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A STUDY OF INVESTOR EXPECTATION TOWARDS SBI MUTUAL FUNDS

CONTENTS
Chapter 1: Introduction Chapter 2: Company profile Chapter 3: Theoretical background Chapter 4: Product Profile Chapter 5: Analysis & Interpretation of data Chapter 6: Finding, Suggestions & Conclusion Annexure Questionnaire Bibliography

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CHAPTER-1

INTRODUCTION
INTRODUCTION STATEMENT OF THE PROBLEM OBJECTIVES OF THE STUDY SCOPE OF THE STUDY METHODOLOGY LIMITATION OF THE STUDY

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INTRODUCTION
Mutual Fund is not new in India; it is there from the past four decades. Only from past one decade after the entry of Private Mutual Funds and Foreign (Sponsored) Mutual Funds, the competition and innovations took place in the Indian Mutual Fund Industry in a rather short period, has grown from infancy to adolescence. Among the 34 SEBI registered mutual funds, are the Unit Trust of India II (assets under management Rs.13, 516 cores), Public sector funds (Rs.I0, 426 cores) and the Private sector funds (Rs.55, 522 cores). Debt funds have been the favorite with investors in the last three years. Shell-shocked by the devastating fall in equity values, and the concurrent appreciation in debt funds, investors have been compelled to take a serious look at this category. The popularity of debt funds has been growing phenomenally since 2000, when they started yielding exceptional returns riding high on soft interest rates. Until last year, returns above 15 per cent were not uncommon. In fact, gilt funds gave returns more than 20 per cent, stunning investors. When seen in the light of falling deposit rates, where most of the retail money finds its place, debt funds appeared too good to be true. An interesting feature of the assets composition in the Mutual Fund Industry in India is that about 70 percent is in Debt funds, 14 percent in Equity funds and the balance in balanced funds.

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For any mutual fund as such, are interested in discovering if the management of a mutual fund is performing well; that is, has management done better through its selective buying and selling of securities than would have been achieved through merely "buying the market", that is picking a large number of securities randomly and holding them throughout the period. The Main purpose of doing was to know about mutual fund and its functions. This helps to know in details about mutual fund industry right from its inception stage, Growth and future prospects. It also helps in understanding different schemes of mutual funds. Because my study depends upon prominent funds in India and their schemes like equity, income, balance as well as the returns associated with those schemes. The project study was done to ascertain the asset allocation, entry load, exit load, associated with the mutual funds. Ultimately this would help in understanding the benefits of mutual funds to investors.

STATEMENT OF THE PROBLEM


The first and the foremost thing the investors should know about the product. Product awareness plays a very crucial role in selecting the right kind of product. The investor should be convinced and comfortable, where being money is invested. Selecting a scheme that suits the investor needs, and will also maximizes his returns. An investor not only needs advice on how to choose from this variety of investment options available, but also a
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proper investment strategy that is suitable to his situation and needs. Mutual fund investor has to time his investment properly, that can be done only by proper advice of a sound financial advisor. The investor should exit at the right time after booking profits, staying longer might affect his returns.

OBJECTIVES OF THE STUDY:


The study mainly relates to the analysis of the Equity Funds, i.e., "Performance Evaluation of Equity Funds (SBI Mutual Fund)".
The main purpose of this study is to know:

To give a brief idea about the benefits available from Mutual Fund investment. To give an idea of the types of schemes available. To discuss about the market trends of Mutual Fund investment. To study some of the mutual fund schemes. To study some mutual fund companies and their funds. Observe the fund management process of mutual funds. Explore the recent developments in the mutual funds in India. To give an idea about the regulations of mutual funds.

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SCOPE OF THE STUDY:


The Study confines of SBI MUTUAL FUNDS have become a hot favorite of millions of people all over the world. The driving force of mutual funds is the safety of the principal of guaranteed, plus, the add advantage of capital appreciation together with the income in the form of interest or dividend people prefer mutual funds to bank deposits, life insurance and even bonds because with a little man, they can get into the investment game. Mutual funds act as a gateway enter into a big company either to inaccessible to an ordinary investor with his small investment. It works on the principle of small drops of water make a big ocean A mutual funds provides good avenues for investments in financial assets which are more productive than physical assets. Most of the investors, participate the household sector prefer this avenue since it is convenient and more profitable with small investment.

METHODOLOGY
The purpose of the methodology section is to describe the research procedure. This includes details such as type of research, sources of data, sampling plan, method of contact and data collections method.

Data collection
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The method of data collection will be through a questionnaire, for the above study primary data and secondary data are considered.

Primary data:
Primary data was collected through survey method. A questionnaire on the basics of objectives of the study was prepared. A sample size of 100 was chosen.

Secondary data: Secondary data was collected from different


books, newspaper, web site Journals

LIMITATIONS OF THE STUDY:


The time and the financial constraints because of which detail study was not possible. Non-availability of accurate information of customers portfolio. Constraints to get access to employees for information due to there busy schedules The study was restricted only at Shimoga City. The analysis of investors was restricted to SBI Mutual Fund

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CHAPTER-2

COMPANY PROFILE
INTRODUCTION STATE BANK OF INDIA PROFILE HISTORY/ EVOLUTION OF SBI ORGANISATIONAL STRUCTURE CORPORATE STATE BANK OF INDIA- A BRANCH PROFILE SHIMOGA

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Introduction

COMPANY PROFILE

One of the classical economic functions of the banking industry that has remained virtually unchanged over the centuries is lending. However there have been consideration changes in the institutional structure and the economic environment brought about by heightened competition and technological changes. On the one hand, competition has had considerable adverse impact on the margins, which lenders have enjoyed, but on the other hand technology has to home extent reduced the cost of delivery of various products and service. The Indian financial system comprises a large number of commercial and co-operative banks, specializes developmental banks for industry, agriculture, external trade and housing, social security institutions, collective investment institutions etc, the banking system is at the heart of the finance system. The Indian banking industry, which has RBI (reserve bank of India) as its regularly authority. It is the central bank of the country under which there are the commercial banking including public sector and private sector banks, foreign banks and area banks; it also includes regional rural banks as well as co-operative banks.

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INDIAN BANKING SYSTEM


Reserve Bank of India

Commercial Banks

Regional rural Banks

Co-operative Banks

State Co-operative Bank Public Sector Banks Private Sector Banks Central /district Cooperative Banks India Foreign

Old Banks

New Banks

Local Area

Primary credit societies

State Bank Group

Nationalized Bank

State Bank of India Subsidiary Bank

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COMMERICAL BANKS:
In the organized sector of the money market, commercial banks and co-operative banks have been in existence for the past several decades. Commercial bank is run on commercial line that is to earn profits unlike a co-operative bank which is run for the benefit of a group of members of the co-operative body e.g.: a housing cooperative society. The commercial banks are spread across the length and breadth of the country, and later to the short-term needs of industry. Trade and commerce and agriculture unlike the developmental banks which focus on long-term needs. These days the commercial banks also look after other needs of their customers including long-term credit requirements. Commercial banks operating in India may be categorized into public sector and a private sector bank is further divided into Indian and foreign banks depending upon the ownership, management and control.

Public sector banks:


The public sector banks comprise 19 nationalized banks, the state bank of India and its 7 associates. Till 1955 they were used to be only private commercial bank whether scheduled or non-scheduled, licensed or unlicensed, foreign or Indian, they were all owed and controlled by private entrepreneurs and shareholders. There were three phase of bank nationalization. First was in July 1955, when
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government of India nationalized the imperial bank of India to create the SBI. It was a pioneering attempt in introducing public sector banking in the country. In 1959, eight state banks erstwhile princely states were also nationalized to form the subsidiaries of the SBI. The second phase of phase of public sector banking came into existence when 14 major commercial banks were nationalized on July 19 1969. On April 15 1980 six more private sector banks were nationalized. This led to the dominance of public sector banks as nearly 90% of the banking activity in the country was brought into the public sector. The public sector banks were socially controlled and publicly owned. It was done with the objective of giving a professional bent to bank management and provision of adequate credit for agriculture and rural sector, small industries, export and a new class on entrepreneurs.

