Analytical Study of SBI Mutual Fund By Sachin Kakde


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Analytical Study of SBI Mutual Fund By Sachin Kakde

  1. 1. 1 CHAPTER 1 Executive Summary EXECUTIVE SUMMARY
  2. 2. 2 In few years Mutual Fund has emerged as a tool for ensuring one‘s financial well being. Mutual Funds have not only contributed to the India growth story but have also helped families tap into the success of Indian Industry. As information and awareness is rising more and more people are enjoying the benefits of investing in mutual funds. The main reason the number of retail mutual fund investors remains small is that nine in ten people with incomes in India do not know that mutual funds exist. But once people are aware of mutual fund investment opportunities, the number who decide to invest in mutual funds increases to as many as one in five people. The trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to buy mutual funds and to use the right arguments in the sales process that customers will accept as important and relevant to their decision. This Project gave me a great learning experience and at the same time it gave me enough scope to implement my analytical ability. The analysis and advice presented in this Project Report is based on market research on the saving and investment practices of the investors and preferences of the investors for investment in Mutual Funds. This Report will help to know about the investors‘ Preferences in Mutual Fund means Are they prefer any particular Asset Management Company (AMC), Which type of Product they prefer, Which Option (Growth or Dividend) they prefer or Which Investment Strategy they follow (Systematic Investment Plan or One time Plan). This Project as a whole can be divided into two parts. The first part gives an insight about Mutual Fund and its various aspects, the Company Profile, Objectives of the study, Channel Management and Research Methodology. One can have a brief knowledge about Mutual Fund and its basics through the Project. The second part of the Project consists of data and its analysis the collection of Primary data I SBI Magnum global fund, NAV values& BSE 100 index study to return . Study on all BSE 100 companies & all Indian Mutual fund companies .
  3. 3. 3 CHAPTER 2 Introduction
  4. 4. 4 INTRODUCTION MUTUAL FUNDS – CONCEPT, ORGANISATIONAL STRUCTURE & A DVANTAGES & TYPES: Concept :- 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 then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. 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 basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund : Mutual Fund Operation Flow Chart Organization of Mutual Funds:- Investors Fund Manager Securities Returns Pool their money with Passed back to Invest in Generates
  5. 5. 5 There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund: Organization of a Mutual Fund Advantages of Mutual Funds:- The advantages of investing in a Mutual Fund are:  Professional Management  Diversification  Convenient Administration  Return Potential  Low Costs  Liquidity  Transparency  Flexibility  Choice of schemes TYPES OF MUTUAL FUNDS SCHEMES IN INDIA
  6. 6. 6 TYPES OF MUTUAL FUNDS BY STRUCTURE Open - Ended Schemes Close - Ended Schemes Interval Schemes BY NATURE Equity Fund Debt Funds Balanced Funds BY INVESTMENT OBJECTIVE Growth Schemes Income Schemes Balanced Schemes Money Market Schemes OTHER SCHEMES Tax Saving Schemes Index Schemes Sector Specific Schemes Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection of many stocks, an investors can go for picking a mutual fund might be easy. There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in categories, mentioned below. A). BY STRUCTURE 1. Open - Ended Schemes: 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. 2. Close - Ended Schemes:
  7. 7. 7 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. 3. Interval Schemes: Interval Schemes are that scheme, which combines the features of open-ended and close- ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices. B) BY NATURE 1. Equity Fund: These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund manager‘s outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows: Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS) 2. Debt Funds:
  8. 8. 8 The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as: Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs.. 3. Balanced Funds: As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. . B). BY INVESTMENT OBJECTIVE:
  9. 9. 9 Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. Money Market Schemes: Money Market Schemes aim 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. Load Funds: A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to 2%. No-Load Funds:
  10. 10. 10 A No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. OTHER SCHEMES Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate. Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries.. ADVANTAGES OF MUTUAL FUNDS:
  11. 11. 11 If mutual funds are emerging as the favorite investment vehicle, it is because of the many advantages they have over other forms and the avenues of investing, particularly for the investor who has limited resources available in terms of capital and the ability to carry out detailed research and market monitoring. The following are the major advantages offered by mutual funds to all investors: 1. Portfolio Diversification: Each investor in the fund is a part owner of all the fund‘s assets, thus enabling him to hold a diversified investment portfolio even with a small amount of investment that would otherwise require big capital. 2. Professional Management: Even if an investor has a big amount of capital available to him, he benefits from the professional management skills brought in by the fund in the management of the investor‘s portfolio. The investment management skills, along with the needed research into available investment options, ensure a much better return than what an investor can manage on his own. Few investors have the skill and resources of their own to succeed in today‘s fast moving, global and sophisticated markets. 3. Reduction/Diversification Of Risk: When an investor invests directly, all the risk of potential loss is his own, whether he places a deposit with a company or a bank, or he buys a share or debenture on his own or in any other from. While investing in the pool of funds with investors, the potential losses are also shared with other investors. The risk reduction is one of the most important benefits of a collective investment vehicle like the mutual fund.
  12. 12. 12 4. Reduction Of Transaction Costs: What is true of risk as also true of the transaction costs. The investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund, he has the benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit passed on to its investors. 5. Liquidity: Often, investors hold shares or bonds they cannot directly, easily and quickly sell. When they invest in the units of a fund, they can generally cash their investments any time, by selling their units to the fund if open-ended, or selling them in the market if the fund is close-end. Liquidity of investment is clearly a big benefit. 6. Convenience And Flexibility: Mutual fund management companies offer many investor services that a direct market investor cannot get. Investors can easily transfer their holding from one scheme to the other; get updated market information and so on. 7. 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 equity- oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a concessional rate of 10.5%. In case of Individuals and Hindu Undivided Families a deduction uptoRs. 9,000 from the Total Income will be admissible in respect of income from investments specified in Section 80L, including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax.
  13. 13. 13 8. Choice of Schemes: Mutual Funds offer a family of schemes to suit your varying needs over a lifetime. 9. 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. The operations of Mutual Funds are regularly monitored by SEBI. 10. 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.
