CHAPTER-1 INTRODUCTION

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INTRODUCTION
Investment refers to the process of commitment of funds with the objective of earning additional income or capital appreciation or both. Savings form an important part of the economy of any nation. With savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents multiple avenues to the investors. Though certainly not the best or deepest of markets in the world, it has ignited the growth rate in mutual fund industry to provide reasonable options for an ordinary man to invest his savings. Investment goals vary from person to person. Today an investor has a lot of investment alternatives to choose from in the market such as shares, debentures, mutual funds, Government securities etc. The investor has to make a wise choice keeping in mind various factors such as objective of investment, risk associated with the investment, tax benefits, liquidity, marketability etc. But it is not an easy task for the investor to identify the right avenue for investment due to many investment constraints such as lack of resources and time to conduct research etc. 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 according to the funds objectives. 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.

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CONCEPT OF A MUTUAL FUND

The securities and exchange board of India regulations 1993 defines a mutual fund as a fund established in the form of a trust by a sponsor, to raise monies by the trustees through the sale of units to the public, under one or more schemes, for investing in securities in accordance with these regulations. 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 appreciation realized is 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. A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and invests the same on behalf of the investors/unit holders, in Equity shares, Government securities, Bonds, Call Money Markets etc, and distributes the profits. In the other words, a Mutual Fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time. Investors of mutual funds are known as unit holders. The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time.

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A Mutual Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. Investors earn from a Mutual Fund in three ways: 1 1 Income is earned from dividends declared by mutual fund schemes from time to time. If the fund sells securities that have increased in price, the fund has a capital gain. This

is reflected in the price of each unit. When investors sell these units at prices higher than their purchase price, they stand to make a gain. 1 gain. Though still at a nascent stage, Indian MF industry offers a plethora of schemes and serves broadly all type of investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds. There are also funds meant exclusively for young and old, small and large investors. Moreover, the setup of a legal structure, which has enough teeth to safeguard investors" interest, ensures that the investors are not cheated out of their hard-earned money. If fund holdings increase in price but are not sold by the fund manager, the fund's unit

price increases, the mutual fund units can be sold for a profit. This amounts to a valuation

HISTORY OF MUTUAL FUNDS IN INDIA

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The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases

FIRST PHASE 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.

SECOND PHASE 1987-1993

The year 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canara bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

THIRD PHASE 1993-2003

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first
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Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

FOURTH PHASE SINCE FEBRUARY 2003:

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.

FIFTH PHASE
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
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Fund etc. There were 33funds as at the end of March 2010. This is a continuing phase of growth of the industry through consolidation and entry of new international and private sector players.

ORGANIZATION OF A MUTUAL FUND

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management Company (AMC) and custodian. The

sponsor of a mutual fund is like the promoter of a company. The sponsor may be a bank, a

financial institution, or a financial service company. The sponsor is responsible for setting up and establishing the mutual fund. The

trust is established by a sponsor or more than one sponsor who is like promoter of a company.

The trustees of the mutual fund hold its property for the benefit of the unit holders.

Asset Management Company (AMC)

making investments in various types of securities.

approved by SEBI manages the funds by

Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its
custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme.

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

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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 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. The Association of Mutual Funds of India works with 30 registered AMCs of the country. 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 are as follows:? To define and maintain high professional and ethical standards in all areas of operation of mutual fund industry ? To recommend and promote best business practices and code of conduct to be followed by members and others engaged in the activities of mutual fund and asset management including agencies connected or involved in the field of capital markets and financial services. ? To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all matters concerning the mutual fund industry. ? To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry. ? To develop a cadre of well trained Agent distributors and to implement a programme of training and certification for all intermediaries and other engaged in the industry. ? To undertake nationwide investor awareness programme so as to promote proper understanding of the concept and working of mutual funds

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. ? To disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies. ? 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 MEMBERS OF AMFI:

BANK SPONSORED
? SBI Fund Management Ltd. ? BOB Asset Management Co. Ltd. ? Canbank Investment Management Services Ltd. ? UTI Asset Management Company Pvt. Ltd.

PRIVATE SECTOR : INDIAN

? Benchmark Asset Management Co. Pvt. Ltd. ? Cholamandalam Asset Management Co. Ltd. ? Credit Capital Asset Management Co. Ltd. ? Escorts Asset Management Ltd. ? JM Financial Mutual Fund ? Kotak Mahindra Asset Management Co. Ltd. ? Reliance Capital Asset Management Ltd. ? Sahara Asset Management Co. Pvt. Ltd ? Sundaram Asset Management Company Ltd. ? Tata Asset Management Private Ltd. ? Predominantly India Joint Ventures:- ? Birla Sun Life Asset Management Co. Ltd. ? DSP Merrill Lynch Fund Managers Limited ? HDFC Asset Management Company Ltd.

PREDOMINANTLY FOREIGN JOINT VENTURES:? ABN AMRO Asset Management (I) Ltd. ? Alliance Capital Asset Management (India) Pvt. Ltd. ? Deutsche Asset Management (India) Pvt. Ltd. ? Fidelity Fund Management Private Limited ? Franklin Templeton Asset Mgmt. (India) Pvt. Ltd. ? HSBC Asset Management (India) Private Ltd. ? ING Investment Management (India) Pvt. Ltd. ? Morgan Stanley Investment Management Pvt. Ltd. ?
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Principal Asset Management Co. Pvt. Ltd. ? Prudential ICICI Asset Management Co. Ltd. ? Standard Chartered Asset Mgmt Co. Pvt. Ltd.

ADVANTAGES OF MUTUAL FUNDS

1. PROFESSIONAL MANAGEMENT: Mutual Funds provide the services of experienced
and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.

2. DIVERSIFICATION: Mutual Funds invest in a number of companies across a broad crosssection of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.
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CONVENIENT ADMINISTRATION: Investing in a Mutual Fund reduces

paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

4. RETURN POTENTIAL: Over a medium to long-term, Mutual Funds have the potential to
provide a higher return as they invest in a diversified basket of selected securities.

5. LOW COSTS: Mutual Funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

6. LIQUIDITY: In open-end schemes, the investor gets the money back promptly at net asset
Value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock
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exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

7. TRANSPARENCY: You get regular information on the value of your investment in addition
to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

8. FLEXIBILITY: Through features such as regular investment plans, regular withdrawal plans
and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

9. AFFORDABILITY: Investors individually may lack sufficient funds to invest in high-grade

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

10. WELL REGULATED: All Mutual Funds are registered with SEBI and they function within
the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

DRAWBACKS OF MUTUAL FUNDS

1. NO GUARANTEES: The return of any mutual fund scheme is not assured as the investment
or the corpus of the fund is invested in the capital market which may or may not generate returns. No investment is risk free, if the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio is but investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own.