State bank of India profile:


State bank of India is Indias largest commercial bank and it is public sector undertaking, which was born with a new sense of social purposes aided by the 10000 offices comprising branches, sub officer and local head offices inherited from the imperial bank. It has a vast domestic network and commands one-fifth of deposits and loans of all scheduled commercial banks in India and also SBI ranks as 57th in top 1000 world banks. It was destined to act as the pacesetter in this respect and lead the Indian banking system into exciting field of national development.
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The state bank group includes a network of seven banking subsidiaries and several non-banking subsidiaries offering banking, finance, factoring, leasing service, primary dealership in government securities, credit cards and insurance facility. It is also involved in mutual fund and capital market activities through its subsidiaries SBI has the largest asset base among Indian banks and financial Institution, all 13630 branches of state bank if India and its seven associate banks are fully computerized. The implementation of V R S in the year 2000-01 has enabled SBI to effect significant reduction in staff expenses.

Evolution of SBI:The origin of the state bank of India goes back to the first decade of the 19th century with establishment of the bank of Calcutta in Calcutta on 2nd June 1806. Three years later the bank received its chater and was re-designed as the bank of Bengal on 2nd January 1809. A unique institution. It was the first joint stock bank of British India sponsored by the government of Bengal. The bank of Bombay on 15th April 1840 and the bank of madras on 1st July 1843 followed the bank of Bengal. These three banks remained at the apex of modern banking in India till their amalgamation as the imperial bank of India on 27th January 1921. When India attained freedom, the imperial bank has a capital base(including reserves) of Rs 11.85 Cores, deposits and advance of Rs.275.14 cores and Rs.72.94 cores respectively and a
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network of 172 branches and more than 200 sub office extending all over the country. In 1951, when the first five year plan was launched, the development of rural India was given the highest priority. The commercial banks of the country including the imperial bank of India had till then confined their operation to the urban sector and were not equipped to respond to the emergent needs of economic regeneration of the rural sector in particular, the all India rural credit survey committee under the chairmanship of A.D. growl recommendation the creation of state-partnered and state-sponsored bank by taking over the imperial bank of India and integrating with it, the former state owned or state associate banks. An act was according passing in parliament in May 1955 and the state bank of India as constituted on 1 July 1955. More than a quarter of the resources of the state, Later the state bank of India act was passed in 1959, enabled the state bank of India to take over eight state associated banks as its subsidiaries.(but now the seven association banks). The state bank of India was thus born with a new sense of social purpose aided by the 10000 offices comprising branches, sub offices and three local head offices inherited from the imperial bank. The concept of banking as mere repositories of the communitys savings and lenders to credit worthy parties was soon to give way to the concept of purposeful banking sub-serving the growing and diversified financial needs of planned economic development. The state bank of India was destined to act as the pace

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setter in this respect and lead the Indian banking system into the exciting field of national development. The number of branches thus, increased from 466 as on 30th June 1955 to 10000 offices as 31.3.2011

Year 1955 1960 1970

Changes by

SBI

Reflecting Changes in Economy

Branch expansion

1950s: focus on ruler & semi-urban Small Scale Industries & areas Focus on Industry along with the growth of public sector institution in small business Indian economy Entrepreneurial Earliest application of entrepreneurial development development methodology Agriculture Overseas Expansion 1980s: International expansion NRIimportant role SBI as the flagship bank of India creating a presence in the word Mobilizing funds including special schemes- RIBs, IMDs 1990s: Deregulation & liberalization

1980

1990

Technology Transformation Corporate Financing

2002 2004 2005

Significant capital raised form market focus on enlarged role of private sector infrastructure, core areas Focus on Retail Banking 2000: technology transforming banking emphasis on the services sector. Full Computerization Further: retail Banking, BRP (Business ATMs & restructuring Process Re-engineering) & Technology Core Banking & BRP to Fuel Future Growth.

Changes in SBI have reflected changes in the entire economy as indicated below:

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ORGANISATIONAL STRUCTURE CORPORATE

CHAIRMAN

DMD & CEO DMD & CCO

DMD (I & MA) DMD & CDO CVO DMD(IT)

MD & GE (CB)

MD & GE (NB)

DMD & GE (IB)

DMD & GE (A &S)

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Abbreviations of concerned officers


DMD-Deputy Managing Director CCO-Chief Credit And Risk Officer CFO-Chief Financial Officer CDO-Circle Development Officer GE-Group Executive MD-Managing Directors DGM-Deputy General Manager AGM-Assistant General Manager
Chief General Manager

DGM Circle Credit & Financial Officer

DGM (Vigilance)

DGM Circle Development Officer

DGM (Law)@

AGM BPR Implementation

AGM Public Realations & Community Services Banking

General Manager-1

General Manager-2

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Central Board of directors as on 10th June 2011:


Mr. Pratip Chaudhuri Mr. Deepak Kumar Chatterjee Managing Director Mrs. Madhu Dubhashi Independent Director Mr. Shyamal Acharya Associate Director Mr. Thierry Raymond Mequillet Associate Director Mr. Jayesh Gandhi Dr. H. Sadhak Independent Director Dr. H. K. Pradhan Independent Director Mr. Shishir Joshipura Independent Director

Chairman & Associate Director Independent Director

AWARDS At SBI Funds Management, we devote considerable resources to gain, maintain and sustain our profitable insights into market movements. The trust reposed on us by millions of investors is a genuine tribute to our expertise in Fund Management and dedication to our singular focus. And this has resulted in various awards and accolades for us from the fund industry, motivating us to do better. Some of the awards won by us are listed below. 2012 ICRA Mutual Fund Awards 2012 For Various Schemes 2011 Readers Digest Awards 2011 For Trusted Brand in Fund Management Category ICRA Mutual Fund Awards 2011 For Magnum Income Fund - Floating Rate Plan - Long Term Plan
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2010 ICRA Mutual Fund Awards 2010 For Magnum Global Fund 2009 ICRA Mutual Funds Awards 2009 For Magnum Tax Gain Scheme 1993 The Lipper India Fund Awards 2009 For Various Schemes 2008 Outlook Money NDTV Profit Awards 2008 The Lipper India Fund Awards 2008 For Magnum Balanced Fund Dividend ICRA Mutual Fund Awards 2008 For Various Schemes

Vision of State Bank of India:


1. Premier Indian Financial Services Group with Global perspective, world class standards of efficiency and professionalism and core institutional values. 2. Retain its position in the country as a pioneer in development banking. 3. Maximize shareholder value through high sustained earnings per share. 4. An institution with a culture of mutual care and commitment and continuous learning opportunities.

Mission of State Bank of India: 1. We will be prompt, polite and proactive with our customers. 2. We will be speaking the language of young India. 3. We will create products and services that help our customers achieve their goals.
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4. We will go beyond the call of duty to make our customer feel valued. 5. We will be of services even in the remotest part of our country. 6. We will offer excellence in services to those abroad as much as we do to those in India. 7. We will imbibe state of the art technology to drive excellence.

Values of State Bank of India: 1. We will always be honest, transparent and ethical. 2. We will respect our customers and fellow associates. 3. We will be knowledge driven. 4. We will learn and we will share our learning. 5. We will never take the easy way out. 6. We will do everything we can to contribute to the community we work in. 7. We will nature pried in India.

