A Project Report On A STUDY OF RELIGARE MUTUAL FUND Submitted to fulfillment Of the requirement to award the degree of Master of Business Administration By STUDENT NAME: SAURABH GUPTA Roll No: 520846146 Under the guidance of Mr. DHARMENDER ThroughSoftdot Hi-Tech Educational & Training Institute Pitampura, New Delhi-34 (Study Center Code: 02801) To SIKKIM MANIPAL UNIVERSITY Directorate of distance Education GANGTOK 2010
A Project Report On A STUDY OF RELIGARE MUTUAL FUND Submitted to fulfillment Of the requirement to award the degree of Master of Business Administration By STUDENT NAME: SAURABH GUPTA Roll No: 520846146 Under the guidance of Mr. DHARMENDER ThroughSoftdot Hi-Tech Educational & Training Institute Pitampura, New Delhi-34 (Study Center Code: 02801) To SIKKIM MANIPAL UNIVERSITY Directorate of distance Education GANGTOK 2010
CERTIFICATION BY EXAMINERSThe project report is submitted for the Final year of MASTER of BUSINESSADMINISTRATION in the Stream of Finance by the student of SIKKIM MANIPALUNIVERSITY, Directorate of Distance Education.Roll No: 520846146Academic Council of Softdot Hi-Tech Educational & Training Institutehas decided the title of Religare Mutual Fund as an approved andacceptable project in the standard quality according to the set norms ofSIKKIM MANIPAL UNIVERSITY and by the Institute as a recognized StudyCentre for award of Master of Business Administration (Finance) to thestudent SAURABH GUPTA, Roll No. 520846146 according to norms ofUniversity standards academically.ExaminerMr. DHAMENDERFaculty of FinanceSignatureCertified by:(Academic Director)
UNIVERSITY STUDY CENTRE CERTIFICATION This is to certify that the project report entitled RELIGARE MUTUAL FUND Submitted in fulfillment Of the requirement to award the degree Of Master of Business Administration Of SIKKIM MANIPAL UNIVERSITY Directorate of distance Education GANGTOK 2010 By NAME: SAURABH GUPTA Roll No. : 520846146Has worked under my supervision and guidance for his project and no partof this project has been submitted for the award of any degree, diploma,fellowship, or any other similar title or prizes and that the work has not beenpublished in any journal or magazine.Certified by(Academic Director)
CERTIFICATION BY ORIGINALITY This is to certify that the project titled RELIGARE MUTUAL FUNDIs an original work of Saurabh Gupta as a Student of M.B.A (Finance)Roll No. 520846146 is being submitted in fulfillment for the award ofDegree of MASTER of BUSINESS ADMINISTRATION of SIKKIMMANIPAL UNIVERSITY through a recognized Study Centre (02801), TheSOFTDOT HI-TECH EDUCATIONAL and TRAINING INSTITUTE,Pitampura, New Delhi-34. NAME SAURABH GUPTA as a student of M.B.A (FINANCE) RollNo. :520846146 has worked out under the guidance of Mr.DHARMENDER and declare that no part of this project has been submittedfor the award of any degree, diploma, fellowship, or any other similar title orprizes earlier to this university or to any other University/institution for thefulfillment of the requirement of a course of study.Academic Director
ACKNOWLEDGEMENTThe development of software is a very hard work and it is not possible underimproper guidance and suggestions and this project report itself is anacknowledgement to the sincere efforts of all individuals who havecontributed to it for its completion. I want to give my deep appreciation and regards to my guideMr. DHAMENDER for his great efforts, helpful suggestions, and properguidance. He has been always a great source of inspiration to me and underhis guidance I have done my work better. I specially want to quote my thanks to our program centercoordinator and my counselors who are sincere care & guidance helped meeverywhere times to time. I am also thankful to the director and staffs of Softdot Hi-TechEducational & Training Institute for their major cooperation. And above all I am thankful to the God and my parent becausemy existence is from them they are my source of inspiration. NAME: SAURABH GUPTA
PREFACE In the current economic scenario interest rates are falling and fluctuation in theshare market has put investors in confusion. One finds it difficult to take decision oninvestment. This is primarily, because of investments are risky in nature and investorshave to consider various factors before investing in investment avenues. These factors include risk, return, volatility of shares and liquidity. The mainobjective of comparing investment in equity shares with mutual fund schemes is toanalyze the performance of mutual funds with their benchmark and comparing them withequities by using risk, return, beta and alpha as a parameter. Mutual Funds (MF) have become one of the most attractive ways for the averageperson to invest their money. It is said that Bank investment is the first priority of peopleto invest their savings and the second place is for investment in Mutual Funds and otheravenues. A Mutual Fund pools resources from thousands of investors and then diversifiesits investment into many different holdings such as stocks, bonds, or Governmentsecurities in order to provide high relative safety and returns. Historical data were taken for calculating risk, return, alpha and beta. Analysis hasdone on percentage method for comparing equity shares with mutual fund schemes.Compare to equities mutual funds are less risky with stable returns and mutual fundsgives the investor a diversified portfolio. Those who have well knowledge in equitymarket they can go for equity investments rather that investing in mutual funds becauseno control on the expenses made by the fund manager. The study will guide the new investor who wants to invest in equity and mutualfund schemes by providing knowledge about how to measure the risk and return ofparticular scrip or mutual fund scheme. The study recommends new investors to go formutual funds rather than equities, because of high risk and market instability.
