Literature Review Helpli

A
REPORT ON
COMPARITIVE ANALYSIS OF MUTUAL
FUNDS
WITH SPECIAL REFERENCE TO
SBI MUTUAL FUND

MRINAL MANISH
ENR. NO.:4108078078
2008 2010
COMPANY GUIDE: MR. KAPIL MALIK
(H.O.D.- RETAIL)
A report submitted in partial fulfilment for the requirement of MBF program

MRINAL MANISH (4108078078)
INDIAN INSTITUTE OF FINANCE Page 2

ACKNOWLEDGEMENT

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

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

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

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

Again, I sincerely thank all of them.

- MRINAL MANISH
ENR. NO.- 4108078078


CERTI FI CATE

This is to certify that the project on Comparative Analysis of Mutual Funds with
special refernce to SBI Mutual Fund has been done by Mr. Mrinal Manish with
Reference to SBI Mutual Fund, Ashoka Estate, New Delhi as a part of the
requirement of the Management of Business Finance (MBF) summer training
program. This study is being submitted for approval to Indian Institute of Finance.
I declare that the form and contents of the above mentioned project are
original and have not been submitted in part or full, for any other degree or
diploma of this or any other Organization / Institute/ University.

Signature: --------------------
Name: Mrinal Manish
Enrollment No. 4108078078
MBF (2008-2010)
Indian Institute of Finance


PREFACE

Finance & its functions are the part of economic activity. Finance is very essentially needed
for all types of organizations viz; small, medium, large-scale industries & service sector.
Hence the role of finance manager & the subject finance accounting gained maximum
importance. Liberalization, globalization & privatization created new challengers to
entrepreneur & corporate in carrying theyre day to day activities. So, finance is regarded
as the life blood of a business organization.
Master of business administrator is professional course which develop a new body of
knowledge & skill set & make as available for those seeking challenging carriers in the of
liberalization & globalization.
The goal of the Summer Training is to give a corporate exposure to the students as well as to
give them an opportunity to apply theory into the practice. The real business problems are
drastically different from class-room case solving. Summer Project aims to providing little
insight into working of an organization to a management trainee.
Among every stage of knowledge being inculcated in students, practical training in the
corporate world plays a significant role in exhibiting and pruning their capabilities.
The purpose behind writing a report is to put in to works the practical training that is
imparted into me that gives a better and a clear understanding of the experience I got.
COMPARATIVE ANALYSIS OF MUTUAL FUNDS WITH SPECIAL REFERENCE
TO SBI MUTUAL FUND
being a very important aspect of SBI Mutual Fund Pvt. Ltd., I have tried to explore many
areas of the subject in my project report.


While preparing this project report I got the knowledge about various
aspects regarding financial decisions made in organisation like SBI Mutual Fund Pvt. Ltd.
the business world.
My project is divided into 5 chapters & they are given as under.
1. Chapter 1 is an introduction of the mutual fund industry and the company.
2. Chapter 2 deals with review of literature.
3. Chapter 3 states the methodology being used in the project.
4. Chapter 4 basically states the Analysis of the Mutual Funds
5. Chapter 5 deals with the use of findings, conclusion. suggestions and limitations.


CONTENTS
Chapter Page no.
I. INTRODUCTION15-62
1. WHY COMPARATIVE ANALYSIS OF MUTUAL FUNDS?............15
2. INTRODUCTION TO MUTUAL FUNDS.17
3. INDUSTRY PROFILE40
4. COMPANY PROFILE....46
5. NEW FUND OFFER (SBI GETS)...................................................61
6. OTHER WORK EXPERIENCE AND LEARNINGS DURING THE PROJECT
....................................................................................................62

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

III. RESEARCH METHODOLOGY.......................................................75-119
1. NEED OF THE STUDY........................78
2. TERMINOLOGY.....79
3. DATA COLLECTION METHOD.........................85
4. ANALYSIS OF THE INDIVIDUAL INVESTOR..86
5. MOST POPULAR FUNDS OF SBI MUTUAL FUND................100
6. INVESTMENT BEHAVIOUR...........102
FACTOR ANALYSIS...................................................107
DISCRIMINANT ANALYSIS.......................................109
7. MOST POPULAR FUND HOUSE IN TERMS OF HIGHEST
INVESTMENT........................................................................119

IV. COMAPARRATIVE ANALYSIS...........121-176
1. INTRODUCTION....................................................................122


- NAV..............................................................122
- BETA.......................................................124
- STANDARD DEVIATION.........................124
- SHARPE RATIO.......................................125
- TREYNOR RATIO....................................125

2. INTER FIRM COMPARISION....................................127
- EQUITY DIVERSIFIED FUNDS................129
- EQUITY LINKED SAVING SCHEMES.....138
- EQUITY LARGE CAP FUNDS..................147
- EQUITY SMALL AND MID CAP FUNDS.155
- EQUITY THEMATIC FUNDS...................165

V. EXPECTATION OF THE INDUSTRY FROM BUDGET 2009-10....176
SWOT ANALYSIS............................................................................181
CONCLUSIONS......184
SUGGESTIONS AND RECOMMENDATIONS.........186
LIMITATIONS....192
GLOSSARY..........................103
REFERENCES..................................................................................205
ANNEXURE......................................................................................207


TABLE I NDEX

Table Name Page no.
1. BOARD OF DIRECTORS OF SBI MUTUAL FUND......................................53
2. NATIONAL DISTRIBUTORS..........................................................................59
3. ANALYSIS OF FUNDS ON THE BASIS OF VARIOUS RATIOS................81
4. ANALYSIS ACCORDING TO SAVINGS FROM INCOME..........................88
5. DESCRIPTIVE WEIGHTED FACTOR COUNTING METHOD...................105
6. FACTOR ANALYSIS.......................................................................................106
7. FUNDS RETURN OF EQUITY DIVERSIFIED FUNDS...............................129
8. RISK PROFILE OF EQUITY DIVERSIFIED FUNDS....................................130
9. PORTFOLIO ANALYSIS OF EQUITY DIVERSIFIED FUNDS....................133
10. NAV DETAILS OF EQUITY DIVERSIFIED FUNDS...................................135
11. FUNDS RETURN OF ELSS.............................................................................138
12. RISK PROFILE OF ELSS.................................................................................140
13. PORTFOLIO ANALYSIS OF ELSS.................................................................142
14. NAV DETAILS OF ELSS..................................................................................144
15. FUNDS RETURN OF EQUITY LARGE CAP.................................................147
16. RISK PROFILE OF EQUITY LARGE CAP.....................................................149
17. PORTFOLIO ANALYSIS OF EQUITY LARGE CAP.....................................151
18. NAV DETAILS OF EQUITY LARGE CAP.....................................................153


19. FUNDS RETURN OF SMALL AND MID CAP.............................156
20. RISK PROFILE OF SMALL AND MID CAP.................................158
21. PORTFOLIO ANALYSIS OF SMALL AND MID CAP.................160
22. NAV DETAILS OF SMALL AND MID CAP..................................162
23. FUNDS RETURN OF EQUITY THEMATIC..................................165
24. RISK PROFILE OF EQUITY THEMATIC .....................................167
25. PORTFOLIO ANALYSIS OF EQUITY THEMATIC......................169
26. NAV DETAILS OF EQUITY THEMATIC.......................................171
27. COMPARISION OF MUTUAL FUNDS AGAINST OTHER INVESTMENT
AVENUES................................................................................................173


CHART I NDEX
Chart name Page no.
1. PRODUCT PORTFOLIO.............................................................57
2. ANALYSIS OF THE PREFERENCES OF THE RESPONDENT.......86
3. ANALYSIS ACCORDING TO AGE...............................................87
4. ANALYSIS ACCORDING TO OCCUPATION................................89
5. ANALYSIS ON THE BASIS OF PURCHASE OF INVESTMENT....93
6. INVESTMENT OBJECTIVES........................................................94
7. RISK PREFERENCES...................................................................94
8. PREFERABLE ROUTE TO INVESTING IN MUTUAL FUND........96
9. SATISFACTION LEVEL WITH SBI..............................................100
10. DEMOGRAPHIC FACTORS..........................................................109
11. MOST POPULAR FUND HOUSE..................................................119
12. FUND RETURNS OF EQUITY DIVERSIFIED FUNDS .................129
13. RISK PROFILE OF EQUITY DIVERSIFIED FUNDS......................131
14. PORTFOLI ANALYSIS OF EQUITY DIVERSIFIED FUNDS..........133
15. NAV DETAILS OF EQUITY DIVERSIFIED FUNDS......................135
16. FUND RETURNS OF ELSS...........................................................139
17. RISK PROFILE OF ELSS..............................................................140
18. PORTFOLIO ANALYSIS OF ELSS...............................................143
19. NAV DETAILS OF ELSS..............................................................145


20. FUND RETURNS OF EQUITY LARGE CAP.........................147
21. RISK PROFILE OF EQUITY LARGE CAP...........................149
22. PORTFOLIO ANALYSIS OF LARGE CAP..........................151
23. NAV DETAILS OF LARGE CAP.........................................154
24. FUND RETURNS OF EQUITY SMALL AND MID CAP.......156
25. RISK PROFILE OF EQUITY SMALL AND MID CAP...........158
26. PORTFOLIO ANALYSIS OF EQUITY SMALL AND MID CAP
.................................................................................................160
27. NAV DETAILS OF EQUITY SMALL AND MID CAP...........162
28. FUND RETURNS OF EQUITY THEMATIC..........................165
29. RISK PROFILE OF EQUITY THEMATIC.............................167
30. PORTFOLIO ANALYSIS OF EQUITY THEMATIC...............169
31. NAV DETAILS OF EQUITY THEMATIC..............................171


EXECUTI VE SUMMARY

OBJ ECTI VE:

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

SCOPE:

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

FIIs are taking care by head office in MUMBAI. I am under section of National distributors
and Individual financial advisors. To maintain relationships with them and make them aware


about the new offerings and sort out their existing problems. My area of
scope is DELHI region. There are around 250 NDs and IFAs in this region.

METHODOLOGY FOLLOWED:

Methodology basically means the selection of the various methods and techniques in the
research-conducted. The various steps includes: -
1. Selection of a representative sample from the general population, which depicts the
characteristics of the complete
population.
2. Application of various tools and techniques to obtain relevant information related to a case.
3. Collection of relevant data.
4. Analysis and interpretation of the data.
5. Generation of a final report.

RESEARCH DESI GN

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

The following methodology is adopted for Comparison
Step1: Selection of few well-performing Funds of Big Fund Houses of India.
Step2: Collection of data (against various parameters) for comparison of Funds.
Step3: Analyses of the parameters and their relevance in comparing the funds.


Step4: Comparing and Ranking these funds on the basis of inputs from
executives and the
rating agencies.
Step5: Generation of a project report.

DATA COLLECTI ON

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

DATA ANALYSI S

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


1. I NTRODUCTI ON

WHY COMAPARATI VE ANALYSI S OF MUTUAL FUNDS?

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

The mutual fund industry in India is regulated by Association of Mutual Funds in India
(AMFI). The mutual fund industry in India is of 493,287 crores approx. SBI Mutual Fund is
Indias largest bank sponsored mutual fund and has an enviable track record in judicious
investments and consistent wealth creation.
The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has
grown immensely since its inception and today it is India's largest bank, patronized by over
80% of the top corporate houses of the country.
SBI Mutual Fund is a joint venture between the State Bank of India and Socit
Gnrale Asset Management, one of the worlds leading fund management companies
that manages over US$ 500 Billion worldwide.
In twenty years of operation, the fund has launched 38 schemes and successfully redeemed
fifteen of them. In the process it has rewarded its investors handsomely with consistently high
returns.
A total of over 4.6 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund.
Schemes of the Mutual fund have consistently outperformed benchmark indices and have
emerged as the preferred investment for millions of investors and HNIs.
Today, the fund manages over Rs. 28500 crores of assets and has a diverse profile of
investors actively parking their investments across 36 active schemes.


