Project on Mutual Funds

SUMMER INTERNSHIP
PROJECT-2012

Project Report Of The

Summer Internship Project
At

Topic:- “Increasing the Value of Mutual Funds in India”

Submitted by:
Ravindra Jeet
ICHE-B (FW 2010-13)
ID No. :2010-13/SS/UGP/I-CHE-6B/IND-6B/IA-5020

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Summer Project Certificate

This is to certify that Mr. Ravindra Jeet (ID No.2010-
13/SS/UGP/I-CHE-6B/IND-6B/IA-5020) a student of IIPM
has worked on a summer project titled “Increasing the Value
of Mutual Funds in India” at SBI Mutual Fund, Indore after
Semester-IV in partial fulfillment of the requirement for the
Three year full-time Under graduate programme in Planning
and Entrepreneurship (FW 2010-13). This is his/her original
work to the best of my knowledge.

Date:________ Signature _____________
Dean IIPM, Indore

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Declaration

I hereby declare that the following project report titled
“Increasing the Value of Mutual Funds in India” is an
authentic work done by me. This is to declare that all the work
indulged in the completion of this work such as research, data
collection, analysis is a profound and honest work of mine.

Date: Ravindra Jeet
Place: Indore ICHE-B (FW 2010-13)

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Acknowledgement

I would like to thank employees of SBI Mutual Funds for
giving me an opportunity to intern with them. The training at
the company was held over a period of 45 days. During this
period I was guided by the ISC Head of the Investor Service
Centre, Indore Mr. Gaurav Agrawal. The project report and
the learning process would not have been possible without his
inputs and guidance at critical points of the project. He
imparted to me the knowledge of mutual funds and shared
with me the practical marketing techniques of mutual funds.
He also made sure that I was exposed to all the distribution
channels, the operational processes and also was exposed to
the sale of mutual funds. Under his guidance I was able to
enhance my marketing and inter-personal skills.
During the course of the 45 days I also came across other
people who put in their time and effort towards acclimatizing
me towards the working of their organization. I express my
thanks to every one of them.
These 45 days were very important to me as it helped me in
going beyond the class room and get a practical feel of how
things worked.

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Table of Contents
Sr. No. Title Page No.
1 Executive Summary 6
2 Introduction to SBI Mutual Fund 7
Corporate Profile
 Our Identity
 Our Vision
 Our Services
3 Company Key Information 9
4 History of Mutual Funds 10
5 Regulatory Framework 13
6 Concept of Mutual Funds 16
7 Organization Structure of a Mutual Funds 18
8 Types of Mutual Fund schemes in India 20
9 Advantages Of Mutual Fund 23
10 Mutual Fund Industry Trends 24
Key industry trends and gaps include
i) AUM skewed towards debt funds,
ii) Institutional dominance,
iii) Top 10 players control 80% of AUM,
iv) low penetration, and
v) low awareness.
11 Systematic Investment Planning (SIP) 29
12 How to Invest in Mutual Funds? 30
13 Research Methodology 35
i) Questionnaire
ii) Research Objective
iii) Limitation of the Study
iv) References

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1. Executive Summary

A mutual fund is a scheme in which several people invest their money for a
common financial goal. The collected money invests in the capital market, debt
and the money market, which they earned, is divided based on the number of
units which they hold.

The topic of this project is “Increasing the value of mutual funds in India”.
The mutual fund industry in India has seen dramatic improvements in quantity
as well as quality of product and service offerings in recent years. Along with
this project also touches on the aspect of Systematic Investment Plan and Steps
of how to invest in Mutual Fund.

An effort has been made to work on the concepts that have been taught in class
along with other useful parameters so that better study can be done.

