religare mutual fund project

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 Through Softdot 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 Through Softdot 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 EXAMINERS The project report is submitted for the Final year of MASTER of BUSINESS ADMINISTRATION in the Stream of Finance by the student of SIKKIM MANIPAL UNIVERSITY, Directorate of Distance Education. Roll No: 520846146

Academic Council of Softdot Hi-Tech Educational & Training Institute has decided the title of Religare Mutual Fund as an approved and acceptable project in the standard quality according to the set norms of SIKKIM MANIPAL UNIVERSITY and by the Institute as a recognized Study

Centre for award of Master of Business Administration (Finance) to the student SAURABH GUPTA, Roll No. 520846146 according to norms of University standards academically. Examiner Mr. DHAMENDER Faculty of Finance Signature Certified 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. : 520846146 Has worked under my supervision and guidance for his project and no part of 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 been published in any journal or magazine. Certified by (Academic Director)

CERTIFICATION BY ORIGINALITY

This is to certify that the project titled

RELIGARE MUTUAL FUND Is 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 of Degree of MASTER of BUSINESS ADMINISTRATION of SIKKIM MANIPAL UNIVERSITY through a recognized Study Centre (02801), The

SOFTDOT HI-TECH EDUCATIONAL and TRAINING INSTITUTE, Pitampura, New Delhi-34. NAME SAURABH GUPTA as a student of M.B.A (FINANCE) Roll No.

:520846146

has

worked

out

under

the

guidance

of

Mr.

DHARMENDER and declare that no part of this project has been submitted for the award of any degree, diploma, fellowship, or any other similar title or prizes earlier to this university or to any other University/institution for the fulfillment of the requirement of a course of study. Academic Director

ACKNOWLEDGEMENT The development of software is a very hard work and it is not possible under improper guidance and suggestions and this project report itself is an acknowledgement to the sincere efforts of all individuals who have contributed to it for its completion. I want to give my deep appreciation and regards to my guide Mr. DHAMENDER for his great efforts, helpful suggestions, and proper guidance. He has been always a great source of inspiration to me and under his guidance I have done my work better. I specially want to quote my thanks to our program center coordinator and my counselors who are sincere care & guidance helped me everywhere times to time. I am also thankful to the director and staffs of Softdot Hi-Tech Educational & Training Institute for their major cooperation. And above all I am thankful to the God and my parent because my 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 the share market has put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because of investments are risky in nature and investors have to consider various factors before investing in investment avenues. These factors include risk, return, volatility of shares and liquidity. The main objective of comparing investment in equity shares with mutual fund schemes is to analyze the performance of mutual funds with their benchmark and comparing them with equities by using risk, return, beta and alpha as a parameter. Mutual Funds (MF) have become one of the most attractive ways for the average person to invest their money. It is said that Bank investment is the first priority of people to invest their savings and the second place is for investment in Mutual Funds and other avenues. A Mutual Fund pools resources from thousands of investors and then diversifies its investment into many different holdings such as stocks, bonds, or Government securities in order to provide high relative safety and returns. Historical data were taken for calculating risk, return, alpha and beta. Analysis has done on percentage method for comparing equity shares with mutual fund schemes. Compare to equities mutual funds are less risky with stable returns and mutual funds gives the investor a diversified portfolio. Those who have well knowledge in equity market they can go for equity investments rather that investing in mutual funds because no control on the expenses made by the fund manager. The study will guide the new investor who wants to invest in equity and mutual fund schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. The study recommends new investors to go for mutual funds rather than equities, because of high risk and market instability.

In order to study the above information the researcher has organized the present 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 1

Focuses 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 by the issue of shares serves as a financial floor to the company’s capital structure. Shares indicate the ownership or equity interest in the assets of the company. Shares are of different nominal or face values and of different kinds to attract different kinds of investors. The maximum amount of capital to be raised by the issue of shares is mentioned in the memorandum of association. During 1990-91 and 1991-92, equity accounts for 35 to 39 percent of the total capital raised respectively. This proportion was reversed in 1992-93, the first year of free pricing, when the share of equity increased to 62 percent. His share of equity finance increased to a high of 73.18 percent in 1994-95. However, in 1995-96 there is a rise in the importance of debt largely due to the high interest rates in the economy and negative returns from the secondary market. The mutual fund industry in India started in 1964 with the formation of Unit Trust of India, at the initiative of the Government of India. The 1993 SEBI Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The end of millennium marks 36 years of existence of mutual funds in this country. The ride through these 36 years is not been smooth. Investor opinion is still divided. While some are for mutual funds others are against it. UTI commenced its operations from July 1964. The impetus for establishing a formal institution came from the 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 turmoil that depressed the financial market; entrepreneurs were rather hesitant to enter the capital markets.

