Summer Internship Project A study on awareness and perception of investors and wealth advisors of Ludhiana with respect to Exchange Traded Funds Under Guidance of: Presented by: Mr. P.P. Singh Ankush Gupta Deputy Director, PCTE MBA 2A
Company profile Reliance was founded by the Indian industrialist Dhirubhai Ambani in 1966 with capital of barely US$ 300. Group was divided between Mukesh Ambani and Anil Ambani in 2006. Today Mukesh Ambani is 4th richest person and Anil Ambani is 36th richest person in world.
Continue…… Reliance Anil Dhirubhai Ambani Group is among India’s top three private sector business houses. Market capitalization of Rs.325, 000 cr. net assets in excess of Rs.115, 000 cr. and net worth to the tune of Rs.55, 000 cr. Group has a customer base of over 100 million and shareholder base of over 12 million.
Reliance Mutual Fund One of India’s leading Mutual Fund house with highest Asset Under Management Rs. 1,02,179 Crores Investor count of over 73 Lakh folios. Huge range of plans and schemes according to the need of investors. No. 1 AMC declared by CRISIL in India.
Mission and vision statement Vision Statement To be a globally respected wealth creator with an emphasis on customer care and a culture of good corporate governance. Mission Statement To create and nurture a world-class, high performance environment aimed at delighting our customers.
Organization chart of training unit
SWOT analysis of training unit of RMF Ludhiana Strengths
Brand value Distribution channel strategy Good working environment Cooperative staff Good return funds basket
Delay in operations Unsatisfied investors
High potential market Huge untapped market Increasing awareness of investors regarding mutual funds
Increasing competition Increasing of other investment options
Mutual FundsIntroduction to industry Advantages of mutual funds Portfolio Diversification Professional management Reduction / Diversification of Risk Liquidity Flexibility & Convenience Reduction in Transaction cost Transparency
Investment Strategies Systematic Investment Plan Systematic Transfer Plan Systematic Withdrawal Plan Trigger scheme Smart step
Ratio analysis Current ratio: It measures the firms short term solvency that is the ability to meet short term obligations. Current ratio = Current assets Current liabilities 2006/07 2007/08 2008/09
Absolute Liquid Ratio This ratio is more rigorous test of liquidity as it establishes the relationship between absolute liquid assets and current liabilities. Absolute liquid ratio = Absolute liquid assets Current liabilities Absolute liquid assets = Cash and bank balance + short term term investments 2006/07 2007/08 2008/09
Debt equity ratio Debt equity ratio = Outsiders funds Shareholders funds Outsiders funds = Long term liabilities + short term liabilities Shareholders fund = Equity share capital + preference share capital + reserves and surplus - Accumulated losses and deferred expenses. 2006/07 2007/08 2008/09
PROPRIETORY RATIO Equity Ratio = Shareholders funds Total Assets Shareholders funds = Equity Share Capital + Preference Share Capital + Reserves And Surplus - Accumulated Losses and Deferred Expenses. Total assets = Fixed Assets + Investments + Current Assets, Loans, Advances 2006/07 2007/08 2008/09
RETURN ON CAPITAL EMPLOYED Return on capital employed = Net profits before taxes and interest * 100 Capital Employed Gross Capital Employment = Total of liabilities side - accumulated losses - fictitious and intangible assets Net Capital Employed = Gross capital employed - Current liabilities 2006/07 2007/08 2008/09
Exchange Traded Funds Baskets of securities that are traded, like individual stocks, on an exchange. Track specific indices and trade just like any other stock, combined with the benefits of a mutual fund. Based on the mechanism of creation and redemption of units. Transactions are conducted by sending creation or redemption instructions to the fund.
Unit creation Bundles of shares of stock or equivalent are borrowed from market by sponsor. Sponsor creates ETFs units of the shares of stock. ETFs units are issued in the market, and are listed on the exchange for trading. As shares of stock are converted into ETF units there is no liability of paying tax.
Unit redemption By selling shares in open market. By gathering enough shares of the ETF to form a creation unit and then exchange the creation unit for the underlying securities. No tax liability even on short term capital gain as compare to other investment option in equity and mutual fund market.
History of ETFs Introduced in United States in 1993 by Standard & Poor’s Depositary Receipts SPDR’s or “spiders” Entered India in December 2001, launched by Benchmark AMC based on Nifty. “Niftybees” and “liquidbees” are two most common ETFs by Benchmark AMC. Currently HDFC and MotilalOswal has launched ETFs in market.
