CHAPTER 1: INTRODUCTION

1.1 MEANING:

A mutual fund is just the connecting bridge or a financial intermediary that allows a
group of investors to pool their money together with a predetermined investment objective. The
mutual fund will have a fund manager who is responsible for investing the gathered money into
specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or
portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the
fund.
Mutual funds are considered as one of the best available investments as compare to others
they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual
fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to
do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing
risk & maximizing returns.
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 working of a mutual fund

1.2 OBJECTIVE:
To study the Marketing mix elements followed by Reliance Mutual fund.
To study in the working environment of Reliance Mutual fund.
To study the reasons for slow growth rate of industry.

 To make comparison between reliance and HDFC mutual fund

CHAPTER: 2 CONCEPTUAL DATA

2.1 HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY:

The origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the
year 1987 when non-UTI players entered the industry.
In the past decade, Indian mutual fund industry had seen dramatic improvements, both
quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending
phase, the Assets Under Management (AUM) was Rs. 67bn. The private sector entry to the fund
family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it reached the height of
1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less
than the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian
banking industry.
The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it
is the prime responsibility of all mutual fund companies, to market the product correctly abreast
of selling.
The mutual fund industry can be broadly put into four phases according to the development
of the sector which can b understand on the basis of following diagram:

First Phase 1964-87(UTI was the Only Player)

Second Phase 1987-1993 (Entry of Public Sector Funds):
Third Phase 1993-2003 (Entry of Private Sector Funds):
Fourth Phase since February 2003.

2.2 RELIANCE :
Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Assets Under
Management (AUM) of Rs. 79,974 crores (AUM as on 31st Oct 07) and an investor base of over
40.28 Lakhs
Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the
fastest growing mutual funds in the country. RMF offers investors a well-rounded portfolio of
products to meet varying investor requirements and has presence in 115 cities across the country.
Reliance Mutual Fund constantly 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 Ltd., a wholly owned subsidiary of Reliance Capital Ltd.
Reliance Capital Ltd. is one of Indias leading and fastest growing private sector financial
services companies, and ranks among the top 3 private sector financial services and banking
companies, in terms of net worth.
Reliance Capital Ltd. has interests in asset management, life and general insurance, private
equity and proprietary investments, stock broking and other financial services.

2.3ORGANIZATIONALSTRUCTURE OF MUTUAL FUND:

ganizational Structure of MF

Sponsor

Akin to the Promoter of the company,

Contribute min 40% of net worth of AMC,

Posses sound financial record over five years period,

Establishes the Fund,

Gets it registered with the SEBI,

Forms a trust, & appoints Board of trustee.

Trustees

Holds assets on behalf of unit holders in trust.

Trustees are caretaker of unit holders money.

Two third of the trustees shall be independent persons (not associated with the sponsor).

Trustees ensure that the system, processes & personnel are in place.

Resolves unit holders GRIEVANCES.

Appoint AMC & Custodian, & ensure that all activities are accordance with the SEBI
regulation.

Custodian

Holds the funds securities in safekeeping,

Settles securities transaction for the fund,

Collects interest & dividends paid on securities,

Records information on corporate actions.

Examples of custodian
HDFC

CITY BANK

ABN AMRO

IIT CORPORATE SERVICES

SBI INDIA

STANDARD CHARTRED

SHCIL

DEUTSCHE BANK

Asset Management Company

Floats schemes & manages according to SEBI.

Can not undertake any other business activity, other than portfolio mgmt services.

75% of unit holders can jointly terminate appointment of AMC.

At least 50% of independent directors.

Chairman of AMC can not be a trustee of any MF.

Examples of AMC
UTI

ICICI Prudential

Reliance

SBI

Canbank

ING Vysya

Stanchart

Taurus

HSBC

Distributor / Agents:

Sell units on the behalf of the fund.

It can be bank, NBFCs, individuals.

Banker:

Facilitates financial transactions,

Provides remittance facilities.