Concept of Equity Capital and Mutual Fund The term Equity literally means the stock or ownership of a company. They are also known as ordinary shares. The rate of dividend on equity shares varies according to the amount of profit available and the intention of board of directors. In the event of winding 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 share of ownership in the company. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock of that private company. Two key sources of equity capital for new and emerging businesses are angel investors and venture capital firms. Equity capital is represented by funds that are raised by a business, in exchange for a share of ownership in the company. Equity financing allows a business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time. The Equity Capital Markets Group (ECM) oversees the Firm's activities in the primary equity and equity-linked markets, as well as monetization and equity derivatives. It provides support in the origination of primary market transactions and manages their structuring, syndication, marketing and distribution. The world over, it’s been shown that over long tenures, equities–with their risk premium–have provided approximately 7 percentage points higher returns than risk-free options. People have to accumulate significant amounts of wealth during their working years. Right now, a 17-year bond gives you only 5.5 per cent. So, it is imperative that these 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 are professionally managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio -- entitled to any profits when the securities are sold, but subject to any losses in value as well. A mutual fund is a group of investors operating through a fund manager to purchase 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 good investment is a matter of much public debate, with many claiming they are excellent for the average person, and others saying they are simply a poor way to invest. For the individual investor, mutual funds provide the benefit of having someone else manage your investments, take care of recordkeeping for your account, and diversify your rupees over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds. A mutual fund, by its very nature, is diversified -- its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversify. Many critics of mutual funds point out that scarcely over 20% of mutual funds outperform the Standard and Poor's 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 of the 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-ended scheme depending on its maturity period.

Open-ended Scheme: An open-ended fund or scheme is one that is available for subscription and repurchase 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 prices which 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. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme 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 the units 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 i.e. either repurchase facility or through listing on stock exchanges. 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 balanced scheme considering its investment objective. Such schemes may be open-ended or closeended 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 to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences.

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, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. Balanced Scheme: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such 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 safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. Gilt Fund: These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and 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 Sensitive index, S&P NSE 50 index (Nifty), etc, these schemes invest in the securities in the same weightage comprising of an index. NAV’s of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in 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 or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like 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 will also go up in the market.

2. Voting rights:It is only the equity shareholders who enjoy voting rights on all the policy matters of the company. 3. Pre-emptive right to new shares:Equity shareholders have the pre-emptive right to purchase new shares. Under the provisions of the companies act, the existing shareholders of the company have a right to allotment of newly issued shared. 4. Many privileges and rights:Equity shareholders enjoy many privileges and rights. For example, they can vote at meetings, elect directors, control the directors to run the company efficiently and profitably, look into the books and records of the company and transfer or sell their shareholdings.

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 obtain independently. Such management is vital to achieving results in today's complex markets. Your fund managers' interests are tied to yours, because their compensation is based not on sales commissions, but on how well the fund performs. 2. Diversification:Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund

shareowners can benefit from diversification techniques usually available only to investors 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, you'd need at least Rs.1,00,000 and you'd pay thousands of rupees in commissions to assemble your portfolio. A mutual fund lets you participate in a diversified portfolio for as little as Rs.10,000, and sometimes less. And if you buy a no-load fund, you pay or no sale charges to own them. 4. Convenience and Flexibility:You own just one security rather than many, yet enjoy the benefits of a diversified portfolio 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 on portfolio securities are received and your rights exercised. 5. Quick, Personalized Service:Most funds now offer extensive websites with a host of shareholder services for immediate access to information about your fund account. Or a phone call puts you in touch with a trained investment specialist at a mutual fund company who can provide information you can use to make your own investment choices, assist you with buying and selling your fund shares. 6. Ease of Investing:You may open or add to your account and conduct transactions or business with the fund by mail, telephone or bank wire. You can even arrange for automatic monthly investments by authorizing electronic fund transfers from your checking account in any amount 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 a day or two. 8. Life Cycle Planning:With no-load mutual funds, you can link your investment plans to future individual and family needs -- and make changes as your life cycles change. You can invest in growth funds for future college tuition needs, then move to income funds for retirement, 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 fund investments can be moved as market conditions change. You can place your funds in equities when the market is on the upswing and move into money market funds on the downswing or take any number of steps to ensure that your investments are meeting your needs in changing market climates. 10. Investor Information:Shareholders receive regular reports from the funds, including details of transactions on a year-to-date basis. The current net asset value of your shares (the price at which you may purchase or redeem them) appears in the mutual fund price listings of daily newspapers. You can also obtain pricing and performance results for the all mutual funds 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 monthly fixed 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 reinvested in 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 Social Security or pension checks -- deposited directly into your fund account. This puts your money to work immediately, without waiting to clear your checking account, and it saves you 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 own recordkeeping of purchases, sales, dividends, interest, short-term and long-term gains and losses. Mutual funds provide confirmation of your transactions and necessary tax forms to 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 companies without having to worry about keeping stock certificates in safe deposit boxes or sending them by registered mail. You don't even have to worry about handling the mutual fund stock certificates; the fund maintains your account on its books and sends you periodic statements keeping track of all your transactions.