Benefits of ETFs Trading Like a Stock Tax Efficiency Transparency Diversification Low expense Shorting or Hedging Arbitrage ability
Types of ETFs Commodity ETFs Gold ETFs Silver ETFs Index based ETFs actively managed index ETFS passively managed index ETFs Bond ETFs Currency ETFs
Gold ETFs Investment in gold without actually buying it physically. Gold has been emerging as a good investment option in recent years. Keeping physical gold is very risky and expensive. Purity of physical gold also cannot be checked by investors. No buying premium. Resale is easy.
Evaluation tools and volatility measures Standard deviation Sharpe ratio Beta Alpha R- squared Tracking error Expense ratio
Title A study on awareness and Perception of investors and wealth advisors of Ludhiana with respect to Exchange Traded Funds
Objectives To study the awareness level of investors and wealth advisors regarding ETFs in Ludhiana.
To study the future perspective of ETFs according to investors and Advisors in Ludhiana.
Comparison of Reliance ETFs with respect to its benchmarks and other AMCs ETFs.
Research design Research type : Descriptive Analysis tools : Statistical Collection of data : Secondary data: Through journals, e-source and articles etc. Primary data: Through schedules. Sampling method : convenience and judgment sampling.
Sampling Sample size : Investors – 50 Wealth advisors – 25 Universe : Every direct or indirect equity investor and wealth advisor.
Population – Every direct or indirect equity investor and wealth advisor in Ludhiana.
Sample unit – Every respondent of study chosen by convenient and judgment sampling from population.
Assumptions andLimitations of the study Assumptions It has been assumed that sample respondents represents the whole population. The information given by the customer is unbiased. Limitations 1. Duration of Project was not enough to make a conclusion on such a vast subject time constraint has become a big limitation. 2. The Sample Size being taken for drawing a conclusion was too small to get an accurate result.
3. There can be an error in the research due to the lazy response of the respondents.
Data interpretation and analysis Wealth advisors Title – Age group of the respondents. ( N = 25) Graph 4.1a
Title – awareness level with respect to ETFs (N = 25)Graph 4.2a
Title – Recommendation of ETFs as an investment option.(N = 25)Graph 4.3a
Title – Types of ETFs recommended.(N = 9)Graph 4.4a
Title – Mode of ETFs sold/recommended(N=9)
Title – Preferred AMC (N = 9)
Title – Reason of preference of AMC (N = 9)
Title – Factors considered before recommending any fund (N = 9)
Title – Reason for not recommending ETFs to investors (N = 16)
Title – Attractiveness of ETFs as an investment option (N = 25)
Title – Reason of ETFs still at evolving stage (N = 25)
Benefits of investing in ETFs (N = 25)
Future trends regarding volumes of ETFs ( N = 25)
Title – Recommendation of ETFs as an investment option in future (N = 25)
For investors Title – Age group of investors (N = 50)
Title - Awareness level of investors with respect to ETFs (N = 50)
Title - source of your awareness of ETFs (N = 22)
Title - Investment in ETFs (N = 22)
Title - Type of ETFs in which investors invest (N = 10)
Title - Channel of investment in ETFs (N = 10)
Title - Preference of AMC by investors (N = 10)
Reason of preference of AMC (N = 10)
Title - Factors according to investors consideration to evaluate ETFs before investing
Title – Investors satisfaction level regarding the decision of investing in ETFs(N = 10)
Title - Reason of not investing in ETFs(N = 40)
Title - Rate the return on investment in ETFs (N = 50)
Title - Benefits of ETFs according to investors preference (N = 50)
Title - Steps should be taken for making ETFs familiar among investors( N = 50)
Title – Investorswilling to invest in ETFs in near future(N = 50)
Findings and observations It’s clear from the study that ETFs consists various beneficial features which fulfils various needs of the investors. Further that the awareness level of the investors regarding ETFs is very low. It is also been found that investors and advisors do not evaluate various schemes and funds of various AMCs on various risk measures. There has been wrong perception in the mind of investors that ETFs are complex ones. No special attention is paid by the AMC to increase the awareness of ETFs amongst investors. If investors are given some awareness by conducting some awareness programs, many of them who do not invest presently would possibly like to invest in future. Reliance AMC’s ETFs are doing very good in the market on the basis of returns as compare to its benchmark indices and other AMCs ETFs.
Suggestions There is a high potential market for investments in ETFs in Ludhiana region but this market needs to be explored as investors still hesitate to invest their money in ETFs.
The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully aware and convinced. Reliance AMC should conduct some investors awareness programs, seminars/guest lectures etc. for investors to make ETFs more popular and familiar amongst them. Proper Training and up to date knowledge of ETFs should be given to every employee of Reliance Mutual Fund so that then can explain its benefits and structure to the clients.
Most of marketing executive are not interested in dealing of ETFs because they don’t want to expand their services due to lack of time, so company should pay some special attention towards selling of ETFs.