Summer Training Project Report of Saurabh

8/8/2019 Summer Training Project Report of Saurabh

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SUMMER TRAINING PROJECT REPORT

ON

SBI MUTUAL FUNDSAN INVESTMENT ALTERNATIVE

IN

STATE BANK OF INDIAMUTUAL FUNDS

SUBMITED TO

RAKSHPAL BAHADUR MANAGEMENT INSTITUTE,BAREILLY FOR THE PARTIAL FULFILLMENT OF THE

REQUIREMENT FOR THE ACCOUNT OF DEGREE OF POST

GRADUATE DEGREE IN MASTER OF BUSINESSADMINISTRSRION

SESSION 2008 - 2010

SUBMITTED TO: SUBMITTED BY:GAURAV DIXIT SAURABH VERMAISD-INCHARGE MBA IIIrd SEMMORADABAD ROLL NO.:0801670063


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AcknowledgementThe pleasure that follows the successful completion of an assignment would

remain incomplete without a word of gratitude for the people without whose

cooperation the achievement would have remained a distant dream. So I would like

to extend my immense indebt ness to all of them who have guided and motivated

me throughout my research project. I sincerely thank to all of them for their

valuable contribution without which this project report would have not reached its

goals.

I sincerely wish to acknowledge a deep sense of gratitude to my PARENTS our

Chairman Mrs. Veena Mathura, Executive Director Genral Dr. Manish Sharma ,

Director Dr. Neeraj Saxena, Course Coordinator Mr. Abhijeet Das , external guide

Mr.Gaurav Dixit, all faculty members, library staff and lab staff whose support,

dedication, valuable suggestions and honest efforts have given me an immense

help in doing this project.

Above all I praise GOD the most beneficial, the most merciful that I have been

able to complete my training project successfully.


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PREFACE

This project report has been prepared towards the partial fulfillment of the degree

of MASTER OF BUSINESS ADMINISTRATION approved from

U.P.T.University Lucknow .I have done my study on SBI Mutual Funds An

investment Alternative under SBIMF, MORADABAD.

Mutual Funds are fast becoming a preferred investment option for the investors.

Mutual Funds offer several features that make them a powerful and convenient

wealth creation vehicle worthy of consideration. An investor can invest his money

in different ways in mutual funds such as diversified portfolio, liquidity, tax

savings etc.

The Indian Mutual Fund industry has started opening many of the exciting

opportunities to the investors. Investors are now looking towards equity linked

investment options.

Thus a Mutual Fund is the most suitable investment for the common man as it

offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost.


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LIST OF CONTENTS

1. Objective

2. Mutual Funds

A. Introduction of Mutual Funds

B. History of Mutual Funds

C. Organization of Mutual Funds

D. Types of Mutual Funds

E. Advantages and Disadvantages of Mutual Fund

F. Major Mutual Fund companies in India

4. Research Methodology

5. Comparison of various financial investment avenues

6. Findings & Suggestions

7. Performance of mutual funds

8. Top performing funds

9. Conclusion

10. Recommendation

11. Bibliography &Glossary

12. Annexure


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OBJECTIVE

The main objectives of the project undertaken were:

a) To know about the concept of mutual funds, their functioning, advantages

and disadvantages, and organization of mutual funds.

b) To analyze different equity, debt and balanced schemes being offered by

SBI mutual fund.

c) To compare mutual funds as an investment alternative with other investment

avenues available.

d) To know about the top performing funds under different schemes such as

Equity, Debt and Balanced schemes.

e) To create awareness about Mutual Funds and to know the preference pattern

of the investors.

f) To draw conclusions and to find out the attractiveness of mutual funds.


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INTRODUCTION

World today has become a small village with the borders no longer dividing the

nations in the true sense as people can now move freely between various countries

and invest their money anywhere they want in the world.

Today the investment solution providers have a complete range of financial

products and suggest the various products after analyzing the need of the investors.

With the busy schedule of the people it is not practically possible to keep the track

of the investments on a daily basis and hence the need for a professional service

arises.

Mutual funds are one such avenue for investments where there is a lot of flexibility

available with the professional services of the experts who work in the capacity of

the fund managers. In todays dynamic scenario where the interest rates on the

small savings are reducing and the market linked instruments have become the

main theme of any investment vehicle, mutual funds serve the most of the

investors needs. Globally mutual funds have been preferred route of investments in

the capital markets. The ordinary investor does not have time or the required


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knowledge about the daily movements of the markets.

Mutual funds are one of the best investments ever created because they are very

cost efficient and very easy to invest in.

Mutual funds are investment vehicles, and you can use them to invest in asset

classes such as equities or fixed income. The investor should compare the risks and

expected yields after adjustments of tax on various investments while taking

decisions. The investors may seek advice from experts and consultants including

agents and distributors of mutual funds schemes while making investment

decisions.


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SBI Mutual Fund:

SBI Mutual Fund, a joint venture between State Bank of India and Society General

Asset Management France, is amongst the leading Asset Management

Companies in India with total Assets under Management (AUM) at Rs 16807

crores as on March 31, 2008.

The Equity schemes of SBI Mutual Fund have performed exceedingly well and

have scored over the respective benchmark indices. SBI Mutual Fund has won 12

awards this year including CNBC TV-18 Crisil Mutual Fund of the Year 2007, 3

ICRA Awards for Magnum Taxgain Scheme 1993 and Magnum Global Fund andMSFU IT, 3 Lipper Awards for Magnum Global Fund, MSFU IT, Magnum

Balanced Fund. SBI Mutual Fund has also won the CNBC Awaaz Consumer

Award 2006 for the Most Preferred Mutual Fund Award.

SBI Mutual Fund has an investor base of over 35 Lacs spread over 40 schemes.

With a large network over 26 Investor Service Centers, 28 Investor Service Desks

and 52 District Organizers covering over 100 points of acceptance, the fund house

constantly endeavors to get closer to its growing family of investors.


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It is a fully owned subsidiary of the State Bank of India, India's premier and highly

respected bank with largest banking operation in the country.

SBI Mutual Fund follows certain philosophy in their strategy while parking

investors money in the money family to have a full control upon the risks

concentrating for a heading growth at a reasonable price. It locates sustainable

competitive advantage before investing. The combinations of Top down and

Bottom up approaches are followed. Top down for sector allocation and the latter

for stock selection. While determining the investment universe, SBI Mutual Fund

employees a multi-stage filtering process. The first level looks at liquidity, the

second at management quality. The third level is for the competitive position and

the last for the share price valuation. In the debt sector it always aims at the "risk

adjusted returns" based on the investors risk tolerance. The following four steps are

worked upon while investing:

y Manage the schemes on a "Portfolio basis".

y Active management of interest rate risk.

y Credit risk management by following the conservative approach.

y Continuous monitoring.


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Partnership firms, corporate and even trusts & societies, duly registered under the

applicable laws, can invest in SBI Mutual Funds.


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W hat is a Mutual Fund?

A mutual fund is simply a financial intermediary that allows a group of investors to

pool their money together with a predetermined investment objective. The mutual

fund will have a fund manager who is responsible for investing the pooled money

into specific securities (usually stocks or bonds). When you invest in a mutual

fund, you are buying shares (or portions) of the mutual fund and become a

shareholder of the fund.

Thus it is a mechanism for pooling the resources by issuing units to the investors

and investing funds in securities (such as share, debentures etc.) in accordance with

objectives as disclosed in offer document.

Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all

stocks may not move in the same proportion at the same time. Mutual Fund issues

Units to the investors in accordance with quantum of money invested by them.

Investors of mutual funds are known as unit holders. The profit or losses are shared

by the investors in proportion to their investments.

The mutual funds normally come out with a number of schemes with different

investment objectives which are launched from time to time. A mutual fund is


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required to be registered with Securities and Exchange Board of India (SEBI)

which regulates before it can collect funds from the public.

Thus a Mutual Fund is the most suitable investment for the common man as it

offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. The flow chart below describes broadly the

working of a mutual fund.


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HISTORY OF MUTUAL FUNDS IN INDIA

The origin of mutual fund industry in India is with the introduction of the conceptof mutual fund by UTI in the year 1963.The objective then was to attract the small

investors and introduce them to market investment. Though the growth was slow,

but it accelerated from the year 1987 when non-UTI players entered the industry

In the past decade, Indian mutual fund industry had seen dramatic improvements,

both quality wise as well as quantity wise. Before, the monopoly of the market had

seen an ending phase,: the Assets under Management (AUM) were Rs. 67bn. The

private sector entry to the fund family raised the AUM to Rs. 470 bn in March

1993 and till April 2004; it reached the height of 1,540 bn. Putting the AUM of the

Indian Mutual Funds Industry into comparison, the total of it is less than the

deposits of SBI alone, constitute less than 11% of the total deposits held by the

Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is new

in the country. Large sections of Indian investors are yet to be intellectuated with

the concept. Hence, it is the prime responsibility of all mutual fund companies, to

market the product correctly abreast of selling. The mutual fund industry can be

broadly put into four phases according to the development of the sector. Each


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phase is briefly described as under,

Phase 1. Establishment and Growth of Unit Trust of India - 1964-87 Unit Trust of India enjoyed complete monopoly when it was established in the year

1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it

continued to operate under the regulatory control of the RBI until the two were de-

linked in 1978 and the entire control was tranferred in the hands of Industrial

Development Bank of India (IDBI). UTI launched its first scheme in 1964, named

as Unit Scheme 1964 (US-64), which attracted the largest number of investors in

any single investment scheme over the years.

UTI launched more innovative schemes in 1970s and 80s to suit the needs of

different investors. It launched ULIP in 1971, six more schemes between 1981-84,

Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986,

Master share (Indias first equity diversified scheme) in 1987 and Monthly Income

Schemes (offering assured returns) during 1990s. By the end of 1987, UTI's assets

under management grew ten times to Rs 6700 crores.


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Phase II. Entry of Public Sector Funds - 1987-1993

The Indian mutual fund industry witnessed a number of public sector players

entering the market in the year 1987. In November 1987, SBI Mutual Fund from

the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual

Fund was later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank

Muatual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual

Fund. By 1993, the assets under management of the industry increased seven times

to Rs. 47,004 crores. However, UTI remained to be the leader with about 80%

market share.

Amount

Mobilised

Assets

Under

Management

Mobilisation

as % of

gross

Domestic

Savings

UTI 11,057 38,247 5.2%

Public

Sector 1,964 8,757 0.9%

Total 13,021 47,004 6.1%


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Phase III. Emergence of Private Sector Funds - 1993-96

The permission given to private sector funds including foreign fund management

companies (most of them entering through joint ventures with Indian promoters) to

enter the mutual fund industry in 1993, provided a wide range of choice to

investors and more competition in the industry. Private funds introduced

innovative products, investment techniques and investor-servicing technology. By

1994-95, about 11 private sector funds had launched their schemes.

Phase IV. Growth and SEBI Regulation - 1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from theSEBI after the year 1996. The mobilisation of funds and the number of players

operating in the industry reached new heights as investors started showing more

interest in mutual funds.

Inventors' interests were safeguarded by SEBI and the Government offered tax

benefits to the investors in order to encourage them. SEBI (Mutual Funds)

Regulations, 1996 was introduced by SEBI that set uniform standards for all

mutual funds in India. The Union Budget in 1999 exempted all dividend incomes

in the hands of investors from income tax. Various Investor Awareness


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Programmes were launched during this phase, both by SEBI and AMFI, with an

objective to educate investors and make them informed about the mutual fund

industry.

In February 2003, the UTI Act was repealed and UTI was stripped of its Special

legal status as a trust formed by an Act of Parliament. The primary objective

behind this was to bring all mutual fund players on the same level. UTI was re-

organized into two parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund

Presently Unit Trust of India operates under the name of UTI Mutual Fund and its

past schemes (like US-64, Assured Return Schemes) are being gradually wound

up. However, UTI Mutual Fund is still the largest player in the industry. In 1999,

there was a significant growth in mobilisation of funds from investors and assets

under management which is supported by the following data:

GROSS FUND MOBILISATION (RS. CRORES)

FROM TO UTI PUBLIC

SECTOR

PRIVATE

SECTOR TOTAL

01-

April-98

31-

March-

99

11,679 1,732 7,966 21,377

01- 31- 13,536 4,039 42,173 59,748


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April-99 March-

00

01-

April-00

31-

March-

01

12,413 6,192 74,352 92,957

01-

April-01

31-

March-

02

4,643 13,613 1,46,267 1,64,523

01-

April-02

31-Jan-

035,505 22,923 2,20,551 2,48,979

01-Feb.-

03

31-

March-

03

* 7,259* 58,435 65,694

01-

April-03

31-

March-

04

- 68,558 5,21,632 5,90,190

01-

April-04

31-

March-

05

- 1,03,246 7,36,416 8,39,662


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01-

April-05

31-

March-

06

- 1,83,446 9,14,712 10,98,158

ASSETS UNDER MANAGEMENT (RS.

CRORES)

AS ON UTI PUBLIC

SECTOR

PRIVATE

SECTOR TOTAL

31-

March-

99

53,320 8,292 6,860 68,472

Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently,

examples of which are acquisition of schemes of Alliance Mutual Fund by Birla

Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund.

Simultaneously, more international mutual fund players have entered India like

Fidelity, Franklin Templeton Mutual Fund etc. There were 29 funds as at the end


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of March 2006. This is a continuing phase of growth of the industry through

consolidation and entry of new international and private sector players.

GRO W TH IN ASSETS UNDER MANAGEMENT

The graph indicates the growth of assets over the years.


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LEGAL STRUCTURE OF MUTUAL FUNDS

Mutual funds have a unique structure not shared with other entities such as

companies or firms. It is important for the employees and agents to be aware of

the special nature of this structure, because it determines the rights and

responsibilities of the funds constituents i.e. sponsors , trustees, custodians,

transfer agents and of course, the fund and asset management company (AMC). It

also drives the inter-relationship between these constituents.

MUTUAL FUNDS STRUCTURE IN INDIA

India has a legal framework within which mutual funds must6 be constituted. In

India open and close ended funds operate under the same regulatory structure, and

are constituted along one unique structure as UNIT TRUSTS.

A mutual fund in India is allowed to issue open and close ended schemes under a

common legal structure. Mutual funds in India are laid down under SEBI

regulations, 1996.

There are many entities involved and the diagram below illustrates the

organizational set up of a mutual fund:


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Organization of Mutual Fund

1. Sponsor

Sponsor of the mutual fund is just like the entrepreneur who takes the risk of

starting the business. Sponsor can be an individual, company or another form of

organization. There are three criteria for the sponsors, which are as follows:

a) Three years profitability in the business which they are doing.

b) Five years track record of the business.

c) 40 % of the net worth of the mutual funds should come from the sponsor.

