RESEARCH PROJECT REPORT

ON

“COMPARATIVE ANANLYSIS OF MUTUAL FUNDS”

SUBMITTED FOR THE PARTIAL FULFILLMENT OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION of PUNJAB TECHNICAL UNIVERSITY

By

BABITA CHAUDHARY7118223989

MBA IV SEMESTER UNDER THE SUPERVISION OF LECTURER MRS. ROSY SHARMA

Chandigarh Business School, Landra, Mohali YEAR 2007-09

Certificate of Supervisor

This is to certify that Ms. Babita chaudhary Roll No. 7118223989 has

completed the research project titled “comparative analysis of mutual

funds” under my supervision in partial fulfillment of the MASTER OF

BUSINESS ADMINISTRATION degree of punjab technical university .

Supervisor’s signature:

Supervisor’s name: mrs. Rosy sharma

Supervisor’s Designation: lecturer

Date:

Place:

Forwarded for evaluation by the Dean: (Dean’s Signature) Seal of the Dean

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Declaration

I, hereby declare that the research project report titled “comparative

analysis of mutual funds“is my own original research work and this report

has not been submitted to any University/Institute for the award of any

professional degree or diploma.

Babita chaudhary

M.B.A 4th sem

Chandigarh Business School

Date:

Place:

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Acknowledgements

Management thesis research has been inoculated by ICFAI into the SIP program just to provide a student a opportunity to carry out a research unaided and on individual basis I would like to thank the ICFAI alumni behind this concept, I think that is no other better way out to give a student a first hand account of any sector than to let him conduct a research on the same and imbibing the findings to his advantage, I must say my knowledge base widened immensely by conducting this research this in turn will give me confidence to fall back upon if I join the mutual fund industry. My heartiest gratitude to my faculty guide Ms. Rosy sharma for being the torch bearer for the path and giving positive inputs for making the research more meaningful, my parents of course for providing me monetary support and many more things but most importantly having faith in my ability, my Company guide Mr. Mandeep Singh Arora and the staff of Reliance mutual fund, Chandigarh, last but not the least my friends with whom I held discussions about conducting the research and also about sources of data collection and various other aspects of the study.

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PREFACE

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 appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (pro rata).

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. Anybody with an investible surplus of as l itt le as a few thousand rupees can invest in Mutual Funds.

Each Mutual Fund scheme has a defined investment objective and strategy. A mutual fund is the ideal investment vehicle for today’s complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven.

Mutual fund is a new financial institution, which has entered in the Indian financial markets in recent years. It is a Medium of investment suitable to the small investors, who are not able to invest in stock market directly. Mutual Fund is one of the Major Players in the Financial Market. All the Funds are having a lot of schemes i.e. Income, Growth, Balance, Gilt, Liquid, Tax saving etc., In Mutual Funds investor gets Liquidity & Reasonable tax free return depends upon their needs they can choose the scheme.

The chapters covers the introduction and working of mutual funds. It also covers the comparative study between two leading mutual funds in today’s market vis-à-vis RELIANCE mutual fund and HDFC mutual fund and ICICI mutual fund.

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CHAPTERISATION

Index Page No.

Certificate issued by Project Guide/Supervisor I

Declaration II

Acknowledgements III

Preface IV

Contents

Chapter 1 ….................................................... 6-21What are mutual fundsWorking of mutual funds History of mutual funds in India Types of mutual funds Advantages of mutual funds Constituents of mutual funds Fund distribution Mutual funds terminology Mutual funds key points.

Chapter 2 ………………………………………. 22-29Description of the companies Reliance mutual fundsHDFC mutual funds ICICI Mutual funds

Chapter 3 ………………………………………. 30-31Research methodology Research objectiveType of data collection instruments Limitation of the study

Chapter 4 ……………………………………….. 32-40 Financial AnalysisAnalysis of the questionnaire

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Nature of financial analysis Use and significance of ratio analysis Limitation of ratio analysis Guidelines or precautions for the use of ratios Financial analysis Definition and interpretation of the ratios

Chapter 5 ………………………………………….. 41-43Findings and conclusionReliance salary Addvantage product Analysis of questionnaire Chapter 6 …………………………………………… 44-49 Suggestions

References …………………………………………… 50Appendix …………………………………………….. 51-53

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Chapter 1

OVERVIEW

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WHAT IS MUTUAL FUND…?A mutual fund is a common pool of money into which investors place their contributions that are to be invested in accordance with the stated objective. A mutual fund uses the money collected from investors to buy those assets, which are specifically permitted by its stated investment objective.A mutual fund is an entity that pools the money of many investors—its unit holders—to invest in different securities. Investment may be in shares, debt securities, money market securities or a combination of these.A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investment decision buys units of a particular mutual fund scheme that has a defined investment objective and strategy.The money thus collected is then invested by the fund manager in different types of

securities. The income earned through these investments and the capital appreciation

realized by the scheme is shared by its unit holders in proportion to the number of units

owned by them.

By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. A mutual fund is the ideal investment vehicle for today’s complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven.

WORKING OF A MUTUAL FUND

HISTORY OF MUTUAL FUNDS IN INDIAThe mutual fund industry in India started in 1963 with the formation of Unit Trust of

India (UTI), at the initiative of the Government of India and Reserve Bank of India

(RBI).

The history of mutual funds in India can be broadly divided into four distinct phases:

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First Phase (1964-87)Second Phase (1987-93)Third Phase (1993-2003)Fourth Phase (since 2003)

First Phase (1964-1987)

In 1963, an Act of Parliament established Unit Trust of India. Operationally Unit Trust of India was set up by the Reserve Bank of India to serve as an investment vehicle for small investors. In 1964, Unit Trust of India was delinked from RBI and launched its first scheme-the unit’64 scheme. At the end of 1988, UTI had Rs. 6700 crores of assets under management.

Second phase (1987-1993)(Entry of Public Sector Funds)

1987 marked the entry of non-UTI, public sector mutual funds set up by the public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). State Bank of India (SBI) mutual fund was the first non-UTI mutual fund established in June 1987. From four players in 1985 the number increased to eight in 1993.LIC established its mutual funds in 1989 while GIC had set up its mutual fund in 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.4700 crores.

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

A new era in mutual fund industry began with the permission granted for the entry of

private sector funds in 1993, giving the Indian investors a broader choice of funds and

increasing competition for the existing public sector funds. Kothari Pioneer was the first

private sector fund set up in July 1993. Also, 1993 was the year in which the first mutual

fund Regulation came into being, under which all mutual funds, except UTI were to be

registered and governed. The 1993 SEBI (Mutual Fund) Regulations were substituted by

a more comprehensive and revised mutual fund Regulations in 1996.At the end of 2003,

there were 33 mutual funds with total assets of Rs.121805 crores. The UTI with Rs.44545

crores of assets under management was ahead of other mutual funds.

Fourth Phase (since February 2003)In February 2003, following the repeal of the UTI Act 1963, UTI was revamped and divided into two entities: UTI-I and UTI-II.

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UTI-I or Specified Undertaking of the UTI, having Government guarantee, consists of all assured return schemes.

