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A
PROJECT REPORT DISSERTATION
OF
STATE BANK OF INDIA
ON
INVESTMENT BEHAVIOUR
ONSBI MUTUAL FUNDS
(A study report on SBI)
Submitted in Partial fulfillment of the Requirement of Master ofBusiness Administration (MBA)
DOON BUSINESS SCHOOL
(Affiliated from Uttrakhand Technical University, Dehradun And Approved by AICTE)
Submitted By: Submitted To:
Pradeep Kumar Dr. A.K.Tomar
MBA IV Sem Director
(2010-12) Doon Business School
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DECLARATION
I, Pradeep Kumar, the student of masters of business administration - semester
IV (2010-12) hereby declare that I have completed this project on SBI
MUTUAL FUNDS & INVESTMENT BEHAVIOUR IN STATE BANK OF
INDIA
The information submitted is true & original to the best of my knowledge.
Pradeep Kumar
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CERTIFICATE
This is to certify that Mr. Pradeep Kumar of Masters of Business
Administration semester IV (2010-12) has successfully completed the project
on SBI MUTUAL FUNDS & INVESTMENT BEHAVIOUR IN STATE
BANK OF INDIA under the guidance of
.
Course Coordinator Director
DOON BUSINESS SCHOOLSELAQUI, DEHRADUN
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ACKNOWLEDGEMENTBefore we get into thick of things, I would like to add some words of
appreciation for the people who have been a part of this project right from itsinception. The writing of this project has been one of the significant academicchallenges I have faced and without the support, patience, and guidance of the
people involved, this task would not have been completed. It is to them I owemy deepest gratitude.
It gives me immense pleasure in presenting this project report on SBIMUTUAL FUNDS & INVESTMENT BEHAVIOUR IN STATE BANK OF
INDIA. It has been my privilege to have a team of project guide who haveassisted me from the commencement of this project. The success of this projectis a result of sheer smart work, and determination put in by me with the help ofmy project guide.
I hereby take this opportunity to add a special note of thanks for Dr. AnirudhKumar Tomar & also Ms. Divya Sabarwal & Ms. Sonika Saxena, whoundertook to act as my mentor despite their many other academic and
professional commitments, their wisdom, knowledge and commitment to the
higher standards inspired and motivated me.
I also feel heartiest sense of obligation to my best friend, who helped methrough the project and also in processing. The project is dedicated to all those
people, who helped me while doing this project.
Pradeep KumarDate: 10-04-2012
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PREFACE
This dissertation report is submitted for the partial fulfillment of MBA (Masters
of Business Administration) degree from Doon Business School, Dehradun.
In the emerging scenario with the constant growth and development of the
economy, the saving and investment habits of an individual is changing. With
the change in education profile of individuals the attitude and preference
towards investment and saving has undergone a great change. Indian financial
scene presents a plethora of avenues to the investors whereas mutual fund is
amongst them. For those who are not apt at understanding the stock market, the
task of generating superior returns at similar levels of risk is arduous to say the
least. This is where mutual fund comes into picture. Thus the basic idea behind
the emergence of mutual fund is to help those individuals and small investors,
who lack the time, the skills to manage their own investments. Mutual funds are
investment vehicles where people with similar investment objectives come
together to pool their money and then fund manager invest this money into
different assets to generate profits. Rising inflation, falling interest rates and a
volatile equity make a deadly cocktail for the investors for whom mutual fund
offer a route of the impasse. The investment in mutual Fund are not without risk
because the same force such as regulatory framework, government policies,
interest rates structure, performance of companies etc that rattle the equity and
debt markets, act on mutual fund too. But it is the skill of managing risk that
investment managers seek to implement in order to strive and generate superior
return then otherwise possible that makes them a better option then others.
In this project to study the buying behaviors of the mutual funds special
reference of SBI mutual fund is taken. I have focused on the buying behavior of
the customers amongst the different investment avenues as well as their
awareness about mutual funds. I further gathered information regarding their
performance. Also to analyze the satisfaction level of customers of it so that if
some loop holes exits should be overcome to maintain its brand equity. I have
done my study on Mutual Fund ofState Bank of India.
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CONTENT
DECLARATION 2
CERTIFICATE 3
ACKNOWLEDGEMENT 4
PREFACE 5
CONTENTS 6
CHAPTER 1 EXECUTIVE SUMMARY 8
OBJECTIVES
LIMITATIONS
CHAPTER 2 INTRODUCTION 9
MUTUAL FUNDS
HISTORY OF MF IN INDIA
REGULATORY BODIES
BENEFITS OF INVESTMENT
KEY FINANCIAL TERMS
ORGANIZATIONAL STRUCTURE
CLASSIFICATIONS OF MF
OPTIONS AVAILABLE TO INVESTORS
RISK HIERARCHY
RISK ASSOCIATED WITH MF
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CHAPTER 3 COMPANY DETAILS 31
PROFILE OF SBI MF
SWOT ANALYSIS OF SBI MF
VARIOUS EQUITY SCHEMES
DEBT FUND
BALANCED FUND
SBI SCHEMES AT A GLANCE
HOW TO INVEST IN A SCHEME
SOME COMPETITORS OF SBI MF EISC PACKAGE FOR SBI MF
CHAPTER4 RESEARCH METHODOLOGY 54
LIMITATIONS OF STUDY
CHAPTER 5 DATA ANALYSIS &INTERPRETATION 57
CHAPTER 6 SYSTEMATIC INVESTMENT PLAN 67
CHAPTER 7 CONCLUSION 72
FINDINGS 73
SUGGESTIONS 75
REFERENCES 76
QUESTIONNAIRE 77
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EXECUTIVE SUMMARY
OBJECTIVE:
An in-depth study of mutual funds and SBI mutual funds.
A study of different schemes offered by SBI Mutual funds.
To gain knowledge about the eISC package for MF operations.
A SWOT Analysis of the company SBI mutual funds.
Finally to come to a conclusion along with recommendations.
LIMITATIONS:
There were certain limitations which were faced by me as a trainee.
Lack of expertise being a trainee in analyzing data.
Shortage of time.
Study was done within the branch of SBI; therefore it does not cover abroad study of the other competitors.
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INTRODUCTION
MUTUAL FUNDS
A Mutual Fund is a company that brings together money
from many people and invests it in stocks, bonds or other
assets.
- Securities and Exchange
Commission (SEC)
.Mutual funds are popular among all income levels.
With a mutual fund, we get a diversified basket of stocks
managed by a professional
-Barbara Stanny, author of
How women get smart about money
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A mutual fund is a professionally managed firm of
collective investments that collects money from many
investors and puts it in stocks, bonds, short-term money
market instrumentsThefund manager, also known
as portfolio manager, trades the fund's underlying
securities, realizingcapital gains or losses and passing
any proceeds to the individual investors.
-Wikipedia
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http://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Fund_managerhttp://en.wikipedia.org/wiki/Trade_(financial_instrument)http://en.wikipedia.org/wiki/Capital_gainhttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Fund_managerhttp://en.wikipedia.org/wiki/Trade_(financial_instrument)http://en.wikipedia.org/wiki/Capital_gain8/2/2019 pradeep yadav
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MUTUAL FUNDS CAN GIVE INVESTORS ACCESS TO
EMERGING MARKETS
A Mutual Fund is a mechanism for pooling the resources by issuing units to theinvestors and investing funds in securities in accordance with objectives asdisclosed in offer document.
Investments in securities are spread across a wide cross-section of industriesand sectors and thus the risk is reduced. Diversification reduces the risk becauseall stocks may not move in the same direction in the same proportion at the
same time.
Mutual fund issues units to the investors in accordance with quantum of moneyinvested by them. Investors of mutual funds are known as unit holders. The
profits/losses are shared by the investors in proportion to their investments.
The mutual funds normally come out with a number of schemes with differentinvestment objectives which are launched from time to time. A mutual fund isrequired to be registered with Securities and Exchange Board of India (SEBI)
which regulates securities markets before it can collect funds from the public inIndia.
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HISTORY OF MUTUAL FUNDS IN INDIA
The history of Mutual Funds in India can be divided into 4 phases.
First phase 1964-1987
The mutual fund industry in India started in 1963 with the formation of UnitTrust of India, at the initiative of the Government of India and The ReserveBank. It was 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 Bankof India (IDBI) took over the regulatory and administrative control in place ofRBI.
The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988UTI had Rs.6,700 crores of assets under management.
1987-88Amount Mobilized
(Rs. Crores)
AMC
(Rs. Crores)
UTI 2,175 6,700
Total 2,175 6,700
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Second Phase 1987-1993
1987 was marked by the entry ofnon- UTI orPublic Sector Mutual Funds setup by public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987followed by Canbank Mutual Fund (Dec 87), Punjab National Bank MutualFund (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 June1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management ofRs.47,004 crores.
