

Bank deposits are the safest investment after Post office savings because all bank

deposits are insured under the Deposit Insurance & Credit Guarantee Scheme of

India. It is possible to get a loan up to75- 90% of the deposit amount from banksagainst fixed deposit receipts. The interest charged will be 2% more than the rate of

interest earned by the deposit. With effect from A.Y. 1998-99, investment on bank

deposits, along with other specified incomes, is exempt from income tax up to a

limit of Rs.12, 000/- under Section 80L. Also, from A.Y. 1993-94, bank deposits

are totally exempt from wealth tax. The 1995 Finance Bill Proposals introduced tax

deduction at source (TDS) on fixed deposits on interest incomes of Rs.5000/- and

above per annum.


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CHAPTER-3

RECURRING DEPOSITE


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RECURRING DEPOSIT

The Recurring deposit in bankis meant for someone who wants to invest a specific

sum of money on a monthly basis for a fixed rate of return. At the end, you will get

the principal sum as well as the interest earned during that period. The scheme, a

systematic way for long term savings, is one of the best investment options for the

low income groups.

FEATURES

The minimum investment of Recurring Deposit varies from bank to bank butusually it begins from Rs100/-. There is no upper limit in investing. The rate of

interest varies between 7 and 11 percent depending on the maturity period and

amount invested. The interest is calculated quarterly or as specified by the

bank. The period of maturity ranging from 6 months to 10 years.

The deposit shall be paid as monthly installments and each subsequent monthly

installment shall be made before the end of thecalendarmonth and shall be equal to

the first deposit. In case of default in payment, a default fee is chargeable for

delayed deposit at the rate of Rs1.50/- for every Rs100/- per month for deposits up

to 5 years and Rs2/- per Rs100/- in case of longer maturities.

Since a recurring deposit offers a fixed rate of return, it cannot guard against

inflation if it is more than the rate of return offered by the bank. Worse, lower the

gap between the interest rate on a recurring deposit and inflation, lower your real

rate of return. Premature withdrawal is also possible but it demands a loss of

interest.
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RETURNS

The rate of interest varies between 7 and 11 percent depending on the maturity

period and amount invested. The interest is calculated quarterly or as specified by

the bank.

ADVANTAGES

Some Nationalized banks are giving more facilities to their customer, State Bank of

Indiagive Free Roaming Recurring Deposit facility to their customers. They can

transfer their account to any branch of SBI free. Tax benefit on the interest earned

on Recurring Deposit up to Rs12000 Tax Deductible at source if the interest paid on

deposit exceeds Rs5000/-per customer, per year, per branch.

Amount invested per month Maturity amount in 2 years

(5%interest)

Rs100 Rs2626

Rs500 Rs13,132

Rs750 Rs19,698

Rs3000 Rs78,792
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CHAPTER-4

SHARES


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SHARES

Shares are also known as equity, issue of shares is the most important source ofrising long term finance. Shares refer to a share in the share capital of a company.

It is one of the units which the share capital of company can be divided. It indicates

the interest in the assets and profits of a company.

According to Justice Farewell, a share is the interest of the shareholder in the

company measured by a sum of money for the purpose of liability and of interest

(dividend).

SHARES ARE OF TWO TYPES:

EQUITY SHARES

Equity shares are those shares which do not carry special or preferential rights in the

payment of annual dividend of repayment of capital; rate of dividend on such shares

is not fixed. Equity shareholders are regarded as the real owners of the company.

PREFERENCE SHARES

Preference shares are those shares which carry certain special of priority rights.

Firstly dividend at fixed rate is payable on these shares before any dividend is paid

on equity shares. Secondly at the time of winding up of the company capital is

repaid to preference shareholders prior to the return of equity capital.


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ADVANTAGES

As far as the purpose of long term investment is concerned, investment in shares

can proved to be a better source of investment as compared to bank fixed deposits

and recurring deposits as it may usually yield 15 to 18 percent return but subjected

to market risk. Any big shock to stock market may cause the big blow to the

invested money.

Apart from all these uphills and downfalls directly investing in share market can

cause some really big advantages to the investors. As compared to investing the

same amount for the same period in FD and RD, investing in shares would surely

yield times better return.

