PROJECT REPORT

ON
FINANCIAL PLANNING AND WEALTH MANAGEMENT COMPARISON IN
SBI AND OTHER BANKS

SUBMITTED BY:-
REGISTRATION NO:-
A Project Report submitted in partial fulfillment of the requirement for
POST GRADUATE DIPLOMA IN BANKING & FINANCE
OF SYMBIOSIS CENTRE FOR DISTANCE LEARNING
SYMBIOSIS BHAWAN, 1065-B, GOKHALE CROSS ROAD,
MODEL COLONY, PUNE-411016, MAHARASHTRA

NAME OF THE INSTITUTE:-SYMBIOSIS CENTRE FOR DISTANCE LEARNING

 ACADEMICYEAR:- CONTENTS

Chapter No. Topic Page No.

1 Introduction 1-17

2 Company Profile 18-22

3 Objective & Scope 23-25

4 Review of Literature 26-40

5 Research Methodology 41

6 Key Information 42-49

7 Limitation of the Study 50-59

8 Analysis and Interpretation 60-71

9 Findings & Suggestions 72-75

10 Conclusion 76-77

Annexure

LIST OF TABLES

GILT FUND ANALYSIS

BALANCED FUND ANALYSIS
EQUITY FUND ANALYSIS

Bibliography 78
ACKNOWLEGEMENT
This project in itself is an acknowledgement to the inspiration, drive and valuable guidance
contributed to it by many individuals. This project would never have been the light of day
without the help and guidance that have been received.

I would like to express my sincere appreciation and thanks to who guided me all
throughout the summer training. It is under her valuable guidance, constant interest and
encouragement I have completed this project. He devoted his ever-precious time from his
busy schedule and helped in complete understanding of the mutual fund industry in India.

Finally I would like to thank my professor , whose most valuable expertise was training to
me to be success.
 DECLARATION

This is to declare that I have carried out this project work myself in partial fulfillment of
Post Graduate Diploma in Banking & Finance Program of SCDL.The work is original, has
not been copied from anywhere else and not been submitted to any other University /
Institution for the award of any degree /diploma.

Date: Signature:

Place: Ludhiana Name:

 NO OBJECTION CERTIFICATE

This is to certify that Gunjan Puri is permitted to use relevant data/information of this
organization for his/her project as a partial fulfillment of the Post Graduate Diploma in
Banking & Finance.

We wish him/her all the success.

Place:

Date:
 Declaration by The Learner

This is to declare that I have carried out this project work myself in part fulfillment of the
PGDBF Program of SCDL. The work is original, has not been copied from anywhere else
and has not been submitted to any other University/Institute for an award of any degree /
diploma.

Date:
Signature:
Place:
Name:
 Certificate of Guide

Certified that the work incorporated in this Project Report FINANCIAL PLANNING
AND WEALTH MANAGEMENT COMPARISON IN SBI AND OTHER BANKS
submitted by Gunjan Puri is her original work and completed under my supervision.
Material obtained from other sources has been duly acknowledged in the Project Report

Date:

Place: Signature of Guide

 CHAPTER-1

Introduction
to the
FINANCIAL PLANNING AND WEALTH MANAGEMENT

1
MUTUAL FUNDS: AN INTRODUCTION

A Mutual Fund is an investment tool that allows small investors access to a well-diversified
portfolio of equities, bonds and other securities. Each shareholder participates in the gain or
loss of the fund. Units are issued and can be redeemed as needed. The fund's Net Asset Value
(NAV) is determined each day. The income earned through these investments and the capital
appreciations realized are shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost.

2
Mutual funds are financial intermediaries, which collect the savings of investors and invest
them in a large and well-diversified portfolio of securities such as money market instruments,
corporate and government bonds and equity shares of joint stock companies.

Mutual funds are conceived as institutions for providing small investors with avenues of
investments in the capital market.
Since small investors generally do not have adequate time, knowledge, experience and
resources for directly accessing the capital market, they have to rely on an intermediary, which
undertakes informed investment decisions and provides consequential benefits of professional
expertise. The raison dtre of mutual funds is their ability to bring down the transaction costs.
The advantages for the investors are reduction in risk, expert professional management,
diversified portfolios, and liquidity of investment and tax benefits.

By pooling their assets through mutual funds, investors achieve economies of scale. The
advantage that such a investing logic offers to an individual investor is the advantage of scale.
A collected corpus can be used to procure a diversified portfolio, indicating greater returns as
also create economies of scale through cost reduction. This principle has been effective world-
wide as more and more investors are going the mutual fund way. This portfolio diversification
ensures risk minimization. The criticality of such a measure comes in when you factor in the
fluctuations that characterize stock markets. The interests of the investors are protected by the
SEBI, which acts as a watchdog. Mutual funds are governed by the SEBI (Mutual Funds)
Regulations, 1993.

3
INTRODUCTION TO MUTUAL FUND INDUSTRY
The mutual fund industry in India began with the setting up of the Unit Trust In India (UTI) in
1964 by the Government of India. During the last 36 years, UTI has grown to be a dominant
player in the industry with assets of over Rs.24,464 Crores as of March 31, 2000. The UTI is
governed by a special legislation, the Unit Trust of India Act, 1963. In 1987 public sector
banks and insurance companies were permitted to set up mutual funds and accordingly since
1987, 6 public sector banks have set up mutual funds. Also the two Insurance companies LIC
and GIC established mutual funds. Securities Exchange Board

of India (SEBI) formulated the Mutual Fund (Regulation) 1993, which for the first time
established a comprehensive regulatory framework for the mutual fund industry. Since then
several mutual funds have been set up by the private and joint sectors.
Mutual funds have been a significant source of investment in both government and corporate
securities. It has been for decades the monopoly of the state with UTI being the key player,
with invested funds exceeding Rs.300 bn. (US$ 10 bn.). The state-owned insurance companies
also hold a portfolio of stocks. Presently, numerous mutual funds exist, including private and
foreign companies. Banks--- mainly state-owned too have established Mutual Funds (MFs).
Foreign participation in mutual funds and asset management companies is permitted on a case
by case basis.
UTI, the largest mutual fund in the country was set up by the government in 1964, to
encourage small investors in the equity market. UTI has an extensive marketing network of
over 35, 000 agents spread over the country. The UTI scrips have performed relatively well in
the market, as compared to the Sensex trend. However, the same cannot be said of all mutual
funds.
All MFs are allowed to apply for firm allotment in public issues. SEBI regulates the
functioning of mutual funds, and it requires that all MFs should be established as trusts under
the Indian Trusts Act. The actual fund management activity shall be conducted from a separate
asset management company (AMC). The minimum net worth of an AMC or its affiliate must
be Rs. 50 million to act as a manager in any other fund. MFs can be penalized for defaults
including non-registration and failure to observe rules set by their AMCs. MFs dealing

4
exclusively with money market instruments have to be registered with RBI. All other schemes
floated by MFs are required to be registered with SEBI.
In 1995, the RBI permitted private sector institutions to set up Money Market Mutual Funds
(MMMFs). They can invest in treasury bills, call and notice money, commercial paper,
commercial bills accepted/co-accepted by banks, certificates of deposit and dated government
securities having unexpired maturity up to one year.

MUTUAL FUND INDUSTRY IN INDIA

The end of millennium marks 36 years of existence of mutual funds in this country. The ride
through these 36 years is not been smooth. Investors opinion is still divided. While some are
for mutual funds others are against it.
UTI commenced its operation fom july 1964. The impetus for
establishing a formal institution came from the desire to increase the propensity of the middle
and lower groups to save and to invest. UTI came into existence during a period marked by
great political and economic uncertainity in India. With was on the borders and economic
turmoil that depressed the financial market, entrepreneurs were hesitant to enter capital
market. 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 a

dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of
the market had seen an ending phase: the Assent under Management(AUM) was Rs.67bn. The
private sector entry to the fund family raised the AUM to Rs.470bn in March 1993 and till
April 2004; it reached the height of 1,540bn.