1992-93
Amount
Mobilized
(Rs. Crores)
Assets Under
Management
(Rs. Crores)
UTI 11,057 38,247
Public Sector 1,964 8,757
Total 13,021 47,004
Third Phase 1993-2003
With the entry ofPrivate Sector Funds in 1993, a new era started in the Indianmutual fund industry, giving the Indian investors a wider choice of fundfamilies.
Also, 1993 was the year in which the first Mutual Fund Regulations came intobeing, under which all mutual funds, except UTI were to be registered andgoverned. The erstwhile Kothari Pioneer (now merged with FranklinTempleton) was the first private sector mutual fund registered in July 1993.
In the year 1992, Securities and Exchange Board of India (SEBI) Act waspassed. The objectives of SEBI are to protect the interest of investors insecurities and to promote the development of and to regulate the securitiesmarket.
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The 1993 SEBI (Mutual Fund) Regulations were substituted by a morecomprehensive and revised Mutual Fund Regulations in 1996. The industry nowfunctions under the SEBI (Mutual Fund) Regulations 1996.
As at the end of January 2003, there were 33 mutual funds with total assets ofRs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assetsunder management was way ahead of other mutual funds.
Gross Amount Mobilized
(Rs. Crores)
Assets Under Management
Rs. Crores
1998-99 1999-2000 1998-99 1999-2000
UTI 11,679 13,536 53,320 76,547
(77.87%) (67.75%)
Public Sector 1,732 4,039 8,292 11,412
(12.11%) (10.09%)
Private Sector 7,966 42,173 6,860 25.046
(10.02%) (22.16%)
Total 21.377 59.748 68.472 113,005
Fourth Phase since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTIwas bifurcated into two separate entities. One is the Specified Undertaking ofthe Unit Trust of India with assets under management of Rs.29,835 crores as atthe end of January 2003, representing broadly, the assets of US 64 scheme,assured return and certain other schemes. The Specified Undertaking of UnitTrust of India, functioning under an administrator and under the rules framed byGovernment of India and does not come under the purview of the Mutual FundRegulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB andLIC. It is registered with SEBI and functions under the Mutual FundRegulations. With the bifurcation of the erstwhile UTI which had in March2000 more than Rs.76,000 crores of assets under management and with thesetting up of a UTI Mutual Fund, conforming to the SEBI Mutual FundRegulations.
With recent mergers taking place among different private sector funds, themutual fund industry has entered its current phase of consolidation and growth.
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GROWTH OF ASSETS UNDER MANAGEMENT
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REGULATORY BODIES
AMFI
The Association of Mutual Funds in India is the apex body of all the registeredAsset Management Companies. It was incorporated on August 22, 1995 as anon-profit organization. As of now, all the 32 Asset Management Companiesthat have launched Mutual Fund schemes are its members. The objective ofAMFI is to develop the Indian mutual fund industry on professional, healthyand ethical lines. It also aims to enhance and maintain standards in all areaswith a view to protect and promote the interest of the mutual funds and its unitholders.
AMFI interacts with SBI, RBI and the government on all matters concerning themutual fund industry. It also provides training and certification to agentdistributors and for all intermediaries and other engaged in the industry. AMFIis also widely active in promoting nationwide investor awareness programmes,research and studies to promote understanding of mutual funds.
SEBI
The Security Exchange Board of India, was shed in 1988 to regulate and
develop the growth of the capital market. In the year 1992, SEBI Act waspassed to protect the interest of investors and to promote the development of,and to regulate the securities market.
As far as Mutual Funds are concerned, SEBI formulates policies and regulatesthe Mutual Funds to protect the interest of the investors. In 1993, SEBI notifiedregulations for Mutual Funds, the regulations were fully revised in 1996 andhave been amended thereafter from time to time. SEBI also issues guidelinesregularly to the mutual funds in order to protect the interests of investors.
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BENEFITS OF INVESTING IN MUTUAL FUNDS
1. PROFESSIONAL MANAGEMENT
Mutual Funds provide the services of experienced and skilledprofessionals, backed by a dedicated investment research team thatanalyses the performance and prospects of companies and selects suitableinvestments to achieve the objectives of the scheme.
2. 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 sameproportion. You achieve this diversification through a Mutual Fund withfar less money than you can do on your own.
3. CONVENIENT ADMINISTRATION
Investing in a Mutual Fund reduces paperwork and helps you avoid manyproblems such as bad deliveries, delayed payments and follow up withbrokers and companies. Mutual Funds save your time and make investingeasy and convenient.
4. RETURN POTENTIAL
Over a medium to long-term, Mutual Funds have the potential to providea higher return as they invest in a diversified basket of selected securities.
5. LOW COSTS
Mutual Funds are a relatively less expensive way to invest compared todirectly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for
investors.
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6. LIQUIDITY
In open-end schemes, the investor gets the money back promptly at netasset value related prices from the Mutual Fund. In closed-end schemes,
the units can be sold on a stock exchange at the prevailing market priceor the investor can avail of the facility of direct repurchase at NAVrelated prices by the Mutual Fund.
7. FLEXIBILITY
Through features such as regular investment plans, regular withdrawalplans and dividend reinvestment plans, you can systematically invest orwithdraw funds according to your needs and convenience.
8. AFFORDABILITY
Investors individually may lack sufficient funds to invest in high-gradestocks. A mutual fund because of its large corpus allows even a smallinvestor to take the benefit of its investment strategy.
9. CHOICE OF SCHEMES
Mutual Funds offer a family of schemes to suit your varying needs over alifetime.
10.WELL REGULATED
All Mutual Funds are registered with SEBI and they function within theprovisions of strict regulations designed to protect the interests of
investors. The operations of Mutual Funds are regularly monitored bySEBI.
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KEY FINANCIAL TERMS
As a participant in a mutual fund scheme, following things are necessary tounderstand:
1. ASSET MIX
The asset mix of a scheme refers to the allocation of the corpus of ascheme across three broad categories, viz., stocks, bonds, and cash. Anasset mix of 60:30:10 mean that 60 % of the corpus is invested in stocks,30 % in bonds, and 10 % in cash.
2.NET ASSET VALUE
The net asset value (NAV) is the actual value of a share/unit on anybusiness day.
OR
Net Asset Value is the market value of the assets of the scheme minus its
liabilities.
The per unit NAV is the net asset value of the scheme divided by thenumber of units outstanding on the Valuation Date.
I.e.
NAV = Market value of the funds investments + Receivables +Accrued income Liabilities Accrued expenses
______________________________________________
Number of shares or units outstanding
3. SWITCH & CONSOLIDATION
Switch is when the units of a scheme are transferred to some otherscheme. Whereas, consolidation means that two or more schemes areassigned the same folio number.
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4. SALES PRICE
Is the price you pay when you invest in a scheme, it is also called OfferPrice. It may include a sales load or an entry load.
A closed-ended scheme has to be necessarily listed on a recognized stockexchange to ensure that its participants enjoy liquidity.
Generally, the market price or sales price of a closed-ended scheme tendsto be lower than its NAV.
5. REPURCHASE PRICE
Is the price at which a close-ended scheme repurchases its units and itmay include a back-end load. This is also called Bid Price.
The mutual fund has to stand ready to repurchase and issue its units orshares on a continuing basis.
6. REDEMPTION PRICE
Is the price at which open-ended schemes repurchase their units andclose-ended schemes redeem their units on maturity. Such prices are
NAV related.
7. SALES LOAD
Is a charge collected by a scheme when it sells the units. Also called,Front-end load. Schemes that do not charge a load are called No Load
schemes.
8. REPURCHASE OR BACK-ENDLOAD
Is a charge collected by a scheme when it buys back the units from theunit holders.
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9. RATE OF RETURN
The periodic (the period may be one month, one quarter, one year or any
other) rate of return on a mutual fund scheme is calculated as follows:
RATE OF RETURN = NAV at the end of the period NAV at thebeginning of the period + Dividend paid
during the period._____________________________________
NAV at the beginning of the period
10. GROSS DIVIDEND YIELD
The Gross Dividend Yield is an important indicator of the investmentcharacteristics of a mutual fund. Among the equity funds, value-orientedfunds tend to have a higher gross dividend yield and growth-orientedfunds tend to have a lower gross dividend yield. The gross dividend yieldis a reliable differentiator of a funds investment philosophy.