In order to study the above information the researcher has organized thepresent report as per the following:Chapter 1: Focuses attention on introduction to equity and mutual funds and Company Profile of Religare Securities Ltd., Bangalore.Chapter 2: Focuses on design of study, problem, scope and objectives of the study, and limitations.Chapter 3: Concentrates on the methodology and sources of data collection, Sample design and tools and techniques of data collection.Chapter 4: Is concerned with the analysis and interpretation of data.Chapter 5: Provides the summary of findings.Chapter 6: Deals with the suggestions and conclusions for the benefits of prospective Investors and market analysers. Lastly, it includes the annexure and bibliography.
Chapter 1Focuses attention on introduction to equity and mutual funds and Company Profile of Religare Securities Ltd., Bangalore.
INTRODUCTION TO EQUITY CAPITAL AND MUTUAL FUND Issue of shares is the most important method of raising capital. Finance raised bythe issue of shares serves as a financial floor to the company’s capital structure. Sharesindicate the ownership or equity interest in the assets of the company. Shares are ofdifferent nominal or face values and of different kinds to attract different kinds ofinvestors. The maximum amount of capital to be raised by the issue of shares ismentioned in the memorandum of association. During 1990-91 and 1991-92, equity accounts for 35 to 39 percent of the totalcapital raised respectively. This proportion was reversed in 1992-93, the first year of freepricing, when the share of equity increased to 62 percent. His share of equity financeincreased to a high of 73.18 percent in 1994-95. However, in 1995-96 there is a rise in theimportance of debt largely due to the high interest rates in the economy and negativereturns from the secondary market. The mutual fund industry in India started in 1964 with the formation of Unit Trustof India, at the initiative of the Government of India. The 1993 SEBI Regulations weresubstituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The end of millennium marks 36 years of existence of mutual funds in thiscountry. The ride through these 36 years is not been smooth. Investor opinion is stilldivided. While some are for mutual funds others are against it. UTI commenced itsoperations from July 1964. The impetus for establishing a formal institution came fromthe desire to increase the propensity of the middle and lower groups to save and to invest.UTI came in to existence during a period marked by great political and economic turmoilthat depressed the financial market; entrepreneurs were rather hesitant to enter the capitalmarkets.
Concept of Equity Capital and Mutual Fund The term Equity literally means the stock or ownership of a company. They arealso known as ordinary shares. The rate of dividend on equity shares varies according tothe amount of profit available and the intention of board of directors. In the event ofwinding up of the company, equity shares can be refunded only after all other claims,including those of preference shares for the refund of their capital, have been met. Equity capital or financing is money raised by a business in exchange for a shareof ownership in the company. Ownership is represented by owning shares of stockoutright or having the right to convert other financial instruments into stock of thatprivate company. Two key sources of equity capital for new and emerging businesses areangel investors and venture capital firms. Equity capital is represented by funds that are raised by a business, in exchangefor a share of ownership in the company. Equity financing allows a business to obtainfunds without incurring debt, or without having to repay a specific amount of money at aparticular time. The Equity Capital Markets Group (ECM) oversees the Firms activities in theprimary equity and equity-linked markets, as well as monetization and equity derivatives.It provides support in the origination of primary market transactions and manages theirstructuring, syndication, marketing and distribution. The world over, it’s been shown that over long tenures, equities–with their riskpremium–have provided approximately 7 percentage points higher returns than risk-freeoptions. People have to accumulate significant amounts of wealth during their workingyears. Right now, a 17-year bond gives you only 5.5 per cent. So, it is imperative thatthese people have some exposure to equity. A mutual fund is a trust that pools the money of many investors -- its shareholders-- to invest in a variety of different securities. Investments may be in stocks, bonds,
money market securities or some combination of these. Those securities areprofessionally managed on behalf of the shareholders, and each investor holds a pro ratashare of the portfolio -- entitled to any profits when the securities are sold, but subject toany losses in value as well. A mutual fund is a group of investors operating through a fund manager topurchase a diverse portfolio of stocks or bonds. There are myriad kinds of mutual funds,each with its own goals and methodologies. Whether or not a mutual fund is a goodinvestment is a matter of much public debate, with many claiming they are excellent forthe average person, and others saying they are simply a poor way to invest. For the individual investor, mutual funds provide the benefit of having someoneelse manage your investments, take care of recordkeeping for your account, and diversifyyour rupees over many different securities that may not be available or affordable to youotherwise. Today, minimum investment requirements on many funds are low enough thateven the smallest investor can get started in mutual funds. A mutual fund, by its very nature, is diversified -- its assets are invested in manydifferent securities. Beyond that, there are many different types of mutual funds withdifferent objectives and levels of growth potential, furthering your chances to diversify. Many critics of mutual funds point out that scarcely over 20% of mutual fundsoutperform the Standard and Poors 500 Index. This means that nearly 80% of the time,an investor would have been more profitable by simply buying equal shares in all 500 ofthe companies currently on the S&P 500.SCHEMES OF MUTUAL FUNDS:Schemes according to Maturity Period: A mutual fund scheme can be classified into open-ended scheme or close-endedscheme depending on its maturity period.