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 depostits held by the Indian banking industry.

5
The main reason of its poor growth is theat the mutual fund industry in India is new in the
country. Large sections of Indian investrors are yet to be intellect wih 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 phase is briefly described as under.

First Phase-1964-87

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

Second phase 1987-1993(entry of public sector funds)

The period 1986-1993 can be termed as the period of public sector mutual funds (PMSs).
From one player in 1985 the number increased to 8 in 1993. Entry of non-UTI mutual funds.
SBI mutual fund was the first followed Canbank Mutual Fund (Dec 87), Punjab National Bank
Mutual Fund (Aug 89), Indian Bank Mutual Fund (Oct 90), Bank of Baroda Mutual fund
(oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs. 47,000 as assets under
management. The industry was one-entity show till 1986 when the UTI monopoly was broken
when SBI and BOI, LIC, GIC etc. sponsored by public sector banks. Starting with an asset
base of Rs. 0.25bn in 1964 the industry has grown at a compounded average growth rate of
26.34% to its current size of Rs. 1130bn.

Third phase 1990-2003 (entry of private sector funds)

6
When the private sector made its debut in 1993-94, the stock market was booming. Also, 1993
was the year in which the first Mutual fund Regulations came into being, under which all
mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund registered in
july 1993. Other Private sector mutual funds are Morgan Sanley, Jardine Fleming, JP Morgan,
George Soros and Capital International along with the host of domestic players join the party.
The 1993 SEBI (Mutual Fund)

Regulations substituted by a more comprehensive and revised Mutual Find regulations 1996.
But for the equity funds, the period of 1994-96 was one of the worst in the history of Indian
Mutual Funds, But the year 1999 saw immense future potential and developments in this
sector. This year signaled the year of resurgence of mutual funds and the regaining of investor
confidence in these MFs. As at the end of January 2003, There were 33 mutual fund with total
assets of Rs.1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under
management was way ahead of other mutual funds.

Fourth Phase Since February 2003

This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is
the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on
January 2003). The specified undertaking of Unit Trust of India, functioning under an
adminisratior and unde the rules framed by Government of India and Does not come under the
purview of the Mutual Fund Regulations.

7
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC, It is
registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation
of the erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of AUM and with
the setting up of a UTI mutual fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund
industry has entered its current phase of consolidation and growth. As at the end of September
2004, There were 29 fund, Which manage assets of Rs. 153108 crores under 421 Structure of
Mutual Funds in India. At the end of year 2006 the AUM crossed 2,50,000 crores.

GROWTH IN ASSETS UNDER MANAGEMENT

Growth of the Mutual Fund Industry in India

The mutual fund industry in India came into being in 1963 with the setting up of the Unit Trust
of India (UTI). In 1987, Public Sector Banks and Insurance Companies opened their own
8
mutual funds, thus starting the second phase in the growth of the mutual funds industry. By the
end of 1988, the industry's total assets under management (AUM) reached Rs.6billion.

The industry registered a major milestone in 1993 when the first private sector player, the
erstwhile Kothari Pioneer Mutual Fund (now merged with Franklin Templeton), was set up.
Since then, several international players have also entered the fray.

The industry has also witnessed a spate of mergers and acquisitions, the most recent ones
being the acquisition of Alliance Mutual by Birla Sun Life, GIC Mutual by Canbank Mutual,
and Sun F&C by Principal Mutual.

While the Indian mutual fund industry has grown in size by about 320% from March, 1993
(Rs 470 billion) to December, 2004 (Rs 1505 billion) in terms of AUM, the AUM of the sector
excluding UTI has grown over 8 times from Rs.152 billion in March 1999 to Rs.1295 billion
as at December 2004 (See Chart 1).

The latest phase in the industry's evolution began with the bifurcation of UTI. The Indian
mutual fund industry has grown by about 4.2 times from 1993 (Rs. 470 billion) to 2005 (Rs.
1992 billion) in terms of AUM. The private sector was allowed entry to set up asset
management companies in 1993. There was a brief period of five years during which the asset
growth was slow. The AUM for the mutual fund industry started to grow rapidly after 1998.
Between 1998 and 2005 the AUM of the sector excluding UTI grew by over 15 times from
Rs.114 billion in 1998 to Rs.1738 billion as at 2005. Though India is a minor player in the
global mutual funds industry, its AUM as a proportion of the global AUM has steadily
increased, doubling from 1999 levels

MUTUAL FUND A GLOBALLY PROVEN INVESTMENT AVENUE

Worldwide, Mutual Fund or Unit Trust as it is referred to in some parts of the world, has a
long and.successful history. The popularity of Mutual Funds has increased manifold in
developed financial markets, like the United states. As at the end of March 2006, in the US

9
alone there were 8,002 mutual funds with total assets of over US$ 9.36 trillion (Rs.427Iakh
crores).In India, the mutual fund industry started with the setting up of the Unit Trust of India
In
1964.
Public
sector
banks
and

financial institutions were allowed to establish mutual funds in 1987. Since 1993, private
sector and foreign institutions were permitted to set up mutual funds. In February 2003,
following the repeal of the Unit Trust of India Act 1963 the erstwhile UTI was bifurcated into
two separate entities viz. The Specified Undertaking of the Unit Trust of India, representing
broadly, the assets of US 64 scheme, assured returns and certain other schemes and UTI
Mutual Fund conforming to SEBI Mutual Fund Regulations. As at the end of March 2006,
there were 29 mutual funds, which managed assets of Rs. 2,31,862 crores (US$52 Billion)
under 592 schemes. This fast growing industry is regulated by the Securities and Exchange
Board of India(SEBI).

10
 STRUCTURE OF THE
INDIAN MUTUAL FUND INDUSTRY
The Indian Mutual
Fund industry is
dominated by the Unit

Trust of India which has a total corpus of 700 Billion collected from over 20 million investors.
The UTI has many funds/ schemes in all categories i.e. Equity, balanced, income etc. With
some being open ended and some being closed ended. The Unit scheme 1964 commonly
referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of about
200 billion. UTI was floated by financial institutions and is governed by a special act of
Parliament. Most of its investors believe that the UTI is government owned and controlled,
which, while legally incorrect, is true for all practical purposes.
The second largest category of mutual funds are the ones floated by nationalized banks.
Canbank asset management floated by Canara Bank and SBI Funds Management floated by
State Bank of India are the largest of these. GIC AMC floated by General Insurance
Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other
prominent ones. The aggregate corpus of the funds managed by this category of AMCs is
around Rs.150
The third largest category of mutual funds are the ones floated by the private sector and by
foreign asset management companies. The largest of these are Birla Capital AMC and Kotak
AMC . The aggregate corpus of the assets managed by this category of AMCs is about Rs. 60
billion.
Organization of A Mutual Fund
11
There are many entities involved in organization of Mutual Fund. Diagram given below
illustrates the organization set-up of a mutual fund.

The structure of mutual fund in India is governed by SEBI (Mutual fund) Regulation, 1996.

The Sponsor These regulation make it mandatory to a mutual fund to have three-tier
structure of Sponsor-Trustees-Asset Management Company.

is promoter of the mutual fund appoints trustees, custodians and the AMC with prior approval
of SEBI. The sponsor establishes the mutual fund and registers the same with SEBI. Sponsors
must contribute at least 40% of the capital of the AMC.