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1. Introduction to SBI Mutual Fund

Corporate Profile

Our Identity

With 25 years of rich experience in fund management, we at SBI Funds
Management Pvt. Ltd. bring forward our expertise by consistently delivering
value to our investors. We have a strong and proud lineage that traces back to
the State Bank of India (SBI) - India's largest bank. We are a Joint Venture
between SBI and AMUNDI (France), one of the world's leading fund
management companies.
With our network of over 222 points of acceptance across India, we deliver
value and nurture the trust of our vast and varied family of investors.
Excellence has no substitute. And to ensure excellence right from the first stage
of product development to the post-investment stage, we are ably guided by our
philosophy of „growth through innovation‟ and our stable investment policies.
This dedication is what helps our customers achieve their financial objectives.

Our Vision
“To be the most preferred and the largest fund house for all asset classes, with a
consistent track record of excellent returns and best standards in customer
service, product innovation, technology and HR practices.”

Our Services

Mutual Funds

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Investors are our priority. Our mission has been to establish Mutual Funds as a
viable investment option to the masses in the country. Working towards it, we
developed innovative, need-specific products and educated the investors about
the added benefits of investing in capital markets via Mutual Funds.

Today, we have been actively managing our investor's assets not only through
our investment expertise in domestic mutual funds, but also offshore funds and
portfolio management advisory services for institutional investors.

This makes us one of the largest investment management firms in India,
managing investment mandates of over 5.4 million investors.

Portfolio Management and Advisory Services

SBI Funds Management has emerged as one of the largest player in India
advising various financial institutions, pension funds, and local and
international asset management companies.

We have excelled by understanding our investor's requirements and terms of
risk / return expectations, based on which we suggest customized asset portfolio
recommendations. We also provide an integrated end-to-end customized asset
management solution for institutions in terms of advisory service, discretionary
and non-discretionary portfolio management services.

Offshore Funds

SBI Funds Management has been successfully managing and advising India's
dedicated offshore funds since 1988. SBI Funds Management was the 1st bank
sponsored asset management company fund to launch an offshore fund called
'SBI Resurgent India Opportunities Fund' with an objective to provide our
investors with opportunities for long-term growth in capital, through well-
researched investments in a diversified basket of stocks of Indian Companies.

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2. Company Key Information

Setup date Jun-29-1987

Incorporation date Feb-07-1992

Sponsor State Bank of India

Trustee SBI Mutual Fund Trustee Company
Private Limited

Chairman Mr. Pratip Chaudhri

CEO / MD Mr. Deepak Kumar Chatterjee

CIO Mr. Navneet Munot

Compliance Officer Ms. Vinaya Datar

Investor Service Officer Mr. C A Santosh

Assets Managed Rs.47184.11 crore (Jun-30-2012)

Auditors Haribhakti & Co /M/S. Chandabhoy
&Jassoobhoy

Custodians Computer Age management Services
Pvt.Ltd, Computeronics Financial Services
Ltd, Datamatics Financial Software
Services Ltd.

Corporate Office SBI Funds Management Pvt Ltd.
A joint venture between SBI and
AMUNDI
191, maker Tower „E‟,Cuffe Parade,
Mumbai - 400 005.
Toll Free No. 1800 425 5425
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3. History of Mutual Funds

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

First Phase – 1964-87

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

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Canbank 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.

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At the end of 1993, the mutual fund industry had assets under management of
Rs.47, 004 Crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund
families. Also, 1993 was the year in which the first Mutual Fund Regulations
came into being, under which all mutual funds, except UTI were to be registered
and governed. The erstwhile Kothari Pioneer (now merged with Franklin
Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were 33
mutual funds with total assets of Rs. 1, 21,805 Crores. The Unit Trust of India
with Rs.44, 541 Crores of assets under management was way ahead of other
mutual funds

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI
was bifurcated into two separate entities. One is the Specified Undertaking of
the Unit Trust of India with assets under management of Rs.29, 835 crores as at
the end of January 2003, representing broadly, the assets of US 64 scheme,
assured return and certain other schemes. The Specified Undertaking of Unit
Trust of India, functioning under an administrator and under the rules framed by

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Government of India and does not come under the purview of the Mutual Fund
Regulations.

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.

