PRAMOD PROJECT11

7/31/2019 PRAMOD PROJECT11

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AN IN-DEPTH ANALYSIS OF LIFE INSURANCE AS A BETTER

INVESTMENT AVENUE IN PRESENT SCENARIO

CHAPTER 1

INTRODUCTION

1.1Insurance in India

In 2003, the Indian insurance market ranked 19th globally and was the fifth largest in Asia.

Although it accounts for only 2.5% of premiums in Asia, it has the potential to become one

of the biggest insurance markets in the region. A combination of factors underpins further

strong growth in the market, including sound economic fundamentals, rising household

wealth and a further improvement in the regulatory framework. The insurance industry in

India has come a long way since the time when businesses were tightly regulated andconcentrated in the hands of a few public sector insurers.

Following the passage of the Insurance Regulatory and Development Authority Act in 1999, India

abandoned public sector exclusivity in the insurance industry in favor of market-driven

competition. This shift has brought about major changes to the industry. The inauguration of

a new era of insurance development has seen the entry of international insurers, the

proliferation of innovative products and distribution channels, and the raising of supervisory

standards. The insurance sector in India has come with a full circle from being an opencompetitive market to nationalization and back to a liberalized market again. Tracing the

developments in the Indian insurance sector reveals the 360 degree turn witnessed over a

period of almost two centuries. Insurance in India used to be tightly regulated and

monopolized by state-run insurers. Following the move towards economic reform in the

early 1990s, various plans to revamp the sector finally resulted in the passage of the

Insurance Regulatory and Development Authority (IRDA) Act of 1999.

EAST POINT COLLEGE OF HIGHER EDUCATION 1


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Significantly, the insurance business was opened on two fronts. Firstly, domestic private-sector

companies were permitted to enter both life and non life insurance business. Secondly,

foreign companies were allowed to participate, albeit with a cap on shareholding at 26%.

With the introduction of the 1999 IRDA Act, the insurance sector joined a set of other

economic sectors on the growth march. During the 2003 financial year1, life insurance

premiums increased by an estimated 12.3% in real terms to INR 650 billion (USD 14 billion)

while non-life insurance premiums rose 12.2% to INR 178 billion (USD 3.8 billion). The

strong growth in 2003 did not come in isolation. Growth in insurance premiums has been

averaging at 11.3% in real terms over the last decade.

Insurance in India can be traced back to the Vedas. For instance, yogakshema, the

name of Life Insurance Corporation of India's corporate headquarters, is derived from the Rig

Veda. The term suggests that a form of "community insurance" was prevalent around 1000 BC and

practiced by the Aryans.

Burial societies of the kind found in ancient Rome were formed in the Buddhist

period to help families build houses, protect widows and children. Bombay Mutual Assurance

Society, the first Indian life assurance society, was formed in 1870. Other companies like Oriental,

Bharat and Empire of India were also set up in the 1870-90s. It was during the swadeshi movement

in the early 20th century that insurance witnessed a big boom in India with several more

companies being set up.

As these companies grew, the government began to exercise control on them. The

Insurance Act was passed in 1912, followed by a detailed and amended Insurance Act of 1938 that

looked into investments, expenditure and management of these companies' funds.



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1.2Insurance sector reforms

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N.Malhotra, was formed to evaluate the Indian Insurance Industry and recommend its future

direction. The Malhotra committee was set up with the objective of complementing the

reforms initiated in the financial sector.

The reforms were aimed at 'creating a more efficient and competitive financial system suitable for

the requirements of the economy keeping in mind the structural changes currently underway

and recognizing that insurance is an important part of the overall financial system where it

was necessary to address the need for similar reforms. In 1994, the committee submitted thereport and some of the key recommendations included:

I) Structure

Government stake in the insurance companies to be brought down to 50%.

Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can

act as independent corporations.

All the insurance companies should be given greater freedom to operate.

II) Completion

Private Companies with a minimum paid up capital of Rs. 1bn should be allowed to enter the

industry.

No Company should deal in both Life and General Insurance through a single entity.

Foreign companies may be allowed to enter the industry in collaboration with the domestic

companies.

III) Regulatory Body



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The Insurance Act should be changed.

An Insurance Regulatory body should be set up.

Controller of Insurance (Currently a part from the Finance Ministry) should be made independent.

IV) Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to

50%.

GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to

be brought down to this level over a period of time).

V) Customer Service

LIC should pay interest on delays in payments beyond 30 days.

Insurance companies must be encouraged to set up unit linked pension plans.

Computerization of operations and updating of technology to be carried out in the insurance

industry.

CHAPTER 2

RESEARCH DESIGN

2.1Title of project

An in-depth analysis of life insurance as a better investment avenue in present

scenario



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2.2Statements of Problem

Life insurance being a service industry needs the support of the people; very often

many do not consider life insurance as an investment opportunity. Hence, in todays investmentavenue inflation with special reference to Reliance Life insurance Ltd has to be taken. Keeping the

above in mind , I have found the need of doing the An in-depth analysis of life insurance as a

better investment avenue in todays inflation with special reference to Reliance Life insurance

Company Ltd.

2.3Objectives of the study

To study the life insurance investment at Reliance Life insurance Ltd.

To analyze the risk & Return involved in life insurance investment.

To analyze the acceptability of the products of Reliance Life insurance Ltd.

To probe into the reasons why consumers go for an insurance policy.

To know and analyze the awareness of RELIANCE life insurance Ltd.

To compare traditional investment instruments (Mutual Funds etc.) with investment in

insurance.

2.4 Sources of data

The study is conducted by making use of both primary and secondary data.

2.5 Primary data

The primary data has been collected from the discussions and meetings with

managers, clerks and other officials and interviewing the borrower.



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2.6 Secondary data

The following are the data collected from the secondary sources:

Books

Internet

Company website

Competitors website

Newspaper & Articles

2.7 Plan of Analysis

The data collected will be tabulated to enable analysis.

Percentages and averages will be calculated wherever required.

The data will be diagrammatically represented in the form of graphs and charts.

2.8 The Tools Used For Calculation

Standard deviation

Beta

Alpha

Arithmetic mean

AM=y/N



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Where y= returns of NAV values

N= number of observation

Average returns that can be expected from investment. The Arithmetic returns is

appropriate as a measure of a central tendency of a number of returns calculated from particular

time i.e. for 5 years.

2.9 Returns

Investor wants to maximize expected retunes subject to their tolerance for risk.

Returns are the motivating force and principal reward in investment process and it is the keymethod available to investors in comparing alternative the investments. Measuring the historical

returns allows investor to access the how well the stocks have performed. Investor get returns

either in form of interest, dividend or capital appreciation. There are two terms, realized term and

expected return. Realized return earned in past.

RETURN=( Closing price-opening price) /opening price*100

2.10 Standard Deviation

The Standard deviation is measure of the variables around its mean or it is square

root of the sum of the squared root deviations from the mean divided the number of observation.

S.D is used to measure the variability of return i.e the a measure of dispersion. S.D

is calculated as the square root of variation. In finance investments volatility.S.D is also know ashistorical volatility and its used by investors as a gauge from the amounted of volatility.

S.D=(y-Y)



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N

Where y= return of Investment

Y=average return of Investment

N= number of months

SD = (R- R1)2 /n

BETA: Beta describes the relationship between the securities return and the index

returns.

Beta = + 1.0

One percent change in market index returns causes exactly one percent change in

the security return. It indicates that the security moves in tandem with the market.

Beta = + 0.5

One percent change in the market index return causes 0.5 percent change in the

security return. The security is less volatile compared to the market.

Beta = + 2.0

One percent change in the market index return causes 2 percent change in the

security return. The security return is more volatile. When there is a decline of 10% in the market

return, the security with beta of 2 would give a negative return of 20%. The security with morethan 1 beta value is considered to be risky.

Negative Beta



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Negative beta value indicates that the security return moves in the opposite

direction to the market return. A security with a negative beta of -1 would provide a return of 10%,

if the market return declines by 10% and vice-versa.