Trust/ Board of Trustees: Trustees hold a fiduciary responsibility towards unit holders by
protecting their interests. Trustees float and
market schemes, and secure necessary approvals. They check if the AMCs investments are
within well-defined limits, whether the funds assets are protected, and also ensure that
12
unitholders get their due returns. They also review any due diligence by the AMC. For major
decisions concerning the fund, they have to take the unitholdersconsent. They submit reports
every six months to SEBI; investors get an annual report. Trustees are paid annually out of the
funds assets 0.5 percent of the weekly net asset value

Fund Managers/ AMC: They are the ones who manage money of the investors. An AMC
takes decisions, compensates investors through dividends, maintains proper accounting and
information for pricing of units, calculates the NAV, and provides information on listed
schemes. It also exercises due diligence on investments, and submits quarterly reports to the
trustees. A funds AMC can neither act for any other fund nor undertake any business other
than asset management. Its net worth should not fall below Rs. 10 crore. And, its fee should
not exceed 1.25 percent if collections are below Rs. 100 crore and 1 percent if collections are
above Rs. 100 crore. SEBI can pull up an AMC if it deviates from its prescribed role.

Custodian: Often an independent organization, it takes custody of securities and other assets
of mutual fund. Its responsibilities include receipt and delivery of securities, collecting
income-distributing dividends, safekeeping of the units and segregating assets and settlements
between schemes. Their charges range between 0.15-0.2 percent of the net value of the
holding. Custodians can service more than one fund.
Mutual Fund is managed either trust company or board of trustees. Provisions of Indian Trust
Act govern board of trustees and trust. If trustee is a company , it is also subject to Indian
Company Act. Trustees appoint AMC in consultation with the sponsors and according to SEBI
regulation. All mutual fund scheme floated by AMC have to be

approved by trustees. Trustees review and ensure that net worth of the company is according
to stipulated norms, every quarter.
Though the trust is the mutual fund, the AMC is its operational face. The AMC is the first
functionary to be appointed , and is involved in appointment of all other functionaries. The
AMC structures the mutual fund products, markets them and mobilizes fund, manages the

13
funds and services the investors. It seeks the service other functionaries in carrying out these
functions.
A draft offer document is to be prepared at the time of launching the fund. Typically, it pre
specifies the investment objectives of the fund, the risk associated, the costs involved in the
process and the broad rules for entry into and exit from the fund and other areas of operation.
In India, as in most countries, these sponsors need approval from a regulator, SEBI (Securities
exchange Board of India) in our case.

A sponsor then hires an asset management company to invest the funds according to the
investment objective. It also hires another entity to be the custodian of the assets of the fund
and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management Company also, in which it
holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset
Management Company (AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life
Asset Management Company Ltd., which has floated different mutual funds schemes and also
acts as an asset manager for the funds collected under the schemes.

Types of AMCs in Indian Context

The following are the types of AMCs we have in India
AMCs owned by banks
AMCs owned by financial institutions
AMCs owned by the Indian private sector companies
AMCs owned jointly by Indian and foreign investors.

Different AMCs Working in India are

Name of the AMC Nature of Ownership
Alliance Capital Private Foreign
Anagram Wellington Private Indian
Apple Private Indian
14
Birla Capital International Private Indian
Bank of Baroda Banks
Bank of India Banks
Canbank Investment Banks
Cholamandalam Cazenove Private Foreign
Dundee Private Foreign
DSP Merrill Lynch Private Foreign
Escorts Private Indian
First India Private Indian
GIC Institutions
IDBI Investment Institutions
Indfund Management Ltd. Banks
ING Investment Private Foreign
ITC Threadneedle Private Foreign
RELIANCE Capital ManagementPrivate Indian
Ltd.
Jardine Fleming Private Foreign
Kotak Mahindra Private Indian
Morgan Stanley Private Foreign
Punjab National Bank Banks
Reliance Capital Private Indian
State Bank of India Banks
Shriram Private Indian
Sun F&C Private Foreign
Sundaram Newton Private Foreign
Tata Private Indian
Credit Capital Private Indian
Templeton Private Foreign
UTI Institutions

15
COMPARISON OF MUTUAL FUNDS WITH THE BANKS
Banks v/s Mutual Funds
BANKS MUTUAL FUNDS
Returns Low Better
Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Interest calculation Minimum balance betweenEveryday
10th.&30th.Of every month
Guarantee Max Rs.1 lakh on deposits None
Capital flow in the economy
MFs make it possible for investors to assume risks in the expectation of the higher returns
even if the investor cannot actively manage these investments and the associated risks. This
increases the level of risk capital that is available in the economy for funding enterprise. The
MFs also add depth to the security markets where they invest, thus contributing to liquidity
and price discovery. This again is a significant factor in channelling more money into the
markets, instead of this being locked up in unproductive physical capital like gold, real estate
etc.
Schemes and Units

Investment in a company is normally represented by a certain number of shares. People invest

in a company by acquiring its shares; they disinvest by selling its shares. The total outstanding
shares of a company multiplied by the face value of each share, constitutes the share capital of
the company.
What shares are for a company, units are for a mutual fund scheme. Thus investors invest in a
scheme by buying its units. They disinvest by selling its units. The total outstanding units of
a scheme multiplied by the face value of its units, constitutes the unit capital of the scheme.
Every scheme has an investment objective or philosophy i.e. a promise by the AMC on how
the funds would be managed. Investors in a scheme are essentially buying into this investment
objective or philosophy.

16
In reality, the distinction among some of the stock fund objectives discussed is not clear-cut.
The actual stocks that constitute a specific mutual fund portfolio depend on the analysis and
perspective of the funds manager. Hence, a generic investment objective (e.g. growth,
income) can be interpreted and executed differently by different managers. One companys
aggressive growth fund may look like another companys specialty fund, which may look like
another companys world fund. It is important to read the funds prospectus and review the
list of its top holdings before making your final investment decision.

17
 CHAPTER-2

COMPANY PROFILE

STATE BANK OF INDIA

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable
track record in judicious investments and consistent wealth creation.

The fund traces its lineage to SBI - Indias largest banking enterprise. The institution
has grown immensely since its inception and today it is India's largest bank, patronised
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 management companies that
manages over
US$ 330 Billion worldwide.

In eighteen years of operation, the fund has launched thirty-two schemes and
successfully redeemed fifteen of them. In the process it has rewarded its investors
handsomely with consistently high returns.

A total of over 3.5 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. 20000 crores of assets and has a diverse profile of
investors actively parking their investments across 40 active schemes.

18
The fund serves this vast family of investors by reaching out to them through network of
over 100 points of acceptance, 26 investor service centers, 33 investor service desks and
52 district organizers.

SBI Mutual is the first bank-sponsored fund to launch an offshore fund Resurgent
India Opportunities Fund. Growth through innovation and stable investment policies is
the SBI MF credo.

KEY PERSONNEL

Mr. Syed Shahabuddin

Managing Director

Mr. G.S. Subramanian

SR. Vice President Cross Selling

Mr. Didier Turpin

Dy. Chief Executive Officer

Mr. G. Kandasubramanian
Asst. Vice President - Customer Service

Mr. Achal K. Gupta

Chief Operating Officer

Mr. Ganti N. Murthy

Fund Manager - Debt

19
Mr. Sanjay Sinha
Chief Investment Officer

Ms. Aparna Nirgude

Chief Risk Officer

Mr. R. S. Srinivas Jain

Chief Marketing Officer

Mr. Ashutosh P Vaidya

Company Secretary & Compliance Office

IMPORTANCE OF SBI MUTUAL FUND

1) SBI Mutual Fund helps in introducing a high degree of professional management and
marketing concept in to banking

2) SBI Mutual Fund creates Healthy competition on general efficiency levels in the
industry

3) SBI Mutual Fund is always trying to innovate the new products avenues, new
schemes, services etc.

