1.) Introduction and Rationale of Topic Chosen: 1.1) Mutual Fund - The Concept

1.
) Introduction And Rationale Of Topic Chosen
1.1) Mutual Fund – The Concept
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 then invested in capital market instruments such as
shares, debentures and other securities. The income earned through these investments and the
capital appreciations realized are shared by its unit holders in proportion 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 basket of securities at a
relatively low cost. The flow Chart below describes broadly the work:-
1.2) Mutual Fund Structure

The above diagram gives an idea on the structure of an Indian mutual fund.
Sponsor: He is basically a promoter of the fund. For example Bank of Baroda, Punjab
National Bank, State Bank of India and Life Insurance Corporation of
India (LIC) are the sponsors of UTI Mutual Funds. Housing Development Finance Corporation
Limited (HDFC) and Standard Life Investments Limited are the sponsors of HDFC mutual
funds. The fund sponsor raises money from public, who become fund shareholders. The pooled
money is invested in the securities. Sponsor appoints trustees.
Trustees: Two third of the trustees are independent professionals who own the fund and
supervises the activities of the AMC. It has the authority to sack AMC employees for non-
adherence to the rules of the regulator. It safeguards the interests of the investors. They are
legally appointed i.e. approved by SEBI.
AMC: Asset Management Company (AMC) is a set of financial professionals who manage
the fund. It takes decisions on when and where to invest the money. It doesn’t own the money.
AMC is only a fee-for-service provider. The above 3 tier structure of Indian mutual funds is
very strong and virtually no chance for fraud.
Custodian: A Custodian keeps safe custody of the investments (related documents of

securities invested). A custodian should be a registered entity with SEBI. If the promoter holds
50% voting rights in the custodian company it can’t be appointed as custodian for the fund.
This is to avoid influence of the promoter on the custodian. It may also provide fund
accounting services and transfer agent services. JP Morgan Case is one of the leading
custodians.
Transfer Agents: Transfer Agent Company interfaces with the customers, issue a fund’s
units, help investors while redeeming units. Provides balance statements and fund performance
fact sheets to the investors. CAMS are a leading Transfer Agent in India.
1.3) Classification of Mutual Funds
Mutual Funds
Return Based Investment Based Sector Based Others
Income Funds Equity IT Industry Commodity Funds
Pharmaceutical Exchange Traded

Growth Funds Debt Industry Funds
Conservative Funds Balanced Power Sector Real Estate Funds
Tax Saving Schemes
Return based
I1. Return based classification:
The investors of the mutual fund schemes are made to enjoy a good return in form of regular
dividends or capital appreciation or a combination of these both.
a) Income Funds
Income funds are floated for the interest of investors who want to maximize current income.
These funds distribute periodically the income earned by them, in the form of either a constant
income at relatively low risk or in the form of maximum income possible with higher risk by
the use of leverage.
b) Growth Funds
These Schemes have the objective to achieve an increase in the value of the underlying
investments through capital appreciation, and they invest in growth oriented securities.
c) Conservative Funds
These funds offer a blend of good average returns and reasonable capital appreciation. These
funds are very popular and are ideal for the investors who want both growth and income from
their investment.
2. Investment Based Classification:
Mutual funds may also be classified on the basis of the kind of securities that they invest in:-
a) Equity Funds:
Equities are a high risk-high return asset class; the same risk profile spills over to equity funds
as well. However investors must take note of the fact that a large number of variations exist
within the 'high risk' equity funds segment. For example a sector fund would be on the
relatively higher scale in the risk-return paradigm when compared to an index fund, which
simply tracks the movements in a chosen benchmark index. These funds invest most of their
investible shares in equity shares of companies and undertake the risk associated with the
investment in equity shares. In a developed market, Equity funds can be of different categories.
For example, ‘Blue Chip’, FMCG, PSUs, etc.
b) Short-Term Debt Funds:
There is a category of investors who have two critical needs that short-term debt funds help
achieve. One – they want to be invested for the short-term - less than 6 months. Two- over this
time frame, they are looking at preserving capital with a return that is superior to that of a fixed
deposit of a comparable tenure. The reason why short-term debt funds can preserve capital
better than long term debt funds is because they are invested in debt instruments of a shorter
tenure.
c) Balanced Fund:
These funds have their portfolio consisting of a balanced mix of equity and bonds. The
composition of these funds may vary depending upon the outlook of the market. Balanced
funds invest their corpus in both equity and debt instruments in a predetermined ratio, say
60:40. An aggressive balanced fund would typically hold a higher portion of its assets in
equities maybe as high as 70% of the total assets. On the other hand, a 'disciplined' balanced
fund would maintain a conservative equity allocation during most times.
3. Sector Based Funds:
There are funds that invest in a specified sector of economy and they specialize in the said
sector. However, they run the risk of not being able to diversify. Sector based funds are
aggressive growth funds which make investments on the basis of assessed bright future for a
particular sector. The specialty of sector funds rather oddly lies in the fact that they go against
the very grain of mutual fund investing i.e. holding a diversified portfolio. That is why you will
find some Asset Management Companies that swear against sector funds. Sector funds are
launched with the intention of capitalizing on opportunities in a single sector.
4. Others:
a) Commodity Funds:
It will invest directly in commodities or through shares of the commodity companies or
through commodity futures contract .Most common example of such fund is precious-metal
fund, Gold funds invest in Gold, Gold futures or shares of gold mines
b) Exchange Traded Funds:
It combines the best features of open end and closed structure. It tracks a market index and
trades like a stock on the stock market. ETFs are not the index funds.
c) Real Estate Funds:
It can invest in real estate, Fund real estate developers, Buy shares of housing finance companies,
Buy securitized assets.
Snapshot of Mutual Fund Schemes
Mutual Objective Risk Investment Who should Investm

Fund Portfolio invest ent
Type horizon
Money Liquidity + Negligible Treasury Bills, Those who park their funds 2 days - 3
Market Moderate Certificate of in current accounts or short- weeks
Income + Deposits, term
Reservation of Comm. Papers, Call, bank deposits
Capital Money
Short- Liquidity + Little Call Money, Those with surplus 3 weeks -

term Moderate Interest Rate CPs, Treasury Bills, short-term funds 3 months
Income CDs, Short- term
Funds Securities.
(Floating
-
short-term)
Bond Regular Credit Risk Predominantly Salaried & More than 9-
Funds Income & Interest Debentures, conservative 12 months
Rate Risk Govt. securities, investors
(Floating Corporate Bonds
-
Long-term)
Gilt Funds Security & Interest Government Salaried & conservative 12 months
Income Rate Risk securities investors & more
Equity Long-term High Risk Stocks Aggressive investors with 3 years plus
Funds Capital long term Outlook.
Appreciation
To generate
Index Funds NAV varies Portfolio Aggressive 3 years plus
returns that are with index indices like Investors.
commensurate performance BSE, NIFTY
with returns of etc
respective
indices
Balanced Growth & Regular Capital Balanced ratio Moderate & 2 years plus
Funds Income Market and of equity & debt Aggressive
Interest funds to ensure
Rate Risk higher returns
1.4) Advantages of Mutual Fund
 Diversification- Diversification involves the mixing of investments within a portfolio

and is used to manage risk. By purchasing mutual funds, you are provided with the
immediate benefit of instant diversification and asset allocation without the large
amounts of cash needed to create individual portfolios.
 Economies of scale- Mutual funds are able to take advantage of their buying and
selling size and thereby reduce transaction costs for investors. When you buy a mutual
fund, you are able to diversify without the numerous commission charges.
 Divisibility- Investors can purchase mutual funds in smaller denominations. Smaller
denominations of mutual funds provide mutual fund investors the ability to make
periodic investments through monthly purchase plans while taking advantage of dollar-
cost averaging. So, rather than having to wait until you have enough money to buy
higher-cost investments, you can get in right away with mutual funds. This provides an
additional advantage – liquidity.
 Liquidity- Another advantage of mutual funds is the ability to get in and out with
relative ease. In general, you are able to sell your mutual funds in a short period of time
without there being much difference between the sale price and the most current market
value.
 Professional Management- When you buy a mutual fund, you are also choosing a
professional money manager. This manager will use the money that you invest to buy
and sell stocks that he or she has carefully researched. Therefore, rather than having to
thoroughly research every investment before you decide to buy or sell, you have a
mutual fund's money manager to handle it for you.
1.5) Disadvantages of Mutual Fund
 Fluctuating returns- Mutual funds are like many other investments without a
guaranteed return: there is always the possibility that the value of your mutual fund will
depreciate. Unlike fixed-income products, mutual funds experience price fluctuations
along with the stocks that make up the fund. When deciding on a particular fund to buy,
you need to research the risks involved.
 Diversification- Although diversification is one of the keys to successful investing,
many mutual fund investors tend to over diversify. The idea of diversification is to
reduce the risks associated with holding a single security; over diversification occurs
when investors acquire many funds that are highly related and, as a result, don't get the
risk reducing benefits of diversification.
 Costs- Mutual funds provide investors with professional management, but it comes at a
cost. Funds will typically have a range of different fees that reduce the overall payout.
In mutual funds, the fees are classified into two categories: shareholder fees and annual
operating fees.
 Evaluating Funds- Another disadvantage of mutual funds is the difficulty they pose
for investors interested in researching and evaluating the different funds. Unlike stocks,
mutual funds do not offer investors the opportunity to compare the P/E ratio, sales
growth, earnings per share, etc.
1.6) History of Mutual Fund (Worldwide):
When three Boston securities executives pooled their money together in 1924 to create the
first mutual fund, they had no idea how popular mutual funds would become.
The idea of pooling money together for investing purposes started in Europe in the mid-1800s.
The first pooled fund in the U.S. was created in 1893 for the faculty and staff of Harvard
University. On March 21st, 1924 the first official mutual fund was born. It was called the
Massachusetts Investors Trust.
After one year, the Massachusetts Investors Trust grew from $50,000 in assets in 1924 to
$392,000 in assets (with around 200 shareholders). In contrast, there are over 10,000 mutual
funds in the U.S. today totaling around $7 trillion (with approximately 83 million individual
investors) according to the Investment Company Institute.
The stock market crash of 1929 slowed the growth of mutual funds. In response to the stock
market crash, Congress passed the Securities Act of 1933 and the Securities Exchange Act of
1934. These laws require that a fund be registered with the SEC and provide prospective
investors with a prospectus. The SEC helped create the Investment Company Act of 1940,
which provides the guidelines that all funds must comply with today.
With renewed confidence in the stock market, mutual funds began to blossom. By the end of
the 1960s there were around 270 funds with $48 billion in assets. In 1976, John C. Bogle
opened the first retail index fund called the First Index Investment Trust. It is now called the
Vanguard 500 Index fund. In November of 2000 it became the largest mutual fund ever with
$100 billion in assets.
1.7) Indian Mutual Industry-An Insight
The concept of mutual funds in India dates back to the year 1963. The era between 1963 and
1987 marked the existence of only one mutual fund company in India with Rs. 67bn assets
under management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By
the end of the 80s decade, few other mutual fund companies in India took their position in
mutual fund market.
The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank Mutual
Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual
Fund.
The succeeding decade showed a new horizon in Indian mutual fund industry. By the end of
1993, the total AUM of the industry was Rs. 470.04bn. The private sector funds started
penetrating the fund families. In the same year the first Mutual Fund
Regulations came into existence with re-registering all mutual funds except UTI. The
regulations were further given a revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India which has now
merged with Franklin Templeton. Just after ten years with private sector players’ penetration,
the total assets rose up to Rs. 1218.05 bn. Today there are 37 mutual fund companies in India.
1.8) History Of Indian Mutual Fund Industry
The history of Mutual Funds in India can be broadly divided into 5 Phases:
Phase I. Establishment and Growth of Unit Trust of India - 1964-87
Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an
act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate
under the regulatory control of the RBI until the two were de-linked in 1978 and the entire
control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI
launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the
largest number of investors in any single investment scheme over the years. UTI launched
more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched
ULIP in 1971, six more schemes between 1981 and 1984, Children’s Gift Growth Fund and
India Fund (India's first offshore fund) in 1986, Master share (India’s first equity diversified
scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. By the
end of 1987, UTI's assets under management grew ten times to Rs. 6700 crores.
Phase II. Entry of Public Sector Funds - 1987-1993
The Indian mutual fund industry witnessed a number of public sector players entering the
market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India
became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by
Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual
Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the
industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader
with about 80% market share.
1992-93 Amount Mobilized Assets Under Management Mobilization as % of