Beta= N*xy-(x)(y)

N*(x)-(x)

Where N=No of observation

X=Total of market index value

Y=Total of return to Nav

B = [ (Ra Ra1)(Rm-Rm1)]/ (Rm-Rm1)2

Where Ra = Return on Company, Ra1= Average return on company

Rm= Return on market, Rm1= Average return on market

ALPHA:

Alpha represent the forecast of residual return, which we consider the future return

of any Investment. Alpha measures the unsystematic risk of a Investment property because the

portfolio Investment also consists of both residual return and future expectation.

It is important to remember that the risk-free Investment will always show a zero

residual return hence, any risk less security like cash will have always alpha equal to zero. Apositive alpha of 1.0 means the fund has outperformed its benchmark index by 1%

correspondingly, a similar negative alpha would indicate an underperformance of 1%. Alpha

indicates that the stock return is independent of the market return .A positive value of alpha is a



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healthy sign. Positive alpha values would yield profitable return.

The Formula is used to calculate:-

Alpha=Y-beta(x)

Where

Y-average return to nav return X-average return to market index

Alpha = (Ra1-Rm1)*B

CHAPTER 3

INDUSTRY PROFILE

3.1Present Scenario of Insurance IndustryIndia with about 200 million middle class household shows a huge untapped

potential for players in the insurance industry. Saturation of markets in many developed economies

has made the Indian market even more attractive for global insurance majors. The insurance sector

in India has come to a position of very high potential and competitiveness in the market. Indians,

have always seen life insurance as a tax saving device, are now suddenly turning to the private

sector that are providing them new products and variety for their choice.

Consumers remain the most important centre of the insurance sector. After the

entry of the foreign players the industry is seeing a lot of competition and thus improvement of the

customer service in the industry. Computerization of operations and updating of technology has



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become imperative in the current scenario. Foreign players are bringing in international best

practices in service through use of latest technologies

The insurance agents still remain the main source through which insurance productsare sold. The concept is very well established in the country like India but still the increasing use

of other sources is imperative. At present the distribution channels that are available in the market

are listed below.

Direct selling

Corporate agents

Brokers and cooperative societies

Banc assurance

Customers have tremendous choice from a large variety of products from pure term

(risk) insurance to unit-linked investment products. Customers are offered unbundled products

with a variety of benefits as riders from which they can choose. More customers are buying

products and services based on their true needs and not just traditional moneyback policies, which

is not considered very appropriate for long-term protection and savings. There is lots of saving and

investment plans in the market. However, there are still some key new products yet to be

introduced - e.g. health products.

The rural consumer is now exhibiting an increasing propensity for insurance

products. A research conducted exhibited that the rural consumers are willing to dole out anything

between Rs.3,500 and Rs.2,900 as premium each year. In the insurance the awareness level for life

insurance is the highest in rural India, but the consumers are also aware about motor, accidents and

cattle insurance. In a study conducted by MART the results showed that nearly one third said that

they had purchased some kind of insurance with the maximum penetration skewed in favor of life

insurance. The study also pointed out the private companies have huge task to play in creating



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awareness and credibility among the rural populace. The perceived benefits of buying a life policy

range from security of income bulk return in future, daughter's marriage, children's education and

good return on savings, in that order, the study adds.

3.2A brief history of the Insurance sector

The business of life insurance in India in its existing form started in India in the

year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business in

India are

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the

life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect

statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the

objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central

government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956,

with a capital contribution of Rs. 5 crore from the Government of India.



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The General insurance business in India, on the other hand, can trace its roots to the

Triton Insurance Company Ltd., the first general insurance company established in the year 1850

in Calcutta by the British.

3.3Industry Structure

3.4Insurance Companies



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IRDA has so far granted registration to 12 private life insurance companies and 9

general insurance companies. If the existing public sector insurance companies are included, there

are currently 13 insurance companies in the life side and 13 companies operating in general

insurance business. General Insurance Corporation has been approved as the "Indian reinsurer" for

underwriting only reinsurance business. Particulars of the life insurance companies and general

insurance companies including their web address is given below

Life Insurers WebsitesPublic Sector

Life Insurance Corporation of India www.licindia.com

Private Sector

Allianz Bajaj Life Insurance Company Limited www.allianzbajaj.co.in

Birla Sun-Life Insurance Company Limited www.birlasunlife.com

HDFC Standard Life Insurance Co. Limited www.hdfcinsurance.com

ICICI Prudential Life Insurance Co. Limited www.iciciprulife.com

ING Vysya Life Insurance Company Limited www.ingvysayalife.com

Max New York Life Insurance Co. Limited www.maxnewyorklife.com

MetLife Insurance Company Limited www.metlife.com

Om Kotak Mahindra Life Insurance Co. Ltd. www.omkotakmahnidra.com

SBI Life Insurance Company Limited www.sbilife.co.in

Dabur CGU Life Insurance Co. Pvt. Limited www.avivaindia.com

http://www.licindia.com/http://www.allianzbajaj.co.in/http://www.birlasunlife.com/http://www.hdfcinsurance.com/http://www.iciciprulife.com/http://www.ingvysayalife.com/http://www.maxnewyorklife.com/http://www.metlife.com/http://www.omkotakmahnidra.com/http://www.sbilife.co.in/http://www.licindia.com/http://www.allianzbajaj.co.in/http://www.birlasunlife.com/http://www.hdfcinsurance.com/http://www.iciciprulife.com/http://www.ingvysayalife.com/http://www.maxnewyorklife.com/http://www.metlife.com/http://www.omkotakmahnidra.com/http://www.sbilife.co.in/


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General InsurersPublic Sector

National Insurance Company Limited www.nationalinsuranceindia.com

New India Assurance Company Limited www.niacl.com

Oriental Insurance Company Limited www.orientalinsurance.nic.in

United India Insurance Company Limited www.uiic.co.in

Private Sector

Bajaj Allianz General Insurance Co. Limited www.bajajallianz.co.in

ICICI Lombard General Insurance Co. Ltd. www.icicilombard.com

IFFCO-Tokio General Insurance Co. Ltd. www.itgi.co.in

Reliance General Insurance Co. Limited www.ril.com

Royal Sundaram Alliance Insurance Co. Ltd. www.royalsun.com

TATA AIG General Insurance Co. Limited www.tata-aig.com

Cholamandalam General Insurance Co. Ltd. www.cholainsurance.com

Export Credit Guarantee Corporation www.ecgcindia.comHDFC Chubb General Insurance Co. Ltd.REINSURER

General Insurance Corporation of India www.gicindia.com
http://www.nationalinsuranceindia.com/http://www.niacl.com/http://www.orientalinsurance.nic.in/http://www.uiic.co.in/http://www.bajajallianz.co.in/http://www.icicilombard.com/http://www.itgi.co.in/http://www.ril.com/http://www.royalsun.com/http://www.tata-aig.com/http://www.cholainsurance.com/http://www.ecgcindia.com/http://www.gicindia.com/http://www.nationalinsuranceindia.com/http://www.niacl.com/http://www.orientalinsurance.nic.in/http://www.uiic.co.in/http://www.bajajallianz.co.in/http://www.icicilombard.com/http://www.itgi.co.in/http://www.ril.com/http://www.royalsun.com/http://www.tata-aig.com/http://www.cholainsurance.com/http://www.ecgcindia.com/http://www.gicindia.com/


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3.5Regulatory Body in Industry-IRDA

The Insurance Regulatory and Development Authority Act was introduced toend

the monopoly of State-owned companies and to invest in the Insurance Regulatory Authority

power to control the insurance sector.

The Insurance Regulatory and Development Authority (IRDA) is a national agencyof the government of India, based in Hyderabad. It was formed by an act of Indian Parliament

known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging

requirements.