More about SBI Mutual Fund

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable
track record in judicious investments and consistent wealth creation.

20
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 management
companies that manages over US$ 330 Billion worldwide.

AWARDS AND ACHIEVEMENTS

1)

LIPPER AWARD- lipper India fund award 2007

2)

ICRA MUTUAL FUND AWARD -2007

3)

CNBC TV 18 - CRISIL MUTUAL FUND OF YEAR

AWARD -2007

4)
21
 CNBC AWAAZ CONSUMER AWARD 2006

5)

LIPPER AWARD- lipper India fund award -2006

6)

CNBC TV 18 - CRISIL MUTUAL FUND OF YEAR

AWARD -2006

7)

ICRA MUTUAL FUND AWARD -2006

22
23
 CHAPTER-3

OBJECTIVES & SCOPE

Main Objective
To make Comparative performance analysis of SBI Mutual Fund with ICICI Prudential
Mutual Fund.
Sub-objectives
1. To study the different kinds of schemes provided by each of Mutual funds.
2. Comparative performance analysis of SBI Equity - Diversified with ICICI Prudential
Equity Diversified Fund.
3. Comparative performance analysis of SBI Gilt Fund with ICICI Prudential Gilt Fund
4. Comparative performance analysis of SBI Balance Fund with ICICI Prudential
Balance Fund.

The study Comprises of

1. Comparative analysis of Returns from SBI Mutual Fund and ICICI Prudential Mutual
fund.
2. Comparative analysis of Risk associated with SBI and ICICI Prudential fund, with the
use of Sharpe ratio, Expense ratio, Beta, Treynor Ratio and Standard deviation..
3. To compare Mutual Fund Average Return with NIFTY Average Return
4. Comparative analysis of corpus of the funds.
Business Objectives.
The Primary Objective of SBI Mutual Fund is to Enhance the Investments in the country
through the Provision of Different Mutual Fund Schemes in a systematic and Professional
Manner, and to Promote the Investments In the Mutual Fund

Organizational goal

24
 SBI Mutual Fund Main goals are to

a) Develop a Close Relationship with Customer

b) Transform Ideas in to Viable and Creative Solutions
c) Provide Consistently high Returns to Shareholders,
d) To Grow through diversification by leveraging off the existing client base.

Business Focus
SBI Mutual Fund mission is to be world class Mutual Fund its Main aim is to build
Customer Franchises across distinct business So as to be the Preferred Provider of services in
the Segments

That Fund Operates in and to achieve healthy growth in profitability, and consistency
The SBI Mutual Fund is Committed to maintain the highest level of ethical standards,
professional integrity and regulatory compliance

Subsidiaries and Associates

SBI Bank

SBI Mutual Fund

SBI Life insurance Company

SBI Securities

25
SBI NRI Services

Other Companies co- promoted by SBI

SBI Mutual Fund is Professionally managed organization with a board of directors consisting
of eminent persons who represent various fields including finance, taxation, construction and
Urban policy and development. The board primarily focuses on strategy
Formulation, policy and control, designed to deliver increasing value to the share holders

26
 CHAPTER 4

REVIEW OF LITERATURE

27
S B I MUTUAL FUND SCHEMES

1 EQUITY SCHEMES
The investments of these schemes will predominantly be in the stock markets and
endeavor will be to provide investors the opportunity to benefit from the higher
returns which stock markets can provide. However they are also exposed to the
volatility and attendant risks of stock markets and hence should be chosen only by
such investors who have high risk taking capacities and are willing to think long term.
Equity Funds include diversified Equity Funds, Sectoral Funds and Index Funds.
Diversified Equity Funds invest in various stocks across different sectors while
sectoral funds which are specialized Equity Funds restrict their investments only to
shares of a particular sector and hence, are riskier than Diversified Equity Funds.
Index Funds invest passively only in the stocks of a particular index and the
performance of such funds move with the movements of the index.

Magnum COMMA Fund

Magnum Equity Fund

Magnum Global Fund

Magnum Index Fund

Magnum MidCap Fund

Magnum Multicap Fund

Magnum Multiplier Plus 1993

Magnum Sector Funds Umbrella MSFU - FMCG Fund

MSFU - Emerging Businesses Fund MSFU - IT
Fund MSFU - Pharma Fund
MSFU - Contra Fund

SBI Arbitrage Opportunities Fund

28
 SBI Blue chip Fund
SBI Infrastructure Fund - Series I
SBI Magnum Taxgain Scheme 1993
SBI ONE India Fund

2 DEBT SCHEMES
Debt Funds invest only in debt instruments such as Corporate Bonds, Government
Securities and Money Market instruments either completely avoiding any investments
in the stock markets as in Income Funds or Gilt Funds or having a small exposure to
equities as in Monthly Income Plans or Children's Plan. Hence they are safer than
equity funds. At the same time the expected returns from debt funds would be lower.
Such investments are advisable for the risk-averse investor and as a part of the
investment portfolio for other investors.

Magnum Children`s Benefit Plan

Magnum Gilt Fund

Magnum Gilt Fund (Long Term)

Magnum Gilt Fund (Short Term)

Magnum Income Fund

Magnum Income Plus Fund

Magnum Income Plus Fund (Saving Plan)
Magnum Income Plus Fund (Investment Plan)
Magnum Insta Cash Fund
Magnum InstaCash Fund -Liquid Floater Plan

29
Magnum Institutional Income Fund
Magnum Monthly Income Plan
Magnum Monthly Income Plan Floater
Magnum NRI Investment Fund

SBI Debt Fund Series

SDFS 15 Months Fund

SDFS 90 Days Fund
SDFS 13 Months Fund
SDFS 18 Months Fund
SDFS 24 Months Fund
SDFS 60 Days Fund
SDFS 180 Days Fund

SBI Premier Liquid Fund

3 BALANCED SCHEMES

Magnum Balanced Fund invest in a mix of equity and debt investments. Hence they are less
risky than equity funds, but at the same time provide commensurately lower returns. They
provide a good investment opportunity to investors who do not wish to be completely exposed
to equity markets, but is looking for higher returns than those provided by debt funds.

Magnum Balanced Fund

Magnum NRI Investment Fund - FlexiAsset Plan

30
SBI EQUITY SCHEMES DETAILS
MAGNUM GLOBAL FUND
Investment Objective
To provide the investors maximum growth opportunity through well researched
investments in Indian equities, PCDs and FCDs from selected industries with high
growth potential and Bonds.

Asset Allocation
Instrument %of portfolio Risk Profile
Equity, Partly Convertible Debentures, Fully 80-100% HIGH
Convertible Debentures and Bonds
Money Market instruments 0-20% LOW

Scheme Highlights
1.An open-ended equity scheme investing in stocks from selected industries with high
growth potential.
2. Minimum Investment Rs. 2000 and in multiples of Rs. 1000 with Dividend and
Growth options available. ^ Money Market Instruments will include Commercial Paper,
Commercial Bills, Certificate of Deposit, Treasury Bills, Bills Rediscounting, Repos,
Government securities having an 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
the regulations prevailing from time to time.