Secondly shareholders are the true owners of a company, thats why major

decisions are taken by them or their representatives. They have all the rights of

owner of the company as well as have claim on the various assets and belongings of

the company. At the time of dissolution of the firm the rights of the preference

shareholders are given priority. Even during the mergers, expansions and

acquisitions the shareholders have major roles to play.


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CHAPTER-5

BONDS


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BONDS

In finance, a bond is a debt security, in which the authorized issuer owes the holders

a debt and depending on the terms of the bond, is obliged to pay interest (the

coupon) and/or to repay the principle at a later date, termed maturity. A bond is a

formal contract to repay borrowed money with interest at fixed intervals.

Thus a bond is like a loan: the issuer is the borrower (debtor), the holder is the

lender (creditor), and the coupon is the interest. Bonds provide the borrower with

external funds to finance long-term investments, or in the case of government

bonds, to finance current expenditure. Certificates of deposit (CDs) or commercial

paper are considered to be money market instruments and not bonds. Bonds must be

repaid at fixed intervals over a period of time.

Bonds and stocks are both securities, but the major difference between the two is

that stockholders have an equity stake in the company (i.e., they are owners),

whereas bondholders have a creditor stake in the company (i.e., they are lenders).

Another difference is that bonds usually have a defined term, or maturity, after

which the bond is redeemed, whereas stocks may be outstanding indefinitely. An

exception is a consol bond, which is a perpetuity (i.e., bond with no maturity).
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INVESTING IN BONDS

Bonds are bought and traded mostly by institutions like pension funds, insurance

companies and banks. Most individuals who want to own bonds do so through bond

funds. Still, in the U.S., nearly 10% of all bonds outstanding are held directly by

households.

Sometimes, bond markets rise (while yields fall) when stock markets fall. More

relevantly, the volatility of bonds (especially short and medium dated bonds) is

lower than that of shares.

Thus bonds are generally viewed as safer investments than stocks, but this

perception is only partially correct. Bonds do suffer from less day-to-day volatility

than stocks, and bonds' interest payments are often higher than the general level of

dividend payments. Bonds are liquid it is fairly easy to sell one's bond

investments, though not nearly as easy as it is to sell stocks and the comparative

certainty of a fixed interest payment twice per year is attractive. Bondholders also

enjoy a measure of legal protection: under the law of most countries, if a company

goes bankrupt, its bondholders will often receive some money back (the recovery

amount), whereas the company's stock often ends up valueless. However, bonds can

also be risky:
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Fixed rate bonds are subject to interest rate risk, meaning that their market

prices will decrease in value when the generally prevailing interest rates rise. Since

the payments are fixed, a decrease in the market price of the bond means an

increase in its yield. When the market interest rate rises, the market price of bondswill fall, reflecting investors' ability to get a higher interest rate on their money

elsewhereperhaps by purchasing a newly issued bond that already features the

newly higher interest rate. Note that this drop in the bond's market price does not

affect the interest payments to the bondholder at all, so long-term investors who

want a specific amount at the maturity date need not worry about price swings in

their bonds and do not suffer from interest rate risk.

Price changes in a bond will also immediately affect mutual funds that hold these

bonds. If the value of the bonds held in a trading portfolio has fallen over the day,

the value of the portfolio will also have fallen. This can be damaging for

professional investors such as banks, insurance companies, pension funds and asset

managers (irrespective of whether the value is immediately "marked to market" or

not). If there is any chance a holder of individual bonds may need to sell his bonds

and "cash out", interest rate risk could become a real problem. (Conversely, bonds'market prices would increase if the prevailing interest rate were to drop, as it did

from 2001

through 2003.) One way to quantify the interest rate risk on a bond is in terms of its

duration. Efforts to control this risk are called immunization or hedging.

Bond prices can become volatile depending on the credit rating of the issuer

- for instance if the credit rating agencies like Standard & Poor's and Moody's

upgrade or downgrade the credit rating of the issuer. A downgrade will cause the

market price of the bond to fall. As with interest rate risk, this risk does not affect

the bond's interest payments (provided the issuer does not actually default), but puts
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at risk the market price, which affects mutual funds holding these bonds, and

holders of individual bonds who may have to sell them.