(In Rs. crores) (In Rs. crores) Gross Domestic Savings
UTI 11,057 38,247 5.2%
Public Sector 1,964 8,757 0.9%
Total 13,021 47,004 6.1%
Phase III. Emergence of Private Sector Funds - 1993-96
The permission given to private sector funds including foreign fund management companies
(most of them entering through joint ventures with Indian promoters) to enter the mutual fund
industry in 1993, provided a wide range of choice to investors and more competition in the
industry. Private funds introduced innovative products, investment techniques and investor-
servicing technology. By 1994-95, about 11 private sector funds had launched their schemes.
Phase IV. Growth and SEBI Regulation - 1996-2004
The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after
the year 1996. The mobilization of funds and the number of players operating in the industry
reached new heights as investors started showing more interest in mutual funds. Investors'
interests were safeguarded by SEBI and the Government offered tax benefits to the investors in
order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that
set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted all
dividend incomes in the hands of investors from income tax. Various Investor Awareness
Programs were launched during this phase, both by SEBI and AMFI, with an objective to
educate investors and make them informed about the mutual fund industry. In February 2003,
the UTI Act was repealed and UTI was stripped of its Special legal status as a trust formed by
an Act of Parliament. The primary objective behind this was to bring all mutual fund players
on the same level.
UTI was re-organized into two parts:
1. The Specified Undertaking
2. The UTI Mutual Fund
Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past
schemes (like US-64, Assured Return Schemes) are being gradually wound up. However, UTI
Mutual Fund is still the largest player in the industry. In 1999, there was a significant growth in
mobilizations of funds from investors and assets under management which is supported by the
following data:
ASSETS UNDER MANAGEMENT (Rs. CRORES)
AS ON UTI PUBLIC PRIVATE TOTAL
SECTOR SECTOR
31-March- 99 53,320 8,292 6,860 68,472
Phase V. Growth and Consolidation - 2004 Onwards
The industry has also witnessed several mergers and acquisitions recently, examples of which
are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund
and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutual
fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were
38 funds as at the end of April 2010. This is a continuing phase of growth of the industry
through consolidation and entry of new international and private sector players.
1.9) Indian Mutual Fund Industry –Today
Thirteen out of 37 fund houses witnesses a growth in average AUM in January, 2010, with
Reliance Mutual Fund continuing the largest fund house by asset at Rs. 1.17 trillion. HDFC
was at the second spot at Rs. 948 billion, followed by ICICI Prudential Mutual Fund at Rs. 784
billion. UTI Mutual Fund and Birla Sun Life Mutual Fund followed with an average AUM of
Rs. 745 billion and Rs. 626 billion, respectively. The share of top 5 MF’s in the industry’s asset
was at 56% while that of top 10 funds’ asset was close to 80% in January 2010.
As per AMFI data, UTI Mutual Fund had the highest number of investor folios at 10 million as
of December 2009. The total number of investor folios for the mutual fund industry stood at 48
million as of December 2009.
The average AUM data analyzed for equity oriented schemes showed that Reliance Growth
Fund held the highest corpus of around Rs. 70 billion, followed by HDFC top 200 fund,
Reliance diversified Power Sector fund, HDFC equity fund and SBI magnum Tax Gain
Scheme1993 with an average AUM Rs. 61billion, Rs.58 billion, Rs. 55 billion, Rs. 54 billion,
respectively.
Average Assets under Management as of September 2010
As per the data released by the Association of Mutual Funds in India (AMFI), the combined
average AUM of the 41 fund houses in the country increased to Rs. 715466.98 crores in
September, 2010, witnessing a growth of 4.06 per cent compared to Rs. 687559.54 crores in
August, 2010.
Reliance Mutual Fund AAUM increased for a consecutive month and currently stood at Rs 1,
07,748.54 crores. Out of the 41 mutual funds, 13 mutual funds registered fall in AAUM in
September, 2010. All top 10 fund houses registered a gain in the current month. Among the top
5 AMC in terms of total AAUM, ICICI Mutual Fund had the lowest percentage growth of only
1.39 per cent to Rs 69,754.78 crores while UTI Mutual Fund managed to top by growing at
5.36 per cent.
The fund houses which have experienced the maximum gain in their AAUM are Pramerica
Mutual Fund, Peerless Mutual Fund, Axis Mutual Fund, DSP Black Rock Mutual Fund and
Fortis Mutual Fund, the growth experienced by them were above 10 per cent compared to last
month.
1.10) Association of Mutual Funds in India (AMFI)
With the increase in Mutual Fund players in India, a need for Mutual Fund Association in India
was generated to function as a non-profit organization. Association of Mutual Funds in India
(AMFI) was incorporated on 22nd August, 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has been registered
with Securities Exchange Board of India (SEBI). Till date all the AMCs are that have launched
mutual fund schemes are its members. It functions under the supervision and guidelines of its
Board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a
professional and healthy market with ethical lines enhancing and maintaining standards. It
follows the principle of both protecting and promoting the interests of mutual funds as well as
their unit holders.
The objectives of Association of Mutual Funds in India
The Association of Mutual Funds of India works with 30 registered AMCs of the country. It
has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The
objectives are as follows:
1. This Mutual Fund Association of India maintains high professional and ethical standards in
all areas of operation of the industry.
2. It also recommends and promotes the top class business practices and code of conduct which
is followed by members and related people engaged in the activities of Mutual Fund and Asset
Management. The agencies who are by any means connected or involved in the field of capital
markets and financial services also involved in this code of conduct of the association
3. AMFI interacts with SEBI and works according to SEBIs guidelines in the Mutual Fund
industry.
4. Associations of Mutual Fund of India do represent the Government of India, the Reserve
Bank of India and other related bodies on matters relating to the Mutual Fund Industry.
5. It develops a team of well qualified and trained Agent distributors. It implements a
programme of training and certification for all intermediaries and other engaged in the mutual
fund industry.
6. AMFI undertakes all India awareness programme for investors in order to promote proper
understanding of the concept and working of Mutual Funds.
7. At last but not the least Association of Mutual Fund of India also disseminate information on
Mutual Fund Industry and undertakes studies and research either directly or in association with
other bodies.
The sponsors of Association of Mutual Funds in India
Bank Sponsored
1. SBI Fund Management Ltd.
2. BOB Asset Management Co. Ltd.
3. Canbank Investment Management Services Ltd.
4. UTI Asset Management Company Pvt. Ltd.
Institutions
1. GIC Asset Management Co. Ltd.
2. Jeevan Bima Sahayog Asset Management Co. Ltd.
Asset Management Company:
1. Benchmark Asset Management Co. Pvt. Ltd.
2. Cholamandalam Asset Management Co. Ltd.
3. Credit Capital Asset Management Co. Ltd.
4. Escorts Asset Management Ltd.
5. JM Financial Mutual Fund
6. Kotak Mahindra Asset Management Co. Ltd.
7. Reliance Capital Asset Management Ltd.
8. Sahara Asset Management Co. Pvt. Ltd
9. Sundaram Asset Management Company Ltd.
10. Tata Asset Management Private Ltd.
Predominantly India Joint Ventures:

1. Birla Sun Life Asset Management Co. Ltd.
2. DSP Merrill Lynch Fund Managers Limited
3. HDFC Asset Management Company Ltd.
Predominantly Foreign Joint Ventures:

1. ABN AMRO Asset Management (I) Ltd.
2. Alliance Capital Asset Management (India) Pvt. Ltd.
3. Deutsche Asset Management (India) Pvt. Ltd.
4. Fidelity Fund Management Private Limited
5. Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.
6. HSBC Asset Management (India) Private Ltd.
7. ING Investment Management (India) Pvt. Ltd.
8. Morgan Stanley Investment Management Pvt. Ltd.
9. Principal Asset Management Co. Pvt. Ltd.
10. Prudential ICICI Asset Management Co. Ltd.
11. Standard Chartered Asset Mgmt Co. Pvt. Ltd.
1.11) SEBI Regulations for Mutual Funds (1996)
SEBI announced the amended Mutual Fund Regulations on December 9, 1996 covering
Registration of Mutual Funds, Constitution and Management of Mutual funds and Operation of
Trustees, Constitution and Management of Asset Management Companies (AMCs) and
custodian schemes of MFs, investment objectives and valuation policies, general obligations,
inspection and audit. The revision has been carried out with the objective of improving investor
protection, imparting a greater degree of flexibility and promoting innovation.
The increase in the number of MFs and the types of schemes offered by them necessitated
uniform norms for valuation of investments and accounting practices in order to enable the
investors to judge their performance on a comparable basis. The Mutual Fund Regulations is
sued in December 1996 provide for a scheme-wise report and justification of performance,
disclosure of large investments which constitute a significant portion of the portfolio and
disclosure of the movements in the unit capital.
The existing Asset Management Companies are required to increase their net worth from Rs.10
crores within one year from the date of notification of the amended guidelines. AMCs are also
allowed to do other fund-based businesses such as providing investment management services
to offshore funds, other Mutual Funds, Venture Capital Funds and Insurance Companies. The
amended guidelines retained the former fee structure of the AMCs of 1.25% of weekly average
Net Asset Value (NAV) up to Rs.100 crores and 1% of NAV for net assets in excess of Rs.100
crores.
The consent of the investors has to be obtained for bringing about any change in the
fundamental attributes of the scheme on the basis of which the unit holders had made initial
investments. The regulation empowers the investor. The amended guidelines require portfolio
disclosure, standardization of accounting policies, valuation norms for NAV and pricing. The
regulations also sought to address the areas of misuse of funds by introducing prohibitions and
restrictions on affiliate transactions and investment exposures to companies belonging to the
group of sponsors of mutual funds. The payment of early bird incentive for various schemes
has been allowed provided they are viewed as interest payment of early bird incentive for early
investment with full disclosure.
The various Mutual Funds are allowed to mention an indicative return for schemes for fixed
income securities. In 1998-99 the Mutual Funds Regulation were amended to permit Mutual
Funds to trade in derivatives for the purpose of hedging and portfolio balancing. SEBI
registered Mutual Funds and Fund managers are permitted to invest in overseas markets,
initially within an overall limit of US $500 million and a ceiling for an individual fund at US$
50 million.
SEBI made (October 8, 1999) investment guidelines for MFs more stringent. The new
guidelines restrict MFs to invest no more than 10% of NAV of a scheme in share or share
related instruments of a single company. MF’s in rated debt instruments of a single issuer is
restricted to 15% of NAV of the scheme (up to 20% with prior approval of Board of Trustees
or AMC). The new norms also specify a maximum limit of 25% of NAV for any scheme for
investment in listed group companies as against an umbrella limit of 25% of NAV of all
schemes taken together earlier. SEBI increased (June 7, 2000) the maximum investment limit
for MFs in listed companies from 5% to 10% of NAV in respect of open-ended funds. Changes
in fundamental attributes of a scheme was also allowed without the consent of three fourths of
unit holders provided the unit holders are given the exit option at NAV without any exit load.
MFs are also not to make assurance or claim that is likely to mislead investors. They are also
banned from making claims in advertisement based on past performance.
1.12) Future of Mutual Funds in India
At the end of 2006 March, Indian mutual fund industry reached Rs. 2, 57, 499 crores. It is
estimated that by 2010 March-end, the total assets of all scheduled commercial banks should
be Rs. 40, 90, 000 crores.
The annual composite rate of growth is expected 13.4% during the rest of the decade. In the
last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by
year 2010, mutual fund assets will be double.
Going by the above facts and generally, mutual funds have often been considered a good route
to invest and earn returns with reasonable safety. Small and big investors have both invested in
instruments that have suited their needs. And so equity and debt funds have attracted
investments alike. The performance of the investments, equity in particular, for the last one-
year, has however been disappointing for the investors.
The fall in NAVs of equity funds, and it is really steep in some, even to the extent of 60-70
percent, has left investors disgusted. Such backlash was only to be expected when funds, in a
hurry to post good returns invested in volatile tech stocks. The move, though good under
conducive market conditions, is the point of rebuttal now. Owing to volatility in market and
profit warnings by some IT majors, tech stocks have been on the downhill journey and the
result is fall in NAVs of most equity funds.
This hurts the investor but then investments in equity are never safe. Mutual funds are not just
guilty of mismanaging their risks as the recent survey by Price water house Coopers indicates
but also not educating their investors enough on the risks facing them.
It is for the mutual benefit of the investors as well as mutual funds that investor is educated
enough or else an agitated investor might route his investments to other avenues that are
considered safe.
Debt funds are safe investments and generate returns far in excess of what other so-called safe
avenues such as banks generate. Despite this, the inflow of funds in debt funds and banks is by
no means comparable. The factor contributing to this the lack of understanding caused by
improper guidance by the intermediaries.
Till now, Investor education has been one of the issues, less cared for, by the industry. The
industry focused upon the amounts and not why a person wanted to invest or whether a
particular product suited him or not. While educating the customer might not have been on the
cards earlier, the things are beginning to change now.
With SEBI passing on the guidelines, the funds will engage in investor education. The
guidelines state that funds will utilize the income earned on unclaimed money lying with them
for a period exceeding three years to educate the investors. AMFI has started a certification
program for intermediaries. This will be made mandatory for the intermediaries and is aimed at
educating the investors about the risks attached to the schemes and to inculcate adequate skills
into the intermediaries to help the investors choose the right kind of fund. Steps such as these
are aimed at obliterating various flaws in the system by standardizing the knowledge base of
intermediaries, as they are the interface between the investor and the funds.
Although the investors themselves are also guilty of picking funds that were not suited for
them, the blame can’t lie square on their shoulders alone. The industry has also got to bear
some of it. With such programs becoming mandatory, it can be ensured to some extent that
ignorance ceases to be an aspect associated with the industry.
Till now, investors have been ignorant about the kind of fund to be picked or how to select a
fund. Teaching an investor how to select a fund is thus an important aspect. Educated investors
can, on their part, ask pertinent questions to find funds that qualify to be in their portfolio as
per their risk bearing capacity.
It would not be improper to say that investor education is still the key to managing the funds
handed over by investors. The investors are important to the industry and likewise, mutual
funds form an important avenue for an investor. It would thus be of critical importance to
educate people for an informed investor is in the best position to pick up Schemes as per his
need.
1.13) Risk Return Analysis of the Schemes
A rational investor before investing his/her money in stock analysis the risk
associated with the particular stock. The actual returns he receives from the stock may vary
from the expected one and thus an investor is always caution about the rate of risk associated
with particular stock. Hence it becomes very essential on the part of investors to know the risk
as the hard earned money is being invested with the view to good return on investment.
Risk mainly consists of two components.