Open-ended Scheme: An open-ended fund or scheme is one that is available for subscription andrepurchase on a continuous basis. These schemes do not have a fixed maturity period.Investors can conveniently buy and sell units at Net Asset Value (NAV) related priceswhich are declared on a daily basis. The key feature of open-end schemes is liquidity.Close-ended Scheme: A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. Thefund is open for subscription only during a specified period at the time of launch of thescheme. Investors can invest in the scheme at the time of the initial public issue andthereafter they can buy or sell the units of the scheme on the stock exchanges where theunits are listed. In order to provide an exit route to the investors, some close-ended fundsgive an option of selling back the units to the mutual fund through periodic repurchase atNAV related prices. SEBI Regulations stipulate that at least one of the two exit routes isprovided to the investor i.e. either repurchase facility or through listing on stockexchanges. These mutual funds schemes disclose NAV generally on weekly basis.Schemes according to Investment Objective: A scheme can also be classified as growth scheme, income scheme, or balancedscheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:Growth / Equity Oriented Scheme: The aim of growth funds is to provide capital appreciation over the medium tolong- term. Such schemes normally invest a major part of their corpus in equities. Suchfunds have comparatively high risks. These schemes provide different options to theinvestors like dividend option, capital appreciation, etc. and the investors may choose anoption depending on their preferences.
Income / Debt Oriented Scheme: 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, corporatedebentures, Government securities and money market instruments. Such funds are lessrisky compared to equity schemes. These funds are not affected because of fluctuations inequity markets.Balanced Scheme: The aim of balanced funds is to provide both growth and regular income as suchschemes invest both in equities and fixed income securities in the proportion indicated intheir offer documents. These are appropriate for investors looking for moderate growth.They generally invest 40-60% in equity and debt instruments. These funds are alsoaffected because of fluctuations in share prices in the stock markets. However, NAVs ofsuch funds are likely to be less volatile compared to pure equity funds.Money Market or Liquid Fund: These funds are also income funds and their aim is to provide easy liquidity,preservation of capital and moderate income. These schemes invest exclusively in safershort-term instruments such as treasury bills, certificates of deposit, commercial paperand inter-bank call money, government securities, etc. Returns on these schemes fluctuatemuch less compared to other funds. These funds are appropriate for corporate andindividual investors as a means to park their surplus funds for short periods.Gilt Fund: These funds invest exclusively in government securities. Government securitieshave no default risk. NAVs of these schemes also fluctuate due to change in interest ratesand other economic factors as is the case with income or debt oriented schemes.
Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitiveindex, S&P NSE 50 index (Nifty), etc, these schemes invest in the securities in the sameweightage comprising of an index. NAV’s of such schemes would rise or fall inaccordance with the rise or fall in the index, though not exactly by the same percentagedue to some factors known as "tracking error" in technical terms. Necessary disclosuresin this regard are made in the offer document of the mutual fund scheme.Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors orindustries as specified in the offer documents. e.g. Pharmaceuticals, Software, FastMoving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds aredependent on the performance of the respective sectors/industries.Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of theIncome Tax Act, 1961 as the Government offers tax incentives for investment inspecified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemeslaunched by the mutual funds also offer tax benefits. These schemes are growth orientedand invest pre-dominantly in equities. Their growth opportunities and risks associated arelike any equity-oriented scheme.Advantages of Equity Capital:1. High dividend and high value:- In times of prosperity, the equity shareholders get a very high rate of dividend,sufficiently higher than that on preference shares. At the same time, their share value willalso go up in the market.
