yatheesha.doc

A STUDY ON PERFORMANCE ANALYSIS OF SBI MAGNUM TAX GAIN
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1.1 INTRODUCTION
A Mutual fund is a pool of money that is managed on behalf of the investors,
by a Professional fund manager. The manager uses the money to buy stocks, bonds
and other securities according to specific investment objective that have been
established for the fund. In return of the investment, the investors are given units for
that fund. The investments range from shares to debentures to money market
instruments. Each mutual fund with different type of schemes is managed by
respective Asset Management Company (AMC). An investor can invest his money in
one or more schemes depending upon his choice. The income earned by the investor
and the capital appreciation realized by the scheme is shared by the unit holders in
proportion to the number of units held by him. Thus mutual fund is a best investment
option for a common investor as it offers an opportunity to invest in a diversified,
professionally managed portfolio at a relatively lower cost.
Mutual Funds in India are governed by the SEBI (Mutual Fund) Regulations
1996 as amended from time to time.
DEFINITION OF MUTUAL FUNDS:
“Mutual fund is non depository, non-blocking financial intermediary that acts
as an improvement vehicle for bringing wealth holders and deficit units together
directly”.
PIERCE AND JAIMES.L
“Mutual fund is a corporation which accepts money from investors and uses
the same to buy stocks, long-term and short-term debt instruments used by issuers”.
WESTON.J.FRED AND BRINGHAM
“Mutual fund is a common pool of money in which investor place their
contribution that are be invested in accordance with the stated objective. The fund
belongs to all the investors depending on the proportion of his contribution to the
fund.”
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MUTUAL FUND OPERATION FLOW CHART
From the above graph it is understood that Mutual fund is:
1. Pooled Vehicle
A mutual fund (MF) is a vehicle to pool money from investors, with a promise
that the money would be invested in a particular manner, by professional managers
who are expected to honor the promise.
2. Professional Management
The idea of mutual fund is that individual investors generally lack the time, the
inclination of the skills to manage their own investments. Thus, mutual funds hire
professional managers to manage the investments for the benefit of their investors in
return for a management fee.
3. Schemes
Investors have their individual preference on how they would lay their money
invested and how much risk they are willing to take.
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Individual investors could choose to hire a professional manager to manage
money as per his investment and risk preferences. Such personal treatment often
referred to as portfolio management scheme. PMS is economically feasible only for
the investment portfolio above a particular value, rarely below Rs 1000000.
It is possible to balance the time and cost required to manage investment by
grouping investors together based on their preferences. In this manner, the focus of
the investment activity can be shifted from single investor to a group of investor
having similar expectation.
For ease of management and reporting such a group of investor is identified
with a “mutual fund scheme” In commercial terminology, the investor invests in a
scheme and professional manager manage the scheme. A Mutual fund can, and
typically does, have several schemes to cater to different investor preferences.
4. Money in Trust
The mutual fund manages the investment of scheme for the benefit of its
investors. Every scheme has an:
Investment portfolio Account of income and expenditure & Account of asset
and liability.
In order to ensure fairness to investor, SEBI regulate the expenditure that can
be charged to scheme, Heather as management fee of other expenses. The gain of any
scheme belongs to its investor. Similarly losses, if any, would need to be born by its
investors, up to the amount invested. Thus, the mutual fund manages the scheme’s
money in trust for the benefit of investor.
5. Legal Framework
Across the world, mutual fund sector is viewed as a critical mechanism to
channel investor fund in to the capital market. Since these in investor are often not so
well qualified to invest, the mutual fund business is highly regulated. Regulation
varies from country to country. But, broadly, they provided for Checks and balances
in legal structure, Pre-qualification to start a mutual fund, Permissible schemes and
investment, Control over marketing process, level of operational flexibility to
professional investor and valuation of security.
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CLASSIFICATION OF MUTUAL FUNDS
Wide variety of Mutual Fund Schemes exists to cater to the needs such as
financial position, risk tolerance and return expectations etc. The table below gives an
overview into the existing types of schemes in the Industry.
By Structure
o Open - Ended Schemes
o Close - Ended Schemes
o Interval schemes
By Investment Objective
o Growth Schemes
o Income Schemes
o Balanced Schemes
o Money Market Schemes
Other Schemes
o Tax Saving Schemes
o Special Schemes
 Index Schemes
 Sector Specific Schemes
By Structure
Open Ended Schemes
Open- End Funds in India is such that the investors can sell as well as buy all
throughout the year. The investors sell and buy units of Open- End Funds in India at
the related prices of Net Asset Value (NAV) each day. An investor can buy Open-
End Funds in India either from a brokerage house or through the mutual fund
company. Open- End Funds in India have no fixed date of maturity. The main
advantage of Open- End Funds in India is that it offers liquidity to the investors for
they can sell the units whenever they need the money
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Major Open- End Funds in India are:
• UTI Gold Exchange Traded Fund
• Standard Chartered Premier Equity Fund
• Sahara Mid- Cap Fund
• Lotus India Tax Plan
• Reliance Tax Saver (ELSS) Fund
• Canara Robeco Equity Tax Saver- 93
• DSP Merrill Lynch Tax Saver Fund
• Tata Life Sciences and Technology Fund
• JM Arbitrage Advantage Fund
• Kotak Gold ETF
Close Ended Schemes
Closed- End Funds in India have a fixed period of maturity which can vary
between three to fifteen years. Closed- End Funds in India can be subscribed to only
during the period of time that has been specified. Investors can make investments in
Closed- End Funds in India either during the period of public offer or buy the funds
from the stock exchanges.
In Closed- End Funds in India, the number of shares that are sold in the public
offer is fixed and after this the selling and buying of the units are possible only in the
stock exchanges. Certain Closed- End Funds in India repurchase the units periodically
at related prices of Net Asset Value (NAV) in order to provide the investors an exit
route
Major Closed- End Funds in India are:
• UTI Wealth Builder
• HDFC Long-Term Equity
• Standard Chartered Enterprise Equity
• Franklin India Smaller Companies
• Birla Long-Term Advantage
• Tata Capital Builder
• ING Vysya C.U.B.
• Prudential ICICI Fusion
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• Tata Equity Management
Interval Funds
Interval Funds in India combine the characteristics of both the close ended
funds and open ended funds. This means that Interval Funds in India can be
repurchased and sold at the time that has been predetermined. Interval Funds in India
are usually repurchased every six or twelve months or as has been unveiled in the
annual report and prospectus of the fund. Interval Funds in India are sold and
repurchased at the prices that are related to the Net Asset Value (NAV).
Advantages of Interval Funds in India
The advantage of Interval Funds in India is that it allows the investor more
flexibility than the close ended funds for he can sell it at the predetermined time.