The graph indicates the growth of assets over the years:

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4. Regulatory Framework

Securities and Exchange Board of India (SEBI)

The Government of India constituted Securities and Exchange Board of India,
by an Act of Parliament in 1992, the apex regulator of all entities that either
raise funds in the capital markets or invest in capital market securities such as
shares and debentures listed on stock exchanges. Mutual funds have emerged as
an important institutional investor in capital market securities. Hence they come
under the purview of SEBI. SEBI requires all mutual funds to be registered with
them. It issues guidelines for all mutual fund operations including where they
can invest, what investment limits and restrictions must be complied with, how
they should account for income and expenses, how they should make
disclosures of information to the investors and generally act in the interest of
investor protection. To protect the interest of the investors, SEBI formulates
policies and regulates the mutual funds. MF either promoted by public or by
private sector entities including one promoted by foreign entities are governed
by these Regulations. SEBI approved Asset Management Company (AMC)
manages the funds by making investments in various types of securities.
Custodian, registered with SEBI, holds the securities of various schemes of the
fund in its custody. According to SEBI Regulations, two thirds of the directors
of Trustee Company or board of trustees must be independent.

Association of Mutual Funds in India (AMFI)

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 organization.

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Association of Mutual Funds in India (AMFI) was incorporated on 22nd
August, 1995.

AMFI is an 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 member. 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 line enhancing
and maintaining standards. It follows the principle of both protecting and
promoting the interests of mutual funds as well as their unit holders.

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.

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 Associations of Mutual Fund of India do 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 program for investors 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 on Mutual Fund Industry and undertakes studies
and research either directly or in association with other bodies.

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5. Concept of Mutual Funds

Mutual funds are institutions that collect money from several sources -
individuals or institutions by issuing 'units', invest them on their behalf with
predetermined investment objectives and manage the same all for a fee. They
invest the money across a range of financial instruments falling into two broad
categories – equity and debt. Individual people and institutions no doubt, can
and do invest in equity and debt instruments by themselves but this requires
time and skill on both of which there are constraints. Mutual funds emerged as
professional financial intermediaries bridging the time and skill constraint. They
have a team of skilled people who identify the right stocks and debt instruments
and construct a portfolio that promises to deliver the best possible 'constrained'
returns at the minimum possible cost. In effect, it involves outsourcing the
management of money. More explicitly, the benefits of investing in equities and
debt instruments are supposedly much better if done through mutual funds. This
is because of the following reasons: Firstly, fund managers are more skilled.
They are trained to identify the best investment options and to assess the
portfolio on a continual basis; secondly, they are able to invest in a diversified
portfolio consisting of 15-20 different stocks or bonds or a combination of
them. For an individual such diversification reduces the risk but can demand a
lot of effort and cost. Each purchase or sale invites a cost in terms of brokerage
or transactional charges such as demat account fees in India. The need to
possibly sell 'poor' stocks/bonds and buy 'good' stocks/bonds demands constant
tracking of news and performance of each company they have invested in.
Mutual funds are able to maintain and track a diversified portfolio on a constant
basis with lesser costs. This is because of the pecuniary economies that they
enjoy when it comes to trading and other transaction costs; thirdly, funds also
provide good liquidity. An investor can sell her/his mutual fund investments and

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receive payment on the same day with minimal transaction costs as compared to
dealing with individual securities, this totals to superior portfolio returns with
minimal cost and better liquidity.
This can be represented with the following flow chart:

Source: Association of Mutual Funds in India (AMFI)

In India one can gain additional benefit by investing through mutual funds tax
savings. Investment in certain types of funds such as Equity Linked Tax
Savings Schemes (ELSS) allows for certain amount of income tax benefits.

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6. Organization Structure of a Mutual Fund

There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund

The important terms of the figure are explained as follows:

Fund Sponsor:

A ‟sponsor” is any person who, acting alone or in combination with another
body corporate, establishes a MF. The sponsor of a fund is similar to the
promoter of a company. In accordance with SEBI Regulations, the sponsor
forms a trust and appoints a Board of Trustees, and also generally appoints an
AMC as fund manager. In addition, the sponsor also appoints a custodian to
hold the fund assets. The sponsor must contribute at least 40% of the net worth
of the AMC and possess a sound financial track record over five years prior to
registration.