3.6Mission

Mission of IRDA as stated in the act is "to protect the interests of the policyholders,

to regulate, promote and ensure orderly growth of the insurance industry and for matters connected

therewith or incidental thereto."

3.7Expectations

The law of India has following expectations from IRDA

To protect the interest of and secure fair treatment to policyholders;

To bring about speedy and orderly growth of the insurance industry (including annuity and

superannuation payments), for the benefit of the common man, and to provide long term

funds for accelerating growth of the economy;



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To set, promote, monitor and enforce high standards of integrity, financial soundness, fair

dealing and competence of those it regulates;

To ensure that insurance customers receive precise, clear and correct information about

products and services and make them aware of their responsibilities and duties in this

regard.

To ensure speedy settlement of genuine claims, to prevent insurance frauds and other

malpractices and put in place effective grievance redressal machinery;

To promote fairness, transparency and orderly conduct in financial markets dealing with

insurance and build a reliable management information system to enforce high standards

of financial soundness amongst market players;

To take action where such standards are inadequate or ineffectively enforced;

To bring about optimum amount of self-regulation in day to day working of the industry

consistent with the requirements of prudential regulation.

3.8 Duties, Powers and Functions of IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA

o Subject to the provisions of this Act and any other law for the time being in force, the

Authority shall

o Have the duty to regulate, promote and ensure orderly growth of the insurance business and

re-insurance business.

o Without prejudice to the generality of the provisions contained in sub-section (1), the

powers and functions of the Authority shall include,



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Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend

or cancel such registration.

Protection of the interests of the policy holders in matters concerning assigning of

policy, nomination by policy holders, insurable interest, settlement of insurance

claim, surrender value of policy and other terms and conditions of contracts of

insurance.

Specifying requisite qualifications, code of conduct and practical training for

intermediary or insurance intermediaries and agents.

Specifying the code of conduct for surveyors and loss assessors.

Promoting efficiency in the conduct of insurance business.

Promoting and regulating professional organizations connected with the insurance

and re-insurance business.

Levying fees and other charges for carrying out the purposes of this Act.

Calling for information from, undertaking inspection of, conducting enquiries and

investigations including audit of the insurers, intermediaries, insurance

intermediaries and other organizations connected with the insurance business.

Control and regulation of the rates, advantages, terms and conditions that may be

offered by insurers in respect of general insurance business not so controlled and

regulated by the Tariff Advisory Committee under section 64U of the Insurance

Act, 1938 (4 of 1938).

Specifying the form and manner in which books of account shall be maintained and

statement of accounts shall be rendered by insurers and other insurance

intermediaries.

Regulating investment of funds by insurance companies.

Regulating maintenance of margin of solvency.



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Adjudication of disputes between insurers and intermediaries or insurance

intermediaries.

Supervising the functioning of the Tariff Advisory Committee.

Specifying the percentage of premium income of the insurer to finance schemes for

promoting and regulating professional organizations referred to in clause.

Specifying the percentage of life insurance business and general insurance

business to be undertaken by the insurer in the rural or social

sector.

3.9.Features of Insurance Industry

Insurance Policy India provides the clients with the details required for the

coverages in the policy, date of commencement of the policy and their adopting organizations. It

plays a important role in the Indian insurance sector.

The Insurance Policy India is regulated by certain acts like the Insurance Act

(1938), the Life Insurance Corporation Act(1956), General Insurance Business Nationalization)Act(1972), Insurance Regulatory and Development Authority IRDA) Act(1999). The insurance

policy determines the covers against risks, sometime opens investment options with insurance

companies setting high returns and also informs about the tax benefits like the LIC in India. There

are two types of insurance covers:

Life insurance

General insurance



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3.10 Life insurance

This sector deals with the risks and the accidents affecting the life of the customer.

Alongside, this insurance policy also offers tax planning and investment returns. There are various

types of life Insurance Policy India:

Endowment Policy

Whole Life Policy

Term Life Policy

Money-back Policy

Joint Life Policy

Group Insurance Policy

3.11 General Insurance

This sector covers almost everything related to property, vehicle, cash, household

goods, health and also one's liability towards others. The major segments covered under general

Insurance Policy India are:

Home Insurance

Health Insurance

Motor Insurance

Travel Insurance



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Some of the well known Insurance Policy India are

Social Security Group Scheme

A scheme covering the age group of 18-60 years and an insurance of Rs.5000 for

natural death and of Rs.25000 on due to accidental death.

Shiksha Sahyog Yojana

A scheme providing an educational scholarship of Rs.300 per quarter per child is

given for a period of four years.

Jan Arogya Bima Policy

A scheme for the adults upto the age of 45 years is Rs. 70 and for children it is Rs.

50. The limit coverage is fixed at Rs.5000 per annum.

Mediclaim Insurance Policy

A scheme covering the age group from 5-80 years with a tax benefit of up to Rs

10,000.

Jana Shree Bima Yojana

This is coverage of Rs 2,000 on natural death and Rs 50,000 for accidental death.

The premium amount is fixed at Rs. 200 for single member.



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Videsh Yatra Mitra Policy

A scheme covering medical expenses during the period of overseas travel.

Bhagya Shree Child Welfare Bima Yojana

A scheme covering one girl child in a family upto the age of 18 whose parents age

does not exceed 60 years, with a premium of Rs.15 per annum.

Raj Rajeshwari Mahila Kalyan Yojana

A scheme providing protection to woman in the age group of 10 to 75 years with an

insurance of Rs. 25,000 and premium Rs.15 per annum.

Ashray Bima Yojana

A scheme covering workers in case of loss of jobs.

Personal Accident Insurance Scheme for Kissan Credit Card a scheme covering all the KCCholders up to an age of 70 years. Insurance coverage includes 50,000 for accidental death and

25,000 for partial disability.

The functions of Insurance can be bifurcated into two parts

Primary Functions

Secondary Functions

Other Functions



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The primary functions of insurance include the following

Provide Protection

The primary function of insurance is to provide protection against future risk,

accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly

provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing

the risk with others.

Collective bearing of risk

Insurance is a device to share the financial loss of few among many others.Insurance is a mean by which few losses are shared among larger number of people. All the

insured contribute the premiums towards a fund and out of which the persons exposed to a

particular risk is paid.

Assessment of risk

Insurance determines the probable volume of risk by evaluating various factors that

give rise to risk. Risk is the basis for determining the premium rate also.

Provide Certainty

Insurance is a device, which helps to change from uncertainty to certainty.

Insurance is device whereby the uncertain risks may be made more certain.

The secondary functions of insurance include the following



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Prevention of Losses

Insurance cautions individuals and businessmen to adopt suitable device to prevent

unfortunate consequences of risk by observing safety instructions; installation of automaticsparkler or alarm systems, etc. Prevention of losses cause lesser payment to the assured by the

insurer and this will encourage for more savings by way of premium. Reduced rate of premiums

stimulate for more business and better protection to the insured.

Small capital to cover larger risks

Insurance relieves the businessmen from security investments, by paying small

amount of premium against larger risks and uncertainty.

Contributes towards the development of larger industries

Insurance provides development opportunity to those larger industries having more

risks in their setting up. Even the financial institutions may be prepared to give credit to sick

industrial units which have insured their assets including plant and machinery.

The other functions of insurance include the following



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Means of savings and investment

Insurance serves as savings and investment, insurance is a compulsory way of

savings and it restricts the unnecessary expenses by the insured's For the purpose of availingincome-tax exemptions also, people invest in insurance.

Source of earning foreign exchange

Insurance is an international business. The country can earn foreign exchange by

way of issue of marine insurance policies and various other ways.

Risk Free trade

Insurance promotes exports insurance, which makes the foreign trade risk free with

the help of different types of policies under marine insurance cover.

3.12 Current Scenario In Industry

Liberalization and Globalization have allowed the entry of foreign players in the

Insurance sector. With the entry of private and foreign players in the Insurance business, people



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have got a lot of options to choose from. To survive, the focus of the modern insurers shifted to a

customer-centric relationship.

India's economic development made it a most lucrative Insurance market in theworld. Before the year 1999, there was monopoly state run LIC transacting life business and the

General Insurance Corporation of India. In the wake of reform process and passing Insurance

Regulatory and Development Authority (IRDA) Act through Indian parliament in 1999, Indian

Insurance was opened for private companies. India offers immense possibilities to Insurers since it

is the world's most populous country having over a billion people. At present there are fourteen

companies each in Life and General Insurance.

Private and Foreign entrants in the Insurance Industry made others difficult to retain

their market. Higher customer aspirations lead to new expectations and compel him to move

towards the insurer who provides him the best service in time.

3.13Factors Involved in Current Market Scenario

Information Technology

The Insurance companies are utilizing the Information technology applications for

better customer service, cost reduction, new product design and development and many more. In

the initial years IT was used more to execute back office functions like maintenance of accounts,

reconciling broker accounts, client processing etc. With the advent of "database concepts", these

functions are better integrated in an administrative efficiency. The internet technology has enabled

the Insurer to innovate new products, provide better customer service and deeper and wider

insurance coverage to them. At present, Insurance companies are giving customers a distinct claim

id to track claims on-line, entertaining on-line enrollment, eligibility review, financial reporting,

and billing and electronic fund transfer to its benefit customers.



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Product Innovation

Insurers are continuously innovating new products based on forward-looking

models. They have developed new products addressing the new challenges in society and products

to address the hazards from new environmental issues. Understanding the customer better enable

Insurance companies to design appropriate products, determine price correctly and to increase

profitability. Since a single policy cannot meet all the Insurance objectives, one should have a

portfolio of policies covering all the needs. Product development is made possible by integrating

actuarial, rating, claims and illustration systems. At present, the Life Insurers are concentrating on

the pension schemes and the Non-Life Insurers on many innovative schemes of various realms and

thereby enriching their market share. Moreover, with increased commoditization of insuranceproducts, brand building is going to play a vital role.

Distribution Network

While companies have been successful in product innovation, most of them are still

grappling with right mix of Distribution Channels for capturing maximum market share to build

brand equity, building strong and effective customer relationships and cost effective customer

service. While the traditional channel of tied up advisors or agents would be the chief distributionchannel, insurer should innovate and find new methods of delivering the products to customers.

Corporate agency, brokerage, Bank assurance, e-insurance, cooperative societies .

Customer services

In the present competitive scenario, a key differentiator is the professional customer

service in terms of quality of advice on product choice along with policy servicing. Servicing focus



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is on enhancing the customer's experience and maximizing his convenience. This calls the effective

CRM system, which eventually creates sustainable competitive advantage and enables to build

long lasting relationship.

1. Modern Marketing Approach

After doing market research and finalizing on segmentation, targeting and

positioning the strategy would focus on the marketing mix namely, Product, Price, Place and

Promotion. While determining the implementation methodology, the four characteristics viz.

Intangibility, Inseparability, Perish ability and Variability gives rise to certain unique requirements

that deserve careful attention while formulating the marketing strategy for insurance. After

implementation, the insurers should concentrate on the effective control that would enhance their

business.

In India Insurance is sold and not bought. The agents / Advisors by using various

strategies sell the product by convincing the customers. Moreover, they push Policies with the

highest premium to pocket a higher commission. The consultative approach to selling is the

modern approach, which helps customers and prospects to buy. A consultant makes calls and sells

just like any other sales person. The difference is in their attitude, their approach and theircommitment. Here, the customer is seen as a person to be served and not a person to be sold. It

helps the purchaser to make an intelligent decision. The four-step process includes

1. Need discovery.

2. Selection of the product.

3. Need satisfaction presentation.

4. Serving the sale.



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3.14 Key Players With Market Share

Global integration of financial markets resulted from de-regulating measures,

technological information explosion and financial innovations. Liberalization and Globalizationhave allowed the entry of foreign players in the Insurance sector. With the entry of private and

foreign players in the Insurance business, people have got a lot of options to choose from. Radical

changes are taking place in customer profile due to the changing life style and social perception,

resulting in erosion of brand loyalty. To survive, the focus of the modern insurers shifted to a

customer-centric relationship. The paper focuses the current position of insurance industry.

Liberalization And Privatisation (How The Different Key Players Came Into

Market?)

India's economic development made it a most lucrative Insurance market in the

world. Before the year 1999, there was monopoly state run LIC transacting life business and the

General Insurance Corporation of India with its four Subsidiaries transacting the rest. In the wake

of reform process and passing Insurance Regulatory and Development Authority (IRDA) Act

through Indian parliament in 1999, Indian Insurance was opened for private companies.

Liberalization on the Insurance sectors has allowed the foreign players to enter the

market with their Indian partners. Most of the foreign Insurers have joined within the local market.

India offers immense possibilities to foreign Insurers since it is the world's most populous country

having over a billion people.

Insurance industry had ten and six entrants in life and non-life sector respectively in

the year 2000-2001. The industry again saw two and three entrants in the life and non-life business

respectively in the year 2001-2002. One additional entrant was made both in the life and in non-life



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business in 2004 and 2005 respectively. At present there are fourteen companies each in Life and

General Insurance. The Funds earlier generated by the state owned insurers have been diversified

with other new insurers. We should wait and see how the new players are going to boost up our

economy.

Competition

Private and Foreign entrants in the Insurance Industry made others difficult to retain

their market. Higher customer aspirations lead to new expectations and compel him to move

towards the insurer who provides him the best service in time. It becomes less viable for them even

to maintain the functional networks or competitive standards and services. To survive in the

Industry they analyse, the emerging requirements of the policyholders/insurers and they are in the

forefront in providing essential services and introducing novel products. Thereby they become

niche specialists, who provide the right service to the right person in right time.

In the above table shows, the private players in the life insurance business have

increased their market share to 23.93 per cent. Among them ICICI prudential is ranked first in

capturing the market followed by Bajaj Allianz and HDFC Standard. In the General Insurance

sector the private players have captured 27.35 per cent. Among them ICICI-Lombard is ranked

first, followed by Bajaj Allianz and IFFCO-Tokyo.

The healthy competition in the sector enabled the State owned insurers of our mother country to

reduce its market share to 76.07 per cent and 72.65 percent in life and non-life business

respectively. Moreover, private insurers have planned to increase their market share in the next

five years. The public insurers have to enrich its approach to withhold its share.



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3.15 International Scenario

Life insurance not plays an important role in national economy but also in

international economy. Marine cargo insurance provides risk coverage for shippers and the banks,which finance international trades. This role becomes all the more important in the context of an

active government policy to encourage exports. Indian life insurer operates in more than 30

countries through agencies, branches, associates companies. These operations earn foreign

exchange.

The insurance business is concerned with North America, Western Europe, Japan

and Oceania. Together these regions accounts for about 91 % of the world annul remium. By

regions North America and western Europe are growing moderately while oceanic, Latin

America, eastern Europe and Africa display growth above lone term trends to a global context

globalization of life insurance helps companies practices underwriting discipline in one regions

globalization of the insurance industry received a big boost.

CountriesInsurance Penetration(premium as a% of GDP)

Insurance Density (PerCapita Premiums in USD)

United Kingdom 12.71 3028.5Japan 8.70 3165.1United States 4.48 1611.4South Africa 14.04 392.9Australia 6.04 1193.5South Korea 9.89 935.6India 1.77 7.6China 1.12 9.5Malaysia 2.13 86.4Indonesia 0.54 4.0Brazil 0.36 12.9

India and the World Market



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Unfortunately, the progress achieved by the life insurance industry in India, it

compares unfavorably not just with the developed countries. But also even with the developing

world. The global market for the life insurance is estimated to be around $ 1412.3 billions.

3.16 Market Share Of Insurance Industry



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3.17 Life Insurance Industry grows 49 per cent in April

New Delhi: The life insurance industry clocked 49 per cent growth in new

businesses, while general insurance players saw 16 per cent increase in April, the first month of the

current financial year.

Strong performance by Life Insurance Corporation, ICICI Prudential and SBI Life

helped the 16 player-strong life insurance industry to mop up Rs 2,982 crore in April this year

compared with Rs 1,996 crore collected in the same month last year, according to data compiled by

the Insurance Regulatory and Development Authority.

The countrys largest life insurer, LIC, saw new premiums grow 57 per cent to Rs

2,134 crore in April by selling 15,89,684 policies against Rs 1,355 crore a year ago. It had a

market share of 71.56 per cent in April.

Insurers Premium (Rs cr)

ICICI Prudential 271.00Bajaj Allianz 124.00



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SBI Life 90.00HDFC Standard 70.00Max New York Life 69.00

Tata AIG 48.00Aviva 39.00

Reliance Life 33.00Birla Sunlife 28.00Kotak Mahindra Old Mutual 26.00

ING Vysya 22.00Met Life 19.00

Shriram Life 4.50Sahara Life 1.70

3.18 current Market Share Of Life Insurance Companies

LIC still remains the largest life insurance company accounting for 64% market

share. Mainly owing to entry of private players with innovative products and better sales force.

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market

share went up to 6.98% in 2007-08. The company ranked second (after LIC) in number of policies

sold in 2007-08, with total market share of 7.36%.

ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance

company in India. Accounting for increase in market share to 8.93% in 2007-08.

SBI Life Insurance Co Ltd in terms of new number of policies sold, the companyranked 6th in 2007-08. New premium collection for the company was Rs.4,792.66 crore in 2007-

08, an increase of 87% over last year.



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Reliance Life Insurance Co Ltd Total collected was Rs.2,792.76 crore and its

MARKET SHARE went up to 2.96% from 1.23% a year back.

HDFC Standard Life Insurance Co Ltd with an income of Rs.2,680 crore inFY2007-08, registering a year-on-year growth of 64%. Its MARKET SHARE is 2.88% and it

ranks 6th among the insurance companies and 5th amongst the private players.

Birla Sun Life Insurance Co Ltd market share of the company increased from

1.22% to 2.11% in 2007-08. The company moved to the 7th position in 2007-08 from 8the a year

before.

Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08.

Total new business generated was Rs.641.83 crore as against Rs.387.51 crore. The company was

pushed down to the 8th position from 7th in 2007-08.

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company

reported growth of 80%, moving from the 11th position to 9th. It captured a market share of 1.19%

in 2007-08.

3.22 Future Trends in Market Growth

With a huge population base and large untapped market, insurance industry is a big

opportunity area in India for national as well as foreign investors.

India is the fifth largest life insurance market in the emerging insurance economies

globally and is growing at 32-34% annually. This impressive growth in the market has been driven



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by liberalization, with new players significantly enhancing product awareness and promoting

consumer education and information.

The strong growth potential of the country has also made international players tolook at the Indian insurance market. Moreover, saturation of insurance markets in many developed

economies has made the Indian market more attractive for international insurance players. This

research report will help the client to analyze the leading-edge opportunities critical to the success

of insurance industry in India. Based on this analysis, the report gives a future forecast of the

market that is intended as a rough guide to the direction in which the market is likely to move.

-Total life insurance premium in India is projected to grow Rs 1,230,000 crore by 2010-11.

-Total non-life insurance premium is expected to increase at a CAGR of 25% for the period

spanning from 2008-09 to 2010-11.

-With the entry of several low-cost airlines, along with fleet expansion by existing ones and

increasing corporate aircraft ownership, the Indian aviation insurance market is all set to boom in a

big way in coming years.

-Home insurance segment is set to achieve a 100% growth as financial institutions have made

home insurance obligatory for housing loan approvals.

-Health insurance is poised to become the second largest business for non-life insurers after motor

insurance in next three years.

-A booming life insurance market has propelled the Indian life insurance agents into the top 10

country list in terms of membership to the Million Dollar Round Table (MDRT) an exclusive

club for the highest performing life insurance agents.

To grab the maximum market share, the companies are focusing on the following aspects



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Information Technology

Insurers are the earlier adopters of technology. Because of the Information

revolution, customers are free to choose from a wide range of new and innovative products. TheInsurance companies are utilizing the Information technology applications for better customer

service, cost reduction, new product design and development and many more.

New technology gives the policyholders / insured better, wider and faster access toproducts and services. The impact of Information Technology in Insurance business is being felt at

an accelerating pace. In the initial years IT was used more to execute back office functions like

maintenance of accounts, reconciling broker accounts, client processing etc. With the advent of

"database concepts", these functions are better integrated in an administrative efficiency.

The real evolution is however emerged out of Internet boom. The Internet has

provided brand new distribution channels to the Insurers. The technology has enabled the Insurer

to innovate new products, provide better customer service and deeper and wider insurancecoverage to them. At present, Insurance companies are giving customers a distinct claim id to track

claims on-line, entertaining on-line enrollment, eligibility review, financial reporting, and billing

and electronic fund transfer to its benefit clan customers.

Product Innovations

Insurers are continuously innovating new products based on forward-looking

models. They have developed new products addressing the new challenges in society and products

to address the hazards from new environmental issues. Companies will need to constantly innovate

in terms of product development to meet ever-changing consumer needs. Understanding the

customer better will enable Insurance companies to design appropriate products, determine price



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correctly and to increase profitability. Since a single policy cannot meet all the Insurance

objectives, one should have a portfolio of policies covering all the needs. Product development is

made possible by integrating actuarial, rating, claims and illustration systems. At present, the Life

Insurers are concentrating on the pension schemes and the Non-Life Insurers on many innovative

schemes of various realms and thereby enriching their market share.

Distribution Network

While companies have been successful in product innovation, most of them are still

grappling with right mix of Distribution Channels for capturing maximum market share to buildbrand equity, building strong and effective customer relationships and cost effective customer

service. While the traditional channel of tied up advisors or agents would be the chief distribution

channel, insurer should innovate and find new methods of delivering the products to customers.

Corporate agency, brokerage, Banc assurance, e-insurance, cooperative societies and panchayats

are some of the channels, which can be tapped by the insurers to reach the appropriate market

segments. Now days, the urban masses are tapped with the new techniques provided by

Information Technology through Internet. Rural masses are attracted by the consultative approachadopted by the Insurers. Moreover, they attract the customers through telephone and mobile also.

Customer Education and Services

Insurance is a unique service industry. The key industry drivers are related to life

style issues in terms of perceiving insurance as a savings instrument rather than for risk cover,

need based selling, quality of service and customers awareness.

In the present competitive scenario, a key differentiator is the professional customer

service in terms of quality of advice on product choice along with policy servicing. Servicing focus

is on enhancing the customer's experience and maximizing his convenience. This calls the effective



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CRM system, which eventually creates sustainable competitive advantage and enables to build

long lasting relationship.

4. COMPANY PROFILE

The Reliance group founded by Dhirubhai H.Ambani (1932-2002) is Indias largest

business house with total revenue of over Rs 99,000 crores (US$ 22.6 billion), each profit of Rs.12,500 crores(US$ 2.8 billion), net profit Of Rs. 6,200 crores(US$1.4 billion ) and exports of Rs.

15,000 crores (US$ 3.6 billion).

Reliance Group revenue is equivalent to about 3.5% of Indias GDP. The Group

contributes nearly 10% of the countries indirect tax revenues and over 6% of the Indias exports.

Reliance is trusted by an investor family of over 3.1 million- Indias largest

Reliance General Insurance Company Limited (RGICL) is one of the first no lifecompanies to get the license from the IRDA. The paid up capital stands at Rs.102 crores .it is one

of the few companies in the private sector to provide a complete insurance solution.

4.1 Indias No. 1 Business Group

Founded as a textile mill in 1966 by Dhirubhai Ambani, the chairman of the

Reliance continued to be a textile company until early 1980s.

However, seizing the opportunities emanating from the growing Indian economy as

well as the opening up of the regulation-driven sectors of the economy such as petrochemicals,

plastics etc., Reliance pursed the policy of backward integration from textiles as well as



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diversification from the early 1980s onwards to set up world-scale facilities for the manufacturing

polyster and textile intermediates, detergent intermediates etc.

Today, Reliance is Indias largest business house with total revenue of Rs80,000

crores (US$ 16.8 billion), cash profit of Rs 9,800 crores (US$ 2.1billion), net profit of over Rs

4,700 crores (US$990 million)and exports of Rs 11,900 crores (US$2.5 billion).

The reliance Group companies include: Reliance industries Limited, Reliance

Capital Limited, Reliance industrial infrastructure Limited, Reliance Telecom Limited, Reliance

infocomm Limited, Reliance General insurance company Limited, Indian Petrochemicals

Corporation Ltd. And Reliance Energy Limited.

4.2 Reliance Life Insurance

Reliance Life Insurance, one of the leading life insurance companies of India, today

announced it First Year Premium (FYP) income for financial year ended March 2009.

During the year the company has recorded a growth of 70 per cent in individual

first year premium adjusted for single pay. The adjusted individual FYP for FY 2009 stood at

Rs.1,308 crore as compared to Rs.769 crore during previous financial year.

During the last quarter of the financial year (January-March 09), the company grew

by 95 per cent over the corresponding period last year. The adjusted individual FYP for quarter

ended March 2009 stood at Rs.471 crore as compared to Rs.241 crore for quarter ended March2008.



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The Reliance Life Insurance has built a robust and values driven business model.

The Company as the best in class agent advisors who are acknowledged for their quality of

advice.It has a strong focus on customer needs and during past one year we further sharpened our

customer centricity. This reflects in our entry into new product segments like health insurance and

retirement planning and superior customer service and claims record.

Reliance Life Insurance sold 8.7 lakh policies during the financial year 2008, an

increase of 58 per cent over 5.5 lakh policies sold during financial year 2008. The company has

acquired around 23 lakh policies since inception. In the financial Year 2009 the assets under

management also doubled to over Rs.3, 600 crore as compared to Rs.1, 800 crore as at the end of

previous financial year.

During the Financial Year 2009, Reliance Life Insurance further strengthened its

distribution network. The company launched 55 new offices and now has presence in 157 cities

across the country through 200 offices. Reliance Life Insurance offers you products that fulfill yoursavings and protection needs. Our aim is to emerge as a transnational Life Insurer of global scale

and standard.

Reliance Life Insurance is an associate company of Reliance Capital Ltd., a part of

Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of Indias leading private sector

financial services companies, and ranks among the top 3 private sector financial services and

banking companies, in terms of net worth. Reliance Capital has interests in asset management and

mutual funds, stock broking, life and general insurance, proprietary investments, private equity and

other activities in financial services.



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Reliance - Anil Dhirubhai Ambani Group also has presence in Communications,

Energy, Natural Resources, Media, Entertainment, Healthcare and Infrastructure.

The rural business Reliance Life Insurance started in 2003 its hub and spokeoperations in Mumbai after witnessing stupendous success in Maharashtra.

Reliance Life Insurance launched 13 new products during the financial year and

now has a portfolio of 38 products and eight riders for individuals. The company entered the health

insurance segment with the launch of Lifeline Health Insurance Plans in February 2008. It also

strengthened its ULIP portfolio through launch of like maker range of products and retirementportfolio through Smart Invest.

Reliance Life Insurance has a strong growth focus. The company plans to

significantly expand its distribution footprint by opening more than 100 new offices every year for

next 3-4 years. The number of agent advisors is expected to touch 2, 00,000 from current 36,500.

The growth in agency distribution will be complemented by strong growth in

partnership distribution. The company currently has an equity base of Rs.1, 032 crore. To supportthis growth plan, the shareholders are committed to increase the capital base to Rs. 2,650 cores

over the next 3-4 years.The company has positioned itself on the quality platform. In line with its

vision to be the Most Admired Life Insurance Company in India, it has developed a strong

corporate governance model based on the core values of excellence, honesty, knowledge, caring,

integrity and teamwork.

Reliance Life Insurance Company Ltd. a Fortune 100 company one of India's

leading business corporations. The company has positioned itself on the quality platform. In line

with its vision to be the most admired life insurance company in India, it has developed a strong

corporate governance model based on the core values of excellence, honesty, knowledge, caring,



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integrity and teamwork. The strategy is to establish itself as a trusted life insurance specialist

through a quality approach to business.



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The first Insurance in Private sector without any Foreign Collaboration to start in India after LIC.

In line with its values of financial responsibility, Reliance Life has adopted prudent financial

practices to ensure safety of policyholder's funds. The Company's paid up capital is Rs.

907.4 core, which is more than the norm laid down by IRDA.

Reliance Life has identified individual agents as its primary channel of distribution. The Company

places a lot of emphasis on its selection process, which comprises four stages - screening,

psychometric test, career seminar and final interview. The agent advisors are trained in-

house to ensure optimal control on quality of training.

Reliance Life invests significantly in its training programmed and each agent is trained for 152

hours as opposed to the mandatory 100 hours stipulated by the IRDA before beginning to

sell in the marketplace. Training is a continuous process for agents at Reliance Life and

ensures development of skills and knowledge through a structured programmed spread over

500 hours in two years. This focus on continuous quality training has resulted in the

company having amongst the highest agent pass rate in IRDA examinations and the agents

have the highest productivity among private life insurers.450 agent advisors have qualified

for the Million Dollar Round Table (MDRT) membership in 2009. MDRT is an exclusive

congregation of the worlds top selling insurance agents and is internationally recognized as

the standard of excellence in the life insurance business. Having set a best in class agency

distribution model in place, the company is spearheading a major thrust into additional

distribution channels to further grow its business. The company is using a five-pronged

strategy to pursue alternative channels of distribution. These include the franchisee model,

rural business, direct sales force involving group insurance and telemarketing opportunities,

banc assurance and corporate alliances.



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Reliance Life offers a suite of flexible products. It now has 24 life insurance products that can be

customized to over 800 combinations enabling customers to choose the policy that best fits

their need.

4.3 Vision

Empowering everyone live their dreams.

4.4 Mission

Create unmatched value for everyone through dependable, effective, transparent and profitable life

insurance and pension plans.

4.5 Goal

Reliance Life Insurance would strive hard to achieve the 3 goals mentioned below:

Emerge as transnational Life Insurer of global scale and standard

Create best value for Customers, Shareholders and all Stake holders

Achieve impeccable reputation and credentials through best business practices.

4.6 values

Knowledge

Knowledge leads to expertise; and our expertise is in helping people protect them. Perfectly

combining global expertise with local knowledge, we are India's life insurance specialist.

Reliance Life believes that for knowledge to be of value it must be focused, current, tested

and shared.

Caring



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Reliance Life is redefining the life insurance paradigm by focusing on customers first. The service

process is responsive, personalized, humane and empathetic. Every individual who

represents the company is for our brand champion

Honesty

Honesty is the heart of the life insurance business. It is all about trust. Transparency, integrity and

dependability form the cornerstones of the Reliance Life experience. The company ensures

that everyone who represents the brand carries a promise: we car in word as well as deed.

Excellence

Excellence at Reliance Life implies the ability to perform at a consistently high level. Focused on

the value of continuous improvement in people, processes and the organization, the company

strives for the highest standards of quality in every aspect of its business.



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NATURE OF BUSINESS

Reliance Life Insurance has LIFELINE.

Reliance Life Insurance launches range of superior health insurance plans. These plans take

health insurance services to a new level with long-term, fixed benefits, largest scale of

coverage against ailments.