2. Asset Management Company(AMC)

The Asset Management Company is the core part of the mutual fund as the

Chief Investment Officer of the AMC will make all the investment decisions.


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The net worth of the AMC at all the times should be Rs.10 crores. The success

or failures of the fund in generating returns for the investors depend to a very

large extent on the skills and knowledge of the fund manager.

3. Trustee:

Trustees are those individuals who are appointed by the sponsor and have credit

worthiness in the market. The trustees of the mutual fund hold its property for

the benefit of the unit holders; they do not directly manage the portfolio of

securities. For this they appoint the AMC with the prior approval of SEBI. They

see to it that the interests of the mutual fund investors are protected and that the

working of the mutual fund is done in lines with the rules and regulations of the

mutual fund industry.


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Rights of Trustees:

1. The trustees appoint the AMC with the prior approval of SEBI.

2. They also approve each of the schemes floated by the AMC.

3. They have the right to request any necessary information from the

AMC concerning the operations of various schemes managed by AMC to ensure

that the AMC is in compliance with the trust deed and the regulation.

4. The trustees may take remedial action if they believe that the fund are not

being conducted in accordance with SEBI regulations.

4. Custodian and Depositories:

Mutual funds are in the business of buying and selling of securities in large

volumes.

Handling these securities in terms of physical delivery and eventual safekeeping

is therefore a specialized activity. The custodian is appointed by the Board of

Trustees for safekeeping of physical securities or participating in any clearing

system through approved depository companies on behalf of mutual fund in

case of dematerialized securities. A custodian must fulfill its responsibilities in


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accordance with its agreement with the mutual fund. The custodian should be

an entity independent of the sponsors and is required to be registered with

SEBI.

Now the Indian capital markets are moving away from having physical

certificates for securities, to ownership of these securities in dematerialized

form with a depository.

Thus, a Mutual funds dematerialized securities holdings will be held by a

depository through a depository participant. A funds physical securities will

continue to be held by the custodian. Thus deliveries of a funds securities are

given or received by a custodian or a depository participant, at the instruction of

the AMC, although under the overall direction and responsibility of the trustees.

5. Transfer Agents:

Transfer agents are responsible for issuing and redeeming units of the mutual

fund and provide other related services such as preparation of transfer

documents and updating investor records. A fund may choose to carry out this

activity in-house and charge the scheme for the service at a competitive market

rate. Where an outside transfer agent is used, the fund investor will find the

agent to be an important interface to deal with, since all of the investor services


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that a fund provides are going to be dependant on the transfer agent.

6. Distributors:

For a fund to sell units across a wide retail base of individual investors, an

established network of distribution agents is essential. AMC usually appoint

Distributors or agents or brokers, who sell units on behalf of the fund.

Types of Mutual Funds Schemes in India

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial

position, risk tolerance and return expectations etc. The table below gives an

overview into the existing types of schemes in the Industry.

1 By Structure

1 Open - Ended Scheme

2 Close - Ended Schemes

3 Interval Schemes

2 By Investment Objective


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1 Growth Schemes

2 Income Schemes

3 Balanced Schemes

4 Money Market Schemes

3 Other Schemes

1 Tax Saving Schemes

2 Special Schemes

3 Index Schemes

4 Sector Specific Schemes


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Types of Mutual Funds

A mutual fund scheme can be classified into open-ended or closed-ended scheme

depending on its maturity period .

1. Open-ended Fund/Scheme:

The units offered by these schemes are available for sale and repurchase on any

business day at NAV based prices. Hence, the unit capital of the schemes keeps

changing each day. Such schemes thus offer very high liquidity to investors and

are becoming increasingly popular in India.

2. Close-ended Fund/Scheme:

The unit capital of a close-ended product is fixed as it makes a one-time sale of

fixed number of units. These schemes are launched with an initial public offer

(IPO) with stated maturity period after which the units are fully redeemed at NAV

linked prices.

In the interim, investors can buy or sell units on the stock exchanges where they


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are listed. Unlike open-ended schemes, the unit capital in closed-ended schemes

usually remains unchanged. After an initial closed period, the scheme may offer

direct repurchase facility to the investors. Closed-ended schemes are usually more

illiquid as compared to open-ended schemes and hence trade at a discount to the

NAV. This discount tends towards the NAV closer to the maturity date of the

scheme.

Schemes according to Investment objective:

A scheme can also be classified as growth scheme, income scheme, or balanced

scheme considering its investment objective. Such schemes may be open-ended or

close-ended schemes as described earlier. Such schemes may be classified as

follows:

1. Growth Oriented Schemes:

The aim of growth funds is to provide capital appreciation over the medium to

long-term .such schemes normally invest a major part of their corpus in

equities. Such funds have comparatively high risks. These schemes provide

different options to the investors like dividend option, capital appreciation, etc.


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and the investors may choose an option depending on their preferences.

The investors must indicate the option in the application form. The mutual funds

also allow the investors to change the option at a later date. Growth schemes are

good for investors having a long term outlook seeking appreciation over a period

of time.

2. Income/Debt oriented Scheme :

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, government securities and money market instruments. Such funds are

less risky compared to equity schemes. These funds are not affected because of

fluctuations in equity markets. However, opportunities of capital appreciation are

also limited in such funds. The NAVs of such funds are affected because of change

in interest rates in the country. If the interest rates fall, NAVs of such funds are

likely to increase in the short run and vice-versa. However, long term investors

may not bother about these fluctuations.


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3. Balanced Fund:

The aim of balanced funds is to provide both growth and regular income as such

schemes invest both in equities and fixed income securities in the proportion

indicated in their offer documents. These are appropriate for investors looking for

moderate growth. They generally invest 40-60% in equity and debt instruments.

These funds are also affected because of fluctuations in share prices in the stock

markets. However, NAVs of such funds are likely to be less volatile compared to

pure equity funds.

4. Money Market or Liquid Fund:

These funds are also income funds and their aim is to provide easy liquidity,

preservation of capital and moderate income. These schemes invest exclusively in

safer short-term instruments such as treasury bills, certificates of deposit,

commercial paper and inter-bank call money, government securities, etc. Returns

on these schemes fluctuate much less compared to other funds. These funds areappropriate for corporate and individual investors as a means to park their surplus

funds for short periods.


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6. Gilt fund:

If you are among the safe players, invest in a liquid fund. These funds invest

exclusively in government securities which have zero credit risk. The NAVs of

these schemes are determined by changes in interest rates and other economic

factors as is the case with income or debt oriented schemes. SBI mutual fund has

the magnum gilt fund.

7. Tax Saving Fund:

These schemes offer tax rebates to the investors under specific provisions of the

Income Tax Act, 1961 as the government offers tax incentives for investment in

specified avenues. Eg. Equity linked savings schemes (ELSS). Pension schemes

launched by the mutual funds also offer tax benefits. These schemes are growth

oriented and invest pre-dominantly in equities. Their growth opportunities and

risks associated are like any equity-oriented scheme.


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Special schemes:

1. Index funds:

Index funds replicate the portfolio of a particular index such as the BSE sensitive

index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the

same weight age comprising of an index. NAVs of such schemes would rise or fall

in accordance with the rise or fall in the index, though not exactly by the same

percentage due to some factors known as tracking error in technical terms.

Necessary disclosures in this regard are made in the offer document of the mutual

fund scheme.