Launch Date:September 30, 1994

Entry Load

31
Investments below Rs. 5 crores - 2.25% Investments of Rs.5 crores and above NIL

Exit Load
Investments below Rs 5 crores <= 6 months - 1.00% and NIL thereafter. Investments of
Rs 5 crores and above - NIL

SBI GILT FUND DETAILS

SBI MAGNUM GILT FUND
Investment Objective
To provide the investors with returns generated through investments in government
securities issued by the Central Government and / or a State Government

Asset Allocation
Instrument %of portfolio Risk Profile
Government of India Dated Securities 100% Sovereign
State Governments Dated Securities 100% Low
Government of India Treasury Bills 100% Sovereign

Scheme Highlights
1. Open ended Gilt Scheme.
2. The scheme will invest in government securities only with the exception of
investments made in the call money markets. Investment in Government Securities
signifies no risk of default (zero credit risk) either in payment of principal or even

interest on the investments made by the scheme. Long-Term Plan - for investors with a
long-term investment horizon. This Plan will have two options (a) Quarterly Dividend
option and (b) Growth option The Long Term Plan Dividend Plan and the Growth Plan

32
will each have three options for investment 1. Regular Dividend / Growth Option : This
option will be the existing option in this Plan wherein investments in this option would
be subject to a Contingent Deferred Sales Charge (CDSC) of 0.25% for exit within 90
days from the date of investment. 2. PF (Regular) Option : This option under both the
Dividend and Growth Plans would be a no-load option. 3. PF (Fixed Period) Option :
This option under both the Dividend and Growth Plan provides prospective investors
with an option to lock-in their investments for a period of 1 year, 2 years or 3 years
from the date of their investment Facility to reinvest dividend is available under both
the Plans. Both the Plans will have separate investment portfolios and separate NAVs.
Under the Long-Term Plan, the funds will normally be managed to an average portfolio-
maturity longer than three years.

Launch Date: January 1, 2003

Entry Load: Nil

Exit Load: Regular Plan (Long Term) - CDSC of 0.25% for exit within 90 days from
date of investment

SBI BALANCED FUND

Investment Objective
To provide investors long term capital appreciation along with the liquidity of an open-
ended scheme by investing in a mix of debt and equity. The scheme will invest in a
diversified portfolio of equities of high growth companies and balance the risk through
investing the rest in a relatively safe portfolio of debt.

Asset Allocation

33
Instrument %of portfolio Risk Profile
Equities At least 50% MED-HIGH
Debt Instruments like debentures, bonds,khokhas. UP TO 40%
Securitized Debt 10% MED-HIGH
Money Market Instruments Balance Low

Scheme Highlights
1. An open-ended scheme investing in a mix of debt and equity instruments. Investors
get the benefit of high expected-returns of equity investments with the safety of debt
investments in one scheme.
2. On an ongoing basis, magnums will be allotted at an entry load of 2.25% to the NAV.
3. Scheme open for Resident Indians, Trusts, Indian Corporates, on a fully repatriable
basis for NRIs and, Overseas Corporate Bodies.
4. Facility to reinvest dividend proceeds into the scheme at NAV available.
5. Switchover facility to any other open-ended schemes of SBI Mutual Fund at NAV
related prices.
6. The scheme will declare NAV, Sale and repurchase price on a daily basis.
7. Nomination facility available for individuals applying on their behalf either singly or
jointly upto three.

Launch Date: May 1, 1996

Entry Load: Investments below Rs. 5 crores - 2.25% Investments of Rs.5 crores and
above - NIL

Exit Load: Investments below Rs.5 crores < = 6 months - 1.00%, > 6 months but < 12
months - 0.50% Investments of Rs.5 crores and above - NIL

34
ICICI Prudential Mutual Fund
ICICI Prudential Asset Management Company enjoys the strong parentage of Prudential plc,
one of UK's largest players in the insurance & fund management sectors and ICICI Bank, a
well-known and trusted name in financial services in India. ICICI Prudential Asset
Management Company, in a span of just over eight years, has forged a position of pre-
eminence in the Indian Mutual Fund industry as one of the largest asset management
companies in the country with assets under management of Rs. 37,906.24 crores (as of March
31, 2007). The Company manages a comprehensive range of schemes to meet the varying
investment needs of its investors spread across 68 cities in the country.

PRUDENTIAL
Established in London in 1848, Prudential plc, through its businesses in the UK, US and Asia,
provides retail financial services products and services to more than 21 million customers,
policyholders and unit holders worldwide with over US$400 (as of 31st December, 2005) billion in
funds under management. Prudential employs some 23,000 staff worldwide.

In Asia, Prudential has life insurance and funds management operations across twelve countries -
China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan,
Thailand and Vietnam. Prudential has championed customer-centric products and services for over 80
years, supported by an extensive network of over 145,000 staff and agents across the region

ICICI BANK
ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89 bn (US$ 56.3 bn) at
March 31, 2006 and profit after tax of Rs. 25.40 bn (US$ 569 mn) for the year ended March 31, 2006
(Rs. 20.05 bn (US$ 449 mn) for the year ended March 31, 2005). ICICI Bank has a network of about
614 branches and extension counters and over 2,200 ATMs. ICICI Bank

35
offers a wide range of banking products and financial services to corporate and retail customers
through a variety of delivery channels and through its specialised subsidiaries and affiliates in the
areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI
Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients
and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently
has subsidiaries in the United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong
Kong, Sri Lanka and Dubai International Finance Centre and representative offices in the United
States, United Arab Emirates, China, South Africa and Bangladesh. Our UK subsidiary has
established a branch in Belgium. ICICI Bank is the most valuable bank in India in terms of market
capitalisation.

ICICI PRUDENTIAL MUTUAL FUND SCHEMES

ICICI Prudential Infrastructure Fund
ICICI Prudential Services Industries Fund
ICICI Prudential FMCG Fund
ICICI Prudential Technology Fund
ICICI Prudential Discovery Fund
ICICI Prudential Power
ICICI Prudential Dynamic Plan
ICICI Prudential Emerging S.T.A.R Fund
ICICI Prudential Tax Plan
ICICI Prudential Growth Plan
ICICI Prudential Index Fund
ICICI Prudential Spice Fund
ICICI Prudential Child Care Plan
ICICI Prudential Banlanced Fund
ICICI Prudential Income Multiplier Fund
ICICI Prudential Monthly Income Plan
ICICI Prudential Gilt Fund-Investment Option

36
ICICI Prudential Income Plan
ICICI Prudential Flexible Income Plan
ICICI Prudential Long Term Floating Rate Plan
ICICI Prudential Blended Plan
ICICI Prudential Short Term Plan
ICICI Prudential Gilt Fund-Treasury Option
ICICI Prudential Short Term Floater
ICICI Prudential Liquid Plan

ICICI PRUDENTIAL PRODUCT DETAILS

EQUITY SCHEME
ICICI PRUDENTIAL DYNAMIC PLAN is a diversified equity fund that could be your
ideal choice to make the most of dynamic changes in the market. It has the agility to capture
upside opportunities across value and growth , large and midcap , index and non-index stocks.
On the flip side it also has ability to move into cash as markets get overvalued

Investment Objective
To generate capital appreciation by actively investing in equity / equity related securities. For
defensive considerations, the Scheme may invest in debt, money market instruments, to the
extent permitted under the Regulations. The AMC will have the discretion to completely or
partially invest in any of the type of securities stated above so as to maximize the returns.

INVESTMENT PHILOSOPHY
ICICI PRUDENTIAL DYNAMIC PLAN is a diversified equity plan that follows the growth
investment philosophy to invest in a portfolio of large, mid and small-cap stocks. It has the
ability to move gradually into cash as the market gets over-valued. It offers a portfolio of

37
stocks selected through rigorous bottom-up fundamental analysis across market capitalisations
on a diversified basis for long-term capital appreciation.

BENEFITS
1.Has the agility, aimed at capturing upside opportunities in the market across market
capitalizations.