Trustees:

The MF or trust can either be managed by the Board of Trustees, which is a
body of individuals, or by a Trust Company, which is a corporate body. Most of
the funds in India are managed by Board of Trustees. The trustee being the
primary guardian of the unit holders‟ funds and assets has to be a person of high
repute and integrity. The trustees, however, do not directly manage the portfolio

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securities. The portfolio is managed by the AMC as per the defined objectives,
accordance with Trust Deed and SEBI (Mutual Funds) Regulations.

Asset Management Company (AMC):

The AMC, which is appointed by the sponsor or the trustees and approved by
SEBI, acts like the investment manager of the trust. The AMC functions under
the supervision of its own Board of Directors, and also under the direction of
the trustees and SEBI. AMC, in the name of the trust, floats and manages the
different investment ‟schemes‟ as per the SEBI Regulations and as per the
Investment Management Agreement signed with the Trustees.

Others:

Apart from these, the Mutual Fund has some other fund constituents, such as
custodians and depositories, banks, transfer agents and distributors.

The custodian is appointed for safe keeping of securities and participating in the
clearing system through approved depository. The bankers handle the financial
dealings of the fund. Transfer agents are responsible for issue and redemption of
units of Mutual Fund.

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8. Types of Mutual Fund schemes in India

A mutual fund, say, SBI Mutual Fund, can have several 'funds' [called 'schemes'
in India) under its management. These different funds can be categorized by
structure, investment objective and others. It would be well illustrated by the
following flow chart:


An 'Open ended' fund is available for purchase or redemption on continuous
basis at the day's closing Net Asset Value (NAV). This gives liquidity to
investments.

A 'Close ended' fund is open for investment only during the Initial Public Offer
(IPO) after which the investment is locked in until the maturity date which
could be between 3-7yrs. The investor can, however, sell or buy the shares of
the funds on the stock exchange where the shares are listed.

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Interval funds combine the characteristics of both 'open end' funds. They can be
bought or redeemed by the investor at predetermined times, say once in six or
twelve months.

'Growth' oriented funds aim at providing capital appreciation. They tend to
invest primarily in equities.

'Income' funds aim at providing regular income to investors. They generally
invest a major portion of their assets in fixed income earning instruments such
as government securities, corporate bonds and money market instruments. Their
returns are determined by fluctuations in interest rates.

A 'Balanced fund' tries to provide both capital appreciation and regular income.
They invest in both equities and fixed income securities. They specify the
maximum equity exposure in the prospectus and is normally 60 percent; of late
other types of balanced funds such as "Asset Allocation funds· and 'Arbitrage
funds' have also emerged. Asset allocation funds, such as the Franklin
Templeton (FT) PIE ratio funds, allocate funds to equity or debt depending on
the dynamic situation. They tend to increase exposure to equity during a market
downturn and move out during market peaks. The FT PIE ratio fund uses the
market PIE ratio to determine the degree of equity exposure.

Arbitrage funds are funds that try to capitalize on the arbitrage opportunities
that arise out of pricing mismatch of stocks in the equity and derivative (futures
and options) segments of the stock market (Value Research Inc.). They invest
predominantly in equities 'Money Marker. Funds invest only in short term debt
such as call money, treasury bills and commercial paper. In the case of these
funds the Net Asset Value is simply the interest accrued on these investments
on a daily basis. Their NAV does not fall below the initial investment value,
unlike bond funds which are marked to market.

Tax saving funds give an investor tax benefits under section 80 C of the Income
Tax Act. Such funds also termed as Equity Linked Saving Schemes (ELSS),
have a lock in period of three years. By investing in such funds a person can
avail of a maximum of rupees one hundred thousand in tax deductions. ELSSs
are normally diversified equity funds.

Index funds invest in securities of a particular index such as the Bombay Stock
Exchange (BSE) sensex in the same proposition. They provide returns which

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are close to that of the benchmark index with similar risks as well. It is a passive
investment approach with lower costs.

Sector specific funds focus their investments on specific sectors which the fund
manager feels would do well. For instance, Franklin FMCG fund invests only in
shares of companies that produce fast moving consumer goods.

Exchange Traded Fund's (ETF) are relatively a new concept in India. Such
funds are essentially index funds that are listed and traded on the stock markets.

There are also commodities ETFs such as Reliance hold ETF.

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9. Advantages Of Mutual Fund

Diversification - It can help an investor diversify their portfolio with a
minimum investment. Spreading investments across a range of securities can
help to reduce risk. A stock mutual fund, for example, invests in many stocks .
This minimizes the risk attributed to a concentrated position. If a few securities
in the mutual fund lose value or become worthless, the loss may be offset by
other securities that appreciate in value. Further diversification can be achieved
by investing in multiple funds which invest in different sectors.

Professional Management - Mutual funds are managed and supervised by
investment professional. These managers decide what securities the fund will
buy and sell. This eliminates the investor of the difficult task of trying to time
the market.

Well regulated - Mutual funds are subject to many government regulations that
protect investors from fraud.

Liquidity - It's easy to get money out of a mutual fund.

Convenience - we can buy mutual fund shares by mail, phone, or over the
Internet.

Low cost - Mutual fund expenses are often no more than 1.5 percent of our
investment. Expenses for Index Funds are less than that, because index funds
are not actively managed. Instead, they automatically buy stock in companies
that are listed on a specific index

Transparency - The mutual fund offer document provides all the information
about the fund and the scheme. This document is also called as the prospectus
or the fund offer document, and is very detailed and contains most of the
relevant information that an investor would need.

Choice of schemes - there are different schemes which an investor can choose
from according to his investment goals and risk appetite.

Tax benefits - An investor can get a tax benefit in schemes like ELSS (equity
linked saving scheme)

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10. Mutual Fund Industry Trends

The Indian mutual fund industry has come a long way since the formation of the
Unit Trust of India in 1963 by the Government of India and the Reserve Bank
of India (RBI). Currently, there are 44 mutual funds operating in the country
with assets under management (AUM) of Rs 7.13 lakh cr. compared to AUM of
around Rs.1 lakh cr. as of December 2001. However, the quantum of mutual
fund assets in financial savings is very low - at less than 5%, as most Indian
savings are locked in bank fixed deposits, small savings (postal savings) and
insurance. With growing disposable incomes, rising inflation (cost of living),
improving lifestyles and growing aspirations, there is a noticeable shift in
preference for mutual funds though it has still a long way to go.

Break-up of financial savings

* Equity market includes mutual fund investments

Source: Reserve Bank of India

Key industry trends and gaps include i) AUM skewed towards debt funds,
ii ) Institutional dominance, iii) Top 10 players control 80% of AUM, iv) low
penetration, and v) low awareness.

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i) AUM skewed towards debt funds

An analysis of the assets reveals AUM has been traditionally skewed towards
debt funds with 65% assets on an average deployed in debt. Within debt, the
assets are deployed largely in short term debt funds (mainly liquid and ultra
short term debt funds). Liquid and ultra short term debt funds consumed 80% of
assets of all debt funds over these periods.

Mutual Fund AUM across asset classes


ii) Institutional dominance

Traditionally, the majority of the money market in mutual funds comes from
institutional investors which include corporates, banks and foreign institutional
investors (FIIs). All schemes, except equity oriented schemes, have seen a high
participation from institutional investors. Corporates dominate the institutional
segment with close to 90% share of institutional AUM as of September 2011.
Retail participation is more in equity oriented schemes and is slowing picking
up in Gold Exchange Traded Funds (ETFs).

Owing to the institutional dominance, mutual funds inflows / outflows too have
seen a trend wherein quarter ends witness outflows owing to redemptions (on
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account of advance tax payments by corporates) while the funds return to the
industry in the subsequent month.