  14. 14. 14 DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS: 1. No Control Over Costs: An investor in a mutual fund has no control of the overall costs of investing. The investor pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. Fees are payable even if the value of his investments is declining. A mutual fund investor also pays fund distribution costs, which he would not incur in direct investing. However, this shortcoming only means that there is a cost to obtain the mutual fund services. 2. No Tailor-Made Portfolio: Investors who invest on their own can build their own portfolios of shares and bonds and other securities. Investing through fund means he delegates this decision to the fund managers. The very-high-net-worth individuals or large corporate investors may find this to be a constraint in achieving their objectives. However, most mutual fund managers help investors overcome this constraint by offering families of funds- a large number of different schemes- within their own management company. An investor can choose from different investment plans and constructs a portfolio to his choice. 3. Managing A Portfolio Of Funds: Availability of a large number of funds can actually mean too much choice for the investor. He may again need advice on how to select a fund to achieve his objectives, quite similar to the situation when he has individual shares or bonds to select. 4. The Wisdom Of Professional Management: That's right, this is not an advantage. The average mutual fund manager is no better at picking stocks than the average nonprofessional, but charges fees.
  15. 15. 15 5. No Control: Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of somebody else's car 6. Dilution: Mutual funds generally have such small holdings of so many different stocks that insanely great performance by a fund's top holdings still doesn't make much of a difference in a mutual fund's total performance. 7. Buried Costs: Many mutual funds specialize in burying their costs and in hiring salesmen who do not make those costs clear to their clients.
  16. 16. 16 SCOPE & IMPORTANCE OF MUTUAL FUND  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 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.  Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In close-end 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.  Affordability
  17. 17. 17 Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.  Choice of Schemes Mutual Funds offer a family of schemes to suit our varying needs over a lifetime.  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. The operations of Mutual Funds are regularly monitored by SEBI.  Net Asset Value (NAV) The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the ‗‗per unit‘‘. We also abide by the same convention. Note: - In order to understand the term NAV more accurately it is important to learn it’s calculation which is explained as under: - Calculation of NAV The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below. Asset value is equal to Sum of market value of shares/debentures + Liquid assets/cash held, if any + Dividends/interest accrued Amount due on unpaid assets Expenses accrued but not paid. Details on the above items
  18. 18. 18 For liquid shares/debentures, valuation is done on the basis of the last or closing market price on the principal exchange where the security is traded. For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be estimated. For shares, this could be the book value per share or an estimated market price if suitable benchmarks are available. For debentures and bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting for illiquidity. The value of fixed interest bearing securities moves in a direction opposite to interest rate changes Valuation of debentures and bonds is a big problem since most of them are unlisted and thinly traded. This gives considerable leeway to the AMCs on valuation and some of the AMCs are believed to take advantage of this and adopt flexible valuation policies depending on the situation. Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, with every passing day, interest is said to be accrued, at the daily interest rate, which is calculated by dividing the periodic interest payment with the number of days in each period. Thus, accrued interest on a particular day is equal to the daily interest rate multiplied by the number of days since the last interest payment date. Usually, dividends are proposed at the time of the Annual General meeting and become due on the record date. There is a gap between the dates on which it becomes due and the actual payment date. In the intermediate period, it is deemed to be ‗‗accrued‘‘. Expenses including management fees, custody charges etc. are calculated on a daily basis.
  19. 19. 19 STRUCTURE OF INDIAN MUTUAL FUND INDUSTRY The Indian mutual fund industry is dominated by the Unit Trust of India which has a total corpus of Rs 700bn collected from more than 20 million investors. The UTI has many funds/schemes in all categories ie equity, balanced income etc. with some being open-ended and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of about Rs 200 bn. UTI was floated by financial institutions and is governed by a special act of Parliament. Most of its investors believe that the UTI is government owned and controlled, which, while legally incorrect, is true for all practical purposes. The second largest category of mutual funds are the ones floated by nationalized banks. Canbank Asset Management floated by Canara Bank and SBI Funds Management floated by the State Bank of India are the largest of these. GIC AMC floated by General Insurance Corporation and JeevanBimaSahayog AMC floated by the LIC are some of the other prominent ones. The aggregate corpus of funds managed by this category of AMCs is about Rs 150 bn. The third largest category of mutual funds is the ones floated by the private sector and by foreign asset management companies. The largest of these are Prudential ICICI AMC and Birla Sun Life AMC>The aggregate corpus of assets managed by this category of AMCs is in excess of Rs 250 bn.
  20. 20. 20 Global Scenario Some basic facts: The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S. against a corpus of $ 100 million in India. Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital are non-bank mutual funds in this group. In the U.S. the total number of schemes is higher than that of the listed companies while in India we have just 277 schemes Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway. In the U.S. about 9.7 million households will manage their assets on-line by the year 2003, such a facility is not yet of avail in India. On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets. 72% of the core customer base of mutual funds in the top 50-broking firms in the U.S. are expected to trade on-line by 2003. (Source: The Financial Express September, 99) Internationally, on-line investing continues its meteoric rise. Many have debated about the success of e- commerce and its breakthroughs, but it is true that this aspect of technology could and will change the way financial sectors function. However, mutual funds cannot be left far behind. They have realized the potential of the Internet and are equipping themselves to perform better. In fact in advanced countries like the U.S.A, mutual funds buy- sell transactions have already begun on the Net, while in India the Net is used as a source of Information.
  21. 21. 21 Such changes could facilitate easy access, lower intermediation costs and better services for all. A research agency that specializes in internet technology estimates that over the next four years Mutual Fund Assets traded on- line will grow ten folds from $ 128 billion to $ 1,227 billion ; whereas equity assets traded on-line will increase during the period from $ 246 billion to $ 1,561 billion. This will increase the share of mutual funds from 34% to 40% during the period. (Source: The Financial Express September ,99) Such increases in volumes are expected to bring about large changes in the way Mutual Funds conduct their business. Here are some of the basic changes that have taken place since the advent of the Net. Lower Costs: Distribution of funds will fall in the online trading regime by 2003 . Mutual funds could bring down their administrative costs to 0.75% if trading is done on- line. As per SEBI regulations , bond funds can charge a maximum of 2.25% and equity funds can charge 2.5% as administrative fees. Therefore if the administrative costs are low , the benefits are passed down and hence Mutual Funds are able to attract mire investors and increase their asset base. Better advice: Mutual funds could provide better advice to their investors through the Net rather than through the traditional investment routes where there is an additional channel to deal with the Brokers. Direct dealing with the fund could help the investor with their financial planning. In India , brokers could get more Net savvy than investors and could help the investors with the knowledge through get from the Net. New investors would prefer online : Mutual funds can target investors who are young individuals and who are Net savvy, since servicing them would be easier on the Net. India has around 1.6 million net users who are prime target for these funds and this could just be the beginning. The Internet users are going to increase dramatically and mutual funds are going to be the best beneficiary. With smaller administrative costs more funds would be mobilized .A fund manager must be ready to tackle the volatility and will have
  22. 22. 22 to maintain sufficient amount of investments which are high liquidity and low yielding investments to honor redemption. Net based advertisements: There will be more sites involved in ads and promotion of mutual funds. In the U.S. sites like AOL offer detailed research and financial details about the functioning of different funds and their performance statistics. A is witnessing a genesis in this area.
