30838403 comparative-analysis-of-mutual-funds

A
REPORT ON

“COMPARITIVE ANALYSIS OF
MUTUAL FUNDS”

WITH SPECIAL REFERENCE
TO

SBI MUTUAL FUND

MRINAL MANISH

ENR. NO.:4108078078

2008 – 2010
COMPANY GUIDE: MR. KAPIL MALIK
(H.O.D.- RETAIL)
A report submitted in partial fulfilment for the requirement of MBF program

ACKNOWL
EDGEMENT

In pursuit of an MBA degree, summer internship is a critical component of the entire
process. ‘SBI FUNDS MANAGEMENT PVT. LTD.’ has given me the opportunity to
gain invaluable experience under the guidance of Mr. Gaurav Vatsayan (V.P.-Sales,
Delhi Region) & Mr. Kapil Mallik (Head- Retail channel). Their continuous support
and valuable in hand experience provided me with the conceptual understanding and
practical approach needed to work efficiently for this project. The entire SBI Mutual
Fund’s staff is praiseworthy.

I would like to pay my regards and sincere thanks to my in charge Mr. Sumit Mahajan
for
Stimulating suggestions and encouragement helped me in all the time of my internship.

Last but not the least; I also would like to thank the entire staff of SBI Mutual Fund and
all my friends and colleagues who helped whenever I faced any difficult situation.

I hope this report, reflecting my learning in the past fourteen weeks, is as beneficial to
the organization as it had been to me.

Again, I sincerely thank all of them.

MRINAL MANISH (4108078078)

INDIAN INSTITUTE OF FINANCE Page 2

- MRINAL MANISH

ENR. NO.-
4108078078

CERTIFICATE

This is to certify that the project on “Comparative Analysis of Mutual Funds
with special refernce to SBI Mutual Fund ” has been done by Mr. Mrinal
Manish with Reference to SBI Mutual Fund, Ashoka Estate, New Delhi as a
part of the requirement of the Management of Business Finance (MBF)
summer training program. This study is being submitted for approval to Indian
Institute of Finance.

I declare that the form and contents of the above mentioned project are
original and have not been submitted in part or full, for any other degree or
diploma of this or any other Organization / Institute/ University.

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

Name: Mrinal Manish

Enrollment No. 4108078078

MBF (2008-2010)

Indian Institute of Finance



PREFACE

Finance & its functions are the part of economic activity. Finance is very essentially
needed for all types of organizations viz; small, medium, large-scale industries &
service sector. Hence the role of finance manager & the subject finance accounting
gained maximum importance. Liberalization, globalization & privatization created new
challengers to entrepreneur & corporate in carrying they’re day to day activities. So,
“finance is regarded as the life blood of a business organization.”

Master of business administrator is professional course which develop a new body of
knowledge & skill set & make as available for those seeking challenging carriers in the
of liberalization & globalization.

The goal of the Summer Training is to give a corporate exposure to the students as well
as to give them an opportunity to apply theory into the practice. The real business
problems are drastically different from class-room case solving. Summer Project aims to
providing little insight into working of an organization to a management trainee.

Among every stage of knowledge being inculcated in students, practical training in the
corporate world plays a significant role in exhibiting and pruning their capabilities.



The purpose behind writing a report is to put in to works the practical
training that is imparted into me that gives a better and a clear understanding of the
experience I got.

“COMPARATIVE ANALYSIS OF MUTUAL FUNDS WITH SPECIAL
REFERENCE TO SBI MUTUAL FUND”

being a very important aspect of SBI Mutual Fund Pvt. Ltd., I have tried to explore
many areas of the subject in my project report.

While preparing this project report I got the knowledge about various aspects regarding
financial decisions made in organisation like “SBI Mutual Fund Pvt. Ltd.” the business
world.

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

1. Chapter 1 is an introduction of the mutual fund industry and the company.
2. Chapter 2 deals with review of literature.
3. Chapter 3 states the methodology being used in the project.
4. Chapter 4 basically states the Analysis of the Mutual Funds
5. Chapter 5 deals with the use of findings, conclusion. suggestions and limitations.



CONTENTS
Chapter Page no.

I. INTRODUCTION…………………………………………………………
15-62
1. WHY COMPARATIVE ANALYSIS OF MUTUAL FUNDS?............15
2. INTRODUCTION TO MUTUAL FUNDS…………………………….17
3. INDUSTRY PROFILE…………………………………………………40
4. COMPANY PROFILE………………………………………………....46
5. NEW FUND OFFER (SBI GETS)...................................................61
6. OTHER WORK EXPERIENCE AND LEARNINGS DURING THE
PROJECT
....................................................................................................62

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

III. RESEARCH METHODOLOGY.......................................................75-119
1. NEED OF THE STUDY…………………………........................78

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



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

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

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

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

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

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

7. MOST POPULAR FUND HOUSE IN TERMS OF HIGHEST
INVESTMENT........................................................................119

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

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

• NAV..............................................................122

• BETA.......................................................124

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

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

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

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

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



• EQUITY LINKED SAVING SCHEMES.....138

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

• EQUITY SMALL AND MID CAP FUNDS.155

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

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

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

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

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

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

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

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

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

TABLE INDEX

Table Name Page no.

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



27. COMPARISION OF MUTUAL FUNDS AGAINST OTHER INVESTMENT
AVENUES................................................................................................173

CHART INDEX
Chart name Page no.

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

26. PORTFOLIO ANALYSIS OF EQUITY SMALL AND MID CAP

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



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

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

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

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

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

EXECUTIVE SUMMARY

OBJECTIVE:

 To know the awareness of mutual funds among people.
 To see the interest of people in investing in mutual funds.



 To know the investment behaviour of investors in mutual fund
according to different age group.
 To ascertain the percentage of income the investors invest in mutual fund.
 To know the different attitudes of people regarding risk, rate of return, period of
investment.
 To know the investors preferred financial product for investment.

SCOPE:

There are four divisions in SBI MF for the purpose of marketing and sales. They give
special attention for the retention of customers i.e. investors, distributors and brokers.
Four divisions are:
1. National distributors.
2. Banking.
3. Individual financial advisors.
4. FII’s.

FII’s are taking care by head office in MUMBAI. I am under section of National
distributors and Individual financial advisors. To maintain relationships with them and
make them aware about the new offerings and sort out their existing problems. My area
of scope is DELHI region. There are around 250 ND’s and IFA’s in this region.

METHODOLOGY FOLLOWED:

Methodology basically means the selection of the various methods and techniques in the
research-conducted. The various steps includes: -
1. Selection of a representative sample from the general population, which depicts the
characteristics of the complete
population.



2. Application of various tools and techniques to obtain relevant
information related to a case.
3. Collection of relevant data.
4. Analysis and interpretation of the data.
5. Generation of a final report.

RESEARCH DESIGN

There are 34 fund houses currently operating in India of which four have been in
existence for less than three years. Whereas till 2004, hardly a few equity schemes were
launched each year, that number has grown by 8-10 times now.
For the purpose of the research, I have selected 5 fund houses as mentioned under:
 SBI Mutual Fund
 Birla
 Reliance
 Prudential ICICI
 Franklin Templeton

The following methodology is adopted for Comparison
Step1: Selection of few well-performing Funds of Big Fund Houses of India.
Step2: Collection of data (against various parameters) for comparison of Funds.
Step3: Analyses of the parameters and their relevance in comparing the funds.
Step4: Comparing and Ranking these funds on the basis of inputs from executives and
the
rating agencies.
Step5: Generation of a project report.

DATA COLLECTION



The primary data collection was the most important part of the project.
This includes collecting the information through field research. For collecting
information, a personal interview was conducted with the help of questionnaire and the
required information was collected for the respondents.

DATA ANALYSIS

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

1. INTRODUCTION

WHY COMAPARATIVE ANALYSIS OF MUTUAL FUNDS?



All over the world, mutual fund is one of the most popular instruments for
investment. Its popularity with consumer has dramatically increased over the last couple
of years worldwide; the mutual fund has a long and successful history. The popularity of
mutual fund has increased manifold. In developed financial market like United States,
mutual has almost overtaken bank deposits and total assets of insurance funds.

The mutual fund industry in India is regulated by Association of Mutual Funds in India
(AMFI). The mutual fund industry in India is of 493,287 crores approx. SBI Mutual
Fund is India’s largest bank sponsored mutual fund and has an enviable track record in
judicious investments and consistent wealth creation.
The fund traces its lineage to SBI - India’s largest banking enterprise. The institution has
grown immensely since its inception and today it is India's largest bank, patronized by
over 80% of the top corporate houses of the country.
SBI Mutual Fund is a joint venture between the State Bank of India and Société
Générale Asset Management, one of the world’s leading fund management
companies that manages over US$ 500 Billion worldwide.
In twenty years of operation, the fund has launched 38 schemes and successfully
redeemed fifteen of them. In the process it has rewarded its investors handsomely with
consistently high returns.
A total of over 4.6 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund.
Schemes of the Mutual fund have consistently outperformed benchmark indices and
have emerged as the preferred investment for millions of investors and HNI’s.
Today, the fund manages over Rs. 28500 crores of assets and has a diverse profile of
investors actively parking their investments across 36 active schemes.
The fund serves this vast family of investors by reaching out to them through network of
over 130 points of acceptance, 28 investor service centers, 46 investor service desks and
56 district organizers.
SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent
India Opportunities Fund.



Growth through innovation and stable investment policies is the SBI MF
credo
State Bank of India was born on 1st July,1955 based on the recommendations of All
India Rural Credit Survey Committee(1954) headed by Shri A.D Gorwala, through an
Act of Parliament. The main objective of SBI is “Extension of Banking facilities on a
large scale, more particularly in rural and semi-urban areas, and for diverse other public
purposes and to transfer to it the undertaking of the Imperial Bank of India and provide
for other matters connected thereto or incidental thereto.”SBI is the oldest, the largest
and the highest profit making bank in India. Its evolution is not only intimately
interwoven with the economic development of modern India but also with our nation
building process to an extent perhaps unparalleled in the world. Moving like colossuses
on the Indian financial turf, it has become a symbol of national pride and economic
development.

SBI with its extensive network of over 9000 branches has vast clientele and extends
service not only on commercial basis but also on the basis of social considerations. The
Bank is also on its way to introduce and absorb technology extensively at a rapid speed
not only to remain customer-friendly and efficient for existing business but also to
manage new business and services in an increasingly dynamic and global environment.

The project entitled “Comparison of Mutual Fund with special reference to SBI
Mutual Fund” gives me an opportunity to enhance my knowledge of mutual funds
industry and gives me an insight of business processes of different types of client.

INTRODUCTION TO MUTUAL FUNDS



Mutual fund is a buzz in the market these days. The mutual fund industry
is burgeoning, it is completely untapped market. Only 5% of total potential of this
industry has been grabbed. Hence this industry has a lot of opportunities in it. That’s
why it is so much interactive.

As Indian economy is growing at the rate of 8% per annum, we can see its effect in all
areas. The Indian stock market and companies have become lucrative for foreign
investors. More and more fund is pouring in our country. This is increasing liquidity in
the market and hence increasing the money in the hands of people and thus investment.
As the future prospects for Indian companies are bright, they have lots of opportunities
to expand their business worldwide, the investment in Indian companies.

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned
through these investments and the capital appreciations realized by the scheme are
shared by its unit holders in proportion to the number of units owned by them (pro rata).
Thus a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed portfolio at a relatively
low cost. Anybody with an investible surplus of as little as a few thousand rupees can
invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective
and strategy.

A mutual fund is the ideal investment vehicle for today’s complex and modern financial
scenario. Markets for equity shares, bonds and other fixed income instruments, real
estate, derivatives and other assets have become mature and information driven. Price
changes in these assets are driven by global events occurring in faraway places. A
typical individual is unlikely to have the knowledge, skills, inclination and time to keep
track of events, understand their implications and act speedily. An individual also finds



it difficult to keep track of ownership of his assets, investments, brokerage
dues and bank transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified
and experienced staff that manages each of these functions on a full time basis. The
large pool of money collected in the fund allows it to hire such staff at a very low cost to
each investor. In effect, the mutual fund vehicle exploits economies of scale in all three
areas - research, investments and transaction processing. While the concept of
individuals coming together to invest money collectively is not new, the mutual fund in
its present form is a 20th century phenomenon. In fact, mutual funds gained popularity
only after the Second World War. Globally, there are thousands of firms offering tens of
thousands of mutual funds with different investment objectives. Today, mutual funds
collectively manage almost as much as or more money as compared to banks.

A draft offer document is to be prepared at the time of launching the fund. Typically, it
pre specifies the investment objectives of the fund, the risk associated, the costs
involved in the process and the broad rules for entry into and exit from the fund and
other areas of operation. In India, as in most countries, these sponsors need approval
from a regulator, SEBI (Securities exchange Board of India) in our case. SEBI looks at
track records of the sponsor and its financial strength in granting approval to the fund
for commencing operations.

A sponsor then hires an asset management company to invest the funds according to the
investment objective. It also hires another entity to be the custodian of the assets of the
fund and perhaps a third one to handle registry work for the unit holders (subscribers) of
the fund.

In the Indian context, the sponsors promote the Asset Management Company also, in
which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the
Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor of the
Birla Sun Life Asset Management Company Ltd., which has floated different mutual



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

Future Scenario

The asset base will continue to grow at an annual rate of about 30 to 35 % over the next
few years as investor’s shift their assets from banks and other traditional avenues. Some
of the older public and private sector players will either close shop or be taken over.

Out of ten public sector players five will sell out, close down or merge with stronger
players in three to four years. In the private sector this trend has already started with two
mergers and one takeover. Here too some of them will down their shutters in the near
future to come.

But this does not mean there is no room for other players. The market will witness a
flurry of new players entering the arena. There will be a large number of offers from
various asset management companies in the time to come. Some big names like Fidelity,
Principal, and Old Mutual etc. are looking at Indian market seriously. One important
reason for it is that most major players already have presence here and hence these big
names would hardly like to get left behind.

The mutual fund industry is awaiting the introduction of derivatives in India as this
would enable it to hedge its risk and this in turn would be reflected in it’s Net Asset
Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes to trade in
derivatives. Importantly, many market players have called on the Regulator to initiate



the process immediately, so that the mutual funds can implement the
changes that are required to trade in Derivatives.

Market Trends

A lone UTI with just one scheme in 1964 now competes with as many as 400 odd
products and 34 players in the market. In spite of the stiff competition and losing market
share, UTI still remains a formidable force to reckon with.

Last six years have been the most turbulent as well as exiting ones for the industry. New
players have come in, while others have decided to close shop by either selling off or
merging with others. Product innovation is now passé with the game shifting to
performance delivery in fund management as well as service. Those directly associated
with the fund management industry like distributors, registrars and transfer agents, and
even the regulators have become more mature and responsible.

The industry is also having a profound impact on financial markets. While UTI has
always been a dominant player on the bourses as well as the debt markets, the new
generations of private funds which have gained substantial mass are now seen flexing
their muscles. Fund managers, by their selection criteria for stocks have forced corporate
governance on the industry. By rewarding honest and transparent management with
higher valuations, a system of risk-reward has been created where the corporate sector is
more transparent then before.

Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG
and technology sector. Funds performances are improving. Funds collection, which
averaged at less than Rs100bn per annum over five-year period spanning 1993-98
doubled to Rs210bn in 1998-99. In the current year mobilization till now have exceeded
Rs300bn. Total collection for the current financial year ending March 2000 is expected
to reach Rs450bn.

What is particularly noteworthy is that bulk of the mobilization has been by the private
sector mutual funds rather than public sector mutual fundsMutual funds are now also


competing with commercial banks in the race for retail investor’s savings
and corporate float money. The power shift towards mutual funds has become obvious.
The coming few years will show that the traditional saving avenues are losing out in the
current scenario. Many investors are realizing that investments in savings accounts are
as good as locking up their deposits in a closet. The fund mobilization trend by mutual
funds in the current year indicates that money is going to mutual funds in a big way.

India is at the first stage of a revolution that has already peaked in the U.S. The U.S.
boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund
assets are not even 10% of the bank deposits, but this trend is beginning to change.
Recent figures indicate that in the first quarter of the current fiscal year mutual fund
assets went up by 115% whereas bank deposits rose by only 17%. (Source: Think-tank,
the Financial Express September, 99) This is forcing a large number of banks to adopt
the concept of narrow banking wherein the deposits are kept in Gilts and some other
assets which improves liquidity and reduces risk. The basic fact lies that banks cannot
be ignored and they will not close down completely. Their role as intermediaries cannot
be ignored. It is just that Mutual Funds are going to change the way banks do business in
the future.

WHAT IS A MUTUAL FUND?

common financial goal. It offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost. The flow chart below describes
broadly the working of a mutual fund:

Pool their money with

Investors Fund managers

Invest in
Passed back to

Returns Securities

“Mutual Funds are popular among all income levels. With a mutual fund, we get a
diversified basket of stocks managed by professionals”

These Trusts are run by experienced Investment Managers who use their knowledge and
expertise to select individual securities, which are classified to form portfolios that meet
predetermined objectives and criteria.
These portfolios are then sold to the public. They offer the investors the following main
services:

 Portfolio Diversification
 Marketability: A new financial asset is created that may be more easily
marketable than the underlying securities in the portfolio.

Organization of a Mutual Fund

A mutual fund is set up in the form of a trust, which has sponsor, trustees,
asset management company (AMC) and custodian. The trust is established by a sponsor
or more than one sponsor who is like promoter of a company. The trustees of the mutual
fund hold its property for the benefit of the unit holders. Asset Management Company
(AMC) approved by SEBI manages the funds by making investments in various types of
securities. Custodian, who is registered with SEBI, holds the securities of various
schemes of the fund in its custody. The trustees are vested with the general power of


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

TYPES OF MUTUAL FUND SCHEMES

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

By Structure:

Open-ended Funds:

An open-end fund is one that is available for subscription all through the year. These do
not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Closed ended Funds:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can
invest in the scheme at the time of the initial public issue and thereafter they can buy or


sell the units of the scheme on the stock exchanges where they are listed.
In order to provide an exit route to the investors, some close-ended funds give an option
of selling back the units to the Mutual Fund through periodic repurchase at NAV related
prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to
the investor. .
Interval Funds:

Interval funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during pre-determined intervals at NAV related prices

By Investment Objective

Growth Funds:

The aim of growth funds is to provide capital appreciation over the medium to long
term. Such schemes normally invest a majority of their corpus in equities. It has been
proved that returns from stocks, have outperformed most other kind of investments held
over the long term. Growth schemes are ideal for investors having a long term outlook
seeking growth over a period of time.

Income Funds:

The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate debentures
and Government securities. Income Funds are ideal for capital stability and regular
income.

Balanced Fund:
The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed


income securities in the proportion indicated in their offer documents. In a
rising stock market, the NAV of these schemes may not normally keep pace, or fall
equally when the market falls. These are ideal for investors looking for a combination of
income and moderate growth.

MoneyMarketFunds:

The aim of money market funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer short-term instruments such
as treasury bills, certificates of deposit, commercial paper and inter-bank call money.
Returns on these schemes may fluctuate depending upon the interest rates prevailing in
the market. These are ideal for Corporate and individual investors as a means to park
their surplus funds for short periods.

Other Schemes

Tax Saving Schemes:

These schemes offer tax rebates to the investors under specific provisions of the Indian
Income Tax laws as the Government offers tax incentives for investment in specified
avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension
Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also
provides opportunities to investors to save capital gains u/s 54EA and 54EB by
investing in Mutual Funds.

Special Schemes

• Industry Specific Schemes



Industry Specific Schemes invest only in the industries specified in the
offer document. The investment of these funds is limited to specific industries like
InfoTech, FMCG, and Pharmaceuticals etc.

• Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50

• Sectoral Schemes

Sectoral Funds are those which invest exclusively in a specified sector. This could be an
industry or a group of industries or various segments such as 'A' Group shares or initial
public offerings

BENEFITS OF MUTUAL FUNDS

Diversification

Professional management Tax benefits



Affordability Transparency

Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.

Diversification

Mutual Funds invest in a number of companies across a broad cross – section of
industries and sectors. This diversification reduces the risk because seldom do all stocks
decline at the same time and in the same proportion. You achieve this diversification
through a Mutual Fund with far less money than you can do on your own.

Affordability

A mutual fund invests in a portfolio of assets, i.e. bonds, shares etc. depending upon the
investment objective of the scheme. An investor can buy into a portfolio of equities,
which would otherwise be extremely expensive.