State Bank of India A Branch Profile Shimoga


Branch History: Now a day Bank plays on important role in the economic system of a country. In countries like India, Banking system has to be encouraged in every ruler areas. After the independence of our nation, the leaders are giving more prominence to improve the economic progress of the people. This gave rise to the birth of Banks.
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In the middle of the 19th century, there were many banks started in every part of the Nationalized and some were nonNationalized. In such nationalized bank state bank of India is also one, which has its central office at Mumbai. To popularized the banking system and provide more facility to the Semi- urban and rural people, is started its branches all over the country and also in Karnataka. In Shimoga that is in Shimoga branch located main road is also one of them. The branch is situated in urban area. This branch was started on 22nd November 1969, by marketing strategy it is started in Shimoga. Since that time, it was not rendering different schemes and services. But now a day it provides schemes and services to their customers. In the beginning the branch does not have sufficient staff members. The bankers will trying its level best satisfy its customers. All it required is the best support and encouragement from its customers. Today, state bank of India has spread its aim around the world and has a network of branches spanning all time zones. SBIs international banking group delivers the full range of cross border finance solution through its four winnings the domestic division, the foreign offices division, the foreign department and the international services division.

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All the branches of the bank are computerized, for making easy transaction. In Karnataka the state Bank of India has two zonal offices viz., ORGANISATION STRUCTURE OF THE BRANCH:

Officers Clerks & cashiers Peon & Armed Guards Total

Staff 12 20 5 37

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CHAPTER-3

THEROITCAL BACKGROUND

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INTRODUCTION:
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A mutual fund is the ideal investment vehicle for todays complex and modern 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. Individuals also find it difficult to keep track of ownership of assets, investments, brokerage dues and bank transactions etc. A mutual 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 economics of scale in all three areas
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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 fund gained popularity only after the Second World War. Globally there are thousands of firms offering mutual funds with different investments objectives. .Today mutual funds collectively manage almost as much as or more money as compared to banks.

Advantages of Mutual Fund:


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 in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.500/-. This amount today would get you less than quarter of an Infosys share.

Diversification
It simply means that spread investment across different securities. This kind of a diversification may add to the stability of 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. Similarly the information technology sector might be faring poorly but the auto and textile sectors might do well and may protect your principal investment as well as help you meet your return objectives.

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Variety
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity. For example, an investor can invest his money in a Growth Fund (equity scheme) and Income Fund (debt scheme) depending on his risk appetite and thus create a balanced portfolio easily or simply just buy a Balanced Scheme.

Professional Management
Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. When investors would like to invest their money in to a mutual fund, they are handing their money to an investment professional who has experience in making investment decisions. It is the Fund Manager's job to (a) find the best securities for the fund, given the fund's stated investment objectives; and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio, as and when required.

Tax Benefits
Any income distributed after March 31, 2002 will be subject to tax in the assessment of all Unit holders. However, as a measure of concession to Unit holders of open-ended equity-oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a confessional rate of 10.5%.

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In case of Individuals and Hindu Undivided Families a deduction up to Rs. 9,000 from the Total Income will be admissible in respect of income from investments specified in Section 80L, including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and GiftTax. Regulations Securities Exchange Board of India (SEBI), the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors. Liquidity In open-ended mutual funds, investor can redeem all or part of his units any time he wish. Some schemes do have a lock-in period where an investor cannot return the units until the completion of such a lock-in period. Convenience An investor can purchase or sell fund units directly from a fund, through a broker or a financial planner. The investor may opt for a Systematic Investment Plan (SIP) or a Systematic Withdrawal Advantage Plan (SWAP). In addition to this an investor receives account statements and portfolios of the schemes.

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Flexibility Mutual Funds offering multiple schemes allow investors to switch easily between various schemes. This flexibility gives the investor a convenient way to change the mix of his portfolio over time. Transparency Open-ended mutual funds disclose their Net Asset Value (NAV) daily and the entire portfolio monthly. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument. Thus the investor is in the knowledge of the quality of the portfolio and can invest further or redeem depending on the kind of the portfolio that has been constructed by the investment manager.

Disadvantages of Mutual Fund:


No Guarantees
No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.

Fees and commissions


All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners.
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Taxes
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. Fund makes a profit on its sales, will pay taxes on the income they receive, even reinvest the money can be done.

Management Risk When invest in a mutual fund, investors depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the fund manager does not perform as well as expected they might not make as much money on their investment as expected. Of course, if they invest in Index Funds, they forego management risk, because these funds do not employ managers. Mutual Fund industry is required to address this problem, as we believe that bigger the size of asset, bigger is the problem. Large funds end up paying more for the stock they purchase and sell them at a lower price thus reducing the returns to the investors.

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Evolution of Mutual Fund Industry:

Mutual Fund Industry

I PHASE 1964..1987 II PHASE 1987..1993

III PHASE 1993.2003 IV PHASE Since 2003


Fig 2

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 cores of assets under management.

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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 the mutual fund industry had assets under management of Rs.47, 004 cores.

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. 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. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 cores.

Fourth Phase Existing period.


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 corers as at the end of January 2003; the second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 cores
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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, As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 cores under 421 schemes.

Structure of Fund Industry:

AMFI

Fig 3

Sponsor: Sponsor is the person who acting alone or in combination with another
body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.
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Trust: The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908. 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 inter alias 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, the provisions of the Trust Deed and the Offer Documents of the respective Schemes. At least 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner.

Asset Management Company (AMC):


The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company 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 cores at all times.

Registrar and Transfer Agent:


The AMC if so authorized 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.
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Institutional investor:
They have qualified treasury personnel to look at investment option. They also have access to professional advice from investment bankers. This class of investors understands the risk reward relationship and can take informed decisions.

High net-worth individuals (HNI):


These persons are savvy investors and have access to professional advice. They are able to understand the product features and can take a informed view about investing in mutual fund products.

Retail Savers:
This class of investors has been traditionally investing in fixed deposits mainly of banks. They have a certain mind set which need to be changed. A mutual fund need to essentially focus on this segment because this is huge base and has a potential to grow.

Association of Mutual Fund of India: (AMFI)


AMFI, the apex body of all the registered Asset Management Companies was incorporated on August 22, 1995 as a non-profit organization. As of now, all the 34 Asset Management companies that have launched mutual fund schemes are its Members. AMFI functions under the supervision and guidance of a Board of Directors.

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Objectives
1. To define and maintain high professional and ethical standards in all areas of Operation of mutual fund industry. 2. To recommend and promote best business practices and code of conduct to be followed by members and others engaged in the activities of mutual fund and asset management including agencies connected or involved in the field of capital markets and financial services. 3. To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all matters concerning the mutual fund industry. 4. To represent to the Government, RBI and other bodies on all matters relating to the Mutual Fund Industry. To undertake nationwide investor awareness programmed so as to promote proper understanding of the concept and working of mutual funds. Calculation of NAV (Net Asset Value) The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NA V is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below.
Asset value is equal to: Sum of market value of shares/debentures + Liquid assets/cash held + Dividends/interest accrued - Amount due on unpaid assets - Expenses accrued but not paid

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Details on the above items:


For liquid shares/debentures, valuation is done some the basis of the last or closing market price on the principal exchange where the security is traded. For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be estimated. For shares, this could be the book value per share or an estimated market price if suitable benchmarks are available. For debentures and bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting for illiquidity. Valuation of debentures and bonds is a big problem since most of them are unlisted and thinly traded. This gives considerable leeway to the AMCs on valuation and some of the AMCs are believed to take advantage of this and adopt flexible valuation policies depending on the situation. Interest is payable on debentures bonds on a periodic basis say every 6 months. But, with every passing day, interest is said to be accrued, at the daily interest rate, which is calculated by dividing the periodic interest payment with the number of days in each period. Thus, accrued interest on a particular day is equal to the daily interest rate multiplied by the number of days since the last interest payment date. Usually, dividends are proposed at the time of the Annual General meeting and become due on the record date. There is a gap between the dates on which it becomes due and the actual payment date. In the intermediate period, it is deemed to be "accrued".