TYPES OF MUTUAL FUNDS

1. ACCORDING TO INVESTMENT OBJECTIVES

Mutual funds come in all shapes and sizes there are three basic types of such funds:

1. Growth Funds

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2. Income Funds

3. Hybrid Funds

(a) Growth/Equity oriented scheme: -These schemes seek to invest a majority of their funds in equities and a small

portion in money market instruments. These funds seek to provide growth of capital with secondary emphasis on dividend. Such schemes have the potential to deliver superior returns over the long term because the market boom and depression phases get evaded out over a longer time span. However, because they invest in equities, these schemes are exposed to fluctuations in value especially in the short-term.

Equity schemes are hence not suitable for investors seeking regular income or needing to use their investments in the short-term. They are ideal for investors who have a long-term investment horizon.

(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.

(c). Hybrid Scheme: -These are also known, as balanced Schemes. These balanced schemes aim to

provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in shares 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.

By investing in a mix of this nature, balanced schemes seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative, long-term orientation

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2. ACCORDING TO STRUCTURE/CONSTITUTION

(a) Open-ended Scheme

An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. Investors can conveniently buy and sell units at Net Asset Value (NAV) Related prices, which are declared on a daily basis. Such schemes thus offer very high liquidity to investors and are becoming increasingly popular in India.

These schemes have unlimited capitalization, open-ended schemes do not have a fixed maturity-i.e. there is no cap on the amount you can buy from the fund and the unit capital can keep growing. These funds are not generally listed on any exchange.

Open-ended funds are bringing in a revival of the mutual fund industry owing to increased liquidity, transparency and performance in the new open-ended funds promoted by the private sector and foreign players.

(b) Close–ended Scheme

Schemes that have a stipulated maturity period e.g. 5-7 years, limited capitalization and the units are listed on the stock exchange are called close – ended scheme. 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 units of the scheme on the stock exchanges where the units are listed.

(c) Interval scheme: - Interval funds combine the features of open-ended and close ended-schemes.

They may be traded on the stock exchanges or may be open for sale or redemption during pre-determined intervals at NAV based prices.

ADVANTAGES OF MUTUAL FUNDS

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Professional ManagementInstead of making decisions based on gut-feel or what one has heard from

others, when an investor buys into a mutual fund, he simply leaves his investments in the expert hands of Professional fund managers, who invest this money on the basis of minute analysis and astute investment strategies. With their skill and experience at work, one’s money ends up in the relevant assets.

DiversificationIt is a well known fact that one way of ensuring safe investments is to

spread them out over various instruments, securities, and locations and so on.Mutual funds, by virtue of their structure, offer investors precisely this benefit of diversification. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion.

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 fund saves your time and makes investing easy and convenient.

Return PotentialReturns in the mutual funds are generally better than any other option in

any other avenue over a reasonable period of time. People can pick their investment horizon and stay put in the chosen fund for the duration. Though they are affected by the interest rate risk in general, the returns generated are more as they pick securities with different duration that have different yields and so are able to increase the overall returns from the portfolio.

Low CostsMutual Funds offer a relatively less expensive way to invest when

compared to other avenues such as capital market operations. The fee in terms of brokerages, custodial fees and other management fees are substantially lower than other options and are directly linked to the performance of the scheme.

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LiquidityInvestment in a mutual fund is very liquid. An investor can liquidate the

investment, by selling the units to the fund if open end, or selling them in the market if the fund is closed end and collect funds at the end of a period specified by the mutual fund or the stock market.

TransparencyInvestors get regular information about the value of his investment in

addition to disclosure on the specific investment made by a scheme and the proportion invested in each class of assets and the fund manager’s investment strategy and outlook.

FlexibilityMutual fund offering multiple schemes allows investors to switch between

various schemes. This flexibility gives the investor a convenient way to change the mix of his portfolio over time.

AffordabilityInvestors individually may lack sufficient funds to invest in high-grade

stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment.

10. Choice of SchemesMutual fund offers a tremendous variety of schemes. This variety is

beneficial in two ways:

It offers different types of schemes to investors with different needs and risk appetites.It offers an opportunity to an investor to invest sums across a variety of schemes.

11. Well RegulatedAll Mutual Funds are registered with SEBI, and SEBI acts a watchdog, so

the Mutual Funds are well regulated. Securities Exchange Board of India (SEBI) has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors.

CONSTITUENTS OF MUTUAL FUND

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Sponsor:

What a promoter to a company, a sponsor is to a mutual fund. “Sponsor” is defined under SEBI Regulations as any person who is acting alone or in combination with another body corporate, establishes a mutual fund. The sponsor initiates the idea to set up a mutual fund. It could be registered company, scheduled bank or financial institution.In order to run a mutual fund in India, the sponsor has to obtain a license from SEBI. For

this, a sponsor has to satisfy certain conditions, such as on capital track record (at least 5

years operation in financial services), default-free dealings and a general reputation of

fairness.

Trustees:

Trustees are like internal regulators in a mutual fund, and their job is to

protect the interest of the unit holders. Trustees are appointed by sponsors, and can either

be individuals or corporate bodies. In order to ensure they are impartial and fair, SEBI

rules mandate that at least two third of the trustees be independent i.e. not having any

association with the sponsor.

Trustees float and market schemes and secure necessary approvals. They check if the

asset management company’s investments are within defined limits and whether the

fund’s assets are protected. Trustees can be held accountable for financial irregularities in

the mutual fund.

Asset Management Company (AMC):

An Asset Management Company is the entity formed by the sponsor to

run a mutual fund. It’s the AMC that employs fund managers and analysts, and other

personnel. It’s the AMC that handles all operational matters of a mutual fund-from

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launching schemes to managing them to interacting with investors. It also exercises due

diligence on investments, and submits quarterly reports to the trustees. The people in the

AMC who should matter the most to you are those who take investment decisions. There

is the head of the fund house, generally referred to as Chief Executive Officer (CEO).

Under him comes the Chief Investment Officer (CIO), who shapes the fund’s investment

philosophy, and fund managers, who manages its schemes. A team of analysts, who track

market, sectors and companies, assists them.

4. Custodian:

A custodian handles the investment back office of a mutual fund. Its

responsibilities include receipt and delivery of securities, collecting income-distributing

dividends, segregating assets and settlement between schemes. The sponsor of a mutual

fund cannot act as a custodian to the mutual fund. This condition, formulated in the

interest of the investors, ensure that the assets of a mutual fund are not in the hands of its

sponsors.

5. Registrar:

Registrar also known as Transfer Agents handles all investor related

services. This includes issuing and redeeming units, sending fact sheets and annual

reports. Some fund houses handle such functions in house, others outsource it to registrar.

Most mutual funds, in addition to registrar, also have investor service centers of their own

in some cities.

FUND DISTRIBUTION

Distribution Channels: -

Mutual funds consider investment plans for the institutional and the individual investors. Some funds target and contact the institutional investors directly, without using any external distribution channels. For example, UTI and some private funds have some schemes targeted at provident fund, which contacted directly by their own sales officers. Other funds work through distributors for institutional clients as well as individual ones.

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Distribution channels:

(a) Individual Agents: - An agent acts on the behalf of a principal that is the mutual fund. An agent

is broker between a fund and the investor. In India we also have the unique system where by a broker has a number of sub-brokers working under him.