The fund serves this vast family of investors by reaching out to them
through network of over 130 points of acceptance, 28 investor service centers, 46 investor
service desks and 56 district organizers.
SBI Mutual is the first bank-sponsored fund to launch an offshore fund Resurgent India
Opportunities Fund.
Growth through innovation and stable investment policies is the SBI MF credo
State Bank of India was born on 1
st
July,1955 based on the recommendations of All India
Rural Credit Survey Committee(1954) headed by Shri A.D Gorwala, through an Act of
Parliament. The main objective of SBI is Extension of Banking facilities on a large scale,
more particularly in rural and semi-urban areas, and for diverse other public purposes and to
transfer to it the undertaking of the Imperial Bank of India and provide for other matters
connected thereto or incidental thereto.SBI is the oldest, the largest and the highest profit
making bank in India. Its evolution is not only intimately interwoven with the economic
development of modern India but also with our nation building process to an extent perhaps
unparalleled in the world. Moving like colossuses on the Indian financial turf, it has become a
symbol of national pride and economic development.

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

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


I NTRODUCTI ON TO MUTUAL FUNDS

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

As Indian economy is growing at the rate of 8% per annum, we can see its effect in all areas.
The Indian stock market and companies have become lucrative for foreign investors. More
and more fund is pouring in our country. This is increasing liquidity in the market and hence
increasing the money in the hands of people and thus investment. As the future prospects for
Indian companies are bright, they have lots of opportunities to expand their business
worldwide, the investment in Indian companies.
A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is invested by the fund manager in different types of
securities depending upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned through these investments and
the capital appreciations realized by the scheme are shared by its unit holders in proportion to
the number of units owned by them (pro rata). Thus a Mutual Fund is the most suitable
investment for the common man as it offers an opportunity to invest in a diversified,
professionally managed portfolio at a relatively low cost. Anybody with an investible surplus
of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme
has a defined investment objective and strategy.
A mutual fund is the ideal investment vehicle for todays complex and modern financial
scenario. Markets for equity shares, bonds and other fixed income instruments, real estate,
derivatives and other assets have become mature and information driven. Price changes in
these assets are driven by global events occurring in faraway places. A typical individual is
unlikely to have the knowledge, skills, inclination and time to keep track of events,
understand their implications and act speedily. An individual also finds it difficult to keep
track of ownership of his assets, investments, brokerage dues and bank transactions etc.


A mutual fund is the answer to all these situations. It appoints
professionally qualified and experienced staff that manages each of these functions on a full
time basis. The large pool of money collected in the fund allows it to hire such staff at a very
low cost to each investor. In effect, the mutual fund vehicle exploits economies of scale in all
three areas - research, investments and transaction processing. While the concept of
individuals coming together to invest money collectively is not new, the mutual fund in its
present form is a 20
th
century phenomenon. In fact, mutual funds gained popularity only after
the Second World War. Globally, there are thousands of firms offering tens of thousands of
mutual funds with different investment objectives. Today, mutual funds collectively manage
almost as much as or more money as compared to banks.
A draft offer document is to be prepared at the time of launching the fund. Typically, it pre
specifies the investment objectives of the fund, the risk associated, the costs involved in the
process and the broad rules for entry into and exit from the fund and other areas of operation.
In India, as in most countries, these sponsors need approval from a regulator, SEBI
(Securities exchange Board of India) in our case. SEBI looks at track records of the sponsor
and its financial strength in granting approval to the fund for commencing operations.
A sponsor then hires an asset management company to invest the funds according to the
investment objective. It also hires another entity to be the custodian of the assets of the fund
and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.
In the Indian context, the sponsors promote the Asset Management Company also, in which it
holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset
Management Company (AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life
Asset Management Company Ltd., which has floated different mutual funds schemes and
also acts as an asset manager for the funds collected under the schemes.


Future Scenario
The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few
years as investors shift their assets from banks and other traditional avenues. Some of the
older public and private sector players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge with stronger players
in three to four years. In the private sector this trend has already started with two mergers and
one takeover. Here too some of them will down their shutters in the near future to come.
But this does not mean there is no room for other players. The market will witness a flurry of
new players entering the arena. There will be a large number of offers from various asset
management companies in the time to come. Some big names like Fidelity, Principal, and
Old Mutual etc. are looking at Indian market seriously. One important reason for it is that
most major players already have presence here and hence these big names would hardly like
to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in India as this would
enable it to hedge its risk and this in turn would be reflected in its Net Asset Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund schemes to trade in
derivatives. Importantly, many market players have called on the Regulator to initiate the
process immediately, so that the mutual funds can implement the changes that are required to
trade in Derivatives.
Market Trends
A lone UTI with just one scheme in 1964 now competes with as many as 400 odd products
and 34 players in the market. In spite of the stiff competition and losing market share, UTI
still remains a formidable force to reckon with.
Last six years have been the most turbulent as well as exiting ones for the industry. New
players have come in, while others have decided to close shop by either selling off or


merging with others. Product innovation is now pass with the game
shifting to performance delivery in fund management as well as service. Those directly
associated with the fund management industry like distributors, registrars and transfer agents,
and even the regulators have become more mature and responsible.
The industry is also having a profound impact on financial markets. While UTI has always
been a dominant player on the bourses as well as the debt markets, the new generations of
private funds which have gained substantial mass are now seen flexing their muscles. Fund
managers, by their selection criteria for stocks have forced corporate governance on the
industry. By rewarding honest and transparent management with higher valuations, a system
of risk-reward has been created where the corporate sector is more transparent then before.
Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and
technology sector. Funds performances are improving. Funds collection, which averaged at
less than Rs100bn per annum over five-year period spanning 1993-98 doubled to Rs210bn in
1998-99. In the current year mobilization till now have exceeded Rs300bn. Total collection
for the current financial year ending March 2000 is expected to reach Rs450bn.
What is particularly noteworthy is that bulk of the mobilization has been by the private sector
mutual funds rather than public sector mutual fundsMutual funds are now also competing
with commercial banks in the race for retail investors savings and corporate float money.
The power shift towards mutual funds has become obvious. The coming few years will show
that the traditional saving avenues are losing out in the current scenario. Many investors are
realizing that investments in savings accounts are as good as locking up their deposits in a
closet. The fund mobilization trend by mutual funds in the current year indicates that money
is going to mutual funds in a big way.
India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts of
an Asset base that is much higher than its bank deposits. In India, mutual fund assets are not
even 10% of the bank deposits, but this trend is beginning to change. Recent figures indicate
that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas
bank deposits rose by only 17%. (Source: Think-tank, the Financial Express September, 99)


This is forcing a large number of banks to adopt the concept of narrow
banking wherein the deposits are kept in Gilts and some other assets which improves liquidity
and reduces risk. The basic fact lies that banks cannot be ignored and they will not close
down completely. Their role as intermediaries cannot be ignored. It is just that Mutual Funds
are going to change the way banks do business in the future.

WHAT I S A MUTUAL FUND?

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

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

Pool their money with
Investors Fund managers

Invest in
Passed back to

Returns Securities

Generates


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

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

Organization of a Mutual Fund

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


TYPES OF MUTUAL FUND SCHEMES

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

By Structure:

Open-ended Funds:

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

Closed ended Funds:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can invest
in the scheme at the time of the initial public issue and thereafter they can buy or sell the
units of the scheme on the stock exchanges where they are listed. In order to provide an exit
route to the investors, some close-ended funds give an option of selling back the units to the
Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate
that at least one of the two exit routes is provided to the investor. .
Interval Funds:

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

By Investment Objective


Growth Funds:

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

Income Funds:

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

Balanced Fund:
The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the
NAV of these schemes may not normally keep pace, or fall equally when the market falls.
These are ideal for investors looking for a combination of income and moderate growth.

MoneyMarketFunds:

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


Other Schemes

Tax Saving Schemes:

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

Special Schemes

- Industry Specific Schemes

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

- Index Schemes

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

- Sectoral Schemes

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


BENEFI TS OF MUTUAL FUNDS

Diversification

Professional management Tax benefits

Affordability Transparency

Professional Management

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

Diversification


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

Affordability

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

Tax Benefits

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

Return Potential

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

Low Costs

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

Liquidity


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

Transparency

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

Flexibility

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

Well Regulated

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

Tax breaks

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


They also give you the advantages of capital gains taxation. If you hold
units beyond one year, you get the benefits of indexation. Simply put, indexation benefits
increase your purchase cost by a certain portion, depending upon the yearly cost-inflation
index (which is calculated to account for rising inflation), thereby reducing the gap between
your actual purchase cost and selling price. This reduces your tax liability.
Whats more, tax-saving schemes and pension schemes give you the added advantage of
benefits under Section 88. You can avail of a 20 per cent tax exemption on an investment of
up to Rs 10,000 in the scheme in a year

No assured returns and no protection of capital

If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not
offer assured returns and carry risk. For instance, unlike bank deposits, your investment in a
mutual fund can fall in value. In addition, mutual funds are not insured or guaranteed by any
government body (unlike a bank deposit, where up to Rs 1 lakh per bank is insured by the
Deposit and Credit Insurance Corporation, a subsidiary of the Reserve Bank of India).
There are strict norms for any fund that assures returns and it is now compulsory for funds to
establish that they have resources to back such assurances. This is because most closed-end
funds that assured returns in the early-nineties failed to stick to their assurances made at the
time of launch, resulting in losses to investors.
Restrictive gains

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


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

RISK ASSOCIATED WITH MUTUAL FUNDS

Risk-Return Trade Off

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

Market Risk

Credit Political inflation

RISKS
Liquidity Market


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

Credit Risk

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

Inflation Risk

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

Interest Rate Risk

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

Political Risk


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

Liquidity Risk

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

DI SADVANTAGES OF MUTUAL FUNDS

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

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


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

3. Fees and Expenses: Most mutual funds charge management and operating fees that
pay for the fund's management expenses (usually around 1.0% to 1.5% per year). In
addition, some mutual funds charge high sales commissions, 12b-1 fees, and
redemption fees. And some funds buy and trade shares so often that the transaction
costs add up significantly. Some of these expenses are charged on an ongoing basis,
unlike stock investments, for which a commission is paid only when you buy and sell
.
4. Poor Performance: Returns on a mutual fund are by no means guaranteed. In fact, on
average, around 75% of all mutual funds fail to beat the major market indexes, like
the S&P 500, and a growing number of critics now question whether or not
professional money managers have better stock-picking capabilities than the average
investor.

5. Loss of Control: The managers of mutual funds make all of the decisions about
which securities to buy and sell and when to do so. This can make it difficult for you
when trying to manage your portfolio. For example, the tax consequences of a
decision by the manager to buy or sell an asset at a certain time might not be optimal
for you. You also should remember that you are trusting someone else with your
money when you invest in a mutual fund.


6. Trading Limitations: Although mutual funds are highly liquid in
general, most mutual funds (called open-ended funds) cannot be bought or sold in the
middle of the trading day. You can only buy and sell them at the end of the day, after
they've calculated the current value of their holdings.

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

8. Inefficiency of Cash Reserves: Mutual funds usually maintain large cash reserves as
protection against a large number of simultaneous withdrawals. Although this
provides investors with liquidity, it means that some of the fund's money is invested
in cash instead of assets, which tends to lower the investor's potential return.
Different Types: The advantages and disadvantages listed above apply to mutual funds in
general. However, there are over 10,000 mutual funds in operation, and these funds vary
greatly according to investment objective, size, strategy, and style. Mutual funds are available
for virtually every investment strategy (e.g. value, growth), every sector (e.g. biotech,
internet), and every country or region of the world. So even the process of selecting a fund
can be tedious.