2.On the flip side, in case stock markets get into an over valued position, the plan has the
ability to switch to cash thus seeking to limit the downside

PERFORMANCE

Entry Load: (i) For investments of less

than Rs. 5 Crores : Entry load at 2.25% of
applicable NAV. (ii)For investments of Rs.
5 crores and Above : Nil

Exit Load: Nil

ICICI PRUDENTIAL GUILT FUND

Investment Objective
To generate income through investment in Gilts of various maturities.

38
INVESTMENT PHILOSOPHY

ICICI PRUDENTIAL GILT FUND is a pure debt fund that invests in short tenure
Government securities (G-Secs). These securities are essentially liquid and carry no credit
risk. Having said that, the portfolio's exposed to some interest rate risk as the securities are
marked to market, and therefore, respond to changes in market interest rates. The portfolio
seeks to limit volatility by deploying funds in short-term G-Secs, with an average maturity not
exceeding 3 years. The objective is to closely manage the downside risks of the portfolio
arising out of changes in the market rates, by actively managing the duration of the portfolio.

BENEFITS
1.Enables exposure to a pure Government security portfolio.

2.Facilitates participation in the wholesale market for Government debt, even for smaller
ticket-size exposures.

3.Provides the benefits of professional management of investment portfolios.

PERFORMANCE OF THE FUND

39
Entry Load:Nil
Exit Load: Nil

ICICI PRUDENTIAL BALANCED FUND: Asset allocation is the key to investing success.
It helps to reduce the volatility of returns. A Balanced Fund takes care of this asset allocation
by investing in equity for capital appreciation and debt for stable returns. It focuses on
reducing volatility of returns by increasing / decreasing equity exposure based on the market
outlook and using a core debt portfolio to do the rebalancing.

Investment Objective
To seek to generate long-term capital appreciation and current income from a portfolio that is
invested in equity and equity related securities as well as in fixed income securities.

INVESTMENT PHILOSOPHY
an open-ended fund that allocates to both equity and debt markets, reflects this wisdom. In a
bullish market equity allocation can go upto 80%. In a bearish market equity allocation can go
down to 65%. This dynamic allocation along with core debt portfolio reduces the volatility of
return.

40
BENEFITS
Balanced fund brings you the twin benefits of growth from equity markets and steady income
from debt markets

PERFORMANCE

Entry Load: (i) For investments of less

than Rs. 5 Crores : 2.25% of applicable
NAV.(ii) For investments of Rs. 5 crores
and Above : Nil

Exit Load: Nil

41
 CHAPTER-5

RESEARCH METHODOLOGY

o Information is collected from the managers of Selected firms who deal in mutual
funds.

o Information is collected from the officials of SBI Mutual Fund officials.

o Information is also collected from the secondary sources like the offer documents, fact
sheets, key information memorandum, web sites, magazines, newspapers etc.

o In case of corpus size, lock in period, entry and exit load the information is collected
from SBI & ICICI Prudential the offer documents.

o In case of returns, minimum investment and performance (Track Records) is collected

from the offer documents & fact sheets.

o Extensive use of Mutual Fund Related magazines like Mutual Fund Review,
Mutual Fund Insight by value researchers is being made.

42
 CHAPTER-6

COMPANY KEY INFORMATION

CATEGORIES OF MUTUAL FUND SCHEMES
1.SCHEMES ACCORDING TO MATURITY PERIOD:

A mutual fund scheme can be classified into open-ended scheme or close-ended scheme
depending on its maturity period.

1.1OPEN-ENDED FUND/ SCHEME

An open-ended fund or scheme is one that is available for subscription and repurchase on a
continuous basis. These schemes do not have a fixed maturity period. Investors can
conveniently buy and sell units at Net Asset Value (NAV) related prices, which are
declared on a daily basis. The key feature of open-end schemes is liquidity.

1.2CLOSE-ENDED FUND/ SCHEME

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is
open for subscription only during a specified period at the time of launch of the scheme.
Investors can invest in the scheme at the time of the initial public issue and thereafter they
can buy or sell the units of the scheme on the stock exchanges where the units are listed. In
order to provide an exit route to the investors, some close-ended funds give an option of
selling back the units to the mutual fund through periodic repurchase at NAV related
prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the
investor i.e. either repurchase facility or through listing on stock exchanges. These mutual
funds schemes disclose NAV generally on weekly basis.

2.SCHEMES ACCORDING TO INVESTMENT OBJECTIVE:

43
 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 mainly as follows:

2.1GROWTH / EQUITY ORIENTED SCHEME

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. 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 options at a later date.
Growth schemes are good for investors having a long-term outlook seeking appreciation
over a period of time.

2.2INCOME / 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.

2.3BALANCED 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

44
 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.

2.4MONEY 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 are appropriate for corporate and individual
investors as a means to park their surplus funds for short periods.

2.5GILT FUND
These funds invest exclusively in government securities. Government securities have no
default risk. NAVs of these schemes also fluctuate due to change in interest rates and other
economic factor as is the case with income or debt oriented schemes.
2.6INDEX 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
weightage 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.
There are also exchange traded index funds launched by the mutual funds, which are
traded on the stock exchanges.

45
Other Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under tax laws as prescribed from time to
time. This is made possible because the Government offers
tax incentives for investment in specified avenues. For example, Equity Linked Savings
Schemes (ELSS) and Pension Schemes. The details of such tax saving schemes are provided
in the relevant offer documents.

Ideal for: . Investors seeking tax rebates.

Special Schemes
This category includes index schemes that attempt to replicate the erformance of a particular
index such as the SSE Sensex or the NSE 50, or industry specific schemes (which invest in
specific industries) or sectoral schemes (which invest exclusively in segments such as
'IXGroup shares or initial public offerings).

Index fund schemes are ideal for investors who are satisfied with a return approximately
equal to that of an index.

Sectoral fund schemes are ideal for investors who have already decided to invest in a
particular sector or segment. Keep in mind that anyone scheme may not meet all your
requirements for all time. You need to place your money judiciously in different schemes to be
able to get the combination of growth, income and stability that is right for you. Remember, as
always, higher the return you seek higher the risk you should be prepared to take.

A few frequently used terms are explained here

46
FREQUENTLY USED TERMS

NET ASSET VALUE(NAV)

Net Asset Value is the market value of the assets of the scheme minus
its liabilities. The per unit NAV is he net asset value of the scheme divided by the number of
units outstanding on the Valuation date. Net Asset Value is the market value of securities of
scheme divided by the total number of units of the scheme on any particular date. For
example, if the market value of the securities of a mutual fund scheme is Rs 200 lakhs and the
mutual fund has issued 10 lakhs units at Rs. 10 each to the investors, then the NAV per unit of
the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis-
daisy or weekly- depending on the type of scheme

Sale Price
Is the price you pay when you invest in a scheme or NAV a unit holder
is charged while investing in an open-ended scheme is sale price. Also called Offer Price. It
may include a Sale load, if applicable.

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

Redemption Price
Is the price at which open-ended schemes repurchase their units and
close-ended schemes redeem their units on maturity. Such prices are NAV related.

Sales load
Is a charge collected by a scheme when it sells when it sells the units
also called, Front-end load. A Load 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

47
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 were 1%, then the investors who buy would be
required to pay Rs. 10.10 and those who offer their unit for repurchase to the mutual fund will
get only Rs.9.90 per unit. The investors should take the loads into consideration while making
investment as these affect their yields/returns

Whether a mutual fund impose fresh load or increase the load beyond the level
mentioned in the offer documents

Mutual funds cannot increase the load beyond the leel mentioned in the
offer document. Any change in the load will be applicable only to prospective investments
and not to the original investments. In case of imposition of fresh loads or increase in existing
loads, the mutual funds are required to amend their offer documents so that the new investors
are aware of loads at the time of investments.
No load
Schemes that do not charge a load are called No Load schemes. 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 not additional charges are payable on purchase or sale of units.