11. PORTFOLIO TURNOVER RATIO
Portfolio Turnover represents the churn in the portfolio. It is measured asfollows:
Portfolio Turnover Ratio = Lower of purchase or sales during a givenperiod
_________________________________
Average daily net assets
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ORGANIZATIONAL STRUCTURE OF MUTUAL FUND
Sponsor Company(For eg. SBI MF)
Managed by the board oftrustee
Hold unit holders fund inMFEnter into an agreement withSEBI and ensurecompliance
Mutual Fund(for eg SBI mutual fund)
Float MF funds,Manages the fund as SEBIGuidelines and AMCagreement
AMC(eg. SBI MF AMC)
Provides custodial services
REGISTERProvides registrar andtransfer service
CUSTODIAN
Established MF as the trustRegister the MF underSEBI
DISTRIBUTORSProvides the network fordistribution of the schemes
to the investor
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CLASSIFICATION OF MUTUAL FUNDS
Mutual fund schemes may be classified on the basis of its structure andits investment objective.
1. BY STRUCTURE
Open-ended Funds
An open-end fund is one that is available for subscription all through theyear. These do not have a fixed maturity. Investors can conveniently buy
and sell units at Net Asset Value ("NAV") related prices. The key featureof open-end schemes is liquidity.
Closed-ended Funds
A closed-end fund has a stipulated maturity period which generallyranging from 3 to 15 years. The fund is open for subscription only duringa specified period. Investors can invest in the scheme at the time of theinitial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed.
Interval Funds
Interval funds combine the features of open-ended and close-endedschemes. They are open for sale or redemption during pre-determinedintervals at NAV related prices.
2. BY INVESTMENT OBJECTIVE
Growth Funds
The aim of growth funds is to provide capital appreciation over themedium to long- term. Such schemes normally invest a majority of theircorpus in equities. It has been proven that returns from stocks, haveoutperformed most other kind of investments held over the long term.Growth schemes are ideal for investors having a long-term outlookseeking growth over a period of time.
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Income/Debt Oriented Funds
The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities suchas bonds, corporate debentures and Government securities. Income Fundsare ideal for capital stability and regular income. However, opportunities ofcapital appreciation are also limited in such funds. The NAVs of such funds areaffected because of change in interest rates in the country. If the interest ratesfall, 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.
Balanced Funds
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 intheir offer documents. In a rising stock market, the NAV of theseschemes may not normally keep pace, or fall equally when the marketfalls.They generally invest 40-60% in equity and debt instruments. These areideal for investors looking for a combination of income and moderategrowth.
Money Market Funds
The aim of money market funds is to provide easy liquidity, preservationof capital and moderate income. These schemes generally invest in safershort-term instruments such as treasury bills, certificates of deposit,commercial paper and inter-bank call money. Returns on these schemesmay fluctuate depending upon the interest rates prevailing in the market.These are ideal for corporate and individual investors as a means to parktheir surplus funds for short periods.
Load Funds
A Load Fund is one that charges a commission for entry or exit. That is,each time you buy or sell units in the fund, a commission will be payable.Typically entry and exit loads range from 1% to 2%. It could be worth
paying the load, if the fund has a good performance history.
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No-Load Funds
A No-Load Fund is one that does not charge a commission for entry orexit. That is, no commission is payable on purchase or sale of units in the
fund. The advantage of a no load fund is that the entire corpus is put towork.
3. OTHER SCHEMES
Tax Saving Schemes
These schemes offer tax rebates to the investors under specific provisionsof the Indian Income Tax laws as the Government offers tax incentivesfor investment in specified avenues. Investments made in Equity LinkedSavings Schemes (ELSS) and Pension Schemes are allowed a deductionunder the Income Tax Act, 1961.
Index Schemes
Index Funds attempt to replicate the performance of a particular indexsuch as the BSE sensex or the NSE 50.
Sectoral Schemes
Sectoral Funds are those, which invest exclusively in a specified industryor a group of industries or various segments such as 'A' Group shares orinitial public offerings, . e.g. Pharmaceuticals, Software, Fast MovingConsumer Goods (FMCG), Petroleum stocks, etc. While these funds may givehigher returns, they are more risky compared to diversified funds.
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OPTIONS AVAILABLE TO INVESTORS
Each plan of every mutual fund has three options Growth, Dividend
Payout and DividendReinvestment.
1. DIVIDEND PAYOUT
Under the dividend plan dividend are usually declared on quarterly or annualbasis. Mutual fundreserves the right to change the frequency of dividenddeclared.
2. DIVIDEND REINVESTMENT OPTION
Instead of remittances of units through payouts, Units holder may choose toinvest the entire dividend in additional units of the scheme at NAV related
prices of the next working day after the record date. No sales or entry load islevied on dividend reinvest.
3. GROWTH OPTION
Under this plan returns accrue to the investor in the form of capital appreciationas reflected in the NAV. The scheme will not declare the dividend under theGrowth plan and investors who opt for this plan will not receive any incomefrom the scheme. Instead of income earned on their units will remain investedwithin the scheme and will be reflected in the NAV.
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The following chart portrays the relative shares of the different fund
categories of the mutual fund industry in India across the development
phases discussed above.
1.4
Type of fund
RISK HIERARCHY OF MUTUAL FUNDS
Money
MarketFunds
Debts
Funds
Equity
Funds
Hybri
dFunds
GiftsFunds
Growth funds
Flexible AssetAllocation Funds
High YieldDebt Funds
AggressiveFunds
Focused DebtsFunds
Diversified
E uit FundsIndex Funds
Value Funds
Growth andIncome Funds
BalancedFunds
EquityIncome
DiversifiedDebt FundsGilt Funds
Money marketFunds
Risk
Level
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RISK ASSOCIATED WITH MUTUAL FUNDS
Mutual funds and securities investment are subject to various risks and there isno assurance that a scheme objective will be achieved. These risks should be
properly understood by investors so that they can understand how much riskytheir investment avenue is. Equity and fixed income bearing securities havedifferent risks associated with them. Various risks associated with mutual fundscan be described as below.
Risk associated with fixed income bearing securities are
Interest Rate Risk
As with all the securities, changes in interest rates may affect the schemes NetAsset Value (NAV) as the prices of the securities generally increase as interestrates decline and generally decrease as interest rates rise. Prices of long-termsecurities generally fluctuate more in response to interest rates changes thanshort term securities do. Indian Debt markets can be volatile leading to the
possibility of price movements up or down in the fixed income securities andthereby to the possible movements in the NAV.
Liquidity or Marketable Risk
This refers to the ease with which a security can be sold at near to its valuationyield to maturity. The primary measure of liquidity risk is the spread betweenthe bid price and the offer price quoted by the dealer. Liquidity risk is inherentto the Indian Debt market.
Credit RiskCredit risk or default risk refers to the risk that an issuer of fixed incomesecurity may default (i.e., will be unable to make timely principal and interest
payments on the security). Because of this risk corporate debentures are sold ata yield above those offered on Government securities, which are sovereignobligations and free of credit risk. Normally the value of fixed income securitywill fluctuate depending upon the perceived level of credit risks well as theactual event of default. The greater the credit risk the greater the yield requirefor someone to be compensated for increased risk.
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Risk associated with equities
Market RiskThe NAV of the scheme investing in equity will fluctuate as the daily prices ofthe individual securities in which they invest fluctuate and the units whenredeemed may be worth more or less than the original cost.
Timing the Market
It is difficult to identify which is the right time to invest and which is the righttime to take out the money. There may be situations where stocks may not be
rightly timed according to the market leading to loss in the value of scheme.
LiquidityInvestment made in unlisted equities or equity related securities might only berealizable upon the listing of the securities. Settlement problems could cause thescheme to miss certain investment opportunities.
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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 case of open-ended schemes and on weekly basis in
case of close-ended schemes. The NAVs of mutual funds are required to be
published in newspapers. The NAVs are also available on the web sites of
mutual funds. All mutual funds are also required to put their NAVs on the web
site of Association of Mutual Funds in India (AMFI) www.amfiindia.com and
thus the investors can access NAVs of all mutual funds at one place. The mutual
funds are also required to send annual report or abridged annual report to theunit holders at the end of the year.
NAVs for a day must are posted on the AMFIs website by 8.00p.m. On that
day, this applies to both the open end and close end schemes. One exception is
that those close end schemes which are not mandatory required to be listed in
any stock exchange may publish their NAV at monthly or quarterly intervals as
permitted by SEBI.
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COMPANY DETAILS
PROFILE OF SBI MF
SBI Mutual Fund, the first bank sponsored mutual fund in India,was incorporated on 29 June, 1987 by State Bank of India. SBI Mutual Fund isIndias largest bank sponsored mutual fund and has an enviable track record in
judicious investments and consistent wealth creation. Magnum RegularIncome Scheme -1987was the first scheme launched by SBI. The Fund haslaunched 40 schemes till date, of which 32 schemes are available currently.