Tax Benefits

Any income distributed after March 31, 2002 will be subject to tax in the assessment of
all unit-holders. However, as a measure of concession to Unit holders of open – ended
and equity – oriented funds, income distributions for the year ending March 31, 2003,
will be taxed at a concessional rate of 10%.



Return Potential

Over a medium to long – term, mutual funds have the potential to provide a higher
return as they invest in a diversified basket of selected securities.

Low Costs

Investing in the capital markets because the benefits of scale in brokerage, mutual funds
are a relatively less expensive way to invest compared to directly custodial and other
fees translate into lower costs for investors.

Liquidity

In open – ended schemes, the investor gets the money back promptly at MAV related
prices from the mutual fund. In closed – ended schemes, the units can be sold on a stock
exchange at the prevailing market price or the investor can avail of the facility of direct
repurchase at NAV related prices by the mutual fund.

Transparency

You get regular information on the value of your investment in addition to disclosure on
the specific investments made by your scheme, the proportion invested in each class of
assets and the fund manager’s investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans and
dividend reinvestment plans, you can systematically invest or withdraw funds according
to your needs and convenience.



Well Regulated

All mutual funds are registered with SEBI and they function within the provisions of
strict regulations designed to protect the interests of investors.

Tax breaks

Last but not the least, mutual funds offer significant tax advantages. Dividends
distributed by them are tax-free in the hands of the investor.

They also give you the advantages of capital gains taxation. If you hold units beyond
one year, you get the benefits of indexation. Simply put, indexation benefits increase
your purchase cost by a certain portion, depending upon the yearly cost-inflation index
(which is calculated to account for rising inflation), thereby reducing the gap between
your actual purchase cost and selling price. This reduces your tax liability.

What’s more, tax-saving schemes and pension schemes give you the added advantage of
benefits under Section 88. You can avail of a 20 per cent tax exemption on an
investment of up to Rs 10,000 in the scheme in a year

No assured returns and no protection of capital

If you are planning to go with a mutual fund, this must be your mantra: mutual funds do
not offer assured returns and carry risk. For instance, unlike bank deposits, your
investment in a mutual fund can fall in value. In addition, mutual funds are not insured
or guaranteed by any government body (unlike a bank deposit, where up to Rs 1 lakh



per bank is insured by the Deposit and Credit Insurance Corporation, a
subsidiary of the Reserve Bank of India).

There are strict norms for any fund that assures returns and it is now compulsory for
funds to establish that they have resources to back such assurances. This is because most
closed-end funds that assured returns in the early-nineties failed to stick to their
assurances made at the time of launch, resulting in losses to investors.

Restrictive gains

Diversification helps, if risk minimization is your objective. However, the lack of
investment focus also means you gain less than if you had invested directly in a single
security.

In our earlier example, say, Reliance appreciated 50 per cent. A direct investment in the
stock would appreciate by 50 per cent. But your investment in the mutual fund, which
had invested 10 per cent of its corpus in Reliance, will see only a 5 per cent
appreciation.

RISK ASSOCIATED WITH MUTUAL FUNDS

Credit Political inflation

RISKS

Liquidity Market


Risk-Return Trade Off

The most important relationship to understand is the risk-return trade off. Higher the risk
greater the returns/loss and lower the risk lesser the returns/loss. Hence it is up to you,
the investor to decide how much risk you are willing to take. In order to do this you
must first be aware of the different types of risks involved with your investment
decision.

Market Risk

Sometimes prices and yields of all securities rise and fall. Broad outside influences
affecting the market lead to this. This is true, may it be big corporations or smaller mid-
sized companies. This is known as Market Risk. A Systematic Investment Plan (SIP)
that works
on the concept of Rupee Cost Averaging (RCA) might help mitigate the risk.

Credit Risk

The debt servicing ability of a company through its cash flows determines the Credit
Risk faced by you. This credit risk is measured by independent rating agencies like
CRISIL who rate companies and their paper. A ‘AAA’ rating is considered the safest
whereas a ‘D’ rating is considered poor credit quality. A well – diversified portfolio
might help mitigate this risk.

Inflation Risk



Inflation is the loss of purchasing power over a time. A lot of times people make
conservative investment decisions to protect their capital but end up with a sum of
money that can buy less than what the principal could, at the time of investment. A
well–diversified portfolio with some investment in equities might help mitigate this risk.

Interest Rate Risk

In a free market economy interest rates are difficult and not impossible to predict.
Changes in interest rates affect the prices of bonds as well as equities. If interest rates
rise, the prices of bonds will fall and vice versa. Equity might be negatively affected as
well in a rising interest rate environment. A well-diversified portfolio might help
mitigate this risk.

Political Risk

Changes in government policy and political decision can change the investment
environment. They can create a favourable environment for investment or vice versa.

Liquidity Risk

Liquidity risk arises when it becomes difficult to sell the securities that one has
purchased. It can be partly mitigated by diversification, staggering of maturities as well
as internal risk controls that lean towards purchase of liquid securities. It simply means
that you must spread your investment across different securities (stocks, bonds, money
market instruments, real estate, fixed deposits etc.). This kind of a diversification may
add to the stability of your returns, for example, during one period of time equities
might under perform but bonds and money market instruments might do well enough to
offset the effect of a slump in the equity
Markets.



DISADVANTAGES OF MUTUAL FUNDS

There are certainly some benefits to mutual fund investing, but you should also be aware
of the drawbacks associated with mutual funds.

1. No Insurance: Mutual funds, although regulated by the government, are not
insured against losses. The Federal Deposit Insurance Corporation (FDIC) only
insures against certain losses at banks, credit unions, and savings and loans, not
mutual funds. That means that despite the risk-reducing diversification benefits
provided by mutual funds, losses can occur, and it is possible (although
extremely unlikely) that you could even lose your entire investment.

2. Dilution: Although diversification reduces the amount of risk involved in
investing in mutual funds, it can also be a disadvantage due to dilution. For
example, if a single security held by a mutual fund doubles in value, the mutual
fund itself would not double in value because that security is only one small part
of the fund's holdings. By holding a large number of different investments,
mutual funds tend to do neither exceptionally well nor exceptionally poorly.

3. Fees and Expenses: Most mutual funds charge management and operating fees
that pay for the fund's management expenses (usually around 1.0% to 1.5% per
year). In addition, some mutual funds charge high sales commissions, 12b-1
fees, and redemption fees. And some funds buy and trade shares so often that the
transaction costs add up significantly. Some of these expenses are charged on an


ongoing basis, unlike stock investments, for which a commission is
paid only when you buy and sell .
4. Poor Performance: Returns on a mutual fund are by no means guaranteed. In
fact, on average, around 75% of all mutual funds fail to beat the major market
indexes, like the S&P 500, and a growing number of critics now question
whether or not professional money managers have better stock-picking
capabilities than the average investor.

5. Loss of Control: The managers of mutual funds make all of the decisions about
which securities to buy and sell and when to do so. This can make it
difficult for you when trying to manage your portfolio. For example, the tax
consequences of a decision by the manager to buy or sell an asset at a certain
time might not be optimal for you. You also should remember that you are
trusting someone else with your money when you invest in a mutual fund.
6. Trading Limitations: Although mutual funds are highly liquid in general, most
mutual funds (called open-ended funds) cannot be bought or sold in the middle
of the trading day. You can only buy and sell them at the end of the day, after
they've calculated the current value of their holdings.

7. Size: Some mutual funds are too big to find enough good investments. This is
especially true of funds that focus on small companies, given that there are strict
rules about how much of a single company a fund may own. If a mutual fund has
$5 billion to invest and is only able to invest an average of $50 million in each,
then it needs to find at least 100 such companies to invest in; as a result, the fund
might be forced to lower its standards when selecting companies to invest in.



8. Inefficiency of Cash Reserves: Mutual funds usually maintain
large cash reserves as protection against a large number of simultaneous
withdrawals. Although this provides investors with liquidity, it means that some
of the fund's money is invested in cash instead of assets, which tends to lower the
investor's potential return.

Different Types: The advantages and disadvantages listed above apply to mutual funds
in general. However, there are over 10,000 mutual funds in operation, and these funds
vary greatly according to investment objective, size, strategy, and style. Mutual funds
are available for virtually every investment strategy (e.g. value, growth), every sector
(e.g. biotech, internet), and every country or region of the world. So even the process of
selecting a fund can be tedious.

Net Asset Value (NAV)Open-end mutual funds price their shares in terms of a Net
Asset Value (NAV) (note that you can calculate NAV for a closed-end fund too, but it
will not necessarily be the price at which you buy or sell closed-end shares). NAV is
calculated by adding up the market value of all the fund's underlying securities,
subtracting all of the fund's liabilities, and then dividing by the number of outstanding
shares in the fund. The resulting NAV per share is the price at which shares in the fund
are bought and sold (plus or minus any sales fees). Mutual funds only calculate their
NAVs once per trading day, at the close of the trading session.

HISTORY OF MUTUAL FUND IN INDIA

HISTORY – The Landmarks

1963: UTI is India’s first mutual fund.



1964: UTI launches US-64.

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

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

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

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

1993: Private sector and foreign players allowed; Kothari Pioneer first private fund
house to start operations; SEBI set up to regulate industry.

1994: Morgan Stanley is the first foreign player.

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

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

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

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

2001: US-64 scam leads to UTI overhaul.

2002: UTI bifurcated, comes under SEBI purview; mutual fund distributors banned from
giving commissions to investors; floating rate funds and Foreign debt funds debut.


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

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank. The history of
mutual funds in India can be broadly divided into four distinct phases.

FIRST PHASE: 1964 – 87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the regulatory and administrative
control of the Reserve Bank of India. In 1978, UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI was Unit
Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under the
management.

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

1987 marked the entry of non – UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non – UTI Mutual Fund established in
June1987 followed by Can Bank Mutual Fund (Dec ‘87), Punjab National Bank Mutual
Fund (Aug ‘89), Indian Bank Mutual Fund (Nov ‘89), Bank of India (Jun ‘90), Bank of
Baroda Mutual Fund (Oct ‘92). LIC established its mutual fund in June 1989 while GIC
had set up its mutual fund in December 1990. At the end of 1993, the mutual fund
industry had assets under management of Rs.47, 004 crores.

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


With the entry of private sector funds in 1993, a new era started in the Indian mutual
fund industry, giving the Indian investors a wider choice of fund families. Also, 1993
was the year in which the first Mutual Fund came into being, under which all mutual
funds, except UTI, were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996.
The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The
number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets
of Rs.1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under
management was way ahead of other mutual funds.

FOURTH PHASE: since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with assets under management of Rs.29,835 crores as at the end of January
2003, representing broadly, the assets of US 64 scheme, assured return and certain other
schemes. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With
the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000
crores of assets under management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector
funds, the mutual fund industry has entered its current phase of consolidation and
growth



INDUSTRY PROFILE:



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

STRUCTURE OF MUTUAL FUNDS IN INDIA



Like other countries, India has a legal framework within which mutual funds must be
constituted. In India, open and close – end funds operate under the same regulatory
structure, i.e. in India, all mutual funds are constituted along one unique structure – as
unit trust. A mutual fund in India is allowed to issue open – end and close – end
schemes under a common legal structure. The structure, which is required to be
followed by mutual funds in India, laid down under SEBI (Mutual Fund) Regulations,
1996.

The Fund Sponsor

‘Sponsor’ is defined under SEBI Regulations as any person who, acting alone or in
combination with another body corporate establishes a mutual fund. The sponsor of a
fund is akin to the promoter of companies he gets the fund registered with SEBI. The



sponsor will form a Trust and appoint a Board of Trustees. All these
appointments are made in accordance with the SEBI Regulations. As per the existing
SEBI Regulations, for a person to qualify as a sponsor, must contribute at least 40% of
the net worth of the AMC and issues a sound financial track over five years prior to
registration.

Mutual Funds as Trusts

Mutual Fund in India is constituted in the form of a Public Trust under the Indian Trust
Act 1882. The fund invites investors to contribute their money in the common pool by
subscribing to units issued by various schemes established by the Trust as evidence of
their beneficial interest in the fund. The Trust or Fund has no legal capacity itself rather
it is the Trustee(s) who have legal capacity and therefore the trustees take all acts in
relation to the Trust itself.

Trustees

A Board of Trustees – a body of individuals, or a trust company – a corporate body, may
manage the Trust. Board of Trustees manages most of the funds in India. The Trust is
created through a document called the Trust Deed that is executed by the Fund Sponsor
in favors of the trustees. They are the primary guardian of the unit holder’s funds and
assets. They ensure that AMC’s operations are along professional lines.

Right of Trustees

a) Appoint the AMC with the prior approval of SEBI
b) Approve each of the schemes floated by the AMC
c) Have the right to request any necessary information from the AMC concerning
the operations of various schemes managed by the AMC

Obligations of the AMC and its Directors


They must ensure that:
a) Investment of funds is in accordance with SEBI Regulations and the Trust Deed
b) Take responsibility for the act of its employees and others whose services it has
procured
c) Do not undertake any other activity conflicting with managing the fund

Asset Management Company

The role of an Asset Management Company (AMC) is to act as the investment manager
of the trust under the Board supervision.

Transfer Agents

Transfer Agents are responsible for issuing and redeeming units of the mutual fund and
provide other related services such as preparation of transfer documents updating
investor’s records. A fund may choose to opt this activity in-house or by an outside
transfer agent.

Distributors

AMCs usually appoint distributors or brokers, who sell units on behalf of the fund.
Some funds require that all transactions to be routed through such brokers.

Bankers

A fund’s activities involved dealing with the money on a continuous basis primarily
with respect to buying and selling units, paying for investment made, receiving the
proceeds from sale of investment and discharging its obligations towards operative
expenses. A fund’s banker therefore plays a crucial role with respect to its financial
dealings.


Custodian and Depository

The custodian is appointed by the Board of Trustees for safekeeping of securities in
terms of physical delivery and eventual safe keeping or participating in the clearing
system through approved depository companies.

ASSOCIATION OF MUTUAL FUNDS IN INDIA

With the increase in mutual fund players in India, a need for mutual fund association in
India was generated to function as a non profit organisation. Association of Mutual
Funds in India (AMFI) was incorporated on 22nd August, 1995.

AMFI is a apex body of all Asset Management Companies (AMC) which has been
registered with SEBI. Till date all the AMCs are that have launched mutual fund
schemes are its members. It functions under the supervision and guidelines of its Board
of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry
to a professional and healthy market with ethical lines enhancing and maintaining
standards. It follows the principle of both protecting and promoting the interests of
mutual funds as well as their unit holder.

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of the
country. It has certain defined objectives which juxtaposes the guidelines of its Board of
Directors. The objectives are as follows:



 This mutual fund association of India maintains high professional and
ethical standards in all areas of operation of the industry.
 It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in the activities
of mutual fund and asset management. The agencies who are by any means
connected or involved in the field of capital markets and financial services also
involved in this code of conduct of the association.
 AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual
fund industry.
 Association of Mutual Fund in India does represent the Government of India, the
Reserve Bank of India and other related bodies on matters relating to the Mutual
Fund Industry.
 It develops a team of well qualified and trained Agent distributors. It implements a
program of training and certification for all intermediaries and other engaged in the
mutual fund industry.
 AMFI undertakes all India awareness programmed for investor’s in order to promote
proper understanding of the concept and working of mutual funds.
 At last but not the least association of mutual fund of India also disseminate
information’s on Mutual Fund Industry and undertakes studies and research either
directly or in association with other bodies



COMPANY PROFILE

ABOUT THE ORGANIZATION:

SBI Mutual Fund is India’s largest bank sponsored mutual fund. The fund traces its
lineage to SBI - India’s largest banking enterprise. The institution has grown immensely
since its inception and today it is India's largest bank, patronized by over 80% of the top
corporate houses of the country. SBI Mutual Fund is a joint venture between the
State Bank of India and Société Générale Asset Management, one of the world’s
leading fund management companies that manages over US$ 500 Billion worldwide. In
twenty years of operation, the fund has launched 38 schemes and successfully redeemed
fifteen of them.

A total of over 4.6 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund. The fund serves this vast family of investors by reaching
out to them through network of over 130 points of acceptance, 28 investor service
centers, 46 investor service desks and 56 district organizers. Today, the fund manages
over Rs. 28500crores of assets and has a diverse profile of investors actively parking
their investments across 36 active schemes. SBI Mutual is the first bank-sponsored fund
to launch an offshore fund – Resurgent India Opportunities Fund. Growth through
innovation and stable investment policies is the SBI MF credo.

GUIDING PRINCIPLES OF SBI MUTUAL FUND:



Consistency

Value oriented investment philosophy is designed to produce consistent results aiming
to beat
the benchmark at all times.

Flexibility

Offers investors a broad range of managed investment products in various asset classes
and risk parameters, within the at most operational flexibility to suit their investment
needs.

Stability

Our commitment to the highest quality of service and integrity are the foundation upon
which clients can build their trust with us

Origin

The origin of the Indian mutual funds industry dates back to 1963 when the Unit Trust
of India (UTI) came into existence at the initiative of the Government of India and the
Reserve Bank of India. Since then the mutual funds sector remained the sole fiefdom of
UTI till 1987 when a slew of non-UTI, public sector mutual funds were set up by
nationalized banks and life insurance companies.
The year 1993 saw sweeping changes being introduced in the mutual fund industry with
private sector fund houses making their debut and the laying down of comprehensive
mutual fund regulations. Over the years, the Indian mutual funds industry has witnessed



an exponential growth riding piggyback on a booming economy and the
arrival of a horde of international fund houses.

Concept

“Mutual fund is vehicle that enables a number of investors to pool their money and
have it jointly managed by a professional money manager.”
A Mutual Fund is a pool of money, collected from investors, and is invested according
to certain investment objectives.

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

Mutual Fund companies are known as asset management companies. They offer a
variety of diversified schemes. Mutual Fund acts as investment companies. They pool
the savings of investors and invest them in a well-diversified portfolio of sound
investments.

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

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

Within each of these sectors, investors have a myriad of choices to consider, including:
international or domestic, active or indexed, and value or growth, just to name a few.



I will cover these topics shortly. First, however, I am going to focus my
attention on the “nuts and bolts” of how mutual funds operate.

Mutual Fund Operation Flow Chart



ORGANIZATION

Organization of a Mutual Fund

Mutual funds

Mutual fund is vehicle that enables a number of investors to pool their money and have
it jointly managed by a professional money manager

Sponsor

Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. The Sponsor is not responsible or liable for any loss or


shortfall resulting from the operation of the Schemes beyond the initial
contribution made by it towards setting up of the Mutual Fund.

Trustee

Trustee is usually a company (corporate body) or a Board of Trustees (body of
individuals). The main responsibility of the Trustee is to safeguard the interest of the
unit holders and ensure that the AMC functions in the interest of investors and in
accordance with the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996.

Asset Management Company (AMC)

The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund.
At least 50% of the directors of the AMC are independent directors who are not
associated with the Sponsor in any manner. The AMC must have a net worth of at least
10 crores at all times.

Transfer Agent

The AMC if so authorised by the Trust Deed appoints the Registrar and Transfer Agent
to the Mutual Fund. The Registrar processes the application form, redemption requests
and dispatches account statements to the unit holders. The Registrar and Transfer agent
also handles communications with investors and updates investor records.



SBI Mutual Fund is India’s largest bank sponsored mutual fund and
has an enviable track record in judicious investments and consistent wealth
creation. The fund traces its lineage to SBI - India’s largest banking enterprise.
The institution has grown immensely since its inception and today it is India's
largest bank, patronized by over 80% of the top corporate houses of the country.
SBI Mutual Fund is a joint venture between the State Bank of India and Société
Générale Asset Management, one of the world’s leading fund management
companies that manages over US$ 330 Billion worldwide. At SBI Mutual Fund,
resources are considerably devoted to gain, maintain and sustain profitable
insights into market movements. The trust reposed on SBI-MF by over 2 million
investors is a genuine tribute to its expertise in Fund Management. SBI Mutual
Fund is India’s largest bank sponsored mutual fund and has an enviable track
record in judicious investments and consistent wealth creation.