BENEFITS OF MUTUAL FUNDS

PROFESSIONAL MANAGEMENT:
Mutual Funds are backed by experienced and skilled professionals, a dedicated investment
research team that analyses the performance and prospects of companies and selects
investments.

CONVENIENT ADMINISTRATION:
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as
bad deliveries, delayed payments and follow up with brokers and companies. This is important
when you want to have a diversified portfolio through direct equity investments.

48
DIVERSIFICATION :
Mutual Funds always have an investment mix. The diversity in this mix spreads out the
probability of profits and losses, reducing the risk of a substantial fall in the money you have
invested.

RETURN POTENTIAL :
Over a medium to long-term, Mutual Funds have the potential to provide a higher net return
as they invest in a diversified basket of selected securities.
ECONOMIES:
Mutual Funds are a relatively less expensive way to invest compared to directly investing in
the capital markets because the benefits of scale in brokerage, custodial and other fees
translate into lower costs for investors.

LIQUIDITY:
In open-end schemes, the investor gets the money back promptly at net NAV pegged prices.
In closed-end schemes, the units can be sold on a stock exchange at the prevailing market
price. The fund also repurchases from the investors at NAV pegged prices. There is scope to
speedily disinvest assets and obtain disinvestments proceeds.

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

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

49
AFFORDABILITY:
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund
because of its large corpus allows even a small investor to take the benefit of its investment
strategy.

OPTIONS:
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

INVESTOR SAFETY:
All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI.

50
 CHAPTER-7
LIMITATIONS OF MUTUAL FUND
No Guarantee:
No investment is risk free. If the entire stock market declines in value, the value of mutual
fund shares will go down as well, no matter how balanced the portfolio. Investors encounter
fewer risks when they invest in mutual funds than when they buy and sell stocks on their own.
However, anyone who invests through a mutual fund runs the risk of losing money.

Fees and commissions:

All funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge sales commissions or loads to compensate brokers, financial consultants, or financial
planners. Even if you dont use a broker or other financial adviser, you will pay a sales
commission if you buy shares in a load fund.

Taxes:
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you will
pay taxes on the income you receive, even if you reinvest the money you made.

Management Risk:
When you invest in a mutual fund, you depend on the fund manager to make the right
decisions regarding the funds portfolio. If the manager does not perform as well as you had
hoped, you might not make as much money on your investments as you expected. Of course,
if you invest in Index Funds, you forego management risk, because these funds do not employ
managers.

51
1. ROLE OF INTERMEDIARIES IN THE INDIAN MUTUAL
FUND INDUSTRY
1.1 The mutual fund industry in India started in 1964 with the formation of the Unit
Trust of India (UTI). In 1987, other public sector institutions entered this business, and
it was in 1993 that the first of the private sector participants commenced its operations.

1.2 From the beginning, UTI and other mutual funds have relied extensively on
intermediaries to market their schemes to investors. It would be accurate to say that
without intermediaries, the mutual fund industry would not have achieved the depth and
breadth of coverage amongst investors that it enjoys today. Intermediaries have played a
pivotal and valuable role in popularizing the concept of mutual funds across
India. They make the forms available to clients, explain the schemes and provide
administrative and paperwork support to investors, making it easy and convenient for the
clients to invest.
1.3 Intermediation itself has undergone a change over the past few decades. While
individual agents provided the foundation for growth in the early years, institutional
agents, distribution companies and national brokers soon started to play an active role in
promoting mutual funds. Recently, banks, finance companies, secondary market
brokers and even post offices have also begun to market mutual funds to their
existing and potential client bases.

1.4 It is, thus clear that all types of intermediaries are required for the growth of the
industry, and their wellbeing, quality orientation and ways of doing business will
have a significant impact on how the mutual fund industry in India evolves in the future.

HOW SAFE ARE MUTUAL FUNDS

By investing in mutual funds, the risk is not totally removed but one will have the benefits of
diversification.
Any mutual fund is as safe or unsafe as the assets that it invests in.

52
NAV of growth funds mirrors the fluctuations of the share prices of its constituents.
Sometimes there is permanent erosion in value too.
Bond funds, in which the constituents are debt instruments, don't waver so much. Income
funds seldom face permanent value erosion.
Despite professional setups for both investment decisions and research, funds cannot be
immune to fluctuating market health. However, funds diversify the investment portfolio
substantially so that default in any single investment (in the case of an income fund) will not
affect the overall performance of a fund in a significant manner. In the event of default of a
part of the portfolio, an income fund is extremely unlikely to face erosion in face value.
Generally, mutual funds are not guaranteed by anybody. However, in the Indian context, some
of the mutual funds have floated "guaranteed" or "assured" return schemes that guarantee a
certain annual return or guarantee a buyback at a specified price after some time. Examples of
these include funds floated by the TI, Cannabis Mutual Fund, BSI Mutual Fund, etc. Many of
these funds have not earned returns that they promised and the asset management companies
of the respective mutual funds or their sponsors have made good their promises

Ground Rules of Mutual Fund Investing

Assess yourself: Self-assessment of ones needs; expectations and risk profile is of prime
importance failing which, one will make more mistakes in putting money in right places than
otherwise. One should identify the degree of risk bearing capacity one has and also clearly
state the expectations from the investments. Irrational expectations will only bring pain.
Try to understand where the money is going: It is important to identify the nature of
investment and to know if one is compatible with the investment. One can lose substantially if
one picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go
through the literature such as offer document and fact sheets that mutual fund companies
provide on their funds.

53
Don't rush in picking funds, think first: one first has to decide what he wants the money for
and it is this investment goal that should be the guiding light for all investments done. It is
thus important to know the risks associated with the fund and align it with the quantum of risk
one is willing to take. One should take a look at the portfolio of the funds for the purpose.
Excessive exposure to any specific sector should be avoided, as it will only add to the risk of
the entire portfolio. Mutual funds invest with a certain ideology such as the "Value Principle"
or "Growth Philosophy". Both have their share of critics but both philosophies work for
investors of different kinds. Identifying the proposed investment philosophy of the fund will
give an insight into the kind of risks that it shall be taking in future.
Invest. Dont speculate: A common investor is limited in the degree of risk that he is willing
to take. It is thus of key importance that there is thought given to the process of investment
and to the time horizon of the intended investment. One should abstain from speculating
which in other words would mean getting out of one fund and investing in another with the
intention of making quick money. One would do well to remember that nobody can perfectly
time the market so staying invested is the best option unless there are compelling reasons to
exit.

Dont put all the eggs in one basket: This old age adage is of utmost importance. No matter
what the risk profile of a person is, it is always advisable to diversify the risks associated. So
putting ones money in different asset classes is generally the best option as it averages the
risks in each category. Thus, even investors of equity should be judicious and invest some
portion of the investment in debt. Diversification even in any particular asset class (such as
equity, debt) is good. Not all fund managers have the same acumen of fund management and
with identification of the best man being a tough task, it is good to place money in the hands
of several fund managers. This might reduce the maximum return possible, but will also
reduce the risks.
Be regular: Investing should be a habit and not an exercise undertaken at ones wishes, if one
has to really benefit from them. As we said earlier, since it is extremely difficult to know when
to enter or exit the market, it is important to beat the market by being systematic.