2. Voting rights:- It is only the equity shareholders who enjoy voting rights on all the policy mattersof the company.3. Pre-emptive right to new shares:- Equity shareholders have the pre-emptive right to purchase new shares. Under theprovisions of the companies act, the existing shareholders of the company have a right toallotment of newly issued shared.4. Many privileges and rights:- Equity shareholders enjoy many privileges and rights. For example, they can voteat meetings, elect directors, control the directors to run the company efficiently andprofitably, look into the books and records of the company and transfer or sell theirshareholdings.Advantages of Mutual Fund:1. Professional Investment Management:- By pooling the funds of thousands of investors, mutual funds provide full-time,high-level professional management that few individual investors can afford to obtainindependently. Such management is vital to achieving results in todays complex markets.Your fund managers interests are tied to yours, because their compensation is based noton sales commissions, but on how well the fund performs.2. Diversification:- Mutual funds invest in a broad range of securities. This limits investment risk byreducing the effect of a possible decline in the value of any one security. Mutual fund
shareowners can benefit from diversification techniques usually available only toinvestors wealthy enough to buy significant positions in a wide variety of securities.3. Low Cost:- If you tried to create your own diversified portfolio of 50 stocks, youd need atleast Rs.1,00,000 and youd pay thousands of rupees in commissions to assemble yourportfolio. A mutual fund lets you participate in a diversified portfolio for as little asRs.10,000, and sometimes less. And if you buy a no-load fund, you pay or no salecharges to own them.4. Convenience and Flexibility:- You own just one security rather than many, yet enjoy the benefits of a diversifiedportfolio and a wide range of services. Fund managers decide what securities to trade,clip the bond coupons, collect the interest payments and see that your dividends onportfolio securities are received and your rights exercised.5. Quick, Personalized Service:- Most funds now offer extensive websites with a host of shareholder services forimmediate access to information about your fund account. Or a phone call puts you intouch with a trained investment specialist at a mutual fund company who can provideinformation you can use to make your own investment choices, assist you with buyingand selling your fund shares.6. Ease of Investing:- You may open or add to your account and conduct transactions or business withthe fund by mail, telephone or bank wire. You can even arrange for automatic monthlyinvestments by authorizing electronic fund transfers from your checking account in anyamount and on a date you choose.
7. Total Liquidity, Easy Withdrawal:- You can easily redeem your shares anytime you need cash by letter, telephone,bank wire or check, depending on the fund. Your proceeds are usually available within aday or two.8. Life Cycle Planning:- With no-load mutual funds, you can link your investment plans to futureindividual and family needs -- and make changes as your life cycles change. You caninvest in growth funds for future college tuition needs, then move to income funds forretirement, and adjust your investments as your needs change throughout your life.9. Market Cycle Planning:- For investors who understand how to actively manage their portfolio, mutual fundinvestments can be moved as market conditions change. You can place your funds inequities when the market is on the upswing and move into money market funds on thedownswing or take any number of steps to ensure that your investments are meeting yourneeds in changing market climates.10. Investor Information:- Shareholders receive regular reports from the funds, including details oftransactions on a year-to-date basis. The current net asset value of your shares (the priceat which you may purchase or redeem them) appears in the mutual fund price listings ofdaily newspapers. You can also obtain pricing and performance results for the all mutualfunds at this site, or it can be obtained by phone from the fund.
11. Periodic Withdrawals:- If you want steady monthly income, many funds allow you to arrange for monthlyfixed checks to be sent to you, first by distributing some or all of the income and then,if necessary, by dipping into your principal.12. Dividend Options:- You can receive all dividend payments in cash. Or you can have them reinvestedin the fund free of charge, in which case the dividends are automatically compounded.This can make a significant contribution to your long-term investment results.13. Automatic Direct Deposit:- You can usually arrange to have regular, third-party payments -- such as SocialSecurity or pension checks -- deposited directly into your fund account. This puts yourmoney to work immediately, without waiting to clear your checking account, and it savesyou from worrying about checks being lost in the mail.14. Recordkeeping Service:- With your own portfolio of stocks and bonds, you would have to do your ownrecordkeeping of purchases, sales, dividends, interest, short-term and long-term gains andlosses. Mutual funds provide confirmation of your transactions and necessary tax formsto help you keep track of your investments and tax reporting.15. Safekeeping:- When you own shares in a mutual fund, you own securities in many companieswithout having to worry about keeping stock certificates in safe deposit boxes or sendingthem by registered mail. You dont even have to worry about handling the mutual fundstock certificates; the fund maintains your account on its books and sends you periodicstatements keeping track of all your transactions.
16. Retirement and College Plans:- Mutual funds are well suited to Individual Retirement Accounts and most fundsoffer IRA-approved prototype and master plans for individual retirement accounts (IRAs)and Keogh, 403(b), SEP-IRA and 401(k) retirement plans.17. Online Services:- The internet provides a fast, convenient way for investors to access financialinformation. A host of services are available to the online investor including direct accessto no-load companies. Visit Company Links to access these Companies.18. Sweep Accounts:-With many funds, if you choose not to reinvest your stock or bond fund dividends, youcan arrange to have them swept into your money market fund automatically. You get allthe advantages of both accounts with no extra effort.19. Asset Management Accounts:- These master accounts, available from many of the larger fund groups, enable youto manage all your financial service needs under a single umbrella from unlimited checkwriting and automatic bill paying to discount brokerage and credit card accounts.Disadvantages of Equity Capital:1. No refund of capital:- Since equity shares cannot be refunded, excessive issue of such shares may leadsto overcapitalization, particularly when the earning capacity of the company declining.