  23. 23. 23 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, 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. In the U.S. most mutual funds concentrate only on financial funds like equity and debt. Some like real estate funds and commodity funds also take an exposure to physical assets. The latter type of funds are preferred by corporate‘s who want to hedge their exposure to the commodities they deal with. For instance, a cable manufacturer who needs 100 tons of Copper in the month of January could buy an equivalent amount of copper by investing in a copper fund. For Example, Permanent Portfolio Fund, a conservative U.S. based fund invests a fixed percentage of it‘s corpus in Gold, Silver, Swiss francs, specific stocks on various bourses around the world, short –term and long- term U.S. treasuries etc. In U.S.A. apart from bullion funds there are copper funds, precious metal funds and real estate funds (investing in real estate and other related assets as well.).In India, the Canada based Dundee mutual fund is planning to launch a gold and a real estate fund before the year-end.
  24. 24. 24 In developed countries like the U.S.A there are funds to satisfy everybody‘s requirement, but in India only the tip of the iceberg has been explored. In the near future India too will concentrate on financial as well as physical funds. The mutual fund industry is awaiting the introduction of DERIVATIVES in the country 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.
  25. 25. 25 RISK FACTORS OF MUTUAL FUNDS: 1. The 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.. 2. Market Risk: Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. 3. Credit Risk: The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cashflows determines the Credit Risk faced by you. 4. Inflation Risk: The root cause, Inflation. Inflation is the loss of purchasing power over 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 the investment. Interest Rate Risk: In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. 5. Political / Government Policy Risk:
  26. 26. 26 Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa. 6. Liquidity Risk: Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities.
  27. 27. 27 WORKING OF MUTUAL FUNDS The mutual fund collects money directly or through brokers from investors. The money is invested in various instruments depending on the objective of the scheme. The income generated by selling securities or capital appreciation of these securities is passed on to the investors in proportion to their investment in the scheme. The investments are divided into units and the value of the units will be reflected in Net Asset Value or NAV of the unit. NAV is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the valuation date. Mutual fund companies provide daily net asset value of their schemes to their investors. NAV is important, as it will determine the price at which you buy or redeem the units of a scheme. Depending on the load structure of the scheme, you have to pay entry or exit load.
  28. 28. 28 STRUCTURE OF A MUTUAL FUND: India has a legal framework within which Mutual Fund have to be constituted. In India open and close-end funds operate under the same regulatory structure i.e. as unit Trusts. A Mutual Fund in India is allowed to issue open-end and close-end schemes under a common legal structure. The structure that is required to be followed by any Mutual Fund in India is 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 of another corporate body establishes a Mutual Fund. Mutual Funds as Trusts: A Mutual Fund in India is constituted in the form of Public trust Act, 1882. The Fund sponsor acts as a settlor of the Trust, contributing to its initial capital and appoints a trustee to hold the assets of the trust for the benefit of the unit-holders. .
  29. 29. 29 Trustees: A Trust is created through a document called the Trust Deed that is executed by the fund sponsor in favour of the trustees. The Trust- the Mutual Fund – may be managed by a board of trustees- a body of individuals, or a trust company- a corporate body. Most of the funds in India are managed by Boards of Trustees. The Asset Management Companies: The role of an Asset Management Company (AMC) is to act as the investment manager of the Trust under the board supervision and the guidance of the Trustees.. Custodian and Depositories: .The custodian is appointed by the Board of Trustees for safekeeping of securities or participating in any clearance system through approved depository companies on behalf of the Mutual Fund and it must fulfill its responsibilities in accordance with its agreement with the Mutual Fund. . Bankers: A Fund‘s activities involve dealing in money on a continuous basis primarily with respect to buying and selling units, paying for investment made, receiving the proceeds from sale of the investments and discharging its obligations towards operating expenses. Thus the Fund‘s banker plays an important role to determine quality of service that the fund gives in timely delivery of remittances etc. 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 and updating investor records.
  30. 30. 30 REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA: The structure of mutual funds in India is guided by the SEBI. Regulations, 1996.These regulations make it mandatory for mutual fund to have three structures of sponsor trustee and asset Management Company. The sponsor of the mutual fund and appoints the trustees. The trustees are responsible to the investors in mutual fund and appoint the AMC for managing the investment portfolio. The AMC is the business face of the mutual fund, as it manages all the affairs of the mutual fund. The AMC and the mutual fund have to be registered with SEBI.
  31. 31. 31 REGULATORY ASPECTS Schemes of a Mutual Fund The asset management company shall launch no scheme unless the trustees approve such scheme and a copy of the offer document has been filed with the Board. Every mutual fund shall along with the offer document of each scheme pay filing fees. The offer document shall contain disclosures which are adequate in order to enable the investors to make informed investment decision including the disclosure on maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor. A close-ended scheme shall be fully redeemed at the end of the maturity period. ―Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution‖. The mutual fund and asset management company shall be liable to refund the application money to the applicants,- (i) If the mutual fund fails to receive the minimum subscription amount referred to in clause (a) of sub-regulation (1); (ii) If the moneys received from the applicants for units are in excess of subscription as referred to in clause (b) of sub-regulation (1). The asset management company shall issue to the applicant whose application has been accepted, unit certificates or a statement of accounts specifying the number of units allotted to the applicant as soon as possible but not later than six weeks from the date of closure of the initial subscription list and or from the date of receipt of the request from the unit holders in any open ended scheme.
