30838403 comparative-analysis-of-mutual-funds

A

REPORT ON

“COMPARITIVE ANALYSIS OF MUTUAL FUNDS”

WITH SPECIAL REFERENCE TO

SBI MUTUAL FUND

MRINAL MANISH

ENR. NO.:4108078078

2008 – 2010

COMPANY GUIDE: MR. KAPIL MALIK

(H.O.D.- RETAIL)

A report submitted in partial fulfilment for the requirement of MBF program

ACKNOWL

EDGEMENT

In pursuit of an MBA degree, summer internship is a critical component of the entire process.

‘SBI FUNDS MANAGEMENT PVT. LTD.’ has given me the opportunity to gain

invaluable experience under the guidance of Mr. Gaurav Vatsayan (V.P.-Sales, Delhi

Region) & Mr. Kapil Mallik (Head- Retail channel). Their continuous support and valuable

in hand experience provided me with the conceptual understanding and practical approach

needed to work efficiently for this project. The entire SBI Mutual Fund’s staff is

praiseworthy.

I would like to pay my regards and sincere thanks to my in charge Mr. Sumit Mahajan for

Stimulating suggestions and encouragement helped me in all the time of my internship.

Last but not the least; I also would like to thank the entire staff of SBI Mutual Fund and all

my friends and colleagues who helped whenever I faced any difficult situation.

I hope this report, reflecting my learning in the past fourteen weeks, is as beneficial to the

organization as it had been to me.

Again, I sincerely thank all of them.

- MRINAL MANISH

ENR. NO.- 4108078078

CERTIFICATE

MRINAL MANISH (4108078078)

INDIAN INSTITUTE OF FINANCE Page 2

This is to certify that the project on “Comparative Analysis of

Mutual Funds with special refernce to SBI Mutual Fund ” has been done by Mr.

Mrinal Manish with Reference to SBI Mutual Fund, Ashoka Estate, New Delhi as

a part of the requirement of the Management of Business Finance (MBF) summer

training program. This study is being submitted for approval to Indian Institute of

Finance.

I declare that the form and contents of the above mentioned project are

original and have not been submitted in part or full, for any other degree or

diploma of this or any other Organization / Institute/ University.

Signature: --------------------

Name: Mrinal Manish

Enrollment No. 4108078078

MBF (2008-2010)

Indian Institute of Finance

PREFACE



Finance & its functions are the part of economic activity. Finance is very essentially needed

for all types of organizations viz; small, medium, large-scale industries & service sector.

Hence the role of finance manager & the subject finance accounting gained maximum

importance. Liberalization, globalization & privatization created new challengers to

entrepreneur & corporate in carrying they’re day to day activities. So, “finance is regarded

as the life blood of a business organization.”

Master of business administrator is professional course which develop a new body of

knowledge & skill set & make as available for those seeking challenging carriers in the of

liberalization & globalization.

The goal of the Summer Training is to give a corporate exposure to the students as well as to

give them an opportunity to apply theory into the practice. The real business problems are

drastically different from class-room case solving. Summer Project aims to providing little

insight into working of an organization to a management trainee.

Among every stage of knowledge being inculcated in students, practical training in the

corporate world plays a significant role in exhibiting and pruning their capabilities.

The purpose behind writing a report is to put in to works the practical training that is

imparted into me that gives a better and a clear understanding of the experience I got.

“COMPARATIVE ANALYSIS OF MUTUAL FUNDS WITH SPECIAL REFERENCE

TO SBI MUTUAL FUND”

being a very important aspect of SBI Mutual Fund Pvt. Ltd., I have tried to explore many

areas of the subject in my project report.

While preparing this project report I got the knowledge about various aspects regarding

financial decisions made in organisation like “SBI Mutual Fund Pvt. Ltd.” the business

world.



My project is divided into 5 chapters & they are given as under.

1. Chapter 1 is an introduction of the mutual fund industry and the company.

2. Chapter 2 deals with review of literature.

3. Chapter 3 states the methodology being used in the project.

4. Chapter 4 basically states the Analysis of the Mutual Funds

5. Chapter 5 deals with the use of findings, conclusion. suggestions and limitations.

CONTENTS

Chapter Page no.



I.

INTRODUCTION…………………………………………………………15-62

1. WHY COMPARATIVE ANALYSIS OF MUTUAL FUNDS?............15

2. INTRODUCTION TO MUTUAL FUNDS…………………………….17

3. INDUSTRY PROFILE…………………………………………………40

4. COMPANY PROFILE………………………………………………....46

5. NEW FUND OFFER (SBI GETS)...................................................61

6. OTHER WORK EXPERIENCE AND LEARNINGS DURING THE PROJECT

....................................................................................................62

II. REVIEW OF LITERATURE…………..………………………………..64-74

III. RESEARCH METHODOLOGY.......................................................75-119

1. NEED OF THE STUDY…………………………........................78

2. TERMINOLOGY……………………………………………….....79

3. DATA COLLECTION METHOD…….…………........................85

4. ANALYSIS OF THE INDIVIDUAL INVESTOR…….………….86

5. MOST POPULAR FUNDS OF SBI MUTUAL FUND................100

6. INVESTMENT BEHAVIOUR……….……………………..........102

FACTOR ANALYSIS...................................................107

DISCRIMINANT ANALYSIS.......................................109

7. MOST POPULAR FUND HOUSE IN TERMS OF HIGHEST

INVESTMENT........................................................................119

IV. COMAPARRATIVE ANALYSIS……..………………………….........121-176

1. INTRODUCTION....................................................................122

NAV..............................................................122

BETA.......................................................124



STANDARD DEVIATION.........................124

SHARPE RATIO.......................................125

TREYNOR RATIO....................................125

2. INTER FIRM COMPARISION....................................127

EQUITY DIVERSIFIED FUNDS................129

EQUITY LINKED SAVING SCHEMES.....138

EQUITY LARGE CAP FUNDS..................147

EQUITY SMALL AND MID CAP FUNDS.155

EQUITY THEMATIC FUNDS...................165

V. EXPECTATION OF THE INDUSTRY FROM BUDGET 2009-10....176

SWOT ANALYSIS............................................................................181

CONCLUSIONS………………………………………………………......184

SUGGESTIONS AND RECOMMENDATIONS.……………........186

LIMITATIONS………………………………………………….………...192

GLOSSARY……………………………………………..........................103

REFERENCES..................................................................................205

ANNEXURE......................................................................................207

TABLE INDEX



Table Name

Page no.

1. BOARD OF DIRECTORS OF SBI MUTUAL FUND......................................53

2. NATIONAL DISTRIBUTORS..........................................................................59

3. ANALYSIS OF FUNDS ON THE BASIS OF VARIOUS RATIOS................81

4. ANALYSIS ACCORDING TO SAVINGS FROM INCOME..........................88

5. DESCRIPTIVE WEIGHTED FACTOR COUNTING METHOD...................105

6. FACTOR ANALYSIS.......................................................................................106

7. FUNDS RETURN OF EQUITY DIVERSIFIED FUNDS...............................129

8. RISK PROFILE OF EQUITY DIVERSIFIED FUNDS....................................130

9. PORTFOLIO ANALYSIS OF EQUITY DIVERSIFIED FUNDS....................133

10. NAV DETAILS OF EQUITY DIVERSIFIED FUNDS...................................135

11. FUNDS RETURN OF ELSS.............................................................................138

12. RISK PROFILE OF ELSS.................................................................................140

13. PORTFOLIO ANALYSIS OF ELSS.................................................................142

14. NAV DETAILS OF ELSS..................................................................................144

15. FUNDS RETURN OF EQUITY LARGE CAP.................................................147

16. RISK PROFILE OF EQUITY LARGE CAP.....................................................149

17. PORTFOLIO ANALYSIS OF EQUITY LARGE CAP.....................................151

18. NAV DETAILS OF EQUITY LARGE CAP.....................................................153

19. FUNDS RETURN OF SMALL AND MID CAP.............................156



20. RISK PROFILE OF SMALL AND MID CAP.................................158

21. PORTFOLIO ANALYSIS OF SMALL AND MID CAP.................160

22. NAV DETAILS OF SMALL AND MID CAP..................................162

23. FUNDS RETURN OF EQUITY THEMATIC..................................165

24. RISK PROFILE OF EQUITY THEMATIC .....................................167

25. PORTFOLIO ANALYSIS OF EQUITY THEMATIC......................169

26. NAV DETAILS OF EQUITY THEMATIC.......................................171

27. COMPARISION OF MUTUAL FUNDS AGAINST OTHER INVESTMENT

AVENUES................................................................................................173

CHART INDEX



Chart name Page no.

1. PRODUCT PORTFOLIO.............................................................57

2. ANALYSIS OF THE PREFERENCES OF THE RESPONDENT.......86

3. ANALYSIS ACCORDING TO AGE...............................................87

4. ANALYSIS ACCORDING TO OCCUPATION................................89

5. ANALYSIS ON THE BASIS OF PURCHASE OF INVESTMENT....93

6. INVESTMENT OBJECTIVES........................................................94

7. RISK PREFERENCES...................................................................94

8. PREFERABLE ROUTE TO INVESTING IN MUTUAL FUND........96

9. SATISFACTION LEVEL WITH SBI..............................................100

10. DEMOGRAPHIC FACTORS..........................................................109

11. MOST POPULAR FUND HOUSE..................................................119

12. FUND RETURNS OF EQUITY DIVERSIFIED FUNDS .................129

13. RISK PROFILE OF EQUITY DIVERSIFIED FUNDS......................131

14. PORTFOLI ANALYSIS OF EQUITY DIVERSIFIED FUNDS..........133

15. NAV DETAILS OF EQUITY DIVERSIFIED FUNDS......................135

16. FUND RETURNS OF ELSS...........................................................139

17. RISK PROFILE OF ELSS..............................................................140

18. PORTFOLIO ANALYSIS OF ELSS...............................................143

19. NAV DETAILS OF ELSS..............................................................145

20. FUND RETURNS OF EQUITY LARGE CAP.........................147



21. RISK PROFILE OF EQUITY LARGE CAP...........................149

22. PORTFOLIO ANALYSIS OF LARGE CAP..........................151

23. NAV DETAILS OF LARGE CAP.........................................154

24. FUND RETURNS OF EQUITY SMALL AND MID CAP.......156

25. RISK PROFILE OF EQUITY SMALL AND MID CAP...........158

26. PORTFOLIO ANALYSIS OF EQUITY SMALL AND MID CAP

.................................................................................................160

27. NAV DETAILS OF EQUITY SMALL AND MID CAP...........162

28. FUND RETURNS OF EQUITY THEMATIC..........................165

29. RISK PROFILE OF EQUITY THEMATIC.............................167

30. PORTFOLIO ANALYSIS OF EQUITY THEMATIC...............169

31. NAV DETAILS OF EQUITY THEMATIC..............................171



EXECUTIVE SUMMARY

OBJECTIVE:

To know the awareness of mutual funds among people.

To see the interest of people in investing in mutual funds.

To know the investment behaviour of investors in mutual fund according to different

age group.

To ascertain the percentage of income the investors invest in mutual fund.

To know the different attitudes of people regarding risk, rate of return, period of

investment.

To know the investors preferred financial product for investment.

SCOPE:

There are four divisions in SBI MF for the purpose of marketing and sales. They give special

attention for the retention of customers i.e. investors, distributors and brokers.

Four divisions are:

1. National distributors.

2. Banking.

3. Individual financial advisors.

4. FII’s.

FII’s are taking care by head office in MUMBAI. I am under section of National distributors

and Individual financial advisors. To maintain relationships with them and make them aware

about the new offerings and sort out their existing problems. My area of scope is DELHI

region. There are around 250 ND’s and IFA’s in this region.



METHODOLOGY FOLLOWED:

Methodology basically means the selection of the various methods and techniques in the

research-conducted. The various steps includes: -

1. Selection of a representative sample from the general population, which depicts the

characteristics of the complete

population.

2. Application of various tools and techniques to obtain relevant information related to a

case.

3. Collection of relevant data.

4. Analysis and interpretation of the data.

5. Generation of a final report.

RESEARCH DESIGN

There are 34 fund houses currently operating in India of which four have been in existence

for less than three years. Whereas till 2004, hardly a few equity schemes were launched each

year, that number has grown by 8-10 times now.

For the purpose of the research, I have selected 5 fund houses as mentioned under:

SBI Mutual Fund

Birla

Reliance

Prudential ICICI

Franklin Templeton

The following methodology is adopted for Comparison

Step1: Selection of few well-performing Funds of Big Fund Houses of India.

Step2: Collection of data (against various parameters) for comparison of Funds.

Step3: Analyses of the parameters and their relevance in comparing the funds.

Step4: Comparing and Ranking these funds on the basis of inputs from executives and the



rating agencies.

Step5: Generation of a project report.

DATA COLLECTION

The primary data collection was the most important part of the project. This includes

collecting the information through field research. For collecting information, a personal

interview was conducted with the help of questionnaire and the required information was

collected for the respondents.

DATA ANALYSIS

After collecting the data, data is to be analyzed. The findings and the analysis have been

mentioned further in the report.

1. INTRODUCTION



WHY COMAPARATIVE ANALYSIS OF MUTUAL FUNDS?

All over the world, mutual fund is one of the most popular instruments for investment. Its

popularity with consumer has dramatically increased over the last couple of years worldwide;

the mutual fund has a long and successful history. The popularity of mutual fund has

increased manifold. In developed financial market like United States, mutual has almost

overtaken bank deposits and total assets of insurance funds.

The mutual fund industry in India is regulated by Association of Mutual Funds in India

(AMFI). The mutual fund industry in India is of 493,287 crores approx. SBI Mutual Fund is

India’s largest bank sponsored mutual fund and has an enviable track record in judicious

investments and consistent wealth creation.

The fund traces its lineage to SBI - India’s largest banking enterprise. The institution has

grown immensely since its inception and today it is India's largest bank, patronized by over

80% of the top corporate houses of the country.

SBI Mutual Fund is a joint venture between the State Bank of India and Société

Générale Asset Management, one of the world’s leading fund management companies

that manages over US$ 500 Billion worldwide.

In twenty years of operation, the fund has launched 38 schemes and successfully redeemed

fifteen of them. In the process it has rewarded its investors handsomely with consistently

high returns.

A total of over 4.6 million investors have reposed their faith in the wealth generation

expertise of the Mutual Fund.

Schemes of the Mutual fund have consistently outperformed benchmark indices and have

emerged as the preferred investment for millions of investors and HNI’s.

Today, the fund manages over Rs. 28500 crores of assets and has a diverse profile of

investors actively parking their investments across 36 active schemes.



The fund serves this vast family of investors by reaching out to them

through network of over 130 points of acceptance, 28 investor service centers, 46 investor

service desks and 56 district organizers.

SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent India

Opportunities Fund.

Growth through innovation and stable investment policies is the SBI MF credo

State Bank of India was born on 1st July,1955 based on the recommendations of All India

Rural Credit Survey Committee(1954) headed by Shri A.D Gorwala, through an Act of

Parliament. The main objective of SBI is “Extension of Banking facilities on a large scale,

more particularly in rural and semi-urban areas, and for diverse other public purposes and to

transfer to it the undertaking of the Imperial Bank of India and provide for other matters

connected thereto or incidental thereto.”SBI is the oldest, the largest and the highest profit

making bank in India. Its evolution is not only intimately interwoven with the economic

development of modern India but also with our nation building process to an extent perhaps

unparalleled in the world. Moving like colossuses on the Indian financial turf, it has become

a symbol of national pride and economic development.

SBI with its extensive network of over 9000 branches has vast clientele and extends service

not only on commercial basis but also on the basis of social considerations. The Bank is also

on its way to introduce and absorb technology extensively at a rapid speed not only to remain

customer-friendly and efficient for existing business but also to manage new business and

services in an increasingly dynamic and global environment.

The project entitled “Comparison of Mutual Fund with special reference to SBI Mutual

Fund” gives me an opportunity to enhance my knowledge of mutual funds industry and

gives me an insight of business processes of different types of client.



INTRODUCTION TO MUTUAL FUNDS

Mutual fund is a buzz in the market these days. The mutual fund industry is burgeoning, it is

completely untapped market. Only 5% of total potential of this industry has been grabbed.

Hence this industry has a lot of opportunities in it. That’s why it is so much interactive.

As Indian economy is growing at the rate of 8% per annum, we can see its effect in all areas.

The Indian stock market and companies have become lucrative for foreign investors. More

and more fund is pouring in our country. This is increasing liquidity in the market and hence

increasing the money in the hands of people and thus investment. As the future prospects for

Indian companies are bright, they have lots of opportunities to expand their business

worldwide, the investment in Indian companies.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common

financial goal. The money thus collected is invested by the fund manager in different types of

securities depending upon the objective of the scheme. These could range from shares to

debentures to money market instruments. The income earned through these investments and

the capital appreciations realized by the scheme are shared by its unit holders in proportion to

the number of units owned by them (pro rata). Thus a Mutual Fund is the most suitable

investment for the common man as it offers an opportunity to invest in a diversified,

professionally managed portfolio at a relatively low cost. Anybody with an investible surplus

of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme

has a defined investment objective and strategy.

A mutual fund is the ideal investment vehicle for today’s complex and modern financial

scenario. Markets for equity shares, bonds and other fixed income instruments, real estate,

derivatives and other assets have become mature and information driven. Price changes in

these assets are driven by global events occurring in faraway places. A typical individual is

unlikely to have the knowledge, skills, inclination and time to keep track of events,

understand their implications and act speedily. An individual also finds it difficult to keep

track of ownership of his assets, investments, brokerage dues and bank transactions etc.



A mutual fund is the answer to all these situations. It appoints

professionally qualified and experienced staff that manages each of these functions on a full

time basis. The large pool of money collected in the fund allows it to hire such staff at a very

low cost to each investor. In effect, the mutual fund vehicle exploits economies of scale in all

three areas - research, investments and transaction processing. While the concept of

individuals coming together to invest money collectively is not new, the mutual fund in its

present form is a 20th century phenomenon. In fact, mutual funds gained popularity only after

the Second World War. Globally, there are thousands of firms offering tens of thousands of

mutual funds with different investment objectives. Today, mutual funds collectively manage

almost as much as or more money as compared to banks.

A draft offer document is to be prepared at the time of launching the fund. Typically, it pre

specifies the investment objectives of the fund, the risk associated, the costs involved in the

process and the broad rules for entry into and exit from the fund and other areas of operation.

In India, as in most countries, these sponsors need approval from a regulator, SEBI

(Securities exchange Board of India) in our case. SEBI looks at track records of the sponsor

and its financial strength in granting approval to the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according to the

investment objective. It also hires another entity to be the custodian of the assets of the fund

and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management Company also, in which

it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset

Management Company (AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun

Life Asset Management Company Ltd., which has floated different mutual funds schemes

and also acts as an asset manager for the funds collected under the schemes.



Future Scenario

The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few

years as investor’s shift their assets from banks and other traditional avenues. Some of the

older public and private sector players will either close shop or be taken over.

Out of ten public sector players five will sell out, close down or merge with stronger players

in three to four years. In the private sector this trend has already started with two mergers and

one takeover. Here too some of them will down their shutters in the near future to come.

But this does not mean there is no room for other players. The market will witness a flurry of

new players entering the arena. There will be a large number of offers from various asset

management companies in the time to come. Some big names like Fidelity, Principal, and

Old Mutual etc. are looking at Indian market seriously. One important reason for it is that

most major players already have presence here and hence these big names would hardly like

to get left behind.

The mutual fund industry is awaiting the introduction of derivatives in India as this would

enable it to hedge its risk and this in turn would be reflected in it’s Net Asset Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes to trade in

derivatives. Importantly, many market players have called on the Regulator to initiate the

process immediately, so that the mutual funds can implement the changes that are required to

trade in Derivatives.

Market Trends

A lone UTI with just one scheme in 1964 now competes with as many as 400 odd products

and 34 players in the market. In spite of the stiff competition and losing market share, UTI

still remains a formidable force to reckon with.

Last six years have been the most turbulent as well as exiting ones for the industry. New

players have come in, while others have decided to close shop by either selling off or



merging with others. Product innovation is now passé with the game

shifting to performance delivery in fund management as well as service. Those directly

associated with the fund management industry like distributors, registrars and transfer agents,

and even the regulators have become more mature and responsible.

The industry is also having a profound impact on financial markets. While UTI has always

been a dominant player on the bourses as well as the debt markets, the new generations of

private funds which have gained substantial mass are now seen flexing their muscles. Fund

managers, by their selection criteria for stocks have forced corporate governance on the

industry. By rewarding honest and transparent management with higher valuations, a system

of risk-reward has been created where the corporate sector is more transparent then before.

Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and

technology sector. Funds performances are improving. Funds collection, which averaged at

less than Rs100bn per annum over five-year period spanning 1993-98 doubled to Rs210bn in

1998-99. In the current year mobilization till now have exceeded Rs300bn. Total collection

for the current financial year ending March 2000 is expected to reach Rs450bn.

What is particularly noteworthy is that bulk of the mobilization has been by the private sector

mutual funds rather than public sector mutual fundsMutual funds are now also competing

with commercial banks in the race for retail investor’s savings and corporate float money.

The power shift towards mutual funds has become obvious. The coming few years will show

that the traditional saving avenues are losing out in the current scenario. Many investors are

realizing that investments in savings accounts are as good as locking up their deposits in a

closet. The fund mobilization trend by mutual funds in the current year indicates that money

is going to mutual funds in a big way.

India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts of

an Asset base that is much higher than its bank deposits. In India, mutual fund assets are not

even 10% of the bank deposits, but this trend is beginning to change. Recent figures indicate

that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas

bank deposits rose by only 17%. (Source: Think-tank, the Financial Express September, 99)



This is forcing a large number of banks to adopt the concept of narrow

banking wherein the deposits are kept in Gilts and some other assets which improves

liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not

close down completely. Their role as intermediaries cannot be ignored. It is just that Mutual

Funds are going to change the way banks do business in the future.