Registrar & Transfer Agent

Maintains records of unit holders accounts & transactions

Disburses & receives funds from unit holder transactions.

Prepares & distributes a/c settlements,

Tax information, handles unit holder communication,

Provides unit holder transaction services.

Examples of R & T Agents

CAMS

KARVY

MCS Ltd

Datamatics

MN Dastoor & Co

IIT Corporate Services

Computeronics

TCS

2.4 THE 7 Ps OF MARKETING:

 PRODUCT:
Customers invest in mutual funds with capital appreciation, liquidity and safety as their
objectives. So, marketers need to design the products keeping these objectives in mind. In
addition, the marketer has to take care of the government regulations that govern the industry. As
a result, he needs to be very judicious in designing the product and planning the investment
portfolio of the customer. Only then he can maximize the returns while minimizing the risk.
In the case of Reliance Mutual fund they also have products based on the same segmentation.
PRICE:
Before we try to understand the pricing of mutual funds, let us first understand the concept of
NAV (Net Asset Value). The net asset value of the fund is the cumulative market value of the
assets fund net of its liabilities. In other words, if the funds is dissolved or liquidated, by selling
of all the assets in the fund, this is the amount that the share holders would collectively own .
They give rise to the concept of the net asset value per unit, which is the value, expressed by the
owner ship of one unit in the fund, It is calculated simply by dividing the net asset value of the
fund by the number of units. However, most people refers usually to the NAV per unit as NAV,
ignoring the per unit. We also abide by the same convention.
Calculation of NAV:
The most important part of the calculation is the valuation of the assets owned by the funds .
Once it is calculated the NAV is simply the net value of assets divide by the number of units out
standing . The detail methodology for the calculation of the net asset value is given below :

 PROMOTION:
With more and more private and global players entering the mutual market, the market has
become quite competitive in the recent past. Mutual funds, as an investment option, are now
competing with commercial banks and other financial institutions for the investors savings.
Mutual fund companies need to differentiate themselves from the other investment avenues in
the market and position their services exclusively in the customers mind. They need to adopt
innovative promotional strategies like strategic tie-ups.
Reliance uses electronic media, print media and hoardings for promotion.

PLACE:
The various distribution channels employed by mutual fund companies include their own
employees, agents, third party distribution companies, banks and post offices. The third party
distribution companies started flourishing with the entry of private players into the industry in
1993. UTI and the government players relied completely on their agents for distributing the
funds.
Reliance has more than 500 distributors in the state. In addition to it 50 brokerage houses and 2
AMCs (Asset Management company)

PEOPLE:
The process of investment decision-making in a mutual fund company determines the
importance of the individuals in the company. If the fund manager has a free hand to decide the
fate of savings of thousands of unit holders, he needs to be very competent and judicious in his
decision-making. In such companies, people become the most important element of the
marketing mix. In fact companies publicize the success of their fund manager who has delivered
consistent results, to promote their services.

If we talk about Reliance AMC, it has not a big staff. The reason behind that is the expenses
made on these people is adjusted from the return which they earn from the investment of their
customer. In Reliance AMC there is 1 Relationship manager, 2 Office Coordinator executives
(customer), 1 coordinator (Karvy), 1 Sales manager, and 1 assistant sales manager, and 1
coordinater.

PROCESS:
The process of investment by one mutual fund company can be quite different from that of
another. In some companies, the fund manager given a free hand and he decides where to invest
and how much to invest. On the other hand, the investment decision in some companies is
strictly governed by the company itself. Any fund manager can operate within the defined
parameters of the company.
Difference in investment processes defines the style of functioning of a fund and determines its
success.

PHYSICAL EVIDENCE:
Providing physical evidence to the customer is one of the most difficult aspects of the mutual
fund business. As there are very few instances of the customer entering the company premises,
buildings and infrastructure can rarely be used as physical evidence. Therefore, companies use
their channels of distribution like banks and post offices to attach an element of credibility to
their services. They also try to use their service personnel to reduce the perceived risk of
customers. One of the most important ways is to promote the earlier successes of the company in
a big way.