Net Asset Value (NAV)Open-end mutual funds price their shares in terms of a Net Asset
Value (NAV) (note that you can calculate NAV for a closed-end fund too, but it will not


necessarily be the price at which you buy or sell closed-end shares). NAV
is calculated by adding up the market value of all the fund's underlying securities, subtracting
all of the fund's liabilities, and then dividing by the number of outstanding shares in the fund.
The resulting NAV per share is the price at which shares in the fund are bought and sold (plus
or minus any sales fees). Mutual funds only calculate their NAVs once per trading day, at the
close of the trading session.

HI STORY OF MUTUAL FUND I N I NDI A

HISTORY The Landmarks

1963: UTI is Indias first mutual fund.

1964: UTI launches US-64.

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

1986: UTI Master share, Indias first true mutual fund scheme, launched.

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

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

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

1994: Morgan Stanley is the first foreign player.


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

1998: UTI Master Index Fund is the countrys first index fund.

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

2000: The industrys assets under management crosses Rs 1, 00,000 crore.
2001: US-64 scam leads to UTI overhaul.

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

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

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

FIRST PHASE: 1964 87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by
the Reserve Bank of India and functioned under the regulatory and administrative control of
the Reserve Bank of India. In 1978, UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in


place of RBI. The first scheme launched by UTI was Unit Scheme 1964.
At the end of 1988 UTI had Rs.6, 700 crores of assets under the management.

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

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

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

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

FOURTH PHASE: since February 2003


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


I NDUSTRY PROFI LE:

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


STRUCTURE OF MUTUAL FUNDS I N I NDI A

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

The Fund Sponsor


Sponsor is defined under SEBI Regulations as any person who, acting
alone or in combination with another body corporate establishes a mutual fund. The sponsor
of a fund is akin to the promoter of companies he gets the fund registered with SEBI. The
sponsor will form a Trust and appoint a Board of Trustees. All these appointments are made
in accordance with the SEBI Regulations. As per the existing SEBI Regulations, for a person
to qualify as a sponsor, must contribute at least 40% of the net worth of the AMC and issues a
sound financial track over five years prior to registration.

Mutual Funds as Trusts

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

Trustees

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

Right of Trustees

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


Obligations of the AMC and its Directors

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

Asset Management Company

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

Transfer Agents

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

Distributors

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

Bankers

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


Custodian and Depository

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

ASSOCI ATI ON OF MUTUAL FUNDS I N I NDI A

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

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

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

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It
has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The
objectives are as follows:
This mutual fund association of India maintains high professional and ethical standards
in all areas of operation of the industry.


It also recommends and promotes the top class business practices and
code of conduct which is followed by members and related people engaged in the
activities of mutual fund and asset management. The agencies who are by any means
connected or involved in the field of capital markets and financial services also involved
in this code of conduct of the association.
AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund
industry.
Association of Mutual Fund in India does represent the Government of India, the Reserve
Bank of India and other related bodies on matters relating to the Mutual Fund Industry.
It develops a team of well qualified and trained Agent distributors. It implements a
program of training and certification for all intermediaries and other engaged in the
mutual fund industry.
AMFI undertakes all India awareness programmed for 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 informations
on Mutual Fund Industry and undertakes studies and research either directly or in
association with other bodies


COMPANY PROFI LE

ABOUT THE ORGANIZATION:

SBI Mutual Fund is Indias largest bank sponsored mutual fund. The fund traces its
lineage to SBI - Indias largest banking enterprise. The institution has grown immensely since
its inception and today it is India's largest bank, patronized by over 80% of the top corporate
houses of the country. SBI Mutual Fund is a joint venture between the State Bank of
India and Socit Gnrale Asset Management, one of the worlds leading fund
management companies that manages over US$ 500 Billion worldwide. In twenty years of
operation, the fund has launched 38 schemes and successfully redeemed fifteen of them.
A total of over 4.6 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund. The fund serves this vast family of investors by reaching out to
them through network of over 130 points of acceptance, 28 investor service centers, 46
investor service desks and 56 district organizers. Today, the fund manages over Rs.
28500crores of assets and has a diverse profile of investors actively parking their investments
across 36 active schemes. SBI Mutual is the first bank-sponsored fund to launch an offshore
fund Resurgent India Opportunities Fund. Growth through innovation and stable
investment policies is the SBI MF credo.

GUI DI NG PRI NCI PLES OF SBI MUTUAL FUND:

Consistency

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


Flexibility

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

Stability

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

Origin

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

Concept


Mutual fund is vehicle that enables a number of investors to pool their money and
have it jointly managed by a professional money manager.
A Mutual Fund is a pool of money, collected from investors, and is invested according to
certain investment objectives.
financial goal.
The money thus collected is then invested in capital market instruments such as shares,
debentures and other securities.
The income earned through these investments and the capital appreciation realised are shared
by its unit holders in proportion to the number of units owned by them.
Mutual Fund companies are known as asset management companies. They offer a variety of
diversified schemes. Mutual Fund acts as investment companies. They pool the savings of
investors and invest them in a well-diversified portfolio of sound investments.
Mutual funds can be broken down into two basic categories: equity and bond funds.
Equity funds invest primarily in common stocks, while bond funds invest mainly in various
debt instruments.
Within each of these sectors, investors have a myriad of choices to consider, including:
international or domestic, active or indexed, and value or growth, just to name a few.
I will cover these topics shortly. First, however, I am going to focus my attention on the nuts
and bolts of how mutual funds operate.


Mutual Fund Operation Flow Chart



ORGANI ZATI ON

Organization of a Mutual Fund

Mutual funds

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

Sponsor

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


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

Trustee

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

Asset Management Company (AMC)

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

Transfer Agent

The AMC if so authorised by the Trust Deed appoints the Registrar and Transfer Agent to the
Mutual Fund. The Registrar processes the application form, redemption requests and
dispatches account statements to the unit holders. The Registrar and Transfer agent also
handles communications with investors and updates investor records.
SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable
track record in judicious investments and consistent wealth creation. The fund traces
its lineage to SBI - Indias largest banking enterprise. The institution has grown


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

Thus SBI-MF believes in
- Proven Skills in Wealth Generation
- Exploiting expertise, compounding growth

OPERATI ON

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


BOARD OF DI RECTORS

Mr. Achal K. Gupta
Managing Director & Chief
Executive Office

Mr. C A Santosh
Chief Manager - Customer Service.
Mr. Didier Turpin
Dy. Chief Executive Officer
Ms. Aparna Nirgude
Chief Risk Officer
Mr. Ashwini Kumar Jain
Chief Operating Officer
Mr. Ashutosh P Vaidya
Company Secretary & Compliance Officer
Mr. Navneet Munot
Chief Investment Officer
Mr. Parijat Agrawal
Head Fixed Income
Mr. R. S. Srinivas Jain
Chief Marketing Officer


I NVESTMENT TEAM

Chief Investment Officer :

SanjaySinha

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

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

Vice President - Investment Department :

ThierryNardozi

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


NipaLadiwala

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

Equity :

Aashish Wakankar(Vice President & Fund Manager)

Aashish Wakankar is a Bachelor of Science from University of Mumbai and
holds Post Graduate Diploma in Management Studies from Jamnalal Bajaj
Institute of Management Studies, University of Mumbai. He has more than 12
years of experience in capital markets ranging from institutional equities, equity
research and fund management. He is associated with SBI Funds Management
from December 2005.
Prior to joining SBI Funds Management, he has worked with Kotak Mahindra
Asset Management, Deutsche Asset Management - part of Deutsche Bank Group,
and TATA TD Waterhouse Securities - a joint venture between the TATA Group,
India and TD Bank Financial Group, Canada. At Deutsche Asset Management, he
was responsible for advising the offshore fund Deutsche India Equity Fund, Japan
and MetLife Insurance.

Debt / Fixed Income:
Parijat Agrawal (HeadFixed Income)


Parijat has done his B.E (ECE) and PGDM (IIM Bangalore). He has got 12 years
experience in capital markets in areas like research, dealing and fund
management. Parijat is associated with SBI Funds Management Pvt. Ltd. since
July 2006.
Prior to joining SBI Funds Management Pvt. Ltd., he was with State Bank of
Mauritius Limited, Mumbai as Head Treasury.

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

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

OffshoreFunds

Anand Gupta

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


PRODUCT PORTFOLI O

Distribution channel in SBI MF

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


Overview of Retail channel

The alternative distribution channels that are available are selling, or using lead managers and
brokers along with sub-brokers, for selling units. To be successful in this mission, the
industry will have to ensure that only those agents that have conviction about mutual funds
being the most versatile and an ideal investment vehicle for investors are encouraged. This is
because, there is a sense of loyalty amongst agents, in anticipation of getting continuous
business throughout the year, and the trust and credibility that has been generated or will be
generated by being loyal to one institution. Savings in advertisement and publicity expenses
is also affected, as the target of communication is restricted to a few groups of individuals,
since the agent will function as a facilitator, informer and educator. The reduced cost benefit
will ultimately accrue to the investor in the form of higher returns.
In such a system, one achieves brand loyalty through continuous interaction between agents
and investors. Building a team of agents and other distribution network such as distribution
and collecting agents and franchise offices, will provide the investor the opportunity of
having continuous interaction and contact with the mutual fund.
Therefore, retail distribution through the agents is a preferred alternative for distributing
mutual fund products.
33%
9%
20%
9%
29%
Distribution Channel
N.D.'s SBG BANKS DIRECT IFA's


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

National Distributors Nitin Kumar
West & Central Delhi Yogesh Kumar & Sumit
East Delhi Suyash
South Delhi Amit Srivastava
North Delhi Abhishek Singh
Meerut Ajay Chauhan
Agra Jitin & Amir Raza

Relationship building with active and inactive distributors (I FAs)

During my internship tenure of more than 8 weeks with SBIMF, the main task that has been
assigned to me was relationship building, for which I have personally visited both active and
inactive distributors. AMC have around 2000 distributors in Delhi-NCR region which is sub
divided into 5 regions namely:-
1) North Delhi
2) South Delhi
3) East Delhi
4) West Delhi
5) Central Delhi


I have covered some areas of East, West and Central Delhi. The purpose
behind these visits was to build a relation with the distributors on the behalf of AMC which
in turn help in generating more investment. In case of inactive distributors the motive was to
find out the reasons for which they stopped dealing with SBIMF. In this cumbersome
exercise of relationship building I made several observations from the feedback which I got
from the distributors and are highlighted below.