  32. 32. 32 CHAPTER – 3 Introduction of Industry
  33. 33. 33 CORPORATE PROFILE Our Identity With 25 years of rich experience in fund management, we at SBI Funds Management Pvt. Ltd. bring forward our expertise by consistently delivering value to our investors. We have a strong and proud lineage that traces back to the State Bank of India (SBI) - India's largest bank. We are a Joint Venture between SBI and AMUNDI (France), one of the world's leading fund management companies. With our network of over 222 points of acceptance across India, we deliver value and nurture the trust of our vast and varied family of investors. Excellence has no substitute. And to ensure excellence right from the first stage of product development to the post-investment stage, we are ably guided by our philosophy of ‗growth through innovation‘ and our stable investment policies. This dedication is what helps our customers achieve their financial objectives. Our Vision ―To be the most preferred and the largest fund house for all asset classes, with a consistent track record of excellent returns and best standards in customer service, product innovation, technology and HR practices.‖ Our Services
  34. 34. 34 Mutual Funds Investors are our priority. Our mission has been to establish Mutual Funds as a viable investment option to the masses in the country. Working towards it, we developed innovative, need-specific products and educated the investors about the added benefits of investing in capital markets via Mutual Funds. Today, we have been actively managing our investor's assets not only through our investment expertise in domestic mutual funds, but also offshore funds and portfolio management advisory services for institutional investors. This makes us one of the largest investment management firms in India, managing investment mandates of over 5.4 million investors. Portfolio Management and Advisory Services SBI Funds Management has emerged as one of the largest player in India advising various financial institutions, pension funds, and local and international asset management companies. We have excelled by understanding our investor's requirements and terms of risk / return expectations, based on which we suggest customized asset portfolio recommendations. We also provide an integrated end-to-end customized asset management solution for institutions in terms of advisory service, discretionary and non-discretionary portfolio management services. Offshore Funds SBI Funds Management has been successfully managing and advising India's dedicated offshore funds since 1988. SBI Funds Management was the 1st bank sponsored asset management company fund to launch an offshore fund called 'SBI Resurgent India Opportunities Fund' with an objective to provide our investors with opportunities for long-term growth in capital, through well-researched investments in a diversified basket of stocks of Indian Companies.
  35. 35. 35 INVESTMENT TEAM NavneetMunot Executive Director & Chief Investment Officer ErwanKeraudy VP – Investments Fund Managers - Equity R. Srinivasan Head - Equities JayeshShroff Fund Manager SohiniAndani Fund Manager Richard D‘Souza Fund Manager AjitDange Fund Manager Ruchit Mehta Fund Manager Raviprakash Sharma Chief Dealer & Fund Manager Saurabh Pant Fund Manager Tanmaya Desai Fund Manager Neeraj Kumar Dealer
  36. 36. 36 Fund Managers - Fixed Income Rajeev Radhakrishnan Head - Fixed Income Dinesh Ahuja Fund Manager R Arun Fund Manager Dinesh Balachandran Fund Manager Portfolio Management Services NipaLadiwala Vice President – PMS (Institutional) AashishWakankar Vice President – PMS (Offshore) AmruthRao Senior Fund Manager – PMS (Debt BOARD OF DIRECTORS – AMC Mr. PratipChaudhuri Chairman & Associate Director Mr. Deepak Kumar Chatterjee Managing Director & CEO Mr. ShishirJoshipura Independent Director Dr. H. Sadhak Independent Director Mrs. MadhuDubhashi Independent Director Dr. H. K. Pradhan Independent Director Mr. JashvantRaval Mr. FathiJerfel
  37. 37. 37 Independent Director Associate Director Mr. Thierry Raymond Mequillet Associate Director Mr. Philippe Batchevitch Alternate Director to Mr. Jerfel TRUSTEES SBI Mutual Fund Trustee Company Private Limited (the ―Trustee‖), through its Board of Directors discharge its obligations as Trustee of the SBI Mutual Fund. The Board of Directors of SBI Mutual Fund Trustee Company Private Limited are as under: Shri T.L. Palani Kumar Independent Shri C.M. Dixit Independent Ms. Sandra Martyres Associate Ms. BharatiRao Associate Mr. Krishnamurthy Vijayan Independent Mr. Shriniwas Joshi Independent
  38. 38. 38 MANAGEMENT TEAM Mr. Deepak Kumar Chatterjee MD & CEO Mr. Philippe Batchevitch Deputy CEO Mr. K. T. Ravindran Executive Director & Chief Operating Officer Mr. NavneetMunot Executive Director & Chief Investment Officer Mr. R. S. Srinivas Jain Executive Director & Chief Marketing Officer (Strategy and International Business) Mr. D. P. Singh Executive Director & Chief Marketing Officer (Domestic Business) Ms. AparnaNirgude Chief Risk Officer Mr. RakeshKaushik Senior Vice President (Accounts & Administration) Ms. VinayaDatar CS & Compliance Officer Mr. C. A. Santosh Head - Customer Service Proven Skills in Wealth Generation: 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 topcorporate houses of the country. SBI Mutual Fund is a joint venture between the StateBank of India and associate General Asset Management, one of the national leadingfund management fund institute.
  39. 39. 39 Exploiting expertise, compounding growth: In eighteen years of operation, the fund has launched thirty-two schemes andsuccessfully redeemed fifteen of them. In the process it has rewarded it‘sinvestors handsomely with consistently high returns. A total of over 3.8 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. 20000 crore of assets and has a diverse profile of investors actively parking their investments across 40 active schemes. The fund serves this vast family of investors by reaching out to them through network of over 100 points of acceptance, 26 investor service centers, 33 investor service desks and 52 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. Our expertise and excellent performance is frequently recognized by the mutual fund industry. SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award - 8 times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year 2005- 2006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the Year Award 2007 and 5 Awards for our schemes.
  40. 40. 40 SBI Magnum Global Fund Fund Features Scheme Particulars Type Open Ended Nature Equity (Equity: 95.44%, Debt: 0%, Cash: 4.56%) Option Growth Inception Date Sep 30, 1994 Face Value 10 Fund Size (Rs.Crore) 946.06 as on Jan 31, 2013 Fund Manager Rama IyerSrinivasan . SIP NA STP NA SWP NA Expense ratio(%) 2.27 Portfolio Turnover Ratio(%) 62 Last Divdend Declared 24 Minimum Investment (Rs) 2000 Purchase Redemptions Daily NAV Calculation Daily Entry Load Entry Load is 0%. Entry Load is 0%. Exit Load If redeemed bet. 0 Year to 1 Year; If redeemed bet. 0 Year to 1 Year; Exit load is 1%.