2.5 SWOT ANALYSIS:

STRENGTHS:

Professional Management - The basic advantage of funds is that, they are

professional managed, by well qualified professional. Investors purchase funds
because they do not have the time or the expertise to manage their own portfolio. A
mutual fund is considered to be relatively less expensive way to make and monitor
their investments.

Diversification - Purchasing units in a mutual fund instead of buying individual

stocks or bonds, the investors risk is spread out and minimized up to certain extent.
The idea behind diversification is to invest in a large number of assets so that a loss in
any particular investment is minimized by gains in others.

Economies of Scale - Mutual fund buy and sell large amounts of securities at a time,
thus help to reducing transaction costs, and help to bring down the average cost of the
unit for their investors.

Liquidity - Just like an individual stock, mutual fund also allows investors to
liquidate their holdings as and when they want.

Simplicity - Investments in mutual fund is considered to be easy, compare to other

available instruments in the market, and the minimum investment is small. Most
AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP
start with just Rs.50 per month basis.

WEAKNESS:

Professional Management- Some funds doesn't perform in neither the market, as

their management is not dynamic enough to explore the available opportunity in
the market, thus many investors debate over whether or not the so-called
professionals are any better than mutual fund or investor him self, for picking up
stocks.

Costs The biggest source of AMC income is generally from the entry & exit
load which they charge from investors, at the time of purchase. The mutual fund
industries are thus charging extra cost under layers of jargon.

Dilution - Because funds have small holdings across different companies, high
returns from a few investments often don't make much difference on the overall
return. Dilution is also the result of a successful fund getting too big. When
money pours into funds that have had strong success, the manager often has

trouble finding a good investment for all the new money.

Taxes - when making decisions about your money, fund managers don't consider
your personal tax situation. For example, when a fund manager sells a security, a
capital-gain tax is triggered, which affects how profitable the individual is from
the sale. It might have been more advantageous for the individual to defer the
capital gains liability.

THREATS:

Lack of Investor Awareness - Retail investors had a wrong notion about mutual
funds as an investment avenue. The benefits of risk diversification, professional
management and ease of administration involved while investing in mutual funds
are not clearly understood. Knowledge of financial products is ingrained in
school and college curriculum in countries like UK, US and France.

Investor Risk Appetite -Equity funds account for 30% of the total AUM in
India. This figure is more than 50% in most developed countries. Frequent stock
market scams and the bust of tech sector specific MFs have contributed to this
apprehension. The growth in mutual funds has come through the growth in
investments in short term instrument like Money Market Mutual Funds which
account for 40% of AUM.

Higher Returns of Alternative Debt Instruments -Government guaranteed

schemes provide risk free returns at competitive rates of returns. This is why
mutual funds have difficulty competing retail business.

Concentration of Corporate Investors - Mutual funds have become overly

attractive to corporate investors because of higher returns than bank deposits and
ability to distribute capital gains tax. Corporate investors account for 57% of the
AUM (by value). Though the turnover rates have increased the average fund in
management has grown by only 25% in the past 4 years. It is clear that the lack
of growth in funds under management in India is because of the absence of long
term investors. Corporate investors take profits frequently resulting in
destruction in the compound growth in funds under management. Distributors are
forced to pass on more commissions to companies, while fund companies are
compelled to offer funds with wafer thin margins. Retail investors lose out in the
sense that they continue to pay higher expenses.

Distribution - One of the major factors impacting the growth of mutual fund
industry is the absence of any regulation in distribution of mutual funds. Mutual
fund investors need distributors who are able to inform them about the efficacy
of distribution product for a particular risk profile and stage in life cycle. Lack of
distributor awareness and the absence of any disclosures from distributors make
selling of MF products commonplace. Also penetration in rural areas is a
problem. Only 3% of rural households own mutual funds. For mutual funds to
set up a distribution network in these centres can be very expensive.