A company's bondholders may lose much or all their money if the company

goes bankrupt. Under the laws of many countries (including the United States and

Canada), bondholders are in line to receive the proceeds of the sale of the assets of a

liquidated company ahead of some other creditors. Bank lenders, deposit holders (in

the case of a deposit taking institution such as a bank) and trade creditors may take

precedence.

There is no guarantee of how much money will remain to repay bondholders.

As an example, after an accounting scandal and a Chapter 11 bankruptcy at the

giant telecommunications company Worldcom, in 2004 its bondholders ended up

being paid 35.7 cents on the dollar. In a bankruptcy involving reorganization or

recapitalization, as opposed to liquidation, bondholders may end up having the

value of their bonds reduced, often through an exchange for a smaller number of

newly issued bonds.

Some bonds are callable, meaning that even though the company has agreed

to make payments plus interest towards the debt for a certain period of time, the

company can choose to pay off the bond early. This creates reinvestment risk,

meaning the investor is forced to find a new place for his money, and the investor

might not be able to find as good a deal, especially because this usually happens

when interest rates are falling.
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CHAPTER-6

POST OFFICE DEPOSIT


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POST OFFICE DEPOSIT ACCOUNT

Post office time deposit account is just like the bank fixed deposit account. These

time deposits are meant for those investors who want to deposit a lump sum for a

fixed period.

TIME AND AMOUNT OF DEPOSIT

The amount can be deposited for 1year, 2year, 3year, and 5years. The deposited

amount is repayable after expiry of the period for which is of 1 year, 2 years, 3

years or 5 years. One has to deposit minimum amount of Rs200 while there is no

cup on maximum limit.

INTEREST PAID

Interest is calculated on quarterly compounding basis, and is payable annually. Rate

of interest varies according to the period of the deposit and is decided by the Central

Government from time to time. Rate of interest increases with duration of deposit.

Usually it is between 6 to 8%.

INCOME TAX BENEFIT

Tax exemption on Five Years Time Deposit Account can be availed under U/S

80C of the IT Act.

There is no deduction of income tax at source.


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COMPARISON BETWEEN POST OFFICE TIME DEPOSITS AND

BANKS FIXED DEPOSITS

Post office Time Deposits are of 1 year, 2 year, 3 year and 5 year tenures

and the minimum investment is Rs20. Bank fixed deposits have ranging

from 15 days to 10 years and the minimum amount is higher as compared

to post office time deposits.

Postal time deposits can be closed after 6 months but before one year of

opening the account. On such closure, the amount invested is returned

without interest. If a time deposit of more than a year is closed prematurely,

post office will pay interest only for the completed year or years. For

example if a time deposit of 3 years is withdrawn after 30 months, interest

will be paid only for the two full years completed and the depositor will

lose interest for the remaining 8 months. In case of bank FD is closed

prematurely, banks have the discretion to charge penal interest.


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PREMATURE WITHDRAWALS

Premature withdrawals from all types of post office time deposit accounts are

permissible after expiry of 6 months with certain conditions. Principal amountcum accumulated interested is paid only at maturity. If a person withdraws after

six months, amount is returned without interest. On withdraw after one year,

interest is paid, but it is two per cent less.


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CHAPTER-7

RELIANCE MUTUAL

FUND


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Positioning of the FundThe fund belongs to the family of income funds. It is suitable for investors with short to mediumterminvestment horizon of 6 9 months and medium appetite for risk. The fund predominantly investsinvarious debt instruments like Government and Corporate bonds, Securitized Debt, Money MarketInstruments etc and normally maintains a moderate maturity of the portfolio between 1- 2 years.

Positioning based on Risk Profile

How to read the graph? Liquid signifies all liquid funds- Reliance Liquid Fund (Treasury Plan & CashPlan).Reliance Liquidity Fund, RMTF Reliance Medium Term Fund, RMMF Reliance Money ManagerFund, RFRF STP Reliance Floating Rate Fund Short Term Plan, RSTF Reliance Short Term Fund, RDBFRelianceDynamic Bond Fund, RRSF

D

Reliance Regular Savings Fund

Debt Option, RMIP

Reliance

MonthlyIncome Plan, RIF Reliance Income Fund, RGSF Reliance Gilt Securities Fund.