2. Sector Specific Schemes:

These are the funds/schemes which invest in the securities of only those sectors or

industries as specified in the offer documents. Eg: pharmaceuticals, software,

FMCG, petroleum stocks, etc. The returns in these funds are dependent on the

performance of the respective sectors/industries. While these funds may give


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higher returns, they are more risky compared to diversified funds. Investors need to

keep a watch on the performance of those sectors/industries and must exit at an

appropriate time. They may also seek advice of an expert.

LOAD OR NO LOAD FUND

A load fund is one that charges a percentage of NAV for entry or exit. That is, each

time one buys or sells units in the fund, a charge will be payable. This charge is

used by the mutual fund for marketing and distribution expenses. Suppose the

NAV per unit is Rs.10. if the entry as well as exit load charged is 1%, then the

investors who buy would be required to pay Rs.10.10 and those who offer their

units for repurchase to the mutual fund ill get only Rs.9.90 per unit. The investor

should take the loads into consideration while making investment as these affect

their yields/returns. However, the investor should also consider the performance

track record and service standards of the mutual fund which are more important.

Efficient funds may give higher returns in spite of loads.

A no-load fund is one that does not charge for entry or exit. It means the investors

can enter the fund/scheme at NAV and no additional charges are payable on

purchase or sale of units.


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1. Is SBI Mutual Fund (SBIMF) a subsidiary of The State

Bank of India ?

Yes SBIMF is a fully owned subsidiary of the SBI.

Strong Heritage

SBI Mutual Fund draws strength from India's premier and highly respected bank,

the State Bank of India. Set up on July 1, 1955, the State Bank of India is today,

the largest banking operation in the country.

Through years of commitment to service and national development, SBI has grown

into an instrument of social change. Today, it has 9034 branches in India and 51

offices in 31 countries, spread across the globe.

Investment

Equity:

Our Investment philosophy revolves around the concept of growth at a reasonable

price whereby we invest in growth oriented stocks which are available at attractive

relative valuations.

We use a combination of the Top down and Bottom up approaches to investment

o Top down approach for sector allocation

o Bottom up approach for stock selection


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We identify and invest in businesses that have a sustainable competitive

advantage.

We invest with a medium term view, with an investment horizon of at least 18

months.

Risk control is an important element of our strategy

We believe in pro-active fund management to out-perform benchmark indices

In determining our investment universe, we employ a multi-

stage filtering process. At the first level filter, we look at

liquidity. At the second level filter, we look at management

quality. The third level is the competitive position of the

company and the final level is the share price valuation.

D ebt:

To maximize the "risk adjusted returns" for the investors based on their risk

tolerance.

Manage the schemes on a "Portfolio basis".

Active management of interest rate risk.

Credit risk management by following the conservative approach.

Continuous monitoring


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2. How many schemes does SBIMF have?

SBIMF has one of the widest of range schemes to meet every requirement of

investors. With investment expertise of over 15 years, SBIMF has always fulfilled

its promise to its investors and has striven to manage their funds with honestly and

integrity.

3. How do I purchase units of various schemes of SBI

Mutual Fund?

You will have to fill in the application form, attach the cheque/draft payable at any

of the SBIMF Investor Service Centre locations or SBI's Designated Collection.

Both have to be deposited at your SBI's Designated Collection branch or send it to

any of our Investor Service Centres. You can ask for application through any of

the following modes: From your SBI's Designated Collection

branch. Downloadthe application form from our website. Request by e-mail at

[email protected] Contact any of SBIMF's 26 Investor Service Centres

or 3 Investor Service Desks across the country. Contact any SBIMF


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Distributors/Brokers/District Organizers. In case of additional purchases to your

existing units, an 'Additional Purchase' form is also available in the account

statements sent to you.

If you are an account holder enjoying online debit facility with HDFC Bank or

ICICI Bank or SBI, just click here

4. How long will it take to receive an account statement after

the purchase of units or the cheque in case of sale of units?

The account statement cheque will be mailed to you normally within five working

days from receipt of the purchase/sales request.

5. How do I redeem my units from SBIMF?

To redeem your units, all you have to do is to fill in and sign the brief Redemption

Request attached to your account statement. Send the request to nearest Investor

Service Centre or the concerned registrar of the scheme or SBIMF Corporate

Office.


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6. How long it will take to receive the redemption cheque?

Normally your redemption cheque will be mailed to you within three working days

of our receiving your request.

7. W hat is the procedure for switching over from one

scheme/plan to another?

You will have to fill up a switch-over request form, which will be sent to you along

with your statement of account. You will also have to fill in a fresh application

form for the scheme you switch-over into and send it to the nearest Investor

Service Centre or the concerned Registrar.

8. Should all the unitholders sign for any request like,

additional purchase, redemptions, change of address, etc?

For all such requests only first holder or survivor can sign on behalf of all unit

holders.


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9. Can partnership firms invest in SBIMF?

Partnership firms can invest in the name of the firm, subject to the submission of:

Certified copy of Partnership Deed

List of authorized signatories with specimen signatures

C ertified copy of Resolution.

10. Can a corporate invest in SBIMF?

Corporate can invest in the name of the firm, subject to the submission of:

C ertified copy of Board Resolution

Memorandum & Articles of Association

List of authorized signatories with specimen signatures.

11. Can a trust invest in SBIMF?

Religious / Charitable / Other trusts, WAKFs & Societies registered under the

applicable laws are authorized to invest in Mutual Funds.


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12. W hom should I contact for queries?

Please contact the designated Bank collecting branch or any of the SBI MF's

representatives at the Investor Service Centres with your complaints, queries and

suggestions. You can also use the Feedback Section (Contact Us).

13. Is loan facility available?

Magnum holders can obtain loan against their Magnum from any bank, subject to

relevant RBI regulations & the respective bank's instructions, by getting a lien

registered / recorded with the registrars. In addition to this Magnum holders can

obtain loans against their Magnums from SBI by getting lien registered / recorded

with those Registrars subject to the conditions of SBI.

14. W hat is sales or repurchase/redemption price?

The price or NAV unit holding is charged while investing in open ended scheme is


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called sales price. It may include sales load, if applicable. ITI repurchase or

redemption price or NAV at which an open-ended scheme purchases or redeems its

unit holders. It may include exit load, if applicable.

15. W hat is assured return scheme?

Assured return schemes are those schemes that assure a specific return to the unit

holders irrespective of performance of the scheme.

A scheme cannot promise returns unless such returns are fully guaranteed by the

sponsor or AMC and this is required to be disclosed in the offer document.

Investors should carefully read the offer document whether return is assured for the

entire period of the scheme or only for certain period. some schemes assure returns

one year at a time and they review and change it at the beginning of the next year.

16.Can a mutual fund change the assets allocation while

deploying fund of investors?


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Considering the market trends, any prudent fund managers can change the assets

allocation i.e. he can invest higher or lower percentage of the fund in equity or debt

instruments compared to what is disclosed in the offer document. It can be done on

a short term basis on defensive considerations i.e. to protect the NAV. hence the

fund managers are allowed certain flexibility in altering the assets allocation

considering the interest of the investors. In case the mutual fund wants to change

the assets allocation on a permanent basis, they are required to inform the unit

holders and giving them option to exit the scheme at prevailing NAV without any

load.

17.Can non-resident Indians NRIs invest in mutual fund?

Yes, non resident Indians can also invest in mutual funds. Necessary details in this

respect are given in the offer documents of the scheme.

18.How much should invest in debt or equity oriented

schemes?