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


OTHER WORK EXPERI ENCE AT SBI MUTUAL FUND

INFORMATION SHARING:

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

OPERATIONAL SERVICE:

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

COMPUTER AGE MANAGEMENT SERVICES PVT. LTD. (CAMS) offers a
comprehensive package of Transaction Processing and Customer Care services to the Mutual
Fund industry, and has been constantly raising the bar in customer service since 1995. Setup
in 1988 as a Software Developer, CAMS moved from Capital Market Transaction Processing
(processing Equity IPOs) to Customer Care and Transaction Processing for Mutual Funds.
CAMS today has the most appropriate and advanced technology employed, with the best
network for service delivery through its network of Service Centers in all major cities in
India. At SBIMF we have learnt the software and worked on it, the major things that we have
done using this software are

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

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

LEARNINGS DURING THE PROJECT:


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

1) INTERPERSONAL SKILLS:

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

2) COMMUNICATION SKILLS:

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

3) KNOWLEDGE ENHANCEMENT:

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

4) TEAM BUILDING:

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

5) APPLICATION OF KNOWLEDGE:

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


2. REVI EW OF LI TERATURE

June 2009

This was one of the best months for stocks and commodities in a
long time. Sensex posted a gain of 28% as both foreign and domestic
investors poured money. It is up a whopping 79% from the low
witnessed on March 9 this year. The scale and speed of stock market
gain has taken most investors by surprise and left out feeling is
leading to massive buying in high-beta names. Markets caught fire after the
announcement of election results and further fuel was added by positive news flow
from global markets.
The barrage of liquidity is finally finding its way into riskier assets across markets.
Credit spreads collapsed, high yield currencies gained against safe heavens and bond
yields rose as investors migrate from defensives to risk-assets. Volatility and risk
premiums are touching multi-month low as confidence is coming back into financial
markets. Incremental economic data is less negative, pile of cash is humongous and
policy remains extremely supportive. As we have been writing that the scale,
magnitude and synchronized nature of policy response this time is simply
unprecedented in history. Fundamental problems of global imbalances that led to this
crisis cant get resolved so easily and one might argue that the policy response so far
is something like treating a hangover with more alcohol. But the fact remains, that
in the short term, the sheer power of liquidity can take prices of risk assets to levels
far beyond what fundamentals may justify.
Commodity prices have also shot up with Reuters CRB index posting one of the
biggest monthly gain since 1974. Normally, commodities perform during the late
stage of the bull market, however, investors seem to be playing a paper currency


debasement play through investment in real assets. While central bankers are still
maintaining probably the most accommodative policy ever to combat deflation,
market wisdom as reflected in prices seem to be getting worried about onset of
inflation.
Indian equities were one of the best performing market this month as investors
jumped in after the decisive verdict in favor of UPA government. Foreign
Institutional Investors invested over $ 4 billion in the month of May and their year-to-
date investment has also crossed $ 4 billion. Investors draw comfort from the fact that
a major victory for UPA means greater ability to carry out critical reforms. Immediate
priority for the government would be to provide adequate fiscal stimul us in order to
cushion the economy against headwinds from the global downturn. The finance
minister would have to balance between keeping the fiscal deficit under control and
providing more fiscal stimulus. The government must show a roadmap to bring down
fiscal deficit over the medium term. Some of the long pending reforms related to FDI
in sectors like insurance and retail, rationalization of subsidies, introduction of GST
from 2010-11, continued thrust on agriculture and rural sector and restarting
disinvestment programme should be on the agenda. Apart from the physical
infrastructure, there should be equal focus on building the social infrastructure and
higher outlays on education and healthcare which would go a long way in building a
solid foundation for sustained economic growth. The other point we would like to
highlight is that the focus for the government this time should be on outcome, not
outlays; execution, not just big bang announcements.
This election is a game changer. At a time when the global economy is faced with
severe challenges, the world is looking for new engines of economic growth. India
with its demographic advantage, high savings rate and a domestic consumption and
investment oriented economy has the potential to de-couple from the rest of the world
and deliver higher growth rate on a sustained basis. At this time, we needed a pro-
reforms and stable government which can push structural reforms to unleash the full
potential of Indian economy and corporate sector. People of India have delivered that


decisive mandate.
Our sectoral bets and stock picks in equity funds are rightly positioned to take
advantage of the upturn in equity market. We have been focussing on investing in
companies leveraged on domestic consumption and infrastructure build up. While one
can expect liquidity inflows from domestic and foreign investors, several corporates
are likely to use the opportunity to raise equity. We will continue to keep a close
watch on evolving economic scenario, policy announcements and valuation.
Bond yields moved up on fears of higher government borrowing. Run up in
commodity prices and increase in bond yields globally have also weighed on the
sentiments. Interest rates are likely to be range-bound for some time and will offer
more trading opportunities.
Over the last several months, we have consistently been advising investors to focus
on long term growth potential of Indian economy and take advantage of the downturn
to build exposure to equities. The recent rally in equity markets further highlights the
importance of discipline in asset allocation in investors portfolios.
Regards,

Navneet Munot
Chief Investment Officer
SBI Funds Management Pvt. Ltd


ABSTRACT (1)

Investments goals vary from person to person. While somebody wants security, others might
give more weightage to returns alone. Somebody else might want to plan for his child's
education while somebody might be saving for the proverbial rainy day or even life after
retirement. With objectives defying any range, it is obvious that the products required will
vary as well.
Indian Mutual Funds industry offers a plethora of schemes and serves broadly all types of
investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds.
There are also funds meant exclusively for young and old, small and large investors.
Moreover, the setup of a legal structure, which has enough teeth to safeguard investors
interests, ensures that the investors are not cheated out of their hard earned money. All in all,
benefits provided by them cut across the boundaries of investor category and thus create for
them, a universal appeal.
Investors of all categories could choose to invest on their own in multiple options but opt for
Mutual Funds for the sole reason that all benefits come in a package. The Mutual Fund
industry is having its hands full to cater to various needs of the investors by coming up with
new plans, schemes and options with respect to rate of returns, dividend frequency and
liquidity.
In view of the growing competition in the Mutual Funds industry, it was felt necessary to
understand the working of mutual funds industry in India, its merits and demerits, various
types of schemes available in the Indian market and the investors orientation towards Mutual
Funds i.e. their pattern of risk appetite and preferences in various schemes and plans. Apart
from this the report also includes the details of the work that I have learnt during the project,
which according to me is the best part of the project as it provided me a practical exposure to
the Mutual fund industry and the working of an AMC.


ABSTRACT (2)

Antonella Basso and Stefania Funari of Dipartimento di Matematica Applicata B.
de Finetti, Universit di Trieste, Piazzale Europa, 1, 34127 Trieste, Italy and Dipartimento di
Matematica Applicata, Universit Ca' Foscari di Venezia, Dorsoduro 3825/E, 30123 Venezia,
Italy respectively discussed in this paper about A data envelopment analysis approach to
measure the mutual fund performance. In this paper they present a model which can be
used to evaluate the performance of mutual funds. This model applies an operational research
methodology, called data envelopment analysis (DEA), which allows to measure the relative
efficiency of decision making units. This approach allows to define mutual fund performance
indexes that can take into account several inputs and thus consider different risk measures
and, above all, the investment costs (subscription costs and redemption fees). Moreover, the
DEA approach can naturally envisage other output indicators, in addition to the mean return
considered by the traditional indexes. Therefore, a generalized version of the DEA mutual
fund performance indexes is defined, too, which includes among the outputs a stochastic
dominance indicator that reflects both the investors' preference structure and the time
occurrence of the returns. In addition, the procedure allows to identify, for each mutual fund,
a composite portfolio which can be considered as a particular benchmark. The performance
indexes proposed are tested on empirical data.


ABSTRACT (3)

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


ABSTRACT (4)


ABSTRACT (5)


ABSTRACT (6)


ABSTRACT (7)


ABSTRACT (8)


3. RESEARCH METHODOLOGY

NEED OF THE STUDY:

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

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

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

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

Analysis of the funds on the Basis of various ratios.

PERFORMANCE EVALUATI ON

Mutual Fund industry today, with about 34 players and more than five hundred schemes, is
one of the most preferred investment avenues in India. However, with a plethora of schemes
to choose from, the retail investor faces problems in selecting funds. Factors such as
investment strategy and management style are qualitative, but the funds record is an
important indicator too. Though past performance alone cannot be indicative of future


performance, it is, frankly, the only quantitative way to judge how good a
fund is at present. Therefore, there is a need to correctly assess the past performance of
different mutual funds.
Worldwide, good mutual fund companies over are known by their AMCs and this fame is
directly linked to their superior stock selection skills. For mutual funds to grow, AMCs must
be held accountable for their selection of stocks. In other words, there must be some
performance indicator that will reveal the quality of stock selection of various AMCs.
Return alone should not be considered as the basis of measurement of the performance of a
mutual fund scheme, it should also include the risk taken by the fund manager because
different funds will have different levels of risk attached to them. Risk associated with a fund,
in a general, can be defined as variability or fluctuations in the returns generated by it. The
higher the fluctuations in the returns of a fund during a given period, higher will be the risk
associated with it. These fluctuations in the returns generated by a fund are resultant of two
guiding forces. First, general market fluctuations, which affect all the securities, present in
the market, called market risk or systematic risk and second, fluctuations due to specific
securities present in the portfolio of the fund, called unsystematic risk. The Total Risk of a
given fund is sum of these two and is measured in terms of standard deviation of returns of
the fund. Systematic risk, on the other hand, is measured in terms of Beta, which represents
fluctuations in the NAV of the fund vis--vis market. The more responsive the NAV of a
mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by
relating the returns on a mutual fund with the returns in the market. While unsystematic risk
can be diversified through investments in a number of instruments, systematic risk cannot. By
using the risk return relationship, we try to assess the competitive strength of the mutual
funds vis--vis one another in a better way.
In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class. The most
important and widely used measures of performance are:


- The Treynor Measure

- The Sharpe Measure

The Treynor Measure

Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above risk free
rate of return (generally taken to be the return on securities backed by the government, as
there is no credit risk associated), during a given period and systematic risk associated with it
(beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the fund.
All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative
Treynor's Index is an indication of unfavorable performance.

The Sharpe Measure


In this model, performance of a fund is evaluated on the basis of Sharpe
Ratio, which is a ratio of returns generated by the fund over and above risk free rate of return
and the total risk associated with it. According to Sharpe, it is the total risk of the fund that
the investors are concerned about. So, the model evaluates funds on the basis of reward per
unit of total risk. Symbolically, it can be written as:
Sharpe Index (Si) = (Ri - Rf)/Si
Where, Si is standard deviation of the fund.
While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund,
a low and negative Sharpe Ratio is an indication of unfavorable performance.

Comparison of Sharpe and Treynor

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


TERMI NOLOGY:

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

BETA A ratio that measures the market risk of securities or a fund. If the beta ratio exceeds
one, the fund is more sensitive than funds in general to the fluctuations of the stock market.
The beta may also be negative, which means that the value of the fund will, on average, move
to the opposite direction than the general market development.
Beta measures the sensitivity of rates of return on a fund to general market movements.
Beta measures the volatility of the fund, as compared to that of the overall market. The
Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more volatile than the
market, while a beta lower than 1.00 is considered to be less volatile.
Beta measures the volatility of the funds value relative to the volatility of the funds
benchmark value. The Beta coefficient indicates the percentage change of the funds value
when the benchmark value changes by one percentage point.


Example: When the beta of the fund is 0.8, the value of the fund rises by
0.8 % when the benchmark index rises by one percent. Correspondingly, when the
benchmark index falls by one percent, the value of the fund falls on average by 0.8 %.
The Beta coefficient is a key parameter in the capital asset pricing model (CAPM). It
measures the part of the asset's statistical variance that cannot be mitigated by the
diversification provided by the portfolio of many risky assets, because it is correlated with the
return of the other assets that are in the portfolio.
Beta is also referred to as financial elasticity or correlated relative volatility, and can be
referred to as a measure of the asset's sensitivity of the asset's returns to market returns, its
non-diversifiable risk, its systematic risk or market risk. On an individual asset level,
measuring beta can give clues to volatility and liquidity in the marketplace. On a portfolio
level, measuring beta is thought to separate a manager's skill from his or her willingness to
take risk.
The beta movement should be distinguished from the actual returns of the stocks.

STANDARD DEVI ATI ON

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

CORRELATI ON


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


Analysis of Funds on the basis of various ratios.

Std.
Deviation
Beta R-squared Sharpe
ratio
Portfolio
Turnover
Magnum
Taxgain
30.02% 0.88 0.96 -0.34 18%
Magnum
Global
Fund
36.19% 1.01 0.87 -0.57 43%
Magnum
Contra
31.33% 0.91 0.96 -0.24 74%
Magnum
Comma
37.69% 1.07 0.93 -0.22 64%
SBI
Arbitrage
NA NA NA NA 1146%
MSFU IT 33.03% 0.82 0.61 -0.80 16%
Magnum
Multiplier
30.09% 0.86 0.93 -0.31 47%

CONCLUSI ON:

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


- Magnum Multiplier and
- Magnum Contra
are having beta values of 0.88, 0.86 and 0.91 respectively which means that these funds are
more sensitive and will give more returns than market when market are in good phase but
give negative returns more intensely than market when market in bad phase.
High and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low
and negative Sharpe Ratio is an indication of unfavorable performance. If the Sharpe figure is
positive, the risk taken has paid off, and if the figure is negative, the returns are lower than
the risk-free rate.
Magnum Taxgain,
Magnum Contra and
Magnum Multiplier
Are the three funds which are best among all in terms of risk adjusted returns.
A scheme with high Treynor ratio such as Equity scheme will enjoy a premium when the
markets are bullish and will be affected negatively when the markets are bearish.
So in the bullish market Magnum Global and Magnum Multiplier are the best funds to opt for
getting better returns.