2. NO CUSTOMIZED PORTFOLIOS: The portfolio of securities in which a fund invests is

a decision taken by the fund manager. Investors have no right to interfere in the decision making

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process of a fund manager, which some investors find as a constraint in achieving their financial objectives.

3. FEES AND COMMISSIONS: All funds charge administrative fees to cover their day-today expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if an investor doesn't uses a broker or other financial adviser, he will pay a sales commission if he buys shares in a Load Fund.

4. TAXES: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If a fund makes a profit on its sales, the investor will pay taxes on the income he receives, even if he reinvests the money he made.

5. MANAGEMENT RISK: When an investor invests in a mutual fund, he depends on the

fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as he had hoped, he might not make as much money on his investment as he had expected. Of course, if the investor invests in the Index Funds, he foregoes management risk, because these funds do not employ managers.

DIFFERENT TYPES OF MUTUAL FUND SCHEMES

BY STRUCTURE1

OPEN-END FUNDS: An open-end fund is one that is available for subscription

all through the year. These funds do not have a fixed maturity and investors can conveniently buy and sell its units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is its liquidity.

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CLOSED-END FUNDS: A closed-end fund has a stipulated maturity period

which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period and investors can invest in the scheme only at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.
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INTERVAL FUNDS: Interval funds combine the features of open-ended and

close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

BY INVESTMENT OBJECTIVE1

GROWTH/EQUITY ORIENTED FUNDS: The aim of growth funds is to

provide capital appreciation over a period of time usually medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proved that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time.
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INCOME/ DEBT ORIENTED FUNDS: The aim of income funds is to

provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.
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BALANCED FUNDS: The aim of balanced funds is to provide both growth and

regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a
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rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.
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MONEY MARKET/LIQUID FUNDS: The aim of money market funds is to

provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

OTHER SCHEMES
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TAX SAVING SCHEMES: These schemes offer tax rebates to the investors

under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds.

INDUSTRY SPECIFIC SCHEMES: Industry Specific Schemes invest only in

the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, Pharmaceuticals, etc

INDEX FUNDS: The corpus of the Index Fund is invested in the index stocks and

it attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE Nifty.

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GILT FUNDS: These funds invest exclusively in Government securities.

Government securities have no default risk. NAV"s of these funds also fluctuate due to interest rate changes and other economic factors as is the case with income or debt oriented schemes.
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SECTORAL FUNDS: Sectoral Funds are those which invest exclusively in a

specified sector. This could be an industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.
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LOAD FUNDS: A Load Fund is one that charges a commission for entry or exit.

That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history.

NO-LOAD FUNDS: A No-Load Fund is one that does not charge a commission

for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to work.
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EXCHANGE TRADED FUNDS (ETF): Exchange Traded Funds provide

investors with combined benefits of a closed-end and an open-end mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like a single stock at index linked prices. The biggest advantage offered by these funds is that they offer diversification, flexibility of holding a single share (tradable at index linked prices) at the same time. Recently introduced in India, these funds are quite popular abroad.
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FUND OF FUNDS: Mutual funds that do not invest in financial or physical assets,

but do invest in other mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds provide investors with an added advantage of diversifying into different mutual fund schemes with even a small amount of investment, which further helps in diversification of risks.

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RISKS ASSOCIATED WITH MUTUAL FUNDS

Investing in Mutual Funds, as with any security, does not come without risk. One of the most basic economic principles is that risk and reward are directly correlated. In other words, the greater the potential risk the greater the potential return.
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MARKET RISK- Market risk relates to the market value of a security in the

future. Market prices fluctuate and are susceptible to economic and financial trends, supply and demand, and many other factors that cannot be precisely predicted or controlled.
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POLITICAL RISK- Changes in the tax laws, trade regulations, administered

prices, etc are some of the many political factors that create market risk. Although collectively, as citizens, we have indirect control through the power of our vote individually, as investors, we have virtually no control.

INFLATION RISK- Interest rate risk relates to future changes in interest rates.

For instance, if an investor invests in a long-term debt Mutual Fund scheme and interest rates increase, the NAV of the scheme will fall because the scheme will be end up holding debt offering lower interest rates.
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BUSINESS RISK- Business risk is the uncertainty concerning the future existence,

stability, and profitability of the issuer of the security. Business risk is inherent in all business ventures. The future financial stability of a company cannot be predicted or guaranteed, nor
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can the price of its securities. Adverse changes in business circumstances will reduce the market price of the companys equity resulting in proportionate fall in the NAV of the Mutual Fund scheme, which has invested in the equity of such a company
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ECONOMIC RISK- Economic risk involves uncertainty in the economy, which,

in turn, can have an adverse effect on a companys business. For instance, if monsoons fail in a year, equity stocks of agriculture-based companies will fall and NAVs of Mutual Funds, which have invested in such stocks, will fall proportionately.

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CHAPTER-2 LITERATURE REVIEW

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LITERATURE REVIEW

Performance evaluation of mutual funds is a preferred area of

research where a good amount of study has been carried out . In order to have an insight and in order to acquaint with the topic PERFORMANCE EVALUATION OF SELECTED MUTUAL FUNDS IN INDIA some of the preceding studies have been reviewed. Out of these studies 6 international studies and 8 national studies are taken into consideration. These International studies are indirectly related to the topic whereas national studies are directly related to the topic. Studies undertaken are as follows:
INTERNATIONAL REVIEWS

Massimo Massa, Rajdeep Patgiri, January 19, 2007,Incentives

and Mutual Fund Performance: Higher Performance or Just Higher Risk Taking?
The impact of contractual incentives on the risk-taking behavior and the performance of US mutual funds are studied. Incentives using the shape, i.e. concavity, of the fee structure in the advisory contract are measured. Results show that a high incentive contract induces managers to take more risk and reduces the funds' probability of survival. On the other hand, high-incentive funds deliver higher return. The net of these two effects is that incentives increase the risk-adjusted performance of the fund.

Dirk nitzche, Keith cuthbretson, Niall Sullivan, 2006 Mutual

Fund Performance.
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 Key drivers of relative performance are, load fees, expenses and turnover. Evidence on picking winners suggests past winner funds persist, particularly when rebalancing is frequent (i.e., less than one year) - but transactions costs and fund fees imply that economic gains to investors from actively switching into winner funds may be marginal. Only very sophisticated investors should pursue an active investment strategy of trying to pick winners - and then with much caution.

Doron Avramov, Russ Wermers, March 15,2005 Investing in

Mutual Funds when Returns are Predictable

This paper analyzes the performance of portfolio strategies that invest in no-load, open-end U.S. domestic equity mutual funds, incorporating predictability in (i) manager skills, (ii) fund risk-loadings, and (iii) benchmark returns.. Overall, findings indicate that industries are important in locating outperforming mutual funds, and that active management adds much more value than documented by prior studies.