An investor should take into account his risk taking capacity, age factor, financial


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position, etc. As already mentioned, the schemes invest in different type of

securities as disclosed in the offer documents and offer different returns and risks.

Investors may also consult financial experts before taking decisions. Agents and

distributors may also help in this regard.

19.How to fill up the application form of a mutual fund

scheme?

An investor must mention clearly his name, address, number of units applied for

and such other information as required in the application form. He must give his

bank account number so as to avoid any fraudulent encashment of any cheques /

draft issued by the mutual fund at a later date for the purpose of dividend or

repurchase. Any changes in the address, bank account number, etc at a later date

should be informed to the mutual fund immediately.

20. W hat should an investor look into an offer document?


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An abridged offer document, which contains very useful information, is required to

be given to the prospective investor by the mutual fund. The application norm for

subscription to a scheme is an integral part of the offer document. SEBI has

prescribed minimum disclosure in the offer document. An investor, before

investing in a scheme, should carefully read the offer document. Due care must be

given to portions relating to main features of the scheme, risk factors, initial issue

expenses and recurring expenses to be charged to the scheme, entry or exit loads,

sponsor's track record, educational qualification and work experience of key

personal including fund managers, performance of other schemes launched by

mutual fund in the past, pending litigations and penalties imposed etc.

21. W hen will the investor get certificate or statement of

account after investing in a mutual fund?

Mutual funds are required to dispatch certificates or statements of account within

six weeks from the date of closure of the initial subscription of the schemes, the

investors would get either a demit account statement or unit certificates as these


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are traded in the stock exchanges. In case of open ended schemes, a statement of

account is issued by the mutual fund within 30 days from the date of closure of

initial public offer of the scheme. The procedure of repurchase is mentioned in the

offer document.

22.How long will it take for transfer of units after purchase

from stock markets in case of close ended schemes?

According to SEBI regulations, transfer of units to be done within thirty days from

the date of lodgment of certificates within the mutual fund. As a unit holder, how

much time will it take to receive dividends/repurchase proceeds ?

A mutual fund is required to dispatch to the unit holders the dividend warrants

within 30 days of the declaration of the dividend and the redemption or repurchase

proceeds within 10 working days from the date of redemption or repurchase

request made by the unit holder.

In case of failures to dispatch the reduction ? Repurchase proceeds within the

stipulated time period; Assets Management Company is liable to pay interest as


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specified by SEBI from tome to time (15% at present).

23.Can a mutual fund change the nature of the scheme from

the one specified in the offer document?

Yes, however, no change in the nature or terms of the scheme, known as

fundamental attributes of the scheme e.g. structure, investment pattern, etc can be

carried out unless a written communication is sent o each unit holder and an

advertisement.

Investors can compare the performance of their schemes with those of other mutual

funds under the same category. They can also compare the performance of equity

oriented schemes with the benchmarks like BSE sensitive indexs CNX Nifty, etc.

On the basis of performance of the mutual funds, the investors should decide when

to enter or exit from a mutual fund scheme.

24.How to know where the mutual fund scheme has invested


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money mobilized from the investor?

The mutual funds are required to disclose full portfolios of all of their schemes on

half yearly basis, which are published in the newspapers. Some mutual fund sends

the portfolios to their unit holders.

The scheme portfolio shows investment made in each security i.e. equity,

debenture, money market instruments, government securities etc and their quantity,

market value and % to NAV. These portfolio investments also required to disclose

illiquid securities in the portfolio, investment made in rated and unrated debt

securities, non performing assets (NPAs), etc.

Some of the mutual funds send newsletters to the unit holders on quarterly basis,

which also contain portfolios of the schemes.

25.How to know the performance of a mutual fund scheme?

The performance of a scheme is reflected in its net asset value (NAV) which is

disclosed on daily basis in newspapers and websites of mutual funds.

The mutual funds are also required to publish their performance in the form of half

yearly results which also include their returns/yields over a period of time i.e. last


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six months, 1 year, 3years, 5years and since inception of the scheme.

Apart from these, many research agencies also publish research reports on

performance of mutual funds including the ranking of various schemes in terms of

their performance.

Investors should study these reports and keep themselves informed about the

performance of various schemes of different mutual funds. They can also compare

the performance of equity oriented schemes with the benchmarks like BSE Index,

S&P CNX Nifty, etc. on the basis of performance of the mutual funds, the

investors should decide when to enter or exit from a mutual fund scheme.

26.Is there any difference between investing in a mutual

fund and in an initial public offering(IPO) of company?

Yes, there is a difference. IPOs of companies may open at lower or higher price

than the issue price depending on market sentiency and perception of investors.

However, in the case of mutual funds, the par value of the units may rise or fall

immediately after allotment. A mutual fund scheme takes some time to make

investment in securities. NAV of the scheme depends on the value of securities in

which the funds have been deployed.


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27.If schemes in the same category of differ mutual funds

are available should one chhose a scheme with lower NAV?

Some of the investors have the tendency to prefer a scheme that is available at

lower NAV compared to the one available at higher NAV. Sometimes, they prefer

a new scheme which is issuing units at rs.10 whereas the existing schemes in the

same category are available at much higher NAVs. Investors may please note that

in case of mutual fund schemes, lower or higher NAVs of similar type schemes of

different mutual funds have no relevance. On the other hand, investors should

choose a scheme based on its merit considering performance track record of the

mutual fund, service standards, professional management, etc. This is explained in

an example given below.

Suppose scheme A is available at a NAV of rs.15 and another scheme B at

rs.90.Both schemes are diversified equity oriented schemes.

Investor has put Rs.9000 in each of two schemes. He would get 600 units

(9000/15) in schemes A and 100 units (9000/90) in scheme B.

Assuming that the markets go up by 10 percent and both the schemes perform

equally well and it is reflected in their NAVs. NAV of scheme A would go up to

Rs.16.50 and that of scheme B to Rs.99.thus, the market value of investment would


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be rs.9900(600*16.50)in scheme A and it would be the same amount of Rs.9900 in

scheme B(100*99).The investor would get the same return of 10% on his

investment in each of the schemes. Thus, lower or higher NAV of the schemes and

allotment of higher or lower number of units within the

28.Are the companies having names like mutual benefit the

same as mutual funds schemes?

Investors should not assume some companies having the name "mutual benefit" as

mutual funds. These companies do not come under the purview of SEBI. On the

other hand, mutual funds can mobilize funds from the investors by launching

schemes only after getting registered with SEBI as mutual funds.

There are number of other web sites, which give a lot of information of various

schemes of mutual funds including over a period of time. Many newspapers also

publish useful information on mutual funds on daily and weekly basis. Investors

may approach their agents and distributors to guide them in this regard.

29.If mutual fund scheme is wound up,what happens to

money invested?


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In case of winding up of a scheme, the mutual funds pay a sum based on prevailing

NAV after adjustment of expenses. Unit holders are entitled to receive a report on

winding up from the mutual funds which gives all necessary details.

30.How can the investors redress their complaints.

Investors would find the name of contact person in the offer document of the

mutual fund scheme, which they may approach in case of any query, complaints or

grievances. Trustees of a mutual fund monitor the activities of the mutual fund

monitor the activities of the mutual fund. The names of the directors of Assets

Management Company and trustees are also given in the offer documents.

Investors can also approach SEBI for redressal of their complaints. On receipt of

complaints, SEBI takes up the matter with the concerned mutual fund and follows

up with them till the matter is resolved. Investors may send their complaints.