SCOPE OF THE STUDY:

Geographical scope-

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

Functional scope-


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

LI MI TATI ONS OF THE STUDY

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

- Limited time was another constraint.

- Geographical locations.

- Extreme variability in MARKET.

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

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


DATA COLLECTI ON METHOD:

Primary data collection:

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

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

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

- Through personal interviews:-

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

- Through questionnaire:-

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

SAMPLI NG METHOD ADOPTED:

The sampling method chosen is Area Sampling. As the primary sampling unit represents a
cluster of units based on geographic area. The geographical area chosen for individual
customers was at SBI Mutual Fund main office at Barakhamba Road.


It is basically a non-probability sampling procedure which does not afford
any basis for estimating the probability that each item in the population has of being included
in the sample.
Under non-probability sampling the organizers of the enquiry purposively choose the
particular units of the universe for constituting a sample on the basis that the small mass that
they so select out of a huge one will be typical or representative of the whole.

Analysis of I ndividual I nvestors

DATA ANALYSI S

POPULATION:-

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

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

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

- MUTUAL FUNDS -44%
- SHARE/BONDS- 23%
- LIFE INSURANCE-7%
- REAL ESTATE-6%
- COMMODITIES-8%
- NSC (NATIONAL SAVING SCHEME)-10%


- OTHERS-2%

ANALYSIS OF THE PREFERENCES OF THE RESPONDENTS:-

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

- Analysis according to Age
- Analysis according to Income
- Analysis according to Occupation

44
23
7
6
8
10
2
mutual funds
Shares/Bonds
insurance
real estate
commodities
NSC
others


Analysis according to Age:

Findings:

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

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

- The persons having the age equal to or above 50 years, only 28% of respondents are
interested to invest in SBI-MF. The reasons being that these persons are more inclined
14
58
28
Less than 35(<35)
35 to 50
greater tha 50(> =50)


to age-old principals and want to invest in schemes giving fixed
returns as compared to investing in Mutual Fund.
Analysis according to Savings from income:

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

Findings:

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

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

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


Analysis according to Occupation:

Findings:

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

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

- Professional are much interested in investing the Mutual Funds as compared to their
counterparts. The main reason for such thing is the complete knowledge of
o Stock markets
6
46
3
32
9
2
Salaried Employee in
Govt/public sector
salaried employee in
corporate
salaried employee in SME
self employed businessman
self employed professional
farmer/cultivator/agricultur
e
others


o Past performance
o Consistent returns
o Measurement of risk
o Finance knowledge
But with the current performance of Mutual Funds on the stock market, less people are
willing to take the huge risk of losing money.

Analysis of different category persons about different schemes:-

SBI MAGNUM TAX GAI N SCHEME (MTGS)

Tax Planning Mutual Funds have come into their own as a compelling cocktail of savings and
returns, surpassing larger rivals such as equity funds in asset growth rates over the past year
and-a-half. Thus, service category is more inclined towards MTGS because of the tax
exemption and phenomenal returns. This scheme was equally supported by the SBI Tax
Advantage series I (new NFO), a close ended fund offered by SBI MF.

61
24
15
Servicemen
Businessman
Proffesional


SBI MAGNUM GLOBAL FUND (MGLF)

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

23
41
46
Sales
servicemen
businessman
professional


MAGNUM SECTOR UMBRELLA- CONTRA FUND

Due to the maximum growth opportunity through equity investments in stocks of
growth oriented sectors of the economy, professionals like the MSFU-Contra fund the
most. Servicemen also like it because of huge untapped growth potential of the
scheme. And businessmen like this scheme less as compared to their counterparts
because businessmen cant block their money for long time and this scheme provides
return in long term.

39
17
44
servicemen
businessman
frofessional


Analysis on the basis of purchase of investment

The above graph shoes us that people purchase funds, when the price of the fund
suddenly increases. This is because of their expectation for the fund to rise more in
the future.
Next are the investors who invest when the price (NAV) of the fund is slowly but
steadily increasing. They do this, thinking that the fund will further raise in the future
at the same pace.
24 % of the investors invest their money when the price of the fund suddenly decreases. They
do this in order to take benefit of the decreased cost, in anticipation that they may sell it in the
future for a higher price.

24
32
13
27
4
0 5 10 15 20 25 30 35
suddenly decreases
suddenly increases
is stable
has been slowly increasing
has been sowly decreasing


FINANCIAL BEHAVIOR OF RESPONDENTS:

I NVESTMENT OBJ ECTI VES:

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

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

INVESTMENT HORIZON: From the study it can be concluded that majority of
respondents invest in mutual funds from More than three year perspective (53%), thats
means once a investor comes to your service he will be there for at least three years, therefore
it is very essential today that AMCs and especially SBI should focused on innovating new
2
21
2
5
Saftey
Good Return
Tax Benefit
Capital Appreciation
Liquidity
Others


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

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

SCHEME PREFERENCES:

ON THE BASIS OF ASSET CLASS:

When it comes to scheme preferences majority of the investors prefer Balanced Schemes
(43%), followed by Equity Schemes (34%) then debt (12%) and finally FMPs (11%). It
0
5
10
15
20
25
30
35
High risk and high
return
Moderate risk and
Moderate return
Low risk and low
return
TOTAL


shows that there is a huge potential for debt instruments in the market
which is unearthed by investors due to its complexity, low awareness etc.

PREFERABLE ROUTE TO I NVESTI NG I N MUTUAL FUNDS:

34
12
43
11
0
5
10
15
20
25
30
35
40
45
50
Equity Debt Balanced FMP's
Friends Suggestion
Newspapers/Magazines
Self Decision
Television
Brokers/Agents
Others .


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

SCHEME PREFERENCES:

ON THE BASIS OF STRUCTURE:

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


SAVI NG HABI TS:

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

0
20
40
60
80
100
120
open ended close ended interval scheme total
2
4
5
8
5
6
Below 5%
5-10%
10-15%
15-20%
20-25%
ABOVE 25%


SAVI NG PREFERENCES:

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

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


SATI SFATI ON LEVEL WI TH SBI :

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

Interaction with individual/Direct (Walk in) investors

Apart from maintaining relationship with the distributors I have also deal with the customers
who are coming directly to the AMC for investment which provided me an exposure to
selling. It also helped me in learning how to deal with different type of customers, how to
insist them for making investments etc. while dealing with them I have done following tasks:-
a) Explain them various funds/schemes according to their objective.
b) Helping them in filling the forms.
16
47
33
3
1
0
5
10
15
20
25
30
35
40
45
50
highly satisfied cosiderably
satisfied
reasonably
satisfied
unsatisfied highly satisfied


c) Solving their problems related to statement, redemption etc.
d) Insisting them to invest in Systematic Investment Plans (SIP).
While interacting with them I have tried to find out various factors effecting their investments
in mutual funds, for this I have carried out a survey by requesting them to fill a questionnaire
a sample of which I have attached in the annexure. On the basis of that that questionnaire I
have analyzed various points which are discussed below.

I NVESTMENT BEHAVI OUR


I NTRODUCTI ON:

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

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

The liberalization of the financial sector has sent signals to a wave of changes in savings and
investment behavior adding a new dimension to the growth of financial sector. The Indian
financial system in general and the mutual fund industry in particular continue to take
turnaround from early 1990s. During this period mutual funds have pooled huge investments


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

OBJ ECTI VES OF THE STUDY:

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

LI MI TATI ONS OF THE STUDY:

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

METHODOLOGY:


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

RELI ABI LI TY AND VALI DI TY

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

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

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

We are going to see how these selected factors affect the investment behaviour of the existing
& potential investors. Above mentioned statistical tools have been used to analyze this
thing.As we use Factor analysis we can reduce the number of factors to draw some clear
picture for the investors who are looking to invest irrespective of market conditions. Factor
analysis will recognize similar factors & club them into one generalized factor and this will


help any researcher to observe the most important factors that contribute
most to the investment behaviour of the investors.

DESCRI PTI VE WEI GHTED FACTOR COUNTI NG METHOD

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

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


15 Fluctuation In Equity Market 4 18 18 34 18
16 Personal Attention 4 10 35 32 11
17 Prior Experience 11 11 25 29 16
18 Prospectus 10 20 24 25 13
19 Family Recommendation 15 20 27 24 6
20 Fund Rating 24 28 13 15 12
21 Internet 15 30 27 11 9
22 Promotional Campaign 22 25 26 14 5
23 Lot Size 20 30 25 10 7
24 Performance Of Fund Manager 25 30 26 6 5
25 Economic &Market Conditions 24 35 21 8 4
26 Transparency 33 34 18 5 2


FACTOR ANALYSI S:

As the numbers of independent variables are very high, we have tried to classify similar
variables under a broad heading through factor analysis. In KMO adequacy level is 50% with
100% significance which makes the model satisfactory. We can increase the adequacy level
by changing factors like fees load and expenses because it has a very low communality. Total
variance explained by the model is 64% which means that 64% of the variance has been
accounted by the factors. Through rotated component matrix we can classify all the variables
into 10 factors. Some of the factors are as follows:
(Refer Annexure)

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

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


been made by the modal on the basis of factor loadings which we can see
in one of the tables of factor analysis.

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

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

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

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


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

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

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

DEMOGRAPHI C FACTORS:

- SEX PROFILE:


- AGE PROFILE:

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

62%
21%
17%
ACADEMIC QUALIFICATION
GRADUATE POST GRADUATE PROFESSIONAL


- MARITAL STATUS:

OCCUPTION PROFILE:

From above charts it can be easily inferred that:
Majority of respondents are graduates, therefore it remains to be seen that to what
extent post graduates and professional have interest in mutual funds.
Majority of respondents are married (80%), therefore it remains to be seen that how
many young and unmarried investors have preference towards mutual funds.
80%
20%
MARITAL STATUS
MARRIED UNMARRIED
56%
17%
20%
7% 0%
OCCUPATION
Professional Salaried Business Retired Others


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

ANNUAL INCOME RANGE:

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

27%
56%
17%
0%
ANNUAL INCOME
LESS THAN 200000 200001-500000
500001-1000000 ABOVE 1000000


FI NANCI AL BEHAVI OUR OF THE RESPONDENTS:

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

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

INVESTMENT HORIZON: From study it can be concluded that majority of respondents
invest in mutual funds from More than three year perspective (53%), thats means once a
investor comes to your service he will be there for at least three years, therefore it is very
essential today that AMCs and especially SBI should focused on innovating new ways to
serve the customers like giving SMS time to time, giving value added services like free
insurance, debit cards etc.
INVESTMENT AMOUNT: From pilot study it can be concluded that majority of
respondents (46%) have investments in mutual funds in a range of More than 1, 00,000
6%
70%
7%
17%
INVESTMENT OBJECTIVE
Saftey Good Return
Tax Benefit Capital Appreciation
Liquidity


category which implies that over a period of time if an investor see that
his capital is growing than the probability of his subsequent investment becomes very strong.

SCHEME PREFERENCES:

ON THE BASIS OF ASSET CLASS:

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

PREFERABLE ROUTE TO INVESTING IN MUTUAL FUNDS:

93%
0%
7% 0% 0%
SCHEME PREFERENCES
EQUITY DEBT BALANCED FMPs Others


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

SCHEME PREFERENCES:

ON THE BASIS OF STRUCTURE:
3%
27%
57%
3%
10% 0%
PREFERABLE ROUTE
Friends Suggestion Newspapers/Magazines
Self Decision Television
Brokers/Agents Others .