Reliance Life Insurance took health insurance services to a new level with the introduction of its

LIFELINE health insurance plans. Reliance Life Insurance's LIFELINE series, launched all

across the country , brings long term insurance coverage for hospitalization, surgeries and

critical illness. The LIFELINE series comprises of 3 distinct groups of solutions -

The Medicash Plans are hospital cash plans that provide the customer a fixed per day benefit for

hospitalization, ICU admission, recuperation benefit and a lump sum benefit against an

unlimited number of surgeries.

The Wellness Plans are critical illness covers against as many as 38 critical medical

conditions from Alzheimer's to liver disease, deafness to permanent disability, cancer to

heart ailments, a range offered by no other insurer in India under one plan.

The Safety Net is a comprehensive term plus health protection plan, offering the policyholder

protection from any losses arising from critical illness, accident, disability and death. It is the

only plan of its nature in the Indian market.

4.7 Risk Return Analysis Of The Schemes



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A rational investor before investing his/her money in stock analysis the risk

associated with the particular stock. The actual returns he receives from the stock may vary from

the expected one and thus an investor is always caution about the rate of risk associated with

particular stock. hence it becomes very essential on the part of investors to know the risk as the

hard earned money is being invested with the view to good return on investment.

Risk mainly consists of two components.

Systematic risk

unsystematic risk

Systematic risk

The systematic risk affects the entire market. The economic conditional, political

situation, sociological change affects the entire market in turn affecting the company and even the

stock market. These situations are uncontrollable by corporate and investeors.

Unsystematic risk

The Unsystematic risk is unique to industries. It differs from industries toindustries. Unsystematic risk stems from managerial inefficiency, technological change in

production process, availability of raw materials, change in the customer preference and labour

problem. The nature and magnitude of above mentioned factors differ from industry to industry

and company to company.

In general view, the risk for any investor would be the probably loss from investing

money in any mutual fund.but when look at the technical side of its, we cant just say these



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schemes/ fund carry risk without any proof. They are certain set formulas to say the percentage risk

associated with it.

There are certain tools or formulas used to calculate the risk associated withschemes. These tools helps us to understand the associated wit the schemes. These schemes are

compared with the benchmark BSE 100

CHAPTER 5

ANALYSIS AND INTERPRETATION



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5.1 Reliance Vision Fund

Reliance Vision Fund is large cap open ended growth fund. Its objective is to

achieve long term growth of capital through a research based Investment approach. Monthlyrisk & return from 01sApril 2005 to 31st March2008 is calculated below

Table 5.1 Calculation of Risk and Return

Date Asset Value Return in % (R-R1) R-R1)21-Apr-05 88.1329-Apr-05 86.10 2.30 -4.96 24.6331-May-05 91.64 6.43 3.77 14.2530-Jun-05 91.49 -0.16 -2.82 7.97

29-Jul-05 99.75 9.03 6.37 40.5631-Aug-05 104.82 5.08 2.42 .8730-Sep-05 114.32 9.06 6.40 41.011-Oct-05 105.35 -7.85 -10.51 110.37

30-Nov-05 118.05 12.06 9.40 88.2830-Dec-05 125.97 6.71 4.05 16.4031-Jan-06 134.38 6.68 4.02 16.1328-Feb-06 139.26 3.63 0.97 0.9431-Mar-06 155.75 11.84 9.18 84.3029-Apr-06 165.65 6.36 3.70 13.6731-May-06 141.84 -14.37 -17.03 290.1330-Jun-06 137.65 -2.95 -5.61 31.5131-Jul-06 138.85 0.87 -1.79 3.20

31-Aug-06 150.99 8.74 6.08 37.0129-Sep-06 160.53 6.32 3.66 13.3931-Oct-06 171.09 6.58 3.92 15.3630-Nov-06 174.93 2.24 -0.42 0.1729-Dec-06 183.67 -7.00 2.34 5.4631-Jan-07 184.14 0.26 -2.40 5.7828-Feb-07 171.42 -6.91 -9.57 1.5330-Mar-07 169.70 -1.00 -3.66 13.42

30-Apr-07 183.80 8.31 5.65 31.9131-May-07 200.00 8.81 6.15 37.8829-Jun-07 207.32 3.66 1.00 1.0031-Jul-07 219.24 5.75 3.09 9.55

31-Aug-07 214.28 -2.26 -4.92 24.2228-Sep-07 235.29 9.80 7.15 51.06



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31-Oct-07 268.30 14.03 11.37 129.2830-Nov-07 264.45 -1.43 -4.09 16.7631-Dec-07 287.66 8.78 6.12 37.4231-Jan-08 246.44 -14.33 -16.99 288.62

29-Feb-08 240.47 -2.42 -5.08 25.8331-Mar-08 206.12 -14.28 -16.94 287.10

Total 5.74 911.97

Table 5.2 Calculation of Beta

DateReturn of

Company

Return of

MarketRa-Ra1 Rm-Rm1

[Ra-Ra1]

(Rm-Rm1)

(Rm-

Rm1)2

31-Apr-05

29-Apr-05 -2.30 -4.84 -4.96 -7.52 37.34 56.6231-May05 6.43 8.70 3.77 6.01 22.70 36.1530-Jun-05 -0.16 5.51 -2.82 2.82 -7.97 7.9729-Jul-05 9.03 7.16 6.37 4.47 28.45 19.96

31-Aug-05 5.08 2.77 2.42 0.08 0.19 0.01

30-Sep-05 9.06 9.12 6.40 6.44 41.21 41.4231-Oct-05 -7.85 -8.91 -10.51 -11.60 121.88 134.5930-Nov-05 12.06 11.79 9.40 9.10 85.49 82.7930-Dec-05 6.71 6.53 4.05 3.84 15.54 14.7231-Jan-06 6.68 5.49 4.02 2.80 11.24 7.8228-Feb-06 3.63 3.78 0.97 1.10 1.07 1.2031-Mar-06 11.84 8.88 9.18 6.19 56.85 38.3329-Apr-06 6.36 5.88 3.70 3.19 11.80 10.20

31-May06 -14.37 -13.86 -17.03 -16.54 281.79 273.69

30-Jun-06 -2.95 -0.06 -5.61 -2.75 15.41 7.5431-Jul-06 0.87 0.75 -1.79 -1.94 3.47 3.76

31-Aug-06 8.74 9.43 6.08 6.74 41.02 45.47

29-Sep-06 6.32 6.65 3.66 3.96 14.49 15.6931-Oct-06 6.58 4.35 3.92 1.66 6.51 2.76



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30-Nov-06 2.24 4.96 -0.42 2.27 -0.94 5.16

29-Dec-06 5.00 0.74 2.34 -1.94 -4.54 3.78

31-Jan-07 0.26 2.34 -2.40 -0.35 0.84 0.12

28-Feb-07 -6.91 -8.66 -9.57 -11.35 108.56 128.7630-Mar-07 -1.00 0.92 -3.66 -1.77 6.47 3.12

30-Apr-07 8.31 6.77 5.65 4.08 23.04 16.63

31-May07 8.81 6.20 6.15 3.51 21.59 12.3129-Jun-07 3.66 1.83 1.00 -0.86 -0.86 0.74

31-Jul-07 5.75 5.24 3.09 2.55 7.89 6.52

31-Aug-07 -2.26 -1.83 -4.92 -4.52 22.23 20.41

28-Sep-07 9.80 14.12 7.15 11.44 81.72 130.78

31-Oct-07 14.03 15.88 11.37 13.19 149.96 173.96

30-Nov-07 -1.43 -0.07 -4.09 -2.75 11.27 7.5831-Dec-07 8.78 7.41 6.12 4.73 28.91 22.33

31-Jan-08 -14.33 -15.36 -16.99 -18.05 306.62 325.7429-Feb-08 -2.42 -0.38 -5.08 -3.07 15.60 9.42

31-Mar-08 -14.28 -12.46 -16.94 -15.15 256.71 229.54

Total 95.74 96.77 1823.56 1897.60

Calculation of Risk and Return

Return = (P1-P0 /P0 *100) - 100

Where, P1 = Current month price, P0 = Previous month price

R1 = R/n,

Where n=number of months.