The fund traces its lineage to SBI - Indias largest banking enterprise. Theinstitution 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(63%)and Socit Gnrale Asset Management(37%) France, one of the worldsleading fund management companies, managing over US$ 500 Billionworldwide.
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Exploiting expertise, compounding growth
In twenty years of operation, the fund has launched thirty-two schemes andsuccessfully redeemed fifteen of them. In the process it has rewarded itsinvestors handsomely with consistently high returns.
A total of over 25, 00,000 investors have reposed their faith in the wealthgeneration expertise of the Mutual Fund.
Schemes of the Mutual fund have consistently outperformed benchmark indicesand have emerged as the preferred investment for millions of investors.
Today, the fund manages over Rs. 35,000 crores of assets and has a diverseprofile of investors actively parking their investments across 28 active schemes.
The fund serves this vast family of investors by reaching out to them throughnetwork of 82 collection branches, 26 investor service centers, 21 investorservice desks and 21 district organizers.
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SBI Mutual is the first bank-sponsored fund to launch an offshore fund Resurgent India Opportunities Fund. Growth through innovation and stableinvestment policies is the SBI MF credo.
SBI Mutual Fund, one of the leading mutual funds has been awarded the MostPreferred Mutual Fund by CNBC Awaaz Consumer Awards 2006, anexhaustive consumer preference survey conducted by AC Nielson-Org Margon behalf of CNBC Awaaz, a popular business channel. Economic Times hasalso given SBI MF, the title of being Indias Second Brand equity, mutualfunds AMC. SBIFM was awarded the Mutual Fund of the Year 2007
MAGNUM TAXGAIN MAGNUM CONTRA MAGNUM GLOBAL MAGNUM BALANCED
The consumer survey spread over 21 cities had 10,000 respondents who chosemost preferred brands from 41 product and services categories. The survey wasconducted in 14 states through a structured questionnaire. Among the financialservices, banks, mutual funds, life insurance companies, credit cards, housingloans, auto loans and financial advisory services were selected for the brandstudy. Fast Moving Consumer Goods, Consumer durables, telecom, auto, retailand hospitality and travel were some of the other sectors, which were
considered for this exercise.
Accepting the award, Mr. Deepak Chawla, Managing Director (before), SBI MFsaid, SBI MF is proud to receive this prestigious recognition as it reaffirms itscommitment to investors. SBI Mutual Fund has been consistently spreading theawareness about mutual funds by investor education campaigns through themedia and this has successfully raised awareness about Mutual funds.
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SWOT ANALYSIS OF SBI MUTUAL FUND
STRENGTHS
1. Established name in the market :
SBI MF is a wholly owned subsidiary of State Bank of India, which is a
widely acclaimed name in the banking sector. It has got good name andreputation in the market. It is one among the fortune 500 companies in theworld. People have faith in the name of SBI, so they do not hesitate whileinvesting in SBI MF.
2. Good Performance History :
SBI MF has an enviable track record in judicious investment and
consistent wealth creation . Most of the schemes offered by SBI MF havedone well in the past which in turn helps in creating new customers.
3. Good product line :
SBI MF offers a wide range of products to the investors, enabling them tochoose the product according to their own need and preferences.
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4. Professional expertise :
SBI MF is a joint venture between The State Bank of India and SocieteGenerale Asset Management (France), one of the worlds leading assetmanagement companies that manages over US$ 330 billion worldwide.
WEAKNESSES
1. Poor services :
The services of SBI MF are not up to the mark. Most of the investors arenot satisfied with the services provided by them. Delay in payment ofamount in case of repurchase and delay in dispatch of statement are the
main problem faced by the investors.
2. Lack of awareness about mutual funds :
Most of the people in India do not know about mutual funds and thosewho know dont think about investing in it which demands more effortson their part.
3. Non availability of MF related services in all SBI branches :Non availability of MF services in all SBI branches is one of theweaknesses of SBI MF. Only one service desk is functioning in one citywhich creates problems for the investors.
OPPORTUNITIES
1. Opportunity to use various branches of SBI to provide better services :
SBI MF can use various branches of SBI for the betterment of its MFrelated services. It will be more convenient for the investors.
2. It can use already set up network of SBI to make the people aware of
MF and to convert them into investors :
As the customers of SBI come to the bank on a regular basis, so, SBI MFcan use the various branches for educating the customers about MF and toconvert them into investors of mutual fund.
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3. Potential rural market :
There is so much potential in the rural market and SBI MF can easilypenetrate in this market with its (SBI) strong reputation and set upbranches. It can mobilize huge amount of funds from this market through
educating people about mutual fund.
THREATS
1. Tough competition from other mutual fund organizations :
SBI MF is facing so much competition from other growing MF in themarket as they are also performing well. The entry of new MForganizations has made the competition more severe.
2. Highly volatile share market :
The Indian share market is highly volatile and as we know that mutualfund invests a large part of its corpus into share market which makes theinvestment into mutual fund very risky. As a result it makes the task verydifficult to induce people to invest in mutual fund.
3. Competition from other investment opportunities available for investors :
AS now a days so many investment opportunities are available in themarket like insurance, investment in share market and real estate whichare also attracting the investors, thereby increasing competition and
posing threat to mutual fund.
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VARIOUS EQUITY SCHEMES OFFERED BY SBI MF
The investments of these schemes are predominantly in the stock markets and
endeavor will be to provide investors the opportunity to benefit from the higherreturns which stock markets can provide.
However they are also exposed to the volatility and attendant risks of stockmarkets and hence should be chosen only by such investors who have high risktaking capacities and are willing to think long term.
Equity Funds include diversified Equity Funds, Sectoral Funds and IndexFunds. Diversified Equity Funds invest in various stocks across different sectors
while sectoral funds which are specialized Equity Funds restrict theirinvestments only to shares of a particular sector and hence, are riskier thanDiversified Equity Funds. Index Funds invest passively only in the stocks of a
particular index and the performance of such funds move with the movementsof the index.
The different type of equity schemes are as follows:
Magnum COMMA Fund :
The objective of the scheme would be to generate opportunities for growthalong with possibility of consistent returns by investing predominantly in a
portfolio of stocks of companies engaged in the commodity business withinthe following sectors - Oil& Gas, Metals, Materials & Agriculture and indebt & money market instruments.
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Scheme Highlights:
1. An open-ended equity scheme investing in stocks of commodity basedcompanies.
2. Minimum Investment Rs. 5000 and in multiples of Rs. 1000 Dividendand Growth options available. Reinvestment and payout facility available.3. Dividends will be completely tax-free. Long term capital gains to be
completely tax-free. STT would be at the rate of 0.20% at the time ofrepurchase.
Magnum Equity Fund
To provide the investor Long-term capital appreciation by investing in highgrowth companies along with the liquidity of an open-ended schemethrough investments primarily in equities and the balance in debt andmoney market instruments.
Scheme Highlights:
1. A diversified equity fund, focusing on aggressive growth.2. Ideal for investors who wish to benefit from the growth of the equity
markets and are comfortable with the attendant volatility.
Magnum Global Fund
To provide the investors maximum growth opportunity through wellresearched investments in Indian equities, PCDs and FCDs from selectedindustries with high growth potential and Bonds.
Scheme Highlights:
1. An open-ended equity scheme investing in stocks from selected industrieswith high growth potential.
2. Minimum Investment Rs. 2000 and in multiples of Rs. 1000 withDividend and Growth options available. ^ Money Market Instrumentswill include Commercial Paper, Commercial Bills, Certificate of Deposit,Treasury Bills, Bills Rediscounting, Repos, Government securities havingan unexpired maturity of less than 1 year, call or notice money, usance
bills and any other such short-term instruments as may be allowed under
regulations prevailing from time to time.
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Magnum Index Fund
The scheme will adopt a passive investment strategy. The scheme will
invest in stocks comprising the S&P CNX Nifty index in the sameproportion as in the index with the objective of achieving returnsequivalent to the Total Returns Index of S&P CNX Nifty index byminimizing the performance difference between the benchmark index andthe scheme. The Total Returns Index is an index that reflects the returns onthe index from index gain/loss plus dividend payments by the constituentstocks.
Scheme Highlights:
1. An open-ended passively managed index fund tracking the S&P CNXNifty Index where the investments will be made in all the stockscomprising the S&P CNX Nifty in the same proportion as their weightagein the index.
2. Following options available : Growth and Dividend.3. Investors have the facility to switchover at NAV related prices to other
open-end schemes of SBI Mutual Fund. This facility of switchover toother schemes is not available to NRIs and FIIs.