  41. 41. 41
  42. 42. 42 SBI Magnum Global Fund
  43. 43. 43 BSE 100 Index Sector Breakdown Sector Allocation Finance 22.26 Oil & Gas 17.55 Information Technology 14.53 Capital Goods 9.88 FMCG 7.17 Metal, Metal product & Mining 6.98 Transport Equipment‘s 6.59 Power 5.12 Telecom 4,26 Housing Related 3.26 25% 20% 14% 10% 10% 9% 7% 0% 5% Oil & Gas Information Technology Capital Goods FMCG Metal, Metal product & Mining Transport Equipment’s Power Telecom Housing Related
  44. 44. 44 Some of the AMCs operating currently are : Name of the AMC Nature of ownership Alliance Capital Asset management (I) Private Limited Private foreign Birla Sun Life Asset Management Company Limited Private Indian Mank of Baroda Asset management Company Limited Banks Bank of India Asset Management Company Limited Banks Canbank Investment Management Servies Limited Banks CholamanadalamCazenove Asset Management Company Private foreign Limited Dundee Asset Management Company Limited Private foreign DSP Merrill Lynch Asset Management Company Limited Private foreign Escorts Asset Management Limited Private Indian First India Asset Management Limited Private Indian GIC Asset Management Company Limited Institutions IDBI Investment Management Company Limited Institutions Indfund Management Limited Banks ING Investment Asset Management Company Private Private foreign limited JM Capital Management Limited Private Indian Jardine Fleming (I) Asset Management Limited Private foreign Kotak Mahindra Asset Management company Limited Private Indian JeevanBimaSahayog Asset Management Company Institutions Limited
  45. 45. 45 Morgan Stanley Asset Management Company Private Private foreign Limited Punjab National Bank Asset Management Company Banks Limited Reliance Capital Asset Management Company Limited Private Indian State Bank of India Funds Management Limited Banks Shriram Asset Management company Limited Private Indian Sun F and C Asset Management (I) Private Limited Private foreign Sundaram Newton Asset Management Company Limited Private foreign Tata Asset Management Company Limited Private Indian Credit Capital Asset Management Company Limited Private Indian Templeton Asset Management (India) Private Limited Private foreign Unit Trust of India Institutions Zurich Asset management Company (I) Limited Private foreign
  46. 46. 46 CHAPTER – 4 Company Profile
  47. 47. 47 State Bank of India State Bank of India (SBI) ( - ) is a multinational banking and financial services company based in India. It is astate-owned corporation with its headquarters in Mumbai, Maharashtra. As at December 2012, it had assets of US$501 billion and 15,003 branches, including 157 foreign offices making it the largest banking and financial services company in India by assests. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks—Bank of Calcutta and Bank of Bombay—to form the Imperial Bank of India, which in turn became the State Bank of India. The Government of India nationalised the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India. SBI has been ranked 285th in the Fortune Global 500 rankings of the world's biggest corporations for the year 2012. SBI provides a range of banking products through its network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). SBI has 14 regional hubs and 57 Zonal Offices that are located at important cities throughout the country. SBI is a regional banking behemoth and has 20% market share in deposits and loans among Indian commercial banks. The State Bank of India was named the 29th most reputed company in the world according to Forbes 2009 rankings and was the only bank featured in the "top 10 brands of India" list in an annual survey conducted by Brand Finance and The Economic Times in 2010
  48. 48. 48 Story Seal of Imperial Bank of India. The roots of the State Bank of India lie in the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal was one of three Presidency banks, the other two being the Bank of Bombay(incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated asjoint stock companies and were the result of the royal charters. These three banks received the exclusive right to issue paper currency till 1861 when with the Paper Currency Act, the right was taken over by the Government of India. The Presidency banks amalgamated on 27 January 1921, and the re-organized banking entity took as its name Imperial Bank of India. The Imperial Bank of India remained a joint stock company but without Government participation. Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 30 April 1955, the Imperial Bank of India became the State Bank of India. Thegovernment of India recently acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority. In 1959, the government passed the State Bank of India (Subsidiary Banks) Act, which made eight state banks associates of SBI. A process of consolidation began on 13 September 2008, when the State Bank of Saurashtra merged with SBI. SBI has acquired local banks in rescues. The first was the Bank of Behar (est. 1911), which SBI acquired in 1969, together with its 28 branches. The next year SBI acquired National Bank of Lahore (est. 1942), which had 24 branches. Five years later, in 1975, SBI acquired KrishnaramBaldeo Bank, which had been established in 1916 in Gwalior State, under the patronage of Maharaja MadhoRaoScindia. The bank had been the DukanPichadi, a small moneylender, owned by the Maharaja. The new banks first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of Travancore, already had an extensive network in Kerala.