(b )Distribution companies: -

DISTRIBUTION CHANNELS

Direct Marketing

Banks

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IndividualAgents

Distribution companies

Availing of the services of established distribution A company is a practice by Mutual Funds internationally. Instead of having to deal with several agents, a fund can interact with a distribution company, which has several employees or sub-brokers under it. A distribution company usually manages distribution for several funds simultaneously and receives commission for its services. In India there are about 10 major distribution companies in addition to a few hundred smaller ones.(c) Banks: -

In developed countries banks are important marketing vehicles for mutual funds, given that banks themselves have a large depositor/client base of their own. Several banks, particularly private and foreign banks are involved in the fund distribution by providing services similar to those of distribution companies, on a commission basis.

(d) Direct Marketing: -

Direct marketing means that the mutual funds sell their own products without the use of any intermediaries. Usually, this takes in the form when the sales officers and employees of the AMC approach the investors and accept their contributions directly. But direct marketing by the funds themselves account for a very small percentage of mutual fund sales. In the case of UTI only 5-6% of total sales come through direct channels.

Mutual fund Terminology

Net Asset Value (NAV) Net Asset Value (NAV) is the actual value of one unit of a given scheme on any given business day. The NAV reflects the liquidation value of the fund's investments on that particular day after accounting for all expenses. It is calculated by deducting all liabilities (except unit capital) of the fund from the realizable value of all assets and dividing it by number of units outstanding.

LoadThe charge collected by a Mutual Fund from an investor for selling the units or investing in it.When a charge is collected at the time of entering into the scheme it is called an Entry load or Front-end load or Sales load. The entry load percentage is added to the NAV at the time of allotment of units.An Exit load or Back-end load or Repurchase load is a charge that is collected at the time of redeeming or for transfer between schemes (switch). The exit load percentage is deducted from the NAV at the time of redemption or transfer between schemes.

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Some schemes do not charge any load and are called "No Load Schemes"

Sale PriceIt is the price paid by an investor when investing in a scheme of a Mutual Fund. This price may include the sales or entry load.

Redemption/Repurchase PriceRedemption or Repurchase Price is the price at which an investor sells back the units to the Mutual Fund. This price is NAV related and may include the exit load.

Repurchase or Back End LoadIt is the charge collected by the scheme when it buys back the units from the unit holders.

Switching Facility Switching facility provides investors with an option to transfer the funds amongst different types of schemes or plans.Investors can opt to switch units between Dividend Plan and Growth Plan at NAV based prices. Switching is also allowed into/from other select open-ended schemes currently within the Fund family or schemes that may be launched in the future at NAV based prices.While switching between Debt and Equity Schemes, one has to take care of exit and entry loads. Switching from a Debt Scheme to Equity scheme involves an entry load while the vice versa does not involve an entry load.

Applicable NAV for switchSwitch requests are affected the day the request for switch is received. The Applicable NAV for the switch will be the NAV on the day that the request for switch is received

Account StatementAn Account Statement is a non-transferable document that serves as a record of transactions between the fund and the investor. It contains details of the investor, the units allotted or redeemed and the date of transaction. The Account Statement is issued every time any transaction takes place.

MUTUAL FUNDS- KEY POINTS

A mutual fund is a pool of money collected from investors and is invested according to stated investment objectives.

Mutual find investors are like shareholders and they own the fund.

Mutual fund invests in marketable securities according to the investment objective.

The net asset value (NAV) of a mutual fund fluctuates with market price movements.

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UTI was the only mutual fund during the period 1963-1988 and enjoyed monopoly status.

UTI is governed by the UTI Act, 1963.

SEBI got regulatory powers in1992.

SBI mutual fund was the first bank sponsored mutual fund to be set up.

The private sector players were allowed to set up mutual funds in 1993.

In 1996 the mutual fund regulations were substantially revised and modified.

Mutual funds in India have a 3-tier structure of Sponsor-Trustee-AMC.

Sponsor creates the AMC and the trustee company and appoints the board of both these companies, with SEBI approval.

The mutual fund is formed as a trust in India, and not as a company.

The AMC’s capital is contributed by the sponsor.

The trustees make sure that the funds are managed according to the investors’ mandate.

Sponsor should have at least a 5-year track record in the financial services business and should have made profit in at least 3 out of the 5 years.

At least 2/3 of trustees should be independent.

An AMC of one fund cannot be trustee of another fund.

AMC should be register with SEBI.

The investors’ funds and the investments are held by the custodian, who is the guardian of the funds and assets of investors.

Sponsors and the custodian cannot be the same entity.

Mutual funds are regulated by the SEBI (Mutual Fund) regulations, 1996.

Bank-sponsored mutual funds are jointly regulated by SEBI and RBI.

UTI does not have a separate sponsor and AMC.

UTI is governed by the UTI Act, 1993 and is voluntarily under SEBI Regulations.

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Chapter2DESCRIPTION OF THE COMPANIES

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Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average Assets Under Management (AAUM) of Rs. 80,963 Crs (AAUM for the month March 09 ) and an investor base of over 71.68 Lacs*. * There may be a minor change in the Investor Count.

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

Reliance Capital Ltd. has interests in asset management, life and general insurance, private equity and proprietary investments, stock broking and other financial services.

AUM Source : http://www.amfiindia.com/

Statutory Details :

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Sponsor : Reliance Capital Limited. Trustee : Reliance Capital Trustee Co. Limited. 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. For details of scheme features and scheme specific risk factors, please refer to the provisions of the offer document.

   Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882 with Reliance Capital Limited (RCL), as the Settlor/Sponsor and Reliance Capital Trustee Co. Limited (RCTCL), as the Trustee.RMF has been registered with the Securities & Exchange Board of India (SEBI) vide registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual Fund has been changed to Reliance Mutual Fund effective 11th. March 2004 vide SEBI's letter no. IMD/PSP/4958/2004 date 11th. March 2004. Reliance Mutual Fund was formed to launch various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.

The main objectives of the Reliance Trust are:

To carry on the activity of a Mutual Fund as may be permitted at law and formulate and devise various collective Schemes of savings and investments for people in India and abroad and also ensure liquidity of investments for the Unit holders;

To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on their savings and

To take such steps as may be necessary from time to time to realize the effects without any limitation.

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BOARD OF DIRECTORS

Mr. Amitabh Chaturvedi Mr. Kanu Doshi Mr. Manu Chandha Mr. Sushil Tripathi

MANAGEMENT TEAM

President Mr. Vikrant Gugnani

Chief Investment Officer Mr. K. Rajagopal

Head Equity Investments Mr. Madhusudan Kela

Equity Fund Manager Mr. Ashwani Kumar

Debt Fund Manager Mr. Prashant Pimple

Reliance Asset Management Company

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

Reliance Capital Asset Management Limited is a wholly owned subsidiary of Reliance Capital Limited, the sponsor. The entire paid-up capital (100%) of Reliance Capital Asset Management Limited is held by Reliance Capital Limited.Reliance Capital Asset Management Limited was approved as the Asset Management Company for the Mutual Fund by SEBI vides their letter no IIMARP/1264/95 dated June 30, 1995. The Mutual Fund has entered into an Investment Management Agreement (IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997 in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is authorized to act as Investment Manager of Reliance Mutual Fund. The net worth of the Asset