 Systematic risk
 Unsystematic risk
Systematic risk
The systematic risk affects the entire market. The economic conditional, political
situation, sociological change affects the entire market in turn affecting the company and even
the stock market. These situations are uncontrollable by corporate and investors.
Unsystematic risk
The Unsystematic risk is unique to industries. It differs from industries to industries.

Unsystematic risk stems from managerial inefficiency, technological change in production
process, availability of raw materials, change in the customer preference and labour problem.
The nature and magnitude of above mentioned factors differ from industry to industry and
company to company.
In general view, the risk for any investor would be the probably loss from investing
money in any mutual fund. but when look at the technical side of its, we cant just say these
schemes/ fund carry risk without any proof. They are certain set formulas to say the percentage
risk associated with it.
There are certain tools or formulas used to calculate the risk associated with schemes.
These tools helps us to understand the associated wit the schemes. These schemes are
compared with the benchmark BSE 100.
The Tools used for calculation
 Standard deviation
 Beta
 Alpha
 Sharpe ratio
 Treynor ratio
Arithmetic mean
AM=Σy/N
Where y= returns of NAV values
N= number of observation
Average returns that can be expected from investment. The Arithmetic returns is appropriate as
a measure of a central tendency of a number of returns calculated from particular time i.e. for 5
years.
Returns
Investor wants to maximize expected retunes subject to their tolerance for risk. Returns are the
motivating force and principal reward in investment process and it is the key method available
to investors in comparing alternative the investments. Measuring the historical returns allows
investor to access the how well the stocks have performed. Investor get returns either in form
of interest, dividend or capital appreciation. There are two terms, realized term and expected
return. Realized return earned in past.
RETURN= (Closing price-opening price) /opening price*100
Standard Deviation
The Standard deviation is measure of the variables around its mean or it is square root of the
sum of the squared root deviations from the mean divided the number of observation.
S.D is used to measure the variability of return i.e. the measure of dispersion. S.D is calculated
as the square root of variation. In finance investments volatility, S.D is also known as historical
volatility and it is used by investors as a gauge from the amounted of volatility.
S.D. = √(y-Y) ²/N

Where, y= return of portfolio
Y=average return of portfolio
N= number of months
Beta
Beta describes the relationship between the securities return and the index returns.
 Beta = + 1.0
One percent change in market index returns causes exactly one percent change in the security
return. It indicates that the security moves in tandem with the market.
 Beta = + 0.5
One percent change in the market index return causes 0.5 percent change in the security return.
The security is less volatile compared to the market.
 Beta = + 2.0
One percent change in the market index return causes 2 percent change in the security return.
The security return is more volatile. When there is a decline of 10% in the market return, the
security with beta of 2 would give a negative return of 20%. The security with more than 1 beta
value is considered to be risky.
 Negative Beta
Negative beta value indicates that the security return moves in the opposite direction to the
market return. A security with a negative beta of -1 would provide a return of 10%, if the
market return declines by 10% and vice-versa.
Beta= N*∑XY-(∑X) (∑Y)

N*∑ (X)²-(∑X)²
Where
N=No of observation
X=Total of market index value
Y=Total of return to Nav
Alpha
Alpha represents the forecast of residual return, which we consider the future return of any
portfolio. Alpha measures the unsystematic risk of a portfolio property because the portfolio
property also consists of both residual return and future expectation.
It is important to remember that the risk-free portfolio will always show a zero residual return
hence, any risk less security like cash will have always alpha equal to zero. A positive alpha of
1.0 means the fund has outperformed its benchmark index by 1% correspondingly; a similar
negative alpha would indicate an underperformance of 1%. Alpha indicates that the stock
return is independent of the market return .A positive value of alpha is a healthy sign. Positive
alpha values would yield profitable return.
The Formula is used to calculate:-

Alpha=Y-beta(x)
Where
Y= Average return to NAV return
X=Average return to market index
Sharpe Ratio
The performance measure developed by William Sharpe is referred to as the Sharpe ratio or the
reward to variability ration. It is the ratio of the reward or risk to the variability of return or risk
measured by the standard deviation of return the formula for calculating Sharpe ratio may be
stated as:
Sharpe ratio= Rp-Rf

S.D
Where,
Rp=Realised return on the portfolio.
Rf=Risk free rate of return.
S.D=standard deviation of portfolio return
Sharpe performance index gives a single value to be used for the performance ranking of
various fund or portfolio. Sharpe index measures the risk premium of the portfolio relative to
the total amount of risk in the portfolio. The risk premium is the difference between the
portfolio’s average rate of return and the risk less rate of return. The Standard Deviation of the
portfolio indicates the risk.
Higher the value of Sharpe ratio better the fund has performed. Sharpe ratio can be used to
rank the desirability of fund or portfolio. The fund that has performed well compared to other
will be rank first than others.
Treynor Ratio
The performance measure by jack. Treynor is referred to as Treynor ratio or reward to

volatility ratio. It is the ratio of the reward or risk premium to the volatility of return as
measuring by the portfolio beta. The formula for calculating Treynor ratio may be stated as:
Treynor ratio= Rp-Rf
Beta
Where:
Rp= realized return on the portfolio
Rf= risk free rate of return
Beta=portfolio beta.
2.) Literature Review & Problem Statement
2.1) About Reliance Mutual Fund
Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882
with Reliance Capital Limited (RCL), as the Settler/Sponsor and Reliance Capital Trustee Co.
Limited (RCTCL), as the Trustee.
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.
Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average Assets
Under Management (AAUM) of Rs. 1,07,749 Crores and an investor count of over 72 Lakh
folios. (AAUM and investor count as of September 2010)
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 159 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."
The main objectives of The 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.
2.2) Sponsor
Reliance Capital Limited
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 Mutual Fund (RMF)
has been sponsored by Reliance Capital Ltd (RCL). The promoter of RCL is AAA Enterprises
Private Limited. Reliance Capital Limited is a Non Banking Finance Company. Reliance
Capital Limited is one of the India’s leading and fastest growing financial services companies,
and ranks among the top three private sector financial services and banking companies, in
terms of net worth
Reliance Capital has interests in asset management and mutual funds, life and non-life
insurance, private equity and proprietary investments, stock broking and other activities in the
financial services sector. The net worth of RCL is Rs. 6086 crore as on March 31, 2008. Given
below is a summary of RCL’s financials:
Particulars 2007- 2006-07 2005-06

(Rs. in crores) 08
Total Income 2079.79 883.86 652.02
Profit Before Tax 1171.45 733.18 550.61
Profit After Tax 1025.45 646.18 537.61
Reserves & Surplus 5779.06 4915.07 3849.58
Net Worth 5927.50 5161.23 4122.46
Earnings per Share (Rs.) 41.75 28.39 29.74
(Basic + (Basic + (Basic +
Diluted) Diluted) Diluted)
Dividend (%) 55% 35% 30%
Paid up Equity Capital 246.16 246.16 223.40
Reliance Capital Ltd. has contributed Rupees One Lac as the initial contribution to the corpus
for the setting up of the Mutual Fund. Reliance Capital Ltd. is responsible for discharging its
functions and responsibilities towards the Fund in accordance with the Securities and
Exchange Board of India (SEBI) Regulations.
The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme
beyond the contribution of an amount of Rupees one Lac made by them towards the initial
corpus for setting up the Fund and such other accretions and additions to the corpus.
2.3) The Asset Management Company
Reliance Capital Asset Management Ltd.
Reliance Capital Asset Management Ltd. (RCAM) is an unlisted Public Limited Company
incorporated under the Companies Act, 1956 on February 24, 1995. RCAM has been appointed
as the Asset Management Company of Reliance Mutual Fund by The Trustee vide Investment
Management Agreement (IMA) dated May 12, 1995 and executed between Reliance Capital
Trustee Co. Limited and Reliance Capital Asset Management Ltd. and amended on August 12,
1997 and January 20, 2004 in line with SEBI (Mutual Funds) Regulations, 1996).
Pursuant to this IMA, RCAM is authorized to act as Investment Manager of the Mutual Fund.
The net worth of the Asset Management Company based on audited accounts as on March 31,
2009 is Rs. 841.32 Crore.
Vision Statement:
“To be a globally respected wealth creator, with an emphasis on customer care and a culture of
good corporate governance”.
Mission Statement:
“To create and nurture a world-class, high performance environment aimed at delighting their
customers”.
No. of schemes 57
No. of schemes 185
including
options
Equity Schemes 60
Debt Schemes 100
Short term debt 15
Schemes
Equity & Debt 2
Money Market 0
Gilt Fund 6
Corpus under management Rs. 109485.69 crores as on May 31, 2010