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

SAVING HABITS:

When it comes to Saving Habits of retail investors it comes out that majority of respondents
saves between 15%-20% p.a. basis followed by above 25% category (20%), therefore at
this stage it is very difficult to say anything about saving preferences about retail investors.
Others categories like 10-15 and 20-25 are equally preferred by respondents but it was a
positive clue that only 7% of respondents save below 5%.
87%
13% 0%
SCHEME PEREFERENCE
Open Ended Scheme Close Ended Scheme
Interval Scheme


SBI AND OTHERS:

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

6%
13%
17%
27%
17%
20%
SAVING HABBITS
Below 5% 5-10% 10-15%
15-20% 20-25% ABOVE 25%


SATISFATION LEVEL WITH SBI:

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

MOST POPULAR FUND HOUSE I N TERMS OF HI GHEST
I NVESTMENT:
When asked about highest investment in an AMC majority of Investors (27%) gave the name
of SBI which is followed by Reliance (23%), ICICI (20%), and rest in others which is lead
by UTI. So there is a stiff competition in the market and it remains to be seen that which fund
house take the leads with the completion of the project.
17%
47%
33%
0% 3%
SATISFACTION LEVEL
Highly Satisfied Considerably Satisfied
Reasonably Satisfied Unsatisfied
Highly Unsatisfied


23%
20%
3%
27% 0%
10%
14%
3%
MOST POPULAR FUND
HOUSE
RELIANCE ICICI HDFC SBI
BIRLA DSP UTI OTHERS


4.COMPARATI VE ANALYSI S


I NTRODUCTI ON:

Return alone should not be considered as the basis of measurement of the performance of a
mutual fund scheme, it should also include the risk taken by the fund manager because
different funds will have different levels of risk attached to them.
Risk associated with a fund, in a general, can be defined as variability or fluctuations in the
returns generated by it. The higher the fluctuations in the returns of a fund during a given
period, higher will be the risk associated with it. These fluctuations in the returns generated
by a fund are resultant of two guiding forces. First, general market fluctuations, which affect
all the securities, present in the market, called market risk or systematic risk and second,
fluctuations due to specific securities present in the portfolio of the fund, called unsystematic
risk. The Total Risk of a given fund is sum of these two and is measured in terms of standard
deviation of returns of the fund.
In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class. But before that we
need to understand all the components that are used to explain the ratios like Beta, Treynor,
Sharpe, and Jensen etc. the components are as follows:

NAV:

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

Factors affecting NAV:

Variation in investment portfolio:
Variation in the investment portfolio causes changes in the NAV of the fund, which in turn
may affect the overall value of the fund. Since, same investment portfolios with different


NAV gives same returns in percentage terms, therefore, the securities that
we have in the portfolio play pivotal importance. Changing the portfolio or replacing any
security with the existing security may change the overall NAV of the fund, which in turn
may change the value of the entire fund..

Sale and repurchase of units:

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

Valuations of assets

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

Cost associated with the Fund

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


BETA:

It is a ratio that measures the market risk of securities or a fund. If the beta ratio exceeds one,
the fund is more sensitive than funds in general to the fluctuations of the stock market. The
beta may also be negative, which means that the value of the fund will, on average, move to
the opposite direction than the general market development.
Beta measures the sensitivity of rates of return on a fund to general market movements. It
also measures the volatility of the fund, as compared to that of the overall market. The
Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more volatile than the
market, while a beta lower than 1.00 is considered to be less volatile.
Beta measures the volatility of the funds value relative to the volatility of the funds
benchmark value. The Beta coefficient indicates the percentage change of the funds value
when the benchmark value changes by one percentage point.

*Benchmark index that is taken here is Sensex.

STANDARD DEVI ATI ON:

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


SHARPE RATI O:

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

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

TREYNOR RATI O:

Treynor (1965) was the first researcher developing a composite measure of portfolio
performance. It measures portfolio risk with beta, and calculates portfolios market risk
premium relative to its beta. This ratio rewards volatility because it shows risk adjusted
returns per unit of market risk for that particular scheme. When the markets are more volatile,
schemes with high Treynor ratio are highly affected and vice versa. A scheme with high
Treynor ratio such as Equity scheme will enjoy a premium when the markets are bullish and
will be affected negatively when the markets are bearish. On the other hand, scheme with low
P
f
R
P
R
Sharpe
o
|
.
|
\
|

=


Treynor ratio such as Debt Fund will not be affected greatly, irrespective
of the bullish or bearish run in the markets.

P
R = Portfolios actual return during a specified time period.
f
R = Risk-free rate of return during the same period.
P
| = Beta of the portfolio.
All risk-averse investors would like to maximize this value. While a high and positive
Treynor Index shows a superior risk-adjusted performance of a fund, a low and negative
Treynor Index is an indication of unfavorable performance.
The trouble with both Sharpe and Treynor ratios for evaluating "risk-adjusted" returns is that
they equate risk with short-term volatility. Therefore these measures may not be applicable in
evaluating the relative merits of long-term investments.

P
f
R
P
R
Treynor
|
|
.
|
\
|

=


I NTER FI RM COMPARI SON:

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

EQUI TY DI VERSI FI ED FUNDS
EQUI TY LI NKED SAVI NG SCHEME
EQUI TY LARGE CAP
EQUI TY MI D AND SMALL CAP
EQUI TY THEMATI C

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

LI MI TATI ONS:

Comparison of funds is done on the basis of various factors but due to time constrain
and non-availability of data, I have done comparison on the basis of three factors
namely return, risk and portfolio of the fund.


Also it is not possible to compare all the funds in market under
each category, thats why I have selected top 5 funds of each category mentioned
above and compared them.

METHODOLOGY

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


1) EQUI TY DI VERSI FI ED FUNDS:

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

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

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

ANALYSI S:

FUNDS RETURNS:

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


Fund Return(in
000 cr.)
SBI Magnum
Contra
HSBC Equity Franklin India
Prima Plus
SBI Magnum
Equity
Reliance
Growth
6 Months 53.64 34.56 43.36 51.79 46.42
1Year 13.55 -0.42 13.80 10.18 2.37
3Year 16.29 14.29 17.36 14.63 17.15
5Year 29.48 19.65 11.46 22.95 26.77
AS ON 29-05-09 Source: Value Research Online

FI NDI NGS:

-10
0
10
20
30
40
50
60
SBI
Magnum
Contra
HSBC
Equity
Franklin
India
Prima Plus
SBI
Magnum
Equity
Reliance
Growth
6 Months
1Year
3Year
5Year


- Since two funds from SBI brand are in top five funds, thats shows
how well the portfolios are managed by the concerned Fund Managers.

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

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

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

RI SK PROFI LE:

SBI Magnum
Contra
HSBC Equity Franklin
India Prima
Plus
SBI Magnum
Equity
Reliance
Growth
Standard
Deviation
32.10 28.84 29.66 33.41 33.35
Sharpe
Ratio
-0.03 0.03 0.03 0.00 -0.01
Beta 0.97 0.87 0.89 1.00 0.97
Alpha -0.31 1.50 1.28 0.67 0.35
R-
Squared
0.95 0.95 0.94 0.95 0.88


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

FI NDI NGS:

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

- Sharpe ratio, which means returns per unit of risk that a fund is able to generate.
Therefore, higher the ratio the better it is. Accordingly, Magnum Contra is not a
winner as per this criterion.
- Beta, which shows the co-movement of funds return with Market rate of returns, is
again measure of volatility or risk. Since Magnum Equity is having highest Beta
-5
0
5
10
15
20
25
30
35
SBI
Magnum
Contra
HSBC
Equity
Franklin
India
Prima
Plus
SBI
Magnum
Equity
Reliance
Growth
Standard Deviation
Sharpe Ratio
Beta
Alpha
R- Squared


which is closed to one and also Magnum contra which is second
highest shows that they are tend to be aggressive or volatile in nature.

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

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


PORTFOLI O ANALYSI S:

SBI Magnum
Contra
HSBC Equity Franklin India
Prima Plus
SBI Magnum
Equity
Reliance
Growth
P/E ratio 14.73 18.93 18.62 21.71 14.34
Fund Size(in
Rs. cr.)
1958.5
0
1180.
7
1153.2
0
241.91 3597.9
2
PortfolioTurno
ver(in %)
63.00 56.00 57.85 48.00 97.00
Top 5
Holdings
21.52% 26.97
%
33.46
%
31.52
%
17.49%

0
500
1000
1500
2000
2500
3000
3500
4000
P/E ratio
Fund Size(in Rs. cr.)
Portfolio Turnover(in %)
Top 5 Holdings


FI NDI NGS:

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

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

- Concentration Level: As shown in above table, Magnum Equity is having 2
nd

highest holdings in top five stock, which means the fund is concentrated towards
major stocks in the portfolio. While Magnum Contra is quite diversified fund as it is
having second lowest concentration level only next to Reliance Growth.

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


NAV DETAI LS OF FUNDS AS ON 29
TH
MAY,2009

FUND NAV
SBI Magnum Contra

45.00
HSBC Equity

80.72
Franklin India Prima
Plus

43.36
SBI Magnum Equity

31.39
Reliance Growth 319.21
AS ON 29-05-09 Source: www.nseindia.com

0
50
100
150
200
250
300
350
SBI Magnum ContraHSBC Equity Franklin India Prima Plus SBI Magnum Equity Reliance Growth
NAV
NAV


CONCLUSI ON:

After considering all three parameters mentioned above it can be concluded that MAGNUM
CONTRA is the best fund in the category because unlike a typical contrarian fund that focus
on out of flavor stocks, this fund considers the underlying companys valuations and
compares that with what it believes the companys true valuations should be and then decide
whether to invest in it or not. According to its Fund Manager Pankaj Gupta if the market
expects a stock to grow by 20%, but we it to grow by 30%, the scrip is contrarian for us.

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


2) EQUI TY LI NKED SAVI NG SCHEME :(ELSS)

These are the open ended saving schemes which generally have lock-in-period of three years
which means that once you have invested certain amount in your fund, you cant withdraw
any amount from your account. These scheme are most popular among retail investors(also
see in Appendices) due to its three-in-one feature which means these schemes are able to
satisfy three different investment objectives simultaneously which are mentioned as follows:

Tax Benefit
Good Return

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

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


ANALYSI S:

FUNDS RETURN:

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

Fund Returns(in
000 cr.)
SBI Magnum
Tax Gain
Principal Tax
Savings
Birla Sunlife
Tax Relief 96
Sundaram BNP
Paribas Tax
Saver
Kotak Tax
Saver
6
Months
48.39 30.32 55.49 41.78 43.98
1 Year 8.81 -16.51 9.34 16.48 2.73
3 Year 13.01 3.68 12.44 19.11 9.91
5 Year 40.02 21.29 22.25 35.99 NA


FI NDI NGS:

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

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

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

-20
-10
0
10
20
30
40
50
60
Fund
Returns
Principal
Tax
Savings
Birla
Sunlife Tax
Relief 96
Sundaram
BNP
Paribas
Tax Saver
Kotak Tax
Saver
6 Months
1 Year
3 Year
5 Year


RI SK PROFI LE:

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

-10
-5
0
5
10
15
20
25
30
35
40
Standard Deviation
Sharpe Ratio
Beta
Alpha
R- Squired


FI NDI NGS:

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

- Sharpe ratio, which means returns per unit of risk that a fund is able to generate.
Therefore, higher the ratio the better it is. Accordingly, Magnum Tax Gain is among
the best fund as it is having 2
nd
highest ratio in the category. All funds in this
category are showing negative ratio which indicates that funds are not able to justify
well whatever it hac investments in risky assets.

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

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

position with negative alpha of -2.78%.

- R-Squared, which explains the change in return caused by market volatility is a good
measure of risk. But a high R-squared means that much of change is caused by market
sentiments or fundamentals. Therefore, it is suggested that if a fund has very high r-


square value it means similar returns can be achieved by investing
in the stock markets. Therefore, a moderate r-square value ranging between 65-
85% is considered good from portfolio management point of view. All funds except
for Magnum Taxgain(0.94) and BSL Tax Relief 96(0.90), as per this criterion are
trailing compared to other funds in this category.