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(Total Unit Capital + Reserves + Income (net of expenses) + Appreciation/Depreciation in investments) (No of Units out Standing)

Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

Redemption Price
Is the price at which open-ended schemes repurchase their units and closeended schemes redeem their units on maturity? Such prices are NAV related.
Repurchase or Back-end Load

Is a charge collected by a scheme when it buys back the units from the unit holders?
Sales Load

Is a charge collected by a scheme when it sells the units. Also called, Frontend load. Schemes that do not charge a load are called No Load schemes.
Sales Price

Is the price investor pay when he invests in a scheme? Also called as Offer Price. It may include a sales load.

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CLASSIFICATION OF MUTUAL FUND SCHEMES:


Any mutual fund has an objective of earning income for the investors and or getting increased value of their investments. To achieve these objectives mutual funds adopt different strategies and accordingly offer different schemes of investments .On these bases the simplest way to categorize schemes would be group these in to two broad classifications.

TYPES OF FUND
(A) CLOSE ENDED FUNDS

The corpus of the fund and its duration are prefixed. In other words, the corpus of the fund and the number of units are determined in advance. Once the subscription reaches the pre-determined level, the entry of investors is closed. After the proceeds are fixed period, the entire corpus is disinvested and the proceeds are distributed to
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the various units holders in proportion to their holding. Thus, the fund ceases to be a fund, after the final distribution.

Features:
1. The period of the fund is definite and fixed beforehand. 2. Once the period is over and the target is reached, the door is closed for investors. They cannot purchase any more units 3. These units are publicly traded through stock exchange and generally, there is no re purchase facility by the fund. 4. The main objective of this fund is capital appreciation. 5. At the time of redemption, the entire investment pertaining to a close ended scheme is liquidated at the proceeds are distributed among the unit holders. 6. From the investors point of view, it may attract more tax since the entire capital appreciation is realized into at once stage itself. 7. If the market condition is not favorable, it may also affect the investors since he may not get the full benefit of capital appreciation in the value of the investment.

(B) OPEN ENDED SCHEME


The size of the fund is not pre determined and period is not prefixed the investors are free to buy and sell any number of units at any point of time.

Features
There is complete flexibility with regard to once investment or dis investment. In other words there is free entry and exit of investors in an open ended fund.
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These units are not publicly traded but, the fund is ready to repurchase them and resell them at any time. The main objective of this one is income generation. The investors get dividend, rights or bonuses as rewards for their investments. The investor is offered instant liquidity in the sense that the units can be sold on any working day to the fund. The listed prices are very close to there net asset value. The fund fixes a different price for their purchases and sales.

Income Fund
This fund aims at generating and distributing regular income to the members on a periodical basis. It concentrates more on the distribution of regular income and it also sees that the average return is higher than that of the income from bank deposits.

Features:
The investor is assured of regular income at periodic intervals, say half - yearly or yearly and so on. The main objective of this type of fund is to declare regular dividends and not capital appreciation. The patterns of investment are oriented towards high and fix income yielding securities like debentures, Bonds etc. This is the best suited to the old and retired people who may not he any regular income. It concerns itself with short run gains only.
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PURE GROWTH FUND:


Growth funds concentrate mainly on long run gains, that is capital appreciation. They do not offer regular income and they aim at capital appreciation in the long run.

PURE GROWTH FUND:


Growth funds concentrate mainly on long run gains, that is capital appreciation. They do not offer regular income and they aim at capital appreciation in the long run. Features The growth oriented fund aims at meeting the investors need for capital appreciation. The investment strategy conforms to the fund objective by investing the fund the predominantly on equities with high growth potential The fund tries to get capital appreciation by taking much risks and investing on risk bearing equities and high growth equity shares. The fund may declare dividend, but its principal objective is only capital appreciation. This is best suited to salary and business people who have high risk bearing capacity and ability to differ liquidity. They can accumulate wealth for future needs.

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BALANCED FUND:

It is nothing but a combination of both income and growth funds. It aims at distributing regular income as well as capital appreciation. This is achieved by balancing the investments between the high growth equity shares and also the fixed income earning securities.

SPECIALISED FUNDS:
A large number of specialized funds are in existence aboard. They offer special scheme needs specific needs of specific categories of people like pensioners, windows etc. There are also funds for investments in securities of specified area. Like Japan fund, south Korea fund etc. these security funds open the door for foreign investors to invest on the domestic securities of the countries. Funds may be confined to one particular sector or industries like fertilizer, automobiles, petroleum etc. these fund carry are high risk taking investors who prefer this type of fund

MONEY MARKET MUTUAL FUND


These funds are basically open ended mutual funds and as such they have all the features of the open ended fund. But, they invested in highly liquid and safe securities like commercial paper, bankers acceptances, certification of deposits, treasury bills etc. these instruments are called money market instruments. They take the place of shares, debentures and bonds in the capital market. They pay money market rate of interests, these funds called money market
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funds in the U.S.A. and they have been functioning since 1972. Investors generally use it as a parking place or stop gap arrangements for their cash resources till they finally decide about the proper avenue for their investment, that is long term financial assets like bonds and stocks.

TAXATION FUNDS
A taxation fund is basically a growth oriented fund. But, it offers tax rebates to the investors either in the domestic or foreign capital market. It is suitable to salaried people who wants enjoy the rebates particularly during the month of February and March. In India, at present the law relating to tax rebates is covered under sec.88 of the income tax act, 1961. An investor is entitled to get 20% rebates in income of Rs 10,000/- per annum. The tax saving magnum of SBI capital market limited is the best example for the domestic type. UTI`s us $60 million India fund, based in the USA, is an example for the foreign type.

LEVERAGE FUND
These funds are also called borrower funds since they are used primarily to increase the size of the value of portfolio of a mutual fund. When the value increases, the earning capacity of the fund also increases. The gains are distributed to the unit holders this is resorted to only when the gains from the borrowed funds are more than the cost of borrowed funds.

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DUAL FUNDS This is a special kind of closed end fund. It provides a single investment opportunity for two different types of investors for this purpose, it sells two types of investment stocks they are income shares and capital shares. Those investors who seek current investment income can purchase income shares. They receive all the interest and dividend earned from the entire investment portfolio. However, they are guaranteed a minimum annual dividend payment. The holders of capital shares receive all the capital gains earned on those shares and they are not entitled to receive any dividend of any type. In this respect, the dual is different from a balance fund.

INDEX FUNDS
Index funds refer to those funds where the portfolios are designed in such a way that they reflect the composition of some broad based market index. This is done by holding securities in proportion as the index itself. The value of these index linked fund will automatically go up whenever the market index goes up and vice versa. Since the construction of portfolio is entirely based upon maintaining proper proportion of the index being followed, it involves less administration expenses, lower transaction costs, less number of portfolio managers etc. it is so because only fewer purchase and sale of securities would take place.

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BOND FUNDS
These funds have portfolios consisting mainly of fixed income securities like bonds. The main thrust of these funds is mostly on income rather than capital gains. They differ from income funds in the sense income funds offer an average returns higher than that from bank deposits and also capital gains lesser than that in equity shares.

AGGRESSIVE GROWTH FUNDS


These funds are just the opposite of bond funds. These funds are capital gains oriented and thus the thrust area of these funds is `capital gains`. Hence, these funds are generally invested in speculation stocks. They may also use specialized investment techniques like short term trading, option writing etc. naturally, these funds tend to be volatile in nature.