WHAT IS A MUTUAL FUND?


financial goal. It offers an opportunity to invest in a diversified, professionally managed

basket of securities at a relatively low cost. The flow chart below describes broadly the

working of a mutual fund:

“Mutual Funds are popular among all income levels. With a mutual fund, we get a

diversified basket of stocks managed by professionals”



Pool their money with

Investors Fund managers

Invest in

Passed back to

Returns Securities

These Trusts are run by experienced Investment Managers who use their

knowledge and expertise to select individual securities, which are classified to form

portfolios that meet predetermined objectives and criteria.

These portfolios are then sold to the public. They offer the investors the following main

services:

Portfolio Diversification

Marketability: A new financial asset is created that may be more easily marketable

than the underlying securities in the portfolio.

Organization of a Mutual Fund

A mutual fund is set up in the form of a trust, which has sponsor, trustees,

asset management company (AMC) and custodian. The trust is established by a sponsor or

more than one sponsor who is like promoter of a company. The trustees of the mutual fund

hold its property for the benefit of the unit holders. Asset Management Company (AMC)

approved by SEBI manages the funds by making investments in various types of securities.

Custodian, who is registered with SEBI, holds the securities of various schemes of the fund

in its custody. The trustees are vested with the general power of superintendence and

direction over AMC. They monitor the performance and compliance of SEBI Regulations by

the mutual fund.



TYPES OF MUTUAL FUND SCHEMES

Mutual fund schemes may be classified on the basis of its structure and its investment

objective.

By Structure:

Open-ended Funds:

An open-end fund is one that is available for subscription all through the year. These do not

have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value

("NAV") related prices. The key feature of open-end schemes is liquidity.

Closed ended Funds:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15

years. The fund is open for subscription only during a specified period. Investors can invest

in the scheme at the time of the initial public issue and thereafter they can buy or sell the

units of the scheme on the stock exchanges where they are listed. In order to provide an exit

route to the investors, some close-ended funds give an option of selling back the units to the

Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate

that at least one of the two exit routes is provided to the investor. .

Interval Funds:

Interval funds combine the features of open-ended and close-ended schemes. They are open

for sale or redemption during pre-determined intervals at NAV related prices

By Investment Objective



Growth Funds:

The aim of growth funds is to provide capital appreciation over the medium to long term.

Such schemes normally invest a majority of their corpus in equities. It has been proved that

returns from stocks, have outperformed most other kind of investments held over the long

term. Growth schemes are ideal for investors having a long term outlook seeking growth over

a period of time.

Income Funds:

The aim of income funds is to provide regular and steady income to investors. Such schemes

generally invest in fixed income securities such as bonds, corporate debentures and

Government securities. Income Funds are ideal for capital stability and regular income.

Balanced Fund:

The aim of balanced funds is to provide both growth and regular income. Such schemes

periodically distribute a part of their earning and invest both in equities and fixed income

securities in the proportion indicated in their offer documents. In a rising stock market, the

NAV of these schemes may not normally keep pace, or fall equally when the market falls.

These are ideal for investors looking for a combination of income and moderate growth.

MoneyMarketFunds:

The aim of money market funds is to provide easy liquidity, preservation of capital and

moderate income. These schemes generally invest in safer short-term instruments such as

treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns

on these schemes may fluctuate depending upon the interest rates prevailing in the market.

These are ideal for Corporate and individual investors as a means to park

their surplus funds for short periods.



Other Schemes

Tax Saving Schemes:

These schemes offer tax rebates to the investors under specific provisions of the Indian

Income Tax laws as the Government offers tax incentives for investment in specified

avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes

are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides

opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual

Funds.

Special Schemes

Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer document. The

investment of these funds is limited to specific industries like InfoTech, FMCG, and

Pharmaceuticals etc.

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE

Sensex or the NSE 50

Sectoral Schemes

Sectoral Funds are those which invest exclusively in a specified sector. This could be an

industry or a group of industries or various segments such as 'A' Group shares or initial

public offerings



BENEFITS OF MUTUAL FUNDS

Diversification

Professional management Tax benefits

Affordability Transparency

Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a

dedicated investment research team that analyses the performance and prospects of

companies and selects suitable investments to achieve the objectives of the scheme.

Diversification



Mutual Funds invest in a number of companies across a broad cross –

section of industries and sectors. This diversification reduces the risk because seldom do all

stocks decline at the same time and in the same proportion. You achieve this diversification

through a Mutual Fund with far less money than you can do on your own.

Affordability

A mutual fund invests in a portfolio of assets, i.e. bonds, shares etc. depending upon the

investment objective of the scheme. An investor can buy into a portfolio of equities, which

would otherwise be extremely expensive.

Tax Benefits

Any income distributed after March 31, 2002 will be subject to tax in the assessment of all

unit-holders. However, as a measure of concession to Unit holders of open – ended and

equity – oriented funds, income distributions for the year ending March 31, 2003, will be

taxed at a concessional rate of 10%.

Return Potential

Over a medium to long – term, mutual funds have the potential to provide a higher return as

they invest in a diversified basket of selected securities.

Low Costs

Investing in the capital markets because the benefits of scale in brokerage, mutual funds are a

relatively less expensive way to invest compared to directly custodial and other fees translate

into lower costs for investors.

Liquidity



In open – ended schemes, the investor gets the money back promptly at MAV related prices

from the mutual fund. In closed – ended schemes, the units can be sold on a stock exchange

at the prevailing market price or the investor can avail of the facility of direct repurchase at

NAV related prices by the mutual fund.

Transparency

You get regular information on the value of your investment in addition to disclosure on the

specific investments made by your scheme, the proportion invested in each class of assets

and the fund manager’s investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans and dividend

reinvestment plans, you can systematically invest or withdraw funds according to your needs

and convenience.

Well Regulated

All mutual funds are registered with SEBI and they function within the provisions of strict

regulations designed to protect the interests of investors.

Tax breaks

Last but not the least, mutual funds offer significant tax advantages. Dividends distributed by

them are tax-free in the hands of the investor.



They also give you the advantages of capital gains taxation. If you hold

units beyond one year, you get the benefits of indexation. Simply put, indexation benefits

increase your purchase cost by a certain portion, depending upon the yearly cost-inflation

index (which is calculated to account for rising inflation), thereby reducing the gap between

your actual purchase cost and selling price. This reduces your tax liability.

What’s more, tax-saving schemes and pension schemes give you the added advantage of

benefits under Section 88. You can avail of a 20 per cent tax exemption on an investment of

up to Rs 10,000 in the scheme in a year

No assured returns and no protection of capital

If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not

offer assured returns and carry risk. For instance, unlike bank deposits, your investment in a

mutual fund can fall in value. In addition, mutual funds are not insured or guaranteed by any

government body (unlike a bank deposit, where up to Rs 1 lakh per bank is insured by the

Deposit and Credit Insurance Corporation, a subsidiary of the Reserve Bank of India).

There are strict norms for any fund that assures returns and it is now compulsory for funds to

establish that they have resources to back such assurances. This is because most closed-end

funds that assured returns in the early-nineties failed to stick to their assurances made at the

time of launch, resulting in losses to investors.

Restrictive gains

Diversification helps, if risk minimization is your objective. However, the lack of investment

focus also means you gain less than if you had invested directly in a single security.



In our earlier example, say, Reliance appreciated 50 per cent. A direct

investment in the stock would appreciate by 50 per cent. But your investment in the mutual

fund, which had invested 10 per cent of its corpus in Reliance, will see only a 5 per cent

appreciation.

RISK ASSOCIATED WITH MUTUAL FUNDS

Risk-Return Trade Off

The most important relationship to understand is the risk-return trade off. Higher the risk

greater the returns/loss and lower the risk lesser the returns/loss. Hence it is up to you, the

investor to decide how much risk you are willing to take. In order to do this you must first be

aware of the different types of risks involved with your investment decision.

Market Risk



Credit Political inflation

RISKS

Liquidity Market

Sometimes prices and yields of all securities rise and fall. Broad outside

influences affecting the market lead to this. This is true, may it be big corporations or smaller

mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (SIP)

that works

on the concept of Rupee Cost Averaging (RCA) might help mitigate the risk.

Credit Risk

The debt servicing ability of a company through its cash flows determines the Credit Risk

faced by you. This credit risk is measured by independent rating agencies like CRISIL who

rate companies and their paper. A ‘AAA’ rating is considered the safest whereas a ‘D’ rating

is considered poor credit quality. A well – diversified portfolio might help mitigate this risk.

Inflation Risk

Inflation is the loss of purchasing power over a time. A lot of times people make conservative

investment decisions to protect their capital but end up with a sum of money that can buy less

than what the principal could, at the time of investment. A well–diversified portfolio with

some investment in equities might help mitigate this risk.

Interest Rate Risk

In a free market economy interest rates are difficult and not impossible to predict. Changes in

interest rates affect the prices of bonds as well as equities. If interest rates rise, the prices of

bonds will fall and vice versa. Equity might be negatively affected as well in a rising interest

rate environment. A well-diversified portfolio might help mitigate this risk.

Political Risk



Changes in government policy and political decision can change the

investment environment. They can create a favourable environment for investment or vice

versa.

Liquidity Risk

Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. It

can be partly mitigated by diversification, staggering of maturities as well as internal risk

controls that lean towards purchase of liquid securities. It simply means that you must spread

your investment across different securities (stocks, bonds, money market instruments, real

estate, fixed deposits etc.). This kind of a diversification may add to the stability of your

returns, for example, during one period of time equities might under perform but bonds and

money market instruments might do well enough to offset the effect of a slump in the equity

Markets.

DISADVANTAGES OF MUTUAL FUNDS

There are certainly some benefits to mutual fund investing, but you should also be aware of

the drawbacks associated with mutual funds.

1. No Insurance: Mutual funds, although regulated by the government, are not insured

against losses. The Federal Deposit Insurance Corporation (FDIC) only insures

against certain losses at banks, credit unions, and savings and loans, not mutual funds.

That means that despite the risk-reducing diversification benefits provided by mutual

funds, losses can occur, and it is possible (although extremely unlikely) that you

could even lose your entire investment.



2. Dilution: Although diversification reduces the amount of risk involved in investing in

mutual funds, it can also be a disadvantage due to dilution. For example, if a single

security held by a mutual fund doubles in value, the mutual fund itself would not

double in value because that security is only one small part of the fund's holdings. By

holding a large number of different investments, mutual funds tend to do neither

exceptionally well nor exceptionally poorly.

3. Fees and Expenses: Most mutual funds charge management and operating fees that

pay for the fund's management expenses (usually around 1.0% to 1.5% per year). In

addition, some mutual funds charge high sales commissions, 12b-1 fees, and

redemption fees. And some funds buy and trade shares so often that the transaction

costs add up significantly. Some of these expenses are charged on an ongoing basis,

unlike stock investments, for which a commission is paid only when you buy and

sell .

4. Poor Performance: Returns on a mutual fund are by no means guaranteed. In fact,

on average, around 75% of all mutual funds fail to beat the major market indexes, like

the S&P 500, and a growing number of critics now question whether or not

professional money managers have better stock-picking capabilities than the average

investor.

5. Loss of Control: The managers of mutual funds make all of the decisions about

which securities to buy and sell and when to do so. This can make it difficult

for you when trying to manage your portfolio. For example, the tax consequences of a

decision by the manager to buy or sell an asset at a certain time might not be optimal

for you. You also should remember that you are trusting someone else with your

money when you invest in a mutual fund.



6. Trading Limitations: Although mutual funds are highly liquid in

general, most mutual funds (called open-ended funds) cannot be bought or sold in the

middle of the trading day. You can only buy and sell them at the end of the day, after

they've calculated the current value of their holdings.

7. Size: Some mutual funds are too big to find enough good investments. This is

especially true of funds that focus on small companies, given that there are strict rules

about how much of a single company a fund may own. If a mutual fund has $5 billion

to invest and is only able to invest an average of $50 million in each, then it needs to

find at least 100 such companies to invest in; as a result, the fund might be forced to

lower its standards when selecting companies to invest in.

8. Inefficiency of Cash Reserves: Mutual funds usually maintain large cash reserves as

protection against a large number of simultaneous withdrawals. Although this

provides investors with liquidity, it means that some of the fund's money is invested

in cash instead of assets, which tends to lower the investor's potential return.

Different Types: The advantages and disadvantages listed above apply to mutual funds in

general. However, there are over 10,000 mutual funds in operation, and these funds vary

greatly according to investment objective, size, strategy, and style. Mutual funds are available

for virtually every investment strategy (e.g. value, growth), every sector (e.g. biotech,

internet), and every country or region of the world. So even the process of selecting a fund

can be tedious.

Net Asset Value (NAV)Open-end mutual funds price their shares in terms of a Net Asset

Value (NAV) (note that you can calculate NAV for a closed-end fund too, but it will not



necessarily be the price at which you buy or sell closed-end shares). NAV

is calculated by adding up the market value of all the fund's underlying securities,

subtracting all of the fund's liabilities, and then dividing by the number of outstanding shares

in the fund. The resulting NAV per share is the price at which shares in the fund are bought

and sold (plus or minus any sales fees). Mutual funds only calculate their NAVs once per

trading day, at the close of the trading session.

HISTORY OF MUTUAL FUND IN INDIA

HISTORY – The Landmarks

1963: UTI is India’s first mutual fund.

1964: UTI launches US-64.

1971: UTI’s ULIP (Unit-Linked Insurance Plan) is second scheme to be Launched.

1986: UTI Master share, India’s first true ‘mutual fund’ scheme, launched.

1987: PSU banks and insurers allowed floating mutual funds; State Bank of India (SBI) first

off the blocks.

1992: The Harshad Mehta-fuelled bull market arouses middle-class interest in shares and

mutual funds.

1993: Private sector and foreign players allowed; Kothari Pioneer first private fund house to

start operations; SEBI set up to regulate industry.

1994: Morgan Stanley is the first foreign player.



1996: Sebi’s mutual fund rules and regulations, which forms the basis of most current laws,

come into force.

1998: UTI Master Index Fund is the country’s first index fund.

1999: The takeover of 20th Century AMC by Zurich Mutual Fund is the first acquisition in

the mutual fund industry.

2000: The industry’s assets under management crosses Rs 1, 00,000 crore.

2001: US-64 scam leads to UTI overhaul.

2002: UTI bifurcated, comes under SEBI purview; mutual fund distributors banned from

giving commissions to investors; floating rate funds and Foreign debt funds debut.

2003: AMFI certification made compulsory for new agents; fund of funds launched.

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at

the initiative of the Government of India and Reserve Bank. The history of mutual funds in

India can be broadly divided into four distinct phases.

FIRST PHASE: 1964 – 87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by

the Reserve Bank of India and functioned under the regulatory and administrative control of

the Reserve Bank of India. In 1978, UTI was de-linked from the RBI and the Industrial

Development Bank of India (IDBI) took over the regulatory and administrative control in



place of RBI. The first scheme launched by UTI was Unit Scheme 1964.

At the end of 1988 UTI had Rs.6, 700 crores of assets under the management.

SECOND PHASE: 1987 – 1993 (Entry of Public Sector Funds)

1987 marked the entry of non – UTI, public sector mutual funds set up by public sector banks

and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India

(GIC). SBI Mutual Fund was the first non – UTI Mutual Fund established in June1987

followed by Can Bank Mutual Fund (Dec ‘87), Punjab National Bank Mutual Fund (Aug

‘89), Indian Bank Mutual Fund (Nov ‘89), Bank of India (Jun ‘90), Bank of Baroda Mutual

Fund (Oct ‘92). LIC established its mutual fund in June 1989 while GIC had set up its mutual

fund in December 1990. At the end of 1993, the mutual fund industry had assets under

management of Rs.47, 004 crores.

THIRD PHASE: 1993 – 2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year

in which the first Mutual Fund came into being, under which all mutual funds, except UTI,

were to be registered and governed. The erstwhile Kothari Pioneer (now merged with

Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and

revised Mutual Fund Regulations in 1996.

The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of

mutual fund houses went on increasing, with many foreign mutual funds setting up funds in

India and also the industry has witnessed several mergers and acquisitions. As at the end of

January 2003, there were 33 mutual funds with total assets of Rs.1,21,805 crores. The Unit

Trust of India with Rs.44,541 crores of assets under management was way ahead of other

mutual funds.

FOURTH PHASE: since February 2003



In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of

India with assets under management of Rs.29,835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and certain other schemes.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation

of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under

management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual

Fund Regulations, and with recent mergers taking place among different private sector funds,

the mutual fund industry has entered its current phase of consolidation and growth



INDUSTRY PROFILE:

Growth of asset under management from March-1965 to March-2009



STRUCTURE OF MUTUAL FUNDS IN INDIA

Like other countries, India has a legal framework within which mutual funds must be

constituted. In India, open and close – end funds operate under the same regulatory structure,

i.e. in India, all mutual funds are constituted along one unique structure – as unit trust. A

mutual fund in India is allowed to issue open – end and close – end schemes under a common

legal structure. The structure, which is required to be followed by mutual funds in India, laid

down under SEBI (Mutual Fund) Regulations, 1996.

The Fund Sponsor



‘Sponsor’ is defined under SEBI Regulations as any person who, acting

alone or in combination with another body corporate establishes a mutual fund. The sponsor

of a fund is akin to the promoter of companies he gets the fund registered with SEBI. The

sponsor will form a Trust and appoint a Board of Trustees. All these appointments are made

in accordance with the SEBI Regulations. As per the existing SEBI Regulations, for a person

to qualify as a sponsor, must contribute at least 40% of the net worth of the AMC and issues

a sound financial track over five years prior to registration.

Mutual Funds as Trusts

Mutual Fund in India is constituted in the form of a Public Trust under the Indian Trust Act

1882. The fund invites investors to contribute their money in the common pool by

subscribing to units issued by various schemes established by the Trust as evidence of their

beneficial interest in the fund. The Trust or Fund has no legal capacity itself rather it is the

Trustee(s) who have legal capacity and therefore the trustees take all acts in relation to the

Trust itself.

Trustees

A Board of Trustees – a body of individuals, or a trust company – a corporate body, may

manage the Trust. Board of Trustees manages most of the funds in India. The Trust is created

through a document called the Trust Deed that is executed by the Fund Sponsor in favors of

the trustees. They are the primary guardian of the unit holder’s funds and assets. They ensure

that AMC’s operations are along professional lines.

Right of Trustees

a) Appoint the AMC with the prior approval of SEBI

b) Approve each of the schemes floated by the AMC

c) Have the right to request any necessary information from the AMC concerning the

operations of various schemes managed by the AMC



Obligations of the AMC and its Directors

They must ensure that:

a) Investment of funds is in accordance with SEBI Regulations and the Trust Deed

b) Take responsibility for the act of its employees and others whose services it has

procured

c) Do not undertake any other activity conflicting with managing the fund

Asset Management Company

The role of an Asset Management Company (AMC) is to act as the investment manager of

the trust under the Board supervision.

Transfer Agents

Transfer Agents are responsible for issuing and redeeming units of the mutual fund and

provide other related services such as preparation of transfer documents updating investor’s

records. A fund may choose to opt this activity in-house or by an outside transfer agent.

Distributors

AMCs usually appoint distributors or brokers, who sell units on behalf of the fund. Some

funds require that all transactions to be routed through such brokers.

Bankers

A fund’s activities involved dealing with the money on a continuous basis primarily with

respect to buying and selling units, paying for investment made, receiving the proceeds from

sale of investment and discharging its obligations towards operative expenses. A fund’s

banker therefore plays a crucial role with respect to its financial dealings.



Custodian and Depository

The custodian is appointed by the Board of Trustees for safekeeping of securities in terms of

physical delivery and eventual safe keeping or participating in the clearing system through

approved depository companies.

ASSOCIATION OF MUTUAL FUNDS IN INDIA

With the increase in mutual fund players in India, a need for mutual fund association in India

was generated to function as a non profit organisation. Association of Mutual Funds in India

(AMFI) was incorporated on 22nd August, 1995.

AMFI is a apex body of all Asset Management Companies (AMC) which has been registered

with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its

members. It functions under the supervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a

professional and healthy market with ethical lines enhancing and maintaining standards. It

follows the principle of both protecting and promoting the interests of mutual funds as well

as their unit holder.

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It

has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The

objectives are as follows:

This mutual fund association of India maintains high professional and ethical standards

in all areas of operation of the industry.



It also recommends and promotes the top class business practices and

code of conduct which is followed by members and related people engaged in the

activities of mutual fund and asset management. The agencies who are by any means

connected or involved in the field of capital markets and financial services also involved

in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund

industry.

Association of Mutual Fund in India does represent the Government of India, the Reserve

Bank of India and other related bodies on matters relating to the Mutual Fund Industry.

It develops a team of well qualified and trained Agent distributors. It implements a

program of training and certification for all intermediaries and other engaged in the

mutual fund industry.

AMFI undertakes all India awareness programmed for investor’s in order to promote

proper understanding of the concept and working of mutual funds.

At last but not the least association of mutual fund of India also disseminate

information’s on Mutual Fund Industry and undertakes studies and research either

directly or in association with other bodies



COMPANY PROFILE

ABOUT THE ORGANIZATION:

SBI Mutual Fund is India’s largest bank sponsored mutual fund. The fund traces its

lineage to SBI - India’s largest banking enterprise. The institution has grown immensely

since its inception and today it is India's largest bank, patronized by over 80% of the top

corporate houses of the country. SBI Mutual Fund is a joint venture between the State

Bank of India and Société Générale Asset Management, one of the world’s leading fund

management companies that manages over US$ 500 Billion worldwide. In twenty years of

operation, the fund has launched 38 schemes and successfully redeemed fifteen of them.

A total of over 4.6 million investors have reposed their faith in the wealth generation

expertise of the Mutual Fund. The fund serves this vast family of investors by reaching out to

them through network of over 130 points of acceptance, 28 investor service centers, 46

investor service desks and 56 district organizers. Today, the fund manages over Rs.

28500crores of assets and has a diverse profile of investors actively parking their investments

across 36 active schemes. SBI Mutual is the first bank-sponsored fund to launch an offshore

fund – Resurgent India Opportunities Fund. Growth through innovation and stable

investment policies is the SBI MF credo.