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Management Company including preference shares as on March 31, 2005 is Rs.30.13 crores. Reliance Mutual Fund has launched twenty five Schemes till date, namely: Reliance Vision Fund (September 1995), Reliance Growth Fund (September 1995) Reliance Income Fund (December 1997), Reliance Liquid Fund (March 1998), Reliance Medium Term Fund (August 2000), Reliance Short Term Fund (December 2002), Reliance Fixed Term Scheme (March 2003), Reliance Banking Fund (May 2003), Reliance Gilt Securities Fund (July 2003), Reliance Monthly Income Plan (December 2003), Reliance Diversified Power Sector Fund (March 2004) Reliance Pharma Fund ( May 2004), Reliance Floating Rate Fund (August 2004), Reliance Media & Entertainment Fund (September 2004), Reliance NRI Equity Fund (October 2004), Reliance NRI Income Fund (October 2004), Reliance Index Fund (January 2005), Reliance Equity Opportunities Fund (February 2005), Reliance Fixed Maturity Fund - Series I (March 2005), Reliance Fixed Maturity Fund - Series II (April 2005), Reliance Regular Saving Fund (May 2005), Reliance Liquidity Fund (June 2005), Reliance Tax Saver (ELSS) Fund (July 2005), Reliance Fixed Tenor Fund (November 2005) and Reliance Equity Fund (Feb 2006),Reliance Equity Advantage Fund (July 2007).

SCHEMES

Equity/Growth Schemes

The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

Debt/Income Schemes

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, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.

Sector Specific Schemes

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These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.

HDFC Mutual FundHDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing Development Finance Corporation Limited and Standard Life Investments Limited.

The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. In 1998, Standard Life Investments Limited became the dedicated investment management company of the Standard Life Group and is owned 100% by The Standard Life Assurance Company. With global assets under management of approximately US$126 billion as at May 15, 2003, Standard Life Investments Limited is one of the world's major investment companies and is responsible for investing money on behalf of five million retail and institutional clients worldwide.

The Trustee Company of HDFC Mutual Fund is HDFC Trustee Company Limited and AMC is HDFC Asset Management Company Limited, incorporated with the SEBI on December 10, 1999.

HDFC Asset Management Company Limited (AMC)

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000. 

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The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020.

In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to  manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crore.

The present equity shareholding pattern of the AMC is as follows :

Particulars % of the paid up equity capital

Housing Development Finance Corporation Limited

60

Standard Life Investments Limited 40

Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a review of its overall strategy, had decided to divest its Asset Management business in India. The AMC had entered into an agreement with ZIC to acquire the said business, subject to necessary regulatory approvals.

On obtaining the regulatory approvals, the following Schemes of Zurich India Mutual Fund have migrated to HDFC Mutual Fund on June 19, 2003. These Schemes have been renamed as follows:

Former Name New NameZurich India Equity Fund HDFC Equity FundZurich India Prudence Fund HDFC Prudence FundZurich India Capital Builder Fund HDFC Capital Builder FundZurich India TaxSaver Fund HDFC TaxSaverZurich India Top 200 Fund HDFC Top 200 FundZurich India High Interest Fund HDFC High Interest FundZurich India Liquidity Fund HDFC Cash Management FundZurich India Sovereign Gilt Fund HDFC Sovereign Gilt Fund*

28

Vision

To be a dominant player in the Indian mutual fund space, recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.

HDFC Asset Management Company LtdHDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated June 30, 2000.

Sponsors

Housing Development Finance Corporation Limited (HDFC)

HDFC was incorporated in 1977 as the first specialized Mortgage Company in India. HDFC provides financial assistance to individuals, corporates and developers for the purchase or construction of residential housing. It also provides property related services (e.g. property identification, sales services and valuation), training and consultancy. Of these activities, housing finance remains the dominant activity. HDFC has a client base of around 9.5 lac borrowers, around 1 million depositors, over 91,000 shareholders and 50,000 deposit agents as at March 31, 2007. HDFC has raised funds from international agencies such as the World Bank, IFC (Washington), USAID, DEG, ADB and KfW, international syndicated loans, domestic term loans from banks and insurance companies, bonds and deposits. HDFC has received the highest rating for its bonds and deposits program for the twelfth year in succession. HDFC Standard Life Insurance Company Limited, promoted by HDFC was the first life insurance company in the private sector to be granted a Certificate of Registration (on October 23, 2000) by the Insurance Regulatory and Development Authority to transact life insurance business in India.

Standard Life Investments Limited

The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. The company was present in the Indian life insurance market from 1847 to 1938 when agencies were set up in Kolkata and Mumbai. The company re-entered the Indian market in 1995, when an agreement was signed with HDFC to launch an insurance joint venture. On April 2006, the Board of The Standard Life Assurance Company recommended that it should demutualise and Standard Life plc float on the London Stock Exchange. At a Special General Meeting held in May voting members overwhelmingly voted in favour of this. The Court of Session in Scotland approved this in June and Standard Life plc floated on the London Stock Exchange on 10 July 2006. Standard Life Investments was launched as an investment management company in 1998. It is a wholly owned subsidiary of Standard Life Investments

29

(Holdings) Limited, which in turn is a wholly owned subsidiary of Standard Life plc. Standard Life Investments is a leading asset management company, with approximately US$ 269 billion as at March 30, 2007, of assets under management. The company operates in the UK, Canada, Hong Kong, China, Korea, Ireland and the USA to ensure it is able to form a truly global investment view. In order to meet the different needs and risk profiles of its clients, Standard Life Investments Limited manages a diverse portfolio covering all of the major markets world-wide, which includes a range of private and public equities, government and company bonds, property investments and various derivative instruments. The company's current holdings in UK equities account for approximately 1.8% of the market capitalization of the London Stock Exchange

Management

HDFC Trustee Company Limited:

A company incorporated under the Companies Act, 1956 is the Trustee to the Mutual Fund vides the Trust deed dated June 8, 2000, as amended from time to time. HDFC Trustee Company Limited is a wholly owned subsidiary of HDFC Limited.

30

Prudential ICICI Mutual Fund is the largest private sector mutual fund in India with assets of over Rs.34,119 crore under management as of Aug 2006. The asset management company, Prudential ICICI Asset Management Company Limited, is a joint venture between Prudential Plc, Europe's leading insurance company and ICICI Bank, India's premier financial institution.Prudential Plc holds 55 per cent of the asset management company and the balance by ICICI Bank. In a span of just over six years, Prudential ICICI Asset Management Company has emerged as one of the largest asset management companies in the country.

The Company manages a comprehensive range of schemes to meet the varying investment needs of its investors spread across 68 cities in the country. The management is headed by Pankaj Razdan, managing director and the fund management team is headed by Nilesh Shah, chief investment officer.

Here is a list of mutual funds of Prudential ICICI which includes Equity Funds, Balanced Funds and Debt Funds.

Mutual Funds Investments Through ICICI Bank

About Mutual FundsMutual Funds pool money of various investors to purchase a wide variety of securities while pursuing a specific goal. Selection of Securities for the purpose is done by specialists from the field. Returns generated are distributed to the Investors.

Mutual Fund Companies offer various schemes. Investors can choose any particular Fund/Scheme or mix of Funds/Schemes

31

depending upon their perception towards risk. Investment is done on the basis of prevailing Net Asset Values of various schemes.

Mutual Funds Investments are subject to Market Risks.Types of Funds Sold

We will help you determine which types of funds you need to meet your investment goals. This may include the following types of funds:

Debt: Liquid schemes, Income schemes, G-sec schemes, Monthly Income Schemes etc.