SBI Magnum
Taxgain 93
Principal Tax
Savings
Birla Sunlife
Tax Relief 96
Sundaram
BNP Paribas
Tax Saver
Kotak Tax
Saver
P/E Ratio 18.13 14.91 16.56 16.12 16.62
Fund Size(in
Rs. Cr.)
3133.66(30-
04-09)
175.63(30-04-
09)
591.69(30-04-
09)
703.54(30-
04-09)
32.1(30-04-
09)
Portfolio
Turnover(in
%)
24.91 22.14 22.43 30.20 20.94
Top 5
Holdings
19.64% 24.48% 29.19% 23.21% 17.39%


FI NDI NGS:

From the above table it can be concluded that:

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

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

0
5
10
15
20
25
30
35
P/E Ratio
Fund Size(in Rs. Cr.)
Top 5 Holdings


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

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

TH
MAY,2009

FUND NAV
SBI Magnum Tax Gain 93

46.09
Principal Tax Savings

57.03
Birla Sun Life Tax Relief 96

71.15
Sundaram BNP Paribas Tax saver 34.88
Kotak Tax Saver 13.79


CONCLUSI ON:

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

0
10
20
30
40
50
60
70
80
SBI Magnum Tax Gain 93 Principal Tax Savings Birla Sun Life Tax Relief 96 Sundaram BNP Paribas Tax
saver
Kotak Tax Saver
NAV
NAV


3) EQUI TY MI D AND SMALL CAP:

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

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

a) ICICI PRU EMERGING STAR
b) MAGNUM GLOBAL 94
c) MAGNUM MULTIPIER PLUS 93
d) RELIANCE GROWTH
e) SUNDARAM BNP PARIBAS SELECT MIDCAP INST


ANALYSI S:

FUNDS RETURN:

Fund
Returns(in000cr.
)
ICICI PRU
Emerging
STAR
Magnum
Global 94
Magnum
Multiplier Plus
93
Reliance
Growth
Sundaram
BNP Paribas
Select Midcap
Inst
3 Months 68.40 85.26 55.77 64.43 NA
1 Year -29.66 -21.61 -5.55 -9.68 NA
3 Year -3.97 -0.36 10.30 11.95 NA
5 Year 24.82 31.21 33.32 35.20 NA

-40
-20
0
20
40
60
80
100
ICICI PRU
Emerging
STAR
Magnum
Global 94
Magnum
Multiplier
Plus 93
Reliance
Growth
3 Months
1 Year
3 Year
5 Year


FI NDI NGS:

- Since two funds from SBI brand are in top five funds, thats shows how well the portfolios
are managed by the concerned Fund Managers.

- In Three month category, Magnum Global is the winner since it has fallen by minimum
value, while both funds Reliance Growth and Multipier Plus 93 have fallen by maximum
value. It means these funds were not able to withstand Ups and Downs in the Indian stock
markets in past three months i.e. from March 2009 to May 2009 compared to other well
performing fund in the same period.

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

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

position giving 11.95% return.

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


RI SK ANALYSI S:

ICICI PRU
Emerging
STAR
Magnum
Global 94
Magnum
Multiplier
Plus 93
Reliance
Growth
Sundaram
BNP
Paribas
Select
Midcap
Inst
Standard
Deviation
38.24 37.22 30.90 33.35 NA
Sharpe
Ratio
-0.40 -0.34 -0.08 -0.01 NA
Beta 1.07 1.05 0.90 0.97 NA
Alpha -
14.78
-
12.07
-1.80 0.35 NA
R-
Squired
0.82 0.83 0.90 0.88 NA

-20
-10
0
10
20
30
40
Standard Deviation
Sharpe Ratio
Beta
Alpha
R-Squired


FI NDI NGS:

- The primary measure of risk i.e. Standard Deviation is highest for ICICI Pru Emerging
Star which means it is the most risky fund in the category. Second is Magnum Global
having Standard Deviation of 37.22%.Fund having lowest Standard Deviation is also
from SBI, Multiplier Plus 93 is having 30.90% as Standard Deviation.

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

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

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

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



0
500
1000
1500
2000
2500
3000
3500
4000
P/E Ratio
Turnover(in %)
Fund size(in Rs.cr)
Top 5 Holdings
ICICI PRU
Emerging
STAR
Magnum
Global 94
Magnum
Multiplier Plus
93
Reliance
Growth
Sundaram
BNP
Paribas
Select
Midcap
Inst
P/E Ratio 12.39 11.64 21.20 14.34 NA
Turnover(in
%)
91.61 90.72 47.00 59.69 NA
Fund
size(in
Rs.cr)
256.0
0(30-
04-
09)
746.87(
30-04-
09)
687.15(3
0-04-09)
3597.9
2
NA
Top 5
Holdings
14.60
%
18.96% 24.68% 17.49 NA


FI NDI NGS:

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

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

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

- Concentration Level: As visible from table, ICICI Pru Emerging STAR is having
lowest percentage (14.60) of holding in its Top five Stocks i.e.it is the most
diversified fund in the category. On the other hand, Magnum Multiplier Plus 93 is


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

TH
MAY,2009

FUND NAV
ICICI PRU EMERGING STAR

21.42
MAGNUM GLOBAL 94

35.81
MAGNUM MULTIPIER PLUS 93

58.57
RELIANCE GROWTH 319.21
SUNDARAM BNP PARIBAS
SELECT MIDCAP INST

100.52


CONCLUSI ON:

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

0
50
100
150
200
250
300
350
1 2 3 4 5 6 7 8 9 10
FUND
NAV


4) EQUI TY LARGE CAP:

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

The following are the top performing funds in the category:

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


ANALYSI S:

FUNDS RETURN:

Fund returns(in
000cr.)
Birla Sunlife
Frontline
Equity
Sundaram
BNP Paribas
S.M.I.L.E. Reg
Kotak 30 Magnum
Equity
Reliance
Vision
3 Months 61.99 80.89 45.96 51.79 59.18
1 Year -0.65 -7.79 -12.42 10.18 -5.81
3 Year 17.69 9.63 9.53 14.63 10.21
5 Year 29.29 NA 27.37 22.95 28.83

-20
-10
0
10
20
30
40
50
60
70
80
90
Birla
Sunlife
Frontline
Equity
Sundaram
BNP
Paribas
S.M.I.L.E.
Reg
Kotak 30 Magnum
Equity
Reliance
Vision
3 Months
1 Year
3 Year
5 Year


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

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

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

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


RI SK PROFI LE:

-5
0
5
10
15
20
25
30
35
40
Standard Deviation
Sharpe Ratio
Beta
Alpha
R-Squired
Birla Sunlife
Frontline
Equity
Sundaram
BNP Paribas
S.M.I.L.E.
Reg
Kotak 30 Magnum
Equity
Reliance
Vision
Standard
Deviation
29.36 38.07 29.98 33.41 30.79
Sharpe Ratio 0.14 -0.10 -0.05 0.00 -0.11
Beta 0.89 1.12 0.90 1.00 0.91
Alpha 4.60 -3.01 -0.99 0.67 -2.95
R-Squired 0.96 0.91 0.95 0.95 0.92


FI NDI NGS:

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

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

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

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

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



Birla Sunlife
Frontline
Equity
Sundaram
BNP Paribas
S.M.I.L.E.
Reg
Kotak 30
Magnum
Equity
Reliance
Vision
P/E Ratio 15.52 14.67 17.22 21.71 14.81
Portfolio
Turnover(in
%)
17.45 10.83 26.31 32.29 17.02
Fund Size(in
Rs.cr.)
481.14(30-
04-09)
130.26(30-
04-09)
688.14(30-
04-09)
241.91(30-
04-09)
2589.02(30-
04-09)
Top 5
Holdings
28.46% 20.93% 32.11% 31.52% 26.21%

0
5
10
15
20
25
30
35
P/E Ratio
Fund Size(in Rs.cr.)
Top 5 Holdings


FI NDI NGS:

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

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

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

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


TH

MAY,2009

AS ON 29-05-09 SOURCE: NSE WEBSITE
FUND NAV
Birla Sun Life Frontline Equity

62.82
Sundaram BNP Paribas
S.M.I.L.E. Reg

22.49
Kotak 30

76.93
Magnum Equity 31.39
Reliance Vision

198.42


CONCLUSI ON:

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

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

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

0
20
40
60
80
100
120
140
160
180
200
1 2 3 4 5 6 7 8 9 10
FUND
NAV


- Fund also didnt take high exposure to any single stock, therefore
Downside risk was also lowest of this fund in the category.

5) EQUI TY THEMATI C FUNDS:

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

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

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


ANALYSI S:

FUNDS RETURNS:

Fund returns(in
000 cr.)
Birla Sunlife
Basic
Industries
Tata
Infrastructure
JM Basic Magnum
Emerging
Businesses
Fund
UTI
Infrastructure
3 Months 71.77 66.96 123.1
5
96.38 52.80
1 Year -8.76 -13.07 -35.62 -24.67 -9.12
3 Year 8.42 12.23 2.76 -2.21 10.89
5 Year 24.63 NA NA NA 33.64


FI NDI NGS:

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

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

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

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

-40
-20
0
20
40
60
80
100
120
140
3 Months
1 Year
3 Year
5 Year


RI SK PROFI LE:

Birla Sunlife
Basic
Industries
Tata
Infrastructure
J M Basic Magnum
Emerging
Businesses
Fund
UTI
Infrastructure
Standard
Deviation
34.57 35.21 47.00 0.82 33.88
Sharpe Ratio -0.17 -0.02 -0.22 -13.41 -0.05
Beta 1.03 1.05 1.36 1.16 1.00
Alpha -5.10 -0.11 -9.58 -0.34 -1.12
R-Squired 0.93 0.92 0.88 41.45 0.90


FI NDI NGS:

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

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

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

-20
-10
0
10
20
30
40
50
Standard Deviation
Sharpe Ratio
Beta
Alpha
R-Squired


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

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


Birla
Sunlife
Basic
Industries
Tata
Infrastructure
JM Basic Magnum
Emerging
Businesses
Fund
UTI
Infrastructure
P/E Ratio 12.72 17.62 11.53 23.90 .01
Portfolio
Turnover(in%)
35.23 46.91 8.80 6.13 51.81
Fund Size(in
Rs.cr.)
79.47(30-
04-09)
1598.09(30-
04-09)
391.54(30-
04-09)
98.65(30-04-
09)
1294.02(30-
04-09)
Top 5 Holdings 24.36% 27.69% 30.24% 27.86% 27.69%


FI NDI NGS:

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

cost are charged to fund. In the above category, JM Basic and SBI is the winner since
both funds are having lowest Portfolio Turnover ratio which are 8.80 and 6.13
0
10
20
30
40
50
60
P/E Ratio
Portfolio Turnover(in%)
Fund Size(in Rs.cr.)
Top 5 Holdings


respectively. However, UTI Infrastructure is having a highest ratio
of 51.81 implying that Fund manager is churning the Portfolio very quickly.

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

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

TH
MAY,2009

FUND NAV
Birla Sun Life Basic Industries 75.89
TATA Infrastructure 27.84
JM Basic 16.57
Magnum Emerging Business
Fund
24.98


UTI Infrastructure 30.79

CONCLUSI ON:

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

- The schemes focus on capital goods, construction, engineering and banking worked
very well.