2.4) Reliance Mutual Fund Schemes
a) 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.
b) 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.
c) Sector Specific Schemes
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.
Equity/Growth Schemes
a) Reliance Natural Resources Fund:
(An Open Ended Equity Scheme): The primary investment objective of the
scheme is to seek to generate capital appreciation & provide long-term growth opportunities by
investing in companies principally engaged in the discovery, development, production, or
distribution of natural resources and the secondary objective is to generate consistent returns by
investing in debt and money market securities.
b) Reliance Equity Fund:
(An open-ended diversified Equity Scheme.): The primary investment

objective of the scheme is to seek to generate capital appreciation & provide long-term growth
opportunities by investing in a portfolio constituted of equity & equity related securities of top
100 companies by market capitalization & of companies which are available in the derivatives
segment from time to time and the secondary objective is to generate consistent returns by
investing in debt and money market securities.
c) Reliance Tax Saver (ELSS) Fund:
(An Open-ended Equity Linked Savings Scheme): The primary objective of

the scheme is to generate long-term capital appreciation from a portfolio that is invested
predominantly in equity and equity related instruments.
d) Reliance Equity Opportunities Fund:
(An Open-Ended Diversified Equity Scheme.): The primary investment

opportunities by investing in a portfolio constituted of equity securities & equity related
securities and the secondary objective is to generate consistent returns by investing in debt and
money market securities.
e) Reliance Vision Fund:
(An Open-ended Equity Growth Scheme.): The primary investment objective

of the Scheme is to achieve long term growth of capital by investment in equity and equity
related securities through a research based investment approach.
d) Reliance Growth Fund:

(An Open-ended Equity Growth Scheme.): The primary investment objective
of the Scheme is to achieve long term growth of capital by investment in equity and equity
related securities through a research based investment approach.
e) Reliance Quant Plus Fund (Formerly known as Reliance Index Fund):
(An Open Ended Equity Scheme.): The investment objective of the Scheme is to
generate capital appreciation through investment in equity and equity related instruments. The
Scheme will seek to generate capital appreciation by investing in an active portfolio of stocks
selected from S & P CNX Nifty on the basis of a mathematical model.
f) Reliance NRI Equity Fund:
(An open-ended Diversified Equity Scheme.): The Primary investment

objective of the scheme is to generate optimal returns by investing in equity or equity related
instruments primarily drawn from the Companies in the BSE 200 Index.
g) Reliance Regular Savings Fund:
(An Open-ended Scheme.): Equity Option: The primary investment objective of

this option is to seek capital appreciation and/or to generate consistent returns by actively
investing in Equity &Equity-related Securities.
Balanced Option: The primary investment objective of this option is to generate
consistent returns and appreciation of capital by investing in mix of securities comprising of
equity, equity related instruments & fixed income instruments.
h) Reliance Long Term Equity Fund:
(A close-ended Diversified Equity Scheme.): The primary investment objective

of the scheme is to seek to generate long term capital appreciation & provide long-term growth
opportunities by investing in a portfolio constituted of equity & equity related securities and
Derivatives and the secondary objective is to generate consistent returns by investing in debt
and money market securities.
i) Reliance Equity Advantage Fund:
(An open-ended Diversified Equity Scheme.): The primary investment

opportunities by investing in a portfolio predominantly of equity & equity related instruments
with investments generally in S & P CNX Nifty stocks and the secondary objective is to
generate consistent returns by investing in debt and money market securities.
Debt/Liquid Schemes
a) Reliance Monthly Income Plan:
(An Open-ended Fund-Monthly Income is not assured & is subject to the

availability of distributable surplus): The primary investment objective of the scheme is to
generate regular income in order to make regular dividend payments to unit holders and the
secondary objective is growth of capital.
b) Reliance Gilt Securities Fund - Short Term Gilt Plan & Long Term Gilt
Plan:
(Open-ended Government Securities Scheme): The primary objective of the

Scheme is to generate optimal credit risk-free returns by investing in a portfolio of securities
issued and guaranteed by the central Government and State Government.
c) Reliance Income Fund:
(An Open-ended Income Scheme): The primary objective of the scheme is to

generate optimal returns consistent with moderate levels of risk. This income may be
complemented by capital appreciation of the portfolio. Accordingly, investments shall
predominantly be made in Debt & Money market Instruments.
d) Reliance Medium Term Fund:
(An Open End Income Scheme with no assured returns.): The primary investment
objective of the Scheme is to generate regular income in order to make regular dividend
payments to unit holders and the secondary objective is growth of capital.
e) Reliance Short Term Fund:
(An Open End Income Scheme): The primary investment objective of the scheme
is to generate stable returns for investors with a short investment horizon by investing in Fixed
Income Securities of short term maturity.
f) Reliance Liquid Fund:
(Open-ended Liquid Scheme): The primary investment objective of the Scheme is to

generate optimal returns consistent with moderate levels of risk and high liquidity.
Accordingly, investments shall predominantly be made in Debt and Money Market
Instruments.
g) Reliance Floating Rate Fund:
(An Open End Liquid Scheme): The primary objective of the scheme is to generate
regular income through investment in a portfolio comprising substantially of Floating Rate
Debt Securities (including floating rate securitized debt and Money Market Instruments and
Fixed Rate Debt Instruments swapped for floating rate returns). The scheme shall also invest in
fixed rate debt Securities (including fixed rate securitized debt, Money Market Instruments and
Floating Rate Debt Instruments swapped for fixed returns
h) Reliance NRI Income Fund:
(An Open-ended Income scheme): The primary investment objective of the Scheme is
to generate optimal returns consistent with moderate levels of risks. This income may be
complimented by capital appreciation of the portfolio. Accordingly, investments shall
predominantly be made in debt Instruments.
i) Reliance Liquidity Fund:
(An Open - ended Liquid Scheme): The investment objective of the Scheme is to
generate optimal returns consistent with moderate levels of risk and high liquidity.
Accordingly, investments shall predominantly be made in Debt and Money Market
Instruments.
j) Reliance Interval Fund:
(A Debt Oriented Interval Scheme): The primary investment objective of the scheme is
to seek to generate regular returns and growth of capital by investing in a diversified portfolio.
k) Reliance Liquid Plus Fund:
(An Open-ended Income Scheme.): The investment objective of the Scheme is to

generate optimal returns consistent with moderate levels of risk and liquidity by investing in
debt securities and money market securities.
l) Reliance Fixed Horizon Fund –I:
(A closed ended Scheme): The primary investment objective of the scheme is to seek to
generate regular returns and growth of capital by investing in a diversified portfolio.
m) Reliance Fixed Horizon Fund –II:
(A closed ended Scheme.): The primary investment objective of the scheme is to seek to
o) Reliance Fixed Horizon Fund –III:
(A Close-ended Income Scheme.): The primary investment objective of the scheme is

to seek to generate regular returns and growth of capital by investing in a diversified portfolio.
p) Reliance Fixed Tenor Fund:
(A Close-ended Scheme.): The primary investment objective of the Plan is to seek to

q) Reliance Fixed Horizon Fund -Plan C:
(A closed ended Scheme.): The primary investment objective of the scheme is to seek to
r) Reliance Fixed Horizon Fund - IV:
(A Close-ended Income Scheme.): The primary investment objective of the scheme is to

seek to generate regular returns and growth of capital by investing in a diversified portfolio.
s) Reliance Fixed Horizon Fund - V:
(A Close-ended Income Scheme.): The primary investment objective of the scheme is to

seek to generate regular returns and growth of capital by investing in a diversified portfolio of
Central and State Government securities and other fixed income/ debt securities normally
maturing in line with the time profile of the scheme with the objective of limiting interest rate
volatility.
t) Reliance Fixed Horizon Fund - VI:

to seek to generate regular returns and growth of capital by investing in a diversified portfolio
of Central and State Government securities and other fixed income/ debt securities normally
maturing in line with the time profile of the series with the objective of limiting interest rate
volatility.
u) Reliance Fixed Horizon Fund - VII:

to seek to generate regular returns and growth of capital by investing in a diversified portfolio
of: - Central and State Government securities and other fixed income/ debt securities normally
maturing in line with the time profile of the series with the objective of limiting interest rate
volatility.
Sector Specific Schemes:
Sector Funds are specialty funds that invest in stocks falling into a certain sector of the
economy. Here the portfolio is dispersed or spread across the stocks in that particular sector.
This type of scheme is ideal for investors who have already made up their mind to confine risk
and return to a particular sector.
a) Reliance Banking Fund:
Reliance Mutual Fund has an Open-Ended Banking Sector Scheme which has the
primary investment objective to generate continuous returns by actively investing in equity /
equity related or fixed income securities of banks.
b) Reliance Diversified Power Sector Fund:
Reliance Diversified Power Sector Scheme is an Open-ended Power Sector Scheme. The
primary investment objective of the Scheme is to seek to generate consistent returns by
actively investing in equity / equity related or fixed income securities of Power and other
associated companies.
c) Reliance Pharma Fund:
Reliance Pharma Fund is an Open-ended Pharma Sector Scheme. The primary

investment objective of the Scheme is to generate consistent returns by investing in equity /
equity related or fixed income securities of Pharma and other associated companies.
d) Reliance Media & Entertainment Fund:

Reliance Media & Entertainment Fund is an Open-ended Media & Entertainment sector
scheme. The primary investment objective of the Scheme is to generate consistent returns by
investing in equity / equity related or fixed income securities of media & entertainment and
other associated companies
Exchange Traded Fund
Reliance Gold Exchange Traded Fund:
(An open-ended Gold Exchange Traded Fund): The investment objective is to seek to
provide returns that closely correspond to returns provided by price of gold through investment
in physical Gold (and Gold related securities as permitted by Regulators from time to time).
However, the performance of the scheme may differ from that of the domestic prices of Gold
due to expenses and or other related factors.
Problem Statement:
The stocks have risk, which comprises of either unique risk also called as diversifiable
risk or unsystematic risk and market risk also called as non-diversifiable risk Or systematic.
There are few problems, which reveal the necessity to analyze the risk and return of the Mutual
Funds. We can neither predict the risk involved nor the future performance of the stock. Many
Mutual Fund schemes have not performed well due to which investor have incurred losses. The
movement of BSE-100 index depends on the performance of the company’s stock. If a
particular industry is not in a booming stage, then the stock of companies related to that
industry would be affected. Given the background of risk and uncertainty about investment in
mutual fund, present study tries to find out risk return on Reliance mutual fund in comparison
with BSE-100 index has been under taken.
3.) Objectives & Research Methodology
Objectives
The Objectives of the Study Are:-
To study Mutual Fund Industry in India.
To study the different Schemes provided by Reliance Mutual Fund.
To study the performance of different schemes of the Company.
To study the Risk involved in different Schemes.
To study the Monthly Returns with respect to their Benchmark.
Research Methodology
Method of Research Design To Be Used Under Study Is:
Descriptive Research
In this research an attempt has been made to analyze the past performance of the
Reliance Mutual schemes and to know the benefits to the investors. The study is to be done on
different schemes provided by the company to know the company’s performance for the past
few months and to know the risk and returns of the funds.
Methodology of Data Collection:
Data Collected
 Five Years monthly Navs of different schemes

 Five Years monthly index of BSE-100 & S&P CNX NIFTY
Sources of Data:
 Secondary Source of Data
The source of data were only the secondary source as the comparison of the schemes were
done keeping BSE SENSEX as the base and thus the project did not require any first hand
information in the form of primary source. The data were collected through, the sources like
the www.Reliancemutual.com for getting the NAV’s of past five years, announcement of
publishing of company and other sites used in the project were www.mutualfundsindia.com,
www.bseindia.com and other internet sites, fact sheets of various mutual funds.
Tools & Techniques Used For The Study
 Beta
 Standard deviation
 Alpha
 Sharpe Ratio
 Treynor Ratio
Conceptual Design:
Sample unit: Schemes of Reliance Mutual Fund.