Equity: Diversified Equity Schemes, Sector Schemes, Index Schemes etc.

Hybrid Funds: Balanced Schemes, Special Schemes - Pension Schemes, Child education Schemes etc.

At ICICI Bank we will help you identify an appropriate mix of Mutual Fund schemes for your portfolio using asset allocation strategies.

Through ICICI Bank you can invest in various schemes of multiple mutual funds with decent performance record. You can take the aid of our various research reports on mutual funds and their schemes before choosing a scheme for investment.

ICICI Prudential Asset Management Company enjoys the strong parentage of Prudential plc, one of UK's largest players in the insurance & fund management sectors and ICICI Bank, a well-known and trusted name in financial services in India. ICICI Prudential Asset Management Company, in a span of just over eight years, has forged a position of pre-eminence in the Indian Mutual Fund industry as one of the largest asset management companies in the country with assets under management of Rs. 37,906.24 crore (as of March 31, 2007). The Company manages a comprehensive range of schemes to meet the varying investment needs of its investors spread across 68 cities in the country.

  At inception - May 1998 As on August 31, 2007Assets Under Management Rs. 160 Crore Rs. 50,658.87 Crore

32

Number of Funds Managed 2 35

Sponsors

Established in London in 1848, Prudential plc, through its businesses in the

UK, US and Asia, provides retail financial services products and services to

more than 21 million customers, policyholders and unit holders worldwide

with over US$400 (as of 31st December, 2005) billion in funds under

management. Prudential employs some 23,000 staff worldwide.

In Asia, Prudential has life insurance and funds management operations

across twelve countries - China, Hong Kong, India, Indonesia, Japan, Korea,

Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.

Prudential has championed customer-centric products and services for over

80 years, supported by an extensive network of over 145,000 staff and agents

across the region

33

ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89 bn (US$ 56.3 bn) at March 31, 2006 and profit after tax of Rs. 25.40 bn (US$ 569 mn) for the year ended March 31, 2006 (Rs. 20.05 bn (US$ 449 mn) for the year ended March 31, 2005). ICICI Bank has a network of about 614 branches and extension counters and over 2,200 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai International Finance Centre and representative offices in the United States, United Arab Emirates, China, South Africa and Bangladesh. Our UK subsidiary has established a branch in Belgium. ICICI Bank is the most valuable bank in India in terms of market capitalization.

34

Chapter3

RESEARCH METHODOLOGY

35

RESEARCH METHODOLOGY:

DA TA S OU RC ES :

The va r ious sou rc es w h ic h wi l l be u se d to co l l ec t da t a a r e :

Pr i mary D ata :

Thi s w i l l be co l l ec t ed t h rough que s t i onna i r e .

S econ d ary Data :

Mut ua l f unds w ebs i t e s . HD F C w ebs i t e . IC ICI p ruden t i a l w ebs i t e . RELA IN CE M UT UA LS w ebs i t e . Ne ws pape r s . Ol d cus tome r s .

TYP ES OF MU TU AL F UN D S IN FO RMA TI ON

The va r ious sou rc es w i l l be cove re d by wh i ch t he po t en t i a l i nves to r o f mu tua l f unds come to know abou t t he sc hemes .

DES I GN I NG OF Q UES TI ON NA I RE:

36

Thi s w i l l be deve loped to b r i ng ou t t he aw arenes s o f t he pub l i c t ow ards mu tua l f und inve s t men t .

SAMPLE SIZE AND TECHNIQUE

The sample size of respondents was 50 & the non-probabili ty sampling technique was used. The questionnaire was distributed on the basis of convenience sampling 50 questionnaires were distributed to the respondents, 8 were unaware about Mutual Funds. So the remaining 42 questionnaires were considered for the purpose of analysis and conclusion.

NO. OF QUESTIONNAIRE

Questionnaire Distributed 50Responses Received 50Unaware Investors 8Questionnaire left 42

The project is divided into three stages:

STAGE 1

Determining the objective of the study:

The objective of my study is to find out the financial analysis of Reliance Mutual Funds with HDFC Mutual funds and ICICI Mutual funds.

STAGE 2

Conceptual study of the topic.

STAGE 3

Data analysis Data analysis covers the analyzing the data which will lead to some findings and recommendations.

37

Objective of the study

The objective of my study is divided into two:

To provide an overview of the mutual fund schemes selected for study.The main ob j ec t ive of study is to study the working of mutual funds in general. However, the specific objectives of the study are:

a)To study investment strategies of mutual funds.b)To know about the awareness of various schemes of mutual funds.c)To study the comparative performance of RELIANCE Mutual Fund and

Prudential ICICI Mutual Fund and HDFC mutual funds.

(d) To find out the financial analysis of Reliance Mutual Funds with HDFC Mutual funds and ICICI Mutual funds by studying their annual reports.

(e) To know the viability of Reliance mutual funds product “Salary Addvantage”, by finding out the untapped market by mutual fund industry.

TYPE OF DATA COLLECTION INSTRUMENT

Primary dataThe primary data is collected through questionnaire in which direct open ended questions were asked with multiple choices for fulfilling the second objective of the study i.e. to find out the viability of “Salary Addvantage” product in the market.

Secondary DataAnnual reports of the samples taken (Reliance Mutual Funds, HDFC Mutual Funds and ICICI Mutual Funds), were taken as secondary data for the financial analysis.

38

LIMITATIONS

Though the study is based on the data collected from various direct sources, still it is not free from limitations like:1) Limited information access because of lack of informed investors.2) Short span of time.3) Unwillingness on the part of customers to spare time for the survey.4) Reluctance to share information regarding, investments and future plans etc.

Chapter 4

FINANCIAL ANALYSIS

39

Introduction

There are various methods or techniques used in financial statement analysis, such as comparative analysis, schedule of change in working capital, cash flow analysis and ratio analysis. The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios i.e. quantitative relationship between figures and group of figures.

A ratio is a simple arithmetic expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. In simple language ratio is one number expressed in terms of another and can be worked out by dividing one number into the other. A ratio can also be expressed as percentage by simply multiplying the ratio by 100.

Ratios provide clues to the financial position of a concern. These are the pointers or indicators of financial strength, soundness, position or weakness of an enterprise. One can draw conclusions about the exact financial position of the concern with the help of ratios.

Nature of Financial Analysis

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various

40

ratios for helping in making certain decisions. However, ratio analysis is not an end in itself. It is only a mean of better understanding of financial strengths and weakness of a firm. Calculation of mere ratios does not serve any purpose, unless several appropriate ratios are analyzed and interpreted.

There are number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios from the same keeping in the mind the objective of the analysis.

Use and significance of ratio analysis Ratio analysis is one of the most powerful tools of financial analysis. It is used as a device to analyze and interpret the financial health of enterprises. There are different parties interested in the ratio analysis for knowing the financial position of the firm for different purposes. With the use of ratio analysis one can measure the financial condition of the firm and point out whether the performance of the firm improving or deteriorating.

Managerial uses of ratio analysisHelps in decision making.Helps in financial forecasting and planning.Helps in communicating.Helps in co-ordination.Helps in control.Helps in budgetary control and standard costing.