OFF-SHORE MUTUA FUNDS


Off-shore mutual funds are those funds which are meant for non-residential investors. In other words, the sources of investments for these funds are from abroad. So, they are regulated by the provision s of the foreign countries where those funds are registered. These funds facilitate flow of funds across different countries, with free and efficient movement of capital for investment and repatriation. Off shore are preferred to direct foreign investment, since, it does not allow foreign domination over host countrys corporate sector. However, these funds involve much currency and country risk and hence they generally yield higher return.
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PROPERTY FUND
It is a real estate mutual fund. It is an investment vehicle which buys, develops, manages and sells real estate assets. Its investment also includes shares/bonds of companies involved in real estate and mortgage backed companies.
FUND OF FUNDS

A fund of fund schemes is a mutual fund scheme that invests in other mutual fund schemes. The concept is widely prevalent aboard. Mutual funds in India are being allowed to launch fund of funds. In India, these funds are subject to the approval of the department of economic affairs, ministry of finance and the RBI monitors such funds by issuing directions then and there. In India, a number of shore funds exist. `India fund ` and `Indian growth fund` were floated by UTI in U.K and U.S.A. respectively.

DIFFERENT PLANS OF MUTUAL FUND


1. Growth Plan and Dividend Plan:A growth plan under a scheme wherein the returns from investments are reinvested and very few income distributions, if any, are made. The investor thus only realizes capital appreciation on the investment. This plan appeals to investors in the high-income bracket. Under the dividend plan, income is distributed from time to time. This plan is ideal to those investors requiring regular income.
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2. Dividend Reinvestment Plan:Dividends plans of schemes carry an additional option for reinvestment of income distribution. This is referred to as the dividend reinvestment plan. Under this plan, dividends declared by a fund are reinvested on behalf of the investor, thus increasing the number of units held by the investors. 3 Automatic Investment Plan:Under an Automatic Investment Plan (AIP) also called Systematic Investment Plan (SIP), the investor is given the option for investing in a specified frequency of months in a specified scheme of the Mutual Fund for a constant sum of investment. AIP allows the investors to plan their savings through a structured regular monthly savings program. 4 Automatic Withdrawal Plan:Under the Automatic Withdrawal Plan (AWP) also called Systematic Withdrawal Plan (SWP), a facility is provided to the investor to withdraw a pre-determined amount from his fund at a pre-determined interval.

PRESENT STATUS OF MUTUAL FUND


The total asset under management of mutual fund industry has increased by 11% from Rs2,31,358 crores to Rs 2,57,528 crores as of April end. The rise in assets could be attributed to accretions in liquid fund assets. April also saw a change in pecking order, with Prudential
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ICICI Mutual Fund regaining its top slot among private sector funds in terms of AUM. Reliance Mutual Fund slipped to third position with total asset under management at Rs26,420 crores. UTI retained its top position with total assets under management at 30,108 crores.

Objectives of investing in Mutual Funds:


There are several benefits from investing in a Mutual Fund: Small investments: Mutual funds help you to reap the benefit of returns by a portfolio spread across a wide spectrum of companies with small investments. Professional Fund Management: Professionals having considerable expertise, experience and resources manage the pool of money collected by a mutual fund. They thoroughly analyse the markets and economy to pick good investment opportunities. Spreading Risk: An investor with limited funds might be able to invest in only one or two stocks/bonds, thus increasing his or her risk. However, a mutual fund will spread its risk by investing a number of sound stocks or bonds. A fund normally invests in companies across a wide range of industries, so the risk is diversified.

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Transparency: Mutual Funds regularly provide investors within formation on the value of their investments. Mutual Funds also provide complete portfolio disclosure of the investments made by various schemes and also the proportion invested in each asset type. Choice: The large amount of Mutual Funds offer the investor a wide variety to choose from. An investor can pick up a scheme depending upon his risk/ return profile. Regulations: All the mutual funds are registered with SEBI and they function within the provisions of strict regulation designed to protect the interests of the investor. RISKS OF MUTUAL FUNDS: Mutual funds are not free from risks. It is so because basically the mutual funds also invest in stick market on shares which are volatile in nature and are not risk free. Hence, the following risks are inherent in their dealings. MARKET RISKS: There are certain risks associated with every kind of investment on shares. They are called market risks. These market risks can be reduced, but can not be completely eliminated even by a good investment management. The prices of shares are subject to wide price fluctuations depending upon market conditions over
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which nobody has a control. Moreover, every economy has to pass through a cycle- boom, recession, slump and control. The phase of the business cycle affects the market condition to a larger extent. SCHEME RISKS: There are certain risks inherent in the scheme itself. It all depends upon the nature of the scheme. For instance, in a pure growth scheme, risks are greater. It is obvious because if one expects more returns as in the case of growth scheme, one has to take more risks. INVESTMENT RISKS: Whether the mutual fund makes money in share or loses depends upon the investment expertise of the Asset management company (AMC), the investment goes wrong, the fund has to suffer a lot. The investment expertise of various funds are different and it is reflected on the returns which they offer to investors. BUSINESS RISKS: The corpus of mutual fund might have been invested in a companys shares. If the business of that company suffers any set back, it cannot declare any dividend. It may even go to the extent of winding up its business. Though the mutual fund can withstand such a risk, its income paying capacity is affected.
POLITICAL RISKS:

Successive government bring with them fancy new economic ideologies and policies. It is often said that many economic decisions are politically motivated, changes in government brings in risks of
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uncertainty which every player in the financial service industry has to face. So mutual funds are no exception to it.

INVESTORS RIGHTS: The SEBI (MF) Regulations, 1993 contains specific provisions with regard s to investor servicing. Certain rights have been guaranteed to the investors as per the above Regulations. They are as follows UNIT CERTIFICATE An investor has a right to receive his unit certificates on allotment within a period of 10 weeks from the date of closure of subscription lists in the case of a close ended scheme and 6 weeks from the date of closure of the initial offer in the case of an open ended scheme. TRANSFER OF UNITS An investor is entitled to get the units certificate transferred within a period of 30 days from the date of lodgment of the certificates along with the relevant transfer forms. REFUND OF APPLICATION MONEY If a mutual fund is not able to collect the statutory amount (close ended funds Rs 20 core, open ended funds Rs 50 core or 60% of the targeted amounts which ever is higher) it has to return the application money as refund within a period of 6 weeks from the date
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of closure of subscription lists. If the refund is delayed beyond this period, each application is entitled to get the refund with interests at rate of 15% p.a. for period of delay. AUDITED ANNUAL REPORTS Every mutual fund is under an obligation to its investors to publish the audited annual reports and unaudited half yearly report through prominent newspapers in respect of each of its schemes within 6 months and 3 month respectively of the date of closure of accounts. SELECTION OF FUND Mutual funds are not magic institutions which can bring treasure to the million of their Investors within a short span of time. All funds are equal to start with. But in due course Of time, some excel the other. It all depends upon the efficiency with which the fund is being managed by the professionals of the fund. Hence, the investor has to be very careful in selecting a fund. He must take into account the following factors for evaluating the performance of any fund and then finally decide one he has to choose. OBJECTIVES OF FUND He must see the objectives of the fund whether income oriented or growth oriented. Income oriented are backed mainly by fixed by interests yielding securities like debentures and bonds where as growth oriented are backed by equities. It is obvious that
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Growth oriented schemes are more risky than income oriented schemes, and hence, the returns from such schemes are not comparable with each other. The investor should compare the particular scheme of one fund with the same scheme of another fund the objective of the scheme which he purpose to choose CONSISTANCY OF PERFORMANCE A mutual fund is always intended to give steady long term returns, and hence, the investor should measures the performance of a fund over a period of at least three years. Investors are satisfied with a fund that shows a steady and consistence performance than a fund which performs superbly in one year and other than the next year. Consistency in performance is a good indicator of its investment expertise. HISTORICAL BACKGROUND The success of any fund depends upon the competence of the management, its integrity, periodicity and experience. The funds integrity should be suspicion. A good historical record could be better horse to bet on the new funds. It is in accordance with the maxim a know devil is better than an unknown angel.