Further the advantage of Interval Funds in India is that it ensures that the investor has
liquidity of capital at regular intervals of time.
By Investment objective
Growth Schemes
Growth schemes invest in those stocks of those companies whose profits are
expected to grow at a higher than average rate. For example, telecom sector is a
growth sector because many people in India still do not own a phone – so as they buy
more and more cell phones, the profits of telecom companies will increase. Similarly,
infrastructure; we do not have well connected roads all over the country; neither do
we have best of ports or airports. For our country to move forward, this infrastructure
has to be of world class. Hence companies in these sectors may potentially grow at a
relatively faster pace. Growth schemes will invest in stocks of such companies.
Income Schemes
Income schemes in India usually invest their principal in companies that give
high payouts of dividends and also in securities of fixed income such as corporate
debentures, government securities, and bonds. The advantage of Income Funds in
India is that it provides regular income to the investor either on a monthly or quarterly
basis. Further the advantage of Income Funds in India is that it also provides stability
of capital to the investor. Income Funds share prices are not fixed for they have a
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tendency to grow with the fall in interest rates and fall with the rise of the interest
rates. The bonds that are there in Income Funds are usually of the investment grade.
The other bonds are of such credit quality that they assure the protection of the
capital.
Balanced Schemes
The Balanced fund aims to provide both growth and income. These funds
invest in both shares and fixed income securities in the proportion indicated in their
offer documents. Ideal for investors who are looking for a combination of income
and moderate growth.
Balanced mutual funds have a portfolio mix of bonds, preferred stocks and
common stocks. Balanced mutual funds aim to conserve investors’ initial investment,
to pay an income and to aid in the long-term growth of both the principle and the
income.
Money-Market Funds
These are generally the safest and most secure of mutual fund investments.
They invest in the largest, most stable securities, including Treasury bills. The
chances of your capital being eroded are very minimal. Money-market funds are risk-
free. If you invest a thousand rupees, you will get that money back. It is simply a
matter of when you get it back. When investing in a money-market fund, you should
pay attention to the interest rate that is being offered, along with the rules regarding
check-writing. Money-markets have allowed investors to reap high yields on their
deposits, and have made the entire investment process more accessible to people.
The interest rates on money-market funds are changing nearly day to day. In
times of inflation, these funds have had high yields.
Other Schemes
Tax Saving Schemes
Investors in India opt for the tax-saving mutual fund schemes for the simple
reason that it helps them to save money. The tax-saving mutual funds or the equity-
linked savings schemes (ELSS) receive certain tax exemptions under Section 88 of
the Income Tax Act. That is one of the reasons why the investors in India add the tax-
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saving mutual fund schemes to their portfolio. The tax-saving mutual fund schemes
are one of the important types of mutual funds in India that investors can opt for.
SPECIAL SCHEMES
1. Index schemes
Equity Schemes come in many variants and thus can be segregated according
to their risk levels. At the lowest end of the equity funds risk – return matrix come the
index funds while at the highest end come the sectoral schemes or specialty schemes.
These schemes are the riskiest amongst all type schemes as well. However, since
equities as an asset class are risky, there is no guaranteeing return for any type of
fund. Index Funds invest in stocks comprising indices, such as the Nifty 50, which is a
broad based index comprising 50 stocks. There can be funds on other indices which
have a large number of stocks such as the CNX Midcap 100 or S&P CNX 500. Here
the investment is spread across a large number of stocks. In India today we find many
index funds based on the Nifty 50 index, which comprises large, liquid and blue chip
50 stocks.
2. Sector Specific Schemes
Sector- Specific Funds in India are those funds that make investments only in
those industries or sectors that have been specified in the prospectus of the funds.
Sector- Specific Funds in India usually make investments in sectors such as power,
pharmaceuticals, petroleum, and technology. The amount of returns that Sector-
Specific Funds in India give depends totally on the performance of the industries or
sectors in which investments have been made. Sector- Specific Funds in India give
very high returns but at the same time they are also very risky in comparison to the
funds that are diversified. This is the reason that the investors that have invested in
Sector- Specific Funds in India need to carefully watch the operation of those
industries or sectors and then at the correct time make an exit.
NATURE OF INCOME DISTRIBUTION
Investors often get confused between the above mentioned (Dividend Payout,
Dividend Reinvestment and Growth Options) three options which he has to choose
while investing in mutual fund’s units. These options have to be selected by the
investor at the time of purchasing the units and many a times investors feel that the
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dividend reinvestment option is better than growth as they get more number of units.
Let’s understand the three options:
Growth Option
Growth option is for those investors who are looking for capital appreciation.
Say an investor aged 25 invests Rs 1 lakh in an equity scheme. He would not be
requiring a regular income from his investment as his salary can be used for meeting
his monthly expenses. He would instead want his money to grow and this can happen
only if he remains invested for a long period of time. Such an investor should go for
Growth option. The NAV will fluctuate as the market moves. So if the scheme
delivers a return of 12% after 1 year, his money would have grown by Rs. 12,000.
Assuming that he had invested at a NAV of Rs. 100, then after 1 year the NAV would
have grown to Rs 112. Notice here that neither is any money coming out of the
scheme, nor is the investor getting more units. His units will remain at 1,000 (1, 00,
000/ 100) which he bought when he invested Rs. 1 lakh @ Rs. 100/ unit.
Dividend Payout Option
In case an investor chooses a Dividend Payout option, then after 1 year he
would Receive Rs. 12 as dividend. This results in a cash outflow from the scheme.
The impact of this would be that the NAV would fall by Rs. 12 (to Rs. 100 after a
year. In the growth option the NAV became Rs. 112). Here he will not get any more
number of units (they remain at 1,000), but will receive Rs 12,000 as dividend (Rs. 12
per unit * 1,000 units). Dividend Payout will not give him the benefit of compounding
as Rs. 12,000 would be taken out of the scheme and will not continue to grow like
money which is still invested in the scheme.
Dividend Reinvestment Option
This option provides the investor an opportunity to re-invest the dividends
Declared by mutual fund back in to the fund itself at NAV that is prevalent at the time
of re-investment. The value of the units will be similar to that under the cumulative
option.
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THE STRUCTURE OF MUTUAL FUND
The following figure illustrates the structure of mutual fund industry.
Figure1.1: Structure of Mutual Fund
Sponsors
The sponsor is the company which sets up the mutual fund. It means anybody
corporate acting alone or in combination with another body corporate established a
mutual fund after initiating and completing the formalities.
Trustees
The management of the mutual fund is subject to the control of the board of
trustees of the fund. They guide the operations of the fund and carry the crucial
responsibility to see that AMC always act in the best interest of the investors.