Magnum MidCap Fund
To provide investors with opportunities for long-term growth in capitalalongwith the liquidity of an open-ended scheme by investing
predominantly in a well diversified basket of equity stocks of companieswhose market capitalization is between Rs. 200 crores to Rs.2000 croresand in debt and money market instruments.
Scheme Highlights :
1. Open-ended Growth scheme2. CDSC not exceeding 1.5% for exit within 12 months from the date of
reopening of the scheme.3. Minimum investment: Rs. 5000 and in multiples of Rs. 1000.4. Dividend & Growth options available.
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Magnum Multicap Fund
To provide investors with opportunities for long-term growth in capitalalong with the liquidity of an open-ended scheme through an active
management of investments in a diversified basket of equity stocksspanning the entire market capitalization spectrum, debt and money marketinstruments.
Scheme Highlights :
1. Scheme opened for continuous sale and repurchase.2. Dividend and Growth options available. Reinvestment and payout facility
available.3. Dividends will be completely tax-free. Long term capital gains to be
completely tax-free. Short -term capital gains to be taxed at 10% (plusapplicable surcharge and cess)
Magnum Multiplier Plus 1993
Magnum Multiplier Plus is an open-ended diversified equity fund and theinvestment objective of the scheme is to provide investors long term capitalappreciation along with the liquidity of an open-ended scheme. The scheme
will invest in a diversified portfolio of equities of high growth companies.
Scheme Highlights:
1. An open-ended equity scheme aiming for aggressive growth frominvestments in equities.
2. Scheme opens for Resident Indians, Trusts, and Indian Corporate and ona fully repatriable basis for NRIs, FIIs & Overseas Corporate Bodies.
3. Facility to reinvest dividend proceeds into the scheme at NAV.4. Easy entry and exit on the basis of sales and repurchase prices determined
daily. NAV will be declared on every business day.5. Nomination facility available for individuals applying on their behalf
either singly or jointly up to three.
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MAGNUM SECTOR FUND UMBRELLA:
MSFU - Emerging Businesses Fund
To provide the investors maximum growth opportunity through equityinvestments in stocks of growth oriented sectors of the economy. There arefive sub-funds dedicated to specific investment themes viz. InformationTechnology, Pharmaceuticals, FMCG, Contrarian (investment in stockscurrently out of favor) and Emerging Businesses. The investment objectiveof the Emerging Business Fund would be to participate in the growth
potential presented by various companies that are considered emergent andhave export orientation/outsourcing opportunities or are globally
competitive by investing in the stocks representing such companies. Thefund may also evaluate emerging businesses with growth potential anddomestic focus.
Scheme Highlights :
1. An open-ended scheme in which there are five sub-funds, viz.Information Technology (IT), Pharmaceuticals, Fast Moving ConsumerGoods (FMCG) and a Contra sub fund - investing in stocks currently outof favor and Emerging Businesses Fund to participate in the growth
potential presented by various companies that are considered emergentand have export orientation / outsourcing opportunities or are globallycompetitive by investing in the stocks representing such companies. Thefund may also evaluate emerging businesses with growth potential anddomestic focus. Accordingly, investors can chose to invest in one or moreof the five sub funds. The fund allows free switchover from one sector toanother. The merits of each of the five sectors are detailed in thefollowing pages.
2. Growth and Dividend Option available under Contra, Pharmaceuticals
and Emerging Businesses Fund.3. Switch-over facility at NAV related price to other open-ended schemes of
SBI Mutual Fund, is available. This facility is not available to NRIs.
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MSFU - IT Fund
To provide the investors maximum growth opportunity through equityinvestments in stocks of growth oriented sectors of the economy. There are
five sub-funds dedicated to specific investment themes viz. InformationTechnology, Pharmaceuticals, FMCG, Contrarian (investment in stockscurrently out of favor) and Emerging Businesses.
Scheme Highlights:
1. Open ended Equity Scheme.2. Targeted at investors seeking high growth and comfortable with attendant
volatility.
MSFU - Pharma Fund
To provide the investors maximum growth opportunity through equityinvestments in stocks of growth oriented sectors of the economy. There arefive sub-funds dedicated to specific investment themes viz. InformationTechnology, Pharmaceuticals, FMCG, Contrarian (investment in stockscurrently out of favor) and Emerging Businesses.
Scheme Highlights:
1. Open ended Equity Scheme.2. Targeted at investors seeking high growth and comfortable with attendant
volatility.
MSFU - Contra Fund
To provide the investors maximum growth opportunity through equityinvestments in stocks of growth oriented sectors of the economy. There arefive sub-funds dedicated to specific investment themes viz. InformationTechnology, Pharmaceuticals, FMCG, Contra-sub funds (investment instocks currently out of favor) and Emerging Businesses.
Scheme Highlights:
1. An open-ended scheme in which there are five sub-funds, viz.Information Technology
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2. (IT), Pharmaceuticals, Fast Moving Consumer Goods (FMCG) and aContra sub fund - investing in stocks currently out of favor and EmergingBusinesses Fund to participate in the growth potential presented byvarious companies that are considered emergent and have export
orientation / outsourcing opportunities or are globally competitive byinvesting in the stocks representing such companies. The fund may alsoevaluate emerging businesses with growth potential and domestic focus.Accordingly, investors can chose to invest in one or more of the five subfunds. The fund allows free switchover from one sector to another. Themerits of each of the five sectors are detailed in the following pages.
3. Growth and Dividend Option available under Contra, Pharmaceuticalsand Emerging Businesses Fund.
4. Switch-over facility at NAV related price to other open-ended schemes of
SBI Mutual Fund, is available. This facility is not available to NRIs.
MSFU - FMCG Fund
To provide the investors maximum growth opportunity through equityinvestments in stocks of growth oriented sectors of the economy. There arefive sub-funds dedicated to specific investment themes viz. InformationTechnology, Pharmaceuticals, FMCG, Contrarians (investment in stockscurrently out of favor) and Emerging Businesses.
SBI Arbitrage Opportunities Fund
To provide capital appreciation and regular income for unit holders byidentifying profitable arbitrage opportunities between the spot andderivative market segments as also through investment of surplus cash indebt and money market instruments.
Scheme Highlights:
1. Investment in a diversified basket of equity & equity related instruments,derivative
2. Instruments and debt and money market instruments in accordance withthe asset allocation pattern.
3. Liquidity:- Fresh Purchases and Redemptions at prices related toApplicable NAV. The interval day for redemption/switch would be the
settlement Thursday (the settlement day for derivatives segment in theNSE which is currently last Thursday of the month) or any other day
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which is declared as the settlement day for derivatives segment by theNSE.
4. Benchmark Index:- CRISIL Liquid Fund Index5. Options: Growth Option and Dividend Option available. Under the
Dividend option, facility for reinvestment/ payout of dividend available.The dividend frequency is at the discretion of the Trustee. Dividends will
be declared subject to availability and adequacy of surplus in the Scheme.6. Cheques/Drafts to be in favor of "SBI Arbitrage Opportunities Fund"7. Cut off times For Redemption Application:- All repurchase requests
received under the scheme till upto 3:00 p.m. on the Friday (in case suchFriday is a holiday, then the last business day) of the week preceding theinterval day would be processed at the NAV (with applicable exit load) ofthe interval day. The interval day would be the settlement Thursday (the
settlement day for derivatives segment in the NSE which is currently lastThursday of the month) or any other day which is declared as thesettlement day for derivatives segment by the NSE.
8. For Purchase Application:- The purchase request received up to 3.00 p.m.on each Business Day would be processed at the NAV applicable for thesame day and the purchase request received after 3.00 p.m. would be
processed at the NAV applicable for the next business day.
SBI Blue chip Fund
The objective of the scheme would be to provide investors withopportunities for long-term growth in capital through an activemanagement of investments in a diversified basket of equitystocks ofcompanies whose market capitalization is atleast equal to or more than theleast market capitalised stock of BSE 100 Index.
Scheme Highlights :
1. Dividend and Growth options available. Reinvestment and payout facilityavailable.
2. Dividends will be completely tax-free. Long term capital gains to becompletely tax-free. Short -term capital gains to be taxed at 10% (plusapplicable surcharge and cess).
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SBI Infrastructure Fund - Series I
To provide investors with opportunities for long-term growth in capitalthrough an active management of investments in a diversified basket of
equity stocks of companies directly or indirectly involved in theinfrastructure growth in the Indian economy and in debt & money marketinstruments.
Scheme Highlights:
1. Close-ended growth fund with 3 year tenure.2. Scheme reopens for continuous repurchase from 9th July 2007.3. Minimum investment of Rs. 5000 and in multiples of Re. 1.
4. NAV and repurchase NAV to be disclosed on all business days.5. Dividend and Growth options available. Payout facility is available onlyduring the close-ended tenure of the scheme.