COST OF OPERATION Mutual funds seek to do a better job of the invisible funds at a lower cost than the individuals could for their themselves. Hence, the
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prospective investor should scrutinize the expense ratio of the fund and compare it with others. Higher the ratio, lower will be the actual returns to investor. CAPACITY FOR INNOVATION The efficiency of fund manager can be tested by means of the innovative schemes he has introduced in the market somas to meet the divers needs of investors. An innovator will be always a successful man. It is quite natural that an Investor will look for funds which are capable of introducing innovations in the financial market. INVESTOR SERVICING The most important factor to be considered is prompted and efficient servicing. Service like quite response to investor queries, prompt dispatch of unit certificate, quick transfer of units etc. will go long way in creating a lasting impression in the minds of investors. MARKET TRENDS Traditionally it has been found that the stock market index and the inflation rate tend to move in the same direction where as the interest rates and the stock market index tend to move in the opposite direction. This sets the time for the investor to enter into the fund and come out of it. A prudent investor must keep his eyes on the stock market index, interest rate and the inflation rate. Of course, there is no scientific reasoning behind it. TRANSPARANCY OF THE FUND MANAGEMENT
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The success of a mutual fund depends to a large extent on the transparency of the fund management. In these days investor awareness, it is very vital that the fund should disclose the complete details regarding the operation of the fund. It will go long way in creating a lasting impression in the minds of the investors to patronize the for ever.

Regulatory Aspects of Mutual Funds:


1. Schemes of a Mutual Fund The asset management company shall launch no scheme unless the trustees approve such scheme and a copy of the offer document has been filed with the Board. Every mutual fund shall along with the offer document of each scheme pay filing fees. The mutual fund and asset Management Company shall be liable to refund application money to the applicants (I) (II) If the mutual fund fails to receive the minimum subscription amount referred to in clause (a) of sub regulation (1); If the moneys received from the applicants for units are in excess of subscription as referred to in clause (b) of sub-regulation (1). The asset management company shall issue to the applicant whose application has been accepted, unit certificates or a statement of accounts specifying the number of units allotted to the applicant as soon as possible but not later than six weeks from the date of closure of the initial subscription list. 2. Procedure for Action In Case Of Default:

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On and from the date of the suspension of the certificate or the approval, as the case may be, the mutual fund, trustees or asset management company, shall cease to carry on any activity as a mutual fund, trustee or asset management company, during the period of suspension, and shall be subject to the directions of the Board with regard to any records, documents, or securities that may be in its custody or control 3. Restrictions on Investments: A mutual fund scheme shall not invest more than 15% of its NAV in debt Instruments issued by a single issuer, such investment limit may be extended to 20% of the NA V of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company. A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NA V of the scheme No mutual fund under all its schemes should own more than ten per cent of any company's paid up capital carrying voting rights. A scheme may invest in another scheme under the same asset management fees. The initial issue expenses in respect of any scheme may not exceed six percent of the funds raised under that scheme. Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in
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company or any other mutual fund without charging any

a position whereby it

has to make short sale or carry forward

transaction or engage in badly finance. Pending deployment of funds of a scheme in securities in terms of investment objectives of the scheme a mutual fund can invest the funds of the scheme in short term deposits of scheduled commercial banks. No mutual fund scheme shall make any investment in Any unlisted security of an associate or group company of the sponsor; or Any security issued by way of private placement by an associate or group company of the sponsor; The listed securities of group companies of the sponsor, which is in excess of 30% of the net assets [of all the schemes of a M.F.] No mutual fund scheme shall invest more than 10 per cent of its NAV in the equity shares or equity related instruments of any company.

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CHAPTER-4

PRODUCT PROFILE
SBIMFS PERFORMANCE INVESTMENT PHILOSOPHY OF SBIMF VARIOUS SCHEMES OF SBI MUTUAL FUND SUGGESTION PRODUCT INNOVATION SERVICE INNOVATION DISTRIBUTION FIRNT INNOVATION TECHNOLOGY INNOVATION ETHICAL CHALLENGES OF MUTUAL FUND INDUSTRY FUTURE PERSPECTIVE SERVICES DISTRIBUTION

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PRODUCT PROFILE
SBI Mutual fund draws strength from Indias premier and largest bank: the State Bank of India .Set up July 1, 1955 the State Bank of India is the largest bank operation in the country. though years of commitment to service and national development, SBI has grown in to instrument of social change. Today it has 9019 branches in India (excluding over 700 branches of banking subsidiaries) and 51 offices in 31 countries spread over all time zones. SBI Mutual fund was the first Non UTI fund to be set up in 1987. Significant shift of investor from Bank deposit to Mutual Fund Industry happened during this period most funds were growth oriented close end funds. SBI mutual Fund has launched 31 schemes of which 14 have been redeemed, yielding handsome returns to investors. SBI MF was also the first bank sponsored Mutual Fund to launch an off shore fund the India Magnum fund with a corpus of around 225 cores Today the fund has an investor base of over 8lacs spread over 21 schemes with a large network over 35 collection branches ,26 investor service centers 3 investor service desk and 35 District organizers. SBI Mutual Fund a wholly owned subsidiary of SBI is among the leading mutual funds in the country in terms of size of net assets. SBI Mutual Fund was the first public sector Mutual Fund to start operations in the country and has currently an expertise of over 13 years in the capital markets.

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The marketing efforts are now concentrated on building a strong investor base in various places across the country (and not only the top 8 cities) by capitalizing on the strong brand image of the SBI The strong brand association of SBI along with focus on certain niche segments and innovative marketing practices has enabled SBIMF to attract even the common man to invest. Some of the unique strengths which are playing important role in making the people to invest in SBIMF Its large size with consequential economies of scale; Its nation-wide well entrenched distribution network and consequently its wide reach and capacity to mobilize large resources; Its brand image arising out of a public perception that the safety of funds is assured by its pseudo Government character, which may not be entirely unjustified. SBIMFs Performance: For SBI Mutual, the year 2004 proved exceptional, with four of its schemes figuring in the top ten. SBI mutual fund won 3 GOLDS and 1 silver at the ICRA awards. Therefore SBIMFs performance is also one of the strength to attract common man to invest.

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Investment Philosophy of SBI Mutual Fund


Debt Equity Balanced

DEBT Fund
Liquid fund Income fund Gilt Fund

Liquid Fund Liquidity Risk Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities Interest Rate Risk In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bonds 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. Credit Risk The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cash flows determines the Credit Risk. This credit risk is measured by independent rating agencies like
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CRISIL who rate companies and their paper. An AAA rating is considered the safest whereas a D rating is considered poor credit quality. A welldiversified portfolio might help mitigate this risk. Income Fund The income fund invest in all type of Debt instrument .The investment philosophy can be broadly defined as consisting of active duration and interest rate management to give optimal returns .The fund is divided mainly between Government securities and corporate bonds with some residual investments in money market instruments Gilt Fund Gilt Fund invest in the Gilt-edged government securities which is predominantly a wholesale market .It allows retail investors to participate in this market it aims to maximize returns by active interest rate management with zero credit risk Equity Funds Our investment philosophy revolves around the concept of growth at a reasonable price where we invest in growth oriented stocks which are available at attractive relative valuations We use a combination of Top Down approach and Bottom Down approach We identify and invest in business that has a sustainable competitive advantage We invest in medium term view, with an investment horizon of at least 18 months Risk control is an important element of our strategy
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We believe in proactive fund management to outperform benchmark indices Balanced Funds Balanced funds invest part of their money in stocks and part in bonds is known as balanced funds. Such fund will put more emphasis on equity share investment when the outlook is bright and will tend to switch to debentures when the future is expected to be poor of shares.