2. Benefits only in prosperity:- During the periods of prosperity, the company has to distribute heavy dividendson these shares.3. Manipulation of control:- Since the equity shares have proportionate voting power, the company’smanagement may be vitiated by manipulation of votes, clique-formation, abuse of proxyrights etc.4. High risk:- Equity share holders cannot claim dividend as a matter of right, because thedecision to fit the rate of dividend on equity shares is vested in the Board of Directors.Therefore investors as a class may find equity shares unsafe, unattractive and lessremunerative.5. Unhealthy Speculation:- During the period of boom, the market value of shares will go up, which leads tounhealthy speculation in the stock market.Disadvantages of Mutual Fund: There are certainly some benefits to mutual fund investing, but you should also beaware of the drawbacks associated with mutual funds.
1. No Insurance:- Mutual funds, although regulated by the government, are not insured againstlosses. The Federal Deposit Insurance Corporation (FDIC) only insures against certainlosses at banks, credit unions, and savings and loans, not mutual funds. That means thatdespite the risk-reducing diversification benefits provided by mutual funds, losses canoccur, and it is possible (although extremely unlikely) that you could even lose yourentire investment.2. Dilution:- Although diversification reduces the amount of risk involved in investing inmutual funds, it can also be a disadvantage due to dilution. For example, if a singlesecurity held by a mutual fund doubles in value, the mutual fund itself would not doublein value because that security is only one small part of the funds holdings. By holding alarge number of different investments, mutual funds tend to do neither exceptionally wellnor exceptionally poorly.3. Fees and Expenses:- Most mutual funds charge management and operating fees that pay for the fundsmanagement expenses (usually around 1.0% to 1.5% per year). In addition, some mutualfunds charge high sales commissions, 12b-1 fees, and redemption fees. And some fundsbuy and trade shares so often that the transaction costs add up significantly. Some ofthese expenses are charged on an ongoing basis, unlike stock investments, for which acommission is paid only when you buy and sell (see Investor Guide University: Fees andExpenses).4. Poor Performance:- Returns on a mutual fund are by no means guaranteed. In fact, on average, around75% of all mutual funds fail to beat the major market indexes, like the S&P 500, and a
growing number of critics now question whether or not professional money managershave better stock-picking capabilities than the average investor.5. Loss of Control:- The managers of mutual funds make all of the decisions about which securities tobuy and sell and when to do so. This can make it difficult for you when trying to manageyour portfolio. For example, the tax consequences of a decision by the manager to buy orsell an asset at a certain time might not be optimal for you. You also should rememberthat you are trusting someone else with your money when you invest in a mutual fund.6. Trading Limitations:- Although mutual funds are highly liquid in general, most mutual funds (calledopen-ended funds) cannot be bought or sold in the middle of the trading day. You canonly buy and sell them at the end of the day, after theyve calculated the current value oftheir holdings.7. Size:- Some mutual funds are too big to find enough good investments. This isespecially true of funds that focus on small companies, given that there are strict rulesabout how much of a single company a fund may own. If a mutual fund has $5 billion toinvest and is only able to invest an average of $50 million in each, then it needs to find atleast 100 such companies to invest in; as a result, the fund might be forced to lower itsstandards when selecting companies to invest in.8. Inefficiency of Cash Reserves:- Mutual funds usually maintain large cash reserves as protection against a largenumber of simultaneous withdrawals. Although this provides investors with liquidity, itmeans that some of the funds money is invested in cash instead of assets, which tends tolower the investors potential return.
9. Different Types:- The advantages and disadvantages listed above apply to mutual funds in general.However, there are over 10,000 mutual funds in operation, and these funds vary greatlyaccording to investment objective, size, strategy, and style. Mutual funds are available forvirtually every investment strategy (e.g. value, growth), every sector (e.g. biotech,internet), and every country or region of the world. So even the process of selecting afund can be tedious.Company Profile: Religare is one of the leading integrated financial services institution of India. Thecompany offers a large and diverse bouquet of services ranging from equities,commodities, insurance broking, to wealth advisory, portfolio management services,personal finance services, Investment banking and institutional broking services. Theservices are broadly clubbed across three key business verticals- Retail, Wealthmanagement and the Institutional spectrum. Religare Enterprises Limited is theholding company for all its businesses, structured and being operated throughvarious subsidiaries. Religare’s retail network spreads across the length and breadth of the country withits presence through more than 1,217 locations across more than 392 cities and towns.Having spread itself fairly well across the country and with the promise of not resting onits laurels, it has also aggressively started eyeing global geographies.
Our Brand IdentityName Religare is a Latin word that translates as to bind together. This name has beenchosen to reflect the integrated nature of the financial services the company offers. Thename is intended to unite and bring together the phenomenon of money and wealth to co-exist and serve the interest of individuals and institutions, alike.Symbol The Religare name is paired with the symbol of a four-leaf clover. The four-leafclover is used to define the rare quality of good fortune that is the aim of every financialplan. It has traditionally been considered good fortune to find a single four leaf cloverconsidering that statistically one may need to search through over 10,000 three-leafclovers to even find one four leaf clover.