Sample size: Five years monthly Navs
4.) Analysis & Interpretation Of Data
1) Reliance Growth Fund
Benchmark-100
Return Of Portfolio Market
Return
Date NAV Rp(y) (y-Y) (y-Y) ² Index Rm(x) (x*X) x*y
Jan-06 34.95 2946.14
Feb-06 35.5 1.5737 0.36844 0.136 2923.99 -0.7518 05653 -1.1831
Mar-06 27.99 -21.155 -22.36 500 2966.31 1.44734 2.0948 -30.318
Apr-06 29.83 6.5738 5.36584 28.82 3025.14 1.98327 3.9334 13.038
May-06 25.59 -14.214 -15.419 237.7 2658.23 -12.129 147.11 172.4
Jun-06 25.88 1.1333 -0.072 0.005 2561.16 -3.6517 13.335 -4.1383
Jul-06 28.31 9.3895 8.18426 66.98 2755.22 7.57704 57.411 71.144
Aug-06 31.23 10.314 9.10914 82.98 2789.07 1.22858 1.5094 12.672
Sep-06 32.93 5.4435 4.23825 17.96 2997.07 7.45768 55.617 40.596
Oct-06 30.48 -7.44 -8.6453 74.74 3027.96 1.03067 1.0623 -7.6682
Nov-06 33.52 9.9738 8.76852 76.89 3339.75 10.297 106.03 102.7
Dec-06 35.41 5.6384 4.43319 19.65 3580.34 7.20383 51.895 40.618
TOTAL 7.2314 1106 TOTAL 21.693 440.56
Y= Σy/12 1.2052 X= Σx/12 1.9721
Analysis:
The above graph shows the movement of NAV of reliance growth fund and
Benchmark index for the period from Jan 2006 to Dec 2006. From the above graph we can see
there is some correlation between the movement of both.
Jan-07 35.55 -0.1694 -3.1427 9.877 3521.71 -1.6376 2.6816 0.2775
Feb-07 37.91 7.2419 4.26861 18.22 3611.9 2.56097 6.5586 18.546
Mar-07 32.61 -13.98 -16.954 287.4 3481.86 -3.6003 12.962 50.334
Apr-07 33.66 3.2199 0.24661 0.061 3313.45 -4.8368 23.394 -15.574
May-07 36.16 7.4272 4.45396 19.84 3601.73 8.7003 75.695 64.619
Jun-07 36.75 1.6316 -1.3416 1.8 3800.24 5.51152 30.377 8.9928
Jul-07 41.13 11.918 8.94511 80.01 4072.15 7.15507 51.195 85.277
Aug-07 45.72 11.16 8.18648 67.02 4184.83 2.76709 7.6568 30.88
Sep-07 47.57 4.0464 1.07311 1.152 4566.63 9.12343 83.237 36.917
Oct-07 42.94 -9.733 -12.706 161.4 4159.59 -8.9134 79.448 86.754
Nov-07 47.74 11.178 8.20513 67.32 4649.87 11.7867 138.93 131.76
Dec-07 48.57 1.7386 -1.2347 1.524 4953.28 6.52513 42.577 11.344
TOTAL 35.679 715.7 TOTAL 35.1422 554.71 509.85
Y= Σy/1 2.9733 X= Σx/12 2.92852
2
Analysis:
The above graph shows the movement of NAV of reliance growth fund and Benchmark
index for the period from Jan 2007 to Dec 2007. From the above graph we can see there is
some correlation between the movement of both.
Jan-08 52.1 7.2679 5.69572 32.44 5224.97 5.48505 30.086 39.865
Feb-08 52.82 1.382 -0.1902 0.036 5422.67 3.78375 14.317 5.229

Mar-08 51.42 -2.6505 -4.2227 17.83 5904.17 8.87939 78.844 -23.535
Apr-08 55.34 7.6235 6.05135 36.62 6251.39 5.88093 34.585 44.833
May-08 49.36 -10.806 -12.378 153.2 5385.21 -13.856 191.98 149.72
Jun-08 44.66 -9.5219 -11.094 123.1 5382.11 -0.0576 0.0033 0.5481
Jul-08 43.34 -2.9557 -4.5278 20.5 5422.39 0.74841 0.5601 -2.212
Aug-08 48.34 11.537 9.96454 99.29 5933.77 9.4309 88.942 108.8

Sep-08 52.55 8.7091 7.137 50.94 6328.33 6.6494 44.214 57.911
Oct-08 53.08 1.0086 -0.5636 0.318 6603.6 4.3498 18.921 4.3871
Nov-08 55.1 3.8056 2.23343 4.988 6931.05 4.95866 24.588 18.871
Dec-08 57.01 3.4664 1.89428 3.588 6982.58 0.74347 0.5527 2.5772
TOTAL 18.866 542.8 TOTAL 36.9964 527.6 407
Y= Σy/1 1.5721 X= Σx/12 3.08303
2
Analysis:
The above graph shows the movement of NAV of reliance growth fund and Benchmark
index for the period from Jan 2008 to Dec 2008. From the above graph we can see there is
some correlation between the movement of both
Jan-09 59.12 3.7011 0.30373 0.092 7145.91 2.33911 5.4714 8.6573
Feb-09 55.73 -5.7341 -9.1315 83.38 6527.12 -8.6594 74.984 49.654
Mar-09 47.86 -14.122 -17.519 306.9 6587.21 0.92062 0.8475 -13.001
Apr-09 50.8 6.1429 2.74554 7.538 7032.93 6.76645 45.785 41.566
May-09 54.29 6.8701 3.4727 12.06 7468.7 6.19614 38.392 42.568
Jun-09 56.7 4.4391 1.04175 1.085 7605.37 1.8299 3.3485 8.1232
Jul-09 59.77 5.4145 2.01709 4.069 8004.05 5.24209 27.479 28.383
Aug-09 53.86 -9.8879 -13.285 176.5 7857.61 -1.8296 3.3473 18.091
Sep-09 60.06 11.511 8.11395 65.84 8967.41 14.1239 199.48 162.58
Oct-09 69.89 16.367 12.9696 168.2 10391.19 15.8773 252.09 259.86
Nov-09 72.38 3.5627 0.16537 0.027 10384.4 -0.0653 0.0043 -0.2328
Dec-09 81.43 12.503 9.10608 82.92 11154.28 7.41381 54.965 92.698
TOTAL 40.769 908.6 TOTAL 50.155 706.2 698.95
Y= Σy/1 3.3974 X= Σx/12 4.17958
2
Analysis:
Jan-10 67.48 -17.1313 -10.291 105.9 9440.94 -15.36 235.94 263.14

Feb-10 65.61 -2.77119 4.06905 16.56 9404.98 -0.3809 0.1451 1.0555
Mar-10 65.61 0 6.84025 46.79 8232.82 -12.463 155.33 0
Apr-10 56.16 -14.4033 -7.563 57.2 9199.46 11.7413 137.86 -169.11
May-10 53.7 -4.38034 2.4599 6.051 8683.27 -5.6111 31.484 24.578
Jun-10 45.81 -14.6927 -7.8525 61.66 7029.27 -19.048 362.83 279.87
Jul-10 48.2036 5.22506 12.0653 145.6 7488.48 6.53283 42.678 34.134
Aug-10 48.4178 0.44437 7.28461 53.07 7621.4 1.77499 3.1506 0.7887
Sep-10 42.6755 -11.8599 -5.0196 25.2 6621.57 -13.119 172.1 155.59
Oct-10 33.1429 -22.3374 -15.497 240.2 4953.98 -25.184 634.24 562.55
TOTAL -82.0829 976.5 TOTAL -69.829 1897.7 1276.6
Y= Σy/1 -6.84025 X= Σx/12 10.5004
2
Analysis:
Benchmark index for the period from Jan 2010 to Oct 2010. From the above graph we can see
1) Standard Deviation
S.D. = √(y-Y)²
N
STANDARD DEVIATION
YEAR (y-Y) ² (y-Y) ²/N Square root
(S.D)
2006 1102.589 91.88242 9.5855
2007 715.7085 59.64238 7.7228
2008 542.8451 45.23709 6.7258
2009 908.6373 75.71978 8.7017
2010 76.5005 81.37504 9.0208
2) Beta
β = N* ∑XY-( ∑X) ( ∑Y)

N*∑ (X)²-( ∑X) ²
BETA
YEAR N* Σ XY (ΣX) ( ΣY) N Σx ² (ΣX) ² β
2006 5286.72 21.69324 7.231404 5286.692 470.5966 0.9878
2007 6118.165 35.14223 35.67909 6656.522 1234.977 0.8972
2008 4883.992 36.99639 18.86572 6331.154 1368.733 0.8435
2009 8387.444 50.15499 40.76851 8474.359 2515.523 1.0644
2010 15318.71 -69.8287 -82.0829 22772.07 4876.05 0.5357
3) Alpha
α =Y-β(X)
ALPHA
YEAR Y β X α =Y- β(X)
2006 1.205234 0.9878 1.972113 -0.742819