Asset Management Company
The mutual fund is operated by a separately established asset management
company (AMC).It manages the funds of the various schemes. It is entrusted with the
specific task of mobilizing funds under the scheme.
Custodian
A custodian is a person carrying on the activities of the safekeeping of the
securities or participating in any clearing system on behalf of the clients to effect
deliveries of the securities.
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Registrar and Transfer Agents
Registrars and Transfer Agents (RTAs) perform the important role of
maintaining investor records. All the New Fund Offer (NFO) forms, redemption
forms (i.e. when an investor wants to exit from a scheme, it requests for redemption)
go to the RTA’s office where the information is converted from physical to electronic
form. How many units will the investor get, at what price, what is the applicable
NAV, what is the entry load, how much money will he get in case of redemption, exit
loads, folio number, etc. is all taken care of by the RTA.
ADVANTAGES AND DIS-ADVANTAGES OF MUTUAL FUNDS
The Advantages Of Investing In A Mutual Fund Are:
1. Professional Management
Qualified professionals manage your money and they have research team that
continuously analyses the performance and prospects of companies. They also select
suitable investment to achieve the objectives of the schemes and expertise which will
add value to your investment. These fund managers are in a better position to manage
your investment and get higher returns.
2. Diversification
The cliché, “don’t put all your eggs in one basket” really applies to the
concept of intelligent investing. Diversification lowers your risk of loss by spreading
your money across various industries. It is a rare occasion when all the stocks decline
at the same time and in the same proportion. Sector funds will spread your investment
across only one industry and it would not be wise for your portfolio to be skewed
towards these types of funds for obvious reasons.
3. Choice of Schemes
Mutual Funds offer a variety of schemes that will suit your needs over a life
time. When you enter a new stage in your life, all you need to do is sit down with
your investment advisor who will help you to rearrange your portfolio to suit your
altered lifestyle.
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4. Affordability
As small investors, many find that it is so not possible to buy shares of large
corporations. Mutual funds generally buy and sell securities in large volumes which
allow investors to benefit from lower trading costs. The smallest investor can get
started on mutual funds because of the minimal investment requirements. You can
invest with a minimum of Rs. 500 in a on a regular basis.
5. Tax Benefits
Investments held by investors for a period of 12 months or more qualify for
Capital gains and will be taxed accordingly (10%of the amount by which the
investment appreciated, or 20%after factoring in the benefits of cost indexation,
whichever is lower). These investments also get the benefits of indexation.
6. Liquidity
With open-ended funds, you can redeem all or part of your investment any
time you wish and receive the current value of the shares or the NAV related price.
Funds are more liquid than most investment in shares, deposits and bonds and the
process is standardized, making it quick and efficient so that you can get your cash in
hand as soon as possible.
7. Transparency
The performance of a mutual fund is reviewed by various publications and
rating agencies, making it easy for investors to compare one to the other. Once you
are part of a mutual fund scheme, you are provided with regular updates, for examples
daily NAVs, as well as information on the specific investment made and the fund
manager’s strategy and outlook of the scheme.
8. Well Regulated
All Mutual Funds are registered by SEBI and they function within the
provision of strict regulations designed to protect the interests of investors. The
operations of Mutual Funds are regularly monitored by SEBI.
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9. Flexibility
Through features such as regular investment plans, regular withdrawal plans
and dividend reinvestment plans, you can systematical invest or withdraw funds
accordingly to your needs and convenience.
10. Low Costs
Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in brokerage,
custodial and other fees translate into lower costs for investors.
The Disadvantages of Investing in a Mutual Fund are:
• Professional Management:
Did you notice how we qualified the advantage of professional management
with the word "theoretically"? Many investors debate over whether or not the so-
called professionals are any better than you or I at picking stocks. Management is by
no means infallible, and, even if the fund loses money, the manager still takes his/her
cut. We'll talk about this in detail in a later section.
• Costs:
Mutual funds don't exist solely to make your life easier--all funds are in it for
a profit. The mutual fund industry is masterful at burying costs under layers of jargon.
These costs are so complicated that in this tutorial we have devoted an entire section
to the subject.
• Dilution:
It's possible to have too much diversification (this is explained in our article
entitled "Are You Over-Diversified?"). Because funds have small holdings in so many
different companies, high returns from a few investments often don't make much
difference on the overall return. Dilution is also the result of a successful fund getting
too big. When money pours into funds that have had strong success, the manager
often has trouble finding a good investment for all the new money.
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• Taxes:
When making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a capital-
gain tax is triggered, which affects how profitable the individual is from the sale. It
might have been more advantageous for the individual to defer the capital gains
liability.
Key Concepts
Net asset value (NAV)
Net asset value (NAV) is a term used to describe the value of an entity's
assets less the value of its liabilities. The term is most commonly used in relation to
open-ended or mutual funds due to the fact that shares of such funds are redeemed at
their net asset value. However, the term may also be used as a synonym for book
value or the equity value of a business. Net asset value may represent the value of the
total equity, or it may be divided by the number of shares outstanding and, thereby,
represent the per share net asset value. There is no universal method of valuing assets
and liabilities for the purposes of calculating net asset value, and the criteria used for
the valuation will depend upon the circumstances, the purposes of the valuation and
any regulations that may apply.
NAV = (Market Value of All Securities Held by Fund + Cash and Equivalent
Holdings - Fund Liabilities) / Total Fund Shares Outstanding
Entry Load
Investors have to bear expenses for availing of the services (professional
management) of the mutual fund. The first expense that an investor has to incur is by
way of Entry Load. This is charged to meet the selling and distribution expenses of
the scheme. A major portion of the Entry Load is used for paying commissions to the
distributor. The distributor (also called a mutual fund advisor) could be an
Independent Financial Advisor, a bank or a large national distributor or a regional
distributor etc. They are the intermediaries who help an investor with choosing the
right scheme, financial planning and investing in scheme s from time to time to meet
one’s requirements. Investors must ensure that his Advisor has passed the AMFI –
Mutual Fund (Advisors) module certification.
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Exit Loads
As there are Entry Loads, there exist Exit Loads as well. As Entry Loads
increase the cost of buying, similarly Exit Loads reduce the amount received by the
investor. Not all schemes have an Exit Load, and not all schemes have similar exit
loads as well. Some schemes have Contingent Deferred Sales Charge (CDSC). This is
nothing but a modified form of Exit Load, wherein the investor has to pay different
Exit Loads depending upon his investment period. If the investor exits early, he will
have to bear more Exit Load and if he remains invested for a longer period of time,
his Exit Load will reduce. Thus the longer the investor remains invested, lesser is the
Exit Load. After some time the Exit Load reduces to nil; i.e. if the investor exits after
a specified time period, he will not have to bear any Exit Load.