Thus SBI-MF believes in
• Proven Skills in Wealth Generation

• Exploiting expertise, compounding growth

OPERATION

In eighteen years of operation, the fund has launched thirty-two schemes and
successfully redeemed fifteen of them. In the process it has rewarded its investors
handsomely with consistently high returns. A total of over 20, 00,000 investors have
reposed their faith in the wealth generation expertise of the Mutual Fund. Schemes of
the Mutual fund have consistently outperformed benchmark indices and have emerged
as the preferred investment for millions of investors and HNI’s. Today, the fund
manages over Rs. 13,000 crores of assets and has a diverse profile of investors actively
parking their investments across 28 active schemes. The fund serves this vast family of
investors by reaching out to them through network of 82 collection branches, 26 investor
service centers, 21 investor service desks and 21 district organizers.


BOARD OF DIRECTORS

Mr. Achal K. Gupta Mr. C A Santosh
Managing Director & Chief Chief Manager - Customer Service.
Executive Office

Mr. Didier Turpin Ms. Aparna Nirgude
Dy. Chief Executive Officer Chief Risk Officer

Mr. Ashwini Kumar Jain Mr. Ashutosh P Vaidya
Chief Operating Officer Company Secretary & Compliance Officer

Mr. Navneet Munot Mr. Parijat Agrawal
Chief Investment Officer Head – Fixed Income

Mr. R. S. Srinivas Jain
Chief Marketing Officer



INVESTMENT TEAM
Chief Investment Officer :

SanjaySinha

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

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

Vice President - Investment Department :

ThierryNardozi

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



Societies).

Head Portfolio Management Services / Fund Manager :

NipaLadiwala

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

Equity :

Aashish Wakankar(Vice President & Fund Manager)

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

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



Debt / Fixed Income:

Parijat Agrawal (Head–Fixed Income)

Parijat has done his B.E (ECE) and PGDM (IIM Bangalore). He has got 12 years
experience in capital markets in areas like research, dealing and fund management.
Parijat is associated with SBI Funds Management Pvt. Ltd. since July 2006.

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

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

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

OffshoreFunds

Anand Gupta

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



PRODUCT PORTFOLIO



Distribution channel in SBIMF

SBI asset management company mainly emphasize on relationship building with its
customers like distributors, Banks, individual investors etc. The distribution channel of
SBIMF is as follows

Overview of Retail channel

The alternative distribution channels that are available are selling, or using lead
managers and brokers along with sub-brokers, for selling units. To be successful in this
mission, the industry will have to ensure that only those agents that have conviction
about mutual funds being the most versatile and an ideal investment vehicle for
investors are encouraged. This is because, there is a sense of loyalty amongst agents, in


anticipation of getting continuous business throughout the year, and the
trust and credibility that has been generated or will be generated by being loyal to one
institution. Savings in advertisement and publicity expenses is also affected, as the target
of communication is restricted to a few groups of individuals, since the agent will
function as a facilitator, informer and educator. The reduced cost benefit will ultimately
accrue to the investor in the form of higher returns.

In such a system, one achieves brand loyalty through continuous interaction between
agents and investors. Building a team of agents and other distribution network such as
distribution and collecting agents and franchise offices, will provide the investor the
opportunity of having continuous interaction and contact with the mutual fund.

Therefore, retail distribution through the agents is a preferred alternative for distributing
mutual fund products.

As my vertical in the company is retail which includes IFA’s (Individual financial
advisors) and National Distributors. The retail channel is subdivided into 5 regions.

National Distributors Nitin Kumar

West & Central Delhi Yogesh Kumar & Sumit

East Delhi Suyash

South Delhi Amit Srivastava

North Delhi Abhishek Singh

Meerut Ajay Chauhan

Agra Jitin & Amir Raza



Relationship building with active and inactive distributors (IFAs)

During my internship tenure of more than 8 weeks with SBIMF, the main task that has
been assigned to me was relationship building, for which I have personally visited both
active and inactive distributors. AMC have around 2000 distributors in Delhi-NCR
region which is sub divided into 5 regions namely:-
1) North Delhi
2) South Delhi
3) East Delhi
4) West Delhi
5) Central Delhi
I have covered some areas of East, West and Central Delhi. The purpose behind these
visits was to build a relation with the distributors on the behalf of AMC which in turn
help in generating more investment. In case of inactive distributors the motive was to
find out the reasons for which they stopped dealing with SBIMF. In this cumbersome
exercise of relationship building I made several observations from the feedback which I
got from the distributors and are highlighted below.

NEW FUND OFFER (SBI GETS)
SBI Mutual Fund had launched a New Fund Offer of the SBI Gold Exchange Traded
Scheme (SBI GETS). The scheme helped investors to invest in gold through the
convenience of their demat account.They could invest in as low as one gram of gold,
since one unit of SBI GETS would track the price of even one gram of gold. Post-NFO,
SBI GETS would be listed on the National Stock Exchange. The investors could be able
to easily trade the units of the scheme, just like an equity stock, through an NSE Broker
or their online trading account. The NFO of SBI GETS was open till 28th April, 2009.



OTHER WORK EXPERIENCE AT SBI MUTUAL FUND

INFORMATION SHARING:

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

OPERATIONAL SERVICE:

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

COMPUTER AGE MANAGEMENT SERVICES PVT. LTD. (CAMS) offers a
comprehensive package of Transaction Processing and Customer Care services to the
Mutual Fund industry, and has been constantly raising the bar in customer service since
1995. Setup in 1988 as a Software Developer, CAMS moved from Capital Market
Transaction Processing (processing Equity IPOs) to Customer Care and Transaction



Processing for Mutual Funds. CAMS today has the most appropriate and
advanced technology employed, with the best network for service delivery through its
network of Service Centers in all major cities in India. At SBIMF we have learnt the
software and worked on it, the major things that we have done using this software are

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

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

LEARNING’S DURING THE PROJECT:

During this internship of three months, apart from project I have learnt several important
skills and gained knowledge which is very important, and according to me is the best
learning during the Summer Internship Project, some of them are covered below:

1) INTERPERSONAL SKILLS:

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

2) COMMUNICATION SKILLS:

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

3) KNOWLEDGE ENHANCEMENT:

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

4) TEAM BUILDING:



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

5) APPLICATION OF KNOWLEDGE:

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

2.REVIEW OF LITERATURE

June 2009
This was one of the best months for stocks and commodities in a
long time. Sensex posted a gain of 28% as both foreign and domestic
investors poured money. It is up a whopping 79% from the low
witnessed on March 9 this year. The scale and speed of stock market
gain has taken most investors by surprise and ‘left out feeling’ is
leading to massive buying in high-beta names. Markets caught fire
after the announcement of election results and further fuel was added by positive
news flow from global markets.

The barrage of liquidity is finally finding its way into riskier assets across markets.
Credit spreads collapsed, high yield currencies gained against safe heavens and bond
yields rose as investors migrate from defensives to risk-assets. Volatility and risk


premiums are touching multi-month low as confidence is coming back into financial
markets. Incremental economic data is less negative, pile of cash is humongous and
policy remains extremely supportive. As we have been writing that the scale,
magnitude and synchronized nature of policy response this time is simply
unprecedented in history. Fundamental problems of global imbalances that led to this
crisis can’t get resolved so easily and one might argue that the policy response so far
is something like treating a ‘hangover’ with more alcohol. But the fact remains, that
in the short term, the sheer power of liquidity can take prices of risk assets to levels
far beyond what fundamentals may justify.

Commodity prices have also shot up with Reuters CRB index posting one of the
biggest monthly gain since 1974. Normally, commodities perform during the late
stage of the bull market, however, investors seem to be playing a paper currency
debasement play through investment in real assets. While central bankers are still
maintaining probably the most accommodative policy ever to combat deflation,
market wisdom as reflected in prices seem to be getting worried about onset of
inflation.

Indian equities were one of the best performing market this month as investors
jumped in after the decisive verdict in favor of UPA government. Foreign
Institutional Investors invested over $ 4 billion in the month of May and their year-
to-date investment has also crossed $ 4 billion. Investors draw comfort from the fact
that a major victory for UPA means greater ability to carry out critical reforms.
Immediate priority for the government would be to provide adequate fiscal stimulus
in order to cushion the economy against headwinds from the global downturn. The
finance minister would have to balance between keeping the fiscal deficit under
control and providing more fiscal stimulus. The government must show a roadmap to
bring down fiscal deficit over the medium term. Some of the long pending reforms
related to FDI in sectors like insurance and retail, rationalization of subsidies,
introduction of GST from 2010-11, continued thrust on agriculture and rural sector
and restarting disinvestment programme should be on the agenda. Apart from the


physical infrastructure, there should be equal focus on building the social
infrastructure and higher outlays on education and healthcare which would go a long
way in building a solid foundation for sustained economic growth. The other point we
would like to highlight is that the focus for the government this time should be on
outcome, not outlays; execution, not just big bang announcements.

This election is a game changer. At a time when the global economy is faced with
severe challenges, the world is looking for new engines of economic growth. India
with its demographic advantage, high savings rate and a domestic consumption and
investment oriented economy has the potential to de-couple from the rest of the world
and deliver higher growth rate on a sustained basis. At this time, we needed a pro-
reforms and stable government which can push structural reforms to unleash the full
potential of Indian economy and corporate sector. People of India have delivered that
decisive mandate.

Our sectoral bets and stock picks in equity funds are rightly positioned to take
advantage of the upturn in equity market. We have been focussing on investing in
companies leveraged on domestic consumption and infrastructure build up. While one
can expect liquidity inflows from domestic and foreign investors, several corporates
are likely to use the opportunity to raise equity. We will continue to keep a close
watch on evolving economic scenario, policy announcements and valuation.

Bond yields moved up on fears of higher government borrowing. Run up in
commodity prices and increase in bond yields globally have also weighed on the
sentiments. Interest rates are likely to be range-bound for some time and will offer
more trading opportunities.

Over the last several months, we have consistently been advising investors to focus
on long term growth potential of Indian economy and take advantage of the downturn
to build exposure to equities. The recent rally in equity markets further highlights the
importance of discipline in asset allocation in investor’s portfolios.



Regards,

Navneet Munot
Chief Investment Officer
SBI Funds Management Pvt. Ltd

ABSTRACT (1)

Investments goals vary from person to person. While somebody wants security, others might
give more weightage to returns alone. Somebody else might want to plan for his child's
education while somebody might be saving for the proverbial rainy day or even life after
retirement. With objectives defying any range, it is obvious that the products required will
vary as well.

Indian Mutual Funds industry offers a plethora of schemes and serves broadly all types of
investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds.
There are also funds meant exclusively for young and old, small and large investors.
Moreover, the setup of a legal structure, which has enough teeth to safeguard investors’
interests, ensures that the investors are not cheated out of their hard earned money. All in all,
benefits provided by them cut across the boundaries of investor category and thus create for


them, a universal appeal.

Investors of all categories could choose to invest on their own in multiple options but opt for
Mutual Funds for the sole reason that all benefits come in a package. The Mutual Fund
industry is having its hands full to cater to various needs of the investors by coming up with
new plans, schemes and options with respect to rate of returns, dividend frequency and
liquidity.

In view of the growing competition in the Mutual Funds industry, it was felt necessary to
understand the working of mutual funds industry in India, its merits and demerits, various
types of schemes available in the Indian market and the investor’s orientation towards Mutual
Funds i.e. their pattern of risk appetite and preferences in various schemes and plans. Apart
from this the report also includes the details of the work that I have learnt during the project,
which according to me is the best part of the project as it provided me a practical exposure to
the Mutual fund industry and the working of an AMC.

ABSTRACT (2)

Antonella Basso and Stefania Funari of Dipartimento di Matematica Applicata “B.
de Finetti”, Università di Trieste, Piazzale Europa, 1, 34127 Trieste, Italy and Dipartimento di
Matematica Applicata, Università Ca' Foscari di Venezia, Dorsoduro 3825/E, 30123 Venezia,
Italy respectively discussed in this paper about “A data envelopment analysis approach to
measure the mutual fund performance.” In this paper they present a model which can be
used to evaluate the performance of mutual funds. This model applies an operational research
methodology, called data envelopment analysis (DEA), which allows to measure the relative
efficiency of decision making units. This approach allows to define mutual fund performance
indexes that can take into account several inputs and thus consider different risk measures
and, above all, the investment costs (subscription costs and redemption fees). Moreover, the
DEA approach can naturally envisage other output indicators, in addition to the mean return
considered by the traditional indexes. Therefore, a generalized version of the DEA mutual



fund performance indexes is defined, too, which includes among the outputs a stochastic
dominance indicator that reflects both the investors' preference structure and the time
occurrence of the returns. In addition, the procedure allows to identify, for each mutual fund,
a composite portfolio which can be considered as a particular benchmark. The performance
indexes proposed are tested on empirical data.

ABSTRACT (3)

Peter Tufano and Mathew Sevick of Harvard Business School, Boston and Monitor
Company, Inc., Cambridge respectively discussed in this paper about “Board structure and
fee-setting in the U.S. mutual fund industry”. This study uses a new database to describe
the composition and compensation of boards of directors of U.S. open-end mutual funds.
They use these data to examine the relation between board structure and the fees charged by a
fund to its shareholders. They find that shareholder fees are lower when fund boards are
smaller, have a greater fraction of independent directors, and are composed of directors who
sit on a large fraction of the fund sponsor's other boards. They find some evidence that funds
whose independent directors are paid relatively higher directors' fees approve higher
shareholder fees.



ABSTRACT (4)



ABSTRACT (5)



ABSTRACT (6)



ABSTRACT (7)



ABSTRACT (8)



3. RESEARCH METHODOLOGY



NEED OF THE STUDY:

• The need of the study aimed to know the awareness in the public about the
various products and services provided by S.B.I-Mutual Fund.

• A study was also conducted to measure the performance of various funds on the
basis of various performance measuring ratios such as Sharpe ratio, total expense
ratio, standard deviation, Beta and R-squared.

• The study was basically undertaken to understand the financial needs of the
customer and to provide or suggest them products and services according to their
financial needs.

• The study was undertaken to find out the Banking channel at SBI Mutual Fund.

Analysis of the funds on the Basis of various ratios.

PERFORMANCE EVALUATION

Mutual Fund industry today, with about 34 players and more than five hundred
schemes, is one of the most preferred investment avenues in India. However, with a
plethora of schemes to choose from, the retail investor faces problems in selecting
funds. Factors such as investment strategy and management style are qualitative, but the
funds record is an important indicator too. Though past performance alone cannot be
indicative of future performance, it is, frankly, the only quantitative way to judge how
good a fund is at present. Therefore, there is a need to correctly assess the past
performance of different mutual funds.



Worldwide, good mutual fund companies over are known by their AMCs
and this fame is directly linked to their superior stock selection skills. For mutual funds
to grow, AMCs must be held accountable for their selection of stocks. In other words,
there must be some performance indicator that will reveal the quality of stock selection
of various AMCs.

Return alone should not be considered as the basis of measurement of the performance
of a mutual fund scheme, it should also include the risk taken by the fund manager
because different funds will have different levels of risk attached to them. Risk
associated with a fund, in a general, can be defined as variability or fluctuations in the
returns generated by it. The higher the fluctuations in the returns of a fund during a
given period, higher will be the risk associated with it. These fluctuations in the returns
generated by a fund are resultant of two guiding forces. First, general market
fluctuations, which affect all the securities, present in the market, called market risk or
systematic risk and second, fluctuations due to specific securities present in the portfolio
of the fund, called unsystematic risk. The Total Risk of a given fund is sum of these
two and is measured in terms of standard deviation of returns of the fund. Systematic
risk, on the other hand, is measured in terms of Beta, which represents fluctuations in
the NAV of the fund vis-à-vis market. The more responsive the NAV of a mutual fund
is to the changes in the market; higher will be its beta. Beta is calculated by relating the
returns on a mutual fund with the returns in the market. While unsystematic risk can be
diversified through investments in a number of instruments, systematic risk cannot. By
using the risk return relationship, we try to assess the competitive strength of the mutual
funds vis-à-vis one another in a better way.

In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate
a portfolio by comparing alternative portfolios within a particular risk class. The most
important and widely used measures of performance are:



• The Treynor Measure

• The Sharpe Measure

The Treynor Measure

Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above
risk free rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and systematic
risk associated with it (beta). Symbolically, it can be represented as:

Treynor's Index (Ti) = (Ri - Rf)/Bi.

Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the
fund.

All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and
negative Treynor's Index is an indication of unfavorable performance.

The Sharpe Measure



In this model, performance of a fund is evaluated on the basis of Sharpe
Ratio, which is a ratio of returns generated by the fund over and above risk free rate of
return and the total risk associated with it. According to Sharpe, it is the total risk of the
fund that the investors are concerned about. So, the model evaluates funds on the basis
of reward per unit of total risk. Symbolically, it can be written as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where, Si is standard deviation of the fund.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a
fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.

Comparison of Sharpe and Treynor

Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well-diversified portfolios. On the other hand,
the systematic risk is the relevant measure of risk when we are evaluating less than fully
diversified portfolios or individual stocks. For a well-diversified portfolio the total risk
is equal to systematic risk. Rankings based on total risk (Sharpe measure) and
systematic risk (Treynor measure) should be identical for a well-diversified portfolio, as
the total risk is reduced to systematic risk. Therefore, a poorly diversified fund that
ranks higher on Treynor measure, compared with another fund that is highly diversified,
will rank lower on Sharpe Measure.



TERMINOLOGY:

ALPHA - The alpha ratio illustrates the effect of the portfolio manager’s choice on the
fund's return. The greater the alpha, the better a return has the investment yielded
compared with other investment objects with the same market risk. Alpha is an
annualized return measure of how much better or worse a fund’s performance is relative
to an index of funds in the same category, after allowing for differences in risk.

BETA – A ratio that measures the market risk of securities or a fund. If the beta ratio
exceeds one, the fund is more sensitive than funds in general to the fluctuations of the
stock market. The beta may also be negative, which means that the value of the fund
will, on average, move to the opposite direction than the general market development.

Beta measures the sensitivity of rates of return on a fund to general market movements.

Beta measures the volatility of the fund, as compared to that of the overall market. The
Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more volatile than
the market, while a beta lower than 1.00 is considered to be less volatile.

Beta measures the volatility of the fund’s value relative to the volatility of the fund’s
benchmark value. The Beta coefficient indicates the percentage change of the fund’s
value when the benchmark value changes by one percentage point.



Example: When the beta of the fund is 0.8, the value of the fund rises by 0.8 % when the
benchmark index rises by one percent. Correspondingly, when the benchmark index
falls by one percent, the value of the fund falls on average by 0.8 %.

The Beta coefficient is a key parameter in the capital asset pricing model (CAPM). It
measures the part of the asset's statistical variance that cannot be mitigated by the
diversification provided by the portfolio of many risky assets, because it is correlated
with the return of the other assets that are in the portfolio.

Beta is also referred to as financial elasticity or correlated relative volatility, and can be
referred to as a measure of the asset's sensitivity of the asset's returns to market returns,
its non-diversifiable risk, its systematic risk or market risk. On an individual asset level,
measuring beta can give clues to volatility and liquidity in the marketplace. On a
portfolio level, measuring beta is thought to separate a manager's skill from his or her
willingness to take risk.

The beta movement should be distinguished from the actual returns of the stocks.

STANDARD DEVIATION



Statistic that measures the tendency of data to be spread out. Accountants can make
important inferences from past data with this measure. The standard deviation, denoted
with S and read as sigma, is defined as follows:

CORRELATION

IT shows the linear dependency between fund returns and the returns of the benchmark
index. Correlation may vary between -1 and 1. The dependency is complete if the fund’s
correlation to the benchmark index is 1. If the correlation is zero, there is no
dependency.



Analysis of Funds on the basis of various ratios.

Portfolio
Std. Beta R-squared Sharpe
Deviation ratio Turnover

Magnum 30.02% 0.88 0.96 -0.34 18%
Taxgain

Magnum 36.19% 1.01 0.87 -0.57 43%
Global
Fund

Magnum 31.33% 0.91 0.96 -0.24 74%
Contra

Magnum 37.69% 1.07 0.93 -0.22 64%
Comma

SBI NA NA NA NA 1146%


Arbitrage

MSFU IT 33.03% 0.82 0.61 -0.80 16%

Magnum 30.09% 0.86 0.93 -0.31 47%
Multiplier

CONCLUSION:

From the above table we can clearly see the comparison between various funds of SBI
Mutual Fund. In this higher the value of Sharpe and Treynor, better is the fund.

• Magnum Taxgain
• Magnum Multiplier and
• Magnum Contra
are having beta values of 0.88, 0.86 and 0.91 respectively which means that these funds
are more sensitive and will give more returns than market when market are in good
phase but give negative returns more intensely than market when market in bad phase.