Utility to share holder and investor An investor in the company will like to assess the financial position of the firm where he is going to invest. His first interest will be the security of his investment and then return in the form of dividend and interest. For this he will try to assess the value of fixed assets and loan raised against them. He will further assess long term solvency ratio profitability ratio for knowing the financial position of the company then he will thing for the investment.

Utility for creditors The creditor or supplier extends short term credit to the concern. They are interested to know whether financial position of the concern warrants their payments at a specific time or not. Current and acid test ratio will help in this concern. Utility to employees The employees are also interested in the financial position of the concern especially profitability. Their wage increase and amount of fringe benefits are related to the volume of profits earned by the concern.

41

Utility to the government Government is interested to know the overall strength of the industry. Ratio may be used as a indicator of overall financial strength as well as private sector and plan future policies.

LIMITATIONS OF RATIO ANALYSIS

The ratio analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from some serious limitations:

Limited Use of a Single Ratio . A single ratio, usually, does not convey much of a sense. To make a better interpretation a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any meaningful conclusion.

Lack of Adequate Standards . There are no well accepted standards or rules of thumb for all ratios which can be accepted as norms. It renders interpretation of the ratios difficult. Inherent Limitations of Accounting . Like financial statements, ratios also suffer from the inherent weakness of accounting records such as their historical nature. Ratios of the past are not necessarily true indicators of the future.

Change of Accounting Procedure . Change in accounting procedure by a firm often makes ratio analysis misleading e.g. a change in the valuation of methods of inventories, from FIFO to LIFO increases the cost of sales and reduces considerably the value of closing stocks which makes stock turnover ratio to be lucrative and an unfavorable gross profit ratio.

Window Dressing . Financial statements can easily be window dressed to present a better picture of its financial and profitability position to outsiders. Hence, one has to be very careful in making a decision from ratios calculated from such financial statements. But it may be very difficult for an outsider to know about the window dressing made by a firm.

Personal Bias . Ratio is only means of financial analysis and not an end in itself. Ratios have to be interpreted and different people may interpret the same ratio in different ways.

Uncomparable. Not only industries differ in their nature but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading. Moreover, comparisons are made difficult due to differences in definitions of various financial terms used in the ratio analysis.

42

Absolute Figures Distortive . Ratios devoid of absolute figures may prove distortive as ratio analysis is primarily a quantitative analysis and not a qualitative analysis.

Price Level Changes . While making ratio analysis, no consideration is made to the changes in price levels and this makes the interpretation of ratios invalid.Ratios no Substitutes . Ratio analysis is merely a tool of financial statements. Hence, ratios become useless if separated from the statements from which they are computed.

Guidelines or precautions for the use of ratios

The calculation of ratios may not be difficult task but their use is not easy. The information on which these are based, the constraints of financial statements, objectives for using them is important factors which influence the use of ratios.

Accuracy of financial statements : Ratios are calculated from the data available in financial statements. The reliability of ratios is liked with accuracy. Before calculating the ratios one should see whether proper concepts and conventions have been used for preparing financial statement or not.

Objective and purpose of analysis : the purpose and the objectives laid down should be properly analyzed. If the purpose is to study the current financial position then ratios relating to current assets and current liabilities will be studied. The purpose of the use of ratios is also important. A creditor , banker , an investor ,a shareholder all have different objects of studying ratios

Selection of ratios : another precaution in ratios analysis is the proper selection of appropriate ratio .the ratios should match the purpose for which these are required. Only those ratios should be selected which can through light on the matter to be discussed. For example I have taken the liquidity and profitability ratios for financial analysis of my sample units.

Use of standard : the ratios will give an indication of financial position only when discussed with reference to certain standards. These standards may be rule of thumb as in case of current ratio and acid test ratio. The comparison of calculated ratios with the standards will help the analyst in forming his opinion about financial situation of the concern

43

Caliber of analyst : the interpretation of the ratios will depend on the caliber and the competence of the analyst. A wrong interpretation may create havoc for the concern since wrong conclusions may lead to wrong decisions.

Ratios provide only a base : The ratios are only the guidelines for the analyst. He should not base his decisions entirely on them .the study of ratios in isolation may not always prove useful.

A) Financial Analysis

S.No Ratios Reliance Mutual Fund 05-06

ICICI PRU Mutual Fund 05-06

HDFC Mutual Fund 05-06

1 Current Ratio 1.39:1 2.20:1 0.889:1 2 Equity Ratio 58.74% 43.4% 58.09% 3 Fixed Assets To

Net Worth Ratio62.3% 0.623:1 56.89%

4 Current Assets To Proprietors Fund

154.8% 100.9% 68.4%

5 Earning Per Share 3.63 7.86 16.94

Definition and Interpretation

CURRENT RATIO

Current ratio may be defined as the relationship between current assets and current liabilities. This ratio, also known as working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position or liquidity of a firm. It is calculated by dividing the total of current assets by total of the current liabilities.

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time as and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties. An increase in the current ratio represents improvement in the liquidity position of a firm while a decrease in the current ratio indicates that there has been deterioration in the liquidity position of the firm. As a convention the minimum of “two to one ratio “is referred to as a rule of thumb or arbitrary

44

standard of liquidity for a firm. A ratio equal or near to the rule of thumb of 2 : 1 i.e. current assets double the current liabilities is considered to be satisfactory. However, the rule of 2 : 1 sound not be blindly followed while making interpretation of the ratio, because firms having less than 2 : 1 ratio may be having a better liquidity than even firms having more than 2 : 1 ratio.

PROPRIETORY RATIO OR EQUITY RATIO

A variant to the debt-equity ratio is the proprietory ratio which is also known as Equity Ratio or Shareholders’ to Total Assets Ratio. This ratio establishes the relationship between shareholders’ funds to total assets of the firm. The ratio or proprietors’ funds to total funds (Proprietors + outsiders’ funds or total funds or total assets) is an important ratio for determining long-term solvency of a firm) As equity ratio represents the relationship of owner’s funds to total assets, higher the ratio or the share of the shareholders in the total capital of the company, better is the long-term solvency position of the company. This ratio indicates the extent to which the assets of the company can be lost without affecting the interest of creditors of the company.

FIXED ASSETS TO TOTAL LONG TERM FUNDS OR FIXED ASSETS RATIO

The ratio indicates the extent to which the totals of fixed assets are financed by long term funds of the firm. Generally, the total of the fixed assets should be equal to the total of the long term funds or, say, the ratio should be 100%, But in case the fixed assets exceed the total of the long term funds it implies that the firm has financed a part of the fixed assets out of current funds or the working capital which is not a good financial policy. And if the total long-term funds are more than total fixed assets, it means that a part of the working capital requirement is met out of the long term funds of the firms. The ratio indicates the extent to which proprietors’ funds are invested in current assets. There is no ‘rule of thumb’ for this ratio and depending upon the nature of the business there may be different ratios for different firms.

RATIO OF CURRENT ASSETS TO PROPRITORS’ FUNDS

The ratio is calculated by dividing the total of current assets by the amount of shareholders’ funds. The ratio indicates the extents to which proprietors’ fund are invested in current assets. There is no “rule of thumb” for this ratio and depending upon the nature of the business there may be different ratios for different firms.

EARNING PER SHARE (E.P.S)

45

Earnings per share are a small variation of return on equity capital. The earnings per share is a good measure of profitability and when compared with E.P.S calculated for a number of years indicates whether or not earning power of the company has increased.