Yonggan Zhao, March 2005 A Dynamic Model of Active Portfolio

and Mutual Fund Performance Evaluation

Based on the analysis in this paper, a dynamic performance measure is defined which relates portfolio's return to its risk sensitivity. Abnormal returns at each point in time are quantified as the difference between the realized and the model-fitted returns. Risk sensitivity is estimated through a dynamic matching that minimizes the total fitted error of portfolio returns. The empirical analysis shows that portfolio performance indices are related to their estimated risk sensitivities in an openupward quadratic curve.

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Russ Wermers, May 2003 Is Money Really 'Smart'? New

Evidence on the Relation between Mutual Fund Flows, Manager Behavior, and Performance Persistence

Mutual fund returns strongly persist over multi-year periods - that is the central finding of this paper. Further, consumer and fund manager behavior both play a large role in explaining these long-term continuation patterns - consumers invest heavily in last-year's winning funds, and managers of these winners invest these inflows in momentum stocks to continue to outperform other funds for at least two years following the ranking year.

Richard C. Green, Jonathan Berk, December 9, 2002 Mutual

Fund Flows and Performance in Rational Markets

A simple rational model of active portfolio management is developed that provides a natural benchmark against which to evaluate observed relationship between returns and fund flows.. Consequently, past performance cannot be used to predict future returns, or to infer the average skill level of active managers.. A strong relationship between past performance and the flow of funds exists in this model.

NATIONAL
Murugesan Selvam, Bhuvaneswari Palanisamy, 2011 Analysis of Risk and Return Relationship of Indian Equity (Dividend) Mutual Fund Schemes
The present study analyzed the risk and return relationship of Indian Mutual Fund Schemes (Dividend Option). The study found out that out of thirty five sample schemes, eleven showed significant tvalues and all other twenty four sample schemes did not prove significant relationship
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between the risk and return. According to t-alpha values, majority (thirty two) of the sample schemes' returns were not significantly different from their market returns and very few number of sample schemes' returns were significantly different from their market returns during the study period.

D.N.Roy, S.B.Rao, July 22, 2009 Effect of Fund Size on the

Performance of Balanced Mutual Funds: An Empirical Study in the Indian Context

The study empirically researches the effect of fund size on the performance of select Balanced Funds. For the purpose of analysis, the selected Balanced Funds have been classified into Micro-, Small-, Medium- and Large sized Balanced Funds. Open end, Balanced Mutual Fund schemes having at least three years track record are only considered for the study

Deepak Agarwal, September 15, 2007,Measuring Performance

of Indian Mutual Funds

This article provides an overview of mutual fund activity in emerging markets. It describes about their size and asset allocation. This paper is a process to analyze the Indian Mutual Fund Industry pricing mechanism with empirical studies on its valuation. It also analyzes data at both the fundmanager and fund-investor levels. The study revealed that the performance is affected by the saving and investment habits of the people and the second side the confidence and loyalty of the fund Manager and rewards affects the performance of the MF industry in India.

Sanjay Sehgal, Manoj Jhanwar, December 18, 2007,Short-Term

Persistence in Mutual Funds Performance: Evidence from India

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In this paper, it is examined if there is any short-term persistence in mutual funds performance in the Indian context. This is owing to the fact that zero investment trading strategies generate low gross returns and that the winners portfolios involve higher investment costs than losers portfolios, thus destroying a major portion of extra-normal returns. Empirical findings are consistent with the efficient market hypothesis and have implications for hedge funds and other managed portfolios that rely on innovative investment styles, including the fund of funds trading strategies that implicitly assume short-term persistence.

Soumya Guha Deb, Ashok Banerjee, B.B.Chakrabarti, December

18, 2007,Performance of Indian Equity Mutual Funds vis-a vis Their Style Benchmarks: An Empirical Exploration
In this paper a return based style analysis is done of equity mutual funds in India using quadratic optimization of an asset class factor model proposed by William Sharpe. It is found the 'style benchmarks' of each of the sample of equity funds as optimum exposure to eleven passive asset class indexes. The relative performance of the funds with respect to their style benchmarks is analyzed. The results show that the funds have not been able to beat their style benchmarks on the average.

Kaushik Bhattacharjee, Bijan Roy, December 19, 2006, Fund

Performance Measurement without Benchmark - A Case of Select Indian Mutual Funds

By using PCM as a measure, this paper, without using any benchmark, attempts to assess whether the selected mutual funds are able to provide above-normal return on average - using no more information than what is available to the common investor. PCM has been calculated for one month, one quarter, and one year lag. And using
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PCM as a measure the study finds that though in the short term, the mutual funds were unable to generate above-normal return but on the average the combined PCM of all the mutual funds is significantly different from zero.

S. Anand, V. Murugaiah, December 18, 2006, Analysis of

Components of Investment Performance - An Empirical Study of Mutual Funds in India

In this paper, an attempt has been made to examine the components and sources of investment performance in order to attribute it to specific activities of Indian fund managers. It also attempts to identify a part of observed return which is due to the ability to pick up the best securities at given level of risk. The empirical results reveal the fact that the mutual funds were not able to compensate the investors for the additional risk that they have taken by investing in the mutual funds.

Sharad

Pawar,

R.Madhumati,

2006Characteristics

and

Performance Evaluation of Selected Mutual Funds in India

The study used sample of public-sector sponsored & private-sector sponsored mutual funds of varied net assets to investigate the differences in characteristics of assets held, portfolio diversification, and variable effects of diversification on investment performance. The study found that public-sector sponsored funds do not differ significantly from private-sector sponsored funds in terms of mean returns. However, there is a significant difference between public-sector sponsored mutual funds and private-sector sponsored mutual funds in terms of average standard deviation, average variance and average coefficient of variation (COV) and e SDAR (excess standard deviation adjusted returns) as a performance measure. In this paper the performance evaluation of Indian mutual funds in a bear market is carried out through relative performance index, risk-return analysis, Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's measure, and Fama's measure. The results of performance measures suggest that
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most of the mutual fund schemes in the sample of 58 were able to satisfy investor's expectations by giving excess returns over expected returns based on both premium for systematic risk and total risk.

CHAPTER-3
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RESEARCH DESIGN

BACKGROUND OF THE STUDY

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them.
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Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Each Mutual Fund scheme has a defined investment objective and strategy. This study is therefore aimed at comparing the performance of selected mutual fund schemes.

NEED OF THE STUDY

Even today investing in mutual funds is a little difficult for laymen. Today in India there are more than 800 mutual fund schemes. This is sufficed to baffle the investor. Researchers have shown that funds picked are those that advertise heavily and sell aggressively. Studies have proved that an investor who analyses and make sense of his investment needs and making the movements according to it could enable the investor to win the game.
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Hence, the need of the study is to provide a thorough understanding of the functionalities and the factors which contributes to the return so that the investors make more sensible movements rather, to be just cajoled by the advertisements and selling spree and invest their money in the most appropriate mutual fund as per their needs.