High and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a
low and negative Sharpe Ratio is an indication of unfavorable performance. If the
Sharpe figure is positive, the risk taken has paid off, and if the figure is negative, the
returns are lower than the risk-free rate.

 Magnum Taxgain,
 Magnum Contra and
 Magnum Multiplier
Are the three funds which are best among all in terms of risk adjusted returns.



A scheme with high Treynor ratio such as Equity scheme will enjoy a
premium when the markets are bullish and will be affected negatively when the markets
are bearish.

So in the bullish market Magnum Global and Magnum Multiplier are the best funds to
opt for getting better returns.

SCOPE OF THE STUDY:

Geographical scope-

The geographical scope of the study is not limited. This study can be implemented in
any part of the country; though the samples taken were from SBI Mutual Fund branch
office at Barakhamba Road, and various banks in the west Delhi region were visited to
know their response.

Functional scope-

This study can be used to understand the behavioral aspect of people who invest, what is
their investment potential and how much risk can they take. The study throws some light
on seven best performing schemes of S.B.I-Mutual Fund.

LIMITATIONS OF THE STUDY

• Limited information through secondary research report is basic hindrance in
finding out the true results related to investments in mutual fund schemes by an
investor.

• Limited time was another constraint.

• Geographical locations.



• Extreme variability in MARKET.

• Unawareness among investors is next in the line. The investor does not
want to invest in Mutual Funds because of the myth that investment in
these funds lead to insensitive returns. They think that market is highly
volatile and will not be able to give him the secured returns.

• The investor also does not want to invest because of the greater risk
attached with equity. Rather, he wants to invest in a fixed instrument
from where he may be able to get secured returns instead of having
unasserted returns.

DATA COLLECTION METHOD:

Primary data collection:

In dealing with real life problem it is often found that data at hand are inadequate, and
hence, it becomes necessary to collect data that is appropriate. There are several ways of
collecting the appropriate data which differ considerably in context of money costs, time
and other resources at the disposal of the researcher.

• Primary data can be collected either through experiment or through survey.

The data collection for this study was done in the following manner:



• Through personal interviews:-

A rigid procedure was followed and we were seeking answers to many pre-conceived
questions through personal interviews.

• Through questionnaire:-

Information to find out the investment potential and goal was found out through
questionnaires.

SAMPLING METHOD ADOPTED:

The sampling method chosen is Area Sampling. As the primary sampling unit
represents a cluster of units based on geographic area. The geographical area chosen for
individual customers was at SBI Mutual Fund main office at Barakhamba Road.
It is basically a non-probability sampling procedure which does not afford any basis for
estimating the probability that each item in the population has of being included in the
sample.
Under non-probability sampling the organizers of the enquiry purposively choose the
particular units of the universe for constituting a sample on the basis that the small mass
that they so select out of a huge one will be typical or representative of the whole.

Analysis of Individual Investors

DATA ANALYSIS

POPULATION:-



According to the data collection method adopted, the size of the
population is 100.
Thus, N=100

After collecting the data the following facts were found out:-

Out of the 100 people the following percentage composition were interested in the
following products:-

• MUTUAL FUNDS -44%

• SHARE/BONDS- 23%

• LIFE INSURANCE-7%

• REAL ESTATE-6%

• COMMODITIES-8%

• NSC (NATIONAL SAVING SCHEME)-10%

• OTHERS-2%

ANALYSIS OF THE PREFERENCES OF THE RESPONDENTS:-



The data collected above shows that approximately 65% of people are aware of the
market in general and 44% are aware of Mutual Funds in particular. Thus further
analysis is made on the basis of data collected; which categories of people are more
aware and inclined towards Mutual Fund. Therefore, further analysis is made as below:

• Analysis according to Age

• Analysis according to Income

• Analysis according to Occupation



Analysis according to Age:

Findings:

• As per the above analysis, only 14% of respondents who are below 35 years are
interested to invest in SBI-MF. The reasons being that there are more needs to be
fulfilled for this age group viz. education, entertainment etc. and therefore these
people do not have surplus funds to invest in saving schemes or Mutual Funds
etc.

• The persons within the age group of 35-50 years only 58% of respondents are
interested to invest in SBI-MF. These persons have more investing potential than
their counterparts and they want to increase their income through investing in
Mutual Funds.



• The persons having the age equal to or above 50 years, only 28%
of respondents are interested to invest in SBI-MF. The reasons being that these
persons are more inclined to age-old principals and want to invest in schemes
giving fixed returns as compared to investing in Mutual Fund.

Analysis according to Savings from income:

Income Percentage (%)
Low 34%
Medium 18%
High 48%

Findings:

• The above analysis shows that Low income category is less interested to invest
in SBI-MF as compared to high income category. The reason being that these
people have to fulfill their basic needs as first. The other reason is that low
income category people are having more consumption as compared to their
savings.

• Among Medium income category people, only 18% of the respondents want to
invest in SBI-MF. The first and foremost reason behind this is that these people
are risk averse and want to invest in those products from which they must get
assured returns as compared to investing in Mutual Funds.

• Among High income category people, only 48% of the respondents want to
invest in SBI-MF because these people have enough resources for their well
being and it does not hurt them to invest a large chunk of their resources in
Mutual Funds.



Analysis according to Occupation:

Findings:

• From the above analysis, it has been learned that only 49% of respondents who
are in service are interested to invest in SBI-MF because these people are well
aware of Mutual Funds and Stock Market. Service category people want to
secure their future and therefore showed interest in investing under risky
ventures.

• Businessmen are also interested to invest in SBI-MF. Only 32% of respondents
who are in business invested in SBI-MF.These people invest more in Debt
schemes than in Equity schemes. This is because Debt schemes promise a less,
but secure return over equity schemes which are more risky. Moreover, the risk
profile of business men is quite moderate.



• Professional are much interested in investing the Mutual Funds as compared to
their counterparts. The main reason for such thing is the complete knowledge of
o Stock markets
o Past performance
o Consistent returns
o Measurement of risk
o Finance knowledge
But with the current performance of Mutual Funds on the stock market, less people are
willing to take the huge risk of losing money.

Analysis of different category persons about different schemes:-

SBI MAGNUM TAX GAIN SCHEME (MTGS)

Tax Planning Mutual Funds have come into their own as a compelling cocktail of
savings and returns, surpassing larger rivals such as equity funds in asset growth rates
over the past year and-a-half. Thus, service category is more inclined towards MTGS
because of the tax exemption and phenomenal returns. This scheme was equally



supported by the SBI Tax Advantage series I (new NFO), a close ended
fund offered by SBI MF.

SBI MAGNUM GLOBAL FUND (MGLF)

Sales

23
46
servicemen
businessman
41 professional

MGLF is an open-ended equity scheme investing in stocks from selected
industries with high growth potential. Due to the high growth potential and
investing the resources in money market instruments, businessmen and
professionals are more inclined towards MGLF.



MAGNUM SECTOR UMBRELLA- CONTRA FUND

39
44
servicemen
businessman
frofessional
17

Due to the maximum growth opportunity through equity investments in stocks of
growth oriented sectors of the economy, professionals like the MSFU-Contra
fund the most. Servicemen also like it because of huge untapped growth potential
of the scheme. And businessmen like this scheme less as compared to their
counterparts because businessmen can’t block their money for long time and this
scheme provides return in long term.



Analysis on the basis of purchase of investment

The above graph shoes us that people purchase funds, when the price of the fund
suddenly increases. This is because of their expectation for the fund to rise more
in the future.

Next are the investors who invest when the price (NAV) of the fund is slowly but
steadily increasing. They do this, thinking that the fund will further raise in the
future at the same pace.

24 % of the investors invest their money when the price of the fund suddenly decreases.
They do this in order to take benefit of the decreased cost, in anticipation that they may
sell it in the future for a higher price.


FINANCIAL BEHAVIOR OF RESPONDENTS:

INVESTMENT OBJECTIVES:

It can be seen from the following graph that the main investment objective of most of
the investors is good returns and capital appreciation.

.

CHANNELS USED BY RESPONDENTS FOR INVESTING: From study it can
easily be inferred that majority of respondents (70%) now invest directly in mutual
funds especially after SEBI guidelines came recently that says there will not be any
ENTRY LOAD for investors investing in mutual fund schemes directly.

INVESTMENT HORIZON: From the study it can be concluded that majority of
respondents invest in mutual funds from “More than three year” perspective (53%),


that’s means once a investor comes to your service he will be there for at
least three years, therefore it is very essential today that AMCs and especially SBI
should focused on innovating new ways to serve the customers like giving SMS time to
time, giving value added services like free insurance, debit cards etc.

RISK PREFERENCES : The following chart explains that majority of investors (57%)
were ready to take moderate level of risk by investing in mutual funds and also rest of
the respondents(43%) go for “High Risk and High Return” category. Not a single
respondent opt for Low risk and low return category that again proved that it is a myth
that Indian Investors are more risk averse when it comes to investment in Stock Markets
or Mutual Funds.

SCHEME PREFERENCES:

ON THE BASIS OF ASSET CLASS:



When it comes to scheme preferences majority of the investors prefer
Balanced Schemes (43%), followed by Equity Schemes (34%) then debt (12%) and
finally FMP’s (11%). It shows that there is a huge potential for debt instruments in the
market which is unearthed by investors due to its complexity, low awareness etc.

PREFERABLE ROUTE TO INVESTING IN MUTUAL FUNDS:



As above chart clearly explains that majority of respondents (57%) take self decision
ones they start investing in mutual funds. Only 10 % of respondents take help of
Brokers/Advisors when it comes to final decision of investing. Therefore, it shows that
AMCs in general and SBI in particular have to be more informative so that they can
provide best material, service and information to facilitate subsequent investment of
investors.

SCHEME PREFERENCES:

ON THE BASIS OF STRUCTURE:

When it come to scheme preference on the basis of its structure, majority of retail
investors prefer “Open Ended Scheme “ primarily due to flexibility of redemptions,
investments, good return and liquidity. None of the investors prefer “Interval Scheme”;
in fact some of the retail investors were confused about the very name of “Interval
Schemes.”



SAVING HABITS:

When it comes to Saving Habits of investors it can be seen that majority of respondents
saves between 15%-20% p.a. basis followed by “above 25%” category (20%).Others
categories like 10-15 and 20-25 are equally preferred by respondents but it was a
positive clue that only 7% of respondents save below 5%.



SAVING PREFERENCES:

Among saving preferences following results came out:

Using Method Of Rank Order as given by Cattell,1903 and Spearman,1904 the
choices were ranked and then as per their Rank Sum Score and Z-Values “Mutual
Funds” emerges as best choice among respondents. Though it is given 2 nd Rank by
majority of investors. Following MFs, “Life insurance” and “Shares and Debentures”
are the second best choices. Surprisingly “Gold and Jewellery” is the most unlikely
best choice among respondents.

Most Popular Fund from SBI: Up till this stage the winner is “MAGNUM TAX
GAIN” which is preferred by majority of respondents (60%), due to its three in one
benefits which are as follows:



 Tax Benefit

 Good Return

 Capital Appreciation

SATISFATION LEVEL WITH SBI:



Form above chart it can be inferred that up to this stage majority of respondents (47%)
are considerably satisfied when they were asked about overall experience with SBI
Mutual Funds including funds, returns, services etc., As can be seen 33% of the
investors are “Reasonably Satisfied” which means that there is more to do on SBI
behalf for Customer Satisfaction.

Interaction with individual/Direct (Walk in) investors

Apart from maintaining relationship with the distributors I have also deal with the
customers who are coming directly to the AMC for investment which provided me an
exposure to selling. It also helped me in learning how to deal with different type of
customers, how to insist them for making investments etc. while dealing with them I
have done following tasks:-
a) Explain them various funds/schemes according to their objective.
b) Helping them in filling the forms.
c) Solving their problems related to statement, redemption etc.
d) Insisting them to invest in Systematic Investment Plans (SIP).
While interacting with them I have tried to find out various factors effecting their
investments in mutual funds, for this I have carried out a survey by requesting them to
fill a questionnaire a sample of which I have attached in the annexure. On the basis of
that that questionnaire I have analyzed various points which are discussed below.



INVESTMENT BEHAVIOUR



INTRODUCTION:

The significant outcome of the government policy of liberalization in industrial and
financial sector has been the development of new financial instruments. These new
instruments are expected to impart greater competitiveness, flexibility and efficiency to
the financial sector. Growth and development of various mutual fund products in Indian
capital market has proved to be one of the most catalytic instruments in generating
momentous investment growth in the capital market. There is a substantial growth in the
mutual fund market due to a high level of precision in the design and marketing of
variety of mutual fund products by banks and other financial institution providing
growth, liquidity and return. In this context, prioritization, preference building and close
monitoring of mutual funds are essentials for fund managers to make this the strongest
and most preferred instrument in Indian capital market for the coming years. With the
decline in the bank interest rates, frequent fluctuations in the secondary market and the
inherent attitude of Indian small investors to avoid risk, it is important on the part of
fund managers and mutual fund product designers to combine various elements of
liquidity, return and security in making mutual fund products the best possible
alternative for the small investors in Indian market.

Researchers have attempted to study various need expectations of small investors from
different types of mutual funds available in Indian market and identify the risk return
perception with the purchase of mutual funds. Various multivariate techniques are
applied to identify important characteristics being considered by the Indian investors in
the purchase decision.

The liberalization of the financial sector has sent signals to a wave of changes in savings
and investment behavior adding a new dimension to the growth of financial sector. The
Indian financial system in general and the mutual fund industry in particular continue to


take turnaround from early 1990s. During this period mutual funds have
pooled huge investments for the corporate sector. The investment habit of the small
investors particularly has undergone a sea change. Increasing number of players from
public as well as private sectors has entered in to the market with innovative schemes to
cater to the requirements of the investors in India and abroad. For all investors,
particularly the small investors, mutual funds have provided a better alternative to obtain
benefits of expertise- based equity investments to all types of investors.

OBJECTIVES OF THE STUDY:

The investors do not evaluate all possible product attributes while making a choice, but
the marketer’s search is for identification of “The key buying criteria” or “The key
choice criteria” which are defined as certain features of a product offering that are
closely associated with preferences. This study aims at tracking investor’s preferences
and priorities towards different types of mutual fund products. An attempt has also been
made to differentiate between the factors which have been considered by the investors
who have been investing for less than a year and the ones who have been investing for
more than a year.

LIMITATIONS OF THE STUDY:

1) Sample size is limited to 100 only thus sample size does not adequately represent
the national market.
2) Most of the investors were those who came to SBIMF directly, thus there may be
a chance of biasness towards SBIMF’s funds.
3) This study has not been conducted over half month period in which most of the
time it was slump and fluctuations in the market. Thus the responses of the
investors are likely to be influenced by the market conditions

METHODOLOGY:



The study is based on a survey of 100 respondents through a questionnaire covering
different groups of investors but I could collect 97 complete questionnaire from
investors out of which 90 were taken as an effective sample and the data obtained were
analyzed by using, Factor analysis and Discriminant analysis. The questionnaire has
been attached in the Annexure.

RELIABILITY AND VALIDITY

In order to check the reliability and validity of the data, we had kept some similar kind
of variables in the questionnaire like fund performance and fund manager performance
as well as security and attitude towards risk. In order to increase the reliability and
validity, we have excluded the questionnaires filled by those respondents who had a
varied opinion
These analysis methods are used for the following reasons:

1) Factor analysis is used to classify similar variables under a broad heading, as the
numbers of independent variables are very high.

2) Discriminant analysis is used to highlight variables which effect the decision of
people investing for less than a year and people who are investing for more than
a year.

We are going to see how these selected factors affect the investment behaviour of the
existing & potential investors. Above mentioned statistical tools have been used to
analyze this thing.As we use Factor analysis we can reduce the number of factors to
draw some clear picture for the investors who are looking to invest irrespective of


market conditions. Factor analysis will recognize similar factors & club
them into one generalized factor and this will help any researcher to observe the most
important factors that contribute most to the investment behaviour of the investors.

DESCRIPTIVE WEIGHTED FACTOR COUNTING
METHOD

We have ranked the independent variables affecting the buying behavior of consumers
by adding the weighted factors. Firstly, we have counted the responses under each scale.
Secondly, we have assigned weights to each of the scale giving least weight to 1 and
maximum weight to 5. Finally, we have added all the weighted responses and ranked
accordingly i.e. in descending order.

RANK INDEPENDENT VARIABLES 1 2 3 4 5
1 Historical Performance 2 4 9 42 35
2 Fund Return Over Market Return 3 5 12 31 41
3 Advisor Influence 2 5 25 35 25
4 Tax Benefit 6 11 13 29 33
5 Lock In Period 1 5 31 32 23
5 Reputation 3 5 29 28 27
7 Security 5 5 20 41 21
8 Type Of Scheme 4 6 24 35 23
9 Regular Income 8 10 15 32 27
10 Aum 3 7 29 36 17
11 Convenience 4 6 30 35 17
12 Attitude Towards Risk 3 10 32 30 17
13 Fees 6 12 23 31 20
13 NAV 6 11 25 30 20
15 Fluctuation In Equity Market 4 18 18 34 18
16 Personal Attention 4 10 35 32 11



17
Prior Experience 11 11 25
29 16
18 Prospectus 10 20 24 25 13
19 Family Recommendation 15 20 27 24 6
20 Fund Rating 24 28 13 15 12
21 Internet 15 30 27 11 9
22 Promotional Campaign 22 25 26 14 5
23 Lot Size 20 30 25 10 7
24 Performance Of Fund Manager 25 30 26 6 5
25 Economic &Market Conditions 24 35 21 8 4
26 Transparency 33 34 18 5 2

FACTOR ANALYSIS:

As the numbers of independent variables are very high, we have tried to classify similar
variables under a broad heading through factor analysis. In KMO adequacy level is 50%



with 100% significance which makes the model satisfactory. We can
increase the adequacy level by changing factors like fees load and expenses because it
has a very low communality. Total variance explained by the model is 64% which
means that 64% of the variance has been accounted by the factors. Through rotated
component matrix we can classify all the variables into 10 factors. Some of the factors
are as follows:
(Refer Annexure)

VARIABLES FACTORS
Performance of fund manager
AUM Technical factors
NAV
Type of scheme
Personal attention Psychological factors
Prior experience
Advisor influence
Family recommendation Promotion
Promotional campaign
Economic & Market condition
Fluctuation in equity market Market condition
Attitude towards risk

There are other factors also which consists of other variables but they cannot be
classified under abroad headings.
We can see in the rotated component matrix in factor analysis table that above factors
have been recognised as sub-factors and generalized in 5 broad categories. All this
selection has been made by the modal on the basis of factor loadings which we can see
in one of the tables of factor analysis.

5 Broad factors have been described in the following manner:-



 Financial Factors -This factor has 3 sub-factors namely
performance of the fund manager, AUM, NAV. Thus this factor tells us more of
the technical side of any given fund under consideration. Investor who ranks this
factor or these sub-factors as the most important is definitely looking for very
good returns & going to invest after much research as he will definitely looking
for a fund having a good performance and decent returns opportunity.

 Customer Oriented Factors – Type of scheme, personal attention and prior
experience are the sub-factors that make this broader category together. In this
category an investor is looking for the different schemes under any particular
fund. Investor is also looking for personal attention being given to his portfolio
or investments, he wants personal attention in the sense that new investment
opportunities should be informed to him or proper entry & exit points should be
recommended to him and the likes.

 Marketing Factors – Investors who are going to rate this broad category as the
most important for them are more inclined to the factors like advisor influence,
family recommendation and promotional campaign. These kinds of investors are
not much experienced as far as these investments are concerned.

 Economic Factors – This factor includes factors like market condition,
fluctuations in the market and attitude towards risk. Investors who are more
concerned about these factors are risk averse investors. These investors wait for
the right moment to enter or to start investing in funds. For these people risk is at
the top most priority and if returns are not that much then also its fine with these
investors.



 Security Factors – It includes tax benefits, prospectus and security
as far as their capital investment is concerned.

DISCRIMINANT ANALYSIS:

Through Discriminant analysis I have tried to highlight variables which effect the
decision of a people investing for less than a year and people who are investing for more
than a year. The term 1 consists of the people who are investing for less than a year
whereas term 2 consists of the people who are investing for 1 to 5 years. I have found
that Eigen value is less than 1 and Wilks’ Lambda is more than 0.5 as well as the
significance level is quite high which shows that the model is not applicable. Through
group statistics in both the terms standard deviation is quite high and mean is quite low
as seen in Appendix. Therefore, there is no difference in the factors affecting the buying
behavior between term 1 and term 2 people.