Sale price
It is the pay when you invest in a scheme, also called as “offer price”.
Re purchase price
It is the price at which a close ended scheme re-purchases its units and it may
include a back end load. This is also called bid price.
Redemption price
It is the price at which an open ended scheme repurchases their units and close
ended schemes redeem their units on maturity. Such prices are NAV related.
Systematic investment plan:
• A specific amount should be invested for a continuous period at regular
intervals under this plan.
• SIP is similar to a regular saving scheme like a recurring deposit. It is a
method of investing a fixed sum regularly in a mutual fund.
• SIP allows the investor to buy units on a given date every month. The investor
decides the amount and also the mutual fund scheme.
• While the investor's investment remains the same, more number of units can
be bought in a declining market and less number of units in a rising market.
• The investor automatically participates in the market swings once the option
for SIP is made.
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Categories of Mutual Funds
Large Cap Funds
Large Cap Funds in India are a kind of mutual fund that looks for
appreciation of capital by investing mainly in the shares of companies that are big
blue chip. The big blue chip companies in which Large Cap Funds in India make their
investments have above- average potential for growth in earnings. The large cap
companies in which Large Cap Funds in India makes investments are usually
companies that have a market capitalization that is more than Rs. 1000 crores. The
main advantage of Large Cap Funds in India is that they are considered to be of low
return and low risk category. This ensures that the investments of the investors are
relatively safe.
Mid - Cap funds
Mid-cap funds are a special type of mutual fund wherein, the corpus
accumulated is invested in small or medium sized companies. In the absence of any
standardized definition or definite classification of small or medium sized company,
each mutual fund classifies small and medium sized companies according to its own
policies. In general, companies with a market capitalization up to Rs 500 crores are
regarded as small and companies with a market capitalization over Rs 500 crores but
below Rs 1,000 crores are defined as medium sized by the mutual fund industry. Mid-
cap funds bear high risk factors and thus offer high returns in case of positive
movements of the indexes.
Small - Cap Funds
A small-cap fund, like Turner Small Cap Equity, will focus on companies with
a market value below $1 billion. The volatility of the fund often depends on the
aggressiveness of the manager. Aggressive small-cap managers will buy hot growth
and technology companies, taking high risks in hopes of high rewards. More
conservative "value" managers will look for companies that have been beaten down
temporarily by the stock market. Value funds aren't as risky as the hot growth funds,
but they can still be volatile. Because of their volatility, small-cap funds require that
you have enough time to make up for short-term losses. And as we saw during 1997
and 1998, there are times when the market turns away from small-cap companies
altogether for extended periods.
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1.2 INDUSTRY PROFILE
A Mutual Fund is defined as “a financial service organization that it receives
money from shareholders, invests it, earns return on it, attempts to make it grow and
agrees to pay the shareholder cash on demand for the current value of his investment”
The primary objective of all mutual funds is to provide better returns to
investors by minimizing risk associated with capital market investment. Naturally the
degree of risk associated with expected returns and the associated benefits differs.
The concept of mutual funds in India dates back to the year 1963. The era
between 1963 and 1987 marked the existence of only one mutual fund company in
India with Rs. 67bn assets under management (AUM), by the end of its monopoly era,
the Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund
companies in India took their position in mutual fund market. The new entries of
mutual fund companies in India were SBI Mutual Fund, Can bank Mutual Fund,
Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual
Fund.
The succeeding decade showed a new horizon in Indian mutual fund industry.
By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private
sector funds started penetrating the fund families. In the same year the first Mutual
Fund Regulations came into existence with re-registering all mutual funds except
UTI. The regulations were further given a revised shape in 1996. Kothari Pioneer was
the first private sector mutual fund company in India which has now merged with
Franklin Templeton. Just after ten years with private sector player’s penetration, the
total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in
India.
HISTORY OF MUTUAL FUNDS
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 of India.
The history of mutual funds in India can be broadly divided into four distinct phases.
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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 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 June 1987 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 Regulations 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
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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 Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, 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.
1. 33 assets management companies manage the financial assets over 2000
billion contributed by the 20 million investors.
2. Majority of the funds approximately 96% of the funds are open ended
remaining are close ended type
3. 48% growth in four decades 1965 – 2005.
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Figure 1.1: Growth in Assets under Management
The Sponsors of Association of Mutual Funds in India
Bank Sponsored Institutions
• SBI Fund Management Ltd.
• Bank of Baroda Asset Management Co. Ltd.
• Canara Investment Management Services Ltd.
• UTI Asset Management Pvt.Ltd.
• GIC Asset Management Co. Ltd.
• Jeevan Bhima Sahayog Asset Management Co. Ltd.
Predominantly Indian Joint Ventures
• Birla Sun Life Asset Management Co .Ltd
• DSP Merrill Lynch Fund Managers Limited
• HDFC Asset Management Co. Ltd
Predominantly Foreign Joint Ventures
• ABN Amro Asset Management (I) Ltd.
• Alliance Capital Asset Management (India)Pvt. Ltd
• Deutsche Asset Management (India) Pvt.Ltd
• Fidelity Fund Management Pvt. Ltd
• Franklin Templeton Asset Management (India) Pvt. Ltd
• HSBC Asset Management (India) pvt.ltd
• ING Investment Management (India) pvt.ltd
• Morgan Stanley Investment Management pvt.ltd
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• Principal Asset Management Co.pvt. ltd
• Prudential ICICI Asset Management Co.ltd
• Standard Chartered Asset Management Co. pvt. ltd
1.3COMPANY PROFILE
INTRODUCTION:
SBI Funds Management is a joint venture between State Bank of India, the
country’s largest bank and Societe Generale Asset Management (France). A
subsidiary of state bank of India, the largest public sector bank in India & a joint
venture with societe Generale asset management with a shareholding ratio of 63:37.
One of the world’s leading fund management companies. With over 20 years of rich
experience in fund management, SBI Funds Management Pvt. Ltd. Is one of the
largest investment management firms in India managing investment mandates of over
46 lakh investors with a network of over 130 points of acceptance spread across India
our vast family of investors is expanding faster and further.
SBI MUTUAL FUND –BACK GROUND:
SBI Mutual Fund, the first bank sponsored mutual fund in India, was
incorporated on 29 June, 1987 by SBI. The first scheme launched by the fund was
‘Magnum Regular Income Scheme-1987’. The Fund has 26 schemes, out of which
21 are open-ended, with an AUM of Rs. 27,431 Core as on 30th
November, 2007.
Until May 1993, SBI Capital Markets Limited (SBICAP), the investment banking
subsidiary of SBI, was the investment Manager as well as the Trustee of the Fund. In
December 2004, SBI entered into a joint venture agreement with societe Generale
asset management and transferred 37% equity shares to them.