AUM break-up for institutional and retail investors

* Institutional includes corporate, Banks/FIs and FIIs

Source: AMFI (Data as of September 2011)

Mutual Fund Inflows/ Outflows Trends


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iii) Top 10 players control 80% of AUM

Among the 44 players, 56% of the AUM is controlled by the top 5 players while
80% of the AUM is controlled by 10 players. The bottom 10 players contribute
less than 1% of the AUM. This significant tilt towards larger players has seen
consolidation among asset management companies (AMCs) from time to time.

AUM distribution by AMCs


iv) Low penetration

The country-wide mutual fund penetration is abysmal with majority of the
assets (over 75%) being held in the top 5 cities (Mumbai, New Delhi,
Bangalore, Chennai and Kolkata) - Mumbai alone accounts for 49% of the
assets. Further, the top 15 cities account for 87% of the AUM. The low
distributor support in smaller cities has resulted in mutual funds becoming an
investment product restricted to urban Indians as of now. Hence, it is of great
importance for mutual funds to target smaller towns and rural areas, to spread
the reach of the asset class as well as provide investors from smaller cities an
important avenue for investment.

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AUM by Geography

Source: AMFI (Data as of September 2011)

v) Low awareness

Low public awareness (especially in smaller towns) about the investment
opportunity in mutual funds is also an integral factor affecting their growth. It is
thus very important to make investors aware about the benefits of mutual funds,
viz., professional management, low costs, transparency, liquidity and a strong
regulatory framework.

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11. Systematic Investment Planning (SIP)

SIP is similar to a Recurring Deposit. Every month on a specified date an
amount you choose is invested in a mutual fund scheme of your choice. The
dates currently available for SIPs are the 5th, 10th, 15th, 20th and the 25th of
a month. There are many benefits of investing through SIP.

Advantages of SIP

•Encourages Regular and Disciplined Investments

•A Convenient way to invest regularly

•Long term perspective

•Rupee Cost Averaging Benefit to counter volatility

•Compounding Benefits

•SIMPLE & CONVENIENT

•A larger target segment due to lower initial investment

SIP – Easy Pay Facility

•Opt for the SIP EASY PAY Auto debit Facility

•Choose the Amount (minimum Rs 500/- p.m.)

•Choose one Day of the month (5th / 10th /15th / 20th / 25th/ 30th )

•Make First Investment by Cheque drawn in favor of the scheme. E.g. SBIMF -
Magnum Tax Gain Scheme

And Relax…….. Every month the said amount will be debited from your bank
account and units will allocated to you.

Register for Statement Of Account (SOA) by mail.

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13. How to invest in mutual funds?

Step One - Identify your investment needs.

Your financial goals will vary, based on your age, lifestyle, financial
independence, family commitments, level of income and expenses among many
other factors. Therefore, the first step is to assess your needs. Begin by asking
yourself these questions:

1. What are my investment objectives and needs?

Probable Answers: I need regular income or need to buy a home or finance a
wedding or educate my children or a combination of all these needs.

2. How much risk am I willing to take?

Probable Answers: I can only take a minimum amount of risk or I am willing to
accept the fact that my investment value may fluctuate or that there may be a
short term loss in order to achieve a long term potential gain.

3. What are my cash flow requirements?

Probable Answers: I need a regular cash flow or I need a lump sum amount to
meet a specific need after a certain period or I don‟t require a current cash flow
but I want to build my assets for the future.

By going through such an exercise, you will know what you want out of your
investment and can set the foundation for a sound Mutual Fund Investment
strategy.

Step Two - Choose the right Mutual Fund.

Once you have a clear strategy in mind, you now have to choose which Mutual
Fund and scheme you want to invest in. The offer document of the scheme tells
you its objectives and provides supplementary details like the track record of
other schemes managed by the same Fund Manager. Some factors to evaluate
before choosing a particular Mutual Fund are:

 The track record of performance over the last few years in relation to the
appropriate yardstick and similar funds in the same category.

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 How well the Mutual Fund is organized to provide efficient, prompt and
personalized service.
 Degree of transparency as reflected in frequency and quality of their
communications.