31.Is the higher net worth of the sponsor a guarantee for

better returns?


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In the offer document of any mutual fund scheme, financial performance including

the net worth of the sponsor for a period of three years is required to be given. The

only purpose is that the investor should know the track record of the company

which has sponsored the mutual fund. However, higher net worth of the sponsor

does not mean that the scheme would give better returns or the sponsor would

compensate in case the NAV falls.

32. W here can an investor look out for information on

mutual funds?

Almost all the mutual funds have their own websites. Investor can also access the

NAVs, half yearly results and portfolios of all mutual funds at the website of

association of mutual funds in India (AMFI) www.amfiindia.com.amfi also

published useful literatures for the investors.

Investors can log on to the website of SEBI www.sebi.gov.in and go to "mutual

fund" section for information on SEBI regulations and guidelines, data on mutual

funds, draft offer document filled by mutual funds, addresses of mutual funds, etc.

Also in the annual reports of SEBI available on the website, a lot of information on


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mutual fund is given.

SYSTEMATIC INVESTMENT PLAN

A systematic investment plan (SIP) lets you invest in small amounts in mutual

funds on a regular basis. It gives you a lot of flexibility and is a very convenient

way of building a large corpus over a period of time. In mutual fund terminology,

SIP allows the investor to invest a fixed amount every month or quarter for

purchasing additional units of the scheme at NAV based prices.

Also, your investments benefit from rupee-cost averaging. Let us explain it. If u

invest an equal amount of money every month in a mutual fund, you are engaging

in rupee cost averaging. shares price change from day to day, so the set amount of

money you invest buys different amounts of shares every time. When prices are

high, NAV is high-so you get less. And when prices are low, NAV is low-so you

get more. In the end if you were to buy all units at once you risk getting less for

your money. If you are lucky enough, you would get more. But for that you would

need to be an expert. So in the interest of an average investor, a SIP ensures that

the chances of loosing out on an investment are spread out and thus minimized.

Let's take an example. Suppose an investor invests Rs.1000 under the systematic


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investment plan on a monthly basis. Using the sip strategy the investor can reduce

his average cost per unit. The investor gets the advantage of getting more units

when the market has turned downwards


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NAMES OF SBIMF SCHEME

1) Magnum NRI investment fund

2) Magnum income plus fund

3) Magnum income fund

4) Magnum children's benefit plan

5) Magnum monthly income plan

6) Magnum gilt fund

7) Magnum equity fund

8) Magnum tax gain schemes 93

9) Magnum index fund

10) Magnum sector funds umbrella

11) Magnum multiplier plus scheme 93

12) Magnum global funds

13) Magnum tax profits 1994

14) Magnum equity linked savings scheme 95

15) Magnum equity linked savings schemes 96

16) Magnum monthly income schemes 97

17) Magnum monthly income scheme 98 (I)

18) Magnum monthly income scheme 98(II)


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Advantages of Mutual Funds

The advantages of investing in a Mutual Fund are:

1 Diversification

The best mutual funds design their portfolios so individual investments will react

differently to the same economic conditions. For example, economic conditions like

a rise in interest rates may cause certain securities in a diversified portfolio to

decrease in value. Other securities in the portfolio will respond to the same

economic conditions by increasing in value. When a portfolio is balanced in this

way, the value of the overall portfolio should gradually increase over time, even if

some securities lose value.

2 Professional Management

Most mutual funds pay topflight professionals to manage their investments. These

managers decide what securities the fund will buy and sell.

3 Regulatory oversight

Mutual funds are subject to many government regulations that protect investors

from fraud.


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4 Liquidity

It's easy to get your money out of a mutual fund. Write a check, make a call, and

you1ve got the cash.

5 Convenience

You can usually buy mutual fund shares by mail, phone; or over the Internet.

6 Low Cost

Mutual fund expenses are often no more than 15 percent of your investment.

Expenses for Index Funds are less than that, because index funds are not actively

managed. Instead, they automatically buy stock in companies that are listed on a

specific index.


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Drawbacks of Mutual Funds

Mutual funds have their drawbacks and may not be for everyone:

1 No Guarantees

No investment is risk free. If the entire stock market declines in value, the value of

mutual fund shares will go down as well, no matter how balanced the portfolio.

Investors encounter fewer risks when they invest in mutual funds than when they

buy and sell stocks on their own. However, anyone who invests through a mutual

fund runs the risk of losing money.

2 Fees and commissions

All funds charge administrative fees to cover their day-to-day expenses. Some

funds also charge sales commissions or "loads" to compensate brokers, financial

consultants, or financial planners. Even if you don't use a broker or other financial

adviser, you will pay a sales commission if you buy shares in a Load Fund.


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3 Management risk

When you invest in a mutual fund, you depend on the fund's manager to make the

right decisions regarding the fund's portfolio. If the manager does not perform as

well as you had hoped, you might not make as much money on your investment as

you expected. Of course, if you invest in Index Funds, you forego management

risk, because these funds do not employ managers. Pan cards and mutual funds to

go hand in hand


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W hat is NAV?

A mutual fund is a common investment vehicle where the assets of the fund belong

directly to the investors. Investors subscriptions are accounted for/by the fund not

as liabilities or deposits but as Unit capital. On the other hand, the investments

made on the behalf of the investors are reflected on the assets side and are the main

constituents of the balance sheet. The funds Net Assets are therefore defined as the

assets minus liabilities. As there are many investors in a fund, it is common

practice for mutual funds to compute the share of each investor on the basis of the

value of Net Assets per share / unit, commonly known as the Net Asset Value

(NAV).

Calculation of NAV according to SEBI:

NAV=Net Assets of the scheme/Number of units Outstanding i.e.

NAV=Market Value of investments + Receivables + other Accrued Income +Other

Assets Accrued Expenses- Other payables Other Liabilities / No. of Units

Outstanding as at the NAV date.


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How is a mutual fund set up?

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset

management Company 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 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 funds 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 funds.


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Future of Mutual Funds in India

By December 2004, Indian mutual fund industry reached Rs 1, 50,537 crore. It is

estimated that by 2010 March-end, the total assets of all scheduled commercial

banks should be Rs 40, 90,000 crore.

The annual composite rate of growth is expected 13.4% during the rest of the

decade. In the last 5 years we have seen annual growth rate of 9%. According to

the current growth rate, by year 2010, mutual fund assets will be double.

Let us discuss with the following table:

Aggregate deposits of Scheduled Com Banks in India(Rs. Crore)Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Mar-

04Sep-04

Dec-04

Deposits 605410 851593 989141 1131188 1280853 - 1567251 1622579

Change in% over lastYear

- 15 14 13 12 - 18 3

Source-RBI

Mutual Fund AUMs GrowthMonth/Year Mar-

98Mar-00

Mar-01

Mar-02

Mar-03

Mar-04 Sep-04

Dec-04

MF AUMs 68984 93717 83131 94017 75306 137626 151141 149300Change in% over lastYear

- 26 13 12 25 45 9 1


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Some facts for the growth of mutual funds in India

1 100% growth in the last 6 years.

2 Number of foreign AMC's is in the queue to enter the Indian markets like

Fidelity Investments, US based, with over US$1trillion assets under

management worldwide.

3 Our saving rate is over 23%, highest in the world. Only channelizing these

savings in mutual funds sector is required.

4 We have approximately 29 mutual funds which are much less than US

having more than 800. There is a big scope for expansion.

5 B and C class cities are growing rapidly. Today most of the mutual

funds are concentrating on theAclass cities. Soon they will find scope in

the growing cities.