2.6 Various Schemes of SBI Mutual Funds:


Magnum Index Fund: Magnum Index Fund invests only in the 50 stocks that constitute S&P CNX Nifty index in proportion to each stock's weight age in the index. Hence, who the portfolio Manager is or what his style is does not really matter in such funds. Volatility of such schemes will be in synchronization with the index. This investment is ideal for: Corporate, Institutions, Banks HNIs and Retail Investors desirous of investing in a basket of Nifty Index stocks for an investment as low as Rs. 5000/- with liquidity of Open-ended Mutual Fund Entryload Investments up to and including Rs. 50 Lakhs: 1.25% Investments above Rs. 50 Lakhs: Nil SIP a minimum of Rs. 1,000/- per month for 6 months or Rs. 1,500/- for 4 quarters
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SWP available for a minimum of Rs. 500/- subject to maintaining the minimum investment payable on a monthly basis Dividend Option Available Magnum Sector Funds Umbrella: Launched in August 1999 Minimum investment of Rs. 2000 per sector Entry Load: Investments up to Rs. 50 Lakhs 2.25% Investments above Rs. 50 Lakhs & up to Rs. 2 Cores 0.50% Investments above Rs. 2 Cores Nil Targeted at investors seeking high growth and comfortable with attendant volatility SIP a minimum of Rs. 500/- per month for 6 months or Rs. 250/- for 12 months SWP available for a minimum of Rs. 500/- subject to maintaining the minimum investment payable on a monthly basis Choice of 4 high-growth sectors: I.T Fund FMCG Fund Parma Fund Contra Fund Information Technology Sector: With the threat of global economic slowdown looming large over the IT industry, software stocks have been under pressure for quite some time now. Inspire of this, the Indian IT industry continues to march ahead as seen by the latest results, making it one of the highest value-addition and
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net foreign exchange earning industry. The Indian IT industry has zoomed from Rs.98.92 bin, five years ago to Rs.554 bin in FY2000-01, a phenomenal CAGR of over 40%, which is almost double the growth rate of IT industries in many of the developed countries. The Indian IT industry can be classified into four sectors viz. Software, Hardware, Peripherals and Networking & Internet service providers. Fast Moving Consumer Goods: Fast Moving Consumer Goods (FMCG) is products that are typically purchased and consumed on a regular basis. Some examples of FMCG products include personal products (soaps, shampoos, hair oils, toothpastes, shaving razors etc.), fabric care, processed foods (dairy products, edible oils, chocolates, ice creams etc.), beverages, cigarettes etc. to name a few. The companies in this sector are sprucing up their brands and distribution networks to realize this huge potential. Pharmaceuticals: Pharmaceutical industry is a continuous growth industry, largely immune to economic recession and commodity cycles. The growth is spurred by a rising population, new disease incidence, and resurgence of certain diseases. The pharmaceutical industry grew at a compounded rate of 17% during the last 10 years. The companies renewed focus on streamlining their production facilities and increased marketing has seen these companies show a rise in their profits. In reflection of this, the stock prices have also rallied in the past year.
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Contra Fund: The objective of the Fund is to invest in undervalued scrips, which may be currently out of favor but are likely to show attractive growth in the long term. Thus, this fund provides an alternative to investors for investing in the growth scrips of the future. The funds collected under this scheme will be invested in the equities of: Companies that are fundamentally sound, but generally are undervalued at the time of investment due to lack of investor interest. Companies that have embarked on the path of turnaround by restructuring of operations, hiving off unrelated business, etc. And where the results of the turnaround are likely to accrue in the long term. Companies with strong management, but operating in commodities where there are signs of bottoming out of the business cycle

Magnum Multiplier plus Scheme: A diversified equity fund, focusing on steady growth Open-ended from April 1998 Minimum application of Rs. 1000 Entry Load: Investments up to Rs. 50 Lakhs 2.25% Investments above Rs. 50 Lakhs & up to Rs. 2 Cores 0.50% Investments above Rs. 2 Cores - Nil

Nomination facility available. Minors can also be nominated. SIP a minimum of Rs. 500/- per month for 6 months or Rs. 250/- for 12 months SWP available for a minimum of Rs. 500/- subject to maintaining the minimum investment payable on monthly basis

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SIP a minimum of Rs. 500/- per month for 6 months or Rs. 250/- for 12 months SWP available for a minimum of Rs. 500/- subject to maintaining the minimum investment payable on a monthly basis.

Magnum Equity Fund: This actively managed fund offers growth through investment in a portfolio of select blue chip stocks. The main features of the scheme are:

A diversified equity fund, focusing on aggressive growth Minimum application of Rs. 1000 Entry Load:

Investments up to Rs. 50 Lakhs 2.25%.Investments above Rs. 50 Lakhs & up to Rs. 2 Cores 0.50%.Investments above Rs. 2 Cores - Nil

Ideal for investors who wish to benefit from the growth of the equity markets and are comfortable with the attendant volatility SIP a minimum of Rs. 500/- per month for 6 months SWP available for a minimum of Rs. 500/- subject to maintaining the minimum investment payable on a monthly basis

Magnum Tax Gain: This is a tax saving scheme, which has become open ended from November 11, 1999. Investment under this scheme up to Rs.10, 000 will have benefit of tax rebate under Section 88. The main features of the scheme are:

An open-ended ELSS scheme Min amount: Rs.500 .Statutory lock-in period of three years

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Entry Load: 2.25% .Ideal for retail investors planning to save Income Tax through investments under section 88, with the returns of Equity investments

SUGGESTIONS:
KEY IMPERATIVE ON WHICH SBI MUTUAL FUND SHOULD CONCENTRATE The SBI needs t looks at the retail segment seriously .Retail savings will be the key drivers of future growth. There needs to be an organized shift to the non metro market where the real retail savings is The distribution mechanism which is polarized today has to grow immersive With a view to reaching the cross section of the retail segment. The idea is to make product accessible The complex also high distribution cost need to be pegged at reasonable levels investors will need to do informed There has to be more transparency Move people to long term investments. Product Innovation: Fixed maturity plans for Risk Averse investors Sweep Plan to give returns of liquid fund and convenience of current account Floating rate funds to counter volatility in the Debt Asset allocation funds to suit varied investor profiles. P/E ratio funds Asset allocation with triggers
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Exchange Traded Fund to capture Intra day volatility Niche products like child care plan with ads on like insurance and scholarships Principal Protection Plan for capital Preservation. Service Innovation: Daily dividend facility to provide tax efficiency Insta cheque for over the counter redemption. T+1/T+0 redemption in debt liquid funds Direct debit credit Facilities Switch facility, Systematic investment plan, and systematic withdrawal plan. Systematic Transfer Plan to suit changing needs Cumulative dividend reinvestment /pay out and bonus unit options. Distribution Front Innovation: Postal network to distribute mutual funds. Retail distribution of mutual funds through the national stock Exchange. Increasing reach through collection centers and third party outlets like direct AMC serving outlets. Technology Innovation: Networking of branches to provide improved customer service and online information Call centers to disseminate information and handle investor queries.

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3. Ethical challenges of mutual fund industry: The fund industry must overcome greed cultivated through decades of blind luck business success. They should hold on to a high ethical standard by embracing ethics even where it sacrifice near term growth. The industry must avoid searching forget rich-quick schemes. Future Perspective: The mutual fund industry must innovate and embrace technology Product: Hedge Funds Pension Funds Derivatives Linked Products Theme Funds Bundled Products Services: Smart triggers based on value and time of investments Advisory services Online payment systems with efficient and effective us of ATMS
Check writing facilities issue of checks to third parties

Distribution:
Technology channels like ATM ,WAP and KIOSKS Supermarkets Multilevel Marketing Customer Relationship management service models
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CHAPTER-5

ANALYSIS AND INTERPRETATION OF DATA


ANALYSIS OF DATA INTRODUCTION INTERPRETATION OF DATA

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ANALYSIS AND INTERPRETATION OF DATA


Analysis of Data Introduction
Managers take decisions on the basis of available information or data. Raw data may be available to managers in scattered form. Unless data are properly collected, analyzed and presented, it may not useful for decision making. Raw data may not be easily be comprehensible and it becomes essential to classify and present them in a meaningful manner. Statistical data can be presented in the form of tables and graphs. In tabular form, classification of data is made with reference to time or some other variables. Graphic analysis presents a visual picture of the given data.