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SBI Mutual Fund has won the prestigious CNBC TV 18 Crisil Mutual Fund
of the year award 2007, apart from winning five awards for scheme performance. SBI
Mutual Fund has also won the most preferred brand of mutual fund at the CNBC
Awaaz Consumer Awards in 2006 and 2007. But above all, it is the trust of over 46
lakh investors that eggs us on to deliver innovative and stable investment services,
day after day. It is the driving force for our team of investment experts to develop and
deliver products that help investors like you achieve their financial objectives.
SBI Mutual Fund is one of the fastest growing mutual fund houses in India
having launched 40 schemes with over Rs.20000 Cores as Assets under Management.
We are currently experiencing growth in many areas with our investor base of over 35
lacks across India, a large network of over 100 points of acceptance, 26 Investor
Service Centers, 28 Investor Service Desks and 42 District Organizers."
SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country
with an investor base of over 5.4 million. With over 20 years of rich experience in fund
management, SBI MF brings forward its expertise in consistently delivering value to its
investors.
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
Society General Asset Management, one of the world’s leading fund
management companies that manages over US$ 500 Billion worldwide.
Exploiting expertise, compounding growth:
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 5.4 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 Rs31, 794 cores of assets and has a diverse
profile of investors actively parking their investments across 36 active schemes. The
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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.
Investment Philosophy:
The Company seeks to provide investors with opportunities for long
term growth in capital through superior stock selection and active portfolio
management.
BOARD OF TRUSTEES
Shri T.L. Palani Kumar
Independent
Shri C.M. Dixit
Independent
Ms. Sandra Martyres
Associate
Ms. Bharati Rao
Associate
Mr. Krishnamurthy Vijayan
Independent
Mr. Shriniwas Joshi
Independent
Board of Directors
Mr. Pratip Chaudhuri
Chairman & Associate Director
Mr. Jayesh Gandhi
Independent Director
Mr. Deepak Kumar Chatterjee
Managing Director
Dr. H. Sadhak
Mrs. Madhu Dubhashi
Dr. H. K. Pradhan
Mr. Shyamal Acharya
Associate Director
Mr. Shishir Joshipura
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Mr. Thierry Raymond Mequillet
Associate Director
Mr. Fathi Jerfel
Associate Director
Mr. Philippe Batchevitch
Alternate Director to Mr. Jerfel
INVESTOR SERVICE CENTERS
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SBIMF INVESTORS SERVICE CENTERS
AHMEDABAD KOLKATTA
BANGALORE LUCKNOW
BHILAI LUDHIANA
BHOPAL MUMBAI
BHUBANESHWAR NAGPUR
CHANDIGARH NEW DELHI
CHENNAI PATNA
COIMBATORE PUNE
ERNAKULAM RANCHI
GOA SILIGURI
GUWAHATI SURAT
HYDERABAD VADODARA
INDORE VARANASI
JAIPUR VIJAYAWADA
KANPUR VIZAG
CAMS INVESTOR SERVICE CENTRES / TRANSACTION POINTS:
M/s Computer Age Management Services Pvt. Ltd. (CAMS) is the Registrar
and Transfer Agent for SBI MF schemes. At CAMS Investor Service Centers, you
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may submit transactions, service requests and make enquiries about your balance,
valuation or ask for a statement. At CAMS Transaction Points, you may submit
transactions and service requests for execution by the nearest Investor Service Centre.
SBIMF INVESTORS SERVICE DESK:
AGRA JODHPUR
ALLAHABAD KOLHAPUR
AJMER KOTA
AMRITSAR MADURAI
AURANGABAD MANGALORE
BHAVNAGAR MORADABAD
CALICUT MYSORE
DEHRADUN NASHIK
DURGAPUR NOIDA
FARIDABAD PANIPAT
GHAZIABAD RAIPUR
GORAKHPUR RAJAHMUNDRY
GURGAON RAJKOT
GWALIOR ROURKELA
HISSAR SHIMLA
HOWRA SRINAGAR
HUBLI TIRUPATHI
JABALPUR THIRUVANANTHAPURAM
JALANDHAR TIRUNVELI
JAMMU VARANASI
JAMNAGAR VISHAKHAPATNAM
JAMSHEDPUR WARANGAL
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1.4 PRODUCT PROFILE
SBI MAGNUM TAX GAIN SCHEME
SBI Magnum Tax gain scheme is an open-ended Equity Linked Savings
Scheme helps the investors to save tax under 80C of Income Tax Act.It has a lock-in
period of 3 years. This fund helps investors to address two critical issues:
• Tax planning
• Wealth creation
KEY FEATURES OF SBI Magnum Tax Gain – 93
Fund category : Equity – ELSS
Scheme plan : Growth
Scheme type : Open Ended from 1999
Launch date : March, 1993
Latest NAV : 108.439 (26/05/16)
52-Week High : 60.4 (13/07/10)
52-Week Low : 45.39 (16/07/09)
Fund manager : Jayesh Shroff
AMC : SBI Funds Management Ltd
Fund Objective : The fund plans to provide tax benefits along
With capital appreciation
Risk Grade : Moderately High
Return Grade : High
Net Assets (Cr) : 4604.80 (30/12/115)
Benchmark : S&P BSE 100
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2.1 REVIEW OF LITERATURE
There is an extensive collection of literature which mainly focuses on US
funds and investors but very limited work has been done on mutual funds that exist in
emerging markets .This could be due to the difficulties in portfolio evaluation of these
markets (Hwang and Satchell, 1998) Moreover , the literature available on
behavioural finance is also limited both for developed and emerging markets and not
much information is available about investor perception, preference, attitudes, and
behaviour. Whatever is able to select a mutual fund which is able to offer high returns
with acceptable risk is a complex task.
Elton and gruber, grindblatt and titman (1989) were Consistent with these
findings that there is some empirical evidence that mutual fund investors make
purchase decision on the basis of past performance at all 1990 Paterl at all 1992
.However other evidence suggests that consumers are influenced by factors other than
return and risk. A consumer report (1990) server of, mutual fund in investors found
that although past performance and level of risk were relevant like amount of sale
charge management fees fund manager reputation clarity of funds accounting
statements recommendation from a financial magazine or newsletter.
Some studies reveal that there is only a slight positive relationship or no
relationship at all between previous performance and current returns (Blake et al 1993
Bogle 1992 Brown and Goetz man 1995:beown at 1992) raised the question of why
poorly performing funds still survive Harless and Peterson (1998 ) they explain that
investors tend to choose funds based on previous performance but stick to these funds
despite their poor return in a recent study of consumers rationally and the mutual fund
purchase decision.