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Duration Risk is the risk undergone by a portfolio based on the forecasts of probable trends ofinterestrates and other macro economic factors and its impact on the funds portfolio and its constituents. Ittypically refers to the sensitivity to the value of a fixed income security/portfolio due to the changesin theinterest rates. Duration is referred to in number of years. The higher the duration number, thegreater theinterest-rate risk for fixed income instruments.Credit Risk is the risk of loss of principal or loss of a financial reward stemming from a borrower'sfailureto repay a loan or otherwise meet a contractual obligation. The higher the perceived credit risk, thehigherthe rate of interest that investors will demand for lending their capital. Therefore, a portfolio withhigherperceived credit risk should typically yield higher returns over an appropriate time frame, everythingelsebeing same.

The placement or position of each fund within the matrix conveys the combination of credit & duration risk

that the fund or portfolio of the fund endeavors to hold. The shaded or the merged areas in the matrix

display a combined duration & credit risk that two funds hold in that zone.

Credit RatingReliance Short Term Fund has been assigned Credit Risk Rating mfAAA by ICRA

LimitedThe rating is valid for a period of 1 year ending August 22, 2011. The rating indicates that the underlyingportfolio of the Scheme has the lowest credit risk and highest degree of safety from credit losses. This

scale applies to debt funds with weighted average maturity up to one year. The rating should not be

construed as an indication of the performance of the Scheme or of volatility in its returns. Past

performance is no guarantee of future results. Please refer to methodology at the end.

Investment PhilosophyReliance Short Term Fund would be run as a low duration product and shall concentrate at the

short to medium end of the yield curve.

As a part of the duration management strategy investments would be optimally allocatedbetweengood rated corporate bonds, active G-Secs, cash and Money market instruments. Duration would

be managed actively by using cash and G-Secs & Corporate issuances in the near term.


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Portfolio & Scheme Features As on 31st March, 2011Asset Allocation as on 31st March, 2011Money Market Instruments 50.88%Floating Rate Instruments 0.00%Corporate Debt 26.33%Securitised Debt/PTC 9.85%Govt. Securities 10.19%

Cash & Other Receivables 2.75%Weighted Average Maturity 659DaysModified Duration 548 DaysBenchmark Crisil Liquid Fund IndexFund Manager Prashant PimpleQuarterly AAUM as on 31st March, 2011 Rs 2864 CrsPortfolio of RELIANCE SHOR


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CHAPTER-8

DATA ANALYSIS

AND

INTERPRETATION


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Q-1 which investment avenues are you aware of?

INVESTMENT AVANUES FREQUENCY PERCENTAGE

EQUITY/MUTUAL FUND 100 34.36%POST OFFICE 94 32.30%

F.D. 86 29.55%

OTHERS 11 3.79%

(Fig no 9: - Define investments avenues)

Interpretation: -

From the above charts we can interpret that awareness of equity/mutual fund, post office

(NSC, KVP, and PPF), fixed deposits is more compare to others like GOVT ISSUEDInstrument, GOVT Backed Instrument, Real Estate, gold etc. so RELIANCE

INFRASTRUCTURE assets Management Company needs to focus more on those

investors who are more invest in KVP, NSC, PPF and fixed deposits.

100

94

86

11

EQUITY/M.F.

POST OFFICE

F.D.

OTHERS


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Q-2 do you invests in mutual fund?

(Fig no 10: - Define investments in mutual fund)

From the above chart it is getting clear that now a days people are like to invest their

money in mutual fund of different assets management company, out of 100 people

sampled 97 are investing in the mutual fund.

3

97

0

20

40

60

80

100

120

YES NO

PREFERNCE

NOO

FPEOPLE

Series1

YES NO

97 3


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Q-3 If yes, in which assets class do you want to invest in

Mutual Fund?