Each leaf of the four-leaf clover has a special meaning in the sphere of Religare. The first leaf of the clover represents Hope. The aspirations to succeed. The dream of becoming. Of new possibilities. It is the beginning of every step and the foundations on which a person reaches for the stars. The second leaf of the clover represents Trust. The ability to place ones own faith in another. To have a relationship as partners in a team. To accomplish a given goal with the balance that brings satisfaction to all not in the binding but in the bond that is built. The third leaf of the clover represents Care. The secret ingredient that is the cement in every relationship. The truth of feeling that underlines sincerity and the triumph of diligence in every aspect. From it springs true warmth of service and the ability to adapt to evolving environments with consideration to all. The fourth and final leaf of the clover represents Good Fortune. Signifying that rare ability to meld opportunity and planning with circumstance to generate those often looked for remunerative moments of success. Hope. Trust. Care. Good fortune. All elements perfectly combine in the emblematic and rare, four-leaf clover to visually symbolize the values that bind together and form the core of the Religare vision.Industry : Finance - GeneralGroup : Ranbaxy GroupBSE Code : 532915NSE Code : RELIGAREMarket Lot :1Face Value : Rs. 10.00Market Cap : Rs. 4022.15 Cr. Listings Incorporation Public Issue Date BSE , NSE 30/01/1984 29/10/2007
Retail Spectrum- To cater to a large number of retail clients by offering all productsunder one roof through the Branch Network and Online mode Equity and Commodity Trading Personal Finance Services Mutual Funds Insurance Saving Products Personal Credit Personal Loans Loans against Shares Online Investment PortalInstitutional Spectrum- To Forge & build strong relationships with Corporate andInstitutions Institutional Equity Broking Investment Banking Merchant Banking Transaction Advisory Corporate FinanceWealth Spectrum - To provide customized wealth advisory services to High Net worthIndividuals Wealth Advisory Services Portfolio Management Services International Advisory Fund Management Services Priority Equity Client Services Arts Initiative
New Initiatives: Religare is on a fast and ambitious growth trajectory with some interesting plansin the pipeline AEGON Religare Life Insurance - Life Insurance Company, a JointVenture with Aegon one of the largest insurance and pensioncompanies, globally Religare AEGON AMC - Asset Management Company, a Joint Venture with Aegon Religare Finance - Personal Loans / Credit Cards / Loan against Property / Mortgage &Reverse Mortgage Online Trading - Agreement with IndusInd Bank to offer onlinetrading services Religare Macquarie Wealth Management Ltd - WealthManagement Company , a Joint Venture with Macquarie Wealth Management Services - with WallStreet Electronica,Inc., a U.S. broker - dealer to give our Indian clients access to U.Smarkets Religare Securities Ltd - Agreement with Vijay Co-operative Bank Ltd. andTamilnadu Mercantile Bank Ltd. to offer offline trading services *******
Chapter 2 Focuses on design of study, problem, scope and objectives of the study, and limitations.Statement of the Problem:
In the current economic scenario interest rates are falling and fluctuation in theshare market has put investors in confusion. One finds it difficult to take decision oninvestment. This is primarily, because investments are risky in nature and investors haveto consider various factors before investing in investment avenues. Therefore the studyaims to compare equity and mutual fund schemes in form their risk, return & liquidityand also creating awareness about Equity and Mutual Fund Schemes among the investors.Objectives of the Study: Saving money is not enough. Each of us also need to invest one’s savingsintelligently in order to have enough money available for funding the higher education ofone’s children, for buying a house, or for one’s own golden years. But the rapidlygrowing number of investment avenues often lead to confusion. Objectives of the studyare to provide information to individual investors regarding their risk, and choosing thebest investment options to match their goals and attitude to risk. 1. To compare Equity and Mutual Fund Schemes in respect of their risk & return. 2. Analyzing the performance of equity shares and mutual fund schemes with their benchmark. 3. Finding the Volatility of shares by using beta. 4. Provide information about pros and cons of investing in Equity and Mutual FundsScope of the Study The project primarily deals with equity, derivatives, mutual funds, portfoliomanagement. The study is limited to compare equity capital and mutual fund schemes in respectof their risk, return and liquidity. The study covers 5 randomly selected stocks out of 30BSE Sensex companies and 5 randomly selected mutual fund schemes out of mutual fundindustry in India for comparison. The analysis is strictly based on share price and unitprice information. Other company performance indicators are not considered.