16. Retirement and College Plans:Mutual funds are well suited to Individual Retirement Accounts and most funds offer 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 financial information. A host of services are available to the online investor including direct access to 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, you can arrange to have them swept into your money market fund automatically. You get all the advantages of both accounts with no extra effort. 19. Asset Management Accounts:These master accounts, available from many of the larger fund groups, enable you to manage all your financial service needs under a single umbrella from unlimited check writing 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 leads to 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 dividends on these shares. 3. Manipulation of control:Since the equity shares have proportionate voting power, the company’s management may be vitiated by manipulation of votes, clique-formation, abuse of proxy rights etc. 4. High risk:Equity share holders cannot claim dividend as a matter of right, because the decision 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 less remunerative. 5. Unhealthy Speculation:During the period of boom, the market value of shares will go up, which leads to unhealthy speculation in the stock market.

Disadvantages of Mutual Fund: There are certainly some benefits to mutual fund investing, but you should also be aware of the drawbacks associated with mutual funds.

1. No Insurance:Mutual funds, although regulated by the government, are not insured against losses. The Federal Deposit Insurance Corporation (FDIC) only insures against certain losses at banks, credit unions, and savings and loans, not mutual funds. That means that despite the risk-reducing diversification benefits provided by mutual funds, losses can occur, and it is possible (although extremely unlikely) that you could even lose your entire investment.

2. Dilution:Although diversification reduces the amount of risk involved in investing in mutual funds, it can also be a disadvantage due to dilution. For example, if a single security held by a mutual fund doubles in value, the mutual fund itself would not double in value because that security is only one small part of the fund's holdings. By holding a large number of different investments, mutual funds tend to do neither exceptionally well nor exceptionally poorly. 3. Fees and Expenses:Most mutual funds charge management and operating fees that pay for the fund's management expenses (usually around 1.0% to 1.5% per year). In addition, some mutual funds charge high sales commissions, 12b-1 fees, and redemption fees. And some funds buy and trade shares so often that the transaction costs add up significantly. Some of these expenses are charged on an ongoing basis, unlike stock investments, for which a commission is paid only when you buy and sell (see Investor Guide University: Fees and Expenses). 4. Poor Performance:Returns on a mutual fund are by no means guaranteed. In fact, on average, around 75% 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 managers have 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 to buy and sell and when to do so. This can make it difficult for you when trying to manage your portfolio. For example, the tax consequences of a decision by the manager to buy or sell an asset at a certain time might not be optimal for you. You also should remember that 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 (called open-ended funds) cannot be bought or sold in the middle of the trading day. You can only buy and sell them at the end of the day, after they've calculated the current value of their holdings. 7. Size:Some mutual funds are too big to find enough good investments. This is especially true of funds that focus on small companies, given that there are strict rules about how much of a single company a fund may own. If a mutual fund has $5 billion to invest and is only able to invest an average of $50 million in each, then it needs to find at least 100 such companies to invest in; as a result, the fund might be forced to lower its standards when selecting companies to invest in. 8. Inefficiency of Cash Reserves:Mutual funds usually maintain large cash reserves as protection against a large number of simultaneous withdrawals. Although this provides investors with liquidity, it means that some of the fund's money is invested in cash instead of assets, which tends to lower the investor's 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 greatly according to investment objective, size, strategy, and style. Mutual funds are available for virtually 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 a fund can be tedious.