TYPES OF SCHEMES RESPONSE PERCENTAGE

EQUITY 86 72.27%

DEBT 27 22.69%

LIQUID 6 5.04%

(Fig no 11: - Define schemes preferred by investors)

From the above chart it is getting clear that from 100 peoples sample 86(72.27%) people

are invest in equity assets class and 27(22.69%) people choose to invests in debt class but

only just 6(5.04%) peoples choose to invests in liquid class.

RESPONSE

86

27

6

0

20

40

60

80

100

EQUITY DEBT LIQUID

SCHEMES

NOO

FPEOPLE

RESPONSE


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Q-4 Do you invest in RELIANCE INFRASTRUCTURE assets

management company

Limited?

YES NO TOTAL

56 44 100

(Fig no 12: - Define investment in RELIANCE INFRASTRUCTURE assetsManagement Company)

From the above chart it is getting clear that out of 100 people sampled, 56 peoplesare invest in RELIANCE INFRASTRUCTURE assets management company and44 peoples are not invests in RELIANCE INFRASTRUCTURE assets

management company.

56

44

0

10

20

30

40

50

60

YES NO

PREFERNCE

NOO

FPEOPLE

Series1


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Q-5 If yes, in which scheme would you invest in RELIANCE

INFRASTRUCTURE assets

Management company limited?

SCHEMES OF RELIANCEINFRASTRUCTURE

NO OFINVESTOERS

EQUITY FUND 43

CAPITAL BUILDER FUND 2

PRUDENCE FUND 17

TAX SAVER FUND 35

CORE AND SATELITE FUND 3

TOP 200 FUND 16

BALANCED FUND 1

GROWTH FUND 16

OTHERS FUND 5

(Fig no 13: - Define scheme in which investors invest in RELIANCEINFRASTRUCTURE assets Management Company)

From the above chart we can see that in RELIANCE INFRASTRUCTURE assets

Management Companys EQUITY FUND maximum number (43) of people are invest. In

TAX SAVER FUND 35 number of people invests. In both TOP 200 FUND andGROWTH FUND 16 numbers of people are invests but in BALANCED FUND,

CAPITAL BUILDER FUND, CORE AND SATELITE FUND only 1,2 and 3 people are

invest so investors are not invested in these 3 schemes. In PRUDENCE FUND 17 numbersof people are invested.

NO OF INVESTOERS

43

2

1735

3

16

116 5

EQUITY FUND CAPITAL BUILDER FUND

PRUDENCE FUND TAX SAVER FUND

CORE AND SATELITE FUND TOP 200 FUND

BALANCED FUND GROWTH FUND

OTHERS FUND


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Q-6 By which medium you invest in RELIANCE



MEDIUM OF INVESTMENT NO OF PEOPLE

DISTRIBUTOR 8

BANK 48

ONLINE 0

(Fig no 14: - Define mediums choose by investors for invest in RELIANCEINFRASTRUCTURE assets management company)

From the above chart its getting cleared that most of the peoples (48) are invest by bank

and only 8 peoples are invest by distributors. Nobody invests through online. So hereRELIANCE INFRASTRUCTURE assets Management Company has to provide facility by

which investors invest their money with out any middle man in mutual fund schemesthrough online.

Notes: - here out of 100 responds, 44 responds are not invest in RELIANCE

INFRASTRUCTURE assets Management Company. These responds are not considered in

these questions.

8

48

00

5

10

15

20

25

30

35

40

45

50

DISTRIBUTOR ONLINE

MEDIUMS

NO OF PEOPLE

NO OF PEOPLE


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Q-7 why do you prefer investing in RELIANCE



PREFENCE CRITERIA NUMBER

BETTER FUND HOUSE 43

EXCELLENT CUSTOMER SERVICEPROVIDER 15

CONSISTANT RETURN 44

OTHERS 1

(Fig no 15: - Define Preference criteria of investors)

From the above pie - chart it can be seen that majority of the people that is 44 peoples give

first rank to consistent return and 43 peoples invest in RELIANCE INFRASTRUCTUREassets management company because RELIANCE INFRASTRUCTURE assets

management company is a better fund house and 15 peoples believes that RELIANCE

INFRASTRUCTURE assets Management Company provides EXCELLENT CUSTOMER

SERVICE.