0
10
20
30
40
50
60
70
80
NAV
NAV


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

COMPARI SON OF MUTUAL FUNDS AGAI NST
OTHER INVESTMENT AVENUES:

PRODUCT SAFETY/CON
VINENCE
LIQUIDITY RETURN VOLATILITY
Equity Low High/low High-Mod. High


FI Bonds High Moderate Mod.-High Moderate
Debentures Moderate Low Mod.-Low Moderate
Corp. FD Low Low Moderate Low
Bank Deposit High High Low-High Low
PPF High Moderate Moderate Low
Life Ins. High Low Low-Mod Low
Gold High Moderate Mod.-Low Moderate
Real Estate Moderate Low High-Low High
MF High High High Moderate
SOURCE:VALUE RESEARCHONLINE.COM

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


5.EXPECTATI ONS OF THE I NDUSTRY FROM
BUDGET 2009-10:

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


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

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

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

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

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

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

Commodity ETFs should be introduced.

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

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

Differential tax incentive (on the lines of equity long term savings) to lure investors
savings into long-term debt products through mutual funds.


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

Level playing field for MFs vis--vis alternative competing instruments, which vie for
intermediation into Indias equity and debt markets.

RELEVANT HI GHLI GHTS OF THE BUDGET 2009-10

The Economy

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

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

FI NANCI AL SECTOR


Financial Inclusion

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

Capital Markets

Measures to expand the market for corporate bonds

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

Permanent Account Number (PAN)

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

Service tax


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

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

Direct Taxes

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

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

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

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

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


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

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

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

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

SWOT ANALYSI S OF SBI MUTUAL FUND

STRENGTH

- Being the 7
th
biggest AMC,SBI Mutual Fund has a cutting edge over other AMCs


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

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

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

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

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

- Winner of Lipper Fund Awards 2009.

- Winner of Outlook Money NDTV Profit Awards- 2008.

WEAKNESS

- Lack of promotional material ,dispensers ,banners.

- Proper training not being provided to bank officials.

OPPORTUNI TI ES


- Untapped rural market offers huge potential.

- More focus on PSUs may enhance business.

- Training provided to investors may lead to more investments.

THREATS

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

- Share market slump may see downfall in investments.

- Ongoing recession may impose adverse effects

FUTURE SCENARI O

Mutual funds are the fastest growing segment of the financial services sector in India. Owing
to the impact of global financial crisis the average AUM of the Indian Mutual Fund industry
fell by 1.53% and stood at rs. 493,287 crores. The average AUM of SBI Mutual Fund for the
month of March 2009 was Rs. 26,383 crores. There is little awareness about mutual fund in
India; people have accepted it as a one of the major investment avenue. Once people know
about the benefits offered by it, mutual funds will become one of the sought after investment
avenues.


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

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

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

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

1) Regarding Funds:-

While dealing with them I have observed that the performance of the schemes of SBIMF is
quite good and the demand for those schemes is also good. I came to know that SBI Magnum
Tax gain 93 is the most popular fund among individual investors. According to them the 3yr
and 5yr returns of the funds are very good. One of the reason for great demands of AMCs
fund is the Brand Value of SBI, as it is the largest bank of country.


At the same time they we also observed that unlike other AMCs like
Reliance, HDFC etc. SBIMF is not very aggressive in marketing of its funds also the funds of
SBIMF are not very innovative (as they dont have any banking or financial sector fund)

2) Regarding services:-

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

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

CONCLUSI ON

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

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


bright future for SBI MF in coming years. They have much potential to
expand their distribution network in northern India.

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

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

SUGGESTI ONS & RECOMMENDATI ONS

A) THE GROUND RULES OF MUTUAL FUND I NVESTI NG

The following are the 10 commandments that were to be followed till eternity. The world of
investments too has several ground rules meant for investors who are novices in their own


right and wish to enter the myriad world of investments. These come in
handy for there is every possibility of losing what one has if due care is not taken.
1. Assess yourself: Self-assessment of ones needs; expectations and risk profile is of
prime importance failing which; one will make more mistakes in putting money in
right places than otherwise. Irrational expectations will only bring pain.

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

3. Don't rush in picking funds, think first: one first has to decide what he wants the
money for and it is this investment goal that should be the guiding light for all
investments done. It is thus important to know the risks associated with the fund and
align it with the quantum of risk one is willing to take. One should take a look at the
portfolio of the funds for the purpose. Excessive exposure to any specific sector
should be avoided, as it will only add to the risk of the entire portfolio.

4. Invest. Dont speculate: A common investor is limited in the degree of risk that he is
willing to take. It is thus of key importance that there is thought given to the process
of investment and to the time horizon of the intended investment. One should abstain
from speculating which in other words would mean getting out of one fund and
investing in another with the intention of making quick money


5. Dont put all the eggs in one basket: This old age adage is of utmost importance. No
matter what the risk profile of a person is, it is always advisable to diversify the risks
associated. So putting ones money in different asset classes is generally the best
option as it averages the risks in each category.

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

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

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


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

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

B) WHEN TO SELL YOUR MUTUAL FUND

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

- Fund is not performing


This reason for selling, although valid in certain conditions, is where
most investors make a mistake. When calculating performance one shouldnt look at too
short a period and make a mistake by comparing apples to oranges. One should compare
the returns posted by his fund with that of the peers across various horizons such as 1-
year, 3-year and above. A short-term view can often lead to committing hara-kiri, as it
doesnt present the full picture. If it has underperformed the average of its peers in all
cases, then it sure is one of the better reasons to exit from the fund.

- A change in life stage

Investments are done with a certain objective in mind and life stages are often a
determining factor of what a person needs. A young man can afford to take more risks
than a person nearing his retirement can. In such cases, it pays to withdraw money
from the equity investments made earlier and put them in safer, more conservative
debt funds that offer stable returns without compromising on risk. So a change in life
stages would be one such reason to consider switching into a fund that matches with
ones needs.
- A major change in any basic attribute of the fund

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


- Fund doesnt comply with its objective

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

- The Funds Expense Ratio Rises

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

- The Fund Manager has changed

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

However, nothing is as important as to rein the horses in time. The primary principle
behind safety of investment is to take risks that can be tolerated. The principle also is


specific on the expectations that the investor must have from any
investment. Just as it is important to set realistic targets that one hopes to achieve
from the investment, it is also important to exit when target as expected has been
achieved irrespective of the fact that it might be generating better returns in a short-
term. Waiting longer might not prove beneficial, as one need not be lucky all the
time.The above list is certainly not exhaustive and individuals will have other better
reasons to quit as well. Its just that most dont know when to apply thought and so
these would come in handy.

LI MI TATI ONS OF THE PROJ ECT

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

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

The company restricts me to deal with its key clients.


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

GLOSSARY

1. General Terms:

i. Bonds

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

ii. Capital Gains


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

iii. Compounding

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

iv. Credit rating

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

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

vi. Fixed income securities

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

vii. Floating Rate Securities


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

viii. Inflation risk

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

ix. Interest rate risk

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

x. Mode of holding:

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

xi. Money Market Instruments


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

xii. Market risk

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

xiii. NRE

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

xiv. NRI

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

xv. NRO

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

xvii. Yield to Maturity (YTM)

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

2. Business specific:


i. Account Number / Folio Number

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

ii. Account statement

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

iii. Asset Management Company (AMC)

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

iv. Application Form

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

v. Annual Return

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

vi. Applicable NAV


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

vii. Average Maturity

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

viii. Assets Under Management (AUM) / Corpus

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

ix. Business Day

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

x. Balanced funds

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

xi. Contingent Deferred Sales Charge (CDSC)

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


xii. Dividend Reinvestment

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

xiii. Debt securities

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

xiv. Entry load

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

xv. Exit load

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

xvi. Equity Schemes

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

xvii. Ex-Dividend Date

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


xviii. Growth funds

Mutual funds with a primary investment objective of long-term growth of capital. Unlike
income, which is somewhat regular and consistent in most cases, growth is much less
consistent. Growth investments, however, usually outpace the returns on income investments
over the long-term (five to ten years, or longer). It invests mainly in common stocks with
significant growth potential.

xix. Holiday NAV

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

xx. Income funds

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

xxi. Initial Public Offer (IPO)

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

xxii. Index Funds

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


xxiii. Liquid Funds /Money Market Funds

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

xxiv. Mutual fund

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

xxv. Minimum Purchase

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

xxvi. No Load Fund

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

xxvii. Management Fee

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

xxviii. Net Asset Value


Market value of one share of a mutual fund on a given day; also known as
the bid price. Unlike the public offering price, the NAV includes no sales charges. The NAV
is calculated each day by taking the closing market value of all securities owned by a mutual
fund, plus all other assets (e.g. cash), and deducting the funds liabilities. This sum is then
divided by the funds total number of shares outstanding.

xxix. Operating Expenses

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

xxx. Offer document

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

xxxi. Offering price

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

xxxii. Portfolio


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

xxxiii. Rate of return

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

xxxiv. Rupee Cost Averaging

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

xxxv. Record Date

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

xxxvi. Sale price

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

xxxvii. Sector Fund


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

xxxviii. Switching

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

xxxix. Systematic Investment Plan (SIP)

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

xxxx. Systematic Withdrawal Plan (SWP)

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

xxxxi. Systematic Transfer Program (STP)

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

xxxxii. Transfer Agent

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


xxxxiii. Unit

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

REFERENCES

Websites referred:

www.mutualfundsindia.com

www.amfiindia.com

www.valueresearchonline.com

Websites of the AMCs taken in cases where data was not available on the above two sites.

www.bseindia.com


www.nseindia.com

www.google.com

www.crisil.com

www.moneycontrol.com

www.crisilratings.com

REFRENCES OF THEORY:

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


ANNEXTURE

QUESTIONNAIRE- 1
(FOR INDIVIDUAL INVESTORS)

KEEP INVESTING AND KEEP SMILING
Q.1 Why do you invest in mutual funds? (Tick the Option)
a)Safety b) Good Return c) Tax Benefit d) Capital Appreciation e) Liquidity f)Others
(Please Specify)

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


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

Q.4 How much is your investment horizon? (Tick the option)
a) Within a year b)Between 1 3years c) More than 3 years

Q.5 How much amount do you invest in Mutual funds? (Tick the option)
a) < Rs.50000 b) Between Rs.50000- Rs.100000 c)>Rs. 100000

Q.6. Are you willing to tolerate decreases in the value of your account from one month
to the next? (Tick the Option)
(a) Not at all (b) Somewhat (c) Definitely

Q.7.What is your risk preference?
a) High risk and high return b) Moderate risk and Moderate return c) Low risk and low
return

Q.8How satisfied you are with your experience of investing in SBI Mutual Funds?
Highly Satisfied Considerably Satisfied Reasonably Satisfied Unsatisfied Highly
Unsatisfied
Q.9 Which Fund House has largest share in your Investment Portfolio: (Mention it)


Q. 10 Scheme Preferences: (Tick the Option)
a) Equity b) Debt c) Balanced d) Fixed Maturity Plan (FMPs) e) Others (Please Specify-------
---------------------)
Q.11 Saving Preference: (please rank them):
(a)Life Insurance
(b)Pension and PF Schemes
(c)Bank Deposit
(d)Shares and Debentures
(e)Units of MFs like SBI
(f)Gold/Jeweler
(f)Others (Please Specify-------------------------------------)

Q.12 Preferable route to Mutual Fund Investing: (Tick the option)
(a)Friends Suggestion (b) Newspapers/Magazines (c) Self Decision (d) Television (e)
Brokers/Agents (f) others (Please Specify------------------------------------)

Q.13You Prefer:
(a)Open Ended Scheme (b) Close Ended Scheme (c) Interval Scheme

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


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

Q. 15Rank following factors that you consider while selecting a scheme:
a) Scheme Qualities like track record, fund size, entry load etc.
b) Fund Manager Experience
c) Investor Services like disclosure of NAV, A/C statements.
d) Marketing of funds through bill boards, relatives, friends, brokers etc.

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

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

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


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

PERSONAL DETAILS:
NAME: TEL.NO:
1. SEX:M F

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

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

4. Marital Status: Married Unmarried


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

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

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

SIGNATURE
QUESTIONNAIRE-2
(For Bankers)

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

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


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

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

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

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

Q7) What are your grievances, if any?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________


___________________________________________________________
____________________________

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

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

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
____________

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