6. Dividends will be completely tax-free. Long term capital gains to becompletely tax-free. Short term capital gains to be taxed at 10% (plusapplicable surcharge and cess).
7. Automatic conversion into open-ended scheme on maturity.8. SIP facility will be made available only after the scheme goes open-
ended.
SBI Magnum Taxgain Scheme 1993
The prime objective of scheme is to deliver the benefit of investment in aportfolio of equity shares, while offering tax rebate on such investmentsmade in the scheme under section 80 C of the Income-tax Act, 1961. It alsoseeks to distribute income periodically depending on distributable surplus.
Scheme Highlights :
1. There is a statutory lock-in period of three years for investments in a TaxSaving Scheme (irrespective of the fact whether the investors claim therebate u/s 80C or any other section or not).
2. Dividends may be declared depending on distributable profits of thescheme.
3. Facility to reinvest dividend proceeds into the scheme at NAV.4. Switchover facility to any other open-ended schemes of SBI Mutual Fund
at NAV related prices available after the statutory lock-in period.
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SBI ONE India Fund
To provide investors with opportunities for long term growth in capitalthrough an active management of investments in a diversified basket of
equity stocks focussing on all four regions of India and in debt and moneymarket instruments.
Scheme Highlights :
1. Close-ended Fund with 3 year tenure. Date of maturity of the scheme is15th January 2010.
2. Scheme reopens for continuous repurchase from 19th January 2007.3. Minimum investment Rs. 5000 and in multiples of Rs. 1.4. NAV and repurchase NAV to be disclosed on a daily basis.5. Dividend and Growth options available. Dividends will be completely
tax-free. Long term capital gains to be completely tax-free. Short termcapital gains to be taxed at 10% (plus applicable surcharge and cess)
6. Automatic conversion into open-ended scheme on maturity.7. The Fund would invest at least 15% and not more than 55% of its equity
exposure to each of the four regions. At least, 15 stock in each region.Diversification across sectors in each region and at the scheme level.
8. Investment approach to be bottom-up without any sector/market
capitalization bias.9. Benchmark Index - BSE 200 Index.
SBI TAX ADVANTAGE FUND - SERIES I
The investment objective of the scheme is to generate capital appreciationover a period of ten years by investing predominantly in equities ofcompanies across large, mid and small market capitalization, along withincome tax benefit.
Scheme Highlights:
1. A 10 year close ended Equity Linked Savings Scheme.2. Dividend Option and Growth Option. Under the Dividend option, only
dividend payout facility isavailable.3. NAV to be disclosed on weekly basis.4. Liquidity only after the lock-in period of three years from the date of
allotment.5. Switch in allowed only during NFO period.
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6. Switch Out from the scheme will be allowed only after the lock in period.
DEBT SCHEMES
Debt Funds invest only in debt instruments such as Corporate Bonds,Government Securities and Money Market instruments either completelyavoiding any investments in the stock markets as in Income Funds or Gilt Fundsor having a small exposure to equities as in Monthly Income Plans or Children'sPlan. Hence they are safer than equity funds. At the same time the expectedreturns from debt funds would be lower. Such investments are advisable for therisk-averse investor and as a part of the investment portfolio for other investors.
Some debt schemes are:
1. Magnum children benefit plan
2. Magnum gilt fund
3. Magnum Income Fund
4. Magnum Insta cash
BALANCED SCHEMES
Magnum Balanced Fund invest in a mix of equity and debt investments. Hencethey are less risky than equity funds, but at the same time providecommensurately lower returns. They provide a good investment opportunity toinvestors who do not wish to be completely exposed to equity markets, but is
looking for higher returns than those provided by debt funds.
Some balanced schemes are:
1. Magnum Balanced Fund
2. Magnum NRI Investment fund
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SBI SCHEMES AT A GLANCE
Scheme
Type of
Scheme and
risk profile
Portfolio mix
Risk profile of
the portfolio
Magnum sector
Funds Umbrella
1. FMCG Fund
2. Pharma
Fund3. Contra Fund
4. IT Fund
Sector Fund
High Risk
90-100%: Equities of a
particular sector
0-10%: Money Market
Instruments
High
Low
Magnum Equity
Fund
Equity Scheme
High Risk
70-100%: Equity 0-40%:
Debt and Money Market
Instruments
High Medium
and Low
Magnum Balanced
Fund
Balanced
(Equity
oriented
scheme)
Moderate risk
50-100%: Equity
0-40%: Dept
0-10%: Money Market
Instruments
High
Medium
Magnum Multiplier
Plus Scheme
Equity Scheme
High risk
Up to 100% in equity
instrumentsHigh
Magnum Tax gain Equity Linked
Saving scheme
(section 88
rebate)
High Risk
80-100%: Equity
0-20%: Money Market
Instruments
High
Low
Magnum income
Fund
Debt Scheme
Low to
Medium risk
100% in Dept and Money
Market Instruments
Medium to Low
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Magnum Gift Fund Dept Scheme
Low Risk
100% in Government
Securities and money
Market Instruments
Low
Magnum Instacash
Fund
Dept Scheme
Low Risk
100% in Dept and Money
Market Instruments
Low
Magnum Monthly
Income Plan
Dept Scheme
Low to
Medium risk
85% and above in Dept
and Money Market
Instruments
0-15%: Equity
Medium to Low
High
Magnum Index
Fund
Passively
managed
growth scheme
tracking the S
& P CNX Nifty
Index high
Risk
Up to 100% in the stock
comprising the Nifty
Index
0-10%: Money Market
Instruments
High
Low
Magnum
Childrens Benefit
Plan
Dept Scheme
Medium risk
At least 75% in dept and
Money Market
Instruments Not more
than 25% in equity
Medium to Low
High
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HOW TO INVEST IN A SCHEME
Mutual funds normally come out with an advertisement in newspaperspublishing the date of launch of the new schemes. Investors can also contact the
agents and distributors of mutual funds who are spread all over the country fornecessary information and application forms. Forms can be deposited withmutual fundsthrough the agents and distributors who provide such services fora commission.
Now a day, the post offices and banks also distribute the units of mutual funds.But the only role of banks and post offices is to help in the distribution ofmutual funds schemes to the investors. The investors can also invest directlywithout paying any extra charges.
SOME COMPETITORS OF SBI MF
NAME OF THE
AMC
NATURE OF
OWNERSHIP
AUM NUMBER OF
CUSTOMERS
WORLD WIDE
DATE OF
INCORPO-
RATION
BIRLA SUN LIFE
AMC Ltd. PRIVATE INDIA Rs. 31 CRORES 15 LAKHS
SEPTEMBER 5
1994
KOTAK
MAHINDRA AMC
Ltd.PRIVATE INDIA
18932. 96
CRORES
9. 78
LAKHS
DECEMBER 1998
RELIANCE
CAPITAL AMC Ltd. PRIVATE INDIA
Rs. 98431
CRORES
65. 68 LAKHS FEBRUARY 24 1995
ICICI PRUDENTIAL
AMC Ltd. PRIVATE FOREIGN
Rs. 59,573. 08
CRORES
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eISC PACKAGE
USED BY SBI MF
FOR
MUTUAL FUNDS
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State Bank of India uses the eISC Package, provided by CAMS (Registrar ofSBI MF) in order to maintain a database of the investors, investing in differentschemes of SBI mutual funds . The package is used to:
1. For Investors:
a) It is used to enquire the personal details about the investor with thehelp of Folio number, application number, cheque number or draftnumber.
b) Retrieve the daily NAV (Net asset value) list.c) Generate the statement of account for the investors.
2. For Brokers:
a) It is used to enquire the personal details about the investor with thehelp of ARN number or the name of the broker.
b) Generate the commission statement for the Brokers with the helpof ARN no. or name.
c) Generate report regarding the total business done by the brokers in
a particular month.
3. For SBI MF:
a) The company can keep an eye and generate reports of the totalbusiness done by the service desk in a particular month or year.b) The company can also see the business done by individual agents,brokers and the nationalized distributors in a particular month or ayear.
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Some of the Snap-shots of the package are :
In order to generate the NAV list, click the NAV Enquiry given under the
CustomerService category :
In order to view the personal details of the investor and generate Accountstatements for them, the folio number or the application number or thecheque number of the investor is necessary. Enter the folio number and clickLocate and then the Ac. Stmt.:
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In case the investor has Application number:
In case the investor has cheque number:
The statement of account of the investor is shown on the next page. In thestatement the personal details, pan card number. Bank particulars and thecurrent and initial investment of the investor, no. of units hold and the current
NAV is given.
An investor should view his/her SOA (statement of account) once with in 15-20days so that the returns generated by a particular scheme are correctly known tothe investor.