2007 2.973257 0.8972 2.928519 0.34579
2008 1.572144 0.8435 3.083033 -1.02839
2009 3.397376 1.0644 4.179583 -`1.0513
2010 -6.84025 0.5357 -5.81906 -3.7229
4) Sharpe Ratio
SR=Rp-Rf/SD
Where;
Rp= (Closing Nav/opening Nav-1)
SHARPE RATIO
YEAR Rp Rf SD SR
2006 1.316166 5 9.5855 -0.38431
2007 37.39745 5.1 7.7228 4.182091
2008 9.424184 5.7 6.7258 0.553716
2009 37.73681 7 8.7017 3.532276
2010 -51.2836 7.5 9.0208 -6.51645
5) Treynor Ratio
TR=Rp-Rf/β
TREYNOR RATIO
YEAR Rp Rf β TR
2006 1.316166 5 0.9878 -3.72933
2007 37.39745 5.1 0.8972 35.9905
2008 9.424184 5.7 0.8435 4.415156
2009 37.73691 7 1.0644 28.87712
2010 -51.2836 7.5 0.5357 -109.732
INTERPRETATION
In the year 2006 standard deviation was high at the rate of 9.5855 and in the year 2008
standard deviation was low at the rate of 6.7258. In the year 2009 β is 1.0644 which is high
risk because β greater than 1. In the year 2010 β value is 0.5357; it is less risky because it is
less than 1. In the year 2007 Sharpe index was higher at the rate of 4.182091 and in the year
2010 Sharpe index was less at the rate of -6.51645. In the year 2007 Treynor index was higher
at the rate of 35.9905 and in the year 2010 treynor index was less at the rate of -109.732 .
2) Reliance Vision Fund
Return Of Market
Portfolio Return
Date NAV Rp(Y) (y-Y) (y-Y) ² Index Rm(x) (x*X) x*y
Jan-06 63.69 0.0647 2946.14
Feb-06 65.39 2.6692 -6.0913 0.00418 2923.99 -0.7518 0.5653 -2.0068
Mar-06 63.11 -3.4868 0.929 37.1036 2966.31 1.44734 2.0948 -5.0465
Apr-06 65.34 3.5335 -19.286 0.86307 3025.14 1.98327 3.9334 7.00792
May-06 54.44 -16.682 0.7386 371.968 2658.23 -12.129 147.11 202.331
Jun-06 56.26 3.3431 5.6429 0.54557 2561.16 -3.6517 13.335 -12.208
Jul-06 60.9 8.2474 2.3873 31.8426 2755.22 7.57704 57.411 62.491
Aug-06 63.94 4.9918 4.84 5.69915 2789.07 1.22858 1.5094 6.1328
Sep-06 68.7 7.4445 -2.3279 23.4254 2997.07 7.45768 55.617 55.5186
Oct-06 68.89 0.2766 5.9163 5.41928 3027.96 1.03067 1.0623 0.28505
Nov-06 74.76 8.5208 7.1868 35.003 3339.75 10.297 106.03 87.7393
Dec-06 82.08 9.7913 51.6506 3580.34 7.20383 51.895 70.5351
TOTAL 28.649 563.524 TOTAL 21.6932 440.56 472.779
Y= Σy/12 2.6045 X= Σx/12 1.97211
Analysis:
The above graph shows the movement of NAV of reliance vision fund and
Jan-07 83.14 1.2914 -2.4937 6.21847 3521.71 -1.6376 2.6816 -2.1148
Feb-07 88.96 7.0002 3.2151 10.3371 3611.9 2.56097 6.5586 17.9274
Mar-07 86.7 -2.5405 -6.3256 40.0129 3481.86 -3.6003 12.962 9.1465
Apr-07 86.1 -0.692 -4.4772 20.0449 3313.45 -4.8368 23.394 3.34725
May-07 91.64 6.4344 2.6493 7.01863 3601.73 8.7003 75.695 55.981
Jun-07 91.49 -0.1637 -3.9488 15.593 3800.24 5.51152 30.377 -0.9021
Jul-07 99.74 9.0174 5.2323 27.3767 4072.15 7.15507 51.195 64.52
Aug-07 104.82 5.0932 1.3081 1.71121 4184.83 2.76709 7.6568 14.0935
Sep-07 114.32 9.0632 5.278 27.8578 4566.63 9.12343 83.237 82.6871
Oct-07 105.35 -7.8464 -11.632 135.292 4159.59 -8.9134 79.448 69.9377
Nov-07 118.05 12.055 8.2699 68.392 4649.87 11.7867 138.93 142.09
Dec-07 125.97 6.709 2.9239 8.54927 4953.28 6.52513 42.577 43.7772
TOTAL 45.421 368.404 TOTAL 35.1422 1235 500.491
Y= Σy/12 3.7851 X= Σx/12 2.92852
Analysis:
Jan-08 134.38 6.6762 3.2654 10.6627 5224.97 5.48505 30.086 36.6193

Feb-08 139.26 3.6315 0.2207 0.0487 5422.67 3.78375 14.317 13.7407
Mar-08 155.75 11.841 8.4304 71.0708 5904.17 8.87939 78.844 105.142
Apr-08 165.65 6.3563 2.9455 8.67615 6251.39 5.88093 34.585 37.3812
May-08 141.84 -14.374 -17.784 316.288 5385.21 -13.856 191.98 199.159
Jun-08 137.65 -2.954 -6.3648 40.5112 5382.11 -0.0576 0.0033 0.17005
Jul-08 138.85 0.8718 -2.539 6.44669 5422.39 0.74841 0.5601 0.65244
Aug-08 150.99 8.7432 5.3324 28.4349 5933.77 9.4309 88.942 82.4567
Sep-08 160.53 6.3183 2.9075 8.45349 6328.33 6.6494 44.214 42.0129
Oct-08 171.09 6.5782 3.1674 10.0324 6603.6 4.3498 18.921 28.6139
Nov-08 174.93 2.2444 -1.1664 1.36044 6931.05 4.95866 24.588 11.1294
Dec-08 183.67 4.9963 1.5855 2.51373 6982.58 0.74347 0.5527 3.71457
TOTAL 40.93 504.499 TOTAL 36.9964 1368.7 560.792
Y= Σy/1 3.4108 X= Σx/1 3.08303
2 2
Analysis:
Jan-09 184.14 0.2559 -3.7235 13.8641 7145.91 2.33911 5.4714 0.59856

Feb-09 171.42 -6.9078 -10.887 118.53 6527.12 -8.6594 74.984 59.817
Mar-09 169.69 -1.0092 -4.9886 24.8858 6587.21 0.92062 0.8475 -0.9291
Apr-09 183.8 8.3152 4.3358 18.7992 7032.93 6.76645 45.785 56.2641
May-09 200 8.8139 4.8346 23.3731 7468.7 6.19614 38.392 54.6123
Jun-09 207.32 3.66 -0.3194 0.10199 7605.37 1.8299 3.3485 6.69745
Jul-09 219.24 5.7496 1.7702 3.13365 8004.05 5.24209 27.479 30.1397
Aug-09 214.28 -2.2624 -6.2417 38.959 7857.61 -1.8296 3.3473 4.13916
Sep-09 235.29 9.8049 5.8256 33.9373 8967.41 14.1239 199.48 138.484
Oct-09 267.61 13.736 9.7569 95.1968 10391.2 15.8773 252.09 218.094
Nov-09 264.45 -1.1808 -5.1602 26.6274 10384.4 0.0653 0.0043 0.07716
Dec-09 287.66 8.7767 4.7974 23.0146 11154.3 7.41381 54.965 65.0689
TOTAL 47.752 420.423 TOTAL 50.155 706.2 633.063
Y= Σy/1 3.9794 X= Σx/1 4.17958
2 2
Analysis:
Jan-10 246.44 -14.329 -8.9084 79.3603 9440.94 -15.36 235.94 220.105
Feb-10 240.47 -2.4225 2.9985 8.99089 9404.98 -0.3809 0.1451 0.92271
Mar-10 206.12 -14.285 -8.8635 78.5625 8232.82 -12.463 155.33 178.031
Apr-10 221.46 7.4423 12.863 165.463 9199.46 11.7413 137.86 87.3819
May-10 211.84 -4.3439 1.0771 1.1601 8683.27 -5.6111 31.484 24.374
Jun-10 172.07 -18.774 -13.353 178.293 7029.27 -19.048 362.83 357.602
Jul-10 184.291 7.1023 12.523 156.832 7488.48 6.53283 42.678 46.398
Aug-10 186.232 1.0534 6.4744 41.9174 7621.4 1.77499 3.1506 1.86976
Sep-10 167.538 -10.038 -4.6171 21.3175 6621.57 -13.119 172.1 131.686
Oct-10 133.547 -20.289 -14.868 221.053 4953.98 -25.184 634.24 510.958
TOTAL -65.052 1120.02 TOTAL -69.829 1897.7 1646.62
Y= Σy/1 -5.421 X= Σx/1 -5.8191
2 2
Analysis:
S.D. = √(y-Y)²
N
STANDARD DEVIATION
(S.D)
2006 563.5243 46.9603 6.8527
2007 368.4037 30.7003 5.5407
2008 504.4993 42.0416 6.4839
2009 420.423 35.0352 5.9190
2010 1120.02 93.335 9.6610
2) Beta
β = N* ∑XY-( ∑X) ( ∑Y)

N*∑ (X)²-( ∑X) ²
BETA
2007 6005.88 35.14223 45.42131 6656.52 1234.97 0.8133
2008 6729.50 36.99639 40.92972 6331.15 1257.74 1.0279
2009 7596.75 50.15499 47.75224 8474.35 2515.52 0.872
2010 19759.41 --69.8287 --65.0517 22772.06 4876.04 0.850
3) Alpha
α =Y-β(X)
ALPHA
2007 3.785109 0.8133 2.928519 1.4033

2008 3.41081 1.0279 3.083033 0.2417
2009 3.979353 0.872 4.179583 0.3337
2010 -5.42098 0.850 -5.81906 0.4747
4) Sharpe Ratio
SR=Rp-Rf/SD
Where;
SHARPE RATIO
YEAR Rp Rf SD SR
2006 28.87423 5 6.8527 3.483916
2007 51.51552 5.1 5.5407 8.377194
2008 36.67957 5.7 6.4839 4.777922
2009 56.21809 7 5.9190 8.315271
2010 -43.8747 7.5 9.6610 -5.31774
5) Treynor Ratio
TR=Rp-Rf/β
TREYNOR RATIO
YEAR Rp Rf β TR
2006 28.87423 5 1.048 22.78075
2007 51.51552 5.1 0.8133 57.0706
2008 36.67957 5.7 1.0279 30.1387
2009 56.21809 7 0.872 56.44276
2010 -43.8747 7.5 0.850 -60.4408
Interpretation
standard deviation was low at the rate of 5.5407. in the year 2008 β is 1.0279 which is high
risk because β greater than 1.In the year 2005 β value is 0.8133 it is less risky because it is less
than 1 . In the year 2007 Sharpe index was higher at the rate of 8.377194 and in the year 2010
Sharpe index was lesser at the rate of – 5.31774 and in the year 2007 Treynor index was
higher at the rate of 57.0706 and Treynor index was lesser at the rate of -60.4408.
3) Reliance Equity Fund
Benchmark- S&P CNX NIFTY

Return Of Market
Portfolio Return
Date NAV Rp(y) (y-Y) (y-Y) ² Index Rm(x) (x*X) x*y
Jan-09 11.77 4899.39
Feb-09 10.94 -7.05183 -11.005 121.1029 4504.73 -8.0553 64.8877 56.8045
Mar-09 11.04 0.91408 -3.0388 9.234154 4605.89 2.24564 5.0429 2.05269
Apr-09 11.67 5.70652 1.75367 3.075358 4934.46 7.13369 50.8896 40.7086
May-09 12.35 5.82691 1.87405 3.512081 5185.95 5.09661 25.9754 29.6974
Jun-09 12.75 3.23887 -0.714 0.509775 5223.82 0.73024 0.53325 2.36516
Jul-09 13.33 4.54902 0.59617 0.355416 5483.25 4.96629 24.664 22.5917
Aug-09 13.12 -1.57539 -5.5282 30.5615 5411.29 -1.3124 1.72229 2.06748
Sep-09 14.47 10.2896 6.33678 40.15481 6094.11 12.6184 159.225 129.839
Oct-09 16.35 12.9924 9.03955 81.7134 7163.3 17.5446 307.815 227.947
Nov-09 16.56 1.2844 2.6684 7.120615 6997.6 -2.3132 5.3508 -2.97106
Dec-09 17.77 7.30676 3.35391 11.24872 7461.48 6.62913 43.9454 48.4375
TOTAL 43.4814 308.5888 TOTAL 45.2838 690.051 559.54
Y= Σy/12 3.95285 X= Σx/12 4.11671
Analysis:
The above graph shows the movement of NAV of reliance equity fund and
Jan-10 15.47 -12.9432 -8.4373 71.1878 6245.45 -16.297 265.606 210.94

Feb-10 14.63 -5.42986 -0.924 0.85376 6356.92 1.78482 3.18558 -9.69133
Mar-10 13.28 -9.22761 -4.7217 22.2948 5762.88 -9.3448 87.3249 86.23
Apr-10 14.16 6.62651 11.1324 123.93 6289.07 9.13068 83.3693 60.5045
May-10 13.47 -4.87288 -0.367 0.13469 5937.81 -5.5852 31.195 27.2162
Jun-10 11.7 -13.1403 -8.6344 74.5535 4929.98 -16.973 288.086 223.032
Jul-10 12.32 5.33932 9.84519 96.9278 5297.47 7.45419 55.5649 39.8003
Aug-10 12.63 2.45118 6.95705 48.4006 5337.28 0.75149 0.56474 1.84204
Sep-10 11.74 -7.05167 -2.5458 6.48106 4807.2 -9.9317 98.6377 70.0347
Oct-10 9.567 -18.4852 -13.979 195.422 3539.57 -26.369 695.345 487.444
TOTAL -54.0705 755.343 TOTAL -62.317 1686.86 1260.12
Y= Σy/1 -4.50588 X= Σx/1 -5.1931 140.571
2 2
Analysis:
The above graph shows the movement of NAV of reliance equity fund and
S.D. = √(y-Y)²
N
STANDARD DEVIATION
(S.D)
2009 308.5888 25.7157 5.0710
2010 755.3429 62.9445 7.93380
2) Beta
β = N* ∑XY-( ∑X) ( ∑Y)