DEMOGRAPHIC FACTORS:

• SEX PROFILE:

• AGE PROFILE:



From above charts it can be easily be inferred that people aged between 31-40 preferred
mutual funds most because of many factors, but mainly due to stability in their earnings
and career, responsibility towards family etc. Also, we found that only 1 respondent is
female in pilot study, so we will see to what number it will go because this number will
give us a rough idea about mutual fund awareness among women in particular and
financial awareness in general.

ACADEMIC QUALIFICATION:



• MARITAL STATUS:

OCCUPTION PROFILE:

From above charts it can be easily inferred that:

 Majority of respondents are graduates, therefore it remains to be seen that to
what extent post graduates and professional have interest in mutual funds.


 Majority of respondents are married (80%), therefore it remains to
be seen that how many young and unmarried investors have preference towards
mutual funds.

 Majority of respondents have their occupation as a professional be it
Relationship Mangers, Insurance agents, Independent Financial Advisors (IFAs),
MBAs etc. mainly due to their high level of awareness about financial products.

ANNUAL INCOME RANGE:

From above chart it can be easily inferred that majority of respondents are from
2,00,000-5,00,000 range, therefore its remain to be seen that how many are from less
than two lakh category because here lies the opportunity for AMCs to generate huge
volumes by offering innovative funds.



FINANCIAL BEHAVIOUR OF THE RESPONDENTS:

INVESTMENT OBJECTIVES: Among given options including “others” category
majority of respondents prefer good return as their primary objective of investment.

CHANNELS USED BY RESPONDENTS FOR INVESTING: From the study it can
easily be inferred that majority of respondents(70%) now invest directly in mutual funds
especially after SEBI guidelines came recently that says there will not be any ENTRY
LOAD for investors investing in mutual fund schemes directly.

INVESTMENT HORIZON: From study it can be concluded that majority of
respondents invest in mutual funds from “More than three year” perspective (53%),
that’s means once a investor comes to your service he will be there for at least three
years, therefore it is very essential today that AMCs and especially SBI should focused


on innovating new ways to serve the customers like giving SMS time to
time, giving value added services like free insurance, debit cards etc.

INVESTMENT AMOUNT: From pilot study it can be concluded that majority of
respondents (46%) have investments in mutual funds in a range of “More than 1,
00,000” category which implies that over a period of time if an investor see that his
capital is growing than the probability of his subsequent investment becomes very
strong.

SCHEME PREFERENCES:

ON THE BASIS OF ASSET CLASS:

When it comes to scheme preferences majority of retail investors prefer Equity
Schemes (93.33%), followed by Balanced Schemes (6.66%) with no single retail
investor preferring debt or fixed income instruments like Fixed Maturity Plans (FMPs).
It shows that there is a huge potential for debt instruments in the market which is
unearthed by retail investors due to its complexity, low awareness etc.



PREFERABLE ROUTE TO INVESTING IN MUTUAL FUNDS:

As above chart clearly explains that majority of respondents (57%) take self decision
once they start investing in mutual funds. Only 10 % of respondents take help of
Brokers/Advisors when it comes to final decision of investing. Therefore, it shows that
AMCs in general and SBI in particular have to be more informative so that they can



provide best material, service and information to facilitate subsequent
investment of retail investors.

SCHEME PREFERENCES:

ON THE BASIS OF STRUCTURE:

When it come to scheme preference on the basis of its structure, majority of retail
investors prefer “Open Ended Scheme “ primarily due to flexibility of redemptions,
investments, good return and liquidity. None of the investors prefer “Interval Scheme”,
in fact some of the retail investors were confused about the very name of “Interval
Schemes.”

SAVING HABITS:



When it comes to Saving Habits of retail investors it comes out that
majority of respondents saves between 15%-20% p.a. basis followed by “above 25%”
category (20%), therefore at this stage it is very difficult to say anything about saving
preferences about retail investors. Others categories like 10-15 and 20-25 are equally
preferred by respondents but it was a positive clue that only 7% of respondents save
below 5%.

SBI AND OTHERS:

Most Popular Fund from SBI: Up till this stage the winner is “MAGNUM TAX
GAIN” which is preferred by majority of respondents (60%), due to its three in one
benefits which are as follows:

 Tax Benefit

 Good Return




SATISFATION LEVEL WITH SBI:

Form above chart it can be inferred that up to this stage majority of respondents (47%)
are considerably satisfied when they were asked about overall experience with SBI
Mutual Funds including funds, returns, services etc., but it remains to be seen that which
category leads with the completion of survey because second best categories preferred
by investors is “Reasonably Satisfied” which means that there is more to do on SBI
behalf for Customer Satisfaction.



MOST POPULAR FUND HOUSE IN TERMS OF
HIGHEST INVESTMENT:

When asked about highest investment in an AMC majority of Investors (27%) gave the
name of SBI which is followed by Reliance (23%), ICICI (20%), and rest in “others”
which is lead by UTI. So there is a stiff competition in the market and it remains to be
seen that which fund house take the leads with the completion of the project.



4.COMPARATIVE ANALYSIS



INTRODUCTION:

Return alone should not be considered as the basis of measurement of the performance
of a mutual fund scheme, it should also include the risk taken by the fund manager
because different funds will have different levels of risk attached to them.



Risk associated with a fund, in a general, can be defined as variability or
fluctuations in the returns generated by it. The higher the fluctuations in the returns of a
fund during a given period, higher will be the risk associated with it. These fluctuations
in the returns generated by a fund are resultant of two guiding forces. First, general
market fluctuations, which affect all the securities, present in the market, called market
risk or systematic risk and second, fluctuations due to specific securities present in the
portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is sum of
these two and is measured in terms of standard deviation of returns of the fund.
In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate
a portfolio by comparing alternative portfolios within a particular risk class. But before
that we need to understand all the components that are used to explain the ratios like
Beta, Treynor, Sharpe, and Jensen etc. the components are as follows:

NAV:

Net Asset Value, or NAV, is the sum total of the market value of all the shares held in
the portfolio including cash, less the liabilities divided by the total number of units
outstanding. Thus, NAV of a mutual fund unit is nothing but the 'book value'.

Factors affecting NAV:

 Variation in investment portfolio:
Variation in the investment portfolio causes changes in the NAV of the fund, which in
turn may affect the overall value of the fund. Since, same investment portfolios with
different NAV gives same returns in percentage terms, therefore, the securities that we
have in the portfolio play pivotal importance. Changing the portfolio or replacing any
security with the existing security may change the overall NAV of the fund, which in
turn may change the value of the entire fund..



 Sale and repurchase of units:

Sale and repurchase of any unit that we have in our portfolio changes the overall NAV
of the fund. For example, we have a portfolio in which the security A is priced at Rs
100. We sell this security and after one week when the price of the security becomes Rs
80 we buy it, keeping all other investments intact, then the NAV of the portfolio will
come down, which in turn will result in better valuation for the fund. Therefore, sale and
repurchase also affects the NAV of the fund.

 Valuations of assets

The value that the underlying asset has, whose portfolio the fund has managed or is
managing, if the value of that asset changes, it can change the overall NAV of the fund.

 Cost associated with the Fund

The cost associated with the fund also affects the NAV of the fund. All the charges
accumulated during the selling of a security are known as Sales charges. Funds with low
expense ratios are always preferred as they decrease the overall cost of the security.

BETA:

It is a ratio that measures the market risk of securities or a fund. If the beta ratio exceeds
one, the fund is more sensitive than funds in general to the fluctuations of the stock
market. The beta may also be negative, which means that the value of the fund will, on


average, move to the opposite direction than the general market
development.

Beta measures the sensitivity of rates of return on a fund to general market movements.
It also measures the volatility of the fund, as compared to that of the overall market. The
Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more volatile than
the market, while a beta lower than 1.00 is considered to be less volatile.

Beta measures the volatility of the fund’s value relative to the volatility of the fund’s
benchmark value. The Beta coefficient indicates the percentage change of the fund’s
value when the benchmark value changes by one percentage point.

*Benchmark index that is taken here is Sensex.

STANDARD DEVIATION:

It measures the tendency of data to be spread out. Accountants can make important
inferences from past data with this measure. The standard deviation, denoted with S and
read as sigma, is defined as follows:

SHARPE RATIO:



Sharpe (1966) developed a composite index which is very similar to the
Treynor measure which will be discussed on a later stage. The only difference being the
use of standard deviation instead of beta, to measure the portfolio risk, in other words
except it uses the total risk of the portfolio rather than just the systematic risk.

R −R 
 P f 
Sharpe =  
σP

σ = The standard deviation of the portfolio.
P

R
P= Return of the portfolio.

R
f = Risk free rate.
While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a
fund, a low and negative Sharpe Ratio is an indication of unfavorable performance. If
the Sharpe figure is positive, the risk taken has paid off, and if the figure is negative, the
returns are lower than the risk-free rate.

TREYNOR RATIO:

Treynor (1965) was the first researcher developing a composite measure of portfolio
performance. It measures portfolio risk with beta, and calculates portfolio’s market risk
premium relative to its beta. This ratio rewards volatility because it shows risk adjusted
returns per unit of market risk for that particular scheme. When the markets are more
volatile, schemes with high Treynor ratio are highly affected and vice versa. A scheme
with high Treynor ratio such as Equity scheme will enjoy a premium when the markets
are bullish and will be affected negatively when the markets are bearish. On the other
hand, scheme with low Treynor ratio such as Debt Fund will not be affected greatly,
irrespective of the bullish or bearish run in the markets.

R −R 
 P f 
Treynor =  
βP



R = Portfolio’s actual return during a specified time period.
P
R
f = Risk-free rate of return during the same period.
β = Beta of the portfolio.
P

All risk-averse investors would like to maximize this value. While a high and positive
Treynor Index shows a superior risk-adjusted performance of a fund, a low and negative
Treynor Index is an indication of unfavorable performance.

The trouble with both Sharpe and Treynor ratios for evaluating "risk-adjusted" returns is
that they equate risk with short-term volatility. Therefore these measures may not be
applicable in evaluating the relative merits of long-term investments.

INTER FIRM COMPARISON:



The main objective of doing Inter Firm Analysis is to judge where SBI
EQUITY FUNDS stands in comparison to other Asset Management Companies
(AMCs) as per different criterion which are explained as follows.
I have taken the help of recently done OUTLOOK MONEY SURVEY, to select the
categories and top performing funds in those categories.
The following are those five categories:

 EQUITY DIVERSIFIED FUNDS
 EQUITY LINKED SAVING SCHEME
 EQUITY LARGE CAP
 EQUITY MID AND SMALL CAP
 EQUITY THEMATIC

The comparative analysis of categories mentioned above is shown as follows as on 29-
05-09:
The following three parameters are considered for comparative analysis:
• Funds’ Returns
• Risk Profile
• Portfolio Analysis

LIMITATIONS:

 Comparison of funds is done on the basis of various factors but due to time
constrain and non-availability of data, I have done comparison on the basis of
three factors namely return, risk and portfolio of the fund.
 Also it is not possible to compare all the funds in market under each category,
that’s why I have selected top 5 funds of each category mentioned above and
compared them.


METHODOLOGY

 For the first part of analysis i.e. fund returns, I have taken five top funds of same
category of different fund houses and compared their returns for 6 months,
1year, 3 years and 5 years.
 For the second part of anlysis i.e. risk profile, I have compared these five funds
with respect to their standard deviation, sharpe ratio, beta, alpha and r- squared.
 For the third part of anlysis i.e. portfolio analysis, I have compared these five
funds with respect to their P/E ratio, fund size(in Rs. cr.), portfolio turnover(in
%), top 5 holdings.
 The comparison of the funds is done using the bar charts and thus arriving at a
conclusion after analyzing those charts.

1)EQUITY DIVERSIFIED FUNDS:



• Meaning: These are the funds in the market which have
investment across the sectors, asset classes and financial instruments to provide
optimal benefit of diversification of portfolio to investors.

The following are the top five funds in the market in this category as per the recently
held survey:

a) SBI MAGNUM CONTRA
b) HSBC EQUITY
c) FRANKLIN INDIA PRIMA PLUS
d) SBI MAGNUM EQUITY
e) RELIANCE GROWTH

ANALYSIS:

FUNDS RETURNS:

As per this criterion funds are compared from past six month duration to five years time.
Latest returns are shown in the analysis. Returns of less than one year are on absolute
basis and for more than one year are on compounded basis.

Fund Return(in SBI Magnum HSBC Equity Franklin India SBI Magnum Reliance
‘000 cr.) Contra Prima Plus Equity Growth



6 Months 53.64 34.56 43.36 51.79
46.42

1Year 13.55 -0.42 13.80 10.18 2.37

3Year 16.29 14.29 17.36 14.63 17.15

5Year 29.48 19.65 11.46 22.95 26.77

AS ON 29-05-09 Source: Value Research
Online



FINDINGS:

• Since two funds from SBI brand are in top five funds, that’s shows how well the
portfolios are managed by the concerned Fund Managers.

• Magnum Contra has performed very well in last six months which shows the funds’
ability to withstand ups and downs in the market which is the case since December
2008.It has increased by only (53.64)% when compared to HSBC Equity which has
fallen by (34.56)%.

• Hit by global recession, from one year perspective also both funds from SBI are
showing stable returns.

• Last, but not the least from three and five years perspective, the horizon which is
considered to be very important from investors point of view, both funds from SBI,
especially Magnum Contra outperformed in the category. It is giving highest return
of 16.29% and 29.48% return in both time periods.

RISK PROFILE:

SBI Magnum HSBC Equity Franklin SBI Magnum Reliance Growth
Contra India Prima Equity
Standard 32.10 28.84 Plus 29.66 33.41 33.35
Deviation
Sharpe -0.03 0.03 0.03 0.00 -0.01
Ratio



Beta 0.97 0.87 0.89 1.00
0.97
Alpha -0.31 1.50 1.28 0.67 0.35

R- 0.95 0.95 0.94 0.95 0.88
Squared
Online

FINDINGS:

• Since Standard Deviation is the measure which shows variability in the returns
from the mean return, therefore it is considered to be the direct measure of risk.
As Both SBI funds have higher Standard Deviation, it shows that these funds are
more aggressive in nature than other funds.



• Sharpe ratio, which means returns per unit of risk that a fund is
able to generate. Therefore, higher the ratio the better it is. Accordingly,
Magnum Contra is not a winner as per this criterion.
• Beta, which shows the co-movement of funds return with Market rate of returns,
is again measure of volatility or risk. Since Magnum Equity is having highest
Beta which is closed to one and also Magnum contra which is second highest
shows that they are tend to be aggressive or volatile in nature.

• Alpha, which measure the excess return over and above the market return is a
measure of risk. A high positive alpha is good sign for fund. e.g. if a fund has
alpha of positive 10 it
means fund is giving a return of more than 10 percent when compared to its
benchmark or Market. Accordingly, HSBC Equity is winner in this category
which is generating a highest positive alpha in the category which is 1.50%.

• R-Squared, which explains the change in return caused by market volatility is a
good measure of risk. But a high r-square means that much of change is caused
by market sentiments or fundamentals. Therefore, it is suggested that if a fund
has very high r-square value it means similar returns can be achieved by
investing in the stock markets. Therefore, a moderate r-square value ranging
between 65-85% is considered good from portfolio management point of view.
Since, Magnum Contra is having one of the highest r-squared value(.9)
alongwith HSBC Equity it is suggested that some changes has to be made in the
portfolio of fund to take benefit of diversification of portfolio. On the contrary,
Reliance Growth is having a r-squared value of .88 which means that it is taking
the benefit of its portfolio in most optimum way.



PORTFOLIO ANALYSIS:

SBI Magnum HSBC Equity Franklin India SBI Magnum Reliance
Contra Prima Plus Equity Growth
P/E ratio 14.73 18.93 18.62 21.71 14.34

Fund Size(in 1958.5 1180. 1153.2 241.91 3597.9
Rs. cr.) 0 7 0 2
PortfolioTurno 63.00 56.00 57.85 48.00 97.00
ver(in %)
Top 5 21.52% 26.97 33.46 31.52 17.49%
Holdings % % %
Online



FINDINGS:

• P/E RATIO is a measure of investors’ confidence in the fund/stock. High P/E
ratio means that investors are paying higher prices for stock when compared to
its earnings. Generally, P/E ratio is high for young/growth funds/stock. Since
Magnum Equity is having a highest P/E ratio in the category, it shows that
investors have a lot of confidence in funds. On the contrary, Magnum Contra is
slowly losing its contrarian approach which reflects in its lowest P/E ratio in the
category.


• As usual funds from SBI brands have largest Assets under Management (in cr.)
this shows the Brand SBI has no problem when it comes to raising funds. Like
Magnum Contra has second highest AUM in the category only preceded by
Reliance Growth.

• Concentration Level: As shown in above table, Magnum Equity is having 2 nd
highest holdings in top five stock, which means the fund is concentrated towards
major stocks in the portfolio. While Magnum Contra is quite diversified fund as
it is
having second lowest concentration level only next to Reliance Growth.

• Portfolio Turnover which measures the extent to which the fund is active in
terms of its dealings in the markets. However, high turnover also implies that
high transaction cost are charged to fund. Since Sbi Magnum Equity of the funds
from SBI have very low turnover, it means that funds were not required to be
changed in recent period which ultimately results in greater efficiency. On the
other hand Reliance Growth is having highest Portfolio Turnover which means
Fund Manager is churning the portfolio very quickly which in turn increasing the
transaction cost charged to the fund.

NAV DETAILS OF FUNDS AS ON 29TH MAY,2009

FUND NAV



SBI Magnum Contra 45.00

HSBC Equity 80.72

Franklin India Prima 43.36
Plus
SBI Magnum Equity 31.39

Reliance Growth 319.21

AS ON 29-05-09 Source: www.nseindia.com

CONCLUSION:

After considering all three parameters mentioned above it can be concluded that
MAGNUM CONTRA is the best fund in the category because unlike a typical
contrarian fund that focus on out of flavor stocks, this fund considers the underlying



company’s valuations and compares that with what it believes the
company’s true valuations should be and then decide whether to invest in it or not.
According to its Fund Manager Pankaj Gupta “if the market expects a stock to grow by
20%, but we it to grow by 30%, the scrip is contrarian for us.”

Also, Fund mainly focused on high-growth stocks like JP Associates, Sintex and
Welspun Gujarat Stahl Rohern throughout 2007.Infact, Fund kept a high exposure to the
capital goods sector, one of the preferred in 2007.Fund also played on some contrarian
bets like it invested in TATA STEEL after it acquired the Anglo-Dutch Steel Major
CORUS despite market shunning it. It increased its exposure to interest-rate sensitive
sectors such as Auto and Banking, a move that eventually benefited the fund in 2007.

2)EQUITY LINKED SAVING SCHEME :(ELSS)



These are the open ended saving schemes which generally have lock-in-
period of three years which means that once you have invested certain amount in your
fund, you can’t withdraw any amount from your account. These scheme are most
popular among retail investors(also see in Appendices) due to its three-in-one feature
which means these schemes are able to satisfy three different investment objectives
simultaneously which are mentioned as follows:

 Tax Benefit
 Good Return

The following are the top five performing funds in ELSS category:

a) SBI MAGNUM TAX GAIN 93
b) PRINCIPAL TAX SAVINGS
c) BIRLA SUN LIFE TAX RELIEF 96
d) SUNDARAM BNP PARIBAS TAX SAVER
e) KOTAK TAX SAVER

ANALYSIS:



FUNDS’ RETURN:

As per this criterion funds are compared from past six month duration to five years time.
Latest returns are shown in the analysis. Returns of less than one year are on absolute
basis and for more than one year are on compounded basis:

Fund Returns(in SBI Magnum Principal Tax Birla Sunlife Sundaram BNP Kotak Tax
‘000 cr.) Tax Gain Savings Tax Relief 96 Paribas Tax Saver
6 48.39 30.32 55.49 Saver 41.78 43.98
Months
1 Year 8.81 -16.51 9.34 16.48 2.73

3 Year 13.01 3.68 12.44 19.11 9.91

5 Year 40.02 21.29 22.25 35.99 NA

Online



FINDINGS:

• In six month category Magnum Tax gain has performed very well, it is
preceeded only by Birla Sunlife Tax Relief when compared to other similar
funds like Sundaram Tax Saver, Principal Tax saving and HDFC Long term
advantage.