GUIDING PRINCIPLES OF SBI MUTUAL FUND:

Consistency

Value oriented investment philosophy is designed to produce consistent results aiming to

beat

the benchmark at all times.



Flexibility

Offers investors a broad range of managed investment products in various asset classes and

risk parameters, within the at most operational flexibility to suit their investment needs.

Stability

Our commitment to the highest quality of service and integrity are the foundation upon which

clients can build their trust with us

Origin

The origin of the Indian mutual funds industry dates back to 1963 when the Unit Trust of

India (UTI) came into existence at the initiative of the Government of India and the Reserve

Bank of India. Since then the mutual funds sector remained the sole fiefdom of UTI till 1987

when a slew of non-UTI, public sector mutual funds were set up by nationalized banks and

life insurance companies.

The year 1993 saw sweeping changes being introduced in the mutual fund industry with

private sector fund houses making their debut and the laying down of comprehensive mutual

fund regulations. Over the years, the Indian mutual funds industry has witnessed an

exponential growth riding piggyback on a booming economy and the arrival of a horde of

international fund houses.

Concept



“Mutual fund is vehicle that enables a number of investors to pool their money and

have it jointly managed by a professional money manager.”

A Mutual Fund is a pool of money, collected from investors, and is invested according to

certain investment objectives.


financial goal.

The money thus collected is then invested in capital market instruments such as shares,

debentures and other securities.

The income earned through these investments and the capital appreciation realised are shared

by its unit holders in proportion to the number of units owned by them.

Mutual Fund companies are known as asset management companies. They offer a variety of

diversified schemes. Mutual Fund acts as investment companies. They pool the savings of

investors and invest them in a well-diversified portfolio of sound investments.

Mutual funds can be broken down into two basic categories: equity and bond funds.

Equity funds invest primarily in common stocks, while bond funds invest mainly in various

debt instruments.

Within each of these sectors, investors have a myriad of choices to consider, including:

international or domestic, active or indexed, and value or growth, just to name a few.

I will cover these topics shortly. First, however, I am going to focus my attention on the “nuts

and bolts” of how mutual funds operate.



Mutual Fund Operation Flow Chart





ORGANIZATION

Organization of a Mutual Fund

Mutual funds

Mutual fund is vehicle that enables a number of investors to pool their money and have it

jointly managed by a professional money manager

Sponsor

Sponsor is the person who acting alone or in combination with another body corporate

establishes a mutual fund. The Sponsor is not responsible or liable for any loss or shortfall



resulting from the operation of the Schemes beyond the initial contribution

made by it towards setting up of the Mutual Fund.

Trustee

Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals).

The main responsibility of the Trustee is to safeguard the interest of the unit holders and

ensure that the AMC functions in the interest of investors and in accordance with the

Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

Asset Management Company (AMC)

The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. At

least 50% of the directors of the AMC are independent directors who are not associated with

the Sponsor in any manner. The AMC must have a net worth of at least 10 crores at all times.

Transfer Agent

The AMC if so authorised by the Trust Deed appoints the Registrar and Transfer Agent to the

Mutual Fund. The Registrar processes the application form, redemption requests and

dispatches account statements to the unit holders. The Registrar and Transfer agent also

handles communications with investors and updates investor records.

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an enviable

track record in judicious investments and consistent wealth creation. The fund traces

its lineage to SBI - India’s largest banking enterprise. The institution has grown



immensely since its inception and today it is India's largest bank,

patronized by over 80% of the top corporate houses of the country. SBI Mutual Fund

is a joint venture between the State Bank of India and Société Générale Asset

Management, one of the world’s leading fund management companies that manages

over US$ 330 Billion worldwide. At SBI Mutual Fund, resources are considerably

devoted to gain, maintain and sustain profitable insights into market movements. The

trust reposed on SBI-MF by over 2 million investors is a genuine tribute to its

expertise in Fund Management. SBI Mutual Fund is India’s largest bank sponsored

mutual fund and has an enviable track record in judicious investments and consistent

wealth creation.

Thus SBI-MF believes in

Proven Skills in Wealth Generation

Exploiting expertise, compounding growth

OPERATION

In eighteen years of operation, the fund has launched thirty-two schemes and successfully

redeemed fifteen of them. In the process it has rewarded its investors handsomely with

consistently high returns. A total of over 20, 00,000 investors have reposed their faith in the

wealth generation expertise of the Mutual Fund. Schemes of the Mutual fund have

consistently outperformed benchmark indices and have emerged as the preferred investment

for millions of investors and HNI’s. Today, the fund manages over Rs. 13,000 crores of

assets and has a diverse profile of investors actively parking their investments across 28

active schemes. The fund serves this vast family of investors by reaching out to them through

network of 82 collection branches, 26 investor service centers, 21 investor service desks and

21 district organizers.



BOARD OF DIRECTORS

Mr. Achal K. GuptaManaging Director & Chief Executive Office

Mr. C A SantoshChief Manager - Customer Service.

Mr. Didier TurpinDy. Chief Executive Officer

Ms. Aparna NirgudeChief Risk Officer

Mr. Ashwini Kumar JainChief Operating Officer

Mr. Ashutosh P VaidyaCompany Secretary & Compliance Officer

Mr. Navneet MunotChief Investment Officer

Mr. Parijat Agrawal Head – Fixed Income

Mr. R. S. Srinivas JainChief Marketing Officer



INVESTMENT TEAM

Chief Investment Officer :

SanjaySinha

Mr. Sanjay Sinha has taken over as Chief Investment Officer with effect from June 1, 2007. Mr. Sinha joined SBI Mutual Fund as the Head of Equities in November 2005 and has managed the largest number of funds in SBI MF covering the entire spectrum of equity funds – from index funds, diversified equity funds to sector funds.

He has over 18 years of experience in the Mutual Fund Industry. Prior to joining SBI MF, Mr. Sinha worked as Senior Fund Manager with UTI Mutual Fund and was managing a corpus of over Rs 28 billion (over US$600 million). A Post Graduate from IIM Kolkatta, Mr. Sanjay Sinha has a rich experience in managing funds.

Vice President - Investment Department :

ThierryNardozi

Thierry graduated from University of Glamorgan with a BA (Hons) in Business studies. He started his career with Irish Life in Dublin before moving to Societe Generale Asset Management. Thierry has an experience of 14 years within the asset management industry and has been involved in fund management for 10 years. Prior to joining SBI Funds Management Pvt. Ltd. in October 2007, he was handling institutional and mutual funds invested in European equities. Thierry is also a post-graduate of SFAF (European Federation of Financial Analysts Societies).

Head Portfolio Management Services / Fund Manager :

NipaLadiwala



After obtaining a post graduate degree in Business Management and Law, Nipa worked as an equity analyst, and dealer for the offshore Funds of UTI. Subsequently she was appointed as Fund Manager for India Growth Fund, which was listed on NYSE. She was head of Research at UTI Securities before joining SBI Funds Management Pvt. Ltd. as Head of PMS. Nipa has 6 years experience as Fund Manager. She has a total of 15 years experience and has been with SBI Funds Management Pvt. Ltd since October 2005.

Equity :

Aashish Wakankar(Vice President & Fund Manager)

Aashish Wakankar is a Bachelor of Science from University of Mumbai and holds Post Graduate Diploma in Management Studies from Jamnalal Bajaj Institute of Management Studies, University of Mumbai. He has more than 12 years of experience in capital markets ranging from institutional equities, equity research and fund management. He is associated with SBI Funds Management from December 2005.

Prior to joining SBI Funds Management, he has worked with Kotak Mahindra Asset Management, Deutsche Asset Management - part of Deutsche Bank Group, and TATA TD Waterhouse Securities - a joint venture between the TATA Group, India and TD Bank Financial Group, Canada. At Deutsche Asset Management, he was responsible for advising the offshore fund Deutsche India Equity Fund, Japan and MetLife Insurance.

Debt / Fixed Income:

Parijat Agrawal (Head–Fixed Income)

Parijat has done his B.E (ECE) and PGDM (IIM Bangalore). He has got 12 years



experience in capital markets in areas like research, dealing and fund management. Parijat is associated with SBI Funds Management Pvt. Ltd. since July 2006.

Prior to joining SBI Funds Management Pvt. Ltd., he was with State Bank of Mauritius Limited, Mumbai as Head – Treasury.

Ganti N. Murthy (Asst.Vice President & Fund Manager)

Mr. Murthy did his B.Sc (Hons) from Osmania University and his Masters in Financial Management from Jamnalal Bajaj Institute of Management Studies, Mumbai. He has over 12 years experience in the Mutual Fund Industry, 9 years in Unit Trust of India and 3 years in Cholamandalam AMC Ltd. Prior to joining SBI Funds Management Pvt. Ltd., he was with Cholamandalam Mutual Fund as Fund Manager – Debt.

OffshoreFunds

Anand Gupta

Anand holds charter from CFA Institute, USA and Institute of Chartered Accountants of India. Before joining SBI Funds Management in October 2005, Anand has worked with HSBC securities and domestic brokerage house as equity research analyst for 3 years. Anand has 5 years of experience in capital markets and 3 years of experience in Audit & Business consulting.

PRODUCT PORTFOLIO



Distribution channel in SBIMF

SBI asset management company mainly emphasize on relationship building with its

customers like distributors, Banks, individual investors etc. The distribution channel of

SBIMF is as follows



Overview of Retail channel

The alternative distribution channels that are available are selling, or using lead managers and

brokers along with sub-brokers, for selling units. To be successful in this mission, the

industry will have to ensure that only those agents that have conviction about mutual funds

being the most versatile and an ideal investment vehicle for investors are encouraged. This is

because, there is a sense of loyalty amongst agents, in anticipation of getting continuous

business throughout the year, and the trust and credibility that has been generated or will be

generated by being loyal to one institution. Savings in advertisement and publicity expenses

is also affected, as the target of communication is restricted to a few groups of individuals,

since the agent will function as a facilitator, informer and educator. The reduced cost benefit

will ultimately accrue to the investor in the form of higher returns.

In such a system, one achieves brand loyalty through continuous interaction between agents

and investors. Building a team of agents and other distribution network such as distribution

and collecting agents and franchise offices, will provide the investor the opportunity of

having continuous interaction and contact with the mutual fund.

Therefore, retail distribution through the agents is a preferred alternative for distributing

mutual fund products.



As my vertical in the company is retail which includes IFA’s (Individual

financial advisors) and National Distributors. The retail channel is subdivided into 5 regions.

National Distributors Nitin Kumar

West & Central Delhi Yogesh Kumar & Sumit

East Delhi Suyash

South Delhi Amit Srivastava

North Delhi Abhishek Singh

Meerut Ajay Chauhan

Agra Jitin & Amir Raza

Relationship building with active and inactive distributors (IFAs)

During my internship tenure of more than 8 weeks with SBIMF, the main task that has been

assigned to me was relationship building, for which I have personally visited both active and

inactive distributors. AMC have around 2000 distributors in Delhi-NCR region which is sub

divided into 5 regions namely:-

1) North Delhi

2) South Delhi

3) East Delhi

4) West Delhi

5) Central Delhi



I have covered some areas of East, West and Central Delhi. The purpose

behind these visits was to build a relation with the distributors on the behalf of AMC which

in turn help in generating more investment. In case of inactive distributors the motive was to

find out the reasons for which they stopped dealing with SBIMF. In this cumbersome

exercise of relationship building I made several observations from the feedback which I got

from the distributors and are highlighted below.

NEW FUND OFFER (SBI GETS)

SBI Mutual Fund had launched a New Fund Offer of the SBI Gold Exchange Traded Scheme

(SBI GETS). The scheme helped investors to invest in gold through the convenience of their

demat account.They could invest in as low as one gram of gold, since one unit of SBI GETS

would track the price of even one gram of gold. Post-NFO, SBI GETS would be listed on the

National Stock Exchange. The investors could be able to easily trade the units of the scheme,

just like an equity stock, through an NSE Broker or their online trading account. The NFO of

SBI GETS was open till 28th April, 2009.



OTHER WORK EXPERIENCE AT SBI MUTUAL FUND

INFORMATION SHARING:

Apart from meeting the distributors the other way to keep in touch with them is to keep updating them about the latest information like NAVs, new products, best performing funds, initiatives like organizing Refresher Courses etc. All this information sharing is done by calling them personally.

OPERATIONAL SERVICE:

All AMCs in India uses CAMS a software package to provide services to its customers.

COMPUTER AGE MANAGEMENT SERVICES PVT. LTD. (CAMS) offers a comprehensive package of Transaction Processing and Customer Care services to the Mutual Fund industry, and has been constantly raising the bar in customer service since 1995. Setup in 1988 as a Software Developer, CAMS moved from Capital Market Transaction Processing (processing Equity IPOs) to Customer Care and Transaction Processing for Mutual Funds. CAMS today has the most appropriate and advanced technology employed, with the best network for service delivery through its network of Service Centers in all major cities in India. At SBIMF we have learnt the software and worked on it, the major things that we have done using this software are

1) Mailing statements to the clients/investors.2) Finding out the AUM of distributors.3) Verification of dividend payment.4) Brokerage payments.

Recording and updating: After meeting the distributors I use to update their records in our database like changing of address, telephone no. etc.

LEARNING’S DURING THE PROJECT:

During this internship of three months, apart from project I have learnt several important skills and gained knowledge which is very important, and according to me is the best



learning during the Summer Internship Project, some of them are covered below:

1) INTERPERSONAL SKILLS:

While visiting the distributors with I have learnt the way of pitching a customer, how to represent the funds, how to handle various queries from them and several others.

2) COMMUNICATION SKILLS:

During this tenure of three months they have provided me various opportunities to improve my communications skills. It includes presentations on various topics like BUDGET’ 08-09, ADR & GDR etc. and group discussions.

3) KNOWLEDGE ENHANCEMENT:

With practices like NEWS submission on regular basis, assignments and daily sensex watch helped me to improve my knowledge regarding both stock market and economic development of the country.

4) TEAM BUILDING:

While working with retail team in SBIMF I have learnt the art of team building and working in a group, the way they work and move ahead as a team helps them in increasing the AUM of the company and achieving their targets.

5) APPLICATION OF KNOWLEDGE:

Another important skill that I have learnt during the project is application of knowledge to real life situations such as handling the investors who have knowledge about the industry, use of EXCEL to make SIP calculators and NAV trackers to attract the customers.



2.REVIEW OF LITERATURE

J

un

e

20

09

This was one of the best months for stocks and commodities in a

long time. Sensex posted a gain of 28% as both foreign and domestic

investors poured money. It is up a whopping 79% from the low

witnessed on March 9 this year. The scale and speed of stock market

gain has taken most investors by surprise and ‘left out feeling’ is

leading to massive buying in high-beta names. Markets caught fire

after the announcement of election results and further fuel was added by positive

news flow from global markets.

The barrage of liquidity is finally finding its way into riskier assets across markets.

Credit spreads collapsed, high yield currencies gained against safe heavens and bond

yields rose as investors migrate from defensives to risk-assets. Volatility and risk

premiums are touching multi-month low as confidence is coming back into financial

markets. Incremental economic data is less negative, pile of cash is humongous and

policy remains extremely supportive. As we have been writing that the scale,

magnitude and synchronized nature of policy response this time is simply

unprecedented in history. Fundamental problems of global imbalances that led to this



crisis can’t get resolved so easily and one might argue that the policy response so far

is something like treating a ‘hangover’ with more alcohol. But the fact remains, that

in the short term, the sheer power of liquidity can take prices of risk assets to levels

far beyond what fundamentals may justify.

Commodity prices have also shot up with Reuters CRB index posting one of the

biggest monthly gain since 1974. Normally, commodities perform during the late

stage of the bull market, however, investors seem to be playing a paper currency

debasement play through investment in real assets. While central bankers are still

maintaining probably the most accommodative policy ever to combat deflation,

market wisdom as reflected in prices seem to be getting worried about onset of

inflation.

Indian equities were one of the best performing market this month as investors

jumped in after the decisive verdict in favor of UPA government. Foreign

Institutional Investors invested over $ 4 billion in the month of May and their year-

to-date investment has also crossed $ 4 billion. Investors draw comfort from the fact

that a major victory for UPA means greater ability to carry out critical reforms.

Immediate priority for the government would be to provide adequate fiscal stimulus

in order to cushion the economy against headwinds from the global downturn. The

finance minister would have to balance between keeping the fiscal deficit under

control and providing more fiscal stimulus. The government must show a roadmap to

bring down fiscal deficit over the medium term. Some of the long pending reforms

related to FDI in sectors like insurance and retail, rationalization of subsidies,

introduction of GST from 2010-11, continued thrust on agriculture and rural sector

and restarting disinvestment programme should be on the agenda. Apart from the

physical infrastructure, there should be equal focus on building the social

infrastructure and higher outlays on education and healthcare which would go a long

way in building a solid foundation for sustained economic growth. The other point

we would like to highlight is that the focus for the government this time should be on



outcome, not outlays; execution, not just big bang announcements.

This election is a game changer. At a time when the global economy is faced with

severe challenges, the world is looking for new engines of economic growth. India

with its demographic advantage, high savings rate and a domestic consumption and

investment oriented economy has the potential to de-couple from the rest of the

world and deliver higher growth rate on a sustained basis. At this time, we needed a

pro-reforms and stable government which can push structural reforms to unleash the

full potential of Indian economy and corporate sector. People of India have delivered

that decisive mandate.

Our sectoral bets and stock picks in equity funds are rightly positioned to take

advantage of the upturn in equity market. We have been focussing on investing in

companies leveraged on domestic consumption and infrastructure build up. While

one can expect liquidity inflows from domestic and foreign investors, several

corporates are likely to use the opportunity to raise equity. We will continue to keep

a close watch on evolving economic scenario, policy announcements and valuation.

Bond yields moved up on fears of higher government borrowing. Run up in

commodity prices and increase in bond yields globally have also weighed on the

sentiments. Interest rates are likely to be range-bound for some time and will offer

more trading opportunities.

Over the last several months, we have consistently been advising investors to focus

on long term growth potential of Indian economy and take advantage of the downturn

to build exposure to equities. The recent rally in equity markets further highlights the

importance of discipline in asset allocation in investor’s portfolios.

Regards,

Navneet Munot



Chief Investment Officer

SBI Funds Management Pvt. Ltd

ABSTRACT (1)

Investments goals vary from person to person. While somebody wants security, others might

give more weightage to returns alone. Somebody else might want to plan for his child's

education while somebody might be saving for the proverbial rainy day or even life after

retirement. With objectives defying any range, it is obvious that the products required will

vary as well.

Indian Mutual Funds industry offers a plethora of schemes and serves broadly all types of

investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds.

There are also funds meant exclusively for young and old, small and large investors.

Moreover, the setup of a legal structure, which has enough teeth to safeguard investors’

interests, ensures that the investors are not cheated out of their hard earned money. All in all,

benefits provided by them cut across the boundaries of investor category and thus create for

them, a universal appeal.

Investors of all categories could choose to invest on their own in multiple options but opt for

Mutual Funds for the sole reason that all benefits come in a package. The Mutual Fund

industry is having its hands full to cater to various needs of the investors by coming up with

new plans, schemes and options with respect to rate of returns, dividend frequency and

liquidity.

In view of the growing competition in the Mutual Funds industry, it was felt necessary to



understand the working of mutual funds industry in India, its merits and

demerits, various types of schemes available in the Indian market and the investor’s

orientation towards Mutual Funds i.e. their pattern of risk appetite and preferences in various

schemes and plans. Apart from this the report also includes the details of the work that I have

learnt during the project, which according to me is the best part of the project as it provided

me a practical exposure to the Mutual fund industry and the working of an AMC.

ABSTRACT (2)

Antonella Basso and Stefania Funari of Dipartimento di Matematica Applicata “B.

de Finetti”, Università di Trieste, Piazzale Europa, 1, 34127 Trieste, Italy and Dipartimento

di Matematica Applicata, Università Ca' Foscari di Venezia, Dorsoduro 3825/E, 30123

Venezia, Italy respectively discussed in this paper about “A data envelopment analysis

approach to measure the mutual fund performance.” In this paper they present a model

which can be used to evaluate the performance of mutual funds. This model applies an

operational research methodology, called data envelopment analysis (DEA), which allows to

measure the relative efficiency of decision making units. This approach allows to define

mutual fund performance indexes that can take into account several inputs and thus consider

different risk measures and, above all, the investment costs (subscription costs and

redemption fees). Moreover, the DEA approach can naturally envisage other output

indicators, in addition to the mean return considered by the traditional indexes. Therefore, a

generalized version of the DEA mutual fund performance indexes is defined, too, which

includes among the outputs a stochastic dominance indicator that reflects both the investors'

preference structure and the time occurrence of the returns. In addition, the procedure allows

to identify, for each mutual fund, a composite portfolio which can be considered as a

particular benchmark. The performance indexes proposed are tested on empirical data.



ABSTRACT (3)

Peter Tufano and Mathew Sevick of Harvard Business School, Boston and Monitor

Company, Inc., Cambridge respectively discussed in this paper about “Board structure and

fee-setting in the U.S. mutual fund industry”. This study uses a new database to describe

the composition and compensation of boards of directors of U.S. open-end mutual funds.

They use these data to examine the relation between board structure and the fees charged by

a fund to its shareholders. They find that shareholder fees are lower when fund boards are

smaller, have a greater fraction of independent directors, and are composed of directors who

sit on a large fraction of the fund sponsor's other boards. They find some evidence that funds

whose independent directors are paid relatively higher directors' fees approve higher

shareholder fees.



ABSTRACT (4)



ABSTRACT (5)



ABSTRACT (6)



ABSTRACT (7)



ABSTRACT (8)



3. RESEARCH METHODOLOGY

NEED OF THE STUDY:

The need of the study aimed to know the awareness in the public about the various

products and services provided by S.B.I-Mutual Fund.