Company Profile: Religare is one of the leading integrated financial services institution of India. The company 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. The services are broadly clubbed across three key business verticals- Retail, Wealth management and the Institutional spectrum. Religare Enterprises Limited is the holding company for all its businesses, structured and being operated through various subsidiaries.

Religare’s retail network spreads across the length and breadth of the country with its 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 on its laurels, it has also aggressively started eyeing global geographies.

Our Brand Identity Name Religare is a Latin word that translates as 'to bind together'. This name has been chosen to reflect the integrated nature of the financial services the company offers. The name is intended to unite and bring together the phenomenon of money and wealth to coexist 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-leaf clover is used to define the rare quality of good fortune that is the aim of every financial plan. It has traditionally been considered good fortune to find a single four leaf clover considering that statistically one may need to search through over 10,000 three-leaf clovers 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 - General Group : Ranbaxy Group BSE Code : 532915 NSE Code : RELIGARE Market Lot :1 Face Value : Rs. 10.00 Market Cap : Rs. 4022.15 Cr.

Listings

Incorporation

Public Issue Date

BSE , NSE

30/01/1984

29/10/2007

Our Envisaged Group Structure

Client Interface

Retail Spectrum- To cater to a large number of retail clients by offering all products under 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 Portal

Institutional Spectrum- To Forge & build strong relationships with Corporate and Institutions  Institutional Equity Broking  Investment Banking  Merchant Banking  Transaction Advisory  Corporate Finance Wealth Spectrum - To provide customized wealth advisory services to High Net worth Individuals  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 plans in the pipeline AEGON Religare Life Insurance - Life Insurance Company, a Joint Venture with Aegon one of the largest insurance and pension companies, 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 online trading services Religare Macquarie Wealth Management Ltd - Wealth Management 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.S markets Religare Securities Ltd - Agreement with Vijay Co-operative Bank Ltd. and Tamilnadu Mercantile Bank Ltd. to offer offline trading services

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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 the share market has put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because investments are risky in nature and investors have to consider various factors before investing in investment avenues. Therefore the study aims to compare equity and mutual fund schemes in form their risk, return & liquidity and 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 savings intelligently in order to have enough money available for funding the higher education of one’s children, for buying a house, or for one’s own golden years. But the rapidly growing number of investment avenues often lead to confusion. Objectives of the study are to provide information to individual investors regarding their risk, and choosing the best 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 Funds

Scope of the Study The project primarily deals with equity, derivatives, mutual funds, portfolio management. The study is limited to compare equity capital and mutual fund schemes in respect of their risk, return and liquidity. The study covers 5 randomly selected stocks out of 30 BSE Sensex companies and 5 randomly selected mutual fund schemes out of mutual fund industry in India for comparison. The analysis is strictly based on share price and unit price 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 and information 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.

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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 research hence; 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 of their risk, return and liquidity. However, with the objective and scope of the study in mind, it was decided to base the study on return series of selected stocks and mutual fund schemes. BSE being the premier exchange of India was chosen for selecting stocks. It is widely accepted that BSE Sensex is the one of the most reliable index of the stock exchange that reflects present day market condition. Since it is not possible to compare all the 30 scrip’s in the index with all Mutual Fund Schemes due to time and resource constraints, sampling techniques were considered. Randomly selected samples will facilitate inference of the population, in our case BSE Sensex and mutual fund industry in India. Hence by stratified random sampling 5 scrip’s out of 30 Sensex and 5 mutual fund schemes out of whole mutual fund industry were selected. The initial examination of the composition of index revealed that it is composed of primarily two types of industries: manufacturing and services in the ratio of 3 : 2. there for to give correct picture appropriate weight was assigned to manufacturing industries and hence three scrip’s from manufacturing and two from service industries were randomly 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 were selected. Monthly share price and unit prices of the selected scrip’s and units were collected from historical data. In order to avoid bias, at least three years monthly data was decided 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 upon appropriateness of the sampling design selected for the study. It was needed to apply inferential 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 BAJAJ AUTO LIMITED BHEL ICICI BANK LIMITED SATYAM COMPUTER SERVICES LIMITED

BSE SENSEX BSE SENSEX BSE SENSEX BSE SENSEX BSE SENSEX

MUTUAL FUNDS RELIANCE MUTUAL FUND FRANKLIN INDIA PRIMA FUND SUNDARAM SMILE FUND

BENCHMARK BSE SENSEX BSE 100 BSE 500 BSE 100 BSE 100

PRUDENTIAL ICICI MUTUAL FUND

SBI MUTUAL FUND

CALCULATION OF RETURN AND RISK OF SELECTED MUTUAL FUND SCHEMES AND THEIR BENCH MARKS

RISK AND RETURN OF BENCH MARKS 1. BSE SENSEX: Calculation of Return and Standard Deviation Date 30-03-03 30-04-03 31-05-03 30-06-03 31-07-03 29-08-03 30-09-03 30-10-03 30-11-03 30-12-03 30-01-04 30-02-04 30-03-04 30-04-04 30-05-04 30-06-04 30-07-04 30-08-04 30-09-04 30-10-04 30-11-04 30-12-04 30-01-05 30-02-05 30-03-05 30-04-05 30-05-05 30-06-05 30-07-05 30-08-05 30-09-05 30-10-05 30-11-05 30-12-05 30-01-06 28-02-06 31-03-06 Total

SENSEX 3048.72 2959.79 3180.75 3607.13 3792.61 4244.73 4453.24 4906.87 5044.82 5838.96 5695.67 5667.51 5590.6 5655.09 4759.62 4795.46 5170.32 5192.08 5583.61 5672.27 6234.29 6602.69 6555.94 6713.86 6492.82 6154.44 6715.11 7193.85 7635.42 7805.43 8634.48 7892.32 8788.81 9397.93 9919.89 10370.2 11280

Return in % -2.92 7.47 13.41 5.14 11.92 4.91 10.19 2.81 15.74 -2.45 -0.49 -1.36 1.15 -15.83 0.75 7.82 0.42 7.54 1.59 9.91 5.91 -0.71 2.41 -3.29 -5.21 9.11 7.13 6.14 2.23 10.62 -8.6 11.36 6.93 5.55 4.54 8.77 140.6

R-R1 -6.83 3.56 9.50 1.23 8.01 1.00 6.28 -1.10 11.83 -6.36 -4.40 -5.27 -2.76 -19.74 -3.16 3.91 -3.49 3.63 -2.32 6.00 2.00 -4.62 -1.50 -7.20 -9.12 5.20 3.22 2.23 -1.68 6.71 -12.51 7.45 3.02 1.64 0.63 4.86

(R-R1)2 46.65 12.67 90.25 1.51 64.16 1.00 39.44 1.21 139.95 40.45 19.36 27.77 7.62 389.67 9.99 15.29 12.18 13.18 5.38 36.00 4.00 21.34 2.25 51.84 83.17 27.04 10.37 4.97 2.82 45.02 156.50 55.50 9.12 2.69 0.40 23.62 1474.39

Bench Mark Return and Risk (BSE Sensex) Return = (P1 /P0 *100)-100 Where, P1 = Current month price, P0 = Previous month price R1 = ΣR/n, where n=number of months. R1 = 140.60/36 =3.9 SD = √ Σ(R- R1)2 /n =√1474.39/36 SD = 6.4 2.

BSE 100: Calculation of Return and Standard Deviation

Date 30-03-03 30-04-03 31-05-03 30-06-03 31-07-03 29-08-03 30-09-03 30-10-03 30-11-03 30-12-03 30-01-04 30-02-04 30-03-04 30-04-04 30-05-04 30-06-04 30-07-04 30-08-04 30-09-04 30-10-04 30-11-04 30-12-04 30-01-05 30-02-05 30-03-05 30-04-05 30-05-05 30-06-05 30-07-05 30-08-05 30-09-05 30-10-05 30-11-05 30-12-05 30-01-06 28-02-06 31-03-06 Total

BSE100 1716.28 1671.63 1641.44 1819.36 1893.45 2229.25 2314.62 2485.43 2594.94 3074.87 2946.14 2923.99 2966.31 3025.14 2525.35 2561.16 2755.22 2789.07 2997.97 3027.96 3231.25 3456.54 3521.71 3611.9 3481.88 3313.45 3601.73 3800.24 4072.15 4184.83 4566.63 4159.59 4849.87 4953.28 5254.97 5422.67 5904.17

Return in %

Bench Mark Return and Risk (BSE 100) Return = (P1 /P0 *100)-100 Where, P1 = Current month price, P0 = Previous month price

-2.60 -1.81 10.84 4.07 17.73 3.83 7.38 4.41 18.49 -4.19 -0.75 1.45 1.98 -16.52 1.42 7.58 1.23 7.49 1.00 6.71 6.97 1.89 2.56 -3.60 -4.84 8.70 5.51 7.16 2.77 9.12 -8.91 16.59 2.13 6.09 3.19 8.88 133.96

R-R1 -6.32 -5.53 7.12 0.35 14.01 0.11 3.66 0.69 14.77 -7.91 -4.47 -2.27 -1.74 -20.24 -2.30 3.86 -2.49 3.77 -2.72 2.99 3.25 -1.83 -1.16 -7.32 -8.56 4.98 1.79 3.44 -0.95 5.40 -12.63 12.87 -1.59 2.37 -0.53 5.16

(R-R1)2 39.96 30.54 50.68 0.12 196.42 0.01 13.39 0.47 218.30 62.51 20.00 5.16 3.02 409.71 5.30 14.88 6.21 14.21 7.40 8.96 10.58 3.37 1.34 53.58 73.23 24.80 3.21 11.80 0.91 29.20 159.60 165.76 2.52 5.62 0.28 26.62 1679.66

R1 = ΣR/n, Where n=number of months. R1 = 133.96/36 = 3.72 SD = √ Σ(R- R1)2 /n = √1679.66/36 SD = 6.83 3. BSE 500: Calculation of Return and Standard Deviation Date 30-03-03 30-04-03 31-05-03 30-06-03 31-07-03 29-08-03 30-09-03 30-10-03 30-11-03 30-12-03 30-01-04 30-02-04 30-03-04 30-04-04 30-05-04 30-06-04 30-07-04 30-08-04 30-09-04 30-10-04 30-11-04 30-12-04 30-01-05 30-02-05 30-03-05 30-04-05 30-05-05

BSE500 1164.68 1182.01 1235.78 1373.56 1439.3 1687.35 1748.43 1877.14 1991.74 2366.36 2246.83 2228.41 2243.6 2321.25 1891.75 1923.78 2081.26 2125.65 2276.87 2319.3 2518.67 2634.51 2726.49 2825.65 2434.66 2610.5 2829.2

Return in % 1.49 4.55 11.15 4.79 17.23 3.62 7.36 6.11 18.81 -5.05 -0.82 0.68 3.46 -18.50 1.69 8.19 2.13 7.11 1.86 8.60 4.60 3.49 3.64 -13.84 7.22 8.38

R-R1 -2.60 0.46 7.06 0.70 13.14 -0.47 3.27 2.02 14.72 -9.14 -4.91 -3.41 -0.63 -22.59 -2.40 4.10 -1.96 3.02 -2.23 4.51 0.51 -0.60 -0.45 -17.93 3.13 4.29

(R-R1)2 6.77 0.21 49.83 0.48 172.77 0.22 10.70 4.06 216.64 83.56 24.11 11.62 0.40 510.44 5.74 16.78 3.83 9.14 4.96 20.31 0.26 0.36 0.21 321.38 9.81 18.38

30-06-05 30-07-05 30-08-05 30-09-05 30-10-05 30-11-05 30-12-05 30-01-06 28-02-06 31-03-06 Total

2928.31 3124.78 3273 3521.83 3198.69 3568.37 3795.96 4004.96 4130.07 4516.73

3.50 6.71 4.74 7.60 -9.18 11.56 6.38 5.51 3.12 9.36 147.26

-0.59 2.62 0.65 3.51 -13.27 7.47 2.29 1.42 -0.97 5.27

0.34 6.86 0.43 12.34 175.97 55.76 5.23 2.00 0.93 27.79 1790.64

Bench Mark Return and Risk (BSE 500) Return = (P1 /P0 *100)-100 Where, P1 = Current month price, P0 = Previous month price X1 = ΣR/n, Where,n=number of months. R1 = 147.26/36 = 4.09 SD = √ Σ(R- R1)2 /n = √1790.64/36 SD = 7.05

1. Reliance Vision Fund:Reliance Vision Fund is large cap open ended growth fund. Its objective is to achieve 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 price R1 = ΣR/n, = 190.14/36, = 5.28

Where n=number of months. SD = √ Σ(R- R1)2 /n, = √1704.71/36 SD = 6.88 Calculation 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 =1424.07/1474.39 B = 0.96

Calculation of Alpha Alpha = (Ra1 - Rm1)*B =(5.16-3.9)*0.96 =1.2 CALCULATION OF RISK AND RETURN Date

Net Asset Value

30-03-03 30-04-03 31-05-03 30-06-03 31-07-03 29-08-03 30-09-03 30-10-03 30-11-03 30-12-03 30-01-04 30-02-04 30-03-04 30-04-04 30-05-04 30-06-04 30-07-04 30-08-04 30-09-04 30-10-04 DATE 30-11-04 Return of Company 30-12-04 27-02-0530-01-05 -7.45 30-03-0530-02-05 -1.18 30-04-0530-03-05 0.7 30-05-0530-04-05 8.48 30-06-0530-05-05 2.09 30-07-0530-06-05 8.73 30-08-0530-07-05 8.03 30-09-0530-08-05 2.35 30-10-0530-09-05 -24.37 30-11-0530-10-05 -0.78 30-12-0530-11-05 -0.10 30-01-0630-12-05 0.10 30-01-06 28-02-06 0.10 31-03-0628-02-06 0.00 31-03-06 Total -3.33 Total

27.66 27.86 31.45 34.70 37.58 43.31 48.11 53.04 57.89 68.51 63.69 65.39 63.11 65.34 54.44 56.26 60.9 63.94 68.7 69.11 Return of 74.76 market 82.08 3.64 83.14 -13.84 90.19 7.22 86.7 8.38 86.10 3.5 91.64 6.71 91.49 4.74 99.74 104.82 7.6 114.32 -9.18 105.35 11.56 118.05 6.38 125.97 5.51 134.38 3.12 139.26 9.36 155.75 147.26

Return in %(R)

Ra-Ra1 -7.23 -0.96 0.92 8.7 2.31 8.95 8.25 2.57 -24.15 -0.56 0.12 0.32 0.32 0.22

R - R1

-----4.85 13.7 10.03 8.29 16.39 9.99 10.24 9.14 18.34 -7.03 2.66 -3.48 3.53 -16.68 3.34 8.24 4.99 7.44 1.45 Rm-Rm1 7.25 9.79 1.6 -0.45 8.14-17.93 -3.86 3.13 -0.69 4.29 6.43 -0.59 -0.16 2.62 9.01 0.65 5.09 3.51 9.06-13.27 -7.84 7.47 12.05 2.29 6.7 1.42 6.67 -0.97 3.63 5.27 11.84 190.14

(R- R1)2

--------0.43 0.18 8.42 70.89 4.75 22.56 3.01 9.06 11.11 123.43 4.71 22.18 4.96 24.6 3.86 14.89 13.06 170.56 -12.31 151.53 -2.62 6.86 -8.76 76.73 -1.8 3.24 -21.96 482.24 -1.94 3.76 2.96 8.76 -1.04 1.08 2.16 4.66 -3.83 14.66 [(Ra-Ra1) (Rm-Rm1)2 1.97 3.88 (Rm-Rm1)] 4.51 20.34 3.25 13.54 0.20 -3.68 17.21 321.48 2.86 8.17 2.88 83.53 9.80 -9.14 37.32 35.64 18.40 5.97 -1.36 1.32 0.35 1.15 23.45 6.86 -5.44 29.59 5.36 13.91 0.42 3.73 -0.19 9.02 0.03 12.32 3.78 320.47 14.28 176.09 13.12 -4.18 172.13 55.80 6.77 0.27 45.83 5.24 1.42 0.45 2.01 2.02 1.39 1.93 -0.31 0.94 -1.92 1.16 3.68 27.77 6.65 43.03 415.00 637.71 1704.71

CALCULATION OF BETA: DATE

Return of Company

Return of market

Ra-Ra1

Rm-Rm1

[(Ra-Ra1) (Rm-Rm1)]

(Rm-Rm1)2

CONCLUSION Saving money is not enough. Each of us also need to invest one’s savings intelligently in order to have enough money available for funding the higher education of one’s children, for buying a house, or for one’s own golden years. The study will guide the new investor who wants to invest in equity and mutual fund schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. The study recommends new investors to go for mutual funds rather than equities, because of high risk and market instability. From the calculation it is found that the average risk of equities based on sample size is 9.87 & they are earning 5.43% returns per month where as mutual funds average risk based on sample size is only 8.74 & they are earning 4.39% per month

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