NUMBER

43

15

44

1

BETTER FUND

HOUSE

EXCELLENT

CUSTOMER

SERVICE

PROVIDER

CONSISTANT

RETURN


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Q-8 In which type of product /schemes would you prefer while

Invested in equity schemes of RELIANCE

INFRASTRUCTURE assets management

Company limited?

TYPES OF SCHEMES RESPONSE

OPEN ENDED 53

CLOSE ENDED 3

(Fig no 16: - Define type of product /schemes investors prefer forinvestments)

From the above chart it is getting clear that most of peoples (53) prefer to invest in OPEN

ENDED equity schemes and only just 3 peoples want to invest in CLOSE ENDED equity

schemes of RELIANCE INFRASTRUCTURE assets Management Company.

Notes: - here out of 100 responds, 44 responds are not invest in RELIANCE

INFRASTRUCTURE assets Management Company. These responds are not considered in

these questions.

Q-9 do you know about on going new fund offer of RELIANCE

RESPONSE

53

3

0

10

20

30

40

50

60

OPEN ENDED CLOSE ENDED

TYPES OF SCHEMES

NOO

FPEOPLE

RESPONSE


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INFRASTRUCTURE

Assets Management company limited?

AWARENESS OF NFO NUMBER PERCENTAGE

YES 58 58%

NO 42 42%

TOTAL 100 100%

(Fig no 17: - Define awareness level about on going NFO of RELIANCE

CAPITAL assets Management Company.)

The above pie - chart shows that around 58% people aware of on going new fund offer of

RELIANCE CAPITAL assets Management Company and only 42% people are unaware

from on going new fund offer of RELIANCE CAPITAL assets management company.

NUMBER

58

42

YES

NO


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QUESTION MARKS ON INFRASTRUCTURE SPENDING:

Huge budgetary and fiscal deficit

Past record on foreign flows so-so and not very robust

HOWEVER, FUTURE LOOKS BRIGHTER:

Avenues to control deficit in sight

PPP

Foreign investments

FUNDING PATTERN (XITH FYP):

Private Funding gains importance- 30% of planned expenditure

FDI

Private Equity

INFRASTRUCTURE FUNDWHY NOW?

Despite recent spurt, still attractive

Political stability for five years

Some stability. Investors will move to higher growth economies

Interest rates plunge, debt available, investors looking for equity investments

Attractive Valuations


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INVESTMENT STRATEGY:

The investment focus would be guided by the growth potential and other economic

factors of the country. The Fund aims to maximize long-term total return by

investing in equity and equity-related securities which have their area of primary

activity in India; the Fund intends to invest in-

Companies in sectors related to infrastructure;

Companies operating and listed in India engaged in Infrastructure Sector and

In diversified companies, where a major portion of their revenues (primary

activity) is derived from the infrastructure related activities.


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CHAPTER-9

CONCLUSION


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CONCLUSION

After considering all sources of long term investments, it can be very easy to

conclude that mutual funds are the best source to invest in. Mutual funds are

different from the conventional sources of investment and quite more better and

more advantageous than investment in bank FDs, RDs, post office deposits, shares

and bonds etc.

A client usually seeks for better returns with least risk involved and for this purpose

mutual funds can proved to be a milestone. Here the best returns are assured with

less time and cost incurred. Investment in various mutual funds can be in lumpsum

or in installments that is known as SIP, systematic investment plan. Although the

market fluctuations causes some big jerks to the investors but usually a long term

investment in mutual fund always yield much more better returns than other

sources.

Reliance mutual fund has launched various fund offers time to time, which have

been performed very well in the period of recession. Reliance have different funds

in equity, debt and hybrid plan with growth and dividend payout and dividend re-

investment options.

Reliances NFO Reliance Infrastructure Fund has been launched recently, whose

major concern is investment in infrastructural development of India. The poor

infrastructure is the root cause of the slow down of the developmental pace of India,

thats why proper focus towards the infrastructural development is mandatory.

At last to conclude with, I can say that mutual funds are much more beneficia

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