N*∑ (X)²-( ∑X) ²
BETA
2009 6714.48 45.28385 43.48137 8280.6 2050.62 0.7617
2010 15121.48 -62.3168 -54.0705 20242.28 3883.38 0.7183
3) Alpha
α =Y-β(X)
ALPHA
2009 3.952852 0.7617 4.116714 0.81715

2010 -4.50588 0.7183 -5.19307 -0.77569
4) Sharpe Ratio
SR=Rp-Rf/SD
Where;
SHARPE RATIO
YEAR Rp Rf SD SR
2009 50.97706 7 5.0710 8.672265
2010 -36.6458 7.5 7.93380 -5.56427
5) Treynor Ratio
TR=Rp-Rf/β
TREYNOR RATIO
YEAR Rp Rf β TR
2009 50.97706 7 0.7617 57.7354
2010 -36.6458 7.5 0.7183 -61.4587
Interpretation
standard deviation was low at the rate of 5.0710. in the year 2009 β is 0.7617 which is high
risk because β greater than 1.In the year 2010 β value is 0.7183 it is less risky compared to
year 2009 . In the year 2009 Sharpe index was higher at the rate of 8.672265 and in the year
2010 Sharpe index was lesser at the rate of – 5.56427. In the year 2009 Treynor index was
higher at the rate of 57.7354 and Treynor index was lesser at the rate of -61.4587.
4) Reliance Income Fund
Return Of
Portfolio
Date NAV Rp(y) (y-Y) (y-Y) ²
Jan-06 20.2532
Feb-06 20.247 -0.03061 -0.25196 0.063484
Mar-06 20.5642 1.566652 1.345304 1.809844
Apr-06 20.7212 0.763463 0.542115 0.293889
May-06 20.5788 -0.68722 -0.90857 0.825493
Jun-06 20.3027 -1.34167 -1.56302 2.44303
Jul-06 20.2417 -0.30045 -0.5218 0.272275
Aug-06 20.3598 0.583449 0.362102 0.131118
Sep-06 20.4848 0.613955 0.392608 0.154141
Oct-06 20.4253 0.29046 0.51181 0.261946
Nov-06 20.5051 0.390692 0.169344 0.028678
Dec-06 20.7444 1.167027 0.945679 0.894309
TOTAL 2.434822 7.178206
Y= Σy/12 0.221347
Jan-07 12.2833 -40.7874 -43.6211 1902.8

Feb-07 12.3696 0.70258 -2.13112 4.541686
Mar-07 12.4257 0.453531 -2.38017 5.665219
Apr-07 21.1542 70.24554 67.41184 4544.356
May-07 21.327 0.816859 -2.01684 4.06766
Jun-07 21.4811 0.722558 -2.11114 4.456933
Jul-07 21.576 0.441784 -2.39192 5.721279
Aug-07 21.6339 0.268354 -2.56535 6.581018
Sep-07 21.7031 0.319868 -2.51383 6.319366
Oct-07 21.7566 0.246509 -2.58719 6.693576
Nov-07 21.838 0.374139 -2.45956 6.049454
Dec-07 21.8817 0.20011 -2.63359 6.935814
TOTAL 34.00444 6504.188
Y= Σy/12 2.833703
Jan-08 21.9243 0.194683 -0.28891 0.083467
Feb-08 21.9714 0.21483 -0.26876 0.072232
Mar-08 22.0254 0.245774 -0.23782 0.056556
Apr-08 22.1279 0.465372 -0.01822 0.000332
May-08 22.2222 0.426159 -0.05743 0.003298
Jun-08 22.2053 -0.07605 -0.55964 0.313197
Jul-08 22.321 0.521047 0.037457 0.001403
Aug-08 22.5169 0.877649 0.394059 0.155283
Sep-08 22.7517 1.042772 0.559183 0.312685
Oct-08 22.9167 0.725221 0.241631 0.058385
Nov-08 23.1332 0.944726 0.461136 0.212647
Dec-08 23.1843 0.220895 -0.2627 0.069009
TOTAL 5.803077 1.338493
Y= Σy/12 0.48359
Jan-09 23.2206 0.156571 -0.58936 0.34735

Feb-09 23.1169 -0.44659 -1.19252 1.422109
Mar-09 23.1637 0.202449 -0.54349 0.135882
Apr-09 23.2511 0.377315 -0.36862 0.018516
May-09 23.3929 0.609864 -0.13607 0.018516
Jun-09 23.5116 0.507419 -0.23852 0.05689
Jul-09 24.1302 2.631042 1.885106 3.553624
Aug-09 24.0049 -0.51927 -1.2652 1.600736
Sep-09 24.2121 0.863157 0.117221 0.013741
Oct-09 24.7023 2.024608 1.278672 1.635002
Nov-09 24.8961 0.784542 0.0386 0.00149
Dec-09 25.3343 1.760115 1.014179 1.02856
TOTAL 8.951229 10.10928
Y= Σy/12 0.745936
Jan-10 25.9301 2.351752 0.592287 0.350804

Feb-10 25.8515 -0.30312 -2.06259 4.254267
Mar-10 25.5116 -1.31482 -3.07428 9.451211
Apr-10 25.5555 0.172079 -1.58739 2.519795
May-10 25.596 0.158479 -1.60099 2.563157
Jun-10 23.5116 -8.14346 -9.90292 98.06792
Jul-10 25.3348 7.75447 5.995005 35.94009
Aug-10 25.6685 1.317161 -0.4423 0.195633
Sep-10 25.7618 3.258499 1.499034 2.247104
Oct-10 26.1378 14.03953 12.28007 150.8001
TOTAL 21.11358 308.4288
Y= Σy/12 1.759465
Standard Deviation
S.D. = √(y-Y)²
N
STANDARD DEVIATION
(S.D)
2006 7.178206 0.59818 0.77342
2007 6504.188 542.015 23.2812
2008 1.338493 0.1115 0.3339
2009 10.10928 0.8419 0.9175
2010 308.4288 25.7024 5.0697
Interpretation
standard deviation was low at the rate of 0.3339.
5) Reliance Liquid Fund
Return Of
Portfolio
Jan-06 11.1677
Feb-06 11.202 0.307136 -0.02615 0.000684
Jun-06 11.3348 0.303526 -0.02976 0.000886
Jul-06 11.3711 0.320253 -0.01303 0.00017
Aug-06 11.4086 0.329783 -0.0035 1.23E-07
Sep-06 11.4462 0.329576 -0.00371 1.38E-07
Oct-06 11.4878 0.363439 0.030155 0.000909
Nov-06 11.537 0.42828 0.094996 0.009024
Dec-06 11.584 0.407385 0.074101 0.005491
TOTAL 3.666125 0.022968
Y= Σy/12 0.333284
Jan-07 11.6257 0.359979 -0.01823 0.000332

Feb-07 11.6643 0.332023 -0.04618 0.002133
Mar-07 11.7086 0.379791 0.001584 2.51E-08
Apr-07 11.7494 0.348462 -0.02975 0.000885
May-07 11.7964 0.40002 0.021813 0.000476
Jun-07 11.8397 0.367061 -0.01115 0.000124
Jul-07 11.8838 0.372476 -0.00573 3.29E-07
Aug-07 11.924 0.338276 -0.03993 0.001595
Sep-07 11.9632 0.328749 -0.04946 0.002446
Oct-07 12.0086 0.379497 0.001289 1.66E-08
Nov-07 12.0639 0.460503 0.082296 0.006773
Dec-07 12.1208 0.471655 0.093447 0.008732
TOTAL 4.538493 0.023533
Y= Σy/12 0.378208
Jan-08 12.1862 0.539568 10.12145 102.4438

Feb-08 12.243 0.466101 10.04798 100.962
Mar-08 12.3054 0.509679 10.09156 101.8396
Apr-08 12.3561 0.412014 9.993898 99.87799
May-08 12.4067 0.409514 9.991398 99.82803
Jun-08 12.459 0.421546 10.00343 100.0686
Jul-08 12.5136 0.438237 10.02012 100.4028
Aug-08 12.5759 0.497858 10.07974 101.6012
Sep-08 12.6371 0.486645 10.06853 101.3753
Oct-08 0 -100
Nov-08 0 #DIV/0!
Dec-08 - #VALUE!
TOTAL -95.8188 908.3993
Y= Σy/12 -9.58188
Jan-09 12.9355 #DIV/0!

Feb-09 13.0013 0.508678 0.045501 0.00207
Mar-09 13.0952 0.722235 0.259059 0.067112
Apr-09 13.2044 0.833893 0.370717 0.137431
May-09 13.2676 0.478628 0.015452 0.000239
Jun-09 13.2842 0.125117 -0.33806 0.114284
Jul-09 13.2926 0.063233 -0.39994 0.159955
Aug-09 13.3493 0.426553 -0.03662 0.001341
Sep-09 13.4105 0.458451 -0.00473 2.23E-07
Oct-09 13.4662 0.415346 -0.04783 0.002288
Nov-09 13.5369 0.525018 0.061842 0.003824
Dec-09 13.6097 0.537789 0.074613 0.005567
TOTAL 5.094942 0.494134
Y= Σy/12 0.463177
Jan-10 13.6668 0.419554 -0.13968 0.01951
Feb-10 13.7314 0.472678 0.08656 0.007492
Mar-10 13.8034 0.524346 --0.03489 0.001217
Apr-10 13.8604 0.412942 -0.14629 0.021401
May-10 13.9262 0.474734 -0.0845 0.00714
Jun-10 14.0024 0.54717 -0.01206 0.000146
Jul-10 14.0846 0.587042 0.027809 0.000773
Aug-10 14.176 0.648936 0.089702 0.008047
Sep-10 14.2857 0.773843 0.21461 0.046057
Oct-10 14.4055 0.838601 0.279367 0.078046
TOTAL 6.710801 0.197461
Y= Σy/12 0.559233
Standard Deviation
S.D. = √(y-Y)²
N
STANDARD DEVIATION
(S.D)
2006 0.022968 1.914 1.1761
2007 0.023533 1.961 1.4003
2008 908.3993 75.69 8.7005
2009 0.494134 0.0411 0.2029
2010 0.541306 0.0451 0.212
Interpretation
6) Reliance Gilt Securities Fund
Return Of Portfolio
Jan-06 -
Feb-06 - #VALUE! #VALUE!
Mar-06 10.9298 #VALUE!
Apr-06 - #VALUE!
May-06 - #VALUE!
Jun-06 - #VALUE!
Jul-06 10.6578 #VALUE!
Aug-06 10.81 1.428062 0.365919 0.133897
Sep-06 10.9379 1.183164 0.12102 0.014646
Oct-06 10.9925 0.499182 -0.56296 0.316926
Nov-06 11.0035 0.100068 -0.96208 0.925588
Dec-06 11.2346 2.100241 1.038098 1.077646
TOTAL 5.310717 2.468703
Y= Σy/12 1.062143
Jan-07 11.2682 0.299076 -0.26145 0.068357