A study was also conducted to measure the performance of various funds on the basis

of various performance measuring ratios such as Sharpe ratio, total expense ratio,

standard deviation, Beta and R-squared.

The study was basically undertaken to understand the financial needs of the customer

and to provide or suggest them products and services according to their financial

needs.

The study was undertaken to find out the Banking channel at SBI Mutual Fund.

Analysis of the funds on the Basis of various ratios.

PERFORMANCE EVALUATION



Mutual Fund industry today, with about 34 players and more than five hundred schemes, is

one of the most preferred investment avenues in India. However, with a plethora of schemes

to choose from, the retail investor faces problems in selecting funds. Factors such as

investment strategy and management style are qualitative, but the funds record is an

important indicator too. Though past performance alone cannot be indicative of future

performance, it is, frankly, the only quantitative way to judge how good a fund is at present.

Therefore, there is a need to correctly assess the past performance of different mutual funds.

Worldwide, good mutual fund companies over are known by their AMCs and this fame is

directly linked to their superior stock selection skills. For mutual funds to grow, AMCs must

be held accountable for their selection of stocks. In other words, there must be some

performance indicator that will reveal the quality of stock selection of various AMCs.

Return alone should not be considered as the basis of measurement of the performance of a

mutual fund scheme, it should also include the risk taken by the fund manager because

different funds will have different levels of risk attached to them. Risk associated with a

fund, in a general, can be defined as variability or fluctuations in the returns generated by it.

The higher the fluctuations in the returns of a fund during a given period, higher will be the

risk associated with it. These fluctuations in the returns generated by a fund are resultant of

two guiding forces. First, general market fluctuations, which affect all the securities, present

in the market, called market risk or systematic risk and second, fluctuations due to specific

securities present in the portfolio of the fund, called unsystematic risk. The Total Risk of a

given fund is sum of these two and is measured in terms of standard deviation of returns of

the fund. Systematic risk, on the other hand, is measured in terms of Beta, which represents

fluctuations in the NAV of the fund vis-à-vis market. The more responsive the NAV of a

mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by

relating the returns on a mutual fund with the returns in the market. While unsystematic risk

can be diversified through investments in a number of instruments, systematic risk cannot.

By using the risk return relationship, we try to assess the competitive strength of the mutual

funds vis-à-vis one another in a better way.



In order to determine the risk-adjusted returns of investment portfolios,

several eminent authors have worked since 1960s to develop composite performance indices

to evaluate a portfolio by comparing alternative portfolios within a particular risk class. The

most important and widely used measures of performance are:

The Treynor Measure

The Sharpe Measure

The Treynor Measure

Developed by Jack Treynor, this performance measure evaluates funds on the basis of

Treynor's Index. This Index is a ratio of return generated by the fund over and above risk free

rate of return (generally taken to be the return on securities backed by the government, as

there is no credit risk associated), during a given period and systematic risk associated with it

(beta). Symbolically, it can be represented as:

Treynor's Index (Ti) = (Ri - Rf)/Bi.

Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the fund.

All risk-averse investors would like to maximize this value. While a high and positive

Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative

Treynor's Index is an indication of unfavorable performance.



The Sharpe Measure

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a

ratio of returns generated by the fund over and above risk free rate of return and the total risk

associated with it. According to Sharpe, it is the total risk of the fund that the investors are

concerned about. So, the model evaluates funds on the basis of reward per unit of total risk.

Symbolically, it can be written as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where, Si is standard deviation of the fund.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund,

a low and negative Sharpe Ratio is an indication of unfavorable performance.

Comparison of Sharpe and Treynor

Sharpe and Treynor measures are similar in a way, since they both divide the risk premium

by a numerical risk measure. The total risk is appropriate when we are evaluating the risk

return relationship for well-diversified portfolios. On the other hand, the systematic risk is the

relevant measure of risk when we are evaluating less than fully diversified portfolios or

individual stocks. For a well-diversified portfolio the total risk is equal to systematic risk.

Rankings based on total risk (Sharpe measure) and systematic risk (Treynor measure) should

be identical for a well-diversified portfolio, as the total risk is reduced to systematic risk.

Therefore, a poorly diversified fund that ranks higher on Treynor measure, compared with

another fund that is highly diversified, will rank lower on Sharpe Measure.



TERMINOLOGY:

ALPHA - The alpha ratio illustrates the effect of the portfolio manager’s choice on the fund's

return. The greater the alpha, the better a return has the investment yielded compared with

other investment objects with the same market risk. Alpha is an annualized return measure

of how much better or worse a fund’s performance is relative to an index of funds in the

same category, after allowing for differences in risk.

BETA – A ratio that measures the market risk of securities or a fund. If the beta ratio exceeds

one, the fund is more sensitive than funds in general to the fluctuations of the stock market.

The beta may also be negative, which means that the value of the fund will, on average, move

to the opposite direction than the general market development.

Beta measures the sensitivity of rates of return on a fund to general market movements.

Beta measures the volatility of the fund, as compared to that of the overall market. The

Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more volatile than the

market, while a beta lower than 1.00 is considered to be less volatile.

Beta measures the volatility of the fund’s value relative to the volatility of the fund’s

benchmark value. The Beta coefficient indicates the percentage change of the fund’s value

when the benchmark value changes by one percentage point.



Example: When the beta of the fund is 0.8, the value of the fund rises by 0.8 % when the

benchmark index rises by one percent. Correspondingly, when the benchmark index falls by

one percent, the value of the fund falls on average by 0.8 %.

The Beta coefficient is a key parameter in the capital asset pricing model (CAPM). It

measures the part of the asset's statistical variance that cannot be mitigated by the

diversification provided by the portfolio of many risky assets, because it is correlated with

the return of the other assets that are in the portfolio.

Beta is also referred to as financial elasticity or correlated relative volatility, and can be

referred to as a measure of the asset's sensitivity of the asset's returns to market returns, its

non-diversifiable risk, its systematic risk or market risk. On an individual asset level,

measuring beta can give clues to volatility and liquidity in the marketplace. On a portfolio

level, measuring beta is thought to separate a manager's skill from his or her willingness to

take risk.

The beta movement should be distinguished from the actual returns of the stocks.

STANDARD DEVIATION



http://en.wikipedia.org/wiki/Liquidity

http://en.wikipedia.org/wiki/Volatility

http://en.wikipedia.org/wiki/Systematic_risk

http://en.wikipedia.org/wiki/Risk

http://en.wikipedia.org/wiki/Asset

http://en.wikipedia.org/wiki/Volatility

http://en.wikipedia.org/wiki/Elasticity_(economics)

http://en.wikipedia.org/wiki/Correlation

http://en.wikipedia.org/wiki/Diversification_(finance)

http://en.wikipedia.org/wiki/Variance

http://en.wikipedia.org/wiki/Capital_asset_pricing_model

Statistic that measures the tendency of data to be spread out. Accountants

can make important inferences from past data with this measure. The standard deviation,

denoted with S and read as sigma, is defined as follows:

CORRELATION

IT shows the linear dependency between fund returns and the returns of the benchmark

index. Correlation may vary between -1 and 1. The dependency is complete if the fund’s

correlation to the benchmark index is 1. If the correlation is zero, there is no dependency.



Analysis of Funds on the basis of various ratios .

Std.

Deviation

Beta R-squared Sharpe

ratio

Portfolio

Turnover

Magnum

Taxgain

30.02% 0.88 0.96 -0.34 18%

Magnum

Global

Fund

36.19% 1.01 0.87 -0.57 43%

Magnum

Contra

31.33% 0.91 0.96 -0.24 74%

Magnum

Comma

37.69% 1.07 0.93 -0.22 64%

SBI NA NA NA NA 1146%



Arbitrage

MSFU IT 33.03% 0.82 0.61 -0.80 16%

Magnum

Multiplier

30.09% 0.86 0.93 -0.31 47%

CONCLUSION:

From the above table we can clearly see the comparison between various funds of SBI

Mutual Fund. In this higher the value of Sharpe and Treynor, better is the fund.

Magnum Taxgain

Magnum Multiplier and

Magnum Contra

are having beta values of 0.88, 0.86 and 0.91 respectively which means that these funds are

more sensitive and will give more returns than market when market are in good phase but

give negative returns more intensely than market when market in bad phase.

High and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low

and negative Sharpe Ratio is an indication of unfavorable performance. If the Sharpe figure is

positive, the risk taken has paid off, and if the figure is negative, the returns are lower than

the risk-free rate.

Magnum Taxgain,

Magnum Contra and

Magnum Multiplier

Are the three funds which are best among all in terms of risk adjusted returns.



A scheme with high Treynor ratio such as Equity scheme will enjoy a

premium when the markets are bullish and will be affected negatively when the markets are

bearish.

So in the bullish market Magnum Global and Magnum Multiplier are the best funds to opt for

getting better returns.

SCOPE OF THE STUDY :

Geographical scope-

The geographical scope of the study is not limited. This study can be implemented in any part

of the country; though the samples taken were from SBI Mutual Fund branch office at

Barakhamba Road, and various banks in the west Delhi region were visited to know their

response.

Functional scope-

This study can be used to understand the behavioral aspect of people who invest, what is their

investment potential and how much risk can they take. The study throws some light on seven

best performing schemes of S.B.I-Mutual Fund.

LIMITATIONS OF THE STUDY

Limited information through secondary research report is basic hindrance in finding

out the true results related to investments in mutual fund schemes by an investor.

Limited time was another constraint.

Geographical locations.



Extreme variability in MARKET.

Unawareness among investors is next in the line. The investor does not want

to invest in Mutual Funds because of the myth that investment in these funds

lead to insensitive returns. They think that market is highly volatile and will

not be able to give him the secured returns.

The investor also does not want to invest because of the greater risk attached

with equity. Rather, he wants to invest in a fixed instrument from where he

may be able to get secured returns instead of having unasserted returns.

DATA COLLECTION METHOD:

Primary data collection:

In dealing with real life problem it is often found that data at hand are inadequate, and hence,

it becomes necessary to collect data that is appropriate. There are several ways of collecting

the appropriate data which differ considerably in context of money costs, time and other

resources at the disposal of the researcher.

Primary data can be collected either through experiment or through survey.

The data collection for this study was done in the following manner:

Through personal interviews:-



A rigid procedure was followed and we were seeking answers to many pre-conceived

questions through personal interviews.

Through questionnaire:-

Information to find out the investment potential and goal was found out through

questionnaires.

SAMPLING METHOD ADOPTED:

The sampling method chosen is Area Sampling. As the primary sampling unit represents a

cluster of units based on geographic area. The geographical area chosen for individual

customers was at SBI Mutual Fund main office at Barakhamba Road.

It is basically a non-probability sampling procedure which does not afford any basis for

estimating the probability that each item in the population has of being included in the

sample.

Under non-probability sampling the organizers of the enquiry purposively choose the

particular units of the universe for constituting a sample on the basis that the small mass that

they so select out of a huge one will be typical or representative of the whole.

Analysis of Individual Investors

DATA ANALYSIS

POPULATION:-

According to the data collection method adopted, the size of the population is 100.

Thus, N=100



After collecting the data the following facts were found out:-

Out of the 100 people the following percentage composition were interested in the following

products:-

MUTUAL FUNDS -44%

SHARE/BONDS- 23%

LIFE INSURANCE-7%

REAL ESTATE-6%

COMMODITIES-8%

NSC (NATIONAL SAVING SCHEME)-10%

OTHERS-2%

ANALYSIS OF THE PREFERENCES OF THE RESPONDENTS:-



The data collected above shows that approximately 65% of people are

aware of the market in general and 44% are aware of Mutual Funds in particular. Thus

further analysis is made on the basis of data collected; which categories of people are more

aware and inclined towards Mutual Fund. Therefore, further analysis is made as below:

Analysis according to Age

Analysis according to Income

Analysis according to Occupation

Analysis according to Age:

Findings:



As per the above analysis, only 14% of respondents who are below 35 years are

interested to invest in SBI-MF. The reasons being that there are more needs to be

fulfilled for this age group viz. education, entertainment etc. and therefore these

people do not have surplus funds to invest in saving schemes or Mutual Funds etc.

The persons within the age group of 35-50 years only 58% of respondents are

interested to invest in SBI-MF. These persons have more investing potential than their

counterparts and they want to increase their income through investing in Mutual

Funds.

The persons having the age equal to or above 50 years, only 28% of respondents are

interested to invest in SBI-MF. The reasons being that these persons are more

inclined to age-old principals and want to invest in schemes giving fixed returns as

compared to investing in Mutual Fund.

Analysis according to Savings from income:

Income Percentage (%)

Low 34%

Medium 18%

High 48%

Findings:

The above analysis shows that Low income category is less interested to invest in

SBI-MF as compared to high income category. The reason being that these people

have to fulfill their basic needs as first. The other reason is that low income category

people are having more consumption as compared to their savings.



Among Medium income category people, only 18% of the

respondents want to invest in SBI-MF. The first and foremost reason behind this is

that these people are risk averse and want to invest in those products from which they

must get assured returns as compared to investing in Mutual Funds.

Among High income category people, only 48% of the respondents want to invest in

SBI-MF because these people have enough resources for their well being and it does

not hurt them to invest a large chunk of their resources in Mutual Funds.

Analysis according to Occupation:

Findings:

From the above analysis, it has been learned that only 49% of respondents who are in

service are interested to invest in SBI-MF because these people are well aware of



Mutual Funds and Stock Market. Service category people want to

secure their future and therefore showed interest in investing under risky ventures.

Businessmen are also interested to invest in SBI-MF. Only 32% of respondents who

are in business invested in SBI-MF.These people invest more in Debt schemes than in

Equity schemes. This is because Debt schemes promise a less, but secure return over

equity schemes which are more risky. Moreover, the risk profile of business men is

quite moderate.

Professional are much interested in investing the Mutual Funds as compared to their

counterparts. The main reason for such thing is the complete knowledge of

o Stock markets

o Past performance

o Consistent returns

o Measurement of risk

o Finance knowledge

But with the current performance of Mutual Funds on the stock market, less people are

willing to take the huge risk of losing money.

Analysis of different category persons about different schemes:-

SBI MAGNUM TAX GAIN SCHEME (MTGS)



Tax Planning Mutual Funds have come into their own as a compelling cocktail of savings

and returns, surpassing larger rivals such as equity funds in asset growth rates over the past

year and-a-half. Thus, service category is more inclined towards MTGS because of the tax

exemption and phenomenal returns. This scheme was equally supported by the SBI Tax

Advantage series I (new NFO), a close ended fund offered by SBI MF.

SBI MAGNUM GLOBAL FUND (MGLF)



MGLF is an open-ended equity scheme investing in stocks from selected industries

with high growth potential. Due to the high growth potential and investing the

resources in money market instruments, businessmen and professionals are more

inclined towards MGLF.

MAGNUM SECTOR UMBRELLA- CONTRA FUND



Due to the maximum growth opportunity through equity investments in stocks of

growth oriented sectors of the economy, professionals like the MSFU-Contra fund the

most. Servicemen also like it because of huge untapped growth potential of the

scheme. And businessmen like this scheme less as compared to their counterparts

because businessmen can’t block their money for long time and this scheme provides

return in long term.

Analysis on the basis of purchase of investment



The above graph shoes us that people purchase funds, when the price of the fund

suddenly increases. This is because of their expectation for the fund to rise more in

the future.

Next are the investors who invest when the price (NAV) of the fund is slowly but

steadily increasing. They do this, thinking that the fund will further raise in the future

at the same pace.

24 % of the investors invest their money when the price of the fund suddenly decreases. They

do this in order to take benefit of the decreased cost, in anticipation that they may sell it in the

future for a higher price.

FINANCIAL BEHAVIOR OF RESPONDENTS:



INVESTMENT OBJECTIVES:

It can be seen from the following graph that the main investment objective of most of the

investors is good returns and capital appreciation.

.

CHANNELS USED BY RESPONDENTS FOR INVESTING: From study it can easily be

inferred that majority of respondents (70%) now invest directly in mutual funds especially

after SEBI guidelines came recently that says there will not be any ENTRY LOAD for

investors investing in mutual fund schemes directly.

INVESTMENT HORIZON: From the study it can be concluded that majority of

respondents invest in mutual funds from “More than three year” perspective (53%), that’s

means once a investor comes to your service he will be there for at least three years, therefore

it is very essential today that AMCs and especially SBI should focused on innovating new

ways to serve the customers like giving SMS time to time, giving value added services like

free insurance, debit cards etc.



RISK PREFERENCES : The following chart explains that majority of

investors (57%) were ready to take moderate level of risk by investing in mutual funds and

also rest of the respondents(43%) go for “High Risk and High Return” category. Not a single

respondent opt for Low risk and low return category that again proved that it is a myth that

Indian Investors are more risk averse when it comes to investment in Stock Markets or

Mutual Funds.

SCHEME PREFERENCES:

ON THE BASIS OF ASSET CLASS:

When it comes to scheme preferences majority of the investors prefer Balanced Schemes

(43%), followed by Equity Schemes (34%) then debt (12%) and finally FMP’s (11%). It

shows that there is a huge potential for debt instruments in the market which is unearthed by

investors due to its complexity, low awareness etc.



PREFERABLE ROUTE TO INVESTING IN MUTUAL FUNDS:

As above chart clearly explains that majority of respondents (57%) take self decision ones

they start investing in mutual funds. Only 10 % of respondents take help of Brokers/Advisors

when it comes to final decision of investing. Therefore, it shows that AMCs in general and



SBI in particular have to be more informative so that they can provide best

material, service and information to facilitate subsequent investment of investors.

SCHEME PREFERENCES:

ON THE BASIS OF STRUCTURE:

When it come to scheme preference on the basis of its structure, majority of retail investors

prefer “Open Ended Scheme “ primarily due to flexibility of redemptions, investments, good

return and liquidity. None of the investors prefer “Interval Scheme”; in fact some of the retail

investors were confused about the very name of “Interval Schemes.”



SAVING HABITS:

When it comes to Saving Habits of investors it can be seen that majority of respondents saves

between 15%-20% p.a. basis followed by “above 25%” category (20%).Others categories

like 10-15 and 20-25 are equally preferred by respondents but it was a positive clue that only

7% of respondents save below 5%.

SAVING PREFERENCES:

Among saving preferences following results came out:

Using Method Of Rank Order as given by Cattell,1903 and Spearman,1904 the choices

were ranked and then as per their Rank Sum Score and Z-Values “Mutual Funds” emerges

as best choice among respondents. Though it is given 2nd Rank by majority of investors.

Following MFs, “Life insurance” and “Shares and Debentures” are the second best

choices. Surprisingly “Gold and Jewellery” is the most unlikely best choice among

respondents.



Most Popular Fund from SBI: Up till this stage the winner is

“MAGNUM TAX GAIN” which is preferred by majority of respondents (60%), due to its

three in one benefits which are as follows:

Tax Benefit

Good Return

Capital Appreciation

SATISFATION LEVEL WITH SBI:



Form above chart it can be inferred that up to this stage majority of respondents (47%) are

considerably satisfied when they were asked about overall experience with SBI Mutual

Funds including funds, returns, services etc., As can be seen 33% of the investors are

“Reasonably Satisfied” which means that there is more to do on SBI behalf for Customer

Satisfaction.

Interaction with individual/Direct (Walk in) investors

Apart from maintaining relationship with the distributors I have also deal with the customers

who are coming directly to the AMC for investment which provided me an exposure to

selling. It also helped me in learning how to deal with different type of customers, how to

insist them for making investments etc. while dealing with them I have done following

tasks:-

a) Explain them various funds/schemes according to their objective.

b) Helping them in filling the forms.



c) Solving their problems related to statement, redemption etc.

d) Insisting them to invest in Systematic Investment Plans (SIP).

While interacting with them I have tried to find out various factors effecting their

investments in mutual funds, for this I have carried out a survey by requesting them to fill a

questionnaire a sample of which I have attached in the annexure. On the basis of that that

questionnaire I have analyzed various points which are discussed below.

INVESTMENT BEHAVIOUR



INTRODUCTION:

The significant outcome of the government policy of liberalization in industrial and financial

sector has been the development of new financial instruments. These new instruments are

expected to impart greater competitiveness, flexibility and efficiency to the financial sector.

Growth and development of various mutual fund products in Indian capital market has

proved to be one of the most catalytic instruments in generating momentous investment

growth in the capital market. There is a substantial growth in the mutual fund market due to a

high level of precision in the design and marketing of variety of mutual fund products by

banks and other financial institution providing growth, liquidity and return. In this context,

prioritization, preference building and close monitoring of mutual funds are essentials for

fund managers to make this the strongest and most preferred instrument in Indian capital

market for the coming years. With the decline in the bank interest rates, frequent fluctuations

in the secondary market and the inherent attitude of Indian small investors to avoid risk, it is

important on the part of fund managers and mutual fund product designers to combine

various elements of liquidity, return and security in making mutual fund products the best

possible alternative for the small investors in Indian market.

Researchers have attempted to study various need expectations of small investors from

different types of mutual funds available in Indian market and identify the risk return

perception with the purchase of mutual funds. Various multivariate techniques are applied to

identify important characteristics being considered by the Indian investors in the purchase

decision.

The liberalization of the financial sector has sent signals to a wave of changes in savings and

investment behavior adding a new dimension to the growth of financial sector. The Indian

financial system in general and the mutual fund industry in particular continue to take

turnaround from early 1990s. During this period mutual funds have pooled huge investments



for the corporate sector. The investment habit of the small investors

particularly has undergone a sea change. Increasing number of players from public as well as

private sectors has entered in to the market with innovative schemes to cater to the

requirements of the investors in India and abroad. For all investors, particularly the small

investors, mutual funds have provided a better alternative to obtain benefits of expertise-

based equity investments to all types of investors.

OBJECTIVES OF THE STUDY:

The investors do not evaluate all possible product attributes while making a choice, but the

marketer’s search is for identification of “The key buying criteria” or “The key choice

criteria” which are defined as certain features of a product offering that are closely associated

with preferences. This study aims at tracking investor’s preferences and priorities towards

different types of mutual fund products. An attempt has also been made to differentiate

between the factors which have been considered by the investors who have been investing for

less than a year and the ones who have been investing for more than a year.