  49. 49. 49 Structure Current Board of Directors As on 14 January 2013, there are fifteen members in the SBI board of directors:- [6] PratipChaudhuri (Chairman) Hemant G. Contractor (Managing Director) Diwakar Gupta (Managing Director) A. Krishna Kumar (Managing Director) S. Visvanathan (Managing Director) S. Venkatachalam (Director) D. Sundaram (Director) ParthasarathyIyengar (Director) Thomas Mathew (Director) S.K. Mukherjee (Officer Employee Director) Rajiv Kumar (Director) JyotiBhushanMohapatra (Workmen Employee Director) Deepak Amin (Director) HarichandraBahadur Singh (Director) D. K. Mittal (Director)
  50. 50. 50 International presence The Israeli branch of the State Bank of India located in Ramat Gan. As of 31 March 2012, the bank had 173 overseas offices spread over 34 countries. It has branches of the parent in Moscow, Colombo,Dhaka, Frankfurt, Hong Kong, Tehran, Johannesburg, London, Los Angeles, Male in the Maldives, Muscat, Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan andCape Town. It also has an ADB in Boston, USA. SBI operates several foreign subsidiaries or affiliates. In 1990, it established an offshore bank: State Bank of India (Mauritius). State Bank of India (S.B.I.) Branch at TsimShaTsui, Hong Kong
  51. 51. 51 In 1982, the bank established a subsidiary, State Bank of India (California), which now has ten branches – nine branches in the state of California and one in Washington, D.C. The 10th branch was opened in Fremont, California on 28 March 2011. The other eight branches in California are located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and Bakersfield. The Canadian subsidiary, State Bank of India (Canada) also dates to 1982. It has seven branches, four in the Toronto area and three inBritish Columbia. In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria. In Nepal, SBI owns 55% of Nepal SBI Bank, which has branches throughout the country. In Moscow, SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest. In Indonesia, it owns 76% of PT Bank Indo Monex. The State Bank of India already has a branch in Shanghai and plans to open one in Tianjin.[7] In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired for US$8 million in October 2005. Associate banks Main Branch of SBI in Mumbai. SBI has five associate banks; all use the State Bank of India logo, which is a blue circle, and all use the "State Bank of" name, followed by the regional headquarters' name: State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala
  52. 52. 52 State Bank of Travancore Earlier SBI had seven associate banks, all of which had belonged to princely states until the government nationalised them between October 1959 and May 1960. In tune with the first Five Year Plan, which prioritized the development of rural India, the government integrated these banks into State Bank of India system to expand its rural outreach. There has been a proposal to merge all the associate banks into SBI to create a "mega bank" and streamline the group's operations.[9] The first step towards unification occurred on 13 August 2008 when State Bank of Saurashtra merged with SBI, reducing the number of associate state banks from seven to six. Then on 19 June 2009 the SBI board approved the absorption of State Bank of Indore. SBI holds 98.3% in State Bank of Indore. (Individuals who held the shares prior to its takeover by the government hold the balance of 1.77%.)[10] The acquisition of State Bank of Indore added 470 branches to SBI's existing network of branches. Also, following the acquisition, SBI's total assets will inch very close to the 10 trillion mark. The total assets of SBI and the State Bank of Indore stood at 9,981,190 million as of March 2009. The process of merging of State Bank of Indore was completed by April 2010, and the SBI Indore branches started functioning as SBI branches on 26 August 2010. State Bank of India Mumbai LHO. Non-banking subsidiaries Apart from its five associate banks, SBI also has the following non-banking subsidiaries: SBI Capital Markets Ltd SBI Funds Management Pvt Ltd SBI Factors & Commercial Services Pvt Ltd SBI Cards & Payments Services Pvt. Ltd. (SBICPSL) SBI DFHI Ltd
  53. 53. 53 SBI Life Insurance Company Limited SBI General Insurance In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas (with 26% of the remaining capital), to form a joint venture life insurance company named SBI Life Insurance company Ltd. In 2004, SBI DFHI (Discount and Finance House of India) was founded with its headquarters inMumbai. Other SBI service points SBI has 27,000+ ATMs (25,000th ATM was inaugurated by the then Chairman of State Bank Shri O.P. Bhatt on 31 March 2011, the day of his retirement); and SBI group (including associate banks) has about 45,000 ATMs. SBI has become the first bank to install an ATM at Drass in the Jammu & Kashmir Kargil region. This was the Bank's 27,032nd ATM on 27 July 2012. Logo and slogan The logo of the State Bank of India is a blue circle with a small cut in the bottom that depicts perfection and the small man the common man - being the center of the bank's business. Slogans: "PURE BANKING, NOTHING ELSE", "WITH YOU - ALL THE WAY", "A BANK OF THE COMMON MAN", "THE BANKER TO EVERY INDIAN", "THE NATION BANKS ON US". Recent awards and recognitions Best Online Banking Award, Best Customer Initiative Award & Best Risk Management Award (Runner Up) by IBA Banking Technology Awards 2010 The Bank of the year 2009, India (won the second year in a row) by The Banker Magazine
  54. 54. 54 Best Bank – Large and Most Socially Responsible Bank by the Business Bank Awards 2009 Best Bank 2009 by Business India The Most Trusted Brand 2009 by The Economic Times Most Preferred Bank & Most preferred Home loan provider by CNBC Visionaries of Financial Inclusion By FINO Technology Bank of the Year by IBA Banking Technology Awards SKOCH Award 2010 for Virtual corporation Category for its e-payment solution The Brand Trust Report 11th most trusted brand in Hindustan. Major competitor Some of the major competitors for SBI in the banking sector are ICICI Bank, HDFC Bank, Axis Bank, Punjab National Bank, UCO Bank and Bank of Baroda. However in terms of average market share, SBI is by far the largest player in the market.