STATEMENT OF THE PROBLEM

Identifying the right mutual fund for investment with regard to returns and performance

OBJECTIVES OF THE STUDY

1. 2. To get an insight knowledge about mutual funds. To evaluate investment performance of selected schemes of mutual funds in terms of risk and return. 3. To help investors in making better choice of mutual fund scheme as per their need.

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Scope of the Study

A big boom has been witnessed in Mutual Fund Industry in recent times. A large number of new players have entered the market and trying to gain market share in this rapidly improving market. In this situation investors generally get confused in making selection.
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The research was carried on in Patna. I had been sent at one of the branch Of Reliance Capital Asset Management Limited Patna where I completed my Project work. I surveyed on my Project Topic An Analysis of Mutual Fund Schemes for Better Choice on the visiting customers of the Branch. The study will help to do the better and smarter choice of schemes by the customers as per their need and they will not be influenced by the advertisements. This project report may help the company to make further planning and in strategy making.

RESEARCH METHODOLOGY

SOURCES OF DATA: 1. Primary Data: Questionnaire has been filled by the Investors.
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2. Secondary Data: Secondary data has been collected from various websites and books.

SAMPLE AMC: Reliance Asset management Co. Ltd. SELECTED SCHEMES: All 22 Equity Schemes
SAMPLING METHOD: Convenient Sampling method PERIOD OF THE STUDY: Twelve Months i.e., 1 June 2012 to 1 May 2013

Tool in the Study:

i) Sharpe Ratio
ii) Standard Deviation iii) Average Returns iv) Net Asset Value

TOOLS FOR ANALYSIS

The following are the tools that have been used to analyze the performance of the selected mutual fund schemes.

PERFORMANCE ANALYSIS TOOLS

1 31 | P a g e

SHARPE INDEX:

Sharpe index was given by WF Sharpe in 1966, it measures risk premium of a portfolio, relative to the total amount for risk in the portfolio. Sharpe index summarizes the risk and return of a portfolio in a single measure that categorizes the performance of funds on the risk- adjusted basis. The larger the Sharpe Index, the portfolio over performance the market and vice versa. Sharpe Index = Portfolio Average Return (Rp) Risk Free Rate of Interest (Rt)/ Standard Deviations of the Portfolio Return
1

NET ASSET VALUE:

Net Asset Value of the fund is the cumulative market value of the assets of the scheme minus its liabilities. The NAV per unit is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. The value of all the securities in the portfolio in calculated daily. The Formula for NAV is NAV= Market value of the Funds Investments+ Receivables +Accrued Income Liabilities Accrued Expenses /Number of Outstanding Units

RETURN:

Rate of return, also known as return on investment (ROI), rate of profit is the ratio of

money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. Here returns on mutual funds refer to the amount gained or lost by an investor on the investments in mutual funds. Absolute returns are considered which refers to the return that an asset achieves over a certain period of time.

STATISTICAL TOOL
1

STANDARD DEVIATION:

It is used to measure the variation in individual returns from the average expected return over a certain period. Standard deviation is used in the concept of risk of a portfolio of investments; higher standard deviation means a greater fluctuation in expected return.

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? = ? (x-x') /N
Where, ? : Standard Deviation of Return, X: Return for the stock in period, x: Arithmetic Return, N: Number of periods

PRESENTATION TOOL

1 2

BAR DIAGRAM Pie Charts

LIMITATIONS OF THE STUDY:

The study is based on the response given by the respondents. Different tools used for analysis may suggest different results as the approach differs. The study considers data for only a limited period of time. The study is based only on selected schemes therefore limiting the area of research.

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CHAPTER-4
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INDUSTRY PROFILE

INDUSTRY AND COMPANY PROFILE

The Indian mutual fund industry has evolved from single player in 1964 to a fast growing, competitive market on the back of a strong regulatory framework. The Indian mutual fund industry currently consists of 38 players offering close to 1000 schemes with total Assets under Management (AUM) of Rs. 7,81,583.84 crore. The Assets under Management (AUM) have grown at a rapid pace over the past few years, at a CAGR of 35 % for the five-year period from 2005 to 2009.

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Over the 10-year period from 1999 to 2009 encompassing varied economic cycles, the industry grew at 22 % CAGR. The industry has witnessed a shift has changed drastically in favour of private sector players, as the number of public sector players reduced from 11 in 2001 to 5 in 2009. India has been amongst the fastest growing markets for mutual funds since 2004; in the five- year period from 2004 to 2008 (as of Dec) the Indian mutual fund industry grew at 29 % CAGR as against the global average of 4 percent. The Indian mutual fund industry is in a relatively nascent stage in terms of its product offerings, and tends to compete with Government securities. As of Dec 2008, the total number of mutual fund schemes was 1,002 in comparison to 10,349 funds in the US. However, despite clocking growth rates that are amongst the highest in the world, the Indian mutual fund industry continues to be a very small market; comprising 0.32 % share of the global AUM of USD 18.97 trillion as of December 2008. The increase in revenue and profitability in the Indian mutual fund industry has not been commensurate with the AUM growth in the last 5 years. The AUM grew at 35 % CAGR in the period from 2005 to 2009, while the profitability of AMCs declined from 24 % in FY 2004 to 14 % in FY 2008. The public sector has gradually ceded market share to the private sector. Public sector mutual funds comprised 21 percent of the AUM in 2009 as against 72 percent AUM share in 2001. While the mutual fund industry in India continues to be metro and urban centric, the mutual funds are beginning to tap Tier 2 and Tier 3 towns as a vital component of their growth strategy.

RELIANCE MUTUAL FUND

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The
sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11,
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2004. Reliance Mutual Fund was formed for launching of 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.

VISION: To be a globally respected wealth creator with an emphasis on customer care and a
culture of good corporate governance. Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds in the country. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 118 cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. "Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of thepaid-up capital of RCAM, the balance paid up capital being held by minority shareholders."The fund has more than 235 schemes with AUM of Rs.112565.11 Crs

MISSION STATEMENT
To create and nurture a world-class, high performance environment aimed at delighting our customers.