Capon et al 1992 explored the extent to which investors make purchase
decision inconsistent with modern finance theory .The theory suggested that purchase
decisions for financial assets should be made on the basis of investors beliefs
regarding the future return and risk of those assets. Markowitz 1959 study results
offered support the mutual fund investment decision is better considered in a multi
attribute framework where return and risk are merely two aspects of a set of attributes
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whose importance varies across consumers however one might hypothesize intuitively
that as mutual fund purchase value increases investors would behave in a more
rational manner simply because of the magnitude of potential gains and losses.
3.1 NEED FOR THE STUDY
 Generally most of the investors investing in mutual funds in order to avail tax
benefits and also to earn returns, in this connection they would park their
funds in the tax saving schemes.
 A study required to analyze the performance of SBI Tax Saving Scheme to
fulfill the objectives of the investors. Hence the study has been undertaken
 The study can helpful to the investor to predict the performance of the SBI
Magnum Tax Gain Scheme.
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3.2 SCOPE OF THE STUDY
 My study is confined to only Tax saving scheme in SBI Mutual funds.
 The study will also helpful to predict the performance of the SBI Tax Saving
Schemes in future.
 Considers performance evaluation of tax saving scheme based on measures-
Mean, Standard Deviation, beta, Sharpe and Treynor.
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3.3 OBJECTIVES OF THE STUDY
 To evaluate the Historical performance of Tax gain scheme by using different
statistical models.
 To find out the Performance of Tax gain scheme with relation to Bench mark
(BSE-100).
 To project the future trends of SBI Tax Gain Scheme in terms of risk and
return.
 To know the benefits of investing in Tax gain scheme.
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3.4 RESEARCH METHODOLOGY
SOURCES OF DATA:
The data has been collected based on purely secondary data.
Secondary data sources
Secondary data has been collected through internet, books, magazines, journal,
manual & records of SBI Funds Management Pvt. Ltd.
Type of study: Descriptive
Tools used
 The tools used for the performance analysis of selected funds are Treynor
Ratio and Sharpe Ratio
 The tools used to compare the fund performance with benchmark are Mean,
Standard deviation and Beta.
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FINANCIAL TOOLS
Variance and standard deviation
The following steps are involved in calculating variance or standard deviation
of returns of assets or securities using historical returns:
 Calculate the average rate of return using equation
 Calculate the deviation of individual rates of return from the average rate of
return and square it. i.e.,
 Calculate the sum of the squares of the deviations as determined in the
preceding step and divide it by the number of periods ( or observations) less
one to obtain variance
 Calculate the square root of the variance to determine the standard deviation
Calculation of Beta
A measure of risk commonly advocated is beta. The beta of a portfolio is
computed the way the beta of an individual security is computed, to calculate the beta
of a portfolio, regress the rate or return of the portfolio on the rate of return of a
market index. The slope of this regression line is the portfolio beta. Remember that is
reflects the systematic risk of the portfolio.
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PERFORMANCE MEASURE
For evaluating the performance of a portfolio it is necessary to consider both
risk and return. The two popularly employed portfolio performance measure are
Treynor measure and the Sharpe measure
Treynor Measure
According to Jack Treynor, systematic risk or beta is the appropriate measure
of risk, as suggested by the capital asset pricing model. The treynor measure of
portfolio relates the excess return on a portfolio to the portfolio beta.
The numerator of the treynor measure is the risk premium earned by the
portfolio; the denominator, the systematic risk (beta). Hence, the treynor measure
reflects the excess return earned per unit of risk. As systematic risk is the measure of
risk, the treynor measure implicitly assumes that the portfolio is well diversified.
Sharpe Ratio
The Sharpe measure is the similar to the treynor measure except that it
employs standard deviation, not beta, as the measure of risk. Thus,
Hence the Sharpe ratio measure reflects the excess return earned on a portfolio
per unit of total risk (standard deviation).
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3.5 LIMITATIONS
 The study has been confined to limited time period i.e., May month only.
 My study purely based on secondary data.
 The study is confined to data available from fact sheets and websites.
 There is less period of time to analyze the future performance of Tax saving
scheme.
 Micro level data have been considered for analyzing the facts.
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4.1 DATA ANALYSIS & INTERPRETATION
PERFORMANCE OF SBI MAGNUM TAX GAIN SCHEME BY USING
STANDARD DEVIATION
Calculation of Standard Deviation of Selected Scheme for the Period 2011
Table: 4.1
SBI MAGNUM TAX GAIN
2011 Open Close R
Jan 65.56 58.69 -11.7056 -8.959147 80.26632
Feb 57.74 55.51 -4.01729 -1.27087 1.615109
Mar 57.25 60.07 4.694523 7.4409477 55.3677
Apr 61.3 60.75 -0.90535 1.8410748 3.389557
May 60.23 58.83 -2.37974 0.3666864 0.134459
Jun 59.08 59.26 0.303746 3.0501708 9.303542
July 59.77 59.04 -1.23645 1.5099748 2.280024
Aug 59.17 54.53 -8.50908 -5.762653 33.20817
Sep 54.8 54.3 -0.92081 1.8256143 3.332868
Oct 53.64 56.57 5.179424 7.9258484 62.81907
Nov 56.15 52.53 -6.8913 -4.144876 17.17999
Dec 53.21 49.93 -6.5692 -3.822772 14.61359
SUM -32.9571 283.5104
=-32.9571/12
=-2.74642
=283.5104
=283.5104/ (12-1)
=25.77367
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=5.076778
CALCULATION OF STANDARD DEVIATION OF SELECTED SCHEME
FOR THE PERIOD 2012
Table: 4.2
2012 Open Close R
Jan 49.9 55.29 9.748598 7.525379 56.63133
Feb 55.61 58.11 4.302186 2.078966 4.322102
Mar 57.81 58.35 0.92545 -1.29777 1.684205
Apr 59.22 58.15 -1.84007 -4.06329 16.51031
May 58.23 55.4 -5.1083 -7.33152 53.75122
Jun 54.64 58.58 6.725845 4.502626 20.27364
July 58.89 59.14 0.422726 -1.80049 3.241776
Aug 59.35 60.06 1.182151 -1.04107 1.083822
Sep 59.84 64.06 6.587574 4.364355 19.0476
Oct 64.34 63.44 -1.41866 -3.64188 13.26331
Nov 63.66 66.49 4.256279 2.03306 4.133333
Dec 66.45 67.05 0.894855 -1.32836 1.764552
SUM 26.67863 195.7072
=26.67863/12
=2.223219
=195.7072
=195.7072/ (12-1)
=17.79156
=4.218005
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FOR THE PERIOD 2013
Table: 4.3
2013 Open Close R
Jan 67.56 66.93 -0.94128 -1.02281 1.046139
Feb 66.66 62.93 -5.92722 -6.00875 36.10505
Mar 63.13 62.6 -0.84665 -0.92817 0.861504
Apr 62.82 65.1 3.502304 3.420777 11.70171
May 65.83 65.99 0.242461 0.160934 0.0259
Jun 65.63 64.13 -2.339 -2.42053 5.858947
July 64.52 62.38 -3.43059 -3.51211 12.33494
Aug 62.18 59.35 -4.76832 -4.84985 23.52105
Sep 60.04 63.05 4.773989 4.692462 22.0192
Oct 63.45 68.93 7.950094 7.868567 61.91435
Nov 69.19 68.79 -0.58148 -0.66301 0.439578
Dec 69.37 71.77 3.344016 3.262488 10.64383
Sum 0.978327 186.4722
=0.978327/12
=0.081527
=186.4722
=186.4722/ (12-1)
=16.95202
=4.117283
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FOR THE PERIOD 2014
Table: 4.4.