LIMITATIONS OF THE STUDY:

1) Sample size is limited to 100 only thus sample size does not adequately represent the

national market.

2) Most of the investors were those who came to SBIMF directly, thus there may be a

chance of biasness towards SBIMF’s funds.

3) This study has not been conducted over half month period in which most of the time

it was slump and fluctuations in the market. Thus the responses of the investors are

likely to be influenced by the market conditions

METHODOLOGY:



The study is based on a survey of 100 respondents through a questionnaire

covering different groups of investors but I could collect 97 complete questionnaire from

investors out of which 90 were taken as an effective sample and the data obtained were

analyzed by using, Factor analysis and Discriminant analysis. The questionnaire has been

attached in the Annexure.

RELIABILITY AND VALIDITY

In order to check the reliability and validity of the data, we had kept some similar kind of

variables in the questionnaire like fund performance and fund manager performance as well

as security and attitude towards risk. In order to increase the reliability and validity, we have

excluded the questionnaires filled by those respondents who had a varied opinion

These analysis methods are used for the following reasons:

1) Factor analysis is used to classify similar variables under a broad heading, as the

numbers of independent variables are very high.

2) Discriminant analysis is used to highlight variables which effect the decision of

people investing for less than a year and people who are investing for more than a

year.

We are going to see how these selected factors affect the investment behaviour of the existing

& potential investors. Above mentioned statistical tools have been used to analyze this

thing.As we use Factor analysis we can reduce the number of factors to draw some clear

picture for the investors who are looking to invest irrespective of market conditions. Factor

analysis will recognize similar factors & club them into one generalized factor and this will



help any researcher to observe the most important factors that contribute

most to the investment behaviour of the investors.

DESCRIPTIVE WEIGHTED FACTOR COUNTING METHOD

We have ranked the independent variables affecting the buying behavior of consumers by

adding the weighted factors. Firstly, we have counted the responses under each scale.

Secondly, we have assigned weights to each of the scale giving least weight to 1 and

maximum weight to 5. Finally, we have added all the weighted responses and ranked

accordingly i.e. in descending order.

RANK INDEPENDENT VARIABLES 1 2 3 4 5

1 Historical Performance 2 4 9 42 35

2 Fund Return Over Market Return 3 5 12 31 41

3 Advisor Influence 2 5 25 35 25

4 Tax Benefit 6 11 13 29 33

5 Lock In Period 1 5 31 32 23

5 Reputation 3 5 29 28 27

7 Security 5 5 20 41 21

8 Type Of Scheme 4 6 24 35 23

9 Regular Income 8 10 15 32 27

10 Aum 3 7 29 36 17

11 Convenience 4 6 30 35 17

12 Attitude Towards Risk 3 10 32 30 17

13 Fees 6 12 23 31 20

13 NAV 6 11 25 30 20



15 Fluctuation In Equity Market 4 18 18 34 18

16 Personal Attention 4 10 35 32 11

17 Prior Experience 11 11 25 29 16

18 Prospectus 10 20 24 25 13

19 Family Recommendation 15 20 27 24 6

20 Fund Rating 24 28 13 15 12

21 Internet 15 30 27 11 9

22 Promotional Campaign 22 25 26 14 5

23 Lot Size 20 30 25 10 7

24 Performance Of Fund Manager 25 30 26 6 5

25 Economic &Market Conditions 24 35 21 8 4

26 Transparency 33 34 18 5 2



FACTOR ANALYSIS:

As the numbers of independent variables are very high, we have tried to classify similar

variables under a broad heading through factor analysis. In KMO adequacy level is 50% with

100% significance which makes the model satisfactory. We can increase the adequacy level

by changing factors like fees load and expenses because it has a very low communality. Total

variance explained by the model is 64% which means that 64% of the variance has been

accounted by the factors. Through rotated component matrix we can classify all the variables

into 10 factors. Some of the factors are as follows:

(Refer Annexure)

VARIABLES FACTORS

Performance of fund manager

Technical factorsAUM

NAV

Type of scheme

Psychological factorsPersonal attention

Prior experience

Advisor influence

PromotionFamily recommendation

Promotional campaign

Economic & Market condition

Market conditionFluctuation in equity market

Attitude towards risk

There are other factors also which consists of other variables but they cannot be classified

under abroad headings.

We can see in the rotated component matrix in factor analysis table that above factors have

been recognised as sub-factors and generalized in 5 broad categories. All this selection has



been made by the modal on the basis of factor loadings which we can see

in one of the tables of factor analysis.

5 Broad factors have been described in the following manner:-

Financial Factors -This factor has 3 sub-factors namely performance of the fund

manager, AUM, NAV. Thus this factor tells us more of the technical side of any

given fund under consideration. Investor who ranks this factor or these sub-factors as

the most important is definitely looking for very good returns & going to invest after

much research as he will definitely looking for a fund having a good performance and

decent returns opportunity.

Customer Oriented Factors – Type of scheme, personal attention and prior

experience are the sub-factors that make this broader category together. In this

category an investor is looking for the different schemes under any particular fund.

Investor is also looking for personal attention being given to his portfolio or

investments, he wants personal attention in the sense that new investment

opportunities should be informed to him or proper entry & exit points should be

recommended to him and the likes.

Marketing Factors – Investors who are going to rate this broad category as the most

important for them are more inclined to the factors like advisor influence, family

recommendation and promotional campaign. These kinds of investors are not much

experienced as far as these investments are concerned.



Economic Factors – This factor includes factors like market

condition, fluctuations in the market and attitude towards risk. Investors who are

more concerned about these factors are risk averse investors. These investors wait for

the right moment to enter or to start investing in funds. For these people risk is at the

top most priority and if returns are not that much then also its fine with these

investors.

Security Factors – It includes tax benefits, prospectus and security as far as their

capital investment is concerned.

DISCRIMINANT ANALYSIS:

Through Discriminant analysis I have tried to highlight variables which effect the decision of

a people investing for less than a year and people who are investing for more than a year. The

term 1 consists of the people who are investing for less than a year whereas term 2 consists of

the people who are investing for 1 to 5 years. I have found that Eigen value is less than 1 and

Wilks’ Lambda is more than 0.5 as well as the significance level is quite high which shows

that the model is not applicable. Through group statistics in both the terms standard deviation

is quite high and mean is quite low as seen in Appendix. Therefore, there is no difference in

the factors affecting the buying behavior between term 1 and term 2 people.

DEMOGRAPHIC FACTORS :

SEX PROFILE:



AGE PROFILE:

From above charts it can be easily be inferred that people aged between 31-40 preferred

mutual funds most because of many factors, but mainly due to stability in their earnings and

career, responsibility towards family etc. Also, we found that only 1 respondent is female in

pilot study, so we will see to what number it will go because this number will give us a rough

idea about mutual fund awareness among women in particular and financial awareness in

general.

ACADEMIC QUALIFICATION:



MARITAL STATUS:

OCCUPTION PROFILE:

From above charts it can be easily inferred that:

Majority of respondents are graduates, therefore it remains to be seen that to what

extent post graduates and professional have interest in mutual funds.



Majority of respondents are married (80%), therefore it remains to

be seen that how many young and unmarried investors have preference towards

mutual funds.

Majority of respondents have their occupation as a professional be it Relationship

Mangers, Insurance agents, Independent Financial Advisors (IFAs), MBAs etc.

mainly due to their high level of awareness about financial products.

ANNUAL INCOME RANGE:

From above chart it can be easily inferred that majority of respondents are from 2,00,000-

5,00,000 range, therefore its remain to be seen that how many are from less than two lakh

category because here lies the opportunity for AMCs to generate huge volumes by offering

innovative funds.



FINANCIAL BEHAVIOUR OF THE RESPONDENTS :

INVESTMENT OBJECTIVES: Among given options including “others” category

majority of respondents prefer good return as their primary objective of investment.

CHANNELS USED BY RESPONDENTS FOR INVESTING: From the study it can

easily be inferred that majority of respondents(70%) now invest directly in mutual funds

especially after SEBI guidelines came recently that says there will not be any ENTRY LOAD

for investors investing in mutual fund schemes directly.

INVESTMENT HORIZON: From study it can be concluded that majority of respondents

invest in mutual funds from “More than three year” perspective (53%), that’s means once a

investor comes to your service he will be there for at least three years, therefore it is very

essential today that AMCs and especially SBI should focused on innovating new ways to



serve the customers like giving SMS time to time, giving value added

services like free insurance, debit cards etc.

INVESTMENT AMOUNT: From pilot study it can be concluded that majority of

respondents (46%) have investments in mutual funds in a range of “More than 1, 00,000”

category which implies that over a period of time if an investor see that his capital is growing

than the probability of his subsequent investment becomes very strong.

SCHEME PREFERENCES:

ON THE BASIS OF ASSET CLASS:

When it comes to scheme preferences majority of retail investors prefer Equity Schemes

(93.33%), followed by Balanced Schemes (6.66%) with no single retail investor preferring

debt or fixed income instruments like Fixed Maturity Plans (FMPs). It shows that there is a

huge potential for debt instruments in the market which is unearthed by retail investors due to

its complexity, low awareness etc.



PREFERABLE ROUTE TO INVESTING IN MUTUAL FUNDS:

As above chart clearly explains that majority of respondents (57%) take self decision once

they start investing in mutual funds. Only 10 % of respondents take help of Brokers/Advisors

when it comes to final decision of investing. Therefore, it shows that AMCs in general and

SBI in particular have to be more informative so that they can provide best material, service

and information to facilitate subsequent investment of retail investors.

SCHEME PREFERENCES:

ON THE BASIS OF STRUCTURE:



When it come to scheme preference on the basis of its structure, majority of retail investors

prefer “Open Ended Scheme “ primarily due to flexibility of redemptions, investments, good

return and liquidity. None of the investors prefer “Interval Scheme”, in fact some of the retail

investors were confused about the very name of “Interval Schemes.”

SAVING HABITS:

When it comes to Saving Habits of retail investors it comes out that majority of respondents

saves between 15%-20% p.a. basis followed by “above 25%” category (20%), therefore at

this stage it is very difficult to say anything about saving preferences about retail investors.

Others categories like 10-15 and 20-25 are equally preferred by respondents but it was a

positive clue that only 7% of respondents save below 5%.



SBI AND OTHERS:

Most Popular Fund from SBI: Up till this stage the winner is “MAGNUM TAX GAIN”

which is preferred by majority of respondents (60%), due to its three in one benefits which

are as follows:

Tax Benefit

Good Return




SATISFATION LEVEL WITH SBI:

Form above chart it can be inferred that up to this stage majority of respondents (47%) are

considerably satisfied when they were asked about overall experience with SBI Mutual

Funds including funds, returns, services etc., but it remains to be seen that which category

leads with the completion of survey because second best categories preferred by investors is

“Reasonably Satisfied” which means that there is more to do on SBI behalf for Customer

Satisfaction.

MOST POPULAR FUND HOUSE IN TERMS OF HIGHEST

INVESTMENT:

When asked about highest investment in an AMC majority of Investors (27%) gave the name

of SBI which is followed by Reliance (23%), ICICI (20%), and rest in “others” which is lead

by UTI. So there is a stiff competition in the market and it remains to be seen that which fund

house take the leads with the completion of the project.





4.COMPARATIVE ANALYSIS

INTRODUCTION:MRINAL MANISH (4108078078)


Return alone should not be considered as the basis of measurement of the performance of a

mutual fund scheme, it should also include the risk taken by the fund manager because

different funds will have different levels of risk attached to them.

Risk associated with a fund, in a general, can be defined as variability or fluctuations in the

returns generated by it. The higher the fluctuations in the returns of a fund during a given

period, higher will be the risk associated with it. These fluctuations in the returns generated

by a fund are resultant of two guiding forces. First, general market fluctuations, which affect

all the securities, present in the market, called market risk or systematic risk and second,

fluctuations due to specific securities present in the portfolio of the fund, called unsystematic

risk. The Total Risk of a given fund is sum of these two and is measured in terms of standard

deviation of returns of the fund.

In order to determine the risk-adjusted returns of investment portfolios, several eminent

authors have worked since 1960s to develop composite performance indices to evaluate a

portfolio by comparing alternative portfolios within a particular risk class. But before that we

need to understand all the components that are used to explain the ratios like Beta, Treynor,

Sharpe, and Jensen etc. the components are as follows:

NAV:

Net Asset Value, or NAV, is the sum total of the market value of all the shares held in the

portfolio including cash, less the liabilities divided by the total number of units outstanding.

Thus, NAV of a mutual fund unit is nothing but the 'book value'.

Factors affecting NAV:

Variation in investment portfolio:

Variation in the investment portfolio causes changes in the NAV of the fund, which in turn

may affect the overall value of the fund. Since, same investment portfolios with different

NAV gives same returns in percentage terms, therefore, the securities that we have in the

portfolio play pivotal importance. Changing the portfolio or replacing any security with the



existing security may change the overall NAV of the fund, which in turn

may change the value of the entire fund..

Sale and repurchase of units:

Sale and repurchase of any unit that we have in our portfolio changes the overall NAV of the

fund. For example, we have a portfolio in which the security A is priced at Rs 100. We sell

this security and after one week when the price of the security becomes Rs 80 we buy it,

keeping all other investments intact, then the NAV of the portfolio will come down, which in

turn will result in better valuation for the fund. Therefore, sale and repurchase also affects the

NAV of the fund.

Valuations of assets

The value that the underlying asset has, whose portfolio the fund has managed or is

managing, if the value of that asset changes, it can change the overall NAV of the fund.

Cost associated with the Fund

The cost associated with the fund also affects the NAV of the fund. All the charges

accumulated during the selling of a security are known as Sales charges. Funds with low

expense ratios are always preferred as they decrease the overall cost of the security.

BETA :



It is a ratio that measures the market risk of securities or a fund. If the

beta ratio exceeds one, the fund is more sensitive than funds in general to the fluctuations of

the stock market. The beta may also be negative, which means that the value of the fund will,

on average, move to the opposite direction than the general market development.

Beta measures the sensitivity of rates of return on a fund to general market movements. It

also measures the volatility of the fund, as compared to that of the overall market. The

Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more volatile than the

market, while a beta lower than 1.00 is considered to be less volatile.

Beta measures the volatility of the fund’s value relative to the volatility of the fund’s

benchmark value. The Beta coefficient indicates the percentage change of the fund’s value

when the benchmark value changes by one percentage point.

*Benchmark index that is taken here is Sensex.

STANDARD DEVIATION :

It measures the tendency of data to be spread out. Accountants can make important

inferences from past data with this measure. The standard deviation, denoted with S and read

as sigma, is defined as follows:

SHARPE RATIO:



Sharpe (1966) developed a composite index which is very similar to the

Treynor measure which will be discussed on a later stage. The only difference being the use

of standard deviation instead of beta, to measure the portfolio risk, in other words except it

uses the total risk of the portfolio rather than just the systematic risk.

= The standard deviation of the portfolio.

= Return of the portfolio.

= Risk free rate.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund,

a low and negative Sharpe Ratio is an indication of unfavorable performance. If the Sharpe

figure is positive, the risk taken has paid off, and if the figure is negative, the returns are

lower than the risk-free rate.

TREYNOR RATIO:

Treynor (1965) was the first researcher developing a composite measure of portfolio

performance. It measures portfolio risk with beta, and calculates portfolio’s market risk

premium relative to its beta. This ratio rewards volatility because it shows risk adjusted

returns per unit of market risk for that particular scheme. When the markets are more volatile,

schemes with high Treynor ratio are highly affected and vice versa. A scheme with high

Treynor ratio such as Equity scheme will enjoy a premium when the markets are bullish and

will be affected negatively when the markets are bearish. On the other hand, scheme with low

Treynor ratio such as Debt Fund will not be affected greatly, irrespective of the bullish or

bearish run in the markets.



= Portfolio’s actual return during a specified time period.

= Risk-free rate of return during the same period.

= Beta of the portfolio.

All risk-averse investors would like to maximize this value. While a high and positive

Treynor Index shows a superior risk-adjusted performance of a fund, a low and negative

Treynor Index is an indication of unfavorable performance.

The trouble with both Sharpe and Treynor ratios for evaluating "risk-adjusted" returns is that

they equate risk with short-term volatility. Therefore these measures may not be applicable in

evaluating the relative merits of long-term investments.

INTER FIRM COMPARISON:



The main objective of doing Inter Firm Analysis is to judge where SBI

EQUITY FUNDS stands in comparison to other Asset Management Companies (AMCs) as

per different criterion which are explained as follows.

I have taken the help of recently done OUTLOOK MONEY SURVEY, to select the

categories and top performing funds in those categories.

The following are those five categories:

EQUITY DIVERSIFIED FUNDS

EQUITY LINKED SAVING SCHEME

EQUITY LARGE CAP

EQUITY MID AND SMALL CAP

EQUITY THEMATIC

The comparative analysis of categories mentioned above is shown as follows as on 29-05-09:

The following three parameters are considered for comparative analysis:

Funds’ Returns

Risk Profile

Portfolio Analysis

LIMITATIONS:

Comparison of funds is done on the basis of various factors but due to time constrain

and non-availability of data, I have done comparison on the basis of three factors

namely return, risk and portfolio of the fund.

Also it is not possible to compare all the funds in market under each category, that’s

why I have selected top 5 funds of each category mentioned above and compared

them.



METHODOLOGY

For the first part of analysis i.e. fund returns, I have taken five top funds of same

category of different fund houses and compared their returns for 6 months, 1year, 3

years and 5 years.

For the second part of anlysis i.e. risk profile, I have compared these five funds with

respect to their standard deviation, sharpe ratio, beta, alpha and r- squared.

For the third part of anlysis i.e. portfolio analysis, I have compared these five funds

with respect to their P/E ratio, fund size(in Rs. cr.), portfolio turnover(in %), top 5

holdings.

The comparison of the funds is done using the bar charts and thus arriving at a

conclusion after analyzing those charts.

1)EQUITY DIVERSIFIED FUNDS:

Meaning: These are the funds in the market which have investment across the

sectors, asset classes and financial instruments to provide optimal benefit of

diversification of portfolio to investors.



The following are the top five funds in the market in this category as per the recently held

survey:

a) SBI MAGNUM CONTRA

b) HSBC EQUITY

c) FRANKLIN INDIA PRIMA PLUS

d) SBI MAGNUM EQUITY

e) RELIANCE GROWTH

ANALYSIS :

FUNDS RETURNS:

As per this criterion funds are compared from past six month duration to five years time.

Latest returns are shown in the analysis. Returns of less than one year are on absolute basis

and for more than one year are on compounded basis.

Fund Return(in

‘000 cr.)

SBI Magnum

Contra

HSBC Equity Franklin India

Prima Plus

SBI Magnum

Equity

Reliance

Growth

6 Months 53.64 34.56 43.36 51.79 46.42

1Year 13.55 -0.42 13.80 10.18 2.37



3Year 16.29 14.29 17.36 14.6317.15

5Year 29.48 19.65 11.46 22.95 26.77

AS ON 29-05-09 Source: Value Research Online

FINDINGS:

Since two funds from SBI brand are in top five funds, that’s shows how well the

portfolios are managed by the concerned Fund Managers.

Magnum Contra has performed very well in last six months which shows the funds’

ability to withstand ups and downs in the market which is the case since December

2008.It has increased by only (53.64)% when compared to HSBC Equity which has fallen

by (34.56)%.



Hit by global recession, from one year perspective also both funds from SBI are showing

stable returns.

Last, but not the least from three and five years perspective, the horizon which is

considered to be very important from investors point of view, both funds from SBI,

especially Magnum Contra outperformed in the category. It is giving highest return of

16.29% and 29.48% return in both time periods.

RISK PROFILE:

SBI Magnum

Contra

HSBC Equity Franklin

India Prima

Plus

SBI Magnum

Equity

Reliance

Growth

Standard

Deviation

32.10 28.84 29.66 33.41 33.35

Sharpe

Ratio

-0.03 0.03 0.03 0.00 -0.01

Beta 0.97 0.87 0.89 1.00 0.97

Alpha -0.31 1.50 1.28 0.67 0.35

R-

Squared

0.95 0.95 0.94 0.95 0.88




FINDINGS:

Since Standard Deviation is the measure which shows variability in the returns from

the mean return, therefore it is considered to be the direct measure of risk. As Both

SBI funds have higher Standard Deviation, it shows that these funds are more

aggressive in nature than other funds.

Sharpe ratio, which means returns per unit of risk that a fund is able to generate.

Therefore, higher the ratio the better it is. Accordingly, Magnum Contra is not a

winner as per this criterion.

Beta, which shows the co-movement of funds return with Market rate of returns, is

again measure of volatility or risk. Since Magnum Equity is having highest Beta

which is closed to one and also Magnum contra which is second highest shows that

they are tend to be aggressive or volatile in nature.



Alpha, which measure the excess return over and above the market

return is a measure of risk. A high positive alpha is good sign for fund. e.g. if a fund

has alpha of positive 10 it

means fund is giving a return of more than 10 percent when compared to its

benchmark or Market. Accordingly, HSBC Equity is winner in this category which is

generating a highest positive alpha in the category which is 1.50%.

R-Squared, which explains the change in return caused by market volatility is a good

measure of risk. But a high r-square means that much of change is caused by market

sentiments or fundamentals. Therefore, it is suggested that if a fund has very high r-

square value it means similar returns can be achieved by investing in the stock

markets. Therefore, a moderate r-square value ranging between 65-85% is

considered good from portfolio management point of view. Since, Magnum Contra is

having one of the highest r-squared value(.9) alongwith HSBC Equity it is suggested

that some changes has to be made in the portfolio of fund to take benefit of

diversification of portfolio. On the contrary, Reliance Growth is having a r-squared

value of .88 which means that it is taking the benefit of its portfolio in most optimum

way.

PORTFOLIO ANALYSIS:



SBI Magnum

Contra

HSBC Equity Franklin India

Prima Plus

SBI

Magnum

Equity

Reliance

GrowthP/E ratio 14.73 18.93 18.62 21.71 14.34

Fund Size(in

Rs. cr.)