  55. 55. 55 CHAPTER – 5 Objective of The study
  56. 56. 56 OBJECTIVE OF THE STUDY 1. To Study the mutual fund industry in detail. 2. To compare SBI Magnum Global Fund with BSE 100 (Benchmark). 3. To compare Return-wise performance of the Fund with BSE 100 (Benchmark). 4. To compare the sectoral Allocation of the Fund with BSE 100 (Benchmark). 5. To compare the periodic change in the Net Asset Value of the Fund with percentage change in BSE 100 (Benchmark) Index. Rationale of the study This project study is related to the performance of SBI mutual fund and its comparison with BSE‘s performance. This project will remain more important for the SBI and also other financial organization can take review for different considerations. This will help the customers, financial planners, agents and the employees also. Overall knowledge is one of the important contents of this project, which will be completed with lots of information
  57. 57. 57 CHAPTER – 6 Research Design
  58. 58. 58 RESEARCH METHODOLOGY RESEARCH DESIGN a) Type of Research: There are so many type of research but we most use i.e. Exploratory Research. Descriptive Research.. The design chosen for this project was ―DESCRIPTIVE RESEARCH DESIGN‖. Which is used when the purpose of the research is to?  Describe the characteristics of the certain groups.  Estimate the proportion of the people in a specified population who behave in a certain way.  Make specific predictions. b) DATA COLLECTION Secondary Data The secondary data means the data which is available publicly and can be used for the study. The data is secondary data and it is collected from the financial statements, the annual reports of the company, some books and the websites of the company. For secondary data collection the research instruments are.  Published material on internet  Annual report of SBI  Reports and record  Books
  59. 59. 59 EXPECTED CONTRIBUTION This project will help organization and its stakeholders by following means 1. It can directly identify the overall performance of this fund. 2. To identify the importance of mutual fund in overall financial marker. For which sector the investment of SBI Mutual fund is necessary So finally from this project it can drawn the importance of SBI mutual fund
  60. 60. 60 CHAPTER – 7 Data analysis and Data interpretation
  61. 61. 61 Table showing Return of SBI magnum global fund & BSE 100 INDEX During the year 2007-08 Month SBI BSE 100 Apr-07 6.83 8.80 May-07 5.37 5.24 Jun-07 2.08 1.37 Jul-07 2.60 4.95 Aug-07 1.90 -1.00 Sep-07 8.51 13.60 Oct-07 8.61 15.59 Nov-07 6.14 -1.39 Dec-07 10.19 6.35 Jan-08 -18.34 -15.60 Feb-08 -1.94 -1.20 Mar-08 -12.24 -10.80 SD 8.72 9.09 AVG RETURN 1.64 2.16 Interpretation :- During the year 2007-08,the overall return of BSE 100 index is more than SBI Magnum global fund (BSE 100 generating monthly average return of 2.16% while SBI magnum fund is generating 1.64%). However, we notice that there is a negative trend in the market during the months Nov 2007, Jan to March 08 in the market. We notice that both the BSE and the SBI Magnum Global Fund have moved in tandem with each other based on the market reactions to the overall demand and supply factors. Major shares invested in the dominant sectors comprise industries like Infrastructure, Banking, Pharma, IT, which form a major part of the portfolio invested by both BSE 100 and the SBI Magnum Global Fund. The monthly average return of BSE 100 index while is relatively more than that of SBI Magnum Global Fund the risk as indicated through the S.D is marginally more in case of BSE 100 index.(BSE 100 index is showing an S.D of 9.08 while SBI Magnum global fund is showing an S.D. of 8.71) -25 -20 -15 -10 -5 0 5 10 15 20 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 SBI BSE 100
  62. 62. 62 Table showing Return of SBI magnum global fund & BSE 100 INDEX During the year 2008-09 Month SBI BSE 100 Apr-08 31.62 10.90 May-08 -6.84 -6.98 Jun-08 -17.84 -19.77 Jul-08 8.27 6.26 Aug-08 0.51 3.65 Sep-08 -13.77 -11.40 Oct-08 -31.11 -26.73 Nov-08 -17.17 -10.60 Dec-08 11.88 7.71 Jan-09 -11.61 -4.61 Feb-09 -48.66 -5.01 Mar-09 110.39 11.09 SD 40.11 12.15 AVG RETURN 1.31 -3.79 Interpretation :- During the year 2008-09,the overall return of SBI Magnum global fund index is more than BSE 100 (SBI magnum fund is generating 1.31% while BSE 100 generating monthly average return of -3.79 %). However, we notice month of Feb. to Mar. 2009 the value of SBI Magnum global fund has increased tremendously. The monthly average return SBI Magnum global fund index while is relatively more than that of BSE 100 index the risk as indicated through the S.D is marginally more in case of SBI Magnum global fund.( SBI Magnum global fund is showing an S.D of 40.11 while BSE 100 index is showing an S.D. of 12.15) -60 -40 -20 0 20 40 60 80 100 120 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 SBI BSE 100
  63. 63. 63 Table showing Return of SBI magnum global fund & BSE 100 INDEX During the year 2009-10 Month SBI BSE 100 Apr-09 10.68 17.07 May-09 38.53 28.21 Jun-09 -2.00 -2.11 Jul-09 9.34 7.74 Aug-09 2.72 0.18 Sep-09 5.97 8.14 Oct-09 -1.60 -6.94 Nov-09 9.38 7.75 Dec-09 6.97 2.95 Jan-10 -5.19 -5.48 Feb-10 -1.75 1.17 Mar-10 4.64 5.12 SD 11.36 9.79 AVG 6.47 5.32 Interpretation :- During the year 2009-10, the overall return of SBI Magnum global fund index is more than BSE 100 (SBI magnum fund is generating 6.47% while BSE 100 generating monthly average return of 5.32 %). However, We notice that both the BSE and the SBI Magnum Global Fund have moved in tandem with each other based on the market reactions to the overall demand and supply factors. Major shares invested in the dominant sectors comprise industries like IT, Infrastructure, Banking, Pharma, which form a major part of the portfolio invested by both BSE 100 and the SBI Magnum Global Fund. The monthly average return SBI Magnum global fund index while is relatively more than that of BSE 100 index the risk as indicated through the S.D is marginally more in case of SBI Magnum global fund.( SBI Magnum global fund is showing an S.D of 11.36 while BSE 100 index is showing an S.D. of 9.79) -10 0 10 20 30 40 50 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 SBI BSE 100
  64. 64. 64 Table showing Return of SBI magnum global fund & BSE 100 INDEX During the year 2010-11 Month SBI BSE 100 Apr-10 -4.19 0.31 May-10 -2.65 -3.09 Jun-10 6.48 4.69 Jul-10 3.90 1.75 Aug-10 2.65 0.01 Sep-10 5.15 9.83 Oct-10 -2.00 -0.36 Nov-10 -14.35 -4.27 Dec-10 -0.17 3.76 Jan-11 -11.71 -10.76 Feb-11 -0.98 -3.66 Mar-11 3.39 8.26 SD 6.45 5.70 AVG -1.21 0.54 Interpretation :- During the year 2010-11 ,the overall return of BSE 100 index is more than SBI Magnum global fund (BSE 100 generating monthly average return of 0.54 % while SBI magnum fund is generating -1.21%). However, we notice that there is a negative trend in the market during the months Nov 2010, Jan to Feb2011 in the market. We notice that both the BSE and the SBI Magnum Global Fund have moved in tandem with each other based on the market reactions to the overall demand and supply factors. Major shares invested in the dominant sectors comprise industries like Infrastructure, Banking, Pharma, IT, which form a major part of the portfolio invested by both BSE 100 and the SBI Magnum Global Fund. The monthly average return of BSE 100 index while is relatively more than that of SBI Magnum Global Fund the risk as indicated through the S.D is marginally less in case of BSE 100 index.(BSE 100 index is showing an S.D of 5.70 while SBI Magnum global fund is showing an S.D. of 6.45) -20 -15 -10 -5 0 5 10 15 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 SBI BSE 100
