Professional Documents
Culture Documents
ON
SALES &DISTRIBUTION OF
FINANCIAL PRODUCTS (MUTUAL
FUND)
For
Mumbai
BY
KALPANA YADAV
14BSP0619
Abstract
As a part of my PGPM curriculum, Im pursuing my Summer Internship
Program at Reliance money solutions.
At Reliance money solutions, I will gain in depth knowledge about mutual
funds. I will study its different types and how it works. I would analyse different
mutual funds and its performance in past 5 years. As a part of my internship I have
to meet investors and based on their risk taking ability, vary the debt and equity
ratio in their investment portfolio to maximize their return.
This report includes the following things
This Interim project report consist of my work done till date. The report
starts with the introduction to portfolio management.
Introduction
The first structure of Mutual fund was the one adopted by UTI in 1963. This was
followed by SEBI MF guidelines in 1993. These guidelines were later replaced by
comprehensive set of SEBI MF regulations 1996.
1 Unit trust of India The first Mutual fund of India was a Unit Trust of
India which was formed as a body corporate under an act of Parliament.
Different provisions of the UTI Act laid down the structure of management,
scope of business, powers and functions of the Trust as well as accounting,
disclosures and regulatory requirements for the Trust. However, it was
different from the present day mutual funds in more than one ways. It was a
trust, custodian, and investment manager all in one. It was capable of buying
property and borrows/lending money for project finance. The management
structure of UTI is thus distinct from the remaining mutual funds. First,
unlike other mutual funds, it is a statutory body corporate and not a Trust
under the Indian Trusts Act. Second, there is no separate asset management
company with a separate Board of directors of AMC to manage the schemes.
2 Organisation Structure of Mutual Funds of Public Sector Banks In
1987, the public sector banks were allowed to set up mutual fund. State
Bank of India was the first one to set up mutual fund. It preferred to adopt
the Trust route and set up the Mutual fund as a Trust under the Indian Trust
Act 1882. Later, other mutual funds followed the same and thus Trusts set up
under the Indian Trusts Act became the adopted legal form of mutual funds
in India. These mutual funds combined the role of Trustee, fund manager
and custodian in the sponsoring bank. However there was little demarcation
in the role and responsibilities and the structure was open to conflict of
interests.
More choice
Mutual funds offer a variety of schemes that will suit investors over a lifetime.
When you enter a new stage in your life, all you need to do is sit down with
your financial advisor who will help you to rearrange your portfolio to suit your
altered lifestyle.
Affordability
For a small investor, it is not possible for him to buy shares of larger companies.
Mutual funds generally buy and sell securities in large volumes which allow
investors to benefit from lower trading costs. The smallest investor can get
started on mutual funds because of the minimal investment requirements. You
can invest with a minimum of 500 in a Systematic Investment Plan on a
regular basis.
Tax benefits
Investments held by investors for a period of 12 months or more qualify for
capital gains and will be taxed accordingly. These investments also get the
benefit of indexation.
Liquidity
With open-end funds, you can redeem all or part of your investment any time
you wish and receive the current value of the shares. Funds are more liquid than
most investments in shares, deposits and bonds. Moreover, the process is
standardised, making it quick and efficient so that you can get your cash in hand
as soon as possible.
Rupee cost averaging
With rupee-cost averaging, you invest a specific rupee amount at regular
intervals regardless of the investment's unit price. As a result, your money
buys more units when the price is low and fewer units when the price is high,
which can mean a lower average cost per unit over time. Rupee-cost averaging
allows you to discipline yourself by investing every month or quarter rather
than making sporadic investments.
Transparency
The performance of a mutual fund is reviewed by various publications and
rating agencies, making it easy for investors to compare fund to another. As a
unit holder, you are provided with regular updates, for example daily NAVs as
well as information on the fund's holdings and the fund manager's strategy.
Regulations
All mutual funds are required to register with SEBI (Securities Exchange Board
of India). They are obliged to follow strict regulations designed to protect
investors. All operations are also regularly monitored by the SEBI.
A close-ended fund trades like a stock on a stock market or over the counter while
an open ended mutual fund is bought and sold directly with to the mutual fund.
Another cost to be aware of for a close-ended fund is the bid-ask spread. If you
place an order to buy a close-ended fund and at the same time place an order to sell
the fund, the prices for both would be different. In other words, your cost to buy
the close-ended fund and the price you would get for selling the close-ended fund
would be different. For instance, you might sell at the bid price of 90.90, while
you would buy at the ask price of 100. This 0.10 difference is known as the bidask spread and is considered the cost of doing business on the exchange or over the
counter.
You can buy both close-ended funds and mutual funds through a broker. The
broker processes the transaction on the stock exchange in the case of close-ended
fund, or with the fund company in the case of mutual funds.
Net asset Value vs Price of Close Ended Fund:
NAV of a fund is the value of close-ended funds holdings (stocks, bonds, cash
etc.) minus any liabilities divided by the total number of fund shares that are held
by investors. Unlike a mutual fund, the NAV of close-ended funds is not the price
you pay for a share of the fund.
Close-ended funds are often bought or sold at a discount to their NAV. For example
if a close-ended fund owns 100 stocks that have a combined value of 1,00,00,000
with 0 liabilities and 1,00,000 outstanding shares, the fund has an NAV of 100.
Investor might not value the portfolio managers ability to pick stocks, however, so
they might only be willing to pay 90 per share of the fund. So, this fund would be
trading at a discount of 10% to its NAV.
Reason for Fund Companies to choose the CEF Structure:
One reason can be that the fund company has a particular niche that is better served
through close-ended funds. For example if a fund company wants to manage a
fund that holds securities that are not easy to trade (illiquid, such as stocks of a
very small company that is rarely traded on the stock exchange), then they might
for a close-ended fund.
Another reason can be the fund managers close-ended funds are not forced to sell a
particular security when an investor wants to sell his shares of the fund. For
example, let say we have a manager who is running two funds that differ only in
structure, one is close-ended fund and other is open-ended fund. Both the funds
hold Tata Motors and Eicher Motor shares. If an investor wants to sell his shares of
the close-ended fund, there is no problem; the fund manager is able to continue to
hold both stocks because the investor goes to an exchange to sell his shares to
another investor. On the other hand, because investors in a mutual fund go to the
fund company to redeem his shares, the fund manager must sell either Tata Motor
or Eicher motor shares in order to meet redemption needs and raise cash for the
investor.
(B)Open Ended Mutual Fund:
It is a fund operated by an investment company which raise money from
shareholders and invest in group of assets, in accordance with the stated set of
objectives. Open-ended funds raise money by selling shares of the fund to the
public, much like any other type of company which can sell stock in itself to the
public.
Mutual funds then take the money they receive from the sale of their sale (along
with any money from previous investments) and use it to purchase various
investment vehicles, such as stocks, bonds and money market instruments. In
return for the money they give to the fund when purchasing shares, shareholders
receive an equity position in the fund and, in effect, in each of its underlying
securities.
For most open-ended funds, shareholders are free to sell their shares at any time,
although the price of a share in an open-ended fund will fluctuate daily, depending
upon the performance of the securities held by the fund.
Benefits of open-ended funds include diversification and professional money
management. Open-ended funds offer choice, liquidity and convenience, but
charge fees. In an open-ended mutual fund, there is no limit to the number of
investors, shares or overall size of the fund, unless the fund manager decides to
close the fund to new investors in order to keep it manageable. Also as mentioned
These funds invest a maximum part of their corpus into equities holdings. The
structure of the fund may vary different for different schemes and the fund
managers outlook on different stocks. Equity investments are meant for longer
time horizon, thus equity funds rank high on the risk-return matrix. The Equity
funds are sub-classified depending upon their investment objective, as follows:
Gilt Funds
Income Funds
Monthly Income Plans (MIP)
Short Term Plans
Liquid Funds
(C)Balanced Funds:
They are a mix of both equity and debt funds. They invest in both equities and
fixed income securities, which are in line with pre-defined investment objective of
the scheme. These aim to provide investors with best of both equity and debt funds.
Here, equity part provides growth and the debt part provides stability in returns.
(C)Index Schemes:
These schemes attempt to replicate the performance of a particular index such as
the BSE Sensex or NSE 50. The portfolio of these schemes will consist of only
those stocks that constitute the index. The percentage of each stock to the total
holding will be identical to the stocks index weight age and hence the returns from
such schemes would be more or less equivalent to those of the Index.
5.Main Text:
MY WORK AT RELIANCE MONEY At RELIANCE MONEY , initially we were imparted
process and product knowledge. We were given sufficient time to know about the products and
also about sales and distribution channel. We had to work with the sales representatives of the
Distributor and think of ways of improving the sales and distribution channel and implementing
them. The main aim was to increase sales and for this different ways were tried and
implemented. We were provided with database and had to make calls from the data. Company
activity was also one of the major sources for generating business. Initially they even
accompanied sales representatives to the clients place. Main objective was to know the need of
the customer and how to fulfil that in the best way.
And there I learnt how to pitch our products to the client and to understand the customer's
existing portfolio and how many types of customers are there in market ..their needs
/requirements and what are the selling techniques they are using. I asked my queries also with
my teammates, company guide Mr Sumit Sir. I understood this company with marketing
concepts also like in respect of marketing mix , BCG Matrix , and who all are the Reliance's
Competitors in the market. That is all what i did till now.