6 Mutual fund can penetrate rural like the Indian insurance industry with

simple and limited products.

7 SEBI allowing the MFs to launch commodity mutual funds.

8 Emphasis on better corporate governance.

9 Trying to curb the late trading practices.


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Pan cards and mutual funds to go hand in hand

The pan card and the NFO application go together now with fund houses selling

them together.

This month, SEBI made a pan card, or application proof, mandatory for mutual

fund investments.

Since then, retail investments have fallen 40-50 per cent. Fund houses like

Reliance, SBI, JM Financial and others, have begun to provide customers with pan

card application forms along with mutual fund forms.

They have also tied up with SBI UTI Securities and Bajaj Capital to speed up the

process.

The AMCs have taken the initiative to partner with us to facilitate many investors

to come to our branches wherever they are facing a query of pan card. We offer

them the entire service of filling up the applications, providing the form 49 A, the

appropriate ticket which is to be filed with the form and depositing with the

concerned authority for processing, said Senior Vice President, Bajaj Capital,

Surajit Mishra.

Reliance, HDFC, SBI, ICICI Prudential, assisting investors, Reliance Mutual

Funds, India's largest fund house, had retail investments fall by half since July 2

when SEBI issued the ruling.

It's now hiring photographers and pan card agents at no cost to the customer.

Fund houses like SBI, ICICI Prudential and HDFC have also started educating

customers on the importance of the pan card.


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Meanwhile, JM Financial, which launched JM contra fund on Monday, is also

helping customers to acquire pan cards.

We are tying up with intermediaries or companies, which are allowed to either,

facilitate or allot pan. To a great extent for this NFO we will even fund it because

the cost of applying for pan is Rs 73-74, said Head of Sales and Marketing, JM

Financial AMC, Bhanu Katoch.

Even as fund houses set up shops for pan cards, fund houses see high expenditure

on the cards hurting their expansion plans.

TAX BENEFITS OF MUTUAL FUNDS:

1) 100% Income Tax exemption on all Mutual Fund dividends

2) Capital Gains Tax to be lower of -

10% on the capital gains without factoring indexation benefit and20% on the capital gains after factoring indexation benefit.

3) Open-end funds with equity exposure of more than 50% are exempt from

the payment of dividend tax for a period of 3 years from 1999-2000.


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O ver View

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has anenviable 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 Society

General Asset Management, one of the worlds leading fund managementcompanies 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 5.4 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. 31,794 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 organisers.

SBI Mutual is the first bank-sponsored fund to launch an offshore fund

Resurgent India Opportunities Fund.


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Growth through innovation and stable investment policies is the SBI MF credo.

Comparison of various financial investment avenues

There are various investment avenues available in the market which have different

risk and return parameters. Every investor has his own objective accordingly to

which he makes the investment. The investment options can be broadly compared

on the following aspects :

Instruments Risk Returns Liquidi

ty

Taxatio

n

Safety

Equity High High High No

LTCG

Low

Financial

institution bonds

High Moderat

e

Low Taxable Modera

te

Bank deposits Low Low Low Taxable High

PPF Low Moderat

e

Low Tax free High

NSC Low Moderat

e

Low Tax free High

Mutual funds Low High High No tax High


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Analysis:

The table clearly shows that the mutual funds have more benefits of investments as

compared to other instruments in all the five parameters which are considered idealfor making any investments. Risk which is the prime concern before making any

investment is low and the returns which are the prime motive for investments are

high , at the same time there is no taxation and liquidity which means when the

investors wants he can have his money back is also there and there is safety of

capital which is also a prime concern as all the mutual funds are SEBI registered

and under its direct control.


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Comparison of returns given by various financial

instruments:

Returns are the prime factor that motivates any investor to make the investments.

Ultimate objective of any investment is to generate high returns for the future so

that better standard of living can be attained. In todays world where modernization

has changed the life style of people and standard of living has also gone up very

sharply, there is need for those instruments which generate higher returns with lowrisk.

Instruments Returns (%)approximateAnd annualized

Financial institutions bonds 5.5%

Corporate debentures 6%

Bank deposits 8% to 9%

PPF 8%

NSC 8%

Equity No assured returns

Mutual funds No assured returns


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PERFORMANCE

Multiplier plusPerformance

Period Annualized returns(%)

Out performancev/s Nifty Index (%)

1 year 78.59 30.223 year 42.43 10.485 year 6.01 -3.64Since inception 10.95 0.90

Equity FundPerformance



1 year 49.50 1.133 year 33.82 1.875 year 5.99 -3.66Since inception 13.07 3.42

Tax gain SchemePerformance

Period Annualized returns

(%)

Out performance

v/s Nifty Index (%)1 year 149.79 101.423 year 66.52 34.575 year 16.65 7.00Since inception 16.98 5.67


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Global fundPerformance



1 year 111.21 62.843 year 56.07 24.125 year 18.15 8.50Since inception 10.68 4.72

Contra FundPerformance


Out performancev/s Nifty Index(%)

1 year 98.88 50.513 year 58.88 26.935 year 38.84 --Since inception 26.50 14.94


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RESEARCH METHODOLOGY

It is method adopted for collecting information for his project. The researcher

started the project by preparing questionnaires and respondents were asked to fill

it. In the project only primary data were used that was collected through a survey

conducted on customer.

Research methodology is a way to systematically solve the research problem. It

may be understood as a science of studying how research is to be done

scientifically. In research methodology, we not only talk about the research method

but also consider the logic behind them methods we use in the context of our

research study, and explain why we are using a particular method or the technique

and why we are not using others so that research results are capable of being

evaluate either by the researcher himself or by the others.

As regarding the sampling method non probability sampling technique was used:-

SAMPLE SIZE: - 100

AREA OF RESEARCH:-MORADABAD


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RESEARCH DESIGN

There are three types of research design which are as follows:

y Exploratory research design

y Descriptive research design

y Experimental research design

Exploratory research design

Seeks to discover new relationship or in other words researcher look for hypothesis. In this, survey of knowledgeable person is done or secondary data is

collected.

Descriptive research design

Provides information that helps the executive take rational decisions typically

concerned with determining frequency with which something occurs or how to

variables vary together.


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Experimental research design

Is defined as a process where events occur in a setting at the discretion of the

experimenter and control are used to identify the sources of variation in subjects

response.

DATA collection

The task of data collection begins after a research for problem is defined and

research design/plan chalked out. While deciding about research should keep in

mind two types or data viz; primary and secondary.

Primary Data

The primary data are those which are collected a fresh and for the first time as

these happen to be original in character. Primary data may be collected through

observation method, through questionnaire, through interview etc.


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Secondary Data

The secondary data on the other hand are those which have already been passed

through statistical process. Qualitative and quantitative data are collected through

newspapers, articles, previous record files etc.

Secondary data also help the researcher to choose to whom he or she should be

contacted. Secondary data gave all relevant information about the particular subject

on which researcher is to be conducted. As our topic of research is to find out the

preference of toothpaste of customer of Moradabad city, we collect data through

questionnaires and interview.

Survey method

Observation method

The observation method implies the collection of information by way of

investigators own observation, without interviewing the respondents. This method

is no doubt an expensive method and the information is provided by this method is

also very limited.


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Interview method

The interview method implies the collection of information involves the

presentation of oral, verbal, stimuli and reply. In terms of oral, verbal responses.

This method can be use through personnel interview and if possible tough

telephone interview.