OPPORTUNITIES:

AUM as a Percentage of GDP - In most of the developed countries the total

assets under management ranges from 30% -60% of the GDP. Total assets under
management are only 8% of the GDP in case of India.

Penetration of Mutual funds - In India it is estimated that 6.7% of the

households hold mutual funds. This figure is close to 50% in case of the US and
17% in case of UK. Mutual funds account for only 0.73% of total financial assets
in India (11% of bank deposits). AUM for Mutual funds had exceeded the bank
deposits in US in as early as 1998.

Growing Economy - Indian economy in a resilient mode in terms of GDP growth

is positioned as the fourth largest economy in terms of purchasing power parity
and has the benefit of low inflation along with rising forex rate and reserve

Opening up of sectors for investment in India service sector is also growing at

a fast rate because government has opened up investment in the sector.

Promising consumer market

Significant investment in infrastructure creation for industry.

2.6 RELIANCE MUTUAL FUND:

The Reliance Mutual Fund is one of the most popular and leading mutual fund in India.
The Fund is owned by Anil Dhirubhai Ambani Group and with respect to net worth it
ranks among the top three of all the private financial service providers in India. It is an
ISO 9001:2000 certified company, which offers innovative mutual fund products to a
wide pool of customers. The Reliance mutual fund products are available in hundred and
fifteen cities across India. It is one of the fastest growing mutual fund in India and the
main reason of its popularity is that it has a wide portfolio of products that meets the
requirements of each and every type of investors. The Reliance Mutual Fund is headed
by Mr. Vikrant Gugnani - the CEO of the company.

Details of Reliance Mutual Fund:

The schemes of Reliance Mutual Fund are being managed by Reliance

Capital Asset Management Ltd, which is a subsidiary of Reliance.

Reliance Capital Ltd holds 93.37% of the paid-up capital of the Reliance
Capital Asset Management Ltd.

The value of the cumulative assets that are being managed (also called
Assets Under Management (AUM)) amounted to Rs. 80,779 crores, as on
Dec 31st 2007.

investor base of Reliance Mutual Fund is over 43.67 lakh.

 EQUITY/GROWTH SCHEMES:

The aim of growth funds is to provide capital appreciation over the medium to longterm. 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.

RELIANCE EQUITY FUND GROWTH

(3-Star Fund ICRA Online MF Rank3 Year-March 2009)

FUND FACTS

Objectives of the Fund

The primary investment objective of the scheme is to seek to generate capital

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

and money market securities.

FUND FEATURE:
TYPES OF SCHEME
NATURE
OPTION
INCEPTION DATE
FACE VALUE

Open ended
Equity
Growth
Mar 28, 2006
10

(RS/UNIT)
FUNDSIZE IN RS CR

2232.02 as on jun 30,2009

2.7 HDFC MUTUAL FUND:

HDFC Mutual Fund is governed by HDFC Asset Management Company Limited

(AMC). The HDFC mutual fund was approved by SEBI in June 2000. Equity Funds,
Balanced Funds, and Debt Funds are the mutual fund schemes offered by HDFC
Mutual Fund.

An Overview of HDFC Mutual Fund

HDFC Mutual Fund has witnessed significant growth in the past few years. It is
regulated by HDFC Asset Management Company Limited (AMC) which works as an
Asset Management Company (AMC) for HDFC Mutual Fund. HDFC Asset
Management Company Limited (AMC) is a Joint Venture concern between the largescale housing finance company HDFC and British investment firm Standard Life
Investments Limited.