2014 Open Close R
Jan 71.76 69.91 -2.64626 -5.8257 33.93882
Feb 69.32 73.37 5.519967 2.340523 5.478049
Mar 72.74 77.35 5.959922 2.780478 7.73106
Apr 77.53 78.48 1.210499 -1.96894 3.876743
May 78.66 86.67 9.241952 6.062508 36.754
Jun 88.38 93.69 5.667627 2.488183 6.191055
July 94.01 95.19 1.239626 -1.93982 3.762894
Aug 94.04 99.59 5.572849 2.393405 5.728385
Sep 100.53 101.46 0.916617 -2.26283 5.120385
Oct 101.31 104.39 2.950474 -0.22897 0.052427
Nov 104.42 108.83 4.052191 0.872747 0.761688
Dec 108.68 107.04 -1.53214 -4.71158 22.199
Sum 38.15333 131.5945
=38.15333/12
=3.179444
=131.5945
=131.5945/ (12-1)
=11.96314
=3.458777
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FOR THE PERIOD 2015
Table: 4.5
2015 Open Close R
Jan 107.2 115.23 6.968671 7.107062 50.51033
Feb 115.48 115.72 0.207397 0.345788 0.119569
Mar 118.25 114.33 -3.42867 -3.29028 10.82595
Apr 115.67 109.86 -5.28855 -5.15016 26.52413
May 111.5 114.9 2.959095 3.097486 9.594418
Jun 114.68 114.85 0.148019 0.28641 0.082031
July 115.93 117.46 1.302571 1.440962 2.076372
Aug 117.49 110.93 -5.91364 -5.77525 33.35349
Sep 109.14 111.14 1.799532 1.937923 3.755546
Oct 111.15 111.95 0.714605 0.852996 0.727602
Nov 111.51 110.78 -0.65896 -0.52057 0.270996
Dec 110.98 110.46 -0.47076 -0.33237 0.110468
Sum -1.66069 137.9509
=-1.66069/12
=-0.13839
=137.9509
=137.9509/ (12-1)
=12.54099
=3.541326
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COMPARISION OF MEAN AND STANDARD DEVIATION OF SBI
MAGNUM TAX GAIN SCHEME FOR THE PERIOD 2011 TO 2015
Chart 4.6
INFERENCE:
 From the above table, we came to know that SBI Magnum Tax Gain fund is
performing low in 2015 compared to 2012 and 2014.
 The risk % for SBI Magnum Tax Gain Scheme is gradually decreasing from
2011 to 2014 and again it starts increasing in 2015.
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COMPARISION BETWEEN RETURNS OF FUND AND BENCHMARK FOR
THE PERIOD 2011
SBI MAGNUM TAX GAIN:
Table: 4.7
2011 R(X) R(Y) (X)2 XY
Jan -12.0635 -11.7056 145.529 141.211
Feb -3.8002 -4.01729 14.44156 15.26652
Mar 7.633809 4.694523 58.27505 35.83709
Apr -1.08743 -0.90535 1.182514 0.984509
May -3.17763 -2.37974 10.09735 7.561939
Jun 0.73915 0.303746 0.546343 0.224514
July -3.35466 -1.23645 11.25378 4.147875
Aug -9.99591 -8.50908 99.91823 85.05601
Sep -2.73837 -0.92081 7.498678 2.52152
Oct 7.199099 5.179424 51.82702 37.28718
Nov -9.58849 -6.8913 91.93916 66.07717
Dec -7.4094 -6.5692 54.89928 48.67386
Sum -37.6436 -32.9571 547.4079 444.8492
Beta calculation for SBI MAGNUM Tax Gain
= ((12*444.85)-(-37.64*-32.96))/((12*547.41)-(-37.64)^2)
=0.795357
Chart 4.7.1
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THE PERIOD 2012
Table: 4.8
2012 R(X) R(Y) (X)2 XY
Jan 11.26791 9.748598 126.9658 109.8463
Feb 3.84318 4.302186 14.77003 16.53408
Mar -1.46543 0.92545 2.147496 -1.35619
Apr -0.99176 -1.84007 0.983589 1.824908
May -7.17423 -5.1083 51.46964 36.64814
Jun 6.593019 6.725845 43.46791 44.34363
July -1.16501 0.422726 1.357238 -0.49248
Aug 0.488662 1.182151 0.238791 0.577673
Sep 7.740569 6.587574 59.9164 50.99157
Oct -1.51646 -1.41866 2.299647 2.15134
Nov 4.891885 4.256279 23.93054 20.82123
Dec 1.094927 0.894855 1.198865 0.979801
SUM 23.60726 26.67863 328.746 282.87
= ((12*282.87)-(23.60*26.68))/((12*328.75)-(23.607)^2)
=0.816091
Chart 4.8.1
THE PERIOD 2013
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Table: 4.9
2013 R(X) R(Y) (X)2 XY
Jan 1.526063 -0.94128 2.32887 -1.43645
Feb -6.54744 -5.92722 42.86894 38.80811
Mar -0.79085 -0.84665 0.625444 0.669573
Apr 4.16269 3.502304 17.32799 14.57901
May 0.988298 0.242461 0.976732 0.239624
Jun -3.66596 -2.339 13.43926 8.574681
July -1.61867 -3.43059 2.620088 5.552988
Aug -5.33931 -4.76832 28.50819 25.45952
Sep 4.424119 4.773989 19.57282 21.12069
Oct 8.477495 7.950094 71.86793 67.39689
Nov -1.50929 -0.58148 2.277948 0.87762
Dec 2.357778 3.344016 5.559116 7.884447
SUM 2.464933 0.978324 207.9733 189.7267
= ((12*189.73)-(2.465*0.98))/((12*207.97)-(2.465)^2)
=0.913522
Chart 4.9.1
THE PERIOD 2014
Table: 4.10
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2014 R(X) R(Y) (X)2 XY
Jan -4.49233 -2.64626 20.18099 11.88786
Feb 2.756419 5.519967 7.597845 15.21534
Mar 7.190545 5.959922 51.70394 42.85509
Apr -0.19686 1.210499 0.038755 -0.2383
May 8.258 9.241952 68.19456 76.32004
Jun 4.611464 5.667627 21.2656 26.13606
July 0.478222 1.239626 0.228697 0.592817
Aug 3.286623 5.572849 10.80189 18.31585
Sep -0.34882 0.916617 0.121672 -0.31973
Oct 4.235852 2.950474 17.94244 12.49777