Other Details: Mutual Fund Setup Date Incorporation Date Sponsor Trustee Chairman CEO / MD
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Reliance Mutual Fund Jun-30-1995 Feb-24-1995 Reliance Capital Limited Reliance Capital Trustee Co. Ltd. N.A Sundeep Sikka

CIO Compliance Officer Investor Service Officer Assets Managed Other Details Auditors Haribhakti & Co., Chartered Accountants Custodians Deutsche Bank AG Registrars Karvy Computershare Pvt. Ltd. Address One India Bulls Centre - Tower One, 11th & 12th flr, Jupiter Mills, Elphinstone Rd, Mum - 400013 Telephone 022-30994600/Touchbase 30301111 Nos. Fax Nos. 022-30994699 E-mail customer_care@reliancemutual.com

N.A Mr. Muneesh Sud Mr. Bhalchandra Joshi Rs. 94580.19 crore (Mar-31-2013)

CHAPTER-5
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DATA COLLECTION AND ANALYSIS

DATA COLLECTION
Secondary data about Net asset value (NAV) of the mutual funds has been collected from the website of Value research online.

Returns have been calculated by applying the formula: Returns(R) = (NAVt NAVt-1)/NAVt-1*100

Mean returns (Ri) =?R/n

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Standard deviation has been calculated by the formula: S.D. () =?dx2/n

Sharpe ratio has been calculated by the following formula: Sharpe ratio =Ri-T/S.D. Where, Ri = Mean returns

T = Risk free return on treasury bills S.D. = Standard deviation The risk free return is assumed to be 6 percent. Assuming there are 365 days in a year so the 30 days rate comes to be 0.49% (30/365*6)

Secondary data related to value of net assets (in crores) has been collected from the website of value research online.

Table 1: Reliance Vision Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 40 | P a g e NAV 231.29 250.32 247.57 241.36 266.14 260.2 264.35 272.01 269.49 247.006 RETURN 8.22 -1.09 -2.5 10.2 -2.23 1.59 2.89 -0.92 -8.34

1-Apr-13 1-May-13 Summation Average

238.28 261.47

-3.53 9.73 14.02 1.27

Standard Deviation SharpeRatio

5.95 0.10

Table 2: Reliance Regular Savings Fund

DATE 1-Jun-12 41 | P a g e

NAV 25.67

RETURN

1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average Standard Deviation Sharpe Ratio

27.77 27.92 28.07 31.41 31.49 33.45 34.33 33.42 30.62 29.77 31.14

8.18 5.4 0.53 11.89882437 0.254695957 6.224198158 2.630792227 -2.650742791 -8.378216637 -2.775963423 4.60194827 25.91553613 2.35595783

5.733331001 0.293193717

Table:Reliance Natural Resource Fund

DATE NAV RETURN 1-Jun-12 9.13 1-Jul-12 9.79 7.22 1-Aug-12 9.49 -3.06 1-Sep-12 9.21 -2.95 42 | P a g e

1-Oct-12 9.69 5.21 1-Nov-12 9.71 0.2 1-Dec-12 9.76 0.51 1-Jan-13 10.04 2.86 1-Feb-13 10.27 2.29 1-Mar-13 9.42 -8.27 1-Apr-13 8.92 -5.3 1-May-13 9.15 2.57 Summation 1.28 Average 0.116363636 Standard Deviation 4.626026962 Sharpe Ratio 0.12

Table 4: Reliance Top 200 Fund

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DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average Standard Deviation Sharpe Ratio

NAV 11.62 12.53 12.53 12.59 13.73 13.72 14.25 14.58 14.55 13.8 13.61 14.19

RETURN 7.831325301 0 0.478850758 9.054805401 -0.072833212 3.862973761 2.315789474 -0.205761317 -5.154639175 -1.376811594 4.261572373 20.99527177 1.90866107

4.128384682 0.298543689

Table 5: Reliance Equity Opportunity Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 44 | P a g e

NAV

RETURN 35 37.44 6.971428571 37.65 0.560897436 37.72 0.185922975 41.44 9.8621421 41.78 0.82046332 43.52 4.164672092 44.68 2.665441176 43.82 1.924798568 41.58 5.111821086 41.94 0.865800866 42.59 1.549833095

Summation Average

20.6099819 8 1.87363472 5 4 . 0 7 0 6 9 5 8 4 9 0.294840295

Standard Deviation

Sharpe Ratio

Table 6:Reliance Quant Plus Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

NAV

RETURN 11.68 12.81 9.674657534 12.68 1.014832162 12.61 0.552050473 13.77 9.199048374 13.63 1.016702977 14.04 3.008070433 14.31 1.923076923 14.41 0.69881202 13.7 4.927133935 13.56 -1.02189781 14.17 4.498525074 20.469573 1.86087027 3

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Standard Deviation

4 . 4 8 6 5 4 9 9 1 2 0.265625

Sharpe Ratio

Table 7:Reliance Long Term Equity Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

NAV

RETURN 13.79 14.63 6.091370558 14.9 1.845522898 14.96 0.402684564 16.23 8.489304813 16.37 0.862600123 17.04 4.092852779 17.28 1.408450704 16.51 4.456018519 15.04 -8.90369473 15.01 0.199468085 15.54 3.530979347 13.1645844 5 1.19678040 5

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Standard Deviation

Sharpe Ratio

4 . 7 7 6 0 3 2 0 7 9 0.109014675

Table 8: Reliance Regular Saving Fund (Balanced Option)

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

NAV

RETURN 21.08 22.71 7.732447818 22.43 0.352267723 22.66 1.025412394 24.51 8.164165931 24.29 0.897592819 25.21 3.7875669 25.78 2.261007537 25.56 0.853374709 24.39 4.577464789 24.16 -0.94300943 25.01 3.518211921 18.8651030 3 1.71500936 6

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Standard Deviation

3 . 8 7 9 1 5 0 6 0 9 0.26873385

Sharpe Ratio

Table 9: Reliance Media & Entertainment Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

NAV

RETURN 26.58 28.11 5.756207675 29.17 3.770900036 28.93 0.822763113 32.88 13.65364673 34.24 4.136253041 38.57 12.64602804 39.35 2.022297122 39.14 6.607369759 36.54 6.642820644 36.49 0.136836344 36.9 1.123595506 42.1138778 1 3.82853434 6

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Standard Deviation

Sharpe Ratio

5 . 8 6 0 0 6 8 9 9 9 0.537542662

Table 10 :Reliance Tax Saver Elss Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

NAV

RETURN 19.99 21.17 5.902951476 21.25 0.377893245 21.05 0.941176471 23.24 10.40380048 23.26 0.08605852 24.08 3.525365434 24.76 2.823920266 24.13 2.544426494 22.27 7.708246995 21.57 -3.14324203 23.13 7.232267038 16.0151644 6 1.45592404 2

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Standard Deviation

Sharpe Ratio

5 . 1 8 9 2 4 4 8 5 8 0.150579151

Table 11: Reliance Arbitrage Advantage Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

NAV

RETURN 11.52 11.64 1.041666667 11.77 1.116838488 11.85 0.679694138 11.94 0.759493671 12 0.502512563 12.05 0.416666667 12.13 0.663900415 12.28 1.236603462 12.38 0.814332248 12.44 0.484652666 12.54 0.803858521 8.52021950 4 0.77456540 9 0 . 2 6 6