ANANLYSIS

1. HDFC TOP 200

FUND MANAGER:- PRASHANT JAIN

INVESTMENT INFORMATION

Launch 03-09-96Plans Growth, DividendDiv Freq. NARedeem Time 3 Working DaysManagement Fee (%) 1.25Dealing Time (Hrs.) 15 Hrs.Min Investment (Rs.) 5000Min SIP Investment (Rs.) 1000Registrar Computer Age Management ServicesLoad: 2.25 % for investment upto Rs. 4.999 Cr.

SECTOR WEIGHTAGE:-

46

0%

7%9% 2%

2%

1%

11%

5%

11%19%

13%

4%

0%

2% 14%

0%Sector wt.

auto

basic/eng

chemicals

construction

cons D

cons. ND

diversified

energy

financial

health care

metals

others

services

technology

textile

2. RELIANCE GROWTH

FUND MGR:- SUNIL SINGHANIA

INVESTMENT INFORMATIONLaunch 07-10-95Plans Growth, Dividend, BonusDiv Freq. NARedeem Time 3 Working DaysManagement Fee (%) 1.25Dealing Time (Hrs.) 15Min Investment (Rs.) 5000Min SIP Investment (Rs.) 1000Registrar Karvy Computer share Pvt Ltd.Load 2.25 % for investment upto Rs.1.999

SECTOR WEIGHTAGE:-

47

0%

3%

4%

7%

1%

0%

3%

4%

10%

2%

8%22%

25%

5%

6%

0% Sector wt.

autobasic/eng

chemicals

constructioncons D

cons. ND

diversifiedenergy

financial

health caremetals

others

servicestechnology

textile

3. ICICI PRU INFRA

FUND MGR:- SANKARAN NAREN,AMIT MEHTA

INVESTMENT INFORMATIONLaunch 16-08-05Plans growth,dividendDiv Freq. NARedeem Time 3 working daysManagement Fee (%) 1.25Dealing Time (Hrs.) 15Min Investment (Rs.) 5000Min SIP Investment (Rs.) 50Registrar Computer Age Management ServicesLoad: 2.25 % for investment upto Rs. 4.999 Cr.

SECTOR WEIGHTAGE:-

48

0%1% 12%0%

7%0%0%

18%

24%

12%

0%

13%

2%

2% 9% 0%

Sector wt.autobasic/eng.chemicalsconstructioncons Dcons. NDdiversifiedenergyfinancialhealth caremetalsothersservicestechnologytextile

Chapter 5

49

MARKET VIABILITY

Reliance Salary Advantage

Reliance Salary AddVantage is a savings cum investment program that has been planned meticulously to draw optimum advantage from your investments by:

50

Allocating idle funds to liquid scheme that has a potential to earn a little extra everyday in the short-term Investing into other open-ended schemes that have the potential to deliver higher returns over a long-term period to meet your long-term financial goals.

Thus, Reliance Salary AddVantage helps you bridge the gap between savings and investments along with the added benefit of liquidity.

Investing with short term perspective

Through Reliance Salary AddVantage the funds are invested in low-risk instruments like the Reliance Liquid Fund to achieve optimum returns in the short term. Reliance Liquid Fund Treasury Plan Retail is an open-ended liquid scheme, which endeavors to make the most of the opportunities that exist in money market and other short-term, fixed income securities.

NAV Performance report as on 30 t h March, 2007Compounded Annualized Growth Return in %

  1 year 3 year 5 year Since inception 23rd March, 1998

Reliance Liquid Fund - TP - Retail - Growth 6.63 5.43 5.68 6.75

Crisil Liquid Fund Index 6.39 5.13 5.15 NA

Investing with the long-term perspective

The key to astute financial planning is to start early and keep on investing on a regular basis to achieve your long-term financial goals. Be it your child’s education, marriage or buying a home. Reliance Salary AddVantage allows you to do exactly the same through the Systematic Transfer Plan (STP). STP allows you to allocate your idle money from Liquid Fund to one or more than one transferee schemes like Growth Fund and Vision Fund which have the potential to give higher returns over a long-term period and thus help you achieve your long term financial goals.

Convenient modes of transactionOnce you have enrolled under Reliance Salary AddVantage program, you would be able to transact through: Reliance Any Time Money Card which enables you to access your investments at over 1 million VISA-enabled ATMs across the globe. You can

51

withdraw up to 50% of your investment instantly - any time of the day or night. The Card is an ATM cum debit card, which allows you to carry out cashless transactions, across the globe.One cash withdrawal and one balance enquiry per card will be free every month at HDFC Bank ATMs only. Charges applicable on subsequent transactions or balance enquiry. No charges applicable on card usage at Merchant Establishment locations.

Online Transaction FacilityA person can buy, switch or redeem your units online from the comfort of your home or office using the online transaction facility.

Other key benefits Intercity Transaction Facility : Purchase/redeem units from any Reliance Mutual Fund Branch across India at no extra cost. Systematic Withdrawal Plan : This facility allows to give standing instructions to transfer money to your bank account for a specific purpose for e.g. for an EMI.

Other schemes where this program is available are as follows :• Reliance Growth Fund • Reliance Vision Fund • Reliance Equity Opportunities Fund • Reliance NRI Equity Fund • Reliance Banking Fund • Reliance Pharma Fund • Reliance Media and Entertainment Fund • Reliance Diversified Power Sector Fund • Reliance Tax Saver (ELSS) Fund- subject to a lock in for 3 yrs • Reliance Equity Fund • Reliance Index Fund • Reliance Income Fund • Reliance Medium Term Fund • Reliance NRI Income Fund • Reliance Floating Rate Fund

Transferee schemes where STP is available are as follows :Reliance Banking Fund, Reliance Diversified Power Sector Fund, Reliance Pharma Fund, Reliance Vision Fund, Reliance Growth Fund, Reliance Media & Entertainment Fund, Reliance Equity Opportunities Fund, Reliance Tax Saver (ELSS) Fund- subject to a lock in for 3 yrs, Reliance Equity Fund, Reliance Monthly Income Plan, Reliance Income Fund, Reliance Medium Term Fund, Reliance Liquid Fund (not eligible in case of Capital Appreciation Systematic Transfer Plan), Reliance Short Term Fund.

52

Chapter 6

53

FINDINGS AND CONCLUSION

Question 1: What motives do you keep in your mind while investing?

54

T- Test was performed for the analysis of this question and the inferences were that returns were given high preference, but there was no significant finding to demarcate between the underline factors of safety and return.

Question 2: In which of the following do prefer to invest?

Paired comparison correlation test was performed for the analysis of the investment preference of the respondents, where demonstrated a high degree of negative correlation pertaining to the investment in mutual funds and other securities. Respondent who made their investment in mutual funds show very less tendency of investing in other options. It is the testimony to the emerging fact that mutual funds off late as the one of the most secure options available in the market.

Question 3: For every rupee 100 you save how much you invest in above mentioned investment option?

According to the survey 42% of the individuals who have ticked investment option save out of Rs. 100, 20% -25% in the opted option, and 29% of the people invest less than 25% in the opted option.

Question 4: Where do you stand in respect to investment in mutual funds?