Feb-07 11.3737 0.936263 0.375735 0.141177
Mar-07 11.4206 0.412355 -0.14817 0.021955
Apr-07 11.4524 0.278444 -0.28208 0.079571
May-07 11.5772 1.089728 0.5292 0.280052
Jun-07 11.6694 0.796393 0.235865 0.055632
Jul-07 11.7971 1.094315 0.533787 0.284928
Aug-07 11.8247 0.233956 -0.32657 0.10665
Sep-07 11.8582 0.283305 -0.27722 0.076853
Oct-07 11.8923 0.287565 -0.27296 0.074509
Nov-07 11.9611 0.578526 0.017997 0.000324
Dec-07 12.0133 0.436415 -0.12411 0.015404
TOTAL 6.72634 1.205413
Y= Σy/12 0.560528
Jan-08 11.9936 -0.16398 -0.66541 0.442777

Feb-08 11.9964 0.023346 -0.47808 0.228564
Mar-08 12.0146 0.151712 -0.34972 0.122302
Apr-08 12.0851 0.586786 0.085356 0.007286
May-08 12.096 0.090194 -0.41124 0.169115
Jun-08 11.9516 -1.19378 -1.69521 2.873747
Jul-08 12.0094 0.483617 -0.01781 0.000317
Aug-08 12.2235 1.78277 1.28134 1.641833
Sep-08 12.4444 1.807175 1.305745 1.70497
Oct-08 12.5512 0.858217 0.356788 0.127297
Nov-08 12.7511 1.592676 1.091247 1.190819
Dec-08 12.7509 -0.00157 -0.503 0.253007
TOTAL 6.017157 8.762035
Y= Σy/12 0.50143
Jan-09 12.7163 -0.27135 -0.90589 0.820642

Feb-09 12.7042 -0.09515 -0.72969 0.532452
Mar-09 12.7487 0.350278 -0.28426 0.080805
Apr-09 12.7655 0.131778 -0.50276 0.252769
May-09 12.8997 1.051271 0.416732 0.173665
Jun-09 12.9131 0.103878 -0.53066 0.281601
Jul-09 13.1887 2.134267 1.499727 2.249182
Aug-09 13.2008 0.091745 -0.54279 0.294626
Sep-09 13.2516 0.384825 -0.24971 0.062357
Oct-09 13.4267 1.32135 0.68681 0.471709
Nov-09 13.4644 0.280784 -0.35376 0.125143
Dec-09 13.7513 2.130804 1.496265 2.238808
TOTAL 7.614474 7.583758
Y= Σy/12 0.634539
Jan-10 14.2153
Feb-10 14.1822 3.374226 3.341792 11.16758
Mar-10 13.8361 -0.23285 -0.26528 0.070374
Apr-10 13.9587 -2.44038 -2.47282 6.114824
May-10 13.9688 0.072356 0.039922 0.001594
Jun-10 13.8601 -0.77816 -0.8106 0.657067
Jul-10 13.7919 -0.49206 -0.52449 0.275094
Aug-10
Sep-10
Oct-10
TOTAL 0.389217 19.01525
Y= Σy/12 0.032434
Standard Deviation
S.D. = √(y-Y)²
N
STANDARD DEVIATION
(S.D)
2006 2.468703 0.2057 0.4535
2007 1.205413 0.1004 0.3169
2008 8.762035 0.7301 0.8544
2009 7.583758 0.6319 0.7949
2010 19.01525 1.5846 1.2588
Interpretation
5.) Findings & Conclusion
1) Standard Deviation:
 When we see Reliance growth fund it has high standard deviation in the year
2006 as compared to other 4 years i.e. 2007, 2008, 2009 & 2010.
 When we see Reliance vision it has high standard deviation in the year 2010 as compared
to other four years.
 In case of Reliance Income Fund has high standard deviation in 2008.
 When we see Reliance equity fund it has high standard deviation in the year 2010 as
compared to another one year i.e. 2009.
 When we see Reliance liquid fund has high standard deviation in 2008 compared other
years.
 When we see Reliance gilt securities fund has high standard deviation in 2010 compared to
last year.
Here standard deviation is referred to volatility of NAV of the scheme hence the one with high
standard deviation means it has high volatility hence the standard deviation is directly related
to the returns hence higher the standard deviation higher the returns.
2) Beta:
 Beta is referred to how much the portfolio is dependent on the market return so higher the
β higher the dependent hence high risk i.e. systematic risk.
 When we see Reliance growth fund in 2009 it has high β i.e. if 10% decrease in Rm result
in 10% Rp which very dangerous to investors but when we observe in 2010 i.e. 0.5357
which mean 10% decrease in Rm results in 5.3 Rp which is healthy sign i.e. in 2007 the
scheme has lowest systematic risk .
 In 2006 1.048 which has higher β value which means the schemes has involved highest
risk.
 In all the 5 years β value is less or decrease in Rm is greater than decrease in Rp. So it has
less systematic risk as compared to reliance growth fund.
 When we observe Reliance equity fund the β value 0.7677 which is highest in the year
2009 whereas in the other one year 2010 is 0.7183.
3) Alpha:
By observing all the 3 schemes we can see that all schemes over all the 3 years
have negative alpha. The reason behind this is due to change in investment plan as in the year
2008.
4) Sharpe Ratio:
Since Sharpe ratio is one of the most popular method of knowing the risk
associated with the particular scheme, the higher the ratio better is the performance.
 In case of Reliance growth fund the Sharpe ratio is high in the year 2007 i.e. 4.182091
compared to other four year 2006 i.e. -0.38431, 2008 i.e. 0.553716,2009 i.e. 3.532276
& 2010 i.e. -6.51645.So we can say that scheme has performed very well in the year
2007 compared to other four years.
 In case of Reliance vision fund the Sharpe ratio is high in the year 2007 8.377194
compared to other 4 years, 2006 i.e. 3.483916, 2008 i.e. 4.777922, 2009 i.e. 8.315271
& 2010 i.e. -5.31774. So we can say the scheme as performed very well in the year
2007 as compared to other four years.
 In case of Reliance equity fund the Sharpe ratio is high in the year 2009 i.e. 8.672265
compared to other one year 2010 i.e. -61.4587 this is very good sign as compared to all
other scheme ,this scheme has recorded higher Sharpe ratio with the value of 8.672265
in 2009.
6) Treynor Ratio:
Now coming to another ratio which is derived as treynor’s ratio which is different
from Sharpe ratio since this ratio observe & consider only systematic risk, which is
uncontrollable but whereas Sharpe ratio considers both controllable & uncontrollable risk i.e.
systematic as well as unsystematic.
 In case of Reliance vision fund the treynor’s ratio is high in the year 2007 i.e. 4.5912
compared to other four years 2006 i.e. -0.2458, 2008 i.e. 3.7252, 2009 i.e. 4.4819 and
2010 i.e. -6.4567.So we can say the scheme performed very well in year 2007
compared to other four years but in 2006 it has lower performance.
 In case of Reliance growth fund the ratio is high in the year 2007 i.e. 3.25708 compared
to other four years 2006 i.e. 1.16950, 2008 i.e. 1.79626, 2009 i.e. 3.12612 and 2010 i.e.
– 12.9086.So we say the scheme performed very well in year 2007 compared to other
four years but in 2010 it has lower performance.
 In case of Reliance equity fund the ratio is high in the year 2009 i.e. 5.09761 compared
to last year 2010 i.e. -6.37737.So we can say the scheme performed very well in year
2009 compared to last year.
Suggestions
 The Mutual Fund companies should utilize this opportunity of soft interest regime
followed by the banks and attract the fixed deposit and the savings Bank Account
Investors.
 The Mutual Fund Asset Management companies should educate and give Awareness
about the concept of Mutual Funds to the investors. As majority of the investors do not
know what a Mutual Fund is. And it should highlight the benefits of mutual fund over
other investment and attract more number of customers.
 The Mutual Fund Asset Management companies come up with more advertisements
and promotional measures and it should also target the F I I’s and individual investors
who invest in the capital markets.
 Always the fund should state the objective of each fund floated by the Asset
Management Company to the investors so that the right investors choose the right fund.
6.) Questionnaire
NAME: - _______________________________________________
ADDRESS: - ____________________________________________
____________________________________________
CONTACT NO:- (O)__________ (R)__________ (M)____________
1) Which investment avenues are you aware of?
Equity /Mutual fund □

Post Office (NSC, KVP, PPF) □
Fixed Deposits □
Others □
If others please specify □
2) Do you invest in mutual funds?
Yes □ No □
3) If yes, in which assets class do you want to invest in Mutual
Funds?
Equity □ Debt □ Liquid □

4) Do you invest in Reliance mutual fund?
Yes □ No □
5) If yes, in which scheme would you invest in RELIANCE MUTUAL
FUND?
Equity □
Tax Saver □
Others □
7.) Bibliography
Books:-
 Security Analysis & Portfolio Management by R.P.RUSTAGI

 Security Analysis & Portfolio Management by D.E. FISHER & R.J. JORDAN
Journals:-
 The Economic Times
 Reliance Money Fact sheet and journals
 The Telegraph
Websites:-
 www.reliancemutual.com
 www.amfiindia.com
 www.valueresearchonline.com
 www.moneycontrol.com
 www.economictimes.com

1.) Introduction and Rationale of Topic Chosen: 1.1) Mutual Fund - The Concept

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1.

) Introduction And Rationale Of Topic Chosen

1.1) Mutual Fund – The Concept

1.2) Mutual Fund Structure

Custodian: A Custodian keeps safe custody of the investments (related documents of

1.3) Classification of Mutual Funds

Return Based Investment Based Sector Based Others

Income Funds Equity IT Industry Commodity Funds

Pharmaceutical Exchange Traded

Conservative Funds Balanced Power Sector Real Estate Funds

Tax Saving Schemes

2. Investment Based Classification:

b) Short-Term Debt Funds:

3. Sector Based Funds:

Mutual Objective Risk Investment Who should Investm

Short- Liquidity + Little Call Money, Those with surplus 3 weeks -

 Diversification- Diversification involves the mixing of investments within a portfolio

1.6) History of Mutual Fund (Worldwide):

1.7) Indian Mutual Industry-An Insight

Phase I. Establishment and Growth of Unit Trust of India - 1964-87

Phase II. Entry of Public Sector Funds - 1987-1993

1992-93 Amount Mobilized Assets Under Management Mobilization as % of

Phase IV. Growth and SEBI Regulation - 1996-2004

Phase V. Growth and Consolidation - 2004 Onwards

1.9) Indian Mutual Fund Industry –Today

1.10) Association of Mutual Funds in India (AMFI)

The objectives of Association of Mutual Funds in India

The sponsors of Association of Mutual Funds in India

Predominantly India Joint Ventures:

Predominantly Foreign Joint Ventures:

1.11) SEBI Regulations for Mutual Funds (1996)

1.12) Future of Mutual Funds in India

1.13) Risk Return Analysis of the Schemes

Risk mainly consists of two components.

The Unsystematic risk is unique to industries. It differs from industries to industries.

The Tools used for calculation

RETURN= (Closing price-opening price) /opening price*100

S.D. = √(y-Y) ²/N

Beta= N*∑XY-(∑X) (∑Y)

The Formula is used to calculate:-

Sharpe ratio= Rp-Rf

The performance measure by jack. Treynor is referred to as Treynor ratio or reward to

2.) Literature Review & Problem Statement

2.1) About Reliance Mutual Fund

Reliance Capital Limited

Particulars 2007- 2006-07 2005-06

2.3) The Asset Management Company

Reliance Capital Asset Management Ltd.

Corpus under management Rs. 109485.69 crores as on May 31, 2010

c) Sector Specific Schemes

a) Reliance Natural Resources Fund:

b) Reliance Equity Fund:

(An open-ended diversified Equity Scheme.): The primary investment

c) Reliance Tax Saver (ELSS) Fund:

(An Open-ended Equity Linked Savings Scheme): The primary objective of

d) Reliance Equity Opportunities Fund:

(An Open-Ended Diversified Equity Scheme.): The primary investment

e) Reliance Vision Fund: