Chapter-1 INTRODUCTION

INTRODUCTION
My Internship consisted of the On Job Training. The best learning experience was that It is started from the very basics of getting to that position and not from the position itself. This helped me get useful insight and understanding of various financial products, the market details about them and the benefits provided by them to the customers. Emphasis was given in analysis of the investor behavior of the clients. Another interesting fact was that all these products were suggested to clients not just based on their market performance and returns, but on the clients financial condition as well as their risk taking capacity. Training sessions were held to give me insights about the various products that Reliance Securities deals. Presentations on the same after self study and analysis were a part of this internship session. Financial advice and suggestions to the investors for Stock trading which may prove prudent to them. For other products it is studied the clients investing behavior and assisted the wealth manager, who decided the investment options and designed the portfolios.

In financial markets, stock is the capital raised by a corporation through the issuance and distribution of shares. A person or organization which holds shares of stocks is called a shareholder. The aggregate value of a corporation's issued shares is its market capitalization. When one buys a share of a company he becomes a shareholder in that company. Shares are also known as Equities. Equities have the potential to increase in value over time. It also provides the portfolio with the growth necessary to reach the long-term investment goals. Research studies have proved that the equities have out performed than most other forms of investments in the long term. Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment. However, this does not mean all equity investments would guarantee similar high returns. Equities are high-risk investments. One needs to study them carefully before investing. Since 1990 till date, Indian stock market has returned about 17% to investors on an average in terms of increase in share prices or capital appreciation annually. Besides that on average stocks have paid 1.5 % dividend annually. Dividend is a percentage of the face value of a share that a company returns to its shareholders from its annual profits. Compared to most other forms of investments, investing in equity shares offers the highest rate of return, if invested over a longer duration.

The first company to issue shares of stock was the Dutch East India Company, in 1602. he innovation of joint ownership made a great deal of Europe's economic growth possible following the Middle Ages. The technique of pooling capital to finance the building of ships, for example, made the Netherlands a maritime superpower. Before adoption of the joint-stock corporation, an expensive venture such as the building of a Equity Markets In India An Overview 4 merchant ship could only be undertaken by governments or by very wealthy individuals or families. Equity markets, the world over, grew at a great speed in the decade of the nineties. After the bear markets of the late eighties, the world markets saw one of the largest ever bull markets of more than ten years. The opening up of Indian economy in the 1990's led to a series of financial sector reforms, prominent being the capital market reforms. These reforms have led to the development of the Indian equity markets to t standards of the major global equity markets. All this started with the abolition of Controller of Capital Issues and subsequent free pricing of shares. The introduction of dematerialization of shares, leading to faster and cheaper transactions and introduction of derivative products and compulsory rolling settlement has followed subsequently. Despite a series of stock market scams and crises beginning from 1992 Harshad Mehta's scam to the Ketan Parekh's 2001 scam, the Indian equity markets have transformed themselves from a broker dominated market to a mass market. The introduction of online trading has given a much-needed impetus to the Indian equity markets. However, over the years, reforms in the equity markets have brought the country on par with many developed markets on several counts. Today, India boasts of a variety of products, including stock futures, an instrument launched only by select markets. The introduction of rolling settlement is the latest step in the direction of overhauling the stock market. The equity market of the country will most likely be comparable with the world's most advanced secondary markets with regard to international best practices. The market moved to compulsory rolling settlement and now all settlements are executed on T+2 basis and market is gearing up for moving to T+1 settlement in 2004 while the Straight Through Processing (STP) is in place from December 2002. Equity Markets In India An Overview 5 The importance of equity market is increasing. Rightly, realizing the advantages of resource allocation through market, Government of India and Reserve Bank of India have been pushing reforms in equity markets. Series of steps are being taken to remove hurdles, increase market efficiency and to make it attractive for the retail investors to take part in the equity market. It may not be an exaggeration to say that the Indian markets are resourceful to put themselves on par with the markets of the developed countries. The Indian markets have
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assimilated in a relatively lesser time, many a developments that took long time in the developed markets.

DEVELOPMENTS IN EQUITY MARKET The Government of India has been trying to improve market efficiency, enhance transparency and bring the Indian Equity Market up to international standards. Many reform measures have been initiated in the 90s. The principal ones are the formation of Securities Exchange Board of India (SEBI), repeal of the Capital Issues (Control) Act, 1947, introduction of screen-based trading, shortening of trading cycle, demutualization of stock exchanges, establishment of depositories disappearance of physical share certificates and better risk management systems in stock exchanges. The formation of SEBI was the first attempt towards integrated regulation of the securities market. Sebi regulates all market intermediaries and has the powers to impose monetary penalties for misconduct of any intermediary. One of the major stumbling blocks in fair pricing of capital issues has been the Capital Issues (Control) Act, 1947. The issuers were denied the opportunity to economically raise money from the capital market. This is now a matter of the past thanks to the repeal of the Act itself. SEBI has also issued Disclosure and Investor Protection (DIP) guidelines to ensure fair prices for Equity Markets In India An Overview 6 the investors, though however, many issuers in the 90s could unfairly price their capital issues at the cost of the poor common investors. The introduction of Screen Based Trading Systems (SBTS) by NSE is a major development in the capital market. This made the markets more efficient. The geographical barriers to trade were dismantled resulting in increased trading volumes. This was possible due to the great advancements in the area of information technology. SBTS electronically matches orders cutting down time, cost and errors, and minimizing the chances of fraud. Very long settlement cycle was another major hindrance in effecting deliveries in the equity market. Often the securities were delivered after 30 days or more due to weekly/fortnightly settlements and carry forward transactions. Sebi has enforced the discipline to compulsorily settle trades in T+3 days since April 2002. This is slated to reduce to T+2 days from April 2003. All scrips are now under rolling settlement since December 2001. The Equity Market is incomplete without products to manage risks in portfolio values. At long last, derivatives trading appeared on Indian exchanges in June 2000. While the product range in derivatives is still limited (futures and options on stocks and stock indices), it is certainly a major step forward in broadening the financial markets. NSE was established as a
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demutualized structure separating the roles of ownership, management and trading to eliminate any conflict of interest among the stakeholders to improve market efficiency and to focus on investor interest. Another notable development in the Indian equity market has been the introduction of depositories to dematerialize the share certificates. This avoids physical movement of certificates, bad eliveries and quicker transfer of ownership of shares. Presently all actively traded shares are held, traded and settled in demat form. The setting up of National Securities Clearing Corporation Ltd., (NSCCL) in April 1996 has been a major development in managing counterparty risks in the equity market. This has helped in increasing trading volumes since traders are now more confident about default-free settlements. While most of the above measures have helped in reinforcing confidence in the Indian equity market by providing more transparent and efficient buying, selling and transfer of shares.

International Scenario
Global integration, the widening and intensifying of links, between high-income and developing countries, have accelerated over the years. Equity Markets In India An Overview 10 According to the 'World Development Indicators 2007, World Bank' there has been an increase in market capitalization as percentage of Gross Domestic Product (GDP) in some of the major country groups. The increase, however, has not been uniform across countries. The market capitalization as a percentage of GDP was the highest at 112.9% for the high income countries as at end 2005 and lowest for middle income countries at 49.5%. Market capitalization as percentage of GDP in India stood at 68.6 % as at end 2005. The turnover ratio, which is a measure of liquidity, was 122.2 % for high-income countries and 96.6 % for low-income countries. The total number of listed companies stood at 28,733 for high-income countries, 11,141 for middle-income countries and 6,177 for low-income countries as at end 2006.

EQUITY AS AN INVESTMENT
1. Stock or any other security representing an ownership interest. 2. On the balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses), also referred to as "shareholder's equity". 3. In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage. Equity is a term whose meaning depends very much on the context. In general, one can think of equity as ownership in any asset after all

debts associated with that asset are paid off. For example, a car or house with no outstanding debt is considered the owner's equity since he or she can readily sell the items for cash. Stocks are equity Equity Markets In India An Overview 11 because they represent ownership of a company, whereas bonds are classified as debt because they represent an obligation to pay and not ownership of assets. The ability of equities to deliver over longer time frames and even outperform other investment avenues like gold, property and bonds is an often chronicled fact. However, over shorter time frames, equities also hold the potential to be a very risky asset class and expose the portfolio to high levels of volatility. This is the primary reason why any fund manager worth his salt always recommends a sufficiently long (at least 3 years) time frame for an equity-oriented investment. Similarly financial planners advocate pruning of the equity holdings with advancement in the investors age, when the investor is typically closer to retirement (shorter investment horizon) and has a lower risk appetite as well.

INVESTING PRINCIPLES
1. Invest for Real Returns 2. Keep an Open Mind 3. Never Follow the Crowd 4. Everything Changes 5. Avoid the Popular 6. Learn from your Mistakes Equity Markets In India An Overview 12 7. Buy During Times of Pessimism 8. Hunt for Value and Bargains 9. Search Worldwide 10. No-one Knows Everything

Indian Capital markets - Chronology 1994- Equity Trading commences on NSE 1995- All Trading goes Electronic 1996- Depository comes in to existence 1999- FIIs Participation- Globalization 2000- over 80% trades in Demat form

2001- Major Stocks move to Rolling Set 2003- T+2 settlements in all stocks 2003 - Demutualization of Exchanges

Capital Market Participants Banks Exchanges Clearing Corporations Brokers Custodians Depositories Investors Merchant Bankers

Types of Investors Institutional Investors- MFs / FI / FIIs / Banks Retail Investors Arbitrageurs / Speculators Hedgers Day traders/Jobbers

C CA AS SH HM MA AR RK KE ET T
The Spot Market or Cash Market is a commodities or securities market in which goods are sold for cash and delivered immediately. Contracts bought and sold on these markets are immediately effective. Spot markets can operate wherever the infrastructure exists to conduct the transaction. The Spot market for most securities exists primarily on the internet. The trading in this cash market can be further divided into Intraday and Delivery.

Key Terms in Markets Intraday refers to buying or selling stocks today with an obligation to sell or buy the stock on the same day. It means completing the trading cycle in the same day. Here the stocks do not come to the Demat account.

Delivery refers to buying stocks today with a plan of selling it in future. In India there is a concept of T+2 settlements. Which means a stock bought on trade day is credited to your Demat account (or delivered) into your Demat account after 2 days. Square off- making the position nil. Say selling off the stocks. (or buying back in case of short selling) Short selling- selling without having the possession of the stocks (possible in intraday trade). Selling the stocks initially and buying them back later. It is a concept used in the falling markets. Demat Account- the account where in the shares are delivered. Every Demat account is linked to a trading account and a savings bank account. Demat account are provided by CDSL (central depository services limited) and NSDL (national securities depository limited). UNICON is a depository participant which links the depository to the beneficial owner of the account (client). Trading pool/margin account- the place where the stock is received after the trade, it is the brokers account called the broker pool account. T+2= Transaction + 2 days

D DE ER RI IV VA AT TI IV VE ES SM MA AR RK KE ET T
By far the most significant event in finance during the past decade has been the extraordinary development and expansion of financial derivatives. These instruments enhance the ability to differentiate risk and allocate it to those investors most able and willing to take it Definition: Derivatives are instruments whose value is derived, in whole or in part, from the value of one or more underlying assets. History of Derivatives The history of derivatives is surprisingly longer than what most people think. Some texts even find the existence of the characteristics of derivative contracts in incidents of Mahabharata. Traces of derivative contracts can even be found in incidents that date back to the ages before Jesus Christ. However, the advent of modern day derivative contracts is

attributed to the need for farmers to protect themselves from any decline in the price of their crops due to delayed monsoon, or overproduction. The first 'futures' contracts can be traced to the Yodoya rice market in Osaka, Japan around 1650. These were evidently standardized contracts, which made them much like today's futures. The Chicago Board of Trade (CBOT), the largest derivative exchange in the world, was established in 1848 where forward contracts on various commodities were standardized around 1865. From then on, futures contracts have remained more or less in the same form, as we know them today. Derivatives have had a long presence in India. The commodity derivative market has been functioning in India since the nineteenth century with organized trading in cotton through the establishment of Cotton Trade Association in 1875. Since then contracts on various other commodities have been introduced as well. Exchange traded financial derivatives were introduced in India in June 2000 at the two major stock exchanges, NSE and BSE. There are various contracts currently traded on these exchanges. National Commodity & Derivatives Exchange Limited (NCDEX) started its operations in December 2003, to provide a platform for commodities trading. The derivatives market in India has grown exponentially, especially at NSE. Stock Futures are the most highly traded contracts on NSE accounting for around 55% of the total turnover of derivatives at NSE, as on April 13, 2005.

Chapter-2 OBJECTIVES OF THE STUDY

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OBJECTIVES OF STUDY:
The main of the present study of is accomplish the following objective. Proper understanding and analysis of share market industry. To study the potential of equity market in Moradabad city. Understanding of various aspects in the field of trading of stocks and also core sales of the financial products like Demat A/Cs. Training aims was to Sell the maximum no. of equity share for the company by opening the Demat a/c and bring the business for the company which ever is going at the particular point of time.

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SCOPE OF THE STUDY

Scope the this study is it will assist Reliance Money to get its own Customer Relationship Management system mirror well and it will get all the important things before eyes to apply all the possible ways to provide a superb service to the customers and accordingly make them loyal and retain them long lasting and also to get new customers to be served. Scopes can be stated in few points as follows. Maintain current / existing customers. Achieve new potential customers. Retain all the customers. Profitability Increment Reputation and credibility Increment, etc.

The company can then use the information to learn about the behavior of its customers and improve the way it does a business. It can look at recurring complaints from multiple customers to solve a problem which would otherwise go unchecked with a normal formats and management system of the company. The main objective of my project is to find effective solution for the Customer Relationship Management and accordingly increase the credibility and profitability of the company. This study is more related to consumer behavior and perception about the facilities and convenience provided by the company, Customer Satisfaction is emphasized in this management. Helping an enterprise to enable its marketing departments to identify and target their best customers, manage marketing campaigns with clear goals and objectives, and generate quality leads for the sales team. Assisting the organization to improve telesales, account, and sales management by optimizing information shared by multiple employees, and streamlining existing processes (for example, taking orders using mobile devices) Allowing the formation of individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits; identifying the most profitable customers and providing them the highest level of service. Providing employees with the information and processes necessary to know their customers, understand their needs, and effectively build relationships between the company, its customer base, and distribution partners.

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Chapter-3 COMPANY PROFILE

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COMPANY PROFILE

Reliance Securities is promoted by Reliance Capital; one of India's leading and fastest growing private sector financial services companies, ranking among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital is a part of the Reliance Anil Dhirubhai Ambani Group. Thus, Reliance Securities provides a comprehensive platform, offering an investment avenue for a wide range of asset classes. Its endeavor is to change the way India transacts in financial market and avails financial services. Reliance Securities offers a single window facility, enabling you to access amongst others, Equities, Equity and Commodity derivatives, Offshore Investments, IPOs, Mutual Funds, Life Insurance and General Insurance products. Advantages offered by Reliance Securities over other companies: Cost Effective

Convenience Security Single Window for Multiple Products 3 in 1 Integrated Access Demat Account with Reliance Capital

Other Services like research, live news from Reuter and Dow Jones, etc.

Management Team
Chairman CEO Deputy CEO National Head Regional Head Cluster Head Center Managers : : : : : : : Mr. Anil Dhirubhai Ambani Mr. Sudip Bandhupadhyay Mr. Kapil Bali Mr. Anshu Azare Mr. Ritu Raj chauhan Mr. Navdeep Kaur Mr. Sandeep saini

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Vision of Reliance Securities

To achieve & sustain market leadership, Reliance Securities shall aim for complete customer satisfaction, by combining its human and technological resources, to provide world class quality services. In the process Reliance Securities shall strive to meet and exceed customer's satisfaction and set industry standards.

Mission statement
Our mission is to be a leading and preferred service provider to our customers, and we aim to achieve this leadership position by building an innovative, enterprising , and technology driven organization which will set the highest standards of service and business ethics.

Highlights of Reliance Securities

The highlights of Reliance Securities's offerings are: 1. Cost-effective The fee charged by the affiliates of Reliance Securities, through whom the transactions can be placed, is among the lowest charged in the present scenario. Pay a flat fee of just Rs. 500/valid for 2 months or specified transactional value. The facility of trading is subject to expiry of the validity period or value limit, whichever comes first.

Illustrations depicting fee structure and validity limits

Access fee- Rs. 500 Validity- Time validity of 2 months or Turnover validity of Rs. 1 cr., whichever is earlier Turnover limit- Non-delivery turnover of Rs. 90 lac, Delivery turnover of Rs. 10 lac Access fee- Rs. 1350 Validity- Time validity of 6 months or Turnover validity of Rs. 3 cr., whichever is earlier Turnover limit- Non-delivery turnover of Rs. 2.7 cr., Delivery turnover of Rs. 30 lakh Access fee- Rs. 2500 Validity- Time validity of 12 months or Turnover validity of Rs. 6 cr., whichever is earlier Turnover limit- Non-delivery turnover of Rs. 5.4 cr., Delivery turnover of Rs. 60 lakh Unutilized delivery limit may be added to Non-delivery limit

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2.

Convenience
You have the flexibility to access Reliance Securities services in multiple ways: through the Internet, Transaction Kiosks, Call & Transact (phone) or seek assistance through our Business Partners

3.

Security

Reliance Securities provides secure access through an electronic token that flashes a unique security number every 32 seconds (and ensures that the number used for earlier transaction is discarded). This number works as a third level password that keeps your account extra safe

4.

Single window for multiple products

Reliance Securities, through its affiliates/partners, facilitates transactions in Equity, Equity & Commodity Derivatives, Offshore Investments, Mutual Funds, IPOs, Life Insurance and General Insurance products. All overseas investments are subject to rules, regulations and guidelines of the Reserve Bank of India as laid down from time to time

5.

3 in 1 integrated access

Reliance Securities offers integrated access to your banking, trading and demat account. You can transact without the hassle of writing cheques Demat account with Reliance Capital Hassles free demat account with Reliance Capital. The Annual Maintenance Charge for the Demat Account is just Rs. 50/- per annum

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6. Other Services
Through the portal www.reliancemoney.com, Reliance Securities provides: a. Reliable research, including views of external experts with an enviable track record b. Live news from Reuters and Dow Jones c. CEOs'/experts' views on the economy and financial markets d. The Personal finance section provides tools that help you plan your investments, retirement, tax, etc e. Analyze your risk profile through the Risk Analyzer f. Get a suitable investment portfolio using the Asset Allocator

KEY BENEFITS OF RELIANCE SECURITIES

Equity is a share in the ownership of a company. It represents a claim on the companys assets and earnings. As you acquire more stock, your ownership stake in the company increases. The terms share, equity and stock mean the same thing and can be used interchangeably. Holding a companys stock means that you are one of the many owners (shareholders) of a company, and, as such, you have a claim (to the extent of your holding) to everything the company owns. Yes, this means that technically, you own a portion of every piece of furniture; every trademark; every contract, etc. of the company. As an owner, you are entitled to your share of the companys earnings as well as any voting rights attached to the stock. Another extremely important feature of equity is its limited liability, which means that, as a part-owner of the company, you are not personally liable if the company is not able to pay its debts. In case of other entities such as partnerships, if the partnership goes bankrupt, the partners are personally liable towards the creditors/lenders and they may have to sell off their personal assets like their house, car, furniture, etc., to make good the loss. In case of holding equity shares, the maximum value you can lose is the value of your investment. Even if a company of which you are a shareholder goes bankrupt, you can never lose your personal assets.

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Reliance Securities gives you the access to Over 5000 Schemes of 28 Assets Management Companies (AMCs) with just one account. Some of them included are.

ORGANIZATIONAL STRUCTURE

Fig. 2.1 Organisation chart of reliance Securities

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Reliance ADA Group Structure

Fig. 2.2 Relia nce ADA g roup structu re

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1.

Chapter-4 PRODUCT PROFILE

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PRODUCT OFFERING
1. Trading Portal (with almost negligible brokerage ) Equity Broking Commodity Broking Derivatives ( Futures & Options ) Offshore Investments (Contract For Differences) D-Mat Account. 2. Financial Products Mutual Funds Life Insurance o ULIP plan o Term Plan o Money Back Plan General Insurance o Vehicle/Motor Insurance o Health Insurance o House insurance IPOs NFOs

3. Value-Added Services Retirement Planning Financial Planning Tax Saving Children Future Planning

4. Credit Cards 5. Gold coins retailing

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TRADING PORTAL
Online trading refers to buying and selling of the shares/stocks/contracts/bonds with the use of internet. In this shares are not issued in physical form rather they are transferred in the dematerialized form in the Demat account directly.

DEMAT ACCOUNT
In India, a Demat account, the abbreviation for dematerialized account, is a type of banking account which dematerializes paper-based physical stock shares. The dematerialized account is used to avoid holding physical shares: the shares are bought and sold through a broker. This account is popular in India. The Securities and Exchange Board of India (SEBI) mandates a Demat account for share trading above 500 shares. As of April 2006, it became mandatory that any person holding a Demat account should posses a Permanent Account Number (PAN), and the deadline for submission of PAN details to the depository lapsed on January 2007.

What are the benefits of opening a Demat account?

Demat account has become a necessity for all categories of investors for the following reasons/ benefits: SEBI has made it compulsory for trades in almost all scrips to be settled in Demat mode. Although, trades up to 500 shares can be settled in physical form, physical settlement is virtually not taking place for the apprehension of bad delivery on account of mismatch of signatures, forgery of signatures, fake certificates, etc. It is a safe and convenient way to hold securities compared to holding securities in physical form.. No stamp duty is levied on transfer of securities held in Demat form. Instantaneous transfer of securities enhances liquidity. It eliminates delays, thefts, interceptions and subsequent misuse of certificates.

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Change of name, address, registration of power of attorney, deletion of deceased's name, etc. - can be effected across companies by one single instruction to the DP.

Each share is a market lot for the purpose of transactions - so no odd lot problem.

Any number of securities can be transferred/delivered with one delivery order. Therefore, paperwork and signing of multiple transfer forms is done away with. It facilitates taking advances against securities on low margin/low interest.

DEMAT ACCOUNT
There are many broking houses doing business in India and they charge a brokerage on every transaction made online or offline. (Buying and Selling are treated as separate transaction). Reliance Securitiess advantage over others is that its charging the lowest brokerage in the market which is just 1 paisa on every executive trade irrespective of the volume traded. Reliance Securities, the brokerage and distribution arm of Reliance ADA Group, aims to tap investors in the smaller towns and cities through a flat fee structure. The current leaders in the retail broking segment like ICICI Direct, India Infoline and Indiabulls offer a pay per use model where the customer pays a percentage of the amount transacted by him. Reliance Securitiess brokerage rates are quite competitive. The new wonder is Reliance Securities's pre-paid card for stock market brokerage. Reliance Securities, the financial services division of Anil Dhirubhai Ambani Grouppromoted Reliance Capital, is bringing to the market pre-paid cards in denominations of Rs500, Rs1,350 and Rs2,500 with validity period of two months, six months and twelve months respectively. These cards would offer brokerage at one-third of the rate being charged by institutional and individual brokerage houses. Sample this. For a pre-paid card worth Rs500, an investor can trade up to Rs90 lakh in futures and option segment or can undertake intraday trade of similar amount. Besides, an investor can undertake a delivery-based activity of Rs10 lakh. The Rs1350 worth pre-paid card, total trading limit would reach Rs 3 crore, of which Rs 2.70 crore is for the F&O segment and balance Rs30 lakh for delivery-based activities.

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For Rs2500 pre-paid card, total trading limit is fixed at Rs16 crore, that include F&O limit of Rs15.40 crore and balance Rs 60 lakh for delivery-based broking. Converted to percentage terms - Reliance Securities offers most competitive brokerage rates - 0.05% for delivery trades and 0.005% for non-delivery trades (fixed fee of Rs500/- for delivery trades up to Rs10 lacs and/or non-delivery trades up to Rs1 crore). Industry rates vary between 0.4% to 0.85% for delivery trades and between 0.05% and 0.10% for non delivery trades. Target low level of retail penetration in India - less than 3 per cent of household financing savings makes it into equity markets Reliance Securities consumers can trade in equities, commodities and offshore Investments , IPOs, Mutual Funds, Insurance, Money transfer and Money Changing - all through single window, both off-line and online. Reliance Securities has already tied-up with CMC Capital Plc UK to offer offshore Investment products to Indian consumers as per guidelines.

How Reliance Securities scored over others?

2. Two way authentication: Reliance offers its customers with a token (an electronic gadget) that generates a password, which are a third level of security in addition to the customer log in and a password provided. The password generated by the token is valid only for a period of 20 seconds. If the web page expires, for the fresh login, a new password generated by the token has to be keyed in by the customer. 3. Lowest brokerage: Reliance offers the lowest brokerage of 1 paisa which is very less with respect to the other DPs in the market. 4. User friendly software: The portal offered is very easy to understand and use. 5. Forex and offshore investment: Reliance provides the offshore facility which no other AMC is providing in the market.

Better research and news: Reliance offers news from the DOW JONES and REUTERS.

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Financial Products

The different schemes offered to various kinds of investors by Reliance mutual fund can be broadly classified into three categories Equity, Debt and sector specific. Each of these categories has different investment objectives and therefore has different portfolio. Equity Schemes

Reliance Growth Fund Reliance Vision Fund Reliance NRI Equity Fund Reliance Equity Opportunities Fund Reliance Index Fund Reliance Tax Saver Fund Reliance Equity Fund

Debt Schemes

Reliance Income Fund Reliance Medium Term Fund Reliance Short Term Fund Reliance Liquid Fund Reliance Monthly Income Plan Reliance Gilt Securities Fund Reliance Floating Rate Fund Reliance NRI Income Fund

Sector Specific Schemes

Reliance Banking Fund Reliance Pharma Fund Reliance Media and Entertainment Fund Reliance Diversified Power Sector Fund

As I was more involved in the understanding and promotion of the NFO of Reliance Equity Fund during the initial part of my training. I would like to summarize it in brief.

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Reliance Equity Fund

The Reliance Equity Fund is an open ended diversified equity fund that seeks to provide long term capital appreciation by investing in a portfolio constituted of equity and equity related securities of top 100 companies by market capitalization and of companies that are available in derivatives segment, belonging to diverse sectors. The investment strategy being that even if the markets go down, the fund has a part of its portfolio hedged, which aims at minimizing the downside risk. The fund will not only use hedging techniques to limit the downside risk but will also try & capitalize on short selling opportunities to generate additional returns for the investors. The fund will invest 75-100% in equity and equity related instruments and 0-25% in debt and money market securities. In a nut shell what this fund tries to do:

Generate long term returns by investing in a diversified portfolio of stocks. Minimize the downside risk by being in a hedged position Capitalize on generating additional returns by selective shorting.

"Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event." Reliance Life Insurance is an associate company of Reliance Capital Ltd., which along with its associates has acquired 100% shares in AMP Sanmar Life Insurance Co Ltd. Reliance Life Insurance, has a pan presence and a range of products catering to individual as well as corporate needs. A total of 16 products covering savings, protection & investment requirements. Vision: Empowering everyone live their dreams Mission: Create unmatched value for everyone through dependable, effective, transparent and profitable life insurance and pension plans Guiding Principles Customer Care and Satisfaction Corporate Governance

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Creativity and Innovation Competitiveness

PLANS
Individual Plans

Product Name Reliance Automatic Investment Plan Reliance Securities Guarantee Plan Reliance Endowment Plan

Description A smart plan which adapts to your changing risk profile with increasing age. Under this plan the investment risk in the investment portfolio is borne by the policyholder. This plan will keep you financially prepared for all the special occasions in your life.

Reliance Special This insurance policy is designed for people who wish to combine Endowment Plan savings with extended security. Reliance Cash Flow Plan Reliance Child Plan Reliance Term Plan Reliance Whole Life Plan Reliance Market Return Plan Reliance Golden Years Plan Reliance Simple Term Plan Reliance Special Term Plan Reliance Credit Guardian Plan This insurance policy is designed for those who have a recurring need for reinvestment in business or look for short-term investment channels. This insurance policy is designed for people who wish to save money for a future time. This insurance policy is designed for those who only want life cover for the protection of their family, and do not wish to save for themselves. This insurance policy is designed for people who do not wish to avail of any benefits themselves but wish to create an immediate estate to protect their family by availing of insurance cover on their life at a very low cost. Reliance Market Return Fund is the unit-linked product that helps you invest in the financial markets in a combination of investment instruments of your choice. Reliance Golden Years Plan is a flexible package that provides freedom of choice in choosing the type of investment, life cover, vesting options such as commuting and annuity options. Reliance Simple Term Plan is a cost-effective, pure life insurance plan that offers you comprehensive and affordable coverage for a limited period of time to suit your needs. Reliance Special Term Plan is a pure life insurance plan that offers you comprehensive and affordable coverage for a limited period of time to suit your needs. Reliance Credit Guardian Plan ensures that your housing loans, personal loans or even outstanding credit card bills are paid in the event of untimely demise. Thus keeping you and your family protected from the burden and the worry of debt in such a situation.

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Reliance Special Credit Guardian Plan helps you and your family avoids Reliance Special such situations by securing your housing loans, personal loans and even Credit Guardian credit card payments. What makes the Plan special is the fact that on survival at maturity, all premiums paid for your basic policy will be Plan returned to you. Reliance Connect Reliance Connect 2 Life Plan helps you build security and savings for a better tomorrow. 2 Life Plan Table 2.1 Plans of Reliance Life Insurance

Employee Benefit Plans Product Name Reliance Group Term Assurance Policy Description Reliance Group Term Assurance Policy is a one year Renewable Term Assurance contract. The benefit is payable on the happening of the contingency during one year. At the end of the year, the contract may be renewed.

Reliance EDLI Scheme All establishments with at least 10 full-time permanent employees and to whom the Employee's Provident Fund and Miscellaneous Provisions Act, 1952 applies, have a statutory liability to subscribe to Employee's Deposit Linked Insurance Scheme (EDLI), to provide for life insurance for all their employees. Reliance Group Gratuity Policy A gratuity policy that reflects your company's identity and which highlights the value of the benefits you provide to your employees.

A superannuation policy that reflects your company's identity and Reliance Group Superannuation Policy which highlights the value of the benefits you provide to your employees. Table 2.2 Employee Benefit plans of Reliance Life Insurance

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COMPETITORS OF RELIANCE SECURITIES

India bulls Indiabulls Group is one of the top business houses in the country with business interests in Real Estate, Infrastructure, Financial Services, Retail, Multiplex and Power sectors. Indiabulls Group companies are listed in Indian and overseas financial markets. The Networth of the Group exceeds USD 2 billion. Indiabulls has been conferred the status of a Business Superbrand by The Brand Council, Superbrands India.Indiabulls Financial Services is an integrated financial services powerhouse providing Consumer Finance, Housing Finance, Commercial Loans, Life Insurance, Asset Management and Advisory services. Indiabulls Financial Services Ltd is amongst 68 companies constituting MSCI Morgan Stanley India Index. Indiabulls Financial is also part of CLSAs model portfolio of 30 Best Companies in Asia. Indiabulls Financial Services signed a joint venture agreement with Sogecap, the insurance arm of Societ Generale (SocGen) for its upcoming life insurance venture. Indiabulls Financial Services in partnership with MMTC Limited, the largest commodity trading company in India, is setting up Indias 4th Multi-Commodities Exchange.Indiabulls Real Estate Limited is Indias third largest property company with development projects spread across residential projects, commercial offices, hotels, malls, and Special Economic Zones (SEZs) infrastructure development. Indiabulls Real Estate partnered with Farallon Capital Management LLC of USA to bring the first FDI into real estate. Indiabulls Real Estate is transforming 14 million sqft in 16 cities into premium quality, high-end commercial, residential and retail spaces. Indiabulls Real Estate has diversified significantly in the following business verticals within the real estate space Motilal Oswal Securities Motilal Oswal Securities Ltd. (MOSL) was founded in 1987 as a small sub-broking unit, with just two people running the show. Focus on customer-first-attitude, ethical and transparent business practices, respect for professionalism, research-based value investing and implementation of cutting-edge technology has enabled us to blossom into an almost 2000 member team.

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Today we are a well diversified financial services firm offering a range of financial products and services such as Wealth Management, Broking & Distribution, Commodity Broking, Portfolio Management Services, Institutional Equities, Private Equity, Investment Banking Services and Principal Strategies. We have a diversified client base that includes retail customers (including High Net worth Individuals), mutual funds, foreign institutional investors, financial institutions and corporate clients. We are headquartered in Mumbai and as of June 30th, 2009, had a network spread over 555 cities and towns comprising 1,308 Business Locations operated by our Business Partners and us. As at June 30th, 2009, we had 5,57,373 registered customers. SMC Group SMC Group, a leading financial services provider in India is a vertically integrated investment solutions company, with a pan-India presence. Over the Years, SMC has expanded its domestic as well as international operations. Existing network includes regional offices at Mumbai, Kolkata, Chennai, Bangalore, Cochin, Ahmedabad, Jaipur and Hyderabad plus a growing network of more than 1500 offices across over 375 cities/towns in India. SMC has plans to grow its network to 2,500 offices across 700+ cities in the next 3 years. The company has expanded internationally, and has established office in Dubai. Its products and Services include Institutional and retail brokerage of equity, commodity,

currency,derivatives,online trading , investment banking, depository services, clearing services, IPOs and mutual funds distribution, Portfolio management, wealth advisory, insurance broking, margin funding and research. SMC has a highly efficient workforce of over 5,500 employees & one of the largest retail network in India currently serving the financial needs of more than 5,50,000 satisfied investors. SMC has entered into a 50:50 joint venture with Sanlam Group, one of the largest listed financial services group in South Africa for setting up wealth Management and Asset Management business in India, Sanlam is operating in over 30 countries globally including UK, USA, Switzerland, Luxembourg, Dublin, Australia and others.

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ICICI Direct.com ICICI Securities Ltd is the largest equity house in the country providing end-to-end solutions (including web-based services) through the largest non-banking distribution channel so as to fulfill all the diverse needs of retail and corporate customers. ICICI Securities (I-Sec) has a dominant position in its core segments of its operations - Corporate Finance including Equity Capital Markets Advisory Services, Institutional Equities, Retail and Financial Product Distribution With a full-service portfolio, a roster of blue-chip clients and performance second to none, we have a formidable reputation within the industry. Today ICICI Securities is among the leading Financial Institutions both on the institutional as well as retail side. Headquartered in Mumbai, I-Sec operates out of several locations in India. ICICI Securities Inc., the stepdown wholly owned US subsidiary of the company is a member of the National Association of Securities Dealers, Inc. (NASD). As a result of this membership, ICICI Securities Inc. can engage in permitted activities in the U.S. securities markets. These activities include Dealing in Securities and Corporate Advisory Services in the United States and providing research and investment advice to US investors. ICICI Securities Inc. is also registered with the Financial Services Authority, UK (FSA) and the Monetary Authority of Singapore (MAS). Kotak Securities Kotak Securities Ltd. 100 % subsidiary of Kotak Mahindra Bank is one of the oldest and largest broking firms in the Industry Our offerings include stock broking through the branch and Internet, Investments in IPO, Mutual funds and Portfolio management service. Our Accolades include: UTI MF CNBC TV18 Financial Advisor Awards - Best Performing Equity Broker (National) for the year 2009 Finance Asia Award (2009)-Best Brokerage Firm In India Best Brokerage Firm in India by Asiamoney in 2008, 2007 & 2006 Best Performing Equity Broker in India CNBC Financial Advisor Awards 2008 Avaya Customer Responsiveness Awards (2007 & 2006) in Financial Services Sector The Leading Equity House in India in Thomson Extel Surveys Awards for the year 2007 Euromoney Award (2007 & 2006) - Best Provider of Portfolio Management: Equities Euromoney Award (2005)-Best Equities House In India Finance Asia Award (2005)-Best Broker In India Finance Asia Award (2004)- India's best Equity House Prime Ranking Award (2003-04)Largest Distributor of IPO's.

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We have been the first in providing many products and services which have now become industry standards. Some of them are: Facility of Margin Finance to the customers Investing in IPOs and Mutual Funds on the phone SMS alerts before execution of depository transactions Mobile application to track portfolios AutoInvest - A systematic investing plan in Equities and Mutual funds Provision of margin against securities automatically against shares in your Demat account We have a full-fledged research division involved in Macro Economic studies, Sectoral research and Company Specific Equity Research combined with a strong and well networked sales force which helps deliver current and up to date market information and news.

We are also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), providing dual benefit services wherein the investors can avail our brokerage services for executing the transactions and the depository services for settling them. We process more than 400000 trades a day which is much higher even than some of the renowned international brokers.Our network spans over 331 cities with 843 outlets.Kotak Securities Limited has Rs. 2599 crore of Assets Under Management (AUM) as of 30th June, 2009. The portfolio Management Service provides top class service, catering to the high end of the market. Portfolio Management from Kotak Securities comes as an answer to those who would like to grow exponentially on the crest of the stock market, with the backing of an expert. Religare Securities Limited Religare Securities Limited (RSL), a 100% subsidiary of Religare Enterprises Limited is a leading equity and securities firm in India. The company currently handles sizeable volumes traded on NSE and in the realm of online trading and investments; it currently holds a reasonable share of the market. The major activities and offerings of the company today are Equity Broking, Depository Participant Services, Portfolio Management Services, International Advisory Fund Management Services, Institutional Broking and Research Services. To broaden the gamut of services offered to its investors, the company offers an online investment portal armed with a host of revolutionary features.

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RSL is a member of the National Stock Exchange of India, Bombay Stock Exchange of India, Depository Participant with National Securities Depository Limited and Central Depository Services (I) Limited, and is a SEBI approved Portfolio Manager. Religare has been constantly innovating in terms of product and services and to offer such incisive services to specific user segments it has also started the NRI, FII, HNI and Corporate Servicing groups. These groups take all the portfolio investment decisions depending upon a clients risk / return parameter. Religare has a very credible Research and Analysis division, which not only caters to the need of our Institutional clientele, but also gives their valuable inputs to investment dealers

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Chapter-5 REVIEW OF LITERATURE

34

REVIEW OF LITERATURE
Friend, et al., (1962) made an extensive and systematic study of 152 mutual funds found that mutual fund schemes earned an average annual return of 12.4 percent, while their composite benchmark earned a return of 12.6 percent. Their alpha was negative with 20 basis points. Overall results did not suggest widespread inefficiency in the industry. Comparison of fund returns with turnover and expense categories did not reveal a strong relationship.

Irwin, Brown, FE (1965) analyzed issues relating to investment policy, portfolio turnover rate, performance of mutual funds and its impact on the stock markets. They identified that mutual funds had a significant impact on the price movement in the stock market. They concluded that, on an average, funds did not perform better than the composite markets and there was no persistent relationship between portfolio turnover and fund performance. Treynor (1965) used characteristic line for relating expected rate of return of a fund to the rate of return of a suitable market average. He coined a fund performance measure taking investment risk into account. Further, to deal with a portfolio, portfolio-possibility line was used to relate expected return to the portfolio owners risk preference.

Sharpe, William F (1966) developed a composite measure of return and risk. He evaluated 34 open-end mutual funds for the period 1944-63. Reward to variability ratio for each scheme was significantly less than DJIA (Dow Jones Industrial Average) and ranged from 0.43 to 0.78. Expense ratio was inversely related with the fund performance, as correlation coefficient was 0.0505. The results depicted that good performance was associated with low expense ratio and not with the size. Sample schemes showed consistency in risk measure.

Treynor and Mazuy (1966) evaluated the performance of 57 fund managers in terms of their market timing abilities and found that, fund managers had not successfully outguessed the market. The results suggested that, investors were completely dependent on fluctuations in the market. Improvement in the rates of return was due to the fund managers ability to identify under-priced industries and companies. The study adopted Treynors (1965) methodology for reviewing the performance of mutual funds.

35

Lal C and Sharma Seema (1992) identified that, the household sectors share in the Indian domestic savings increased from 73.6 percent in 1950-51 to 83.6 percent in 1988-89. The share of financial assets increased from 56 percent in 1970-71 to over 60 percent in 1989-90 bringing out a tremendous impact on all the constituents of the financial market.

Shashikant Uma (1993) critically examined the rationale and relevance of mutual fund operations in Indian Money Markets. She pointed out that money market mutual funds with low-risk and low return offered conservative investors a reliable investment avenue for shortterm investment.

Ansari (1993) stressed the need for mutual funds to bring in innovative schemes suitable to the varied needs of the small savers in order to become predominant financial service institution in the country.

Shukla and Singh (1994) attempted to identify whether portfolio managers professional education brought out superior performance. They found that equity mutual funds managed by professionally qualified managers were riskier but better diversified than the others. Though the performance differences were not statistically significant, the three professionally qualified fund managers reviewed outperformed others.

Rich Fortin and Stuart Michelson (1995) studied 1,326 load funds and 1,161 no load funds and identified that, no-load funds had lower expense ratio and so was suitable for six years and load funds had higher expense ratio and so had fifteen years of average holding period. No-load funds offered superior results in nineteen out of twenty-four schemes. He concluded that, a mutual fund investor had to remain invested in a particular fund for very long periods to recover the initial front-end charge and achieve investment results similar to that of noload funds.

Conrad S Ciccotello and C Terry Grants (1996) study identified a negative correlation between asset size of the fund and the expense ratio. The results of the study brought out that, larger funds had lower expense acquire information for trading decision and were consistent with the theory of information pricing.

36

Gupta and Sehgal (1997) evaluated investment performance for the period 1992 to 1996. Aspects of Mutual fund such as fund diversification, consistency of performance, consistency between risk measures, fund objectives and risk return relation in general were studied. For the study 80 mutual fund schemes of private and public sector were taken. Out of 80 schemes, 54 were close-ended and the were open-ended. Results showed that income growth schemes were the best performers with mean weekly returns of .0087 against mean weekly returns from income growth schemes of .0021 and .0023 respectively. LIC Dhansahyog, Reliance growth and Birla Income Plus were the best income growth and growth income schemes respectively.

Gupta and Sehgal (1998) evaluated performance of 80 mutual fund schemes over four years (1992-96). The study tested the proposition relating to fund diversification, consistency of performance, parameter of performance and risk-return relationship. The study noticed the existence of inadequate portfolio diversification and consistency in performance among the sample schemes.

Ronay and Kim (2006) have pointed out that there is no difference in risk attitude between individuals of different gender, but between the groups, males indicate a stronger inclination to risk tolerance. Gender difference was found at an individual level, but in groups, males expressed a stronger pro-risk position than females.

Sapar, Narayan R. and Madava, R. (2003) conducted a research on the performance evaluation of Indian mutual funds in a bear market. The period of study was September 1998 to April 2002 (bear period). They started with a sample of 269 open ended schemes (out of total schemes of 433) for computing relative performance index. Then after excluding the funds whose returns are less than risk-free returns, 58 schemes were used for further analysis. Mean monthly (logarithmic) return and risk of the sample mutual fund schemes during the period were 0.59% and 7.10%, respectively, compared to similar statistics of 0.14% and 8.57% for market portfolio. The results of performance measures suggest that most of the mutual fund schemes in the sample of 58 were able to satisfy investor's expectations by giving excess returns over expected returns based on both premium for systematic risk and total risk.

37

Rao, D. N. (2006) classified 419 open-ended equity mutual fund schemes and analyzed the financial performance of selected open-ended equity mutual fund schemes for the period 1st April 2005 to 31st March 2006 pertaining to the two dominant investment styles and tested the hypothesis whether the differences in performance was statistically significant or not. The variables chosen for analyzing financial performance were monthly compounded mean return, risk per unit return and Sharpe ratio. A comparison of the financial performance of the 21 Open-ended Equity growth plans and 21 Open-ended Equity dividend plans was made in terms of the chosen variables. The analysis indicated that Growth plans generated higher returns than that of Dividend plans but at a higher risk. Further, 17 Growth plans generated higher returns than that of corresponding Dividend plans offered by the same Asset Management Companies (AMC) and only one Dividend plan could generate higher return than its corresponding Growth plan. However, three Growth plans and the corresponding Dividend plans had the same returns. Out of the 21 Growth plans, 4 Growth plans had higher Coefficient of Variation (Risk per unit Return) than the corresponding Dividend plans and 13 Dividend plans had higher Coefficient of Variation (Risk per unit Return) than the corresponding Growth plans offered by the AMC. Three Growth plans and three Dividend plans had almost equal Risk per unit return. A comparison of the Sharpe ratios of Growth plans and the corresponding Dividend plans indicated that 18 Growth plans out of 21 (approximately 90%) had better risk adjusted excess returns highlighting the fact that Growth plans are likely to reward the investors more for the extra risk they assumed. Pearson's correlation coefficient between the returns of the two plans was found to be moderate (0.5290) and F-test (1-tailed test) indicated a low probability (0.3753) of the variances of the returns of the two plans. Further, Student's t-test (1-tailed test) led to the rejection of Null Hypothesis and acceptance of Alternate Hypothesis at confidence levels ranging from 0.40 to 0.0005 implying that Equity Growth funds provide higher returns than that of Equity Dividend funds and the differences were statistically significant.

Chang and Lewellen (1984) used the method processed by Henryksson Merton and studied 67 mutual funds between 1971 and 1979. They divided data into up and down market components and computed two separate slope coefficient b1 and b2. Of the 67 mutual fund studied, only in 5 cases, data displayed statistically significant difference between b1 and b2. Majority of them were in the negative direction, suggesting poor market timings and they concluded that neither skillful market timing nor clever security selection abilities are evident in abundance in the observed mutual fund return data.
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De Bondt and Thaler (1985) while investigating the possible psychological basis for investor behavior, argue that mean revision in stock prices is an evidence of investor over reaction where investors overemphasize recent firm performance in forming future expectations.

William fung and David a. hsieh (1988) explored the investment styles n mutual fund hedge funds. The results indicated that there were 39 dominants mutual fund styles that were mixed or specialized subsets of 9 broadly defined user classes. There was little evidence of market timing of asset class rotation in these dominants mutual fund styles.

Elton and Gruber, Grindblatt and Titman (1989) found that there is some empirical evidence that mutual fund investors make purchase decision on the basis of past performance et all (1990). Some studies reveal that there is only a slight positive relationship or no relationship at all between previous performance and current returns Blake et al (1993) Bogle (1992) Brown and Goetz man (1995) raised the question of why poorly performing funds still survive.

Harless and Peterson (1998) explained that investors tend to choose funds based on previous performance but stick to these funds despite their poor return in a recent study of consumers rationally and the mutual fund purchase decision.

Ippolito (1992) documents the reaction of investors to performance in mutual fund industry. His findings have shown that poor relative performance results in investors shifting their assets into other funds. Sitkin and Pablo (1992) developed a model of determinants of risk behavior. They found that personal risk preferences and past experiences form an important risk factor in which social influence also affects the individuals perception.

Sitkin and Weingart (1995) extended this model leading to the definition that risk perception and propensity are the mediators in risk behaviors of uncertain decision-making. In this hypothesis, past investment establishes the frame for the propensity to risk, risk transfer, and risk awareness which impact decision-making behavior. Thus risk orientation

39

and risk perception are reduced to antecedent variables in decision-making behavior under risk.

Gupta (1994) made a household investor survey with the objective to provide data on the investor preferences on Mutual Funds and other financial assets. The findings of the study were more appropriate, at that time, to the policy makers and mutual funds to design the financial products for the future.

Sujit Sikidar and Amrit Pal Singh (1996) carried out a survey with an objective to understand the behavioral aspects of the investors of the North Eastern region towards equity and mutual funds investment portfolio. The survey revealed that the salaried and self employed formed the major investors in mutual fund primarily due to tax concessions. UTI and SBI schemes were popular in that part of the country then and other funds had not proved to be a big hit during the time when survey was done.

Shyama Sunder (1998) conducted a survey to get an insight into the mutual fund operations of private institutions with special reference to Kothari Pioneer. The survey revealed that awareness about Mutual Fund concept was poor during that time in small cities like Visakapatnam. Anjan Chakarabarti and Harsh Rungta (2000) stressed the importance of brand effect in determining the competitive position of the AMCs. Their study revealed that brand image factor, though cannot be easily captured by computable performance measures, influences the investors perception and hence his fund/scheme selection.

Block, Stanley B. and French, Dan W. (2000) conducted a study on Portfolios of equity mutual funds .They proposed two-index model using both the value-weighted and an equally weighted index. Estimated models using a sample of 506 mutual funds show that the twoindex model provides a better fit than the single-index model and identifies a larger set of funds with abnormal performance.

Ramesh Chander (2000) examined 34 mutual fund schemes with reference to the three fund characteristics with 91-days treasury bills rated as risk-free investment from January 1994 to December 1997. Returns based on NAV of many sample schemes were superior and highly volatile compared to BSE SENSEX. Open-end schemes outperformed close-end schemes in term of return. Income funds outsmarted growth and balanced funds. Banks and UTI
40

sponsored schemes performed fairly well in relation to sponsorship. Average annual return of sample schemes was 7.34 percent due to diversification and 4.1 percent due to stock selectivity. The study revealed the poor market timing ability of mutual fund investment. The researcher also identified that 12 factors explained majority of total variance in portfolio management practices.

Corter and Chen (2006) studied that investment experience is an important factor influencing behavior. Investors with more experience have relatively high risk tolerance and they construct portfolios of higher risk. Mostafa Soleimanzadeh (June 2006) in his article, Learn how to invest in Mutual Funds discussed the risk and return in mutual funds. He stated that the risk and return depend on each other, the greater the risks, the higher the potential return; the lower the risk, the lower the expected return. Mutual funds try to reduce their risk by investing in a diversified group of individual stocks, bonds, or other securities. He concluded that the investment in stocks can get more return than mutual funds but by investing in mutual funds, the risk is lower.

Muthappan P K and Damodharan E (2006) evaluated 40 schemes for the period April 1995 to March 2000. The study identified that majority of the schemes earned returns higher than the market but lower than 91 days Treasury bill rate. The average risk of the schemes was higher than the market. 15 schemes had an above average monthly return. Growth schemes earned average monthly return. The risk and return of the schemes were not always in conformity with their stated investment objectives. The sample schemes were not adequately diversified, as the average unique risk was 7.45 percent with an average diversification of 35.01 percent. 23 schemes outperformed both in terms of total risk and systematic risk. 19 schemes with positive alpha values indicated superior performance. The study concludes that the Indian Mutual Funds were not properly diversified.

Panwar, S. and Madhumathi, R. (2006) conducted a study on publicsector sponsored and private-sector sponsored mutual funds to investigate the differences in characteristics of assets held, portfolio diversification, and variable effects of diversification on investment performance for the period May 2002 to May 2005. The study found that public-sector sponsored funds do not differ significantly from private-sector sponsored funds in terms of mean returns However, there is a significant difference between public-sector sponsored mutual funds and private-sector sponsored mutual funds in terms of average standard
41

deviation, average variance and average coefficient of variation (COV). The study also found that there is a statistical difference between sponsorship classes in terms of ESDAR (excess standard deviation adjusted returns) as a performance measure. When residual variance (RV) is used as the measure of mutual fund portfolio diversification characteristic, there is a statistical difference between public-sector sponsored mutual funds and private-sector sponsored mutual funds for the study period. The model built on testing the impact of diversification on fund performance found a statistical difference among sponsorship classes when residual variance is used as a measure of portfolio diversification and excess standard deviation adjusted returns as a performance measure. RV, however, has a direct impact on fund performance measure.

Kum Martin (October 2007) in his article, Basics about Mutual Funds discussed about different types of mutual funds .He stated that the equity funds involve just common stock investments. They are extremely risky but can end up earning a lot of money. He concluded that the low risk in investment will not earn a lot of returns. Mutual fund managers have to use various investment styles depending upon investors requirement. Most of the empirical evidences showed that mutual fund investors purchase decision is influenced by past performance. Kozup, John C., Elizabeth Howlett and Michael Pagano (2008) explored whether a single page supplemental information disclosure impacts investors fund evaluations and investment intentions. Results indicated that while investors continue to place too much emphasis on prior performance, the provision of supplemental information, particularly in a graphical format, interacts with performance and investment knowledge to influence perceptions and evaluations of mutual funds.

Rao,D.N.and Rao, S. B. (2009) analyzed the performance of the Balanced and 72 Income Funds in terms of Return, Risk, Return per Risk and Sharpe ratio over the past three years (2006, 2007 and 2008) during which period the Indian Stock Market had witnessed much volatility. Further, the performance of these funds was compared with that of the Market and Benchmark Indices. The Null Hypotheses were rejected leading to the acceptance of Alternate Hypothesis in all the six cases, leading to conclude that Market outperformed both the Balanced and Income Funds over Bull run and 3-year periods while both the funds outperformed the Market over Bear run period which confirms the popular belief of the Investors and Fund Managers in India.

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Chapter-6 RESEARCH METHODOLOGY

43

RESEARCH METHODOLOGY
Introduction of the problem: To study the investment patter of individuals at Reliance Securities.

Research design: Research design is simply the framework or plan for a study, Used guide in collecting and analyzing data. For the study: for conducting the research Descriptive research design has been selected. Descriptive research design: Descriptive research is also called Statistical Research. The main goal of this type of research is to describe the data and characteristics about what is being studied. The idea behind this type of research is to study frequencies, averages, and other statistical calculations. Although this research is highly accurate, it does not gather the causes behind a situation. Descriptive research is mainly done when a researcher wants to gain a better understanding of a topic. that is, analysis of the past as opposed to the future.

1. Sampling design: I. Population: Sampling unit is Customers of Reliance Securities II. Sample size: The sample size of the report is 60 customers III. Sampling method: Non probability sampling: Non probability sampling is non-random and subjective i.e. each member does not have a known non zero chance of being included. Types of non probability sampling: Convenience In contrast, a random sample is one where the researcher insures (usually through the use of random numbers applied to a list of the entire population) that each member of that population has an equal probability of being selected. Random samples are an important foundation of Statistics. Almost all of the mathematical theory upon which Statistics are based rely on assumptions which are consistent with a random sample. This theory is inconsistent with data collected from a convenience sample. For the study: In this report non probability convenience sampling is used to conduct a research.

44

Data collection method: Primary data: The primary data are those which are collected afresh and for the first time, and thus happened to be original in character. There are several methods of collecting primary data particularly in surveys. For the study: Questionnaire method is used for collecting the data while conducting the research.

Secondary data: The secondary data are those which have already been collected by someone and which have already been passed through the statistical process. Secondary data may either be published data or un published data. For the study: Internet is used for collecting the data while conducting the research.

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Chapter-7 DATA ANALYSIS AND INTERPRETATIONS

46

DATA ANALYSIS AND INTERPRETATIONS

Q-1) Are you familiar with the share market?

Table-1: RESPONDENTS AWARENESS OF SHARE MARKET AWARENESS YES NO NUMBER OF RESPONDENTS 40 20 %AGE 66.66% 33.34%

RESPONDENTS AWARENESS OF STOCK MARKETS

45 40 35 30 25 20 15 10 5 0 YES NO 20 NUMBER OF RESPONDENTS 40

INTERPRETATION From the above table we can analyze that most of the people we surveyed are aware of the securities market. Above table shows that out of 60 people surveyed around 66.66% were aware of the stock market & remaining 33.64% were still to know what stock market is all about.

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Q-2) What is the purpose of your investment?

Table-2: PURPOSE OF INVESTMENT REASON FOR INVESTMENT High Returns Tax Exemption Future Benefits Others NUMBER OF RESPONDENTS 25 13 21 1 %AGE 41.66% 21.66% 35.00% 1.66%

PURPOSE OF INVESTMENT
30 25 20 13 15 10 5 0 High Returns Tax Exemption Future Benefits Others 1 NUMBER OF RESPONDENTS 25 21

INTERPRETATION Investment in laymans language is just addition of units of profit into the capital. The purpose of investment can be to save for the future or to get tax exemptions or to get higher returns like in stock market. If we analyze the above table 41% people have opted for higher returns. 35% people have opted for future benefits & 21% have opted for tax exemptions.

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Q-3) Which markets do you think have the potential to give you highest return?

Table: 3 MARKET THAT GIVES HIGHEST RETURNS

MARKET MUTUAL FUNDS SHARE MARKET REAL ESTATE ANY OTHER

NUMBER OF RESPONDENTS 20 08 27 05

%AGE 33.33% 13.33% 45.00% 0 8.33%

MARKET WHICH GIVES HIGH RETURNS

Any Other 8.33%

Mutual Funds MUTUAL FUNDS 33.33%

Real Estate
45.00%

SHARE MARKETS REAL ESTATE ANY OTHER

13.33% Share Mark ets

INTERPRETATION From the above table we can conclude that out of 60 people around 45% want to invest in real estate market, 33.33% want to invest in mutual funds & 13.33% in securities market. The reason for the less no. of investments in securities market is the amount of risk involved in this market and recent crash or market condition of the market.

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Q-4) Where do you invest normally?

Table:4 RESPONDENTS PREFERRED AREA OF INVESTMENT Area of Investment Number of Respondents %Age

Post Office Fixed Deposites Mutual Funds Insurance Equity Bonds

8 4 15 13 18 2

13.33% 6.66% 25.00% 21.66% 30.00% 3.33%

AREA OF INVESTMENT

BONDS 3.33% EQUITY 30%

POST OFFICE 13.33% FIXED DEPOSITS 6.66%

INSURANCE 21.66%

MUTUAL FUNDS 25%

POST OFFICE FIXED DEPOSITS MUTUAL FUNDS INSURANCE EQUITY BONDS

INTERPRETATION
From the above table we will find that out of 60 respondents 30% are interested in equity ,25% in mutual funds ,13.33% in post office ,21.66% in insurance and 6.66% & 3.33% in fixed deposits & bonds respectively which clearly states that people in general normally want to invest in securities , mutual funds & insurance . with these above being the gray areas , we can conclude that gone are the days when people used to invest in Fixed deposits , Post office & others .

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Q-5) Which Profession do you belong to?

Table:5 RESPONDENTS PROFESSION PROFESSION Self Employed Government Employees Private Employees NUMBER OF RESPONDENTS 13 10 37 %AGE 21.66% 16.66% 61.66%

RESPONDENT'S PROFESSION
40 35 30 25 20 15 10 5 0 Self Employed Government Employees Private Employees NUMBER OF RESPONDENTS 13 10 37

INTERPRETATION If we look towards the above table 61.66% respondents are working in the private sector, 16.66% in government sector & 21.66% people are self employed.

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Q-6) What is the total income of your family ?

Table:6 INCOME GROUP OF RESPONDENTS income group 1-5 lacs 6-8 lacs 9-12 lacs 12 lacs & above Number Of Respondents 28 21 9 2 % Age 46.66% 35% 15% 3.34%

Income Group OF Respondents

12 Lacs & Above 3.34% 9-12 Lacs 15% 1-5 Lacs 46.66% 1-5 lacs 6-8 lacs 9-12 lacs 12 lacs & above 6-8 Lacs 35%

INTERPRETATION If we look at the above table 46.66% of the people earn between 1-5 lacs per annum , 35% of them earn between 6-8 lacs , 15% between 9-12 lacs & there are 3.34% people who even earn more 12 lacs per annum which shows that how much the Indian economy is booming .

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Q-7) What is the percentage you want to invest?

Table:7 PERCENTAGE OF SALARY INVESTED PERCENTAGE OF SALARY 10% OF SALARY 20% OF SALARY 25% OF SALARY 30% OF SALARY NUMBER Of RESPONDENTS 9 10 28 13 %AGE 15.00% 16.67% 46.66% 21.67%

PERCENTAGE OF SALARY INVESTED

30% of Salary 21.67% 10% of Salary 15% 10% OF SALARY 20% OF SALARY 25% OF SALARY 20% of Salary 16.67%

25% of Salary 46.66%

INTERPRETATION By looking at the table we can clearly understand that there are 46.66% who want to invest 25% of their salary which is a very good percentage and which shows that these percentages has increase over a period of time because of increase in awareness of the market. 21.67% of the people are those who want to invest even 30% of their salary. And there are also 16.67% people who want to invest 20% of their salary and 15% who want to invest 10% of their salary. The reason behind their low investment may be that the salary packages of these employees may be less.

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Q-8) Do you have interest in?

Table:8 RESPONDENTS INTEREST INTEREST PRIMARY MARKET SECONDRY MARKET BOTH NUMBER OF RESPONDENTS 18 11 31 % AGE 30 18.33 51.67

RESPONDENT'S INTEREST
35 31 30 25 20 15 10 5 0 PRIMARY MARKET SECONDRY MARKET BOTH 18 NUMBER OF RESPONDENTS 11

INTERPRETATION In the above table we can see that out of 60 respondents 30% have interest in primary market in which initial public offers (IPOs) of different organizations are offered to the general public where as 18.33% respondents are interested in secondary market. But the point to be noted here is that 51.67% of people have opted for both which clearly states that most of the people are interested in both primary as well as secondary market.

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Q-9) How do you take decisions to invest ? Table:9 HOW RESPONDENTS TAKE DECISIONS TO INVEST? RESPONDENTS DECISION TO INVESTMENT SELF DECISION FAMILY MEMBER FRIENDS FINANCIAL PLANNER % AGE 63.34% 20.00% 6.66% 10.00%

NUMBER OF RESPONDENTS 38 12 4 6

RESPONDENTS DECISION TO INVESTMENT 40 35 30 25 20 15 10 5 0 SELF DECISION FAMILY MEMBER FRIENDS FINANCIAL PLANNER 12 4 6 NUMBER OF RESPONDENTS 38

INTERPRETATION If we look towards the table 63.34% of the people take self decisions, 20% of the people take investment decisions after consulting their families. These type of respondents are mainly from joint families who make their decisions considering all the members of the family. About 6.66% of the people consult their friends and there are only 10% people who are dependent on financial planners or wealth managers to manage their portfolio, as the new entry of wealth manager companies leaves the choice to respondents to make the best use of it but hardly anyone knows about these wealth management companies that is why the % is less.

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Q- 10. When you choose your brokering house, your main preference is? Table: 10: PREFERENCES FOR BROKERING HOUSE

PREFERENCE BROKERAGE SERVICE BRANDS OTHERS

NUMBER OF RESPONDENTS 12 30 12 6

% AGE 20.00% 50.00% 20.00% 10.00%

Respondents Preference Brokerage House

Others 10% Brokerage 20% Brand 20%

BROKERAGE SERVICE BRANDS OTHERS

Service 50%

INTERPRETATION When we choose our Brokerage house, there are many options which come to our mind. Even during my survey I encountered various options. 20% people gave preference to brokerage as they wanted the least brokerage to be charged from them, 20% opted for Brand as they wanted to associate themselves with a good brand because it guarantees everything whether it is services or safety or you can say status too. 50% opted for services because the first thing when you invest comes to your mind is what services you are been rendered according to your investments. And lastly 10% opted for any other.

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Q:11 - Are you aware of mutual fund. Yes No 74 26

INTERPRETATION The purpose of this question is to know the number of people who are aware of the mutual funds. The findings show that 74% of the people aware about the mutual funds and only 26% are not aware about the mutual funds.