Standard Deviation

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8 4 0 9 0 9 Sharpe Ratio 0.37593985

Table 12:Reliance Index Fund -Nifty Plan

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

NAV

RETURN 7.96 8.71 9.422110553 8.67 -0.45924225 8.69 0.230680507 9.43 8.515535098 9.34 0.954400848 9.71 3.961456103 9.84 1.338825953 9.91 0.711382114 9.45 4.641775984 9.43 0.211640212 9.92 5.196182397 23.1091134 3 2.10082849 4 4 . 2 4

Standard Deviation

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Sharpe Ratio

8 5 2 9 8 6 9 0.337264151

Table 13: Reliance Banking Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

NAV

RETURN

87.1 97.25 11.6532721 96.71 0.555269923 91.91 4.963292317 106.38 15.74366228 109.49 2.923481857 114.58 4.648826377 122.04 6.510734858 120.91 0.925925926 109.53 9.411959309 106.34 2.912444079 111.69 5.031032537 27.7421184 5 2.52201076 9

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Standard Deviation

Sharpe Ratio

7 . 3 1 0 4 1 9 0 2 6 0.253077975

Table 14: Reliance Equity Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

NAV RETURN 11.63 12.8 10.06018917 12.78 -0.15625 12.88 0.078247261 14.29 10.94720497 14.2 -0.629811057 14.97 5.422535211 15.18 1.402805611 15.31 0.856389987 14.35 -6.270411496 13.97 -2.648083624 14.87 6.442376521 25.50519255 2.318653868

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Standard Deviation

5 . 3 1 2 9 8 3 7 7 5 0.308851224

Sharpe Ratio

Table 15: Reliance Growth Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average Standard Deviation Sharpe Ratio

NAV 398.64 424.32 418.3 419.74 463.18 465.62 498.49 505.39 496.16 453.56 443.71 457.34

RETURN 6.441902468 -1.418740573 0.344250538 10.34926383 0.526793039 7.059404665 1.384180224 -1.826312353 -8.585940019 -2.171708264 3.071826193 15.17491975 1.379538159

5.225296139 0.134099617

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Table 16 :Reliance Small Capital Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average Standard Deviation Sharpe Ratio NAV 8.79 9.33 9.38 9.56 10.3 10.63 10.89 10.99 10.28 9.63 9.48 9.58 RETURN 6.14334471 0.535905681 1.918976546 7.740585774 3.203883495 2.445907808 0.918273646 -6.46 -6.322957198 -1.557632399 1.054852321 9.621140383 0.874649126

4.422134971 0.045248869

Table 17: Reliance Infrastructure Fund

DATE 1-Jun-12 55 | P a g e

NAV 6.34

RETURN

1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average

6.96 6.69 6.36 7.1 7.11 7.38 7.46 6.88 6.13 6 6.01

9.779179811 -3.879310345 -4.932735426 11.63522013 0.14084507 3.797468354 1.08401084 -7.774798928 -10.90116279 -2.120717781 0.166666667 3.005334402 0.273212218

Standard Deviation Sharpe Ratio

6.84831579 -0.137426901

Table 18:Reliance Pharma Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average 56 | P a g e NAV RETURN 55.43 58.94 6.332311023 61.49 4.326433661 64.46 4.830053667 65.79 2.063295067 66.63 1.732786138 68.36 2.596428035 69.75 2.033352838 67.05 -3.870967742 64.29 -4.116331096 66.4 3.28 69.52 4.698795181 23.90615677 2.173286979

Standard Deviation

3 . 3 6 2 9 1 5 6 4 0.446428571

Sharpe Ratio

Table 19: Reliance Equity Linked Saving Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average Standard Deviation NAV 13.85 14.79 14.78 15.04 16.23 16.2 16.66 16.83 16.62 15.6 15.34 15.99 RETURN 6.78700361 -0.067613252 1.759133965 7.912234043 -0.184842884 2.839506173 1.020408163 -1.247771836 -6.137184116 -1.666666667 4.237288136 15.25149534 1.386499576 3 . 9 9 6 4

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0 2 6 8 9 Sharpe Ratio 0.177944862

Table 20: Reliance NRI Equity Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average Standard Deviation

NAV 34.34 37.47 37.37 37.75 41.83 41.37 43.81 45 44.74 42.35 42.21 44.36

RETURN 9.114735003 -0.026688017 1.01 10.80794702 -1.099689218 5.897993715 2.716274823 -0.577777778 -5.341975861 -0.330578512 5.09357972 27.2638209 2.478529172

4 . 8 1 2 8 4 6 5 0 4 0.374220374

Sharpe Ratio

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Table 21:Reliance Index FundSensex Plan

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average Standard Deviation

NAV 7.78 8.5 8.44 8.51 9.19 9.1 9.46 9.59 9.69 9.28 9.25 9.6

RETURN 9.254498715 -0.705882353 0.829383886 7.990599295 -0.979325354 3.956043956 1.374207188 1.042752868 -4.231166151 -0.323275862 3.783783784 21.99161997 1.999238179 3 . 9 8 2 7 6 9 3 8 4 0.331658291

Sharpe Ratio

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Table 22 :Reliance Diversified Power Sector Fund

DATE 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 1-Jan-13 1-Feb-13 1-Mar-13 1-Apr-13 1-May-13 Summation Average Standard Deviation

NAV 49.32 54.41 53.06 50.96 57.41 56.41 58.08 59.75 56.45 51.16 48.96 50.7

RETURN 10.32035685 -2.481161551 -3.957783641 12.65698587 -1.741856819 2.960468002 2.875344353 -5.523012552 -9.371124889 -4.300234558 3.553921569 4.991902636 0.453809331 6 . 7 5 1 1 0 3 3 5 5 -0.032592593

Sharpe Ratio

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DATA ANALYSIS & INTERPRETATION

The following tools have been used to measure the performance of the selected mutual fund in terms of risk and return.

1. RETURN
Rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return, is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. Here returns on mutual funds refer to the amount gained or lost by an investor on the investments in mutual funds. Absolute returns are considered which refers to the return that an asset achieves over a certain period of time.