Step Three - Select the ideal mix of Schemes.

Investing in just one Mutual Fund scheme may not meet all your investment
needs. You may consider investing in a combination of schemes to achieve your
specific goals.

The following charts could prove useful in selecting a combination of schemes
that satisfy your needs.

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Step Four - Invest regularly

For most of us, the approach that works best is to invest a fixed amount at
specific intervals, say every month. By investing a fixed sum each month, you
get fewer units when the price is high and more units when the price is low, thus

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bringing down your average cost per unit. This is called rupee cost averaging
and is a disciplined investment strategy followed by investors all over the
world. With many open-ended schemes offering systematic investment plans,
this regular investing habit is made easy for you.

Step Five - Keep your taxes in mind

As per the current tax laws, Dividend/Income Distribution made by mutual
funds is exempt from Income Tax in the hands of investor. However, in case of
debt schemes Dividend/Income Distribution is subject to Dividend Distribution
Tax. Further, there are other benefits available for investment in Mutual Funds
under the provisions of the prevailing tax laws. You may therefore consult your
tax advisor or Chartered Accountant for specific advice to achieve maximum
tax efficiency by investing in mutual funds.

Step Six - Start early

It is desirable to start investing early and stick to a regular investment plan. If
you start now, you will make more than if you wait and invest later. The power
of compounding lets you earn income on income and your money multiplies at
a compounded rate of return.

Step Seven - The final step

All you need to do now is to get in touch with a Mutual Fund or your advisor
and start investing. Reap the rewards in the years to come. Mutual Funds are
suitable for every kind of investor whether starting a career or retiring,
conservative or risk taking, growth oriented or income seeking.

34

13. Research Methodology

i). Questionnaire

SA -Strongly agree
A-Agree
NAND-Neither Agree nor Disagree
D-Disagree
SD-Strongly Disagree

Questionnaire
Sr. Questions SA A NAND D SD
No.
1 SBI MF has a diversified portfolio of 5 4 3 2 1
funds suited to different customers‟ needs.
2 The brand image of the company helps to 5 4 3 2 1
easily convince the customers about its
products.
3 Funds of SBI MF have given consistent 5 4 3 2 1
returns over the years.
4 There is continuous interaction through 5 4 3 2 1
emails, telephone or personal visit.
5 The company responds quickly to the 5 4 3 2 1
complaints and queries.
6 I have friendly relations with the 5 4 3 2 1
employee at SBI MF.
7 Customer‟s queries and other 5 4 3 2 1
transactional requests like redemption,
switch etc. are actively resolved.
8 SBI MF in Indore is led by an effective 5 4 3 2 1
manager.
9 SBI MF has skilled fund managers 5 4 3 2 1
10 Policies of SBI MF are more transparent 5 4 3 2 1
and fair as compared to other AMCs.
11 Systematic investment plan is a batter 5 4 3 2 1
investment plan for future.
12 Mutual funds investment are risk free 5 4 3 2 1
investment.
13 Mutual funds scheme are always perform 5 4 3 2 1
batter.

35

ii). Research Objective

a). To know the value of mutual funds in India and their major aspects.

b). To know the various fund offered by the mutual funds in India.

c). To identify the level of risk involved in investing in various equity
diversified mutual fund schemes.

d). To know various regulatory firm of mutual funds in India.

e). To know the organizational structure of a mutual funds.

f). To know the best mutual funds investment plan like Systematic investment
plan.

g). To know the steps of how to invest in mutual fund by investor.

iii). Limitation of the Study

a). Time constraints: Due to shortage or less availability of time it may be
possible that all the related and concerned aspects may not be covered in the
project.

b). Analysis done is limited to the availability of data.

36

iv). References

Websites:

www.sbimf.com

www.google.co.in

www.mutualfundsindia.com

www.utimf.com

www.moneycontrol.com

www.assocham.org

www.amfiindia.com

Books:

Mutual Funds in India – by H. Sadhak

37

Project on Mutual Funds

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