It focuses on every month ending closing prices of during the period from 1st Apr,2003 to 31st Mar, 2006.Limitations of the Study The time period for the project was limited to only one and half month andinformation provided is limited to the extent of internet and journals. • A good number of explanatory variables must be taken in to consideration in order to assess the share price movement. But due to time constraints detailed analysis of each company were not made. • The information regarding the company’s, which were considered for the analysis, not uniform in nature. That is, number of observations differs from one/two company’s to other company’s. • Generalization of findings and conclusions of the study are likely to be disputed as security prices are determined by so many factors. However, the findings and conclusions drawn upon the primary and secondary data collected are expected to throw some light on volatility of share prices. • This is a one time study. • This being an academic study suffers from time and cost constraints. *******
Chapter 3 Concentrates on the methodology and sources of data collection, Sample design and tools and techniques of data collection.Methodology:
The whole study can be termed as comparative study. It is also a desk researchhence; there is no field work and collection of primary date for this research. The study centers on comparing equity and mutual fund schemes in respect oftheir risk, return and liquidity. However, with the objective and scope of the study inmind, it was decided to base the study on return series of selected stocks and mutual fundschemes. BSE being the premier exchange of India was chosen for selecting stocks. It iswidely accepted that BSE Sensex is the one of the most reliable index of the stockexchange that reflects present day market condition. Since it is not possible to compareall the 30 scrip’s in the index with all Mutual Fund Schemes due to time and resourceconstraints, sampling techniques were considered. Randomly selected samples willfacilitate inference of the population, in our case BSE Sensex and mutual fund industry inIndia. Hence by stratified random sampling 5 scrip’s out of 30 Sensex and 5 mutual fundschemes out of whole mutual fund industry were selected. The initial examination of the composition of index revealed that it is composedof primarily two types of industries: manufacturing and services in the ratio of 3 : 2. therefor to give correct picture appropriate weight was assigned to manufacturing industriesand hence three scrip’s from manufacturing and two from service industries wererandomly selected and in case of mutual funds it consists basically large cap, mid cap,small cap, sectoreal funds and contra funds there fore one fund from each area wereselected. Monthly share price and unit prices of the selected scrip’s and units werecollected from historical data. In order to avoid bias, at least three years monthly data wasdecided to be necessary. The reference period is from 1st Apr, 2003 to 31st Mar, 2006.Sampling technique:
The quality of research output and the validity of its findings depend uponappropriateness of the sampling design selected for the study. It was needed to applyinferential statistical analysis, hence probability sampling was chosen to be essential.Criteria for Selecting Sampling Techniques It is intended to generalize the finding based on the sample examination to the population, therefore, probability sampling adopted in order to have a representative sample. Since the population is heterogeneous stratified random sampling was taken. Probability sampling produces high degree of precision compared to non probability sampling.Sample Design : 1. Relative population – 30 BSE sensitivity index companies and mutual fund industry in India. 2. Sampling frame – list of population, elements from which sample is drawn (see the annexure). 3. Method of sampling – stratified random sampling. Stratification or division of population into homogeneous group was done on the basis of industry. 4. Variables – monthly calculated risk and returns were used for comparing equity and mutual fund schemes.Sample size: Five company’s equity shares and five mutual fund schemes were selected.Sample Description:
EQUITIES BENCHMARK ACC LIMITED BSE SENSEX BAJAJ AUTO LIMITED BSE SENSEX BHEL BSE SENSEX ICICI BANK LIMITED BSE SENSEX SATYAM COMPUTER SERVICES LIMITED BSE SENSEX MUTUAL FUNDS BENCHMARK RELIANCE MUTUAL FUND BSE SENSEX FRANKLIN INDIA PRIMA FUND BSE 100 SUNDARAM SMILE FUND BSE 500 PRUDENTIAL ICICI MUTUAL FUND BSE 100 SBI MUTUAL FUND BSE 100CALCULATION OF RETURN AND RISK OF SELECTED MUTUAL FUND SCHEMES AND THEIR BENCH MARKS