  65. 65. 65 Table showing Return of SBI magnum global fund & BSE 100 INDEX During the year 2011-12 Month SBI BSE 100 Apr-11 -4.90 -1.08 May-11 0.05 -3.08 Jun-11 0.96 0.74 Jul-11 3.51 -3.25 Aug-11 -5.19 -9.09 Sep-11 -3.88 -2.67 Oct-11 3.74 7.76 Nov-11 -8.53 -8.75 Dec-11 -3.14 -6.90 Jan-12 7.69 12.70 Feb-12 4.59 4.00 Mar-12 3.08 -1.44 SD 4.91 6.50 AVG -0.17 -0.92 Interpretation :- During the year 20011-12, the overall return of SBI Magnum global fund and BSE 100 index is showing a slightly negative figure of -0.17 & -0.92 respectively. However, we notice that there is a negative trend in the market during the months Jul to Sep 2011 and Nov to Dec 2011. During the month Dec 2011 to Mar 2012 market is yielding positive returns. The monthly average return of BSE 100 index while is relatively less than that of SBI Magnum Global Fund(while both show slightly negative return). The risk as indicated through the S.D is marginally more in case of BSE 100 index.(BSE 100 index is showing an S.D of 6.50 while SBI Magnum global fund is showing an S.D. of 4.91) -15 -10 -5 0 5 10 15 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 SBI BSE 100
  66. 66. 66 CHAPTER – 8 Conclusion
  67. 67. 67 Conclusion Overall in finance about performance of mutual fund in India mutual fund have a lot of potential to grow. Mutual fund companies have to create and market innovative products and frame long term marketing strategies. Product innovation will be one of the key determinants to success. The mutual fund industry has to bring many innovative concept such as high yield bond funds, principal protected fund long short term fund , arbitrage funds, dynamic funds and precious metal funds. The penetration of mutual funds can be increased through investor education, providing investor–oriented value added services, and innovative distribution channels. Mutual funds have failed during the bearish market conditions. To sell successfully during the bear market, there is a need to educate the investor about risk adjust return and total portfolio return to enable them to take an inform decision. Mutual funds need to develop a wide distribution network to increase its reach and tap investment from all concerns and segments. Increased use of internet time and development of alternative channels such as financial advisors can play a vital role in increasing the potential of mutual funds. Mutual funds in order to increase their reach need to form large capital. Mutual funds have equity capital upto around rupee 80 croreeach which is quite low compared to insurance companies, which, on an average, have equity capital of close to 300 crore. The retail participation in mutual fund is still low on account of incorrect positioning of mutual fund products, industry focus on wholesale market, investors preference for guaranteed return product and industry inability to make inroads into smaller towns. There is need for retail participation. Selling mutual funds require competence in identifying and matching investors needs. Moreover, they need to educate investors that mutual fund help to build capital, not to be become rich overnight. Mutual fund have come a long way, but a lot more can be done. It is observed that I SBI Magnum global fund is performing on par with BSE 100 Index. It is slightly higher than the Index during year 2007-08 , 2008-09 & 2009-10. However during the 2nd half of the 2011-12 . it is observed that the fund is slightly under performing the BSE 100 index. On an overall basis it is appreciable to notice that the a fund has out performed the BSE 100 index during the period of the study. It is noticeable that up to Nov. 2009 the fund has performed more or less on par with the BSE 100index. It is clearly observed that form NOV 2009 up to March 2012 the fund is clearly out performing the BSE 100 index.
  68. 68. 68 CHAPTER –9 Suggestions& Recommendations
  69. 69. 69 Suggestions This analysis shows that the fund is worth considering investment by a moderate risk taking investor. This is attested by the fact that on a long term basis the fund has generated a comparatively higher return to that of BSE 100 index. An investor who has got significant amount that scheme during the a year 2007 -09, If , he has not redeemed the fund that there is a return of 20% plus a generated when compared to that of index which is about 17.5%. It is suggested that they are profitable from the investment point of view. In case of equity fund the portfolio of SBI magnum global fund is in good income stocks.
  70. 70. 70 CHAPTER –10 Limitations of the study
  71. 71. 71 LIMITATIONS 1. Samples sizes is limiting factor, only last five years of Data has been taken. 2. Past performance may not guarantee the future return. 3. Micro level data have been taken in analysis; Macro level data may affect the returns. 4. The statistical tools used have many inbuilt limitations in them. 5. SBI is a very large group but in this project only same part are studied. 6. All data collected is of secondary in nature. Any limitation in the accuracy of the secondary data carries forward to the analysis made.
  72. 72. 72 CHAPTER – 11 Bibliography
  73. 73. 73 BIBLIOGRAPHY Books : Capital Markets in India, -- Rajesh Chakrabarti and Sankar De publisher: Sage India ISBN-10:8132105001, Publishing Year:2010 Mutual funds in India- H. Sadhak Publisher: sage pubns ISBN: 0761997954 Indian capital marketShirinRathorePublisher: Anmol Publications Pvt Ltd ISBN: 9788126114863 Mutual Funds : Management And Working -L.K. BansalPublisher: Deep & Deep Publications P Ltd. Released: 1997 How mutual funds work -- Albert J. Fredman, Russ W Indian Mutual Funds Handboo by Sankaran, Sundar Research Methodology – C.R.kothalar- Publisher- New International Pvt. Ltd. year-1985 Business research methodology – J.K. Sachadev- publisher Himalaya publication,year-2008 Memorandum of SBI mutual Fund Website : -
  74. 74. 74 Namibian, D. (2012). Advice on Mutual Fund Selection. Journal Of Financial Service Professionals, 66(5), 72-76 Cici, G., & Gibson, S. (2012). The Performance of Corporate Bond Mutual Funds: Evidence Based on Security-Level Holdings. Journal Of Financial & Quantitative Analysis, 47(1), 159- 178. doi:10.1017/S0022109011000640 BHOJRAJ, S., JUN CHO, Y., & YEHUDA, N. (2012). Mutual Fund Family Size and Mutual Fund Performance: The Role of Regulatory Changes. Journal Of Accounting Research, 50(3), 647-684. doi:10.1111/j.1475-679X.2011.00436.x Deuskar, P., Pollet, J. M., Wang, Z., &Zheng, L. (2011). The Good or the Bad? Which Mutual Fund Managers Join Hedge Funds?. Review Of Financial Studies, 24(9), 3008-3024.
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