1958.5

0

1180.

7

1153.2

0

241.91 3597.9

2

PortfolioTurno

ver(in %)

63.00 56.00 57.85 48.00 97.00

Top 5

Holdings

21.52% 26.97

%

33.46

%

31.52

%

17.49%


FINDINGS:



P/E RATIO is a measure of investors’ confidence in the

fund/stock. High P/E ratio means that investors are paying higher prices for stock

when compared to its earnings. Generally, P/E ratio is high for young/growth

funds/stock. Since Magnum Equity is having a highest P/E ratio in the category, it

shows that investors have a lot of confidence in funds. On the contrary, Magnum

Contra is slowly losing its contrarian approach which reflects in its lowest P/E ratio in

the category.

As usual funds from SBI brands have largest Assets under Management (in cr.) this

shows the Brand SBI has no problem when it comes to raising funds. Like Magnum

Contra has second highest AUM in the category only preceded by Reliance Growth.

Concentration Level: As shown in above table, Magnum Equity is having 2nd

highest holdings in top five stock, which means the fund is concentrated towards

major stocks in the portfolio. While Magnum Contra is quite diversified fund as it is

having second lowest concentration level only next to Reliance Growth.

Portfolio Turnover which measures the extent to which the fund is active in terms of

its dealings in the markets. However, high turnover also implies that high transaction

cost are charged to fund. Since Sbi Magnum Equity of the funds from SBI have very

low turnover, it means that funds were not required to be changed in recent period

which ultimately results in greater efficiency. On the other hand Reliance Growth is

having highest Portfolio Turnover which means Fund Manager is churning the

portfolio very quickly which in turn increasing the transaction cost charged to the

fund.



NAV DETAILS OF FUNDS AS ON 29 TH

MAY,2009

FUND NAV

SBI Magnum Contra 45.00

HSBC Equity 80.72

Franklin India Prima

Plus

43.36

SBI Magnum Equity 31.39

Reliance Growth 319.21

AS ON 29-05-09 Source: www.nseindia.com



CONCLUSION:

After considering all three parameters mentioned above it can be concluded that MAGNUM

CONTRA is the best fund in the category because unlike a typical contrarian fund that focus

on out of flavor stocks, this fund considers the underlying company’s valuations and

compares that with what it believes the company’s true valuations should be and then decide

whether to invest in it or not. According to its Fund Manager Pankaj Gupta “if the market

expects a stock to grow by 20%, but we it to grow by 30%, the scrip is contrarian for us.”

Also, Fund mainly focused on high-growth stocks like JP Associates, Sintex and Welspun

Gujarat Stahl Rohern throughout 2007.Infact, Fund kept a high exposure to the capital goods

sector, one of the preferred in 2007.Fund also played on some contrarian bets like it invested

in TATA STEEL after it acquired the Anglo-Dutch Steel Major CORUS despite market

shunning it. It increased its exposure to interest-rate sensitive sectors such as Auto and

Banking, a move that eventually benefited the fund in 2007.



2)EQUITY LINKED SAVING SCHEME :(ELSS)

These are the open ended saving schemes which generally have lock-in-period of three years

which means that once you have invested certain amount in your fund, you can’t withdraw

any amount from your account. These scheme are most popular among retail investors(also

see in Appendices) due to its three-in-one feature which means these schemes are able to

satisfy three different investment objectives simultaneously which are mentioned as follows:

Tax Benefit

Good Return


The following are the top five performing funds in ELSS category:

a) SBI MAGNUM TAX GAIN 93

b) PRINCIPAL TAX SAVINGS

c) BIRLA SUN LIFE TAX RELIEF 96

d) SUNDARAM BNP PARIBAS TAX SAVER

e) KOTAK TAX SAVER



ANALYSIS :

FUNDS’ RETURN :

As per this criterion funds are compared from past six month duration to five years time.

Latest returns are shown in the analysis. Returns of less than one year are on absolute basis

and for more than one year are on compounded basis:

Fund Returns(in

‘000 cr.)

SBI Magnum

Tax Gain

Principal Tax

Savings

Birla Sunlife

Tax Relief 96

Sundaram BNP

Paribas Tax

Saver

Kotak Tax

Saver

6

Months

48.39 30.32 55.49 41.78 43.98

1 Year 8.81 -16.51 9.34 16.48 2.73

3 Year 13.01 3.68 12.44 19.11 9.91

5 Year 40.02 21.29 22.25 35.99 NA




FINDINGS:

In six month category Magnum Tax gain has performed very well, it is preceeded

only by Birla Sunlife Tax Relief when compared to other similar funds like Sundaram

Tax Saver, Principal Tax saving and HDFC Long term advantage.

In one year category, fund has performed averagely well than other funds like

Principal Tax saving, and Kotak Tax Saver. Fund has given only 8.81% return against

the best of Sunadaram BNP Paribas Tax Saver’s 16.48%.

Last but not the least, it is good news that fund has outperformed all other funds in

Three Year and Five Year Category giving returns of 13.01% and 40.02%

respectively because this is the most preferred Investment Horizon among retail

investors. In the 3 years category only Sundaram BNP Paribas Tax Saver shown

higher returns of 19.11% than Magnum Taxgain’s.



RISK PROFILE:

SBI Magnum

Taxgain 93

Principal Tax

Savings

Birla Sun

Life Tax

Relief 96

Sundaram

BNP Paribas

Tax Saver

Kotak Tax

Saver

Standard

Deviation

31.01 36.15 36.74 31.42 33.

79

Sharpe Ratio -0.11 -0.25 -0.13 -0.03 -

0.2

7Beta 0.93 1.02 1.07 0.91 0.9

7

Alpha -2.78 -8.41 -4.00 -0.28 -

8.5

9R- Squired 0.94 0.84 0.90 0.87 0.8

6




FINDINGS:

Since Standard Deviation is the measure which shows variability in the returns from

the mean return, therefore it is considered to be the direct and primary measure of

risk. In case of Magnum Tax Gain, it has the lowest standard deviation in the category

which means that the fund has not much risky portfolio.

Sharpe ratio, which means returns per unit of risk that a fund is able to generate.

Therefore, higher the ratio the better it is. Accordingly, Magnum Tax Gain is among

the best fund as it is having 2nd highest ratio in the category. All funds in this

category are showing negative ratio which indicates that funds are not able to justify

well whatever it hac investments in risky assets.

Beta, which shows the co-movement of funds return with Market rate of returns, is

again measure of volatility or risk. Magnum TAX Gain which is having one of the

lowest beta in the category and also less than 1(.9) shows that the fund is actually

very less sensitive to stock market movement.

Alpha, which measure the excess return over and above the market return is a

measure of risk. A high positive alpha is good sign for fund. e.g. if a fund has alpha of

positive 10 it means fund is giving a return of more than 10 percent when compared

to its benchmark or Market. As per this criterion Sundaram BNP Tax Saver is leading

the category having lowest negative alpha of -0.28%. Magnum Taxgain is at the 2nd

position with negative alpha of -2.78%.

R-Squared, which explains the change in return caused by market volatility is a good

measure of risk. But a high R-squared means that much of change is caused by market

sentiments or fundamentals. Therefore, it is suggested that if a fund has very high r-

square value it means similar returns can be achieved by investing in the stock



markets. Therefore, a moderate r-square value ranging between

65-85% is considered good from portfolio management point of view. All funds

except for Magnum Taxgain(0.94) and BSL Tax Relief 96(0.90), as per this criterion

are trailing compared to other funds in this category.

PORTFOLIO ANALYSIS:

SBI Magnum

Taxgain 93

Principal Tax

Savings

Birla Sunlife

Tax Relief 96

Sundaram

BNP Paribas

Tax Saver

Kotak Tax

Saver

P/E Ratio 18.13 14.91 16.56 16.12 16.62

Fund Size(in

Rs. Cr.)

3133.66(30-

04-09)

175.63(30-04-

09)

591.69(30-04-

09)

703.54(30-

04-09)

32.1(30-

04-09)

Portfolio

Turnover(in

%)

24.91 22.14 22.43 30.20 20.94

Top 5

Holdings

19.64% 24.48% 29.19% 23.21% 17.39%




FINDINGS:

From the above table it can be concluded that:

P/E RATIO is a measure of investors’ confidence in the fund/stock. High P/E ratio

means that investors are paying higher prices for stock when compared to its

earnings. Generally, P/E ratio is high for young/growth funds or stock. In this case

Investors have faith in SBI Magnum Taxgain 93 as it is having highest P/E

ratio(18.13). Though Kotak Tax Saver is also having a better figure of 16.62.

Again Magnum Tax gain has largest Assets under Management (AUM), as a result

of strong distribution network, strong brand, and the message of faith that SBI name

itself give to masses of investors. Therefore, SBI Mutual Funds in particular should

build on strength of its Sponsor.



Portfolio Turnover which measures the extent to which the fund

is active in terms of its dealings in the markets. However, high turnover also implies

that high transaction cost are charged to fund. As it is clearly visible from the table

that Magnum Tax Gain(24.91) from SBI has lower ratio compared to Sundaram BNP

Paribas Tax Saver(30.20) in the category it can be concluded that portfolio was

changed least number of time which again resulted in greater efficiency.

Concentration Level: As it is clearly visible from the table that Kotak Tax Saver is

most diversified fund as it is having lowest holdings in Top five holdings while Tax

gain from SBI has 2nd lowest level of concentration level which means it is better

diversified than other two funds in the same category.

NAV DETAILS OF FUNDS AS ON 29 TH MAY,2009

FUND NAV

SBI Magnum Tax Gain 93 46.09

Principal Tax Savings 57.03

Birla Sun Life Tax Relief 96 71.15

Sundaram BNP Paribas Tax saver 34.88

Kotak Tax Saver 13.79




CONCLUSION:

After considering all the three parameter mentioned above, it can be concluded that

MAGNUM TAX GAIN tops the chart. Though shift towards Large-Cap stocks did not help

in 2007 therefore Fund manager Jayesh Shroff has been forced to cut holdings in small and

medium companies from 86% in mid-2005 to around 25% now. Also, since ELSS has more

of Retail money Mr.Shroff decided to play less aggressive strategy. After all large cap stocks

are less volatile and schemes investing them have low downside risk. Principal Tax Saving

fund is the second best fund and also most consistent fund in the category.The fund also

invested in under-researched companies like Adhunik Metaliks, Madhukon Projects, Essen

Rea Roll which helped in generating more returns. The fund has no sectoral bias and invested

in stocks across market capitalization.



3)EQUITY MID AND SMALL CAP:

These are the equity funds which invest primarily in mid cap and small cap stocks, the stocks

which have growth potentials and also have high risk when compared to large cap.

OBJECTIVE: The main objective of such funds is to provide long term growth in capital

along with liquidity, by investing predominantly in a well diversified basket of equity stocks

of companies whose market capitalization is less than Rs 2000 crore.

The following are the top five performing funds in this category as on date:

a) ICICI PRU EMERGING STAR

b) MAGNUM GLOBAL 94

c) MAGNUM MULTIPIER PLUS 93

d) RELIANCE GROWTH

e) SUNDARAM BNP PARIBAS SELECT MIDCAP INST



ANALYSIS:

FUNDS’ RETURN:

Fund

Returns(in’000cr.

)

ICICI PRU

Emerging

STAR

Magnum

Global 94

Magnum

Multiplier Plus

93

Reliance

Growth

Sundaram

BNP Paribas

Select Midcap 3 Months 68.40 85.26 55.77 64.43 NA

1 Year -29.66 -21.61 -5.55 -9.68 NA

3 Year -3.97 -0.36 10.30 11.95 NA

5 Year 24.82 31.21 33.32 35.20 NA




FINDINGS:

Since two funds from SBI brand are in top five funds, that’s shows how well the portfolios

are managed by the concerned Fund Managers.

In Three month category, Magnum Global is the winner since it has fallen by minimum

value, while both funds Reliance Growth and Multipier Plus 93 have fallen by maximum

value. It means these funds were not able to withstand Ups and Downs in the Indian stock

markets in past three months i.e. from March 2009 to May 2009 compared to other well

performing fund in the same period.

Hit by the mammoth of recession in one Year category Winner is Magnum Multiplier

Plus 93 giving the highest return of -5.55%, while funds like ICICI Pru Emerging STAR are

giving lowest returns in the category giving only -29.66% return in past one year.

In three year category which is one of the preferred choice of a retail investor Magnum

Multiplier Plus 93 is 2nd highest giving the return of 10.30% while Reliance Growth is at 1st

position giving 11.95% return.

In five year category, again Reliance Growth is the winner giving a handsome return of

35.20%, while Multiplier plus is giving a return of 33.32% at Second Position and Magnum

Global is giving a return of 31.21% which is not a bad return.



RISK ANALYSIS:

ICICI PRU

Emerging

STAR

Magnum

Global 94

Magnum

Multiplier

Plus 93

Reliance

Growth

Sundaram

BNP

Paribas Standard

Deviation

38.24 37.22 30.90 33.35 NA

Sharpe

Ratio

-0.40 -0.34 -0.08 -0.01 NA

Beta 1.07 1.05 0.90 0.97 NA

Alpha -

14.78

-

12.07

-1.80 0.35 NA

R-

Squired

0.82 0.83 0.90 0.88 NA




FINDINGS:

The primary measure of risk i.e. Standard Deviation is highest for ICICI Pru Emerging

Star which means it is the most risky fund in the category. Second is Magnum Global

having Standard Deviation of 37.22%.Fund having lowest Standard Deviation is also

from SBI, Multiplier Plus 93 is having 30.90% as Standard Deviation.

All funds in this category are showing negative ratio which indicates that funds are not

able to justify well whatever it hac investments in risky assets. Now, 2nd highest return per

unit of risk in the category is from SBI, Multiplier Plus is having a Sharpe Ratio of -0.08

which justify its risk. ICICI Pru Emerging STAR is having lowest ratio(-0.40) again

indicating its aggressive nature.

ICICI Pru Emerging Star is having a highest Beta of 1.07 in the category, which means

it is the most highly sensitive fund to the market in the category. Magnum Multiplier

Plus is having lowest Beta of 0.90 which means that it is less sensitive to the market and

hence less risky.

Reliance Growthis having a highest value of alpha in the category. It is giving 0.35 %

excess return than its benchmark. Multiplier Plus from SBI has second best alpha which

is giving -1.80% deficit return than its benchmark.

Last, but not the least all funds in this category have good R-Squared value, because all

R-Square values are near about .7 or less than that which means all funds are taking the

benefit of Professional Management, since a major part is being played by other

facors.But three funds ICICI Pru Emerging Star(0.82),Magnum Global(0.83) and

Reliance Growth(0.88) are having best R-Squared value in the category.



PORTFOLIO ANALYSIS:

ICICI PRU

Emerging

STAR

Magnum

Global 94

Magnum

Multiplier Plus

93

Reliance

Growth

Sundaram

BNP

Paribas P/E Ratio 12.39 11.64 21.20 14.34 NA

Turnover(in

%)

91.61 90.72 47.00 59.69 NA

Fund

size(in

Rs.cr)

256.0

0(30-

04-

746.87(

30-04-

09)

687.15(3

0-04-09)

3597.9

2

NA

Top 5

Holdings

14.60

%

18.96% 24.68% 17.49 NA


FINDINGS:



P/E RATIO is a measure of investors’ confidence in the fund/stock. High P/E ratio

means that investors are paying higher prices for stock when compared to its

earnings. Generally, P/E ratio is high for young/growth funds or stock. In this case

both funds from SBI are having high P/E Ration in the category.Infact,Magnum

Multiplier Plus 93 is having highest P/E ratio of 21.20 in the category. Magnum

Global 94 is having a lowest P/E Ratio of 11.64 which shows investors are

comparatively lacking confidence in the fund.



cost are charged to fund. As it is clearly visible from the table that Magnum

Multiplier Plus is having lowest turnover ratio of 47% compared to highest of 91.61%

in case of ICICI Pru Emerging Star and 90.72% in case of Magnum Global 94, it

shows that the fund is well managed and is having a lowest transaction costs. Also

Reliance Growth is having moderate value of 59.69% implying less transaction cost

being charged to the fund.

Fund Size, as visible from table itself that, Reliance with its Brand Name and

effective Marketing Strategy has no problem when it comes to raising fund from

public. Reliance Growth is having a largest Fund Size of Rs.3597.92 Crore in the

category, followed by Magnum Global 94 (Rs.746.87 Cr)and SBIs Magnum

Multiplier Plus (Rs.687.15 Cr) which shows popularity of these funds in the market.

Concentration Level: As visible from table, ICICI Pru Emerging STAR is having

lowest percentage (14.60) of holding in its Top five Stocks i.e.it is the most

diversified fund in the category. On the other hand, Magnum Multiplier Plus 93 is

having lowest Diversification as it is having highest holding in top five stocks (24.68)

in the category.




FUND NAV

ICICI PRU EMERGING STAR

21.42

MAGNUM GLOBAL 94 35.81

MAGNUM MULTIPIER PLUS 93 58.57

RELIANCE GROWTH 319.21

SUNDARAM BNP PARIBAS

SELECT MIDCAP INST

100.52




http://www.nseindia.com/

CONCLUSION:

After considering all three parameters discussed above it can be concluded that MAGNUM

MULTIPLIER PLUS FUND is the best fund in the category followed by Reliance Growth.

4)EQUITY LARGE CAP:

These are the funds which have investments predominantly in large cap stock. These are the

stocks which has a solid track record and sound fundamentals. These are the less risky stocks

and hence generally have low growth rates when compared to small and mid-cap stocks.

In this category fund from SBI, Magnum Equity have been taken, since it has significant

exposure to large cap stocks (92.16%).

The following are the top performing funds in the category:

A) BIRLA SUN LIFE FRONTLINE EQUITY

B) SUNDARAM BNP PARIBAS S.M.I.L.E. REG

C) KOTAK 30

D) MAGNUM EQUITY



E) RELIANCE VISION

ANALYSIS:

FUNDS’ RETURN:

Fund returns(in

‘000cr.)

Birla Sunlife

Frontline

Equity

Sundaram

BNP Paribas

S.M.I.L.E. Reg

Kotak 30 Magnum

Equity

Reliance

Vision

3 Months 61.99 80.89 45.96 51.79 59.18

1 Year -0.65 -7.79 -12.42 10.18 -5.81

3 Year 17.69 9.63 9.53 14.63 10.21



5 Year 29.29 NA 27.3722.95 28.83


FINDINGS:

In past three months, Sundaram BNP Paribas S.M.I.L.E. Reg is the winner, since it

has fallen to only (80.89%) compared to highest fall in Kotak 30(45.96). Also,

Magnum Equity from SBI was not able to withstand ups and downs in the market

witnessed in last three months since it is fallen to 51.79% which is second highest

fall.

Hit by the mammoth of recession in one year category, Magnum Equity top the

charts, giving the highest return of 10.81%, when compared to the lowest of -12.42%

given by Kotak 30.

In three Year category Sundaram BNP Paribas Select Focus top the charts giving a x

return of 17.69% followed closely by Magnum Equity giving a return of 14.63%.



In Five year category Birla Sun Life Frontline Equity top the charts giving a return of

29.29% while Magnum Equity stands at only 4TH position giving the return of 22.95%.

RISK PROFILE:

Birla Sunlife

Frontline

Equity

Sundaram

BNP Paribas

S.M.I.L.E.

Kotak 30 Magnum

Equity

Reliance

Vision

Standard

Deviation

29.36 38.07 29.98 33.41 30.79

Sharpe Ratio 0.14 -0.10 -0.05 0.00 -0.11

Beta 0.89 1.12 0.90 1.00 0.91

Alpha 4.60 -3.01 -0.99 0.67 -2.95



R-Squired 0.96 0.91 0.950.95 0.92


FINDINGS:

As per the Standard Deviation, SUNDARAM BNP PARIBAS S.M.I.L.E. Reg is

having the highest risk in the category compared to lowest risky Birla Sun Life

Frontline Equity (29.36%).

The return per unit of risk is highest in case of Birla Sun Life Frontline

Equity(0.41) which is also having lowest risk in the category while RELIANCE

VISION is having one of the lowest Sharpe Ratio(-0.11) in the category indicating

that fund is not able to generate enough return compared to the risk its taking while

investing.



SUNDARAM BNP PARIBAS S.M.I.L.E. REG is having highest Beta (1.12) in the

category signifying its aggressive nature. Since Beta is more than 1 it means Fund is

highly sensitive to the market, therefore whenever Stock Market will fall or rise fund

will fall or rise more than the market. Birla Sun Life Frontline Equity is having lowest

Beta (.89) in the category again signifying that it is having lowest risky profile in the

category.

As per Alpha measure of risk, Birla Sun Life Frontline Equity is again the best fund

in the category, giving the highest excess returns than the market (4.60%).On the

other hand RELIANCE VISION is not able to generate Alpha Returns and it is one of

the lowest alpha generating fund in the category (-2.95%).

All funds in the category are having higher R-Squared Value. Among the funds Birla

Sun Life Frontline Equity is having highest value of .96 which tells us that All funds

are significantly influenced by Market and thus not taking help of Professional

Management at its optimum.

PORTFOLIO ANALYSIS:

Birla Sunlife

Frontline

Equity

Sundaram

BNP Paribas

S.M.I.L.E.

Kotak 30 Magnum

Equity

Reliance

Vision

P/E Ratio 15.52 14.67 17.22 21.71 14.81

Portfolio

Turnover(in

%)

17.45 10.83 26.31 32.29 17.02

Fund Size(in

Rs.cr.)