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In order to view the personal and brokerage details of the Broker, enter theARN Code or the name of the broker:
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INVESTMENT BEHAVIOR
Behavior Finance approach takes into account rational and irrational motives of
the investors in defining the long run price formation in the financial markets.The root of investor psychology has MONEY as its centerpiece. And the mainaim of every investor is to accumulate wealth but still investment goal is thedriving force which influences an investor towards the investment path. Now,on this investment goal there is an impact of some demographic factors such asage, gender, educational qualifications, income group etc. So to understand theinvestment behavior of the investors it is important to analyze the impact of allthese factors on the investment goals.
Apart from this it is also important to know the impact of the tax benefits, as itis also one of the driving forces for investments. Influence of the peer group,risk taking ability, time horizon is yet other parameters, which influences theinvestment style and pattern.
So, keeping all the above in mind a schedule was prepared and the investmentbehavior was analyzed accordingly. A sample size of 50 was taken, the targetgroup was the investors coming to the branch for investments.( the no. ofinvestors who were interrogated were more than the sample size but just for the
purpose of simplification of analysis the size is taken as 50,this does not affectsthe results).Method of data collection was monitoring and interrogative.
The analysis techniques were a combination of both exploratory datatechniques, which provides a good diagnosis by emphasizing visualrepresentations of the data, and Behavior observation approach.
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ANALYSIS
Parameter 1:
INVESTMENT GOAL
Q11: What is your Investment Goal?
To watch your money grow faster.
To earn income and also grow money.
Only to earn a stable income.
20
70
100
10
20
30
40
50
60
70
To watch your money
grow faster
To earn income and
also grow money
Only to earn a stable
income
Percentage
.The First step of investment planning is the identification of the investmentgoals. On the basis of the survey conducted it was found out that 70% of theinvestors wanted their money to further generate income along with the capitalappreciation. 20% among them were aggressive investors who wanted quickcapital appreciation and just 10% were looking for a stable earning.
Effect of DEMOGRAPHIC parameters:
AGE group of 18-27; 80%Aggressive
Interest: fast capital appreciation
Investment goal of people in the age group of 18-28 was highly concentratedtowards fast capital appreciation (i.e. option 1) and 80% of them followed anaggressive investment pattern. This is because being unmarried most of theinvestors in this category are free from family responsibilities and they look justfor growth of money and are least bothered about security of the corpus. Theremaining 20% who have family responsibilities go in for balanced schemes i.e.to earn income along with growth of money.
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The another factor which influences the investment decision in this age group isthe profession .It was seen that 80% of the investors belonging to the serviceclass were inclined towards Mutual Fund investments where as those who were
either self-employed or had a business were attracted more towards the directmarket investments (i.e. share market).Education qualification also reflected theinvestment style of the investors and also the concept of high-risk, high-return ismost famous among the people with post graduation and additionalqualification.
AGE group of 28-38; 40%Aggressive, 60%Moderate
Interest: capital appreciation along with income
Investment goal of the investors in the age group of 28-38 is inclined towardscapital appreciation along with income (which is accepted to befluctuating).40% of the people in this group follow an aggressive investment
pattern i.e. more and more investment towards equity so as to appreciate capitalon a faster rate. But majority of them i.e. 60%of investors get inclined towards
balanced investments as they start planning for retirement and also have familyresponsibilities so they are looking for security of corpus along with income.
The impact of profession is not as much as in the previous case as the investorsget more experienced with the time. But again if an investor is aggressive and
belongs to service class then he/she prefers equity schemes. Whereas, abusinessman would again go for secondary market. Education qualificationdoes play a role but just in understanding the various investment options. Herethe investment decisions are highly influenced by the reference group.
AGE group of 39-50;
45%Moderate,35%Conservative,20%Aggresive;
Interest: capital appreciation along with income
Investors goal in this age group of 39-50 are again inclined towards the capitalappreciation along with income (which is not accepted to be fluctuating).45%of the investors follow the moderate investment approach.35% turnconservative i.e. safe corpus and stable returns and the rest 20% still have the
thirst of showers of equitys return. The investors behavior in this age group isdue to the approaching retirement age and the responsibilities of the childrens
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higher education and their marriage. The impact of education and professiongradually declines in this group.
AGE group of 50+; 85%Conservative
Interest: Stable income
Investors in the age group of 50 and above concentrate only on security ofcorpus along with a stable income so that they can independently live their lifeafter retirement. Here as high as around 85% of the investors look for the same.Whereas the rest 15% still like to play with equity, but that to after securingenough amounts to live the life ahead comfortably.
Parameter 2:
INCLINATION TO TAX BENEFITS
Q10. Are you an active investor in the share market?
Yes.
No.
Q14. How important are tax benefits?
Not important
Avg. important
Very important
10 14
26
0
5
10
15
20
25
30
Not Important Avg. importance Very Imporatnt
no. of investors
With the announcement of budget 2005 the flood gates of investments haveopened wide for the Mutual Fund industry. Increasing the limit of investmentfrom 10,000 to 1, 00,000 in Equity Links Saving Schemes (ELSS) to get a taxrebate of 30%, has resulted in attracting not only the risk averse investors butalso the ones who are active investors in the share market. Out of 50 people onwhom the survey was conducted 26 of them i.e.52% felt that tax benefit was of
great importance and a major driving force for the investments into MutualFunds. For 14 of themi.e.28% tax benefits were important but they were not the
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driving force of investments in MF. And for the remaining 20% tax rebate wasnot the influencing factor. Their is no impact of the age group, educationalqualification and profession on the investors investing behavior as a personwho is looking for investments to save tax ,has ELSS as one of the best options
to earn a good return on the investments.
Parameter 3:
TIME HORIZON
Q 13: What time horizon are you looking at?
6Months
Upto 1Year. 1-3Year
More than 3 years
14%
10%
62%
14%
6 Months
Upto 1 year
1-3 year
More than 3 years
Time horizon is yet an important factor that defines the path of investmentwhich an investor follows. Majority of investors (62%) want to park their fundsfor a period of 1-3years and they mainly invest in ELSS schemes to gain tax
benefits.14% of investors want to invest for a time period of more than 3 years
and they look for a return in excess of 15% .14% of the investors want to investin for less than 6 months. These are the ones who have a balance of 4 lakhs plusin their account and are willing to invest so as to gain in extra return on theirinvestments, usually more than 5.5% is expected. And around 10% of investorswho park their funds for about a year. These are again the ones who are lookingfor those extra returns and moreover are investing in different schemes of newAMCs. Tax benefits for such investors are their last priority.
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Effect of DEMOGRAPHIC parameters:
AGE group of 18-27;
Investment horizon: More than a year
Investors in the age group of 18-27 usually invest in for longer duration as forthem time is not the concern they just want their money to grow at a faster pace,security of the corpus is not their main concern. They are also the ones who
prefer the systematic investment plan the most. Profession here again plays amajor role, 80% of the investors belonging to the service class are inclinedtowards the investments in the equity mutual funds through the systematicinvestment plan route with Growth option. It has been observed that those whoare in their family business or self-employed are not inclined to a greater degree
towards investments and savings, what this class of investors look at is to mintmoney through direct investment in the primary and the secondary market. Therisk taking ability of this class is the highest and most of them seem to be overbullish about the market.
AGE group of 28-38;
Investment horizon: More than a year
Here again the investors look for a longer duration .They go in for theinvestments where there is security of the corpus. Investors in this age grouplook for tax benefits and thus invest for 3 yrs period to get that benefit. Theinfluence of the profession is the same as in the upper case.
AGE group of 39-50;
Investment horizon: About a year
Nearing the retirement age and with the burden of family responsibilities thiscategory of investors is uncomfortable to invest in for more than a year. Theygo in for schemes that provide stable returns along with the safety of the corpus.They only invest for longer duration if the scheme is ELSS, so as to avail thetax benefits. Some of the investors who have more than 4 lakhs in their accountalso park some proportion of their money for less than 6 months just to get thereturns higher than the interest in the saving banks account. (SB A/C) .Theyinvests in the floating rate funds where there is no entry and exit loads. Iflooking for stable income then they go for balanced funds where there is 50 %
of equity and rest is debt and also prefer monthly income plans.
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AGE group of 50+;
Investment horizon: About an year or less
The investment behavior of this category of investors is the same as the
previous one. They are not at all interested to park their funds for more than ayear but there is an exception for ELSS where they have to invest for 3 yrs toavail the tax benefits. This investor category was observed to be the most activeone to go in for the IPOs of the various fund houses as being at this stage of lifethey have already accumulated wealth and now just look for safe investmentsand stable returns. The impact of Profession was negligible.