R1 = 95.74/36

=2.66

SD = (R- R1)2 /n

= 1911.77/36



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SD = 7.29

Calculation of Beta

B = [ (Ra Ra1)(Rm-Rm1)]/ (Rm-Rm1)2

Where Ra = Return on Company

Ra1= Average return on company

Rm= Return on market

Rm1= Average return on market

= 1823.56/1897.60

B = 0.96

Calculation of Alpha

Alpha = (Ra1-Rm1)*B

= (2.66-2.69)*0.96

=-0.027

Risk And Return Of Reliance Vision Fund

Factor PercentageRisk 7.29Return 2.66Beta 0.96



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Alpha -0.03

Chart Risk & Return Of Reliance Vision Fund

ANALYSIS

Reliance Vision Fund has a risk factor of 7.29%

Its rate of return on a monthly average is 2.66%

Alpha and Beta are 0.96 and -0.03 respectively

INTERPRETATION

Beta of Reliance Vision Fund is 0.96 which is less than one; it shows less

volatilityof the fund with respect to market. Risk of the fund is 7.29% and the rate of return is

2.66%.

RELIANCE GROWTH FUND

Benchmark -100

RETURN 0FINVESTMENT

MARKET RETURN

DATENA

VRp(y) (y-Y) (y-Y) INDEX m(x) (x*X) x*y

Jan 04 34.95 2946.14



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Feb 04 35.5 1.5737 0.36844 0.136 2923.99 -0.7518 0.5653 -1.1831Mar 04 27.99 -21.155 -22.36 500 2966.31 1.44734 2.0948 -30.618

Apr 04 29.83 6.5738 5.36854 28.82 3025.14 1.98327 3.9334 13.038

May 04 25.59 -14.214 -15.419 237.7 2658.23 -12.129 147.11 172.4Jun 04 25.88 1.1333 -0.072 0.005 2561.16 -3.6517 13.335 -4.1383Jul 04 28.31 9.3895 8.18426 66.98 2755.22 7.57704 57.411 71.144

Aug 04 31.23 10.314 9.10914 82.98 2789.07 1.22858 1.5094 12.672Sep 04 32.93 5.4435 4.23825 17.96 2997.07 7.45768 55.617 40.596Oct 04 30.48 -7.44 -8.6453 74.74 3027.96 1.03067 1.0623 -7.6682

Nov 04 3.52 9.9738 8.76852 76.89 3339.75 10.297 106.03 102.7Dec 04 35.41 5.6384 4.43319 19.65 3580.34 7.20383 51.895 40.618TOTAL 7.2314 1106 TOTAL 21.693 440.56Y=y/12 1.2052 X=x/12 1.9721

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The above graph shows the movement of NAV of reliance growth fund and

Benchmark index for the period from Jan 2004 to Dec 2004. From the above graph we can see

there is some correlation between the movement of both

Dec 04 35.41 3580.34Jan 05 35.35 -0.1694 -3.1427 9.877 3521.71 -1.6376 2.6816 0.2775Feb 05 37.91 7.2419 4.26861 18.22 3611.9 2.56097 6.5586 18.546Mar 05 32.61 -13.98 -16.954 287.4 3481.86 3.6003 12.962 50.334Apr 05 33.66 3.2199 0.24661 0.061 3313.45 -4.8368 23.394 -15.574May 05 36.16 7.4272 4.45396 19.84 3601.73 8.7003 75.695 64.619Jun 05 36.75 1.6316 -1.3416 1.8 3800.24 5.51152 30.377 8.9928Jul 05 41.13 11.918 8.94511 80.01 4072.15 7.15507 51.195 85.277

Aug 05 45.72 11.16 8.18648 67.02 4184.83 2.76709 7.6568 30.88Sep 05 47.57 4.0464 1.07311 1.152 4566.63 9.12343 83.237 36.917Oct 05 42.94 -9.733 -12.706 161.4 4159.59 -8.9134 79.448 86.754

Nov 05 47.74 11.178 8.20513 67.32 4649.87 11.7867 138.93 131.76Dec 05 48.57 1.7386 -1.2347 1.524 4953.28 6.52513 42.577 11.344TOTAL 35.679 715.7 TOTAL 35.1422 554.71 509.85Y=y/12 2.9733 X=x/12 2.92852



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Dec 05 48.57 4953.28Jan 06 52.1 7.2679 5.69572 32.44 5224.97 5.48505 30.086 39.865Feb 06 52.82 1.382 -0.1902 0.036 5422.67 3.78375 14.317 5.229Mar 06 51.42 -2.6505 -4.2227 17.83 5904.17 8.87939 78.844 -23.535Apr 06 55.34 7.6235 6.05135 36.62 6251.39 5.88093 34.585 44.833May 06 49.36 -10.806 -12.378 153.2 5385.21 -13.856 191.98 149.72Jun 06 44.66 9.5219 -11.094 123.1 5382.11 -0.0576 0.0033 0.5481Jul 06 43.34 -2.9557 -4.5278 20.5 5422.39 0.74841 0.5601 -2.212

Aug 06 48.34 11.537 9.96454 99.29 5933.77 9.4309 88.942 108.8Sep 06 52.55 8.7091 7.137 50.94 6328.33 6.6494 44.214 57.911Oct 06 53.08 1.0086 -0.5636 0.318 6603.6 4.3498 18.921 4.3871

Nov 06 55.1 3.8056 2.23343 4.988 6931.05 4.95866 24.588 18.871Dec 06 57.01 3.4664 1.89428 3.588 6982.58 0.74347 0.5527 2.5772TOTAL 18.866 542.8 TOTAL 36.9964 527.6 407Y=y/12 1.5721 X=x/12 3.08303



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Dec 06 57.01 6982.58



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Jan 07 59.12 3.7011 0.30373 0.092 7145.91 2.33911 5.4714 8.6573Feb 07 55.73 -5.7341 -9.1315 83.38 6527.12 -8.6594 74.984 49.654Mar 07 47.86 -14.122 -17.519 306.9 6587.21 0.92062 0.8475 -13.001Apr 07 50.8 6.1429 2.74554 7.538 7032.93 6.76645 45.785 41.566

May 07 54.29 6.8701 3.4727 12.06 7468.7 6.19614 38.392 42.568Jun 07 56.7 4.4391 1.04175 1.085 7605.37 1.8299 3.3485 8.1232Jul 07 59.77 5.4145 2.01709 4.069 8004.05 5.24209 27.479 28.383Aug 07 53.86 -9.8879 -13.285 176.5 7857.61 -1.8296 3.3473 18.091Sep 07 60.06 11.511 8.11395 65.84 8967.41 14.1239 199.48 162.58Oct 07 69.89 16.367 12.9696 168.2 10391.19 15.8773 252.09 259.86Nov 07 72.38 3.5627 0.16537 0.027 10384.4 -0.0653 0.0043 -0.2328Dec 07 81.43 12.503 9.10608 82.92 11154.28 7.41381 54.965 92.698TOTAL 40.769 908.6 TOTAL 50.155 706.2 698.95Y=y/12 3.3974 X=x/12 4.17958

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there is some correlation between the movement of bot



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Dec 07 81.43 11154.28Jan 08 67.48 -17.1313 -10.291 105.9 9440.94 -15.36 235.94 263.14Feb 08 65.61 -2.77119 4.06905 16.56 9404.98 -0.3809 0.1451 1.0555Mar 08 65.61 0 6.84025 46.79 8232.82 -12.463 155.33 0Apr 08 56.16 -14.4033 -7.563 57.2 9199.46 11.7413 137.86 -169.11May 08 53.7 -4.38034 2.4599 6.051 8683.27 -5.6111 31.484 24.578Jun 08 45.81 -14.6927 -7.8525 61.66

Documents

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