• In one year category, fund has performed averagely well than other funds like
Principal Tax saving, and Kotak Tax Saver. Fund has given only 8.81% return
against the best of Sunadaram BNP Paribas Tax Saver’s 16.48%.



• Last but not the least, it is good news that fund has outperformed all other funds
in Three Year and Five Year Category giving returns of 13.01% and 40.02%
respectively because this is the most preferred Investment Horizon among retail
investors. In the 3 years category only Sundaram BNP Paribas Tax Saver shown
higher returns of 19.11% than Magnum Taxgain’s.

RISK PROFILE:

SBI Magnum Principal Tax Birla Sun Sundaram Kotak Tax
Taxgain 93 Savings Life Tax BNP Paribas Saver
Standard 31.01 36.15 Relief 96
36.74 Tax Saver
31.42 33.
Deviation 79
Sharpe Ratio -0.11 -0.25 -0.13 -0.03 -
0.2
Beta 0.93 1.02 1.07 0.91 7
0.9
7
Alpha -2.78 -8.41 -4.00 -0.28 -
8.5
R- Squired 0.94 0.84 0.90 0.87 9
0.8
6
Online



FINDINGS:

• Since Standard Deviation is the measure which shows variability in the returns
from the mean return, therefore it is considered to be the direct and primary
measure of risk. In case of Magnum Tax Gain, it has the lowest standard
deviation in the category which means that the fund has not much risky portfolio.

• Sharpe ratio, which means returns per unit of risk that a fund is able to
generate. Therefore, higher the ratio the better it is. Accordingly, Magnum Tax
Gain is among the best fund as it is having 2 nd highest ratio in the category. All



funds in this category are showing negative ratio which indicates
that funds are not able to justify well whatever it hac investments in risky assets.

• Beta, which shows the co-movement of funds return with Market rate of returns,
is again measure of volatility or risk. Magnum TAX Gain which is having one of
the lowest beta in the category and also less than 1(.9) shows that the fund is
actually very less sensitive to stock market movement.

• Alpha, which measure the excess return over and above the market return is a
measure of risk. A high positive alpha is good sign for fund. e.g. if a fund has
alpha of positive 10 it means fund is giving a return of more than 10 percent
when compared to its benchmark or Market. As per this criterion Sundaram BNP
Tax Saver is leading the category having lowest negative alpha of -0.28%.
Magnum Taxgain is at the 2nd position with negative alpha of -2.78%.

• R-Squared, which explains the change in return caused by market volatility is a
good measure of risk. But a high R-squared means that much of change is caused
by market sentiments or fundamentals. Therefore, it is suggested that if a fund
has very high r-square value it means similar returns can be achieved by
investing in the stock markets. Therefore, a moderate r-square value ranging
between 65-85% is considered good from portfolio management point of view.
All funds except for Magnum Taxgain(0.94) and BSL Tax Relief 96(0.90), as
per this criterion are trailing compared to other funds in this category.

PORTFOLIO ANALYSIS:



SBI Magnum Principal Tax Birla Sunlife
Taxgain 93 Savings Tax Relief 96 Sundaram Kotak Tax
P/E Ratio 18.13 14.91 16.56 BNP Paribas
16.12 Saver
16.62

Fund Size(in 3133.66(30- 175.63(30-04- 591.69(30-04- 703.54(30- 32.1(30-04-
Rs. Cr.) 04-09) 09) 09) 04-09) 09)
Portfolio 24.91 22.14 22.43 30.20 20.94
Turnover(in
%) 5
Top 19.64% 24.48% 29.19% 23.21% 17.39%
Holdings
Online

FINDINGS:

From the above table it can be concluded that:



its earnings. Generally, P/E ratio is high for young/growth funds or stock. In this
case Investors have faith in SBI Magnum Taxgain 93 as it is having highest P/E
ratio(18.13). Though Kotak Tax Saver is also having a better figure of 16.62.

• Again Magnum Tax gain has largest Assets under Management (AUM), as a
result of strong distribution network, strong brand, and the message of faith that
SBI name itself give to masses of investors. Therefore, SBI Mutual Funds in
particular should build on strength of its Sponsor.

high transaction cost are charged to fund. As it is clearly visible from the table
that Magnum Tax Gain(24.91) from SBI has lower ratio compared to Sundaram
BNP Paribas Tax Saver(30.20) in the category it can be concluded that portfolio
was changed least number of time which again resulted in greater efficiency.

• Concentration Level: As it is clearly visible from the table that Kotak Tax
Saver is most diversified fund as it is having lowest holdings in Top five
holdings while Tax gain from SBI has 2 nd lowest level of concentration level
which means it is better diversified than other two funds in the same category.


FUND NAV



SBI Magnum Tax Gain 93 46.09

Principal Tax Savings 57.03

Birla Sun Life Tax Relief 96 71.15

Sundaram BNP Paribas Tax saver 34.88

Kotak Tax Saver 13.79




CONCLUSION:

After considering all the three parameter mentioned above, it can be concluded that
MAGNUM TAX GAIN tops the chart. Though shift towards Large-Cap stocks did not
help in 2007 therefore Fund manager Jayesh Shroff has been forced to cut holdings in
small and medium companies from 86% in mid-2005 to around 25% now. Also, since
ELSS has more of Retail money Mr.Shroff decided to play less aggressive strategy.
After all large cap stocks are less volatile and schemes investing them have low
downside risk. Principal Tax Saving fund is the second best fund and also most
consistent fund in the category.The fund also invested in under-researched companies
like Adhunik Metaliks, Madhukon Projects, Essen Rea Roll which helped in generating
more returns. The fund has no sectoral bias and invested in stocks across market
capitalization.

3)EQUITY MID AND SMALL CAP:

These are the equity funds which invest primarily in mid cap and small cap stocks, the
stocks which have growth potentials and also have high risk when compared to large
cap.

OBJECTIVE: The main objective of such funds is to provide long term growth in
capital along with liquidity, by investing predominantly in a well diversified basket of
equity stocks of companies whose market capitalization is less than Rs 2000 crore.
The following are the top five performing funds in this category as on date:

a) ICICI PRU EMERGING STAR
b) MAGNUM GLOBAL 94


c) MAGNUM MULTIPIER PLUS 93
d) RELIANCE GROWTH
e) SUNDARAM BNP PARIBAS SELECT MIDCAP INST

ANALYSIS:

FUNDS’ RETURN:

Fund ICICI PRU Magnum Magnum Reliance Sundaram
Returns(in’000cr. Emerging Global 94 Multiplier Plus Growth BNP Paribas
) 3 Months STAR 68.40 85.26 93 55.77 64.43 Select Midcap
NA

1 Year -29.66 -21.61 -5.55 -9.68 NA



3 Year -3.97 -0.36 10.30
11.95 NA
5 Year 24.82 31.21 33.32 35.20 NA

Online

FINDINGS:

• Since two funds from SBI brand are in top five funds, that’s shows how well the
portfolios are managed by the concerned Fund Managers.

• In Three month category, Magnum Global is the winner since it has fallen by
minimum value, while both funds Reliance Growth and Multipier Plus 93 have fallen by
maximum value. It means these funds were not able to withstand Ups and Downs in the



Indian stock markets in past three months i.e. from March 2009 to May
2009 compared to other well
performing fund in the same period.

• Hit by the mammoth of recession in one Year category Winner is Magnum
Multiplier Plus 93 giving the highest return of -5.55%, while funds like ICICI Pru
Emerging STAR are giving lowest returns in the category giving only -29.66% return in
past one year.

• In three year category which is one of the preferred choice of a retail investor
Magnum Multiplier Plus 93 is 2 nd highest giving the return of 10.30% while Reliance
Growth is at 1st position giving 11.95% return.

• In five year category, again Reliance Growth is the winner giving a handsome return
of 35.20%, while Multiplier plus is giving a return of 33.32% at Second Position and
Magnum Global is giving a return of 31.21% which is not a bad return.

RISK ANALYSIS:

ICICI PRU Magnum Magnum Reliance Sundaram
Emerging Global 94 Multiplier Growth BNP
Standard STAR 38.24 37.22 Plus 9330.90 33.35 Paribas NA
Deviation



Sharpe -0.40 -0.34 -0.08 -
Ratio 0.01 NA
Beta 1.07 1.05 0.90 0.97 NA

Alpha - - -1.80 0.35 NA
14.78 12.07
R- 0.82 0.83 0.90 0.88 NA
Squired
Online

FINDINGS:

• The primary measure of risk i.e. Standard Deviation is highest for ICICI Pru
Emerging Star which means it is the most risky fund in the category. Second is
Magnum Global having Standard Deviation of 37.22%.Fund having lowest



Standard Deviation is also from SBI, Multiplier Plus 93 is having
30.90% as Standard Deviation.

• All funds in this category are showing negative ratio which indicates that funds are
not able to justify well whatever it hac investments in risky assets. Now, 2 nd highest
return per unit of risk in the category is from SBI, Multiplier Plus is having a
Sharpe Ratio of -0.08 which justify its risk. ICICI Pru Emerging STAR is having
lowest ratio(-0.40) again indicating its aggressive nature.

• ICICI Pru Emerging Star is having a highest Beta of 1.07 in the category, which
means it is the most highly sensitive fund to the market in the category.
Magnum Multiplier Plus is having lowest Beta of 0.90 which means that it is less
sensitive to the market and hence less risky.

• Reliance Growthis having a highest value of alpha in the category. It is giving 0.35
% excess return than its benchmark. Multiplier Plus from SBI has second best alpha
which is giving -1.80% deficit return than its benchmark.

• Last, but not the least all funds in this category have good R-Squared value,
because all R-Square values are near about .7 or less than that which means all
funds are taking the benefit of Professional Management, since a major part is
being played by other facors.But three funds ICICI Pru Emerging
Star(0.82),Magnum Global(0.83) and Reliance Growth(0.88) are having best R-
Squared value in the category.

PORTFOLIO ANALYSIS:



AS ON 29-05-09 Source:
ICICI PRU Magnum Magnum Reliance Sundaram
Emerging Global 94 Multiplier Plus Growth BNP
P/E Ratio STAR 12.39 11.64 93 21.20 14.34 Paribas NA

Turnover(in 91.61 90.72 47.00 59.69 NA
%)
Fund 256.0 746.87( 687.15(3 3597.9 NA
size(in 0(30- 30-04- 0-04-09) 2
Rs.cr)
Top 5 04-
14.60 09)
18.96% 24.68% 17.49 NA
Holdings %
Value Research Online

FINDINGS:



its earnings. Generally, P/E ratio is high for young/growth funds or stock. In this
case both funds from SBI are having high P/E Ration in the
category.Infact,Magnum Multiplier Plus 93 is having highest P/E ratio of 21.20
in the category. Magnum Global 94 is having a lowest P/E Ratio of 11.64 which
shows investors are comparatively lacking confidence in the fund.

high transaction cost are charged to fund. As it is clearly visible from the table
that Magnum Multiplier Plus is having lowest turnover ratio of 47% compared to
highest of 91.61% in case of ICICI Pru Emerging Star and 90.72% in case of
Magnum Global 94, it shows that the fund is well managed and is having a
lowest transaction costs. Also Reliance Growth is having moderate value of
59.69% implying less transaction cost being charged to the fund.

• Fund Size, as visible from table itself that, Reliance with its Brand Name and
effective Marketing Strategy has no problem when it comes to raising fund from
public. Reliance Growth is having a largest Fund Size of Rs.3597.92 Crore in the
category, followed by Magnum Global 94 (Rs.746.87 Cr)and SBIs Magnum
Multiplier Plus (Rs.687.15 Cr) which shows popularity of these funds in the
market.

• Concentration Level: As visible from table, ICICI Pru Emerging STAR is
having lowest percentage (14.60) of holding in its Top five Stocks i.e.it is the
most diversified fund in the category. On the other hand, Magnum Multiplier



Plus 93 is having lowest Diversification as it is having highest
holding in top five stocks (24.68) in the category.


FUND NAV

ICICI PRU EMERGING STAR 21.42

MAGNUM GLOBAL 94 35.81

MAGNUM MULTIPIER PLUS 93 58.57

RELIANCE GROWTH 319.21

SUNDARAM BNP PARIBAS 100.52
SELECT MIDCAP INST



CONCLUSION:

After considering all three parameters discussed above it can be concluded that
MAGNUM MULTIPLIER PLUS FUND is the best fund in the category followed by
Reliance Growth.



4)EQUITY LARGE CAP:

These are the funds which have investments predominantly in large cap stock. These are
the stocks which has a solid track record and sound fundamentals. These are the less
risky stocks and hence generally have low growth rates when compared to small and
mid-cap stocks.
In this category fund from SBI, Magnum Equity have been taken, since it has significant
exposure to large cap stocks (92.16%).

The following are the top performing funds in the category:

A) BIRLA SUN LIFE FRONTLINE EQUITY
B) SUNDARAM BNP PARIBAS S.M.I.L.E. REG
C) KOTAK 30
D) MAGNUM EQUITY
E) RELIANCE VISION



ANALYSIS:

FUNDS’ RETURN:

Fund returns(in Birla Sunlife Sundaram Kotak 30 Magnum Reliance
‘000cr.) Frontline BNP Paribas Equity Vision
3 Months Equity 61.99 S.M.I.L.E. Reg
80.89 45.96 51.79 59.18

1 Year -0.65 -7.79 -12.42 10.18 -5.81

3 Year 17.69 9.63 9.53 14.63 10.21

5 Year 29.29 NA 27.37 22.95 28.83

AS ON 29-05-09 Source: Value Research Online



FINDINGS:
• In past three months, Sundaram BNP Paribas S.M.I.L.E. Reg is the winner, since
it has fallen to only (80.89%) compared to highest fall in Kotak 30(45.96). Also,
Magnum Equity from SBI was not able to withstand ups and downs in the
market witnessed in last three months since it is fallen to 51.79% which is
second highest fall.

• Hit by the mammoth of recession in one year category, Magnum Equity top the
charts, giving the highest return of 10.81%, when compared to the lowest of
-12.42% given by Kotak 30.



• In three Year category Sundaram BNP Paribas Select Focus top the
charts giving a x return of 17.69% followed closely by Magnum Equity giving a
return of 14.63%.

• In Five year category Birla Sun Life Frontline Equity top the charts giving a
4TH
return of 29.29% while Magnum Equity stands at only position giving the
return of 22.95%.

RISK PROFILE:



Birla Sunlife Sundaram Kotak 30 Magnum Reliance
Frontline BNP Paribas Equity Vision
Standard Equity 29.36 S.M.I.L.E.
38.07 29.98 33.41 30.79
Deviation
Sharpe Ratio 0.14 -0.10 -0.05 0.00 -0.11

Beta 0.89 1.12 0.90 1.00 0.91

Alpha 4.60 -3.01 -0.99 0.67 -2.95

R-Squired 0.96 0.91 0.95 0.95 0.92

Value Research Online

FINDINGS:



• As per the Standard Deviation, SUNDARAM BNP PARIBAS S.M.I.L.E. Reg
is having the highest risk in the category compared to lowest risky Birla Sun Life
Frontline Equity (29.36%).

• The return per unit of risk is highest in case of Birla Sun Life Frontline
Equity(0.41) which is also having lowest risk in the category while RELIANCE
VISION is having one of the lowest Sharpe Ratio(-0.11) in the category
indicating that fund is not able to generate enough return compared to the risk its
taking while investing.

• SUNDARAM BNP PARIBAS S.M.I.L.E. REG is having highest Beta (1.12) in
the category signifying its aggressive nature. Since Beta is more than 1 it means
Fund is highly sensitive to the market, therefore whenever Stock Market will fall
or rise fund will fall or rise more than the market. Birla Sun Life Frontline
Equity is having lowest Beta (.89) in the category again signifying that it is
having lowest risky profile in the category.

• As per Alpha measure of risk, Birla Sun Life Frontline Equity is again the best
fund in the category, giving the highest excess returns than the market
(4.60%).On the other hand RELIANCE VISION is not able to generate Alpha
Returns and it is one of the lowest alpha generating fund in the category (-
2.95%).

• All funds in the category are having higher R-Squared Value. Among the funds
Birla Sun Life Frontline Equity is having highest value of .96 which tells us that
All funds are significantly influenced by Market and thus not taking help of
Professional Management at its optimum.


PORTFOLIO ANALYSIS:

Birla Sunlife Sundaram Magnum Reliance
Kotak 30
Frontline BNP Paribas Equity Vision
Equity S.M.I.L.E.
P/E Ratio 15.52 14.67 17.22 21.71 14.81

Portfolio
17.45 10.83 26.31 32.29 17.02
Turnover(in
Fund%)
Size(in 481.14(30- 130.26(30- 688.14(30- 241.91(30- 2589.02(30-
Rs.cr.) 04-09) 04-09) 04-09) 04-09) 04-09)
Top 5
28.46% 20.93% 32.11% 31.52% 26.21%
Holdings
Online



FINDINGS:

• As per P/E Ratio Magnum Equity is the winner in the category, it is having
highest ratio of 21.71 i.e. Investors are really confident about the fund and they
are paying much higher than the earnings. While Sundaram BNP S.M.I.L.E. Reg
is having lowest P/E Ratio of 14.67 which means investors are not much
confident about the fund.

high transaction cost are charged to fund. In this category, SUNDARAM BNP
PARIBAS S.M.I.L.E. Reg is having lowest Portfolio Turnover Ratio (10.83)
suggesting that Fund Manager is managing the fund without much change in the
portfolio and thus saving the Transaction cost. On the other hand, Magnum
Equity is having the highest Portfolio Turnover Ratio of (32.29),thus incurring
the highest transaction cost.

• As per the Fund Size, Reliance Vision managing the largest fund (2589.02 Cr)
in the category, indicating its Brand Name, Brand Penetration in the market.
While Magnum Equity is having the 2nd minimum Fund Size indicating the not
much popularity of the fund in the market.

• Concentration Level: As per this criterion, Kotak 30 and Magnum Equity are
having highest Top Five Holdings in the category (32.11%) and (31.52%)
respectively, indicating that it is the least diversified fund in the category. While
SUNDARAM BNP PARIBAS S.M.I.L.E. Reg is having lowest (20.93%) top



five holdings indicating that it is the most diversified fund in the
category, thus taking the benefit of the Diversification.


FUND NAV

Birla Sun Life Frontline Equity 62.82

Sundaram BNP Paribas 22.49
S.M.I.L.E. Reg
Kotak 30 76.93

Magnum Equity 31.39

Reliance Vision 198.42



AS ON 29-05-09 SOURCE: NSE WEBSITE

CONCLUSION:

After considering all three parameters discussed above it can be concluded that BIRLA
SUN LIFE FRONTLINE EQUITY tops the category due to following reasons:

• A.Balasubramanian who earlier used to head Fixed Income Team, now heads
overall Investment team, he gave a lot of freedom to its analyst and research
team to present new stock ideas. He also sharpened the internal processes,
stressing on small and
medium companies that are usually under-researched.
• Fund Manager Mahesh Patil’s stock and sector selection ability was also the key
to fund’s success.It did well to identify potential winner in public sector banks,
as also companies like Crompton Greaves, Hindustan Dorr-Oliver and Thermax
in 2007.



• Mahesh also played fairly aggressive strategy by picking up stocks whose Price
levels were attractive.

• Fund also didn’t take high exposure to any single stock, therefore Downside risk
was also lowest of this fund in the category.

5)EQUITY THEMATIC FUNDS:

These are the funds which invest in particular sector or particular group of companies to
take advantage of that group. These funds are generally higher in risk profile and thus
provide high return also.

The following are the top performing funds which have been taken for comparison with
SBIs thematic fund in the category:

A) BIRLA SUN LIFE BASIC INDUSTRIES
B) TATA INFRASTRUCTURE
C) JM BASIC
D) MAGNUM EMERGING BUSINESS FUND


E) UTI INFRASTRUCTURE

ANALYSIS:

FUNDS’ RETURNS:

Fund returns(in Birla Sunlife Tata JM Basic Magnum UTI
‘000 cr.) Basic Infrastructure Emerging Infrastructure
3 Months Industries
71.77 66.96 123.1 Businesses
96.38 52.80
5
1 Year -8.76 -13.07 -35.62 -24.67 -9.12

3 Year 8.42 12.23 2.76 -2.21 10.89



5 Year 24.63 NA NA
NA 33.64
Online

FINDINGS:

• In three Months Category JM BASIC is the winner, giving a solid return of
123.15% followed by Magnum Emerging Business Fund giving a return of
96.38%.