30-06-05 2928.31 3.50 -0.59 0.34 30-07-05 3124.78 6.71 2.62 6.86 30-08-05 3273 4.74 0.65 0.43 30-09-05 3521.83 7.60 3.51 12.34 30-10-05 3198.69 -9.18 -13.27 175.97 30-11-05 3568.37 11.56 7.47 55.76 30-12-05 3795.96 6.38 2.29 5.23 30-01-06 4004.96 5.51 1.42 2.00 28-02-06 4130.07 3.12 -0.97 0.93 31-03-06 4516.73 9.36 5.27 27.79 Total 147.26 1790.64Bench Mark Return and Risk (BSE 500)Return = (P1 /P0 *100)-100 Where, P1 = Current month price, P0 = Previous month priceX1 = ΣR/n, Where,n=number of months.R1 = 147.26/36 = 4.09SD = √ Σ(R- R1)2 /n = √1790.64/36SD = 7.051. Reliance Vision Fund:- Reliance Vision Fund is large cap open ended growth fund. Its objective is toachieve long term growth of capital through a research based investment approach.Monthly risk and return from 30th Apr 2003 to 31st Mar 2006 is calculated below.Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month priceR1 = ΣR/n, = 190.14/36, = 5.28
Where n=number of months. SD = √ Σ(R- R1)2 /n, = √1704.71/36 SD = 6.88Calculation of Beta B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market =1424.07/1474.39B = 0.96Calculation of AlphaAlpha = (Ra1 - Rm1)*B =(5.16-3.9)*0.96 =1.2 CALCULATION OF RISK AND RETURN
Return = (P1 /P0 *100) – 100 Where, P1 = Current month price, P0 = Previous month price R1 = ΣR/n, Where n=number of months. R1 = 201.9/36 = 5.6 SD = √ Σ(R- R1)2 /n = √1669.164/36 SD = 6.8Calculation of Beta B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 375.48/1679.2 B = 0.22Calculation of Alpha Alpha = (Ra1-Rm1)*B = (5.64-3.72)*0.22 =0.42Calculation of Risk and Return
Return=(P1 /P0 *100) - 100 Where, P1 = Current month price, P0 = Previous month priceR1 = ΣR/n, where n=number of months.R1 = 178.5/36 = 4.96SD = √ Σ(R- R1)2 /n = √1567.54/36SD = 6.6Calculation of BetaB = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 1102.22/1679.2B = 0.65Calculation of AlphaAlpha = (Ra1-Rm1)*B = (4.96-3.72)*0.65 =0.80 Calculation of Return and Risk
to achieve capital appreciation by investing in diversified stocks that are generallytermed as Small and Midcaps and by investing in other equities. Monthly risk andreturn from 28th Feb 2005 to 31st Mar 2006 is calculated below.Return = (P1 /P0 *100)-100 Where, P1 = Current month price, P0 = Previous month priceR1 = ΣR/n, where n=number of months.R1 = -3.31/14 = -0.23SD= √ Σ(R- R1)2 /n = √873.52/14SD= 7.89Calculation of BetaB = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 415/637.71B = 0.65Calculation of AlphaAlpha = (Ra1-Rm1)*B = (-0.23-4.09)*0.65 = -2.8
***** Chapter 4Is concerned with the analysis and interpretation of data
Table1.1: AVERAGE RISK OF SELECTED MUTUAL FUND SCHEMES Mutual Fund Schemes Risk Beta Alpha RELIANCE VISION FUND 6.9 0.96 1.2 FRANKLIN INDIA PRIMA FUND 6.8 0.22 0.42 PRU ICICI FMCG SECTOR FUND 6.6 0.65 0.8 SUNDARAM SMILE FUND 7.89 0.65 -2.8 SBI CONTRA FUND 5.53 -0.09 0.76 Total 33.72 Bench Mark 6.4 Average risk = 33.72/5 = 6.74Chart 1.1:
ANALYSIS: Sundaram SMILE fund has the highest risk factor of 7.89% with 0.65% beta and -2.8% of alpha. SBI Contra Fund has the lowest risk factor of 5.53% with -0.09% of beta and 0.76% of alpha. Bench Mark has the risk factor of 6.4% On an average Mutual Fund Schemes have the risk factor of 6.74%INTERPETATION: Risk is a major factor influence all type of investors. In the above selectedMutual Fund Schemes average risk factor is 6.74% even though the risk factor ofbench mark is 6.4%, it is very close to average risk. It is showing Mutual Funds arealso risky.
Table1.2 AVERAGE RETURN OF SELECTED MUTUAL FUND SCHEMES Mutual Fund Schemes Return RELIANCE VISION FUND 5.16 FRANKLIN INDIA PRIMA FUND 5.64 PRU ICICI FMCG SECTOR FUND 4.96 SUNDARAM SMILE FUND -0.23 SBI CONTRA FUND 6.42 Total 21.95 Bench Mark 3.9Average Return = 21.95/5 = 4.39Chart 1.2ANALYSIS: SBI Contra Fund has got the highest return of 6.42%. Sundaram SMILE fund got the negative return of -0.23%. Bench Mark return is 3.9%. On an average Mutual Fund Schemes have got 4.39% per month.INTERPETATION:
Return is a major factor influencing factor to all type of investors. In the aboveselected Mutual Fund Schemes average return is 4.39%, compared to bench markreturn mutual fund returns are good and it will attract more and more customers.CALCULATION OF RETURN AND RISK OF SELECTED COMPANIES Calculation of Return and Risk of Bench Mark(BSE SENSEX)
SD = √ Σ(R- R1)2 /n = √3136.92/36SD = 9.33Calculation of Beta B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2 Where, Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 1267.64/1474.39 B = 0.86Calculation of Alpha Alpha = (Ra1-Rm1)*B = (5.29-3.9)*0.86 =1.19Table 1.3 Return and Risk of ACC LTD Factors Percentage Risk 9.33 Return 5.29 Beta 0.86 Alpha 1.19Chart 1.3
ANALYSIS: ACC Ltd. has a risk factor of 9.33% Its rate of return on a monthly average is 5.29% Alpha and Beta are 1.19 and 0.86 respectivelyINTERPETATION: Beta of the ACC ltd. is 0.86 which is less than one; it shows the less volatilityof scrip with respect to market. Risk of the share is 9.33% and the rate of return isonly 5.29%.2. BAJAJ AUTO LIMITED:- Calculation of Return and Risk