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Table no 1 showing the investors in which company they have invested. Name of Co: UTI SBI HDFC ICICI KOTAK MAHINDRA TATA OTHERS Total No: of Respondents Percentage 10 20 15 30 5 10 8 16 3 6 5 10 4 8 50 100

The below graph showing the percentage of the Investors invested in different companies.

UTI 8% 10% 6% 20% SBI

16% 30% 10%

From the graph we can interpret that respondents have invested in various companies. SBI leading in the list with 30% showing the popularity of the company.

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Table no 2 showing the investor in which scheme they have option to invest. Scheme Equity Debt Liquid Balance Fund Total No: of Respondents 35 5 10 0 50 Percentage (%) 70 10 20 0 100

The graph shows the percentage of respondents that have invested in different scheme

35 35 30 25 20 15 10 5 0 Equity Debt Liquid Balance Fund 5 0 10

From the graph we can interpret that majority of the respondents have invested in equity schemes. Very few respondents have invested in other schemes.

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Table No 3 shows the purpose of investment


Purpose of Investment Tax Benefit Security Returns Total No of Respondent 5 30 15 50 Percentage (%) 10 60 30 100

Graph shows the percentage of the purpose of investment.

RETURNS

30

SECURITY

60

TAXBENEFIT

10

20

40

60

80

From the graph we can interpret that majority of the respondents have invested in mutual fund because of safety. Other investors have invested due to returns.

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Table no 4 showing the number of investors satisfied with the service of SBI Mutual Fund Company. No of Respondents 40 10 50 Percentage (%) 80 20 100

Satisfied Not Satisfied Total

Graph Shows Percentage of the investors satisfied with the service of their Companys

20%

SATISFIED NOT SATISFIED

80%

From the graph we can interpret that majority of the respondents have satisfied with the service of Mutual Fund Company. SBI Mutual Fund has been successful in this area.

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Table no 5 shows how the investors will visualize Mutual Fund from investment angel. Investment No: of respondents Percentage (%) Long Term Investment 10 20 Risk Coverage 30 60 Reasonable rate of return 10 20 Total 50 100 Graph shows the percentage of the investors that they visualize Mutual Fund from different angel.

60% 60% 50% 40% 30% 20% 10% 0% Long Term Investment Risk Coverage Reasonable rate of return 20% 20%

From the graph we can interpret that majority of the respondents have visualized mutual fund from risk coverage point of view. Other investors have visualized mutual fund from long term Investment point of view.

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Table no 6 showing the investors their expected rate of return from investment in Mutual Fund. Rate of Return 7 10 % 10 15 % 15% and above Total No: of Respondent 5 35 10 50 Percentage (%) 20 50 30 100

50 40 30 20 10 0 Rate of Return
10% - 15% > 15%

7% - 10%

We can interpret that half of the respondents have got 10-15% return, while 30% investors have got returns 15% and above.

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Table no 7 showing investment timeframe in mutual fund Period Less than I year 1 to 3 years 3 to 5 years More than 5 years Total Respondents 25 12 7 6 50 Percentage (%) 50 24 14 12 100

More than 5 years

3 to 5 years

1 to 3 years

12

Less than I year 0 5 10 15 20 25

25

We can interpret that half of the respondents have invested in mutual fund for shorter time duration. Other investors have invested in mutual fund for time duration of 1 to 3 years.

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CHAPTER-6
FINDINGS, SUGGESSION AND CONCLUSION

FINDING SUGGESTIONS CONCLUSION

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FINDINGS, SUGGESSION AND CONCLUSION

Findings
1. Significant number of investors has invested in SBI mutual fund. This shows popularity of the company. 2. Majority of the respondents have invested in equity schemes. Very few respondents have invested in other schemes. 3. Majority of the respondents have invested in mutual fund because of safety. Other investors have invested due to returns. 4. Investors have satisfied with services provided by the company. 5. The motive behind investing in mutual fund is risk coverage 6. Majority of the Investors have got returns ranging between 10 7. Majority of the investors have invested for shorter time duration.

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Suggestions Company should try to give more value added services to its investors. Only equity schemes have been popular. So company should popularize other schemes. As investors are more concerned about safety, more transparency should be there as far as investment of fund in other companies by the company. Company should make sure that the investment of investors is risk free.

Conclusion Positive investor perception is the ultimate for any mutual fund. SBI is leading in this area. as more and more private mutual funds are entering in to the industry . So company need to concentrate on its core activities to improve the customers perception. Unless and until the company provides innovative schemes to its the customers, positive perception wont develop. Mutual Fund is not new to India; it is there from the past 4 decades. Only from past one decade after the entry of private Mutual Fund and Foreign (sponsored) Mutual Funds, the competition and innovation took place in the Indian Mutual Fund Industry in a rather short period, has grown from infancy to adolescence.
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Annexure

QUESTIONNAIRE
Dear Sir/Madam, I am the students of Final Year BBM Studying in Govt. First Grade College, Tarikere, have undertaken A study of Investor Expectation towards SBI Mutual Funds. I request you to kindly spare your valuable time to fill up the questionnaire. The information given by you will be used only for academic purpose and kept highly confidential. Thanking you. Yours Faithfully
Santhosh .N

1) Name 2) Age 3) Sex 4) Profession

: : : Male : Government sector Engineers Others If others, specify Female Private sector Professionals

5) Spouse

: Employed

Unemployed

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6) Income level

: 5000-15000PM 16000-30000PM

16000-30000PM 30000 and above

7) Have you invested in mutual fund schemes? Yes No

8) If yes, in which company UTI SBI HDFC TATA ICICI OTHERS

KOTAK MAHINDRA

9) In the above schemes you opted for Open ended scheme close ended

10) Select the scheme you would invested in mutual fund Equity scheme Liquid scheme Debt scheme Balance ended scheme

11) How do you visualize mutual fund from investment angle As long term investment As risk coverage As reasonable rate of return

12) What is the purpose of investment? Tax benefits Security Returns

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13) Are you interested in government or Private Mutual Fund Company? Government Private

14) Are you satisfied with the service of SBI Mutual Fund Company? Satisfied Not satisfied

15) What is your investment time frame i.e. for how long you set aside your funds? Less than 1 year 1 year to 3 years 3 years to 5 years More than 5 years 16) What is the expected return on your investment? 7% - 10% 10% - 15% 15% and above

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17. What is the amount of Money you plan to invest in Mutual Funds? Rs. 5- 10 Thousand Rs.1050 Thousand Rs. 50- 1 lakhs Rs. 1 lakhs & above [ [ [ [ ] ] ] ]

18. Do you find that rate of interest you are paying for portfolio Management is? Competitive Reasonable High Low [ [ [ [ ] ] ] ]

19. What type of investment you are paying /want to pay? Monthly Quarterly Half yearly Annually [ [ [ [ ] ] ] ]

20. Are you satisfied with the different services provided by the Mutual Funds schemes? Yes No [ [ ] ]

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21. If yes what is your opinion about the competitive services of other Mutual Funds schemes? Excellent Good Satisfactory Poor [ [ [ [ ] ] ] ]

22. How do you rate the services provided by SBI Mutual Funds? Excellent Good Satisfactory Poor [ [ [ [ ] ] ] ]

Date: Place:

Signature:

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BIBLIOGRAPHY Books referred: Financial markets and services: By E GORDEN BY DR. K. NATARAJAN Mutual Fund in India: By H. Sadhak Financial services and Investment: By B V Ragunandan Journals Investor India: Business World, business India, Investor Websites: www. Way2wealth.com www.amfi.com www.Mutual fund India .com www.sbimf.org www.mutualfundsindia.com www.google.com mf.pdf www.sbi.com

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