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Q.12:- Awarness towards mutual fund through Newspaper TV Business magazines Friend and Relatives Financial Advisor Others 30 23 20 10 7 10

INTERPRETATION The purpose of this question is to know how people know about mutual fund schemes. The findings show that majority i.e. 30% of people come to know through newspaper & second best is TV and magazine having a stake of 20%.

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Q.13:- Which of the following factors/ source of information important while investing in mutual fund? Safety Liquidity Return earned Tax saving All the above 8 6 6 5 75

INTERPRETATION The purpose of this question is to know what factors are important while investing in mutual fund. The findings show that nearly all the factors i.e. safety, liquidity, returned earned and tax saving are important and considered while making investment in mutual funds. However, 75% investors consider nearly all the factors.

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Chapter-8 RESULTS AND FINDINGS

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RESULTS AND FINDINGS

Most of people wants to invest in real estate market, few want to invest in mutual funds It can be seen that out of 60 respondents 46.66% of the people earn between 1-5 lacs per annum , 35% of them earn between 6-8 lacs , 15% between 9-12 lacs & there are 3.34% people who even earn more 12 lacs per annum which shows that how much the Indian economy is booming . People above 12 lacs of earning are mostly self employed people who have their own business & they focus more on future benefits & return on investments rather than tax savings & other purposes. It is clearly understand that there are 46.66% who want to invest 25% of their salary which is a very good percentage and which shows that these percentages has increase over a period of time because of increase in awareness of the market. 21.67% of the people are those who want to invest even 30% of their salary. And there are also 16.67% people who want to invest 20% of their salary and 15% who want to invest 10% of their salary. It can be seen that out of 60 respondents 30% have interest in primary market in which initial public offers (IPOs) of different organizations are offered to the general public where as 18.33% respondents are interested in secondary market. But the point to be noted here is that 51.67% of people have opted for both which clearly states that most of the people are interested in both primary as well as secondary market. It can be seen that out of 60 respondents 63.34% of the people take self decisions, 20% of the people take investment decisions after consulting their families. These type of respondents are mainly from joint families who make their decisions considering all the members of the family. About 6.66% of the people consult their friends and there are only 10% people who are dependent on financial planners or wealth managers to manage their portfolio.

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Chapter-9 CONCLUSIONS

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CONCLUSIONS
. We can analyze that most of the people we surveyed are aware of the securities market. The information shows the peoples growing concern towards their money which is in fact the result of growing investments in the securities market and other investment areas. Investment in laymans language is just addition of units of profit into the capital. The purpose of investment can be to save for the future or to get tax exemptions or to get higher returns like in stock market. Therefore we can conclude from the above table that the purpose of investment is the mixed bunch of all the things. People want invest to save their tax, they want to invest for the future benefits or gains arising out of the investments. It is very important decision or the factor for any respondent who are working or self employed that how much percentage of salary they should invest? The reason behind their low investment may be that the salary packages of these employees may be less. The securities market has two interdependent segments i.e. primary & secondary market .The primary market provides the channel for sale of new securities while the secondary market deals in securities which are already issued by the companies. To make the investment one should be aware of the market, various instruments in the market and should have proper knowledge, so that the decision to invest in the market will give him good returns as well as security. The decision made by the respondents should be sound backed by good knowledge and awareness of the current market scenario. The information shows the peoples growing concern towards their money which is in fact the result of growing investments in the securities market and other investment areas. Therefore we can conclude from the above table that the purpose of investment is the mixed bunch of all the things. People want invest to save their tax, they want to invest for the future benefits or gains arising out of the investments. The stock market or the securities market in India witnessed several changes since the year 2000 which further refined the market scenario & broadened investment choices for the investors. But in comparison to securities market, the real estate market had already seen a booming period & is still one of the most preferred area of investment for the people in general. Apart from these two there are some more options available for the investments like mutual funds, insurance etc. Well , it is true to say that the market scenario has been changed , people are now more interested towards speculative market as it gives more returns but at the same
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time with more risk involved . If we talk about the FIIs investment in India, its being increased & with positive signs in the market . Last year there was an all time high investment made by the FIIs in equities. If we talk right from back there was always less percentage of self employed people as compared to people who were working. Earlier people used to go for government jobs but now the percentage has dramatically changed. Now people are focusing towards employment in private sectors which in turns gives fruitful opportunities in order to reach heights in their profession. Due to this good working atmosphere, the lifestyles of people have changed. people are earning more , spending more & therefore scope for investments have also increased , as big private companies and MNCs are paying far above the government agencies With India being the most preferred destination for companies & recruiters, the pay package in India has seen a great rise in the recent past. The MNCs pay a very good amount of salary to their employees & the standard of living has also increased with the increase in economy as whole, thats why people are more focused towards the investments. People above 12 lacs of earning are mostly self employed people who have their own business & they focus more on future benefits & return on investments rather than tax savings & other purposes. Their attitude towards investment is different as compare to salaried people. In a way they are more aggressive than the salaried class. It is very important decision or the factor for any respondent who are working or self employed that how much percentage of salary they should invest? The securities market has two interdependent segments i.e. primary & secondary market .The primary market provides the channel for sale of new securities while the secondary market deals in securities which are already issued by the companies. To make the investment one should be aware of the market, various instruments in the market and should have proper knowledge, so that the decision to invest in the market will give him good returns as well as security. The decision made by the respondents should be sound backed by good knowledge and awareness of the current market scenario.

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Chapter-10 SUGGESTIONS AND RECOMMENDATIONS

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SUGGESTIONS AND RECOMMENDATIONS

Reliance security is one of the fastest growing companies in the area of financial market and it has established its image in stock market, but as all growing companies undergo with consistent change to improve further Reliance securities is not an exception and it also has to go under necessary changes so as to achieve even better results. Some of the recommendations are as follows-:

1. There should be a proper co-ordination between all the branches of the company. 2. There should be regular meetings of employees at lower level with Executives at higher level so that the progress and the problems should be discussed to each other from time to time. 3. The company should provide library facility to all its employees so that they can enhance their knowledge base about the financial markets and its various products 4. The company should motivate its employees for better work as well as its clients to have patience in the time of market crash. 5. There should be full co-ordination and co-operation among all the employees of the branch. A sense of team-spirit must be there. 6. The company should approach to the reputed person of the city to tap the business.

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Chapter-11 LIMITATIONS OF THE STUDY

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LIMITATIONS OF THE STUDY

Although the study was carried out with extreme enthusiasm and careful planning there are several limitations, which handicapped the research viz,

1.

Time Constraints:

The time stipulated for the project to be completed is less and thus there are chances that some information might have been left out, however due care is taken to include all the relevant information needed.

2.

Sample size:

Due to time constraints the sample size was relatively small and would definitely have been more representative if I had collected information from more respondents.

3.

Accuracy:

It is difficult to know if all the respondents gave accurate information; some respondents tend to give misleading information.

4.

It was difficult to find respondents as they were busy in their schedule, and collection of data was very difficult. Therefore, the study had to be carried out based on the availability of respondents.

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BIBLIOGRAPHY

69

BIBLIOGRAPHY
Books
Kolb John- Introduction Of Futures And Options Markets, publisher prentice hall,5 edition, page no. 137-173 Kothri C R Research Methodology New Age International publisher, New Delhi, Second Edition : 2004 Page No. 39-149

Magazines
Business World Business Today Business India

Newspapers
Websites http:// http://www.karvy.com/about us http://www.bseindia.com/stocks http://www.rbi.org http://www.sebi.gov.in http://www.nseindia.com/stocks The Economic Times , June, 17, 28 - 2011 Business Line, June 5, 7 - 2011 Times of India, June 4,5 - 2011

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ANNEXURE

71

ANNEXURE
RESPONDANTS PERSONAL INFORMATION

NAME ADDRESS CONTACT E-MAIL AGE PROFESSION

:: _______________________________ :: _______________________________ :: _______________________________ :: _______________________________ :: ________________________________ :: _______________________________

Q-1) Are you familiar with the share market ? Yes No

Q-2) What is the purpose of your investment? High return Tax Exemption Future benefits Specify others (if any)

Q-3) Which market do you think have the potential to give you highest return?

Mutual funds

Real estate

Share market

Any other

Q-4) Where do you invest normally? Post Office Fixed Deposits Mutual Funds

Bonds

Insurance

Equity

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Q-5) Which Profession do you belong to?

Self Employed

Salaried government

Salaried Private

Q-6) What is the total income of your family ?

1-5 lcas 6-8 lacs

9-12 lacs 12 lacs & above

Q-7) What is the percentage you want to invest? 10% of earning 20% of earning 25% of earning 30% of earning

Q-8) Do you have interest in Primary secondary Both None

Q-9) How do you take decisions to invest ? Self Decision Friends Family Members Financial Advisors

Q-10 When you choose your brokering house, your main preference is Brokerage services Brand Name Any Other

Q:11 - Are you aware with mutual fund. Yes No

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Q.12:- Awarness towards mutual fund through Newspaper T.V.

Business Magazine

Friends & Relatives

Financial Advisor

Others

Q.13:- Do you view following factors/ source of information important while investing in mutual fund? Safety Liquidity Return earned

Tax Saving

All the above

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