Nov 2.693082 4.052191 7.252692 10.91288
Dec -3.50843 -1.53214 12.30908 5.375406
SUM 24.96377 38.15332 217.6382 219.5511
= ((12*219.55)-(24.96*38.15))/((12*217.64)-(24.96)^2)
=0.845959
Chart 4.10.1
THE PERIOD 2015
Table: 4.11
2015 R(X) R(Y) (X)2 XY
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Jan 2.742616 6.968671 7.521943 19.11239
Feb 1.014847 0.207397 1.029914 0.210476
Mar -5.09202 -3.42867 25.92869 17.45886
Apr -3.41366 -5.28855 11.65309 18.05333
May 2.015669 2.959095 4.062922 5.964557
Jun -0.81036 0.148019 0.656691 -0.11995
July 2.029397 1.302571 4.118452 2.643433
Aug -6.51535 -5.91364 42.44985 38.52946
Sep 0.043331 1.700532 0.001878 0.073685
Oct 0.885418 0.714605 0.783965 0.632724
Nov -1.39111 -0.65896 1.935194 0.916688
Dec -0.01346 -0.47076 0.000181 0.006337
SUM -8.5047 -1.75969 100.1428 103.482
= ((12*103.48)-(-8.505*-1.76))/ ((12*100.143)-(-8.50) ^2)
=1.086273
Chart 4.11.1
THE PERIOD 2011 to 2015
Table: 4.12
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INFERENCE:
 The fund beta value for the period 2011 to 2014 is less than 1 i.e., (0.80<1),
(0.82<1), (0.91<1), (0.85<1) and for the year 2015 it is more than 1 i.e.,
(1.09>1)
 Since the fund beta values are < 1 for the period 2011-2014. So stock is
defensive. If the market goes up it will also move up but a little bit lower.
MEASURING THE PERFORMANCE OF THE SBI TAX GAIN SCHEME FOR
THE PERIOD 2011
47

SCHEME
1. TREYNOR RATIO
= (-32.96-0.6)/0.80
=-42.19
INFERENCE: As per Treynor ratio SBI Tax Gain Scheme has not performed well.
2. SHARPE RATIO
= (-32.96-0.6)/5.08
=-6.61
INFERENCE: As per Sharpe ratio SBI Tax Gain Scheme has not performed well.
48

SCHEME
THE PERIOD 2012
3. TREYNOR RATIO
= (26.68-0.6)/0.82
=31.96
INFERENCE: As per Treynor ratio SBI Tax Gain Scheme has performed well.
4. SHARPE RATIO
= (26.68-0.6)/4.22
=6.18
INFERENCE: As per sharpe ratio SBI Tax Gain Scheme has performed well.
49

SCHEME
THE PERIOD 2013
5. TREYNOR RATIO
= (0.98-0.6)/0.91
=0.41
6. SHARPE RATIO
= (0.98-0.6)/4.12
=0.09
50

SCHEME
THE PERIOD 2014
7. TREYNOR RATIO
= (38.15-0.6)/0.85
=44.40
8. SHARPE RATIO
= (38.15-0.6)/0.85
=10.86
51

SCHEME
THE PERIOD 2015
9. TREYNOR RATIO
= (-1.76-0.6)/1.09
=-2.17
INFERENCE: As per Treynor ratio SBI Tax Gain Scheme has not performed well.
10.SHARPE RATIO
= (-1.76-0.6)/3.54
=-0.67
INFERENCE: As per sharpe ratio SBI Tax Gain Scheme has not performed well.
52

SCHEME
5.1 FINDINGS
Based on different tools such as:
 Mean : SBI Tax Gain Scheme is yielding high returns in the year 2014(i.e.,
38%) and low returns in the year 2011(i.e., -32%).
 Standard Deviation: SBI Tax Gain Scheme is having high risk in the year
2011 (i.e., 25.7%) and low risk in the year 2014 (i.e., 11.9%).
 Beta values: SBI Tax Gain Scheme having high risk compared to market
returns in the year 2015 (i.e., 1.08%) and low risk in the year 2011 (i.e.,
0.79%).
53

SCHEME
5.2 SUGGESTIONS
 SBI Tax Gain fund is having high risk, so investors are cautioned about
investing in this to earn high returns.
 SBI tax gain has to be revised the portfolio to increase fund returns.
 Fund Manager should take more efforts on spreading awareness about options
in ELSS as these investment instruments provides a higher return with tax
saving.
 I suggest preferring ELSS scheme with SIP plan. It provides more returns and
less Tax burden to the investors.
54

SCHEME
5.3 CONCLUSION
Mutual funds are one of the best options to invest the hard core savings of the
investors.SBI Tax Saving Scheme is one of the best plans for Tax payers. It is
performing well but it yields low returns in 2015 compared to 2014 due to many
external factors and it is having moderately high risk. Even though, it is the best
scheme suggestible to the investors who are interesting to avail Tax benefits.
55

SCHEME
6.1 BIBLIOGRAPHY
BOOKS
 Prasanna Chandra, 2002, “FINANCIAL MANAGEMENT”, 5th
Edition,
Tata-McGraw Hill, New Delhi.
 I. M. Pandey, 2002, “FINANCIAL MANGEMENT”, 8TH
Edition, Vikas
Publishing House Private Limited, New Delhi.
 Dr. V. A. Avadhani, 2006, “SECURITIES ANALYSIS AND PORTFOLIO
MANAGEMENT”, 8TH
Revised Edition, Himalaya Publishing House,
Mumbai.
 Preeti Singh, 2006, “INVESTMENT MANAGEMENT” 14th
Revised
Edition, Himalaya Publishing House, Mumbai.
FACT SHEETS
 SBI Mutual funds
WEBSITES
 www.mutualindia.com
 www.nseindia.com
 www.economictimes.com
 www.moneycontrol.com
 www.valueresearch.com
 www.investopedia.com
56

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