Parameter 4:
RISK TAKING ABILITY:-
Q16:- How much money can you afford to loose before feeling uncomfortable
and exiting from an investment?
20%
5%
0%
0
67%
33%
0%
10%
20%
30%
40%
50%
60%
70%
20% 5% 0%
percentage of
investors
Q12:- Out of your total how much would you invest now?
Less than 25% Between 25% to 35%
More than 50%
34%
66%
0
0%
10%
20%
30%
40%
50%
60%
70%
Less than 25% Between 25to35% More than 50%
No. of Investors
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Risk taking ability is the main reason why rich becomes richer and poorbecomes poorer. And this is whatRobert Kieroskiauthor of Best U.S.A seller,Rich Dad-Poor Dad says that the difference between rich and poor is that;
poor work for money whereas rich makes money to work for them.
With the crave to procure more wealth 67% of the investors were willing to takea risk of loosing 5% of the money invested .These were mostly the investors inthe age group of 18-27 and 28-38 who follow an aggressive investment style,as at this stage of the life they concentrate on fast capital appreciation specially18-27 band. It was also interesting to observe that investment decisions are notgender biased .And the remaining 33% wanted the safety of the corpus.Amongst this the investors were of the age group of 38-50 and 50+,who followeither moderate or conservative investment style, as these investors have to plan
for their retirement and family responsibilities.
Another important observation which was made was that 66% of the investorsare willing to invest 25%-35% of their money ,which is a healthy sign for adeveloping country like ours.34% were the ones who wanted to invest in lessthan 25% of their money. Here the impact of age group and educationqualification was seen in the investors in the age group of 18-27 yrs., as theones in this age group who were either graduates or less qualified than that arespend thrift in nature and dont think about investments and savings.
Parameter 5:
INFLUENCE OF THE PEER GROUP
Q 17: Do your friends and relatives also invest in Mutual Funds?
Yes
No
78
22
0 10 20 30 40 50 60 70 80 90
Yes
No
Yes
No
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According to Brian Tracy, author of Getting rich your own way, the first andthe fore most reason why people do not become wealthy is that it never occursto them because they have a reference group or a social circle that is notwealthy; wealth achievement, therefore, is part of the world view.
Out of 50 people who were surveyed 22% were not influenced by theinvestment pattern followed by their reference group and the remaining 78%were highly influenced. This category is the one where the investment behavioris highly driven by the profession to which a person belongs to and the agegroup.
The investors in the age group of18-27 who belong to the service class wereinfluenced by the investment decisions made by their seniors. Whereas those
belonging to the business class are self-driven for the investments decisions andare over bullish on the secondary market, they rarely get influenced by theirreference group. The impact of education qualification was also seen; usuallyinvestors who are highly qualified dont blindly follow the investment pattern ofothers. They know that the investment goal of every individual is different and a
person has to invest keeping them in mind.
The group of28-38 consists of mature and a much cautious investors. Thoughthe crave to earn higher return on investments was seen here also but still theinvestment decisions were well thought of .Again the impact of education
qualification was same as in the previous case .
The age group of 39-50 and 50+ dont get too influenced by the investmentdecisions made by the reference group rather than they believe in directlygetting the information from the source.
Investors preferences according to question no.15: -
80%75%
59%
22%
70%
52%
23%
0%
20%
40%
60%
80%
100%
SBI Reliance UTI HDFC Pru ICICI MF's IPO Others
Asset M anagement Companies
No. of Investors
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Most of the investors who come in for the investments invest in State Bank ofIndia it is amongst the top performing funds in the market. On an average about80% of the investors invest in this fund either in the form of systematicinvestment or one time investment .The recent CRISIL and CNBC TV 18s best
fund awards have increased its popularity even more. Especially the MSFUContra and Magnum Tax gain are the popular funds among the investors. It ishowever important to note that no investor invests in this fund because of itsgood returns only, it is living on the name of its Parent company SBI.
The next in the list comes the Reliance, 75% investors invest in its SIP, thereason why this fund attracts attention is due to the name Reliance attached to itthe investors invest more in its systematic investment plan.
Pru ICICI another emerging giant in this mutual fund industry is getting noticedfor its good returns in equity schemes. It attracts 70% of the investors.
The next in the list comes UTI, 59 % of investors invest in the schemes offeredby it as it is the first AMC to launch the concept of mutual funds in the country.
MFs IPOs attract a large no. of investors, especially in ones in the age groupof 39-50 and above. It is due to the myth which most of the investors have thatthe IPOs of MFs are like the IPOs of share market, and are the safeinvestments. As a matter of fact MFs IPOs have attracted a lot of investors till
this date. In this SBI and reliance have attracted a major chunk of investors.
HDFC is slowly but surely firming its position in the market, reason being goodreturns and is hence gaining investors confidence. This is a note worthy factorfor SBI MF AMC because HDFC is attracting investors not because of thename HDFC attached to it but because of its performance.
Other funds attract about 23% of the investors. It consists of Birla Sun Life,Kotak MF, TATA MF, Standard Charted and JM Financials.
Most of the Investments done above attracting investors attention, especiallythat of salaried middle class is through the Systematic Investment Plan ofvarious fund houses.
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Systematic Investment Plan-
The bread and butter of the Mutual Fund industry
Buy Low and sell high, just four words sum up a winning strategy for the stockmarkets Indian Market is a synonym for volatility and dynamism. NationalStock Exchange is the most liquid exchange in the world. Predicting IndianMarket is the most difficult task, almost an impossible one. The inability totime the market on a regular basis can leave an investor high and dry. However,ironically, the time in the market has historically shown more consistent successthan timing the market.
Though great returns from the market may not always be possible, stable and
consistent returns are. And one of the best ways to get this return in this marketof ours is the Systematic Investment Plan (SIP)offered by the mutual funds.SIP is a powerful tool with a strategy of not only preserving capital but alsotranslating into substantial creation of wealth in the long run.
Under this plan Investors invest a specific amount for a continuous period, atregular intervals. By doing this, the investor get the advantage of rupee costaveraging. Which means that by investing the same amount at regular intervals,the average cost per unit remains lower than the average market price,
irrespective of how the market is - rising, falling or fluctuating.i.e.with everyfluctuation in the market the units are purchased systematically, thus resulting inaveraging the purchase price. Whereas this is not true for a one-time investment.This is the reason why a SIP investor gets phenomenal rate of return comparedto a one-time investor.
Features of a systematic investment plan
1. To get a disciplined investment
2. To create value/wealth.
3. To avoid short-term fluctuations in the market.
4. Avoid risk of timing the market.
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For Example:-Let us suppose that a person invests Rs. 1,000 every month, in anequity fund using the SIP. The following table shows how investments wouldlook in the two scenarios of fluctuating and rising market.
Average Unit Cost(Rs. 12,000/1435.9) =Rs. 8.36
(Rs. 12,000/961.1) = Rs. 12.49
Average Unit Price (Sum of Purchaseprice / 12) = Rs. 9.13
(Sum of Purchase price / 12) =Rs. 12.72
Assumed NAV @Q12
Rs. 14.90 Rs. 16.00
Market Value(1435.9 units x Rs.14.90) = Rs. 21,395
(961.11 units x Rs. 16.00) = Rs.15,378
Therefore, the average unit cost is lower than average unit price irrespective ofmarket rising or fluctuating. This happens because you get the advantage of
buying more units when the market is low and averaging out the purchase price.
Month AmountInvested(Rs.)
Fluctuating Market Rising MarketPurchasePrice(Rs.)
No. of UnitsPurchased
PurchasePrice(Rs.)
No. of Units
Purchased
InitialInvestment
1,000 10.00 100.00 10.00 100.00
1 1,000 8.20 121.95 10.50 95.24
2 1,000 7.40 135.14 11.00 90.91
3 1,000 6.10 163.93 11.50 86.96
4 1,000 5.40 185.19 12.00 83.33
5 1,000 6.00 166.67 12.40 80.65
6 1,000 8.20 121.95 12.90 77.52
7 1,000 9.25 108.11 13.35 74.91
8 1,000 10.00 100.00 14.00 71.43
9 1,000 11.25 88.89 14.50 68.97
10 1,000 13.40 74.63 15.00 66.67
11 1,000 14.40 69.44 15.50 64.52
TOTAL 12,000 1,435.90 961.11
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PORTFOLIO MANAGEMENT
Every individual investor would like to be apprised about the benefits thataccrue out of his investments. This forms the crux of portfolio management andwhat I underwent with the bank. Working with the investment and servicesmanager, I assisted him in handling the portfolio of some of the HNIs of theSBI Bank. These portfolios have to be updated on a fortnightly basis. My workrequired me to update the investments undertaken by each High ValueCustomer, calculating and stating th