Questionnaire method

In this method a questionnaire is sent to the persons concerned with a request to

answer the question and return the questionnaire. It is to being adopted by private

individuals, research workers, private and public organization even by

governments.

Experimentation emphasizes the creation of a controlled environment where some

variables are allowed to vary and cause and effect relationship is suited.

Survey research is systematic gathering of data from respondents through

questionnaire. Questionnaire may be administered by mail, telephone or personal

interview.

In the project undertaken I have used the telephone and personal interview

methods to get the required information from the respondents.


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SAMPLING

It refers to a process of learning about the population on the basis of sample drawn

from

Sampling method is divided into probability sampling and non probability

sampling.

Probability sampling

Is choose in such a way that each number of the universe has the known chance of

being selected.

Non-probability sampling

The chance of any particular unit in the universe being selected is unknown.

Here, in the project undertaken I have used non probability sampling method. In

brief, the first step taken by me was to prepare a questionnaire. Secondly, I

classified the sampling locations area wise.

Thirdly, I planned my visit in different locations, fixed date and time of my visit.


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After these preliminary preparations I was all set to start my works visited

customers talked to them and told them about the research, explained its purpose

giving them questionnaire and requesting their cooperation.


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Questionnaire

Name of the customer/investor ________________________

Address ________________________

City ________________________

Telephone No ________________________

1. Occupation:

a) Salaried

b) Retired

c) Self-employed

d) Professional

2. What is the main objective with which you make investment ?

a) Savings

b) Return

c) Safety

d) Tax benefit

3. Where would you like to invest ?


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a) Mutual fund

b) Real estate

c) Insurance

d) Share market

4. Are you aware of mutual fund ?

a) Yes

b) No

5. Have you invested in mutual fund ?

a) Yes

b) No

6. In which fund would you like to invest ?

a) Equity Fund

b) Debt Fund

c) Balanced Fund(debt + equity)

7. In which scheme would you like to invest ?


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a) Blue chip fund

b) Sectoral fund

c) Tax gain fund

d) Debt fund

8. How would you rate the importance of Entry and Exit load as a factor while

investing in Mutual Funds ?

a) Very Important

b) Important

c) Somewhat Important

d) Not Important

9. Have you ever availed the services of SBIMF ?

a) Yes

b) No

10. Are you satisfied by the services provided by the SBIMF ?

a) Yes

b) No. If No, give suggestions for improvement, if any


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FINDINGS

1. Occupation

45% people are salaried employees, 11% people are retired, 33% people are self-employed and 11% are professional.

2. What is the main objective with which you make investment ?

40% people had the objective of savings, 25% of returns, 15% of safety and 20%had the objective of availing tax benefits

45%

11%

33%

11%

salaried

retired

self employed

professional

40%

25%

15%

20%Savings

Return

Safety

Tax benefit


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3. Where would you like to invest ?

Findings reveal that 40% people would like to invest in mutual fund,10% in realestate, 30% in insurance and 20% in share market.

4. Are you aware of mutual fund ?

65% people were aware of mutual fund and 35% were not aware

40%

10%30%

2 0%M u

u

u

I u c

h k

6

%

35%

Yes

No


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5. Have you invested in mutual fund ?

75% people had invested in mutual fund while 25% had not invested in mutualfund.

6. In which fund would you like to invest ?

65% people showed interest in Equity fund, 15% in Debt fund, 20% in Balancedfund

75%

25%

Yes

No

65%15%

20%

Equity fund

Debt fund

Balanced fund


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7. In which scheme would you like to invest ?

45% people showed interest in blue chip fund, 15% in sectoral fund, 30% in taxgain fund and 10% in debt fund.

8. How would you rate the importance of Entry and Exit load as a factor

while investing in Mutual Funds ?

Answering to this question, most (60%) of the respondents said that it is a veryimportant factor, while 25% respondents said that it is an important factor and 15%did not consider it as an important factor.

45%

15%

30%

10%Blue chip fund

Sectoral fund

Tax gain fund

Debt fund

60%25%

15%

Very important

Important

Not important


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9. Have you ever availed the services of SBIMF ?

55% people were aware of Sbimf while 45% were not aware.

10. Are you satisfied by the services provided by the SBIMF ?

75% of the respondents were found to be satisfied by the services provided bySBIMF while 25% were unsatisfied.

55%

45%Yes

No

75%

25%

Yes

No


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CONCLUSION

Mutual Funds as an investment avenue have emerged as one of the fascinating

investment instrument. The investors have the benefit of low risk, high returns,

liquidity, no taxation and the professional expertise of the fund manager. Even the

investors have received more return than the market index especially in the bull run

which helps those investors who do not have the required expertise to decide which

stock to go for. The returns given by the various mutual funds over a period of say

three years has been very high.

Thus, as an investment avenue mutual funds are very much suited for those

investors who want higher returns with low risk and who do not want to have

direct exposure to the stock market.


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SUGGESTIONS

1 Increasing Awareness about Mutual Funds

The organization should lay emphasis towards increasing knowledge about

Mutual Funds among people by adopting appropriate measures and actions.

2 Better services

SBIMF should make efforts to provide better and improved services to the

investors. Any information regarding changes in Mutual Fund investment

should be properly and promptly communicated to the investors.

3

Promotional Activities

SBIMF should undertake planned promotional program on a wide scale to

reach the potential investor and to induce them to invest in Mutual Fund. It

would help the organization in attracting more investments.


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4 Investor friendly environment

SBIMF should create an investor friendly environment in its various

branches. It should help the investors in selecting the right type of scheme

which would suit their need and pocket.

5 Ensuring attractive return through continuous search for low

risk and better investment avenues

The organization should ensure attractive return to its investors through

continuous search for low risk and better investment avenues.

Company should be able to build the investors faith by identifying their

investment needs and serving them accordingly


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RECOMMENDATION

There should be comprehensive legislation to control the operation of the mutual

funds including the UTI. At present, mutual funds are subject to guidelines laid

down by the RBI, govt. of India and the SEBI. Further the guidelines governing the

UTI are not same. It is therefore necessary that the govt. should come out with

single set of comprehensive legislation which will uniformly be applicable to

public sector and private sector mutual funds and the UTI.

1 So far mutual funds in India confide themselves to urban areas; leaving vast

saving potentials in rural hinterlands. By penetrating in rural areas and

introducing saving schemes tailored to the diverse preference of rural

community and by education them about the benefits of the schemes, mutual

fund can raise burgeoning resources which can be gainful employed for the

national development.

2

Investors confidence in mutual fund can be restored by rendering their operation more transparent and providing better service.

3 While it is fine to advertise good performance of a particular schemes by a


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fund in order to attract more investment the times are fast approaching when

an honest view based approach would compel a mutual fund to advice

investor on "sell" or "switch" between schemes as emphatically as it would

advise on the purchase .so {as to attract investor, it is therefore, advisable to

mutual fund to offer this sort of counseling which will certainly make a

mutual fund different from other institutions.


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LIMITATIONS OF THE PROJECT:

1. The study is limited to the city limits of Moradabad only.

2. The study is time bound for a period of two months only.

3. The limited amount of outlay for the project is also a major constraint.

4. Manpower constraint in the sense that I will be the sole person

working on the project may also be deemed as a constraint.

5. Lack of education among people as they are unaware of SBIMF procedure.

6. Difficult to understand the questionnaire in English.

7. Many people give false rating because they are not i

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Summer Training Project Report of Saurabh

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