The HDFC Asset Management Company Limited conducts the activities carried out by
the HDFC Mutual Fund and manages the assets of various mutual fund schemes. The
August 2006 report states that the fund has assets of Rs. 25,892 crores under Asset
Management Company (AMC).
HDFC Asset Management Company Limited (AMC) entered into an agreement with
Zurich Insurance Company (ZIC) with the aim to develop the asset management
business in India in the year 2003. Following to this, all the mutual fund schemes of
Zurich Mutual Fund in India got transferred to HDFC Mutual Fund and gained the
name of HDFC schemes.

Details of HDFC Mutual FundHDFC Asset Management Company Ltd (AMC) was set up on December 10, 1999

under the Companies Act, 1956. It got the approval to function as an Asset Management
Company for the HDFC Mutual Fund by SEBI on June 30, 2000. AMC was appointed
in order manage the HDFC Mutual Fund. The registered office of HDFC Asset
Management Company Limited (AMC) is located at Ramon House, 3rd Floor, H.T.
Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020.

Schemes of HDFC Mutual Fund-

HDFC Equity Fund

HDFC Prudence Fund

HDFC Capital Builder Fund

HDFC Tax Saver

HDFC Top 200 Fund

HDFC High Interest Fund

HDFC Cash Management Fund

HDFC Sovereign Gilt Fund

Equity Funds, Balanced Funds, and Debt Funds are the broad categories of mutual
fund schemes offered by HDFC Mutual Fund.

HDFC EQUITY FUND GROWTH:

(3-STAR FUND ICRA Online MF Rank3 Year-March 2009)

FUND FACTS

OBJECTIVE
Aims at providing capital appreciation through investments predominantly in
equity oriented securities
FUND FEATURES:
TYPES OF SCHEME
NATURE
OPTION
INCEPTION DATE
FACE VALUE

Open ended
Equity
Growth
Jan 1, 1995
10

(RS/UNIT)
FUNDSIZE IN RS CR

3870.79 as on jun 30,2009

2.8 RELIANCE MUTUAL FUND HAS SECTOR SPECIFIC SCHEMES

WHICH HDFC DOESNT HAVE?

The SECTOR SPECIFIC FUNDS OF RELIANCE ARE:

1. Reliance Banking Fund

2. Reliance Diversification Power Sector Fund

3. Reliance Pharma Fund

4. Reliance Media & Entertainment Fund.

2.9 SWOT ANALYSIS OF HDFC MUTUAL FUND & RELIANCE MUTUAL

FUND:

Strength:
Good brand name of the company in all over india.
Flexible products
Expertise in the field of mutual fund
Sound financial resources of the company as well as sponsors.
Strong communication network all over the country.

Weakness:

 Less awareness regarding mutual fund among investors

Yet to build strong distribution network
Cannot tap rural market

Opportunities:
Untapped rural market
Lack of competitive products to suit clients investment objective

Threat:
The numbers of players are increasing which further increases the competition.
Product innovation is done by other asset management companies and are able to collect
large amounts.
Customer mindsets are still rigid and they mostly prefer traditional pattern of investments.

SWOT ANALYSIS OF RELIANCE MUTUAL FUND

Strength:
Reliance mutual fund a part of the Anil Dhirubhai Ambani Group(ADAG) is one of the
fastest growing mutual fund company in the country
Reliance mutual fund offers investors a well-rounded portfolio of products to meet

varying investor requirements

Reliance mutual fund has a presence over 118 cities across the contry
Strong and consistent fund management team
Investor friendly personal and technological support
Brand name- Reliance mutual fund is a brand name among customers
Good image between customers

Weaknesses:
Less existence in rural areas

 Less expenditure on promotional schemes

Opportunities:
First company to launch equity fund with hedging feature which aim to minimize risk
Good perception among customers
Threat:
Lot of competitors in market
Mutual fund doesnt guarantee or assure dividend/ bonus

CHAPTER 3 CONCLUSION

3.1 CONCLUSION:

CHAPTER 4 ANNEXURE

4.1 BIBLIOGRAPHY:

www.moneyoutlookindia.com
www.dictionaryreference.com
www.economictimes.com
www.moneycontrol.com
www.amfindia.com