SCHEMES
Media and Entertainment Fund Banking Fund NRI Equity Fund Regular Saving Fund(Equity) Equity Fund Pharma Fund Index Fund-Nifty Plan Index Fund-Sensex Plan Top 200 Fund

AVERAGE RETURN 3.82 2.52 2.47 2.35 2.31 2.17 2.1 1.99 1.9

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SCHEMES
Equity oppoptunity Fund Quant Plus Fund regular Savings Fund(Bal.) tax Saver(ELSS) Fund Equity Linked Savings Fund Growth fund Vision Fund Long Term Equity Fund Small Capital Fund Arbitrage Advantage Fund Diversified Power Sector Fund Natural Resource Fund Infrastrusture Fund

AVERAGE RETURN 1.87 1.86 1.71 1.45 1.38 1.37 1.27 1.19 0.87 0.77 0.45 0.11 -0.27

Table 23. Showing returns of the funds (12 months)

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Diversified

Pharma Fund

Banking Fund

Equity Linked

Graph 1. Showing returns of the funds (12 months)

Any investor would like to maximize the returns on the investments and therefore mutual fund scheme which delivers the highest returns will be selected. Here the average returns are considered for the past twelve month period. It can be observed that Media and Entertainment has yielded the highest return (3.82%) of all the equity scheme. Banking Fund ,NRI Fund, Regular Saving Fund ,Equity and Pharma fund has yielded good return near to (2.2%) . Infrastructure fund has delivered the negative return (-.27%) among all the funds.

2. STANDARD DEVIATION
Standard Deviation is a statistical tool, used to measure the variation in individual returns from the average expected return over a certain period. Standard deviation is used in the concept of risk of portfolio of investments; higher standard deviation means a greater fluctuation in expected return. It is denoted by sigma (). ssssssschemesSCHEME
63 | P a g e STANDsxssxx xxARD

Small Capital

Infrastrusture

Index Fund-

Regular

regular

Vision Fund

SCHEMES

Equity

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 -0.5

Series1 Series2 Series3

Arbitrage Advantage Fund Pharma Fund regular Savings Fund(Balanced Option) Index Fund-Sensex Plan Equity Linked Savings Fund Equity oppoptunity Fund Top 200 Fund Small Capital Fund Index Fund-Nifty Plan Quant Plus Fund Natural Resource Fund Long Term Equity Fund NRI Equity Fund tax Saver(ELSS) Fund Growth fund Equity Fund Regular Saving Fund Media and Entertainment Fund Vision Fund Diversified Power Sector Fund Infrastrusture Fund Banking Fund

DEVIATION 0.26 3.36 3.87 3.98 3.99 4.07 4.12 4.22 4.24 4.48 4.62 4.77 4.81 5.18 5.22 5.31 5.73 5.86 5.95 6.75 6.84 7.31

8 7 6 5 4 3 2 1 0 Arbitrage Advantage Regular Saving Fund regular Savings Fund(Balanced Top 200 Fund Equity Linked Savings Fund Natural Resource Fund Infrastrusture Fund Index FundNifty Plan Growth fund NRI Equity Fund Vision Fund

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Graph 2. Showing returns of the funds (12 months)

A higher standard deviation means that the returns of the fund have been more volatile than a fund having low standard deviation. In other words high standard deviation means high risk. Arbitrage Advantage Fund has the lowest SD which means it is comparatively less risky to the other funds as its returns are less volatile. Pharma Fund has the next lowest SD, followed by Reliance Regular saving Fund (bal). Banking Fund has the highest SD among all the funds which means it is comparatively more risky as its returns are more volatile.

3. SHARPE RATIO
Sharpe Ratio measures risk premium of a portfolio, relative to the total amount for risk in the portfolio. It was given by William Sharpe. It measures the excess return (i.e., risk premium) per unit of total risk. It is one of the most widely used tools to measure the performance of a mutual fund. Higher Sharpe ratio means higher returns for the same risk level.

Column1 Scheme Relience Media and Entertainment Fund Relience Pharma Fund Relience Arbitrage Advantage Fund Relience NRI Equity Fund Relience Index Fund-Nifty Plan Relience Index Fund-Sensex Plan Relience Equity Fund Relience Regular Saving Fund Relience Equity oppoptunity Fund Relience Top 200 Fund Relience regular Savings Fund(Balanced Option) 65 | P a g e

Column3 Sharpe Ratio 0.53 0.44 0.37 0.37 0.33 0.33 0.3 0.29 0.29 0.29 0.26

Relience Relience Relience Relience Relience Relience Relience Relience Relience Relience Relience

Quant Plus Fund Banking Fund Equity Linked Savings Fund tax Saver(ELSS) Fund Growth fund Long Term Equity Fund Vision Fund Small Capital Fund Diversified Power Sector Fund Natural Resource Fund Infrastrusture Fund

0.26 0.25 0.17 0.15 0.13 0.1 0.1 0.04 -0.03 -0.12 -0.13

Table 9. Showing Sharpe ratio of the funds (12 months)

0.6 0.5 0.4 0.3 0.2 0.1 0 -0.1 -0.2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Scheme Sharpe Ratio

Graph 3. Showing Sharpe ratio of the funds (12 months )

Reliance Media and Entertainment Fund has the highest Sharpes ratio (0.53) which means it has outperformed all the other funds, as higher the Sharpes Ratio, higher the performance of the mutual fund. Pharma Fund has the next highest Sharpes ratio. Infrastructure Fund has the Negative Sharpes ratio (-.13) among all the selected funds, which means it, has yielded negative returns for the same risk level.

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CHAPTER-6 FINDINGS AND CONCLUSION

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FINDINGS
The analysis of 22 Equity Schemes of Reliance Mutual funds (Growth option) based on NAV returns for a period of 12 months yielded the following results: Media and Entertainment has outperformed all the other funds as it has yielded the highest

return (3.82%) of the entire equity scheme. This is due to the portfolio of its investments which have performed very well. Hence, investors who are attracted to funds with highest returns will be interested in this mutual fund scheme. Arbitrage Advantage Fund has delivered more consistent returns, as it has the lowest Standard

Deviation (0.26) among all the funds. This fund is less risky due to the low risk profile of its portfolio of investments. Investors interested in stable returns & less volatility would like to invest in this mutual fund. The returns of the fund can hence be trusted. It can be observed that Media and Entertainment Fund has the best performance according to

the Sharpe Ratio (0.53). This means it has outperformed all the other funds, as higher the Sharpe Ratio, higher the performance of the mutual fund. The investors should select a mutual fund with a higher Sharpe ratio, as it yields higher returns for the same risk level.
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SUGGESTIONS
Investors while investing their funds should consider both the risk and the returns associated with the mutual fund, as they should balance both the risk and the return to earn optimum profits. As the famous lines say, Mutual Fund Investments Are subject To Market Risks. Please Read The Offer Documents Carefully Before Investing" Another important thing to be remembered is that investors should invest in a mutual fund that

matches their objective of investment which should be very clearly decided. A good Fund Manager is also very important for a mutual fund, as he will be responsible for

the funds performance. Therefore investors should invest in a fund which has a good & capable fund manager to get the best performance. In the light of the current state of industry, and the huge latent opportunity for growth, Explore the demand for Exchange Traded Funds (ETFs) especially gold ETFs Attractive product offerings Cost Rationalization Increased investment in technology to support distribution network Investor Education Awareness Programs
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Researcher would like to highlight a few imperatives on this road to success-

 Increase transparency for mutual fund houses, particularly at the retail level.