481.14(30-

04-09)

130.26(30-

04-09)

688.14(30-

04-09)

241.91(30-

04-09)

2589.02(30-

04-09)



Top 5

Holdings28.46% 20.93% 32.11% 31.52% 26.21%


FINDINGS:

As per P/E Ratio Magnum Equity is the winner in the category, it is having highest

ratio of 21.71 i.e. Investors are really confident about the fund and they are paying

much higher than the earnings. While Sundaram BNP S.M.I.L.E. Reg is having

lowest P/E Ratio of 14.67 which means investors are not much confident about the

fund.





cost are charged to fund. In this category, SUNDARAM BNP

PARIBAS S.M.I.L.E. Reg is having lowest Portfolio Turnover Ratio (10.83)

suggesting that Fund Manager is managing the fund without much change in the

portfolio and thus saving the Transaction cost. On the other hand, Magnum Equity is

having the highest Portfolio Turnover Ratio of (32.29),thus incurring the highest

transaction cost.

As per the Fund Size, Reliance Vision managing the largest fund (2589.02 Cr) in the

category, indicating its Brand Name, Brand Penetration in the market. While

Magnum Equity is having the 2nd minimum Fund Size indicating the not much

popularity of the fund in the market.

Concentration Level: As per this criterion, Kotak 30 and Magnum Equity are having

highest Top Five Holdings in the category (32.11%) and (31.52%) respectively,

indicating that it is the least diversified fund in the category. While SUNDARAM

BNP PARIBAS S.M.I.L.E. Reg is having lowest (20.93%) top five holdings

indicating that it is the most diversified fund in the category, thus taking the benefit of

the Diversification.




FUND NAV

Birla Sun Life Frontline Equity

62.82

Sundaram BNP Paribas

S.M.I.L.E. Reg

22.49

Kotak 30 76.93

Magnum Equity 31.39

Reliance Vision 198.42

AS ON 29-05-09 SOURCE: NSE WEBSITE

CONCLUSION:

After considering all three parameters discussed above it can be concluded that BIRLA SUN

LIFE FRONTLINE EQUITY tops the category due to following reasons:

A.Balasubramanian who earlier used to head Fixed Income Team, now heads overall

Investment team, he gave a lot of freedom to its analyst and research team to present

new stock ideas. He also sharpened the internal processes, stressing on small and

medium companies that are usually under-researched.



Fund Manager Mahesh Patil’s stock and sector selection ability

was also the key to fund’s success.It did well to identify potential winner in public

sector banks, as also companies like Crompton Greaves, Hindustan Dorr-Oliver and

Thermax in 2007.

Mahesh also played fairly aggressive strategy by picking up stocks whose Price levels

were attractive.

Fund also didn’t take high exposure to any single stock, therefore Downside risk was

also lowest of this fund in the category.

5)EQUITY THEMATIC FUNDS:

These are the funds which invest in particular sector or particular group of companies to take

advantage of that group. These funds are generally higher in risk profile and thus provide

high return also.

The following are the top performing funds which have been taken for comparison with SBIs

thematic fund in the category:



A) BIRLA SUN LIFE BASIC INDUSTRIES

B) TATA INFRASTRUCTURE

C) JM BASIC

D) MAGNUM EMERGING BUSINESS FUND

E) UTI INFRASTRUCTURE

ANALYSIS:

FUNDS’ RETURNS:

Fund returns(in

‘000 cr.)

Birla Sunlife

Basic

Industries

Tata

Infrastructure

JM Basic Magnum

Emerging

Businesses

UTI

Infrastructure

3 Months 71.77 66.96 123.1

5

96.38 52.80



1 Year -8.76 -13.07 -35.62 -

24.67-9.12

3 Year 8.42 12.23 2.76 -2.21 10.89

5 Year 24.63 NA NA NA 33.64


FINDINGS:

In three Months Category JM BASIC is the winner, giving a solid return of 123.15%

followed by Magnum Emerging Business Fund giving a return of 96.38%.

In one year category, Birla Sunlife Basic Industries is the winner showing a fall of-

8.76% followed by UTI Infrastructure(-9.12).The 2nd lowest return was given by SBIs

Magnum Emerging Business Fund (-24.67%).



In three year category, TATA Infrastructure is the winner giving a return of 12.23%

followed by UTI Infrastructure(10.89%). Again the lowest return is given by

Magnum Business Fund (-2.21%).

In Five Year category data is not available since all the above listed funds are new

and have a track record of only three years except UTI Infrastructure giving a return

of 33.64% which is a quite good return.

RISK PROFILE:

Birla Sunlife

Basic

Industries

Tata

Infrastructure

J M Basic Magnum

Emerging

Businesses

UTI

Infrastructure

Standard

Deviation

34.57 35.21 47.00 0.82 33.88

Sharpe Ratio -0.17 -0.02 -0.22 -13.41 -0.05



Beta 1.03 1.05 1.361.16 1.00

Alpha -5.10 -0.11 -9.58 -0.34 -1.12

R-Squired 0.93 0.92 0.88 41.45 0.90


FINDINGS:

As per Standard Deviation (S.D), which is considered to be primary measure of risk,

SBIs Magnum Emerging Fund is the winner in the category having a lowest Standard

Deviation of 0.82.On the other hand JM Basic is the looser having the highest S.D Of

47.00.



As per Sharpe Ratio, the return per unit of risk is negative for all

the funds in this category. Its lowest in the case of Magnum Emerging Business

Fund(-13.41) which means that funds is a looser.

As per Beta measure of risk, JM Basic is the most sensitive to the market, sine it is

having highest Beta in the category of 1.36. All the funds in this category have Beta

greater or equal to 1 which show that they are highly sensitive to market sentiments.

All the funds in this category have negative alpha 1 which show that they are giving

negative returns. As per Alpha Measure of risk, Tata Infrastructure and Magnum

Emerging Business Fund are showing smallest negative figures of -0.11 and -0.34 in

ths category which suggests that they have given minimum loss to the investors

compared to other funds. On the other fund, JM Basic was looser generating a highest

negative alpha of (-9.58%).

As per R-Squared Value, JM Basic is having the best value as per MORNING

STAR, because it is having a moderate value of .88 i.e. it is taking the benefit of

diversification.

PORTFOLIO ANALYSIS:

Birla

Sunlife

Basic

Tata

Infrastructure

JM Basic Magnum

Emerging

Businesses

UTI

Infrastructure

P/E Ratio 12.72 17.62 11.53 23.90 .01

Portfolio

Turnover(in%)

35.23 46.91 8.80 6.13 51.81



Fund Size(in

Rs.cr.)

79.47(30-

04-09)

1598.09(30-

04-09)

391.54(30-

04-09)

98.65(30-

04-09)1294.02(30-

04-09)Top 5 Holdings 24.36% 27.69% 30.24% 27.86% 27.69%


FINDINGS:

As per P/E ratio, SBIs Magnum Emerging Business Fund is the winner in the

category, since it is having highest P/E Ratio of 23.90 in the category which means

that Investors are paying almost 24 times of fund’s earnings and have a lot of



confidence in the fund. On the other hand Birla Sun Life Basic

Industries is having the lowest P/E Ratio in the category implying low investors’

confidence.



cost are charged to fund. In the above category, JM Basic and SBI is the winner since

both funds are having lowest Portfolio Turnover ratio which are 8.80 and 6.13

respectively. However, UTI Infrastructure is having a highest ratio of 51.81 implying

that Fund manager is churning the Portfolio very quickly.

As per Fund Size, Tata Infrastructure is the winner in the category having largest

Fund Size of 1598.09 crores and this was possible only due to its sound track record

since inception because the fund has not have Strong Brand name when compared to

other fund house like Reliance, Birla, SBI etc. UTI Infrastructure is also having a

large corpus of 1294.02 Crores building on its Brand and performance also.

Concentration Level: As per this criterion, Birla Sun Life Basic Industries is the

most diversified fund in the category because it is having a lowest holding in top five

stock in terms of percentages( 24.36). On the other hand JM Basic and Magnum

Emerging Business Fund are the least diversified fund in the category having 30.24%

and 27.86% holding in top 5 Stock respectively.


FUND NAV



Birla Sun Life Basic Industries 75.89

TATA Infrastructure 27.84

JM Basic 16.57

Magnum Emerging Business

Fund

24.98

UTI Infrastructure 30.79


CONCLUSION:

After considering all three parameters discussed above it can be concluded that Infrastructure

was the dominant theme in 2008.Though SBI came up with its infrastructure a bit late in



2007 therefore Magnum Emerging Business fund from SBI has been taken

due to its available track record. However, among the funds mentioned above TATA

INFRASTRUCTURE tops the category due to following reasons:

The scheme’s focus on capital goods, construction, engineering and banking worked

very well.

Out of all infrastructure funds this fund was the least volatile since it had the well

diversified portfolio.

COMPARISON OF MUTUAL FUNDS AGAINST

OTHER INVESTMENT AVENUES:



PRODUCT SAFETY/

CONVINENC

E

LIQUIDITY RETURN VOLATILITY

Equity Low High/low High-Mod. High

FI Bonds High Moderate Mod.-High Moderate

Debentures Moderate Low Mod.-Low Moderate

Corp. FD Low Low Moderate Low

Bank Deposit High High Low-High Low

PPF High Moderate Moderate Low

Life Ins. High Low Low-Mod Low

Gold High Moderate Mod.-Low Moderate

Real Estate Moderate Low High-Low High

MF High High High Moderate

SOURCE:VALUE RESEARCHONLINE.COM

FINDINGS:

From above table it can be interpreted that Mutual Funds give high return, are safe in nature,

gives high liquidity when compared to other investment avenues. Also, Mutual funds are

Moderate in volatility compared to some high volatile avenues like equity and real estate.

Therefore, features mentioned here make Mutual Funds an attractive investment instrument

for all investors.



5.EXPECTATIONS OF THE INDUSTRY FROM

BUDGET 2009-10:



The Budget 2008-09 was expected to be a populist budget presented by

the Finance Minister Mr. P. Chidambaram as it was the last budget by the UPA govt. before

the general election in 2009. The mutual fund industry had the following items in its wish list

before the announcement of the budget 2009-10:

Bring Equity Fund of Funds, International Equity Funds, and Gold ETFs under

the definition of Equity Mutual Fund.

Minimum criterion for equity oriented mutual fund be bought down from 65% to 50%

Dividend Distribution Tax on Corporate for Non Equity and Non Liquid Mutual

Funds should be reduced to 10% from 20% at present.

Dividend Distribution Tax on Money Market / Liquid Mutual Funds should be

reduced to 10% from 25% at present.

Overseas Investment Limit for individuals and international funds both should be

lifted completely.

Dedicated Infrastructure Funds guidelines should be issued so that the huge

infrastructure funding requirements can be met.

Commodity ETFs should be introduced.

PSUs should be allowed to invest across all mutual funds irrespective of

Public/Private Status.



Redefine ‘equity-oriented’ schemes to include funds that invest in

securities of foreign listed companies and ADR/GDRs issued by Indian and Foreign

companies.

Differential tax incentive (on the lines of equity long term savings) to lure investor’s

savings into long-term debt products through mutual funds.

Tax incentives for individuals to save in dedicated infrastructure funds, where money

will be locked for a period for investment in infrastructure projects. Maybe a separate

exemption limit of Rs. 100,000 can be set-aside for individuals.

Level playing field for MFs vis-à-vis alternative competing instruments, which vie for

intermediation into India’s equity and debt markets.

RELEVANT HIGHLIGHTS OF THE BUDGET 2009-10

The Economy

The Gross Domestic Product increased by 7.5 per cent, 9.4 per cent and 9.6 percent in

first three years, of the UPA Government resulting in an unprecedented average

growth rate of 8.8 per cent. The drivers of growth continue to be 'services' and

'manufacturing' which are estimated to grow at 10.7 per cent and 9.4 per cent

respectively.



Saving rate and investment rate estimated to be 35.6 per cent and

36.3 per cent, respectively, by the end of 2007-08; between April- December 2007-

2008. FDI amounted to US$ 12.7 billion and FII to US$ 18 billion.

FINANCIAL SECTOR

Financial Inclusion

Two recommendations of the Committee on Financial Inclusion proposed to be accepted viz.

(i) to advise commercial banks, including RRBs, to add at least 250 rural household accounts

every year at each of their rural and semi-urban branches; and (ii) to allow individuals such

as retired bank officers, ex-servicemen etc. to be appointed as business facilitator or business

correspondent or credit counselor; banks to be encouraged to embrace concept of Total

Financial Inclusion; Government to request all scheduled commercial banks to follow the

example set by some public sector banks and meet the entire credit requirements of SHG

members, namely, income generation activities, social needs like housing, education,

marriage etc., and debt swapping.

Capital Markets

Measures to expand the market for corporate bonds

Exchange-traded currency and interest rate futures to be launched and transparent credit

derivatives market to be developed with appropriate safeguards; Tradability of domestic

convertible bonds to be enhanced through the mechanism of enabling investors to separate

the embedded equity option from the convertible bond, and trade it separately; Development

of a market-based system for classifying financial instruments based on their complexity and

implicit risks to be encouraged.



Permanent Account Number (PAN)

Requirement of PAN extended to all transactions in the financial market subject to suitable

threshold exemption limits.

Service tax

Four services brought under service tax net namely, asset management service provided

under ULIP, services provided by stock/commodity exchanges and clearing houses; right

to use goods, in cases where VAT is not payable; and customized software, to bring it on

par with packaged software and other IT services.

Threshold limit of exemption for small service providers increased from Rs.8 lakhs per

year to Rs.10 lakhs per year; about 65,000 small service providers go out of the tax net.

Direct Taxes

Threshold limit of exemption from personal income tax in the case of all assesses

increased to Rs.150, 000. The slabs and rates of tax are :

Up to Rs.150, 000 NIL

Rs.150, 001 to Rs.300, 000 10 per cent

Rs.300, 001 to Rs.500, 000 20 per cent

Rs.500, 001 and above 30 per cent

Every income tax assesses to get relief of minimum of Rs 4,000.



In case of a woman employees, the threshold limit increased from

Rs.145,000 to Rs.180,000; for a senior citizens, the threshold limit increased from

Rs.195,000 to Rs.225,000.

Senior Citizen Saving Scheme 2004 and the Post Office Time Deposit Account added to

the basket of saving instruments under Section 80C of the Income Tax Act.

Additional deduction of Rs.15,000 allowed under Section 80D to an individual paying

medical insurance premium for his/her parent or parents.

Corporate debt instruments issued in Demat form and listed on recognized stock

exchanges exempted from TDS.

Parent company allowed to set off the dividend received from its subsidiary company

against dividend distributed by the parent company; provided that the dividend received

has suffered DDT and the parent company is not a subsidiary of another company.

Rate of tax on short term capital gains under Section 111A & Section 115AD

increased to 15 per cent.

STT paid to be treated like any other deductible expenditure against business income;

Levy of STT, in the case of options to be only on premium, where the option is not

exercised; liability to be on the seller; where the option is exercised, levy to be on the

settlement price and the liability on the buyer; no change in the present rates.

SWOT ANALYSIS OF SBI MUTUAL FUND



STRENGTH

Being the 7th biggest AMC,SBI Mutual Fund has a cutting edge over other AMC’s

The name SBI is also associated with one of the largest public sector bank in

India,and hence people show more faith in SBI Mutual Fund.

SBI Mutual Fund is one of the oldest AMC’s in private sector and schemes which are

matured enough pull new investors because of high returns.

Wide variety of funds,ranging from debt funds to equity and a mixture of both in

various proportions,give ample amount of choice to customers.

SBI Mutual Fund offers clear and non overlapping positioning of different funds.

Winner of ICRA Mutual Fund Awards 2009(Magnum Taxgain Scheme).

Winner of Lipper Fund Awards 2009.

Winner of Outlook Money NDTV Profit Awards- 2008.

WEAKNESS



Lack of promotional material ,dispensers ,banners.

Proper training not being provided to bank officials.

OPPORTUNITIES

Untapped rural market offers huge potential.

More focus on PSU’s may enhance business.

Training provided to investors may lead to more investments.

THREATS

Competitors like Reliance AMC,ICICI prudential are catching up fast on the market

share.

Share market slump may see downfall in investments.

Ongoing recession may impose adverse effects

FUTURE SCENARIO

Mutual funds are the fastest growing segment of the financial services sector in India. Owing

to the impact of global financial crisis the average AUM of the Indian Mutual Fund industry



fell by 1.53% and stood at rs. 493,287 crores. The average AUM of SBI

Mutual Fund for the month of March 2009 was Rs. 26,383 crores. There is little awareness

about mutual fund in India; people have accepted it as a one of the major investment avenue.

Once people know about the benefits offered by it, mutual funds will become one of the

sought after investment avenues.

In future, Out of ten public sector players five will sell out, close down or merge with

stronger players in three to four years. In the private sector this trend has already started with

two mergers and one takeover. But this does not mean there is no room for other players. The

market will witness a flurry of new players entering the arena. There will be a large number

of offers from various asset management companies in the time to come. Some big names

like Fidelity, JP Morgan, etc. have entered the Indian market. One important reason for it is

that most major players already have presence here and hence these big names would hardly

like to get left behind.

The mutual fund industry is witnessing the introduction of derivatives in the country. This

enables it to hedge its risk and this in turn would be reflected in its Net Asset Value (NAV).

I personally visualize a minimum annual growth of between 30 and 35 per cent, since we are

on a growth phase (a real take off, if I may venture to say) as penetration into semi-urban and

rural areas is steadily increasing since more and more households are opting for mutual

funds.

I feel that this industry has a very interesting past, an encouraging present

and a very bright future.

FINDINGS:

1) Regarding Funds:-



While dealing with them I have observed that the performance of the

schemes of SBIMF is quite good and the demand for those schemes is also good. I came to

know that SBI Magnum Tax gain 93 is the most popular fund among individual investors.

According to them the 3yr and 5yr returns of the funds are very good. One of the reason for

great demands of AMCs fund is the Brand Value of SBI, as it is the largest bank of country.

At the same time they we also observed that unlike other AMCs like Reliance, HDFC etc.

SBIMF is not very aggressive in marketing of its funds also the funds of SBIMF are not very

innovative (as they don’t have any banking or financial sector fund)

2) Regarding services:-

Apart from fund performance observations are also made regarding the services of SBIMF,

after analyzing the feedback of distributors I found that the services of SBIMF is not as good

as other AMCs and some of the field in which they are lacking

a) Complaints related to not delivering the account statements and brokerage on

time.

b) Problems related to material, like unavailability of forms, fact sheets and other

promotional matters, also there are some problems related to courier services.

c) They have also complained that AMC do not provide any fringe benefits on good

performance.

CONCLUSION

The future of primary market is growing at a very high pace. Taking this thing into

consideration, there are lots of opportunities for the SBI Munds Management Pvt Ltd to tap

the golden opportunities from the Indian market.



SBI Funds Management Pvt Ltd has emerged a very strong player in the field of distribution

of financial product within a short period of one year time in Northern India and is giving

stiff competition to all the players in the market including the banks. It is expanding its area

of business, if the progress of SBI MF goes in the same way, than I can say that there is

bright future for SBI MF in coming years. They have much potential to expand their

distribution network in northern India.

The company is currently following huge investment and growth strategies. Apart from the

market growth rate the distribution industry doesn’t seem so attractive. Hence the firm should

be selective using growth strategies. This is not to undermine the bright future of SBI MF,

just a check to be a cautious.

There is little awareness about mutual fund in India; people have accepted it as a one of the

major investment avenue. Mutual funds will become one of the sought after investment

avenues. As far as the other investment products marketed by SBI MF are concerned, they

have a ready market. The only thing, which it needs to focus on, is that they should have a

strong network so that prompt services and availability of forms is made available to the

investor at a short notice, and if it keeps the traditional base for marketing in India, which is a

price sensitive market, we can say that SBI MF has a great future ahead.

SUGGESTIONS & RECOMMENDATIONS



A) THE GROUND RULES OF MUTUAL FUND INVESTING

The following are the 10 commandments that were to be followed till eternity. The world of

investments too has several ground rules meant for investors who are novices in their own

right and wish to enter the myriad world of investments. These come in handy for there is

every possibility of losing what one has if due care is not taken.

1. Assess yourself: Self-assessment of one’s needs; expectations and risk profile is of

prime importance failing which; one will make more mistakes in putting money in

right places than otherwise. Irrational expectations will only bring pain.

2. Try to understand where the money is going: One can lose substantially if one

picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go

through the literature such as offer document and fact sheets that mutual fund

companies provide on their funds.

3. Don't rush in picking funds, think first: one first has to decide what he wants the

money for and it is this investment goal that should be the guiding light for all

investments done. It is thus important to know the risks associated with the fund and

align it with the quantum of risk one is willing to take. One should take a look at the

portfolio of the funds for the purpose. Excessive exposure to any specific sector

should be avoided, as it will only add to the risk of the entire portfolio.

4. Invest. Don’t speculate: A common investor is limited in the degree of risk that he is

willing to take. It is thus of key importance that there is thought given to the process



of investment and to the time horizon of the intended investment.

One should abstain from speculating which in other words would mean getting out of

one fund and investing in another with the intention of making quick money

5. Don’t put all the eggs in one basket: This old age adage is of utmost importance. No

matter what the risk profile of a person is, it is always advisable to diversify the risks

associated. So putting one’s money in different asset classes is generally the best

option as it averages the risks in each category.

6. Be regular: Investing should be a habit and not an exercise undertaken at one’s

wishes, if one has to really benefit from them. As we said earlier, since it is extremely

difficult to know when to enter or exit the market, it is important to beat the market

by being systematic. The SIPs (Systematic Investment Plans) offered by all funds

helps in being systematic. All that one needs to do is to give post-dated cheques to the

fund and thereafter one will not be harried later.

7. Do your homework: It is important for all investors to research the avenues available

to them irrespective of the investor category they belong to. This is important because

an informed investor is in a better decision to make right decisions. Having identified

the risks associated with the investment is important and so one should try to know all

aspects associated with it. Asking the intermediaries is one of the ways to take care of

the problem.



8. Find the right funds: Finding funds that do not charge much fees

is of importance, as the fee charged ultimately goes from the pocket of the investor.

This is even more important for debt funds as the returns from these funds are not

much. Funds that charge more will reduce the yield to the investor. Finding the right

funds is important and one should also use these funds for tax efficiency.