Number of respondents

Zero13%

less than 2529%

25-30 per cent42%

50 to 75 percent

8%

more than 758%

55

respondents

Present37%

earlier25%

planning17%

never17%

any other4%

The findings clearly hints that 37% of the people have already cashed in lucrative mutual funds industry and there are still 63% of the people who are apprehensive about the industry, ignorance playing the spoil sport in optimal growth of the industry. Although there are people who want to avail from the sector but having desirable knowledge about the sector is holding them back.

Question 5: Do you carry any financial liability at present?No. of households

67%

29%

4%

No liability

single liability

double liability

According to the study there are 67% of the people who do not carry any financial liability and 29% of the people carry single liability either house loans, car loans or education loans. And around 4% people carry double financial liabilities.

Question 6: Whom do you consult while making the investment decisions?

56

Number of households

single advisor42%

Two advisors29%

three advisors8%

four advisors21%

single advisorTwo advisorsthree advisorsfour advisors

According to the analysis 42% of the people make self decision or they make their decision consulting only one of the options available. And 29% of the people consult twice before making any investment, followed by 21% and 8% of the people consulting three and four advisors respectively.

Question 7:) Do you do tax planning?Respondents

Always50%

Not always33%

Sometimes17%

50% of the respondents always go in for the tax planning, 17% do it sometimes and 33% of them do it on their convenience. Majority of the respondents go in for tax planning suiting to the investment options prevalent in the market with due compliance of Govt. regulations.

Question 8: How do you do tax planning? Please rank the following from 1 to 5.

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Rank Self Govt. Advisors Others1 6 2 1 12 1 3 1 03 2 2 2 04 0 1 1 05 8 1 6 5

Respondents generally like to plan their returns on their own; some prefer Tax advisors while some call for Govt. consultancies which are mostly free of cost, to undertake their planning in an optimal manner. Small portion of the sample, however take help of other instruments.

Question 9: Where do you invest to do the same?

Respondents

LIC27%

Post Office21%

Mutual Fund46%

Others6%

Mutual funds surfaced as prime investment option with 46% respondents followed by Insurance 27% and Post Office 21%. 6% respondents look for other options in the market. Lucrative Mutual Fund industry with low risk hassle free environment has definitely come up with goods to suit the investment aspirations of the people.

Question 10: Are you satisfied with your present investment portfolio?

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Respondents

Highly13%High

4%

moderately54%

satisfied25%

Not satisfied4%

A high proportion of the respondents 54% of them are moderately satisfied with their investment portfolio, 25% of the respondents are satisfied and 13 % highly satisfied with 4% in between highly satisfied and moderately satisfied, only 4% of the respondents are not at all satisfied with their investment portfolio.

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CHAPTER 7

SUGGESTIONS

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While making investment decisions the investors tries to forgo a optimal way through either going for safety or returns but there being no clear demarcation between the above two factors, hence the need of the hour being a customized product which achieves the optimal balance between the two. Innovation is the key to put an end to customer apprehensions.In the research it was found that we have 63% of unexplored market and out of this portion of market 67% although do not carry any financial liability still are apprehensive about investing in mutual funds. So at least people who have the disposal income to invest in the mutual funds must be captured by spreading awareness regarding mutual funds and Word of Mouth (WOM) publicity can be used as to inform people because according to the survey when it comes to customer buying behavior the most trusting factor is peer group suggestions.

Although many people are going for the tax planning but still 54% of the Market is untapped by mutual funds, so the company should come up with more tax rebate schemes to attract the customers to mutual funds.So we can say that Salary Addvantage product of Reliance mutual have a market viability as there exits a huge untapped market by the mutual fund industry, moreover mutual funds are emerging as the most preferable investment option in future market trends.

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REFERENCES

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BOOKS

1. Gupta S.K "Financial Management" Kalyani Publications,2nd edition, 2003

2. Pandey, I.M ."Financial Management" Vikas Publishers, 8th edition

3. Kothari C.R. "Research Methodology" Vishwa Prakashan, 2nd edition, 2003

Annual reports of the Companies for the financial years 2004-2005 & 2005-2006www.reliancemutual.comwww.amfiindia.comwww.google.com.in

WEB SITES

http://www.indiainfoline.com/mufu/MFDaily.asphttp://www.icicipruamc.comhttp://www.hdfc.comhttp://www.reliancemutual.com

MAGAZINES AND JOURNALS

Business World, “India’s Best Mutual Fund”ICICI Mutual Fund Review ,March 2004

HDFC Investment update April 2004

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Appendix

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Formulas applied and items included in various ratios.

Current ratio

Current assetsCurrent liabilities

Current Assets: - raw material, stores& spares, finished goods, stock in progress, debtors (unsecured, considered good), and interest accrued on investment, cash & bank balance.Current liabilities:-acceptances, sundry creditors, education and protection fund, other liabilities and interest accrued but not due on loans.

Proprietory or Equity Ratio

Shareholder’s fundTotal Assets

Total assets =Fixed assets + current assets

Fixed Assets net worth Ratio

Fixed Assets (After depreciation ) Shareholder’s Funds

Ratio of Current Assets to Proprietor’s Fund

Current AssetsShareholder’s Funds

Earning Per Share (E.P.S)

Net Profit and Pref. Dividend

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No. of Equity Shares

Questionnaire

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I am a management student of ICFAI National College doing my Summer Internship Training in Reliance Mutual Funds. I am making a project on Mutual Funds, so I need your valuable co-operation in this regard. This questionnaire is solely for educated purpose and has been designed to gather information regarding mutual fund investments.

1.) What motives do you keep in your mind while investing? Please rank the following from1 to 5, 1 being least preferred and 5 being most preferred.

1 2 3 4 5SafetyReturnsCapital appreciation

2.) In which of the following do prefer to invest?

1 2 3 4 5Mutual fundsSharesPost office Other (plz.specify)

3.) For every rupee 100 you save how much you invest in above mentioned investment option?

Less than 25 25-50 50-75 More than 75

4.) Where do you stand in respect to investment in mutual funds?Presently invested Earlier invested Planning to invest Never invested

5.) Do you carry any financial liability at present?

Less than50,000 50000-2 lkh 2-4 lkh 4-6 lkh 6 lkh aboveHouse loanCar loan Education loanCredit loan

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6.) Whom do you consult while making the investment decisions?

Always Not always Sometimes NeverSelfFriends/relativesBrokerBanker

7.) Do you do tax planning?

Always Not always Sometimes Never

8). How do you do tax planning? Please rank the following from 1 to 5

1 2 3 4 5SelfGovernment (TDS)Tax/wealth advisorOthers (plz specify)

9). Where do you invest to do the same?

Insurance (LIC) Post office (KVP,NSC) Mutual funds Others (plz specify )

10). Are you satisfied with your present investment portfolio?

Highly High moderately satisfied Not satisfied

Please specify the reason:Returns Safety Liquidity

Personal information1. Name:

2. Gender M/F Age Qualification

3. Occupation:

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Business Professional Retired Student Service Others

4. Name of the organization you are working for___________________________

5. Earning slab in which you fall: Below 50,000) 50000- 1 lakh 1lakh- 3lakh 3 lakh- 5 lakh 5lakh-above6. Address: _______________________________________________________________________________________________________________________

Contact number (M): __________________________________ (Off.): _________________________________ Email: _____________________________________________ Thanks for sparing your valuable time Babita chaudhary (Babita.chawdry@gmail.com)

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