CONCLUSION
Very aggressive investors who want the highest returns and are willing to take higher risk should invest their funds in Media and Entertainment Fund, as it has yielded the highest returns (3.82%) among all the selected mutual funds and has the best performance according to the Sharpe Ratio (0.53) as well as it has higher standard deviation (5.86) which shows it is more risky as its returns are more volatile. It has quarterly net assets of Rs. 104 crores which also reflects its good performance. In all, comparing the overall performance of all the selected mutual fund schemes, it is the best mutual fund scheme for investment in regards to returns and performance. But most of my respondents fall in the category of aggressive zone, who want a relatively consistent return. So, those customers should invest in Reliance Pharma Fund as it has second lowest standard deviation (3.36) which indicates its consistency and second best performance according to Sharpe ratio and it ranked fifth (2.17) in terms of return which shows good position. It has quarterly net assets of Rs. 655 crores which also reflects confidence of so many investors which gives lead to other aggressive investors.

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REFERENCES

INTERNATIONAL REVIEWS
1. Massimo Massa, Rajdeep Patgiri, January 19, 2007, Incentives and Mutual Fund Performance: Higher Performance or Just Higher Risk Taking? www.ssrn.com 2. Dirk nitzche, Keith cuthbretson, Niall Sullivan, 2006Mutual Fund Performance, www.ssrn.com 3. Doron Avramov, Russ Wermers, March 15, 2005Investing in Mutual Funds when Returns are Predictable, www.ssrn.com 4. Yonggan Zhao, March 2005 A Dynamic Model of Active Portfolio and Mutual Fund Performance Evaluation, www.ssrn.com 5. Russ Wermers, May 2003 Is Money Really 'Smart'? New Evidence on the Relation between Mutual Fund Flows, Manager Behavior, and Performance Persistence, www.ssrn.com 6. Richard C. Green, Jonathan Berk, December 9, 2002 Mutual Fund Flows and Performance in Rational Markets, www.ssrn.com 7. Graciela Kaminsky, March 23 2001 Mutual Fund Investment in Emerging Markets: An Overview, www.ssrn.com
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8. Luis Ferruz, Cristina Ortiz, 2001 Does Mutual Fund Management in India Correspond to its Investment Objective Classification?, www.ssrn.com 9. Chm & Eric. 1984 Mutual fund Investment Performance.www.ssrn.com 10. Smith.V, 1978 Is fund growth related to fund performance, www.ssrn.com.

NATIONAL REVIEWS
1. Murugesan Selvam, Bhuvaneswari Palanisamy, 2011 Analysis of Risk and Return Relationship of Indian Equity (Dividend) Mutual Fund Schemeswww.ssrn.com 2. D.N.Roy, S.B.Rao, July 22, 2009 Effect of Fund Size on the Performance of Balanced Mutual Funds: An Empirical Study in the Indian Context, www.ssrn.com 3. Deepak Agarwal, September 15, 2007,Measuring Performance of Indian Mutual Funds, www.ssrn.com 4. Sanjay Sehgal, Manoj Jhanwar, December 18, 2007, Short-Term Persistence in Mutual Funds Performance: Evidence from India, www.ssrn.com 5. Soumya Guha Deb, Ashok Banerjee, B.B.Chakrabarti, December 18, 2007,Performance of Indian Equity Mutual Funds vis-a vis Their Style Benchmarks: An Empirical Exploration,www.ssrn.com 6. Kaushik Bhattacharjee, Bijan Roy, December 19, 2006, Fund Performance Measurement without Benchmark - A Case of Select Indian Mutual Funds, www.sssrn.com 7. S. Anand, V. Murugaiah, December 18, 2006, Analysis of Components of Investment Performance - An Empirical Study of Mutual Funds in India, www.ssrn.com 8. Sharad Pawar, R.Madhumati, 2006Characteristics and Performance Evaluation of

Selected Mutual Funds in India, www.ssrn.com

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9. Bijan Roy, Saikat Sovan Deb, January 2004, Conditional Alpha and Performance Persistence for Indian Mutual Funds: Empirical Evidence, www.ssrn.com 10. Bijan Roy, Saikat Sovan Deb, December 2003,The Conditional Performance of Indian Mutual Funds: An Empirical Study,www.ssrn.com 12. Narayan Rao Sapar, Ravindran Madava, 2003, Performance Evaluation of Indian Mutual Funds, www.ssrn.com

BIBLIOGRAPHY

Prasanna Chandra, Investment Analysis and Portfolio Management (3rd

Edition), Tata McGraw-Hill Publishing Co Ltd

R Shanmugam, Investment Analysis and Management (1st Edition),

Kalyani Publishers.

WEBIOGRAPHY
www.mutualfundsindia.com www.valueresearchonline.com www.reliance mutual fund.com www.moneycontrol.com www.ssrn.com
www.amfiindia.com

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Questionnaire

Respected Sir / Madam, This is a request to help me in carrying out a survey for project, Analysis of Mutual Fund Schemes for Better Choice . I have been pursuing my MBA (Finance) from Dayalbagh Educational Institute, Agra. Your support will enable me to assess the current status and insights for further development in mutual fund Industry. Your honest feedback will help me in arriving at an authentic conclusion. The results will not be revealed and would be used for academic purpose only.

GenderEducational QualificationOccupation1 What is your investment objective? b) Small but Stable d) Any Other

a Huge Growth Income b 1 Just Tax benefits What is your Investment Horizon?

a) Less than 1 Yr. c) 3-5 Yr. 1 The age group you belong to:

b) 1-3 Yr. d) 5 Yr. & more

a)Less than 25 Yrs. c)35-45 Yrs.

b) 25-35Yrs. d) 45 & above

1 My current and Future Income Sources (salary ,business income etc.)are: a) Very unstable b) Unstable
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c) Stable d) Very Unstable 1 a b How well do you understand investing in markets? Dont understand at all. Basic understanding of investing.

c Understands how market fluctuates & the Pros & Cons of different investment strategies. d Very Experienced Investor.

1 If a few months after investing, the value of your investment declines by 20%, what would you do? a) Liquidate all investments. b) Transfer investment to safer asset class. c) You would give your investments a little more time. d) you are confident about your investment and are not perturbed by notional losses. 7) Your minimum expected return is: a) Normal FD Return b) Inflation Value of the Investment. c) More than Inflation. d) In Proportion to Risk Taken. 8) Specify reason for investing in mutual fund rather than somewhere else? 10) Any suggestion for better choice of scheme? ................................................................................................................ .........

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Thanking you.

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