9. Keep track of your investments: Finding the right fund is important but even more

important is to keep track of the way they are performing in the market. If the market

is beginning to enter a bearish phase, then investors of equity too will benefit by

switching to debt funds as the losses can be minimized. One can always switch back

to equity if the equity market starts to show some buoyancy.

10. Know when to sell your mutual funds: Knowing when to exit a fund too is of

utmost importance. One should book profits immediately when enough has been

earned i.e. the initial expectation from the fund has been met with. Other factors like

non-performance, hike in fee charged and change in any basic attribute of the fund

etc. are some of the reasons for to exit.

B) WHEN TO SELL YOUR MUTUAL FUND

While there are many investment consultants, some by profession, some self-professed, who

suggest on when to invest in a particular avenue, there is a certain paucity of people who talk

of when to exit. Here are some situations when the investor should consider withdrawing

their investments from the funds.



Fund is not performing

This reason for selling, although valid in certain conditions, is where most investors make

a mistake. When calculating performance one shouldn’t look at too short a period and

make a mistake by comparing apples to oranges. One should compare the returns posted

by his fund with that of the peers across various horizons such as 1-year, 3-year and

above. A short-term view can often lead to committing hara-kiri, as it doesn’t present the

full picture. If it has underperformed the average of its peers in all cases, then it sure is

one of the better reasons to exit from the fund.

A change in life stage

Investments are done with a certain objective in mind and life stages are often a

determining factor of what a person needs. A young man can afford to take more risks

than a person nearing his retirement can. In such cases, it pays to withdraw money

from the equity investments made earlier and put them in safer, more conservative

debt funds that offer stable returns without compromising on risk. So a change in life

stages would be one such reason to consider switching into a fund that matches with

one’s needs.

A major change in any basic attribute of the fund

When the fund changes any basic attribute as mentioned by it in its offer documents,

the investors have a choice of getting out of it. Even SEBI has provided for an exit

route being made available to the investors. Changes like a change in Asset



Management Company or in investment style of fund or change of

structure say from closed-end to open-end etc. are good enough reasons for an

investor to consider switching or exiting from it as they are certainly likely to affect

the fund in a major way.

Fund doesn’t comply with its objective

One of the important parameters in the selection of the fund is alignment of the risk

profiles of the investor and fund. The objective of the fund says a lot about how the

fund plans to invest. If the objective is not being complied with, it is one of the exit

points worth considering.

The Fund’s Expense Ratio Rises

A small rise in an expense ratio is not a big deal, however a significant rise can result

in substantial reduction of yields and so it would be better to exit the fund. In the case

of bond funds or money market funds, it is highly unlikely that the fund can increase

its returns enough to justify an increase in the fund's expenses.

The Fund Manager has changed

a simple change of fund managers, in itself, is not enough reason to sell a fund on a short-

term basis. If it is a passively managed fund (index fund), then one has little to no reason

to worry. However, if it is an actively managed fund, then has to keep the eyes open on

the new manager.



Enough has been earned

However, nothing is as important as to rein the horses in time. The primary principle

behind safety of investment is to take risks that can be tolerated. The principle also is

specific on the expectations that the investor must have from any investment. Just as

it is important to set realistic targets that one hopes to achieve from the investment, it

is also important to exit when target as expected has been achieved irrespective of the

fact that it might be generating better returns in a short-term. Waiting longer might

not prove beneficial, as one need not be lucky all the time.The above list is certainly

not exhaustive and individuals will have other better reasons to quit as well. It’s just

that most don’t know when to apply thought and so these would come in handy.

LIMITATIONS OF THE PROJECT

As my project involves interaction with both prospective as well as existing clients,

lack of any identity proof hinders the assignment as people often suspect the authenticity

of the concerned person.

Being a trainee, I was not given the authority to handle any transaction myself but under

the guidance of some superior.



The company restricts me to deal with its key clients.

Since I have not undertaken the AMFI exam, which is a mandatory condition to work in

the operations department, I was not able to understand some of the common terms of

the mutual funds industry but later I learnt them.

GLOSSARY

1. General Terms:

i. Bonds

A debt security issued by government or corporation, which generally pays a stated rate of

interest and to returns the principal amount of the loan on the maturity date. Unlike

stockholders, bondholders do not have ownership privileges.



ii. Capital Gains

The gains made on sale of securities and certain other assets (including units of mutual funds)

are called capital gains. The gains can be long-term or short-term depending on the period of

holding of the asset and are charged to tax at different rates. Gains on mutual fund units held

for a period of 12 months or more are long-term gains.

iii. Compounding

Interest earned not only on the initially invested principal but also on accumulated interest

during the period.

iv. Credit rating

A measure indicating the bond issuer’s credit worthiness, or his/her ability to repay the loan.

The bonds are rated by an independent rating agency such as CRISIL, ICRA, and CARE.

v. Equity

A type of security representing part ownership in a company/corporation. Common stocks,

preferred stock, and convertible stock are types of equity securities, but debt securities are

not, as they do not represent ownership. These are generally listed on BSE, NSE & other

stock exchanges.

vi. Fixed income securities

A debt security that pays a defined rate of return. These do not offer an investor much

potential for growth. This usually refers to government, corporate or municipal bonds, which

pay a fixed rate of interest until the bonds mature, or preferred stock, which pays a fixed

dividend. A mutual fund investing in these types of securities may also be referred to as a

fixed income investment or security.



vii. Floating Rate Securities

An interest rate, which is periodically adjusted, usually based on a standard market rate

outside the control of the institution. These rates often have a specified floor and ceiling,

which limit the floating rate. The rates are pre-decided at regular intervals like half yearly,

annually based on market conditions. The opposite of having a floating rate is having a fixed

rate.

viii. Inflation risk

The possibility that the value of assets or income will be eroded by inflation, affecting the

purchasing power of a currency. Often mentioned in relation to fixed income Funds as they

may minimize the possibility of losing the principal.

ix. Interest rate risk

The risk that a security’s value will change due to an increase or decrease in interest rates. A

bond’s price will always drop as interest rates rise and when interest rates fall, a bond’s price

will rise.

x. Mode of holding:

When an investor makes investment only under his name, the mode of holding is termed as

‘Single’. However, when the investor makes an application with one or more persons as the

second or third applicants, the mode of holding can be ‘Joint’ or can also be ‘Anyone or

Survivor’. However, when the mode of holding is ‘Joint’, all the applicants have to sign

jointly or simultaneously for any transactions. But when the mode of holding is ‘Anyone or

Survivor’ the holder / applicants do not have to sign jointly but can be signed by either of the

holders/ applicants.



xi. Money Market Instruments

Commercial paper, treasury bills, GOI securities with an unexpired maturity up to one year,

call money, certificates of deposit and any other instrument specified by the Reserve Bank of

India.

xii. Market risk

The potential loss that is possible as a result of short-term volatility of the stock market

indicated by beta. Owning mutual funds shields an investor to some market risk that a

stockholder may be vulnerable to because of their diversification.

xiii. NRE

A Non-Resident External Rupee account that NRIs can open with any Indian bank. They can

use this account for making investments in India on a repatriable basis.

xiv. NRI

A Non-Resident Indian who is an Indian citizen or a person of Indian origin but who resides

abroad. NRIs have to follow specific rules when investing in India.

xv. NRO

An Ordinary Non-Resident Rupee account which can be opened for funds coming in from

abroad or from local funds. The amount in the account is, however, non-repatriable.

xvii. Yield to Maturity (YTM)

The yield earned by a bond if it is held until its maturity date.



2. Business specific:

i. Account Number / Folio Number

After the investor makes an investment, he is allotted units at the ‘Applicable NAV’ & he is

given a unique account / folio number for the investments made by him.

ii. Account statement

A document similar to a bank account statement that indicates the mutual fund units owned.

A statement is issued each time the investor carries out a transaction.

iii. Asset Management Company (AMC)

The trustee delegates the task of floating schemes and managing the collected money to a

company of professionals, usually experts who are known for smart stock picks. This is an

asset management company (AMC). AMC charges a fee for the services it renders to the MF

trust. Thus the AMC acts as the investment manager of the trust under the broad supervision

and direction of the trustees. The AMC must have a net worth of at least Rs10 crores at all

times and it cannot act as a trustee of any other mutual fund.

iv. Application Form

Form prescribed for investors to make applications for subscribing to the units of a fund.

v. Annual Return

The percentage of change in net asset value over a year's time, assuming reinvestment of

distribution such as dividend payment and bonuses.



vi. Applicable NAV

NAV at which a transaction is effected. A cut-off time is set by the fund house and all

investments or redemption’s are processed at that particular NAV. This NAV is relevant if

the application is received before that cut-off time on a day. A different NAV holds if

received thereafter.

vii. Average Maturity

Average time to maturity of all fixed-period investments in the portfolio of a scheme.

viii. Assets Under Management (AUM) / Corpus

The total amount of money invested by all the investors in a scheme as on a date.

ix. Business Day

Business day is defined as a day other than (I) Saturday & Sunday (ii) a day on which BOTH

the National Stock Exchange and the banks in Mumbai are closed (iii) a day on which the

Sale & Redemption of Units is suspended.

x. Balanced funds

A mutual fund scheme with an investment objective of both long-term growth and income,

through investment in stocks and bonds. Generally 60% is invested in stocks and 40% in

bonds, in order to obtain the highest returns consistent with a low risk strategy.

xi. Contingent Deferred Sales Charge (CDSC)



A type of exit sales load which is charged when units are redeemed within

a specific time period following their purchase. These charges reduce the longer the units are

held.

xii. Dividend Reinvestment

In a dividend reinvestment plan, the dividend is reinvested in the scheme itself. Hence instead

of receiving dividend, the unit holders receive units.

xiii. Debt securities

A general term for any security representing money loaned that must be repaid to the lender

at a future date. Bonds, T-notes, T-bills and money market instruments are debt securities,

but they vary in maturities.

xiv. Entry load

The load on purchases after the Initial (Public) Offer, now called NFO (New Fund Offer)

xv. Exit load

The load on redemption other than the Contingent Deferred Sales Charge (CDSC) permitted

under SEBI Regulations. A fee charged by some funds for redeeming or buying back of

units. The amount sometimes depends on how long the investment was held, so the longer

the time period, the smaller the charge.

xvi. Equity Schemes

A scheme that invests primarily in stocks while seeking to provide relatively high long-term

growth of capital.



xvii. Ex-Dividend Date

The date following the record date for a scheme. When a fund's net asset value reduces by an

amount equal to a dividend distribution.

xviii. Growth funds

Mutual funds with a primary investment objective of long-term growth of capital. Unlike

income, which is somewhat regular and consistent in most cases, growth is much less

consistent. Growth investments, however, usually outpace the returns on income investments

over the long-term (five to ten years, or longer). It invests mainly in common stocks with

significant growth potential.

xix. Holiday NAV

Holiday NAV is the NAV at the day immediately preceding the day which is both a Business

Day as well as a working day for banks at the centre where the application is received

xx. Income funds

A mutual fund that primarily seeks current income rather than growth of capital. It will tend

to invest in stocks and bonds that normally pay high dividends and interest.

xxi. Initial Public Offer (IPO)

A fixed time period during which the first sale of units of a scheme are made available to the

public. The term Initial Public Offer used by mutual funds has been replaced by a new term

“New Fund Offer” effective June 2, 2005 by SEBI.

xxii. Index Funds



A type of mutual fund in which the portfolios are constructed to mirror a

specific market index. Index funds are expected to provide a rate of return over time that will

approximate or match, but not exceed, that of the market, which they are mirroring.

xxiii. Liquid Funds /Money Market Funds

Funds investing only in short-term money market instruments including treasury bills,

commercial paper and certificates of deposit. The objective is to provide liquidity and

preserve the capital.

xxiv. Mutual fund

A Mutual Fund is a common pool of money from numerous investors who wish to save

money. Each fund’s investments are chosen and monitored by qualified professionals who

use this money to create a portfolio. That portfolio could consist of stocks, bonds, money

market instruments or a combination of those. Mutual funds offer investors the advantages of

diversification, professional management, affordability, liquidity and convenience.

xxv. Minimum Purchase

The smallest investment amount a scheme will accept to open a new unit holder account.

xxvi. No Load Fund

A fund that sells its units to investors without a sales load / charge.

xxvii. Management Fee

The amount a scheme pays to its asset management company for its services. Typically, a

certain percentage of assets under management. A fund's management fee is listed in its offer

document.



xxviii. Net Asset Value

Market value of one share of a mutual fund on a given day; also known as the bid price.

Unlike the public offering price, the NAV includes no sales charges. The NAV is calculated

each day by taking the closing market value of all securities owned by a mutual fund, plus all

other assets (e.g. cash), and deducting the fund’s liabilities. This sum is then divided by the

fund’s total number of shares outstanding.

xxix. Operating Expenses

The day-to-day cost a mutual fund incurs in conducting business, such as for maintaining

offices, staff, and equipment. These expenses are paid from the fund's assets before any

earnings are distributed.

xxx. Offer document

The offer document or prospectus is a booklet, a legal document that provides information

about a specific mutual fund such as the fund’s investment objectives, load structure,

subscription and redemption policies. Its purpose is to also inform investors of potential risks

involved before they decide to invest in a fund and provides other information that could help

an individual decide whether the investment is appropriate for him. An abridged offer

document of the scheme also accompanies the application form of every scheme.

xxxi. Offering price

The price at which mutual fund shares are offered for sale to the public. Also known as

offering price. The public offering price represents the net asset value plus any applicable

initial sales charges.

xxxii. Portfolio



A pool of individual investments owned by an investor or mutual fund. Portfolios may

include a combination of stocks, bonds, and money market instruments. A list of the fund’s

current portfolio will usually be contained in a mutual fund’s annual report.

xxxiii. Rate of return

Rate of return is calculated by subtracting the purchase value by the present value and then

dividing it by the purchase value. For equities, we often include dividends with the present

value.

xxxiv. Rupee Cost Averaging

An investment strategy based on investing equal amounts in a fund at regular intervals.

Because more shares are bought when prices are low and fewer shares when prices are high,

the average cost of your shares may be lower than the average price over the period you

bought them. Rupee cost averaging cannot guarantee a profit or protect against loss in

declining markets.

xxxv. Record Date

The date by which mutual fund holders are registered as unit owners to receive any future

dividend or capital gains distribution.

xxxvi. Sale price

The price at which a fund offers to sell one unit of its scheme to investors. This NAV is

grossed up with the entry load applicable, if any.



xxxvii. Sector Fund

A fund that invests primarily in securities of companies engaged in a specific industry. Sector

funds entail more risk, but may offer greater potential returns than funds that diversify their

portfolios.

xxxviii. Switching

The movement of investment from one scheme to another; usually within the family of

schemes. An investor may switch schemes because of market conditions.

xxxix. Systematic Investment Plan (SIP)

Allows an investor to periodically invest in units by issuing post-dated cheques or by giving

auto debit instructions. It allows the investor to benefit from rupee cost averaging.

xxxx. Systematic Withdrawal Plan (SWP)

Permits the investor to receive regular payments of a fixed amount or capital appreciation

from his investment in a mutual fund scheme on a periodic basis. Retirees in need of a

regular income often opt for this.

xxxxi. Systematic Transfer Program (STP)

A plan that allows the investor to give a mandate to the fund to periodically and

systematically transfer a certain amount from one scheme to another.

xxxxii. Transfer Agent



A firm employed by a mutual fund to maintain unit holder records,

including purchases, sales, and account balances.

xxxxiii. Unit

The interest of the investors in either of the Schemes, which consists of each Unit

representing one undivided, share in the assets of the Schemes.

REFERENCES

Websites referred:

· www.mutualfundsindia.com

· www.amfiindia.com

· www.valueresearchonline.com

· Websites of the AMC’s taken in cases where data was not available on the above two sites.



http://www.valueresearchonline.com/

http://www.amfiindia.com/

http://www.mutualfundsindia.com/

· www.bseindia.com

· www.nseindia.com

· www.google.com

· www.crisil.com

· www.moneycontrol.com

· www.crisilratings.com

REFRENCES OF THEORY:

· Security Analysis and Portfolio Management : Donald E Fischer, Ronald J Jordan

· Outlook Money

· Mutual Funds Review

· Money Life

· How to rate management of mutual funds : Harvard Business review

· Association of mutual funds in India (AMFI) Publications and quarterly reports

· Securities and Exchange Board of India

· Investopedia

· Mutual Fund Performance : W. Sharpe

· Market Timing, Selectivity, and Mutual Fund Performance: An Empirical Investigation

· Fact sheets of different fund houses



http://www.crisilratings.com/

http://www.moneycontrol.com/

http://www.crisil.com/

http://www.google.com/

http://www.nseindia.com/

http://www.bseindia.com/

ANNEXTURE

QUESTIONNAIRE- 1

(FOR INDIVIDUAL INVESTORS)

KEEP INVESTING AND KEEP SMILING

Q.1 Why do you invest in mutual funds? (Tick the Option)

a)Safety b) Good Return c) Tax Benefit d) Capital Appreciation e) Liquidity f)Others

(Please Specify………………………………………)



Q.2Which fund from SBI have largest share in your “PORTFOLIO”.

Q.3Through which channels do you invest in Mutual fund? (Tick the option)

a) Directly b) Through Brokers

Q.4 How much is your investment horizon? (Tick the option)

a) Within a year b)Between 1 – 3years c) More than 3 years

Q.5 How much amount do you invest in Mutual funds? (Tick the option)

a) < Rs.50000 b) Between Rs.50000- Rs.100000 c)>Rs. 100000

Q.6. Are you willing to tolerate decreases in the value of your account from one month

to the next? (Tick the Option)

(a) Not at all (b) Somewhat (c) Definitely

Q.7.What is your risk preference?

a) High risk and high return b) Moderate risk and Moderate return c) Low risk and low

return

Q.8How satisfied you are with your experience of investing in SBI Mutual Funds?

Highly Satisfied Considerably Satisfied Reasonably Satisfied Unsatisfied Highly

Unsatisfied



Q.9 Which Fund House has largest share in your Investment

Portfolio: (Mention it)

Q. 10 Scheme Preferences: (Tick the Option)

a) Equity b) Debt c) Balanced d) Fixed Maturity Plan (FMPs) e) Others (Please

Specify----------------------------)

Q.11 Saving Preference: (please rank them):

(a)Life Insurance

(b)Pension and PF Schemes

(c)Bank Deposit

(d)Shares and Debentures

(e)Units of MFs like SBI

(f)Gold/Jeweler

(f)Others (Please Specify-------------------------------------)

Q.12 Preferable route to Mutual Fund Investing: (Tick the option)

(a)Friend’s Suggestion (b) Newspapers/Magazines (c) Self Decision (d) Television (e)

Brokers/Agents (f) others (Please Specify------------------------------------)

Q.13You Prefer:

(a)Open Ended Scheme (b) Close Ended Scheme (c) Interval Scheme



Q.14How much of your income you able to save:

Below 5% 5-10% 10-15% 15-20% 20-25% ABOVE 25

Q. 15Rank following factors that you consider while selecting a scheme:

a) Scheme Qualities like track record, fund size, entry load etc.

b) Fund Manager Experience

c) Investor Services like disclosure of NAV, A/C statements.

d) Marketing of funds through bill boards, relatives, friends, brokers etc.

Q.16.Any Suggestion for SBI Mutual Funds: (Please mention it)

Q.17. Rate the following factors which influences your investment in mutual funds on the

importance scale where 1 is least important, 3 is neutral, 5 is most important.

Factors 1 2 3 4 5

Historical performance of fund

Fund’s returns over market return

Performance of Fund manager

Current Economic and Market conditions

Type of schemes (growth, income, balanced & others)

Expected Dividend going to be deliver by the fund



Advisor or broker or agent influence

Convenience in investing in the fund

Transparency maintained by the fund house

Minimum investment or lot size

Lock in period in a fund

Asset under management

Fund rating

Fund prospectus or offer document

Internet i.e. Website influence

Prior experience with the fund house

Fluctuation in equity markets

Fees ,load and expenses

Reputation of fund house

Security provided by the fund in terms of return

Tax benefit deriving from investment in the fund

NAV or price of fund’s unit

Attitude towards risk

Friend/family recommendation

Promotional campaign of the fund

PERSONAL DETAILS:

NAME: TEL.NO:

1. SEX:M F

2. AGE: Below 30 31-40 41-50 Above 50

3. ACADEMIC QUALIFICATION: Graduate Post Graduate Professional

Others(Please Specify---------------------------)



4. Marital Status: Married Unmarried

5. Occupation: Professional Salaried Business Retired

Others--------------------

6. Annual Income: Less than 2,00,000 2,00,001-5,00,000 5,00,001-10,00,000

Above10lakh

7. Area: East Delhi West Delhi North Delhi South Delhi

Others……………….

SIGNATURE

QUESTIONNAIRE-2

(For Bankers)

Q1) what is the age group of the investors?

Under 25 yrs 25 to 45 yrs 45 to 65 yrs Over 65 yrs

Q2) Which are the best performing schemes in the market?

SBI Mutual Fund Reliance Mutual Fund Kotak Mahindra Mutual Fund Birla SunLife Mutual Fund DSP Mutual Fund



HDFC Mutual Fund ICICI Mutual Fund Others (Please specify)

Q3) Do they want any changes in the existing or future schemes?

Services Dividends Portfolio Others(please specify)

Q4) Suggest a portfolio for a dream scheme?

IT sector FMCG sector Pharma sector Infrastructure Commodities Automobile Energy Telecom Financial services Media & Entertainment Others(Please specify)

Q5) What is the approx sales of the best seller scheme?

Less than 10 lakh 10 to 20 lakh 20 to 30 lakh More than 30 lakh

Q6) What are the facilities that other Banks/Mutual Fund houses are providing?

Service Commission Product related information Others (Please Specify)

Q7) What are your grievances, if any?

__________________________________________________________________________________________________________________________________________________



______________________________________________________________________________________________________________________________________________________________________

Q8) What is the expected return in that scheme (any specific scheme)?

Scheme name: ___________________

Less than 10% 10-15% 15-20% 20-25% Over 25%

Q9) Suggest ways by which we can improve upon our relationship.

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________



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