• In one year category, Birla Sunlife Basic Industries is the winner showing a fall
of-8.76% followed by UTI Infrastructure(-9.12).The 2nd lowest return was given
by SBIs Magnum Emerging Business Fund (-24.67%).



• In three year category, TATA Infrastructure is the winner giving a
return of 12.23% followed by UTI Infrastructure(10.89%). Again the lowest
return is given by Magnum Business Fund (-2.21%).

• In Five Year category data is not available since all the above listed funds are
new and have a track record of only three years except UTI Infrastructure giving
a return of 33.64% which is a quite good return.

RISK PROFILE:

Birla Sunlife Tata J M Basic Magnum UTI
Basic Infrastructure Emerging Infrastructure
Standard Industries
34.57 35.21 47.00 Businesses
0.82 33.88
Deviation
Sharpe Ratio -0.17 -0.02 -0.22 -13.41 -0.05



Beta 1.03 1.05 1.36
1.16 1.00
Alpha -5.10 -0.11 -9.58 -0.34 -1.12

R-Squired 0.93 0.92 0.88 41.45 0.90

Online

FINDINGS:

• As per Standard Deviation (S.D), which is considered to be primary measure of
risk, SBIs Magnum Emerging Fund is the winner in the category having a lowest
Standard Deviation of 0.82.On the other hand JM Basic is the looser having the
highest S.D Of 47.00.



• As per Sharpe Ratio, the return per unit of risk is negative for all the funds in
this category. Its lowest in the case of Magnum Emerging Business Fund(-13.41)
which means that funds is a looser.

• As per Beta measure of risk, JM Basic is the most sensitive to the market, sine it
is having highest Beta in the category of 1.36. All the funds in this category have
Beta greater or equal to 1 which show that they are highly sensitive to market
sentiments.

• All the funds in this category have negative alpha 1 which show that they are
giving negative returns. As per Alpha Measure of risk, Tata Infrastructure and
Magnum Emerging Business Fund are showing smallest negative figures of
-0.11 and -0.34 in ths category which suggests that they have given minimum
loss to the investors compared to other funds. On the other fund, JM Basic was
looser generating a highest negative alpha of (-9.58%).

• As per R-Squared Value, JM Basic is having the best value as per MORNING
STAR, because it is having a moderate value of .88 i.e. it is taking the benefit of
diversification.

PORTFOLIO ANALYSIS:

Birla Tata JM Basic Magnum UTI
Sunlife Infrastructure Emerging Infrastructure
P/E Ratio Basic
12.72 17.62 11.53 Businesses
23.90 .01



Portfolio 35.23 46.91 8.80 6.13
Turnover(in%) 51.81
Fund Size(in 79.47(30- 1598.09(30- 391.54(30- 98.65(30-04- 1294.02(30-
Rs.cr.) 04-09) 04-09) 04-09) 09) 04-09)
Top 5 Holdings 24.36% 27.69% 30.24% 27.86% 27.69%

Online

FINDINGS:



As per P/E ratio, SBIs Magnum Emerging Business Fund is the
winner in the category, since it is having highest P/E Ratio of 23.90 in the
category which means that Investors are paying almost 24 times of fund’s
earnings and have a lot of confidence in the fund. On the other hand Birla Sun
Life Basic Industries is having the lowest P/E Ratio in the category implying low
investors’ confidence.

high transaction cost are charged to fund. In the above category, JM Basic and
SBI is the winner since both funds are having lowest Portfolio Turnover ratio
which are 8.80 and 6.13 respectively. However, UTI Infrastructure is having a
highest ratio of 51.81 implying that Fund manager is churning the Portfolio very
quickly.

• As per Fund Size, Tata Infrastructure is the winner in the category having
largest Fund Size of 1598.09 crores and this was possible only due to its sound
track record since inception because the fund has not have Strong Brand name
when compared to other fund house like Reliance, Birla, SBI etc. UTI
Infrastructure is also having a large corpus of 1294.02 Crores building on its
Brand and performance also.

• Concentration Level: As per this criterion, Birla Sun Life Basic Industries is
the most diversified fund in the category because it is having a lowest holding in
top five stock in terms of percentages( 24.36). On the other hand JM Basic and
Magnum Emerging Business Fund are the least diversified fund in the category
having 30.24% and 27.86% holding in top 5 Stock respectively.




FUND NAV

Birla Sun Life Basic Industries 75.89

TATA Infrastructure 27.84

JM Basic 16.57

Magnum Emerging Business 24.98
Fund
UTI Infrastructure 30.79

www.nseindia.com



CONCLUSION:

After considering all three parameters discussed above it can be concluded that
Infrastructure was the dominant theme in 2008.Though SBI came up with its
infrastructure a bit late in 2007 therefore Magnum Emerging Business fund from SBI
has been taken due to its available track record. However, among the funds mentioned
above TATA INFRASTRUCTURE tops the category due to following reasons:

• The scheme’s focus on capital goods, construction, engineering and banking
worked very well.



• Out of all infrastructure funds this fund was the least volatile since
it had the well diversified portfolio.

COMPARISON OF MUTUAL FUNDS AGAINST
OTHER INVESTMENT AVENUES:

PRODUCT SAFETY/CONVI LIQUIDITY RETURN VOLATILITY
NENCE

Equity Low High/low High-Mod. High

FI Bonds High Moderate Mod.-High Moderate



Debentures Moderate Low Mod.-Low
Moderate

Corp. FD Low Low Moderate Low

Bank Deposit High High Low-High Low

PPF High Moderate Moderate Low

Life Ins. High Low Low-Mod Low

Gold High Moderate Mod.-Low Moderate

Real Estate Moderate Low High-Low High

MF High High High Moderate
SOURCE:VALUE
RESEARCHONLINE.COM

FINDINGS:

From above table it can be interpreted that Mutual Funds give high return, are safe in
nature, gives high liquidity when compared to other investment avenues. Also, Mutual
funds are Moderate in volatility compared to some high volatile avenues like equity and
real estate. Therefore, features mentioned here make Mutual Funds an attractive
investment instrument for all investors.



5.EXPECTATIONS OF THE INDUSTRY FROM
BUDGET 2009-10:

The Budget 2008-09 was expected to be a populist budget presented by the Finance
Minister Mr. P. Chidambaram as it was the last budget by the UPA govt. before the
general election in 2009. The mutual fund industry had the following items in its wish
list before the announcement of the budget 2009-10:

 Bring Equity Fund of Funds, International Equity Funds, and Gold ETFs
under the definition of Equity Mutual Fund.



 Minimum criterion for equity oriented mutual fund be bought
down from 65% to 50%

 Dividend Distribution Tax on Corporate for Non Equity and Non Liquid
Mutual Funds should be reduced to 10% from 20% at present.

 Dividend Distribution Tax on Money Market / Liquid Mutual Funds should be
reduced to 10% from 25% at present.

 Overseas Investment Limit for individuals and international funds both should be
lifted completely.

 Dedicated Infrastructure Funds guidelines should be issued so that the huge
infrastructure funding requirements can be met.

 Commodity ETFs should be introduced.

 PSUs should be allowed to invest across all mutual funds irrespective of
Public/Private Status.



 Redefine ‘equity-oriented’ schemes to include funds that invest in securities of
foreign listed companies and ADR/GDRs issued by Indian and Foreign
companies.

 Differential tax incentive (on the lines of equity long term savings) to lure
investor’s

savings into long-term debt products through mutual funds.

 Tax incentives for individuals to save in dedicated infrastructure funds, where
money will be locked for a period for investment in infrastructure projects.
Maybe a separate exemption limit of Rs. 100,000 can be set-aside for
individuals.

 Level playing field for MFs vis-à-vis alternative competing instruments, which
vie for intermediation into India’s equity and debt markets.

RELEVANT HIGHLIGHTS OF THE BUDGET 2009-10

The Economy



 The Gross Domestic Product increased by 7.5 per cent, 9.4 per cent and 9.6
percent in first three years, of the UPA Government resulting in an
unprecedented average growth rate of 8.8 per cent. The drivers of growth
continue to be 'services' and 'manufacturing' which are estimated to grow at 10.7
per cent and 9.4 per cent respectively.

 Saving rate and investment rate estimated to be 35.6 per cent and 36.3 per cent,
respectively, by the end of 2007-08; between April- December 2007-2008. FDI
amounted to US$ 12.7 billion and FII to US$ 18 billion.

FINANCIAL SECTOR

Financial Inclusion

Two recommendations of the Committee on Financial Inclusion proposed to be accepted
viz. (i) to advise commercial banks, including RRBs, to add at least 250 rural household
accounts every year at each of their rural and semi-urban branches; and (ii) to allow
individuals such as retired bank officers, ex-servicemen etc. to be appointed as business
facilitator or business correspondent or credit counselor; banks to be encouraged to
embrace concept of Total Financial Inclusion; Government to request all scheduled
commercial banks to follow the example set by some public sector banks and meet the
entire credit requirements of SHG members, namely, income generation activities,
social needs like housing, education, marriage etc., and debt swapping.



Capital Markets

Measures to expand the market for corporate bonds

Exchange-traded currency and interest rate futures to be launched and transparent credit
derivatives market to be developed with appropriate safeguards; Tradability of domestic
convertible bonds to be enhanced through the mechanism of enabling investors to
separate the embedded equity option from the convertible bond, and trade it separately;
Development of a market-based system for classifying financial instruments based on
their complexity and implicit risks to be encouraged.

Permanent Account Number (PAN)

Requirement of PAN extended to all transactions in the financial market subject to
suitable threshold exemption limits.

Service tax

 Four services brought under service tax net namely, asset management service
provided under ULIP, services provided by stock/commodity exchanges and
clearing houses; right to use goods, in cases where VAT is not payable; and
customized software, to bring it on par with packaged software and other IT
services.



 Threshold limit of exemption for small service providers increased
from Rs.8 lakhs per year to Rs.10 lakhs per year; about 65,000 small service
providers go out of the tax net.

Direct Taxes

 Threshold limit of exemption from personal income tax in the case of all assesses
increased to Rs.150, 000. The slabs and rates of tax are :

Up to Rs.150, 000 NIL
Rs.150, 001 to Rs.300, 000 10 per cent
Rs.300, 001 to Rs.500, 000 20 per cent
Rs.500, 001 and above 30 per cent

 Every income tax assesses to get relief of minimum of Rs 4,000.

 In case of a woman employees, the threshold limit increased from Rs.145,000 to
Rs.180,000; for a senior citizens, the threshold limit increased from Rs.195,000 to
Rs.225,000.

 Senior Citizen Saving Scheme 2004 and the Post Office Time Deposit Account
added to the basket of saving instruments under Section 80C of the Income Tax
Act.

 Additional deduction of Rs.15,000 allowed under Section 80D to an individual
paying medical insurance premium for his/her parent or parents.



 Corporate debt instruments issued in Demat form and listed on
recognized stock exchanges exempted from TDS.
 Parent company allowed to set off the dividend received from its subsidiary
company against dividend distributed by the parent company; provided that the
dividend received has suffered DDT and the parent company is not a subsidiary of
another company.

 Rate of tax on short term capital gains under Section 111A & Section 115AD
increased to 15 per cent.

 STT paid to be treated like any other deductible expenditure against business
income; Levy of STT, in the case of options to be only on premium, where the
option is not exercised; liability to be on the seller; where the option is exercised,
levy to be on the settlement price and the liability on the buyer; no change in the
present rates.

SWOT ANALYSIS OF SBI MUTUAL FUND

STRENGTH

• Being the 7th biggest AMC,SBI Mutual Fund has a cutting edge over other
AMC’s



• The name SBI is also associated with one of the largest public
sector bank in India,and hence people show more faith in SBI Mutual Fund.

• SBI Mutual Fund is one of the oldest AMC’s in private sector and schemes
which are matured enough pull new investors because of high returns.

• Wide variety of funds,ranging from debt funds to equity and a mixture of both in
various proportions,give ample amount of choice to customers.

• SBI Mutual Fund offers clear and non overlapping positioning of different funds.

• Winner of ICRA Mutual Fund Awards 2009(Magnum Taxgain Scheme).

• Winner of Lipper Fund Awards 2009.

• Winner of Outlook Money NDTV Profit Awards- 2008.

WEAKNESS

• Lack of promotional material ,dispensers ,banners.

• Proper training not being provided to bank officials.



OPPORTUNITIES

• Untapped rural market offers huge potential.

• More focus on PSU’s may enhance business.

• Training provided to investors may lead to more investments.

THREATS

• Competitors like Reliance AMC,ICICI prudential are catching up fast on the
market
share.

• Share market slump may see downfall in investments.

• Ongoing recession may impose adverse effects

FUTURE SCENARIO

Mutual funds are the fastest growing segment of the financial services sector in India.
Owing to the impact of global financial crisis the average AUM of the Indian Mutual
Fund industry fell by 1.53% and stood at rs. 493,287 crores. The average AUM of SBI
Mutual Fund for the month of March 2009 was Rs. 26,383 crores. There is little



awareness about mutual fund in India; people have accepted it as a one of
the major investment avenue. Once people know about the benefits offered by it, mutual
funds will become one of the sought after investment avenues.

In future, Out of ten public sector players five will sell out, close down or merge with
stronger players in three to four years. In the private sector this trend has already started
with two mergers and one takeover. But this does not mean there is no room for other
players. The market will witness a flurry of new players entering the arena. There will
be a large number of offers from various asset management companies in the time to
come. Some big names like Fidelity, JP Morgan, etc. have entered the Indian market.
One important reason for it is that most major players already have presence here and
hence these big names would hardly like to get left behind.

The mutual fund industry is witnessing the introduction of derivatives in the country.
This enables it to hedge its risk and this in turn would be reflected in its Net Asset Value
(NAV).

I personally visualize a minimum annual growth of between 30 and 35 per cent, since
we are on a growth phase (a real take off, if I may venture to say) as penetration into
semi-urban and rural areas is steadily increasing since more and more households are
opting for mutual funds.

I feel that this industry has a very interesting past, an encouraging present
and a very bright future.

FINDINGS:

1) Regarding Funds:-



While dealing with them I have observed that the performance of the
schemes of SBIMF is quite good and the demand for those schemes is also good. I came
to know that SBI Magnum Tax gain 93 is the most popular fund among individual
investors. According to them the 3yr and 5yr returns of the funds are very good. One of
the reason for great demands of AMCs fund is the Brand Value of SBI, as it is the
largest bank of country.
At the same time they we also observed that unlike other AMCs like Reliance, HDFC
etc. SBIMF is not very aggressive in marketing of its funds also the funds of SBIMF are
not very innovative (as they don’t have any banking or financial sector fund)

2) Regarding services:-

Apart from fund performance observations are also made regarding the services of
SBIMF, after analyzing the feedback of distributors I found that the services of SBIMF
is not as good as other AMCs and some of the field in which they are lacking

a) Complaints related to not delivering the account statements and brokerage
on time.
b) Problems related to material, like unavailability of forms, fact sheets and
other promotional matters, also there are some problems related to courier
services.
c) They have also complained that AMC do not provide any fringe benefits on
good performance.

CONCLUSION



The future of primary market is growing at a very high pace. Taking this
thing into consideration, there are lots of opportunities for the SBI Munds Management
Pvt Ltd to tap the golden opportunities from the Indian market.

SBI Funds Management Pvt Ltd has emerged a very strong player in the field of
distribution of financial product within a short period of one year time in Northern India
and is giving stiff competition to all the players in the market including the banks. It is
expanding its area of business, if the progress of SBI MF goes in the same way, than I
can say that there is bright future for SBI MF in coming years. They have much
potential to expand their distribution network in northern India.

The company is currently following huge investment and growth strategies. Apart from
the market growth rate the distribution industry doesn’t seem so attractive. Hence the
firm should be selective using growth strategies. This is not to undermine the bright
future of SBI MF, just a check to be a cautious.

There is little awareness about mutual fund in India; people have accepted it as a one of
the major investment avenue. Mutual funds will become one of the sought after
investment avenues. As far as the other investment products marketed by SBI MF are
concerned, they have a ready market. The only thing, which it needs to focus on, is that
they should have a strong network so that prompt services and availability of forms is
made available to the investor at a short notice, and if it keeps the traditional base for
marketing in India, which is a price sensitive market, we can say that SBI MF has a
great future ahead.



SUGGESTIONS &
RECOMMENDATIONS

A) THE GROUND RULES OF MUTUAL FUND INVESTING

The following are the 10 commandments that were to be followed till eternity. The
world of investments too has several ground rules meant for investors who are novices
in their own right and wish to enter the myriad world of investments. These come in
handy for there is every possibility of losing what one has if due care is not taken.

1. Assess yourself: Self-assessment of one’s needs; expectations and risk profile is
of prime importance failing which; one will make more mistakes in putting
money in right places than otherwise. Irrational expectations will only bring
pain.

2. Try to understand where the money is going: One can lose substantially if one
picks the wrong kind of mutual fund. In order to avoid any confusion it is better
to go through the literature such as offer document and fact sheets that mutual
fund companies provide on their funds.

3. Don't rush in picking funds, think first: one first has to decide what he wants
the money for and it is this investment goal that should be the guiding light for
all investments done. It is thus important to know the risks associated with the



fund and align it with the quantum of risk one is willing to take.
One should take a look at the portfolio of the funds for the purpose. Excessive
exposure to any specific sector should be avoided, as it will only add to the risk
of the entire portfolio.

4. Invest. Don’t speculate: A common investor is limited in the degree of risk that
he is willing to take. It is thus of key importance that there is thought given to the
process of investment and to the time horizon of the intended investment. One
should abstain from speculating which in other words would mean getting out of
one fund and investing in another with the intention of making quick money

5. Don’t put all the eggs in one basket: This old age adage is of utmost
importance. No matter what the risk profile of a person is, it is always advisable
to diversify the risks associated. So putting one’s money in different asset classes
is generally the best option as it averages the risks in each category.

6. Be regular: Investing should be a habit and not an exercise undertaken at one’s
wishes, if one has to really benefit from them. As we said earlier, since it is
extremely difficult to know when to enter or exit the market, it is important to
beat the market by being systematic. The SIPs (Systematic Investment Plans)
offered by all funds helps in being systematic. All that one needs to do is to give
post-dated cheques to the fund and thereafter one will not be harried later.



7. Do your homework: It is important for all investors to research
the avenues available to them irrespective of the investor category they belong
to. This is important because an informed investor is in a better decision to make
right decisions. Having identified the risks associated with the investment is
important and so one should try to know all aspects associated with it. Asking
the intermediaries is one of the ways to take care of the problem.

8. Find the right funds: Finding funds that do not charge much fees is of
importance, as the fee charged ultimately goes from the pocket of the investor.
This is even more important for debt funds as the returns from these funds are
not much. Funds that charge more will reduce the yield to the investor. Finding
the right funds is important and one should also use these funds for tax
efficiency.

9. Keep track of your investments: Finding the right fund is important but even
more important is to keep track of the way they are performing in the market. If
the market is beginning to enter a bearish phase, then investors of equity too will
benefit by switching to debt funds as the losses can be minimized. One can
always switch back to equity if the equity market starts to show some buoyancy.

10. Know when to sell your mutual funds: Knowing when to exit a fund too is of
utmost importance. One should book profits immediately when enough has been
earned i.e. the initial expectation from the fund has been met with. Other factors
like non-performance, hike in fee charged and change in any basic attribute of
the fund etc. are some of the reasons for to exit.



B) WHEN TO SELL YOUR MUTUAL FUND

While there are many investment consultants, some by profession, some self-professed,
who suggest on when to invest in a particular avenue, there is a certain paucity of people
who talk of when to exit. Here are some situations when the investor should consider
withdrawing their investments from the funds.

• Fund is not performing

This reason for selling, although valid in certain conditions, is where most investors
make a mistake. When calculating performance one shouldn’t look at too short a
period and make a mistake by comparing apples to oranges. One should compare the
returns posted by his fund with that of the peers across various horizons such as 1-
year, 3-year and above. A short-term view can often lead to committing hara-kiri, as
it doesn’t present the full picture. If it has underperformed the average of its peers in
all cases, then it sure is one of the better reasons to exit from the fund.

• A change in life stage

Investments are done with a certain objective in mind and life stages are often a
determining factor of what a person needs. A young man can afford to take more
risks than a person nearing his retirement can. In such cases, it pays to withdraw
money from the equity investments made earlier and put them in safer, more


conservative debt funds that offer stable returns without
compromising on risk. So a change in life stages would be one such reason to
consider switching into a fund that matches with one’s needs.

• A major change in any basic attribute of the fund

When the fund changes any basic attribute as mentioned by it in its offer
documents, the investors have a choice of getting out of it. Even SEBI has
provided for an exit route being made available to the investors. Changes like a
change in Asset Management Company or in investment style of fund or change
of structure say from closed-end to open-end etc. are good enough reasons for an
investor to consider switching or exiting from it as they are certainly likely to
affect the fund in a major way.

• Fund doesn’t comply with its objective

One of the important parameters in the selection of the fund is alignment of the
risk profiles of the investor and fund. The objective of the fund says a lot about
how the fund plans to invest. If the objective is not being complied with, it is one
of the exit points worth considering.

• The Fund’s Expense Ratio Rises

A small rise in an expense ratio is not a big deal, however a significant rise can
result in substantial reduction of yields and so it would be better to exit the fund.
In the case of bond funds or money market funds, it is highly unlikely that the



fund can increase its returns enough to justify an increase in the
fund's expenses.

• The Fund Manager has changed

a simple change of fund managers, in itself, is not enough reason to sell a fund on a
short-term basis. If it is a passively managed fund (index fund), then one has little to
no reason to worry. However, if it is an actively managed fund, then has to keep the
eyes open on the new manager.

• Enough has been earned

However, nothing is as important as to rein the horses in time. The primary
principle behind safety of investment is to take risks that can be tolerated. The
principle also is specific on the expectations that the investor must have from
any investment. Just as it is important to set realistic targets that one hopes to
achieve from the investment, it is also important to exit when target as expected
has been achieved irrespective of the fact that it might be generating better
returns in a short-term. Waiting longer might not prove beneficial, as one need
not be lucky all the time.The above list is certainly not exhaustive and
individuals will have other better reasons to quit as well. It’s just that most don’t
know when to apply thought and so these would come in handy.



LIMITATIONS OF THE PROJECT

 As my project involves interaction with both prospective as well as existing clients,
lack of any identity proof hinders the assignment as people often suspect the
authenticity of the concerned person.

 Being a trainee, I was not given the authority to handle any transaction myself but
under the guidance of some superior.

 The company restricts me to deal with its key clients.

 Since I have not undertaken the AMFI exam, which is a mandatory condition to
work in the operations department, I was not able to understand some of the
common terms of the mutual funds industry but later I learnt them.



GLOSSARY

1. General Terms:

i. Bonds

A debt security issued by government or corporation, which generally pays a stated rate
of interest and to returns the principal amount of the loan on the maturity date. Unlike
stockholders, bondholders do not have ownership privileges.

ii. Capital Gains

The gains made on sale of securities and certain other assets (including units of mutual
funds) are called capital gains. The gains can be long-term or short-term depending on
the period of holding of the asset and are charged to tax at different rates. Gains on
mutual fund units held for a period of 12 months or more are long-term gains.

iii. Compounding

Interest earned not only on the initially invested principal but also on accumulated
interest during the period.

iv. Credit rating



A measure indicating the bond issuer’s credit worthiness, or his/her ability
to repay the loan. The bonds are rated by an independent rating agency such as CRISIL,
ICRA, and CARE.

v. Equity
A type of security representing part ownership in a company/corporation. Common
stocks, preferred stock, and convertible stock are types of equity securities, but debt
securities are not, as they do not represent ownership. These are generally listed on BSE,
NSE & other stock exchanges.

vi. Fixed income securities

A debt security that pays a defined rate of return. These do not offer an investor much
potential for growth. This usually refers to government, corporate or municipal bonds,
which pay a fixed rate of interest until the bonds mature, or preferred stock, which pays
a fixed dividend. A mutual fund investing in these types of securities may also be
referred to as a fixed income investment or security.

vii. Floating Rate Securities

An interest rate, which is periodically adjusted, usually based on a standard market rate
outside the control of the institution. These rates often have a specified floor and ceiling,
which limit the floating rate. The rates are pre-decided at regular intervals like half
yearly, annually based on market conditions. The opposite of having a floating rate is
having a fixed rate.

viii. Inflation risk

The possibility that the value of assets or income will be eroded by inflation, affecting
the purchasing power of a currency. Often mentioned in relation to fixed income Funds
as they may minimize the possibility of losing the principal.


ix. Interest rate risk

The risk that a security’s value will change due to an increase or decrease in interest
rates. A bond’s price will always drop as interest rates rise and when interest rates fall, a
bond’s price will rise.

x. Mode of holding:

When an investor makes investment only under his name, the mode of holding is termed
as ‘Single’. However, when the investor makes an application with one or more persons
as the second or third applicants, the mode of holding can be ‘Joint’ or can also be
‘Anyone or Survivor’. However, when the mode of holding is ‘Joint’, all the applicants
have to sign jointly or simultaneously for any transactions. But when the mode of
holding is ‘Anyone or Survivor’ the holder / applicants do not have to sign jointly but
can be signed by either of the holders/ applicants.

xi. Money Market Instruments

Commercial paper, treasury bills, GOI securities with an unexpired maturity up to one
year, call money, certificates of deposit and any other instrument specified by the
Reserve Bank of India.

xii. Market risk

The potential loss that is possible as a result of short-term volatility of the stock market
indicated by beta. Owning mutual funds shields an investor to some market risk that a
stockholder may be vulnerable to because of their diversification.

xiii. NRE


A Non-Resident External Rupee account that NRIs can open with any Indian bank. They
can use this account for making investments in India on a repatriable basis.

xiv. NRI

A Non-Resident Indian who is an Indian citizen or a person of Indian origin but who
resides abroad. NRIs have to follow specific rules when investing in India.

xv. NRO

An Ordinary Non-Resident Rupee account which can be opened for funds coming in
from abroad or from local funds. The amount in the account is, however, non-
repatriable.

xvii. Yield to Maturity (YTM)

The yield earned by a bond if it is held until its maturity date.

2. Business specific:

i. Account Number / Folio Number

After the investor makes an investment, he is allotted units at the ‘Applicable NAV’ &
he is given a unique account / folio number for the investments made by him.

ii. Account statement

A document similar to a bank account statement that indicates the mutual fund units
owned. A statement is issued each time the investor carries out a transaction.


iii. Asset Management Company (AMC)

The trustee delegates the task of floating schemes and managing the collected money to
a company of professionals, usually experts who are known for smart stock picks. This
is an asset management company (AMC). AMC charges a fee for the services it renders
to the MF trust. Thus the AMC acts as the investment manager of the trust under the
broad supervision and direction of the trustees. The AMC must have a net worth of at
least Rs10 crores at all times and it cannot act as a trustee of any other mutual fund.

iv. Application Form

Form prescribed for investors to make applications for subscribing to the units of a fund.

v. Annual Return

The percentage of change in net asset value over a year's time, assuming reinvestment of
distribution such as dividend payment and bonuses.

vi. Applicable NAV

NAV at which a transaction is effected. A cut-off time is set by the fund house and all
investments or redemption’s are processed at that particular NAV. This NAV is relevant
if the application is received before that cut-off time on a day. A different NAV holds if
received thereafter.

vii. Average Maturity

Average time to maturity of all fixed-period investments in the portfolio of a scheme.

viii. Assets Under Management (AUM) / Corpus


The total amount of money invested by all the investors in a scheme as on a date.

ix. Business Day

Business day is defined as a day other than (I) Saturday & Sunday (ii) a day on which
BOTH the National Stock Exchange and the banks in Mumbai are closed (iii) a day on
which the Sale & Redemption of Units is suspended.

x. Balanced funds

A mutual fund scheme with an investment objective of both long-term growth and
income, through investment in stocks and bonds. Generally 60% is invested in stocks
and 40% in bonds, in order to obtain the highest returns consistent with a low risk
strategy.

xi. Contingent Deferred Sales Charge (CDSC)

A type of exit sales load which is charged when units are redeemed within a specific
time period following their purchase. These charges reduce the longer the units are held.

xii. Dividend Reinvestment

In a dividend reinvestment plan, the dividend is reinvested in the scheme itself. Hence
instead of receiving dividend, the unit holders receive units.

xiii. Debt securities



A general term for any security representing money loaned that must be
repaid to the lender at a future date. Bonds, T-notes, T-bills and money market
instruments are debt securities, but they vary in maturities.

xiv. Entry load

The load on purchases after the Initial (Public) Offer, now called NFO (New Fund
Offer)

xv. Exit load

The load on redemption other than the Contingent Deferred Sales Charge (CDSC)
permitted under SEBI Regulations. A fee charged by some funds for redeeming or
buying back of units. The amount sometimes depends on how long the investment was
held, so the longer the time period, the smaller the charge.

xvi. Equity Schemes

A scheme that invests primarily in stocks while seeking to provide relatively high long-
term growth of capital.

xvii. Ex-Dividend Date

The date following the record date for a scheme. When a fund's net asset value reduces
by an amount equal to a dividend distribution.

xviii. Growth funds

Mutual funds with a primary investment objective of long-term growth of capital.
Unlike income, which is somewhat regular and consistent in most cases, growth is much
less consistent. Growth investments, however, usually outpace the returns on income


investments over the long-term (five to ten years, or longer). It invests
mainly in common stocks with significant growth potential.

xix. Holiday NAV

Holiday NAV is the NAV at the day immediately preceding the day which is both a
Business Day as well as a working day for banks at the centre where the application is
received

xx. Income funds

A mutual fund that primarily seeks current income rather than growth of capital. It will
tend to invest in stocks and bonds that normally pay high dividends and interest.

xxi. Initial Public Offer (IPO)

A fixed time period during which the first sale of units of a scheme are made available
to the public. The term Initial Public Offer used by mutual funds has been replaced by a
new term “New Fund Offer” effective June 2, 2005 by SEBI.

xxii. Index Funds

A type of mutual fund in which the portfolios are constructed to mirror a specific market
index. Index funds are expected to provide a rate of return over time that will
approximate or match, but not exceed, that of the market, which they are mirroring.

xxiii. Liquid Funds /Money Market Funds

Funds investing only in short-term money market instruments including treasury bills,
commercial paper and certificates of deposit. The objective is to provide liquidity and
preserve the capital.


xxiv. Mutual fund

A Mutual Fund is a common pool of money from numerous investors who wish to save
money. Each fund’s investments are chosen and monitored by qualified professionals
who use this money to create a portfolio. That portfolio could consist of stocks, bonds,
money market instruments or a combination of those. Mutual funds offer investors the
advantages of diversification, professional management, affordability, liquidity and
convenience.

xxv. Minimum Purchase

The smallest investment amount a scheme will accept to open a new unit holder
account.

xxvi. No Load Fund

A fund that sells its units to investors without a sales load / charge.

xxvii. Management Fee

The amount a scheme pays to its asset management company for its services. Typically,
a certain percentage of assets under management. A fund's management fee is listed in
its offer document.

xxviii. Net Asset Value

Market value of one share of a mutual fund on a given day; also known as the bid price.
Unlike the public offering price, the NAV includes no sales charges. The NAV is
calculated each day by taking the closing market value of all securities owned by a



mutual fund, plus all other assets (e.g. cash), and deducting the fund’s
liabilities. This sum is then divided by the fund’s total number of shares outstanding.

xxix. Operating Expenses

The day-to-day cost a mutual fund incurs in conducting business, such as for
maintaining offices, staff, and equipment. These expenses are paid from the fund's assets
before any earnings are distributed.

xxx. Offer document

The offer document or prospectus is a booklet, a legal document that provides
information about a specific mutual fund such as the fund’s investment objectives, load
structure, subscription and redemption policies. Its purpose is to also inform investors of
potential risks involved before they decide to invest in a fund and provides other
information that could help an individual decide whether the investment is appropriate
for him. An abridged offer document of the scheme also accompanies the application
form of every scheme.

xxxi. Offering price

The price at which mutual fund shares are offered for sale to the public. Also known as
offering price. The public offering price represents the net asset value plus any
applicable initial sales charges.

xxxii. Portfolio

A pool of individual investments owned by an investor or mutual fund. Portfolios may
include a combination of stocks, bonds, and money market instruments. A list of the
fund’s current portfolio will usually be contained in a mutual fund’s annual report.



xxxiii. Rate of return

Rate of return is calculated by subtracting the purchase value by the present value and
then dividing it by the purchase value. For equities, we often include dividends with the
present value.

xxxiv. Rupee Cost Averaging

An investment strategy based on investing equal amounts in a fund at regular intervals.
Because more shares are bought when prices are low and fewer shares when prices are
high, the average cost of your shares may be lower than the average price over the
period you bought them. Rupee cost averaging cannot guarantee a profit or protect
against loss in declining markets.

xxxv. Record Date

The date by which mutual fund holders are registered as unit owners to receive any
future dividend or capital gains distribution.

xxxvi. Sale price

The price at which a fund offers to sell one unit of its scheme to investors. This NAV is
grossed up with the entry load applicable, if any.

xxxvii. Sector Fund

A fund that invests primarily in securities of companies engaged in a specific industry.
Sector funds entail more risk, but may offer greater potential returns than funds that
diversify their portfolios.


xxxviii. Switching

The movement of investment from one scheme to another; usually within the family of
schemes. An investor may switch schemes because of market conditions.

xxxix. Systematic Investment Plan (SIP)

Allows an investor to periodically invest in units by issuing post-dated cheques or by
giving auto debit instructions. It allows the investor to benefit from rupee cost
averaging.

xxxx. Systematic Withdrawal Plan (SWP)

Permits the investor to receive regular payments of a fixed amount or capital
appreciation from his investment in a mutual fund scheme on a periodic basis. Retirees
in need of a regular income often opt for this.

xxxxi. Systematic Transfer Program (STP)

A plan that allows the investor to give a mandate to the fund to periodically and
systematically transfer a certain amount from one scheme to another.

xxxxii. Transfer Agent

A firm employed by a mutual fund to maintain unit holder records, including purchases,
sales, and account balances.

xxxxiii. Unit



The interest of the investors in either of the Schemes, which consists of
each Unit representing one undivided, share in the assets of the Schemes.

REFERENCES

Websites referred:

· www.mutualfundsindia.com

· www.amfiindia.com

· www.valueresearchonline.com

· Websites of the AMC’s taken in cases where data was not available on the above two
sites.

· www.bseindia.com

· www.nseindia.com



· www.google.com

· www.crisil.com

· www.moneycontrol.com

· www.crisilratings.com

REFRENCES OF THEORY:

· Security Analysis and Portfolio Management : Donald E Fischer, Ronald J Jordan
· Outlook Money
· Mutual Funds Review
· Money Life
· How to rate management of mutual funds : Harvard Business review
· Association of mutual funds in India (AMFI) Publications and quarterly reports
· Securities and Exchange Board of India
· Investopedia
· Mutual Fund Performance : W. Sharpe
· Market Timing, Selectivity, and Mutual Fund Performance: An Empirical Investigation
· Fact sheets of different fund houses



ANNEXTURE

QUESTIONNAIRE- 1
(FOR INDIVIDUAL INVESTORS)

 KEEP INVESTING AND KEEP SMILING

Q.1 Why do you invest in mutual funds? (Tick the Option)

a)Safety b) Good Return c) Tax Benefit d) Capital Appreciation e) Liquidity f)Others
(Please Specify………………………………………)

Q.2Which fund from SBI have largest share in your “PORTFOLIO”.



Q.3Through which channels do you invest in Mutual fund? (Tick the
option)

a) Directly b) Through Brokers

Q.4 How much is your investment horizon? (Tick the option)

a) Within a year b)Between 1 – 3years c) More than 3 years

Q.5 How much amount do you invest in Mutual funds? (Tick the option)

a) < Rs.50000 b) Between Rs.50000- Rs.100000 c)>Rs. 100000

Q.6. Are you willing to tolerate decreases in the value of your account from one
month to the next? (Tick the Option)

(a) Not at all (b) Somewhat (c) Definitely

Q.7.What is your risk preference?

a) High risk and high return b) Moderate risk and Moderate return c) Low risk and low
return

Q.8How satisfied you are with your experience of investing in SBI Mutual Funds?

Highly Satisfied Considerably Satisfied Reasonably Satisfied Unsatisfied
Highly Unsatisfied

Q.9 Which Fund House has largest share in your Investment Portfolio: (Mention
it)



Q. 10 Scheme Preferences: (Tick the Option)

a) Equity b) Debt c) Balanced d) Fixed Maturity Plan (FMPs) e) Others (Please
Specify----------------------------)

Q.11 Saving Preference: (please rank them):

(a)Life Insurance

(b)Pension and PF Schemes

(c)Bank Deposit

(d)Shares and Debentures

(e)Units of MFs like SBI

(f)Gold/Jeweler

(f)Others (Please Specify-------------------------------------)

Q.12 Preferable route to Mutual Fund Investing: (Tick the option)

(a)Friend’s Suggestion (b) Newspapers/Magazines (c) Self Decision (d) Television (e)
Brokers/Agents (f) others (Please Specify------------------------------------)

Q.13You Prefer:

(a)Open Ended Scheme (b) Close Ended Scheme (c) Interval Scheme



Q.14How much of your income you able to save:

Below 5% 5-10% 10-15% 15-20% 20-25% ABOVE 25

Q. 15Rank following factors that you consider while selecting a scheme:

a) Scheme Qualities like track record, fund size, entry load etc.

b) Fund Manager Experience

c) Investor Services like disclosure of NAV, A/C statements.

d) Marketing of funds through bill boards, relatives, friends, brokers etc.

Q.16.Any Suggestion for SBI Mutual Funds: (Please mention it)

Q.17. Rate the following factors which influences your investment in mutual funds on
the importance scale where 1 is least important, 3 is neutral, 5 is most important.

Factors 1 2 3 4 5
Historical performance of fund
Fund’s returns over market return
Performance of Fund manager
Current Economic and Market conditions
Type of schemes (growth, income, balanced & others)
Expected Dividend going to be deliver by the fund
Advisor or broker or agent influence
Convenience in investing in the fund
Transparency maintained by the fund house
Minimum investment or lot size
Lock in period in a fund



Asset under management

Fund rating
Fund prospectus or offer document
Internet i.e. Website influence
Prior experience with the fund house
Fluctuation in equity markets
Fees ,load and expenses
Reputation of fund house
Security provided by the fund in terms of return
Tax benefit deriving from investment in the fund
NAV or price of fund’s unit
Attitude towards risk
Friend/family recommendation
Promotional campaign of the fund

PERSONAL DETAILS:

NAME: TEL.NO:

1. SEX:M F

2. AGE: Below 30 31-40 41-50 Above 50

3. ACADEMIC QUALIFICATION: Graduate Post Graduate Professional
Others(Please Specify---------------------------)

4. Marital Status: Married Unmarried

5. Occupation: Professional Salaried Business Retired
Others--------------------



6. Annual Income: Less than 2,00,000 2,00,001-5,00,000
5,00,001-10,00,000 Above10lakh

7. Area: East Delhi West Delhi North Delhi South Delhi
Others……………….

SIGNATURE

QUESTIONNAIRE-2
(For Bankers)

Q1) what is the age group of the investors?
• Under 25 yrs
• 25 to 45 yrs
• 45 to 65 yrs
• Over 65 yrs

Q2) Which are the best performing schemes in the market?
• SBI Mutual Fund
• Reliance Mutual Fund
• Kotak Mahindra Mutual Fund
• Birla SunLife Mutual Fund
• DSP Mutual Fund
• HDFC Mutual Fund
• ICICI Mutual Fund
• Others (Please specify)



Q3) Do they want any changes in the existing or future schemes?
• Services
• Dividends
• Portfolio
• Others(please specify)

Q4) Suggest a portfolio for a dream scheme?
• IT sector
• FMCG sector
• Pharma sector
• Infrastructure
• Commodities
• Automobile
• Energy
• Telecom
• Financial services
• Media & Entertainment
• Others(Please specify)

Q5) What is the approx sales of the best seller scheme?
• Less than 10 lakh
• 10 to 20 lakh
• 20 to 30 lakh
• More than 30 lakh

Q6) What are the facilities that other Banks/Mutual Fund houses are providing?
• Service
• Commission
• Product related information
• Others (Please Specify)

Q7) What are your grievances, if any?



________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
___________________________________________

Q8) What is the expected return in that scheme (any specific scheme)?
Scheme name: ___________________
• Less than 10%
• 10-15%
• 15-20%
• 20-25%
• Over 25%

Q9) Suggest ways by which we can improve upon our relationship.
___________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
________________________________



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