54
The basic philosophy of Rupee cost averaging would suggest that if one invests regularly
through the ups and downs of the market, he would stand a better chance of generating more
returns than the market for the entire duration. The SIPs (Systematic Investment Plans) offered
by all funds helps in being systematic. All that one needs to do is to give post-dated cheques to
the fund and thereafter one will not be harried later. The Automatic investment Plans offered
by some funds goes a step further, as the amount can be directly/electronically transferred
from the account of the investor.
Do your homework:
It is important for all investors to research the avenues available to them irrespective of the
investor category they belong to. This is important because an informed investor is in a better
decision to make right decisions. Having identified the risks associated with the investment is
important and so one should try to know all aspects associated with it. Asking the
intermediaries is one of the ways to take care of the problem.
Find the right funds
Finding funds that do not charge much fees is of importance, as the fee charged ultimately
goes from the pocket of the investor. This is even more important for debt

funds as the returns from these funds are not much. Funds that charge more will reduce the
yield to the investor

Risks involved in investing in Mutual Funds

Mutual Funds do not provide assured returns. Their returns are linked to their
performance. They invest in shares, debentures, bonds etc. All these investments involve an
element of risk. The unit value may vary depending upon the performance of the company and
if a company defaults in payment of interest/principal on their debentures/bonds the
performance of the fund may get affected. Besides incase there is a sudden downturn in an
industry or the government comes up with new a regulation which affects a particular industry

55
or company the fund can again be adversely affected. All these factors influence the
performance of Mutual Funds.

Some of the Risk to which Mutual Funds are exposed to is given below:
Market risk

If the overall stock or bond markets fall on account of overall economic factors, the
value of stock or bond holdings in the fund's portfolio can drop, thereby impacting the fund
performance.

Non-market risk
Bad news about an individual company can pull down its stock price, which can negatively
affect fund holdings. This risk can be reduced by having a diversified portfolio that consists of
a wide variety of stocks drawn from different industries.

Interest rate risk

Bond prices and interest rates move in opposite directions. When interest rates rise, bond
prices fall and this decline in underlying securities affects the fund negatively.

Credit risk
Bonds are debt obligations. So when the funds invest in corporate bonds, they run the risk of
the corporate defaulting on their interest and principal payment obligations and when that risk
crystallizes, it leads to a fall in the value of the bond causing the NAV of the fund to take a
beating.

Performance Measures or Risk Measurement Of Mutual Funds

56
Mutual Fund industry today, with about 34 players and more than five hundred schemes, is
one of the most preferred investment avenues in India. However, with a plethora of schemes to
choose from, the retail investor faces problems in selecting funds. Factors such as investment
strategy and management style are qualitative, but the funds record is an important indicator
too. Though past performance alone can not be indicative of future performance, it is, frankly,
the only quantitative way to judge how good a fund is at present. Therefore, there is a need to
correctly assess the past performance of different mutual funds.
Worldwide, good mutual fund companies over are known by their AMCs and this fame is
directly linked to their superior stock selection skills. For mutual funds to grow, AMCs must
be held accountable for their selection of stocks. In other words, there must be some
performance indicator that will reveal the quality of stock selection of various AMCs.
Return alone should not be considered as the basis of measurement of the performance of a
mutual fund scheme, it should also include the risk taken by the fund manager because
different funds will have different levels of risk attached to them. Risk associated with a fund,
in a general, can be defined as variability or fluctuations in the returns generated by it. The
higher the fluctuations in the returns of a fund during a given period, higher will be the risk
associated with it. These fluctuations in the returns generated by a fund are resultant of two
guiding forces. First, general market fluctuations, which affect all the securities present in the
market, called market risk or systematic risk and second, fluctuations due to specific securities
present in the portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is
sum of these two and is measured in

terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is
measured in terms of Beta, which represents fluctuations in the NAV of the fund vis--vis
market. The more responsive the NAV of a mutual fund is to the changes in the market; higher
will be its beta. Beta is calculated by relating the returns on a mutual fund with the returns in
the market. While unsystematic risk can be diversified through investments in a number of
instruments, systematic risk can not. By using the risk return relationship, we try to assess the
competitive strength of the mutual funds vis--vis one another in a better way.

57
In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class.
The most important and widely used measures of performance are:
The Treynor Measure
The Sharpe Measure
Jenson Model
Fama Model
The Treynor Measure
Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above risk free
rate of return (generally taken to be the return on securities backed by the government, as there
is

no credit risk associated), during a given period and systematic risk associated with it (beta).
Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the fund.

All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative
Treynor's Index is an indication of unfavorable performance.

The Sharpe Measure

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a ratio
of returns generated by the fund over and above risk free rate of return and the total risk
associated with it. According to Sharpe, it is the total risk of the fund that the investors are
concerned about. So, the model evaluates funds on the basis of reward per unit of total risk.
Symbolically, it can be written as:

58
Sharpe Index (Si) = (Ri - Rf)/Si
Where, Si is standard deviation of the fund.
While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund,
a low and negative Sharpe Ratio is an indication of unfavorable performance.

Comparison of Sharpe and Treynor

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

Jenson Model
Jenson's model proposes another risk adjusted performance measure. This measure was
developed by Michael Jenson and is sometimes referred to as the Differential Return Method.
This measure involves evaluation of the returns that the fund has generated vs. the returns
actually expected out of the fund given the level of its systematic risk. The surplus between the
two returns is called Alpha, which measures the performance of a fund compared with the
actual returns over the period. Required return of a fund at agiven level of risk (Bi) can be
calculated as:
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it, alpha can be
obtained by subtracting required return from
the actual return of the fund.

59
Higher alpha represents superior performance of the fund and vice versa. Limitation of this
model is that it considers only systematic risk not the entire risk associated with the fund and
an ordinary investor can not mitigate unsystematic risk, as his knowledge of market is
primitive.

Fama Model
The Eugene Fama model is an extension of Jenson model. This model compares the
performance, measured in terms of returns, of a fund with the required return commensurate
with the total risk associated with it. The difference between these two is taken as a measure of
the performance of the fund and is called net selectivity.
The net selectivity represents the stock selection skill of the fund manager, as it is the excess
return over and above the return required to compensate for the total risk taken by the fund
manager. Higher value of which indicates that fund manager has earned returns well above the
return commensurate with the level of risk taken by him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)
Where, Sm is standard deviation of market returns. The net selectivity is then calculated by
subtracting this required return from the actual return of the fund.

Among the above performance measures, two models namely, Treynor measure and Jenson
model use systematic risk based on the premise that the unsystematic risk is diversifiable.
These models are suitable for large investors like institutional investors with high risk taking
capacities as they do not face paucity of funds and can invest in a number of options to dilute
some risks. For them, a portfolio can be spread across a number of stocks and sectors.
However, Sharpe measure and Fama model that consider the entire risk associated with fund
are suitable for small investors, as the ordinary investor lacks the necessary skill and resources
to diversified. Moreover, the selection of the fund on the basis of superior stock selection
ability of the fund manager will also help in safeguarding the money invested to a great extent.
The investment in funds that have generated big returns at higher levels of risks leaves the
money all the more prone to risks of all kinds that may exceed the individual investors' risk
appetite

60
 CHAPTER-8

Analysis of Interpretation

61
SOURCES OF INFORMATION

PRIMERY SOURCES OF INFORMATION

Officials and sales executives of SBI Mutual fund.
Official and executives of SBI
Discussion about mutual funds with existing and new investors

SECONDARY SOURCES OF INFORMATION

Offer documents of SBI and ICICI Prudential Mutual Funds.
Mutual Fund related magazines like Mutual Fund Review, Mutual Fund Insight by value
researchers, Outlook Money.
Fact Sheets of SBI Mutual Fund and ICICI Prudential Mutual Fund
Web sites, mainly www.mutualfundsindia.com, sbimf.com www.valueresearchersonline.com,
www.indiainfoline.com. icicipruamc.com
The analysis is done on the basis of past performance of the funds. But the past performance
may not be an indicator of future performance.

Performance of mutual funds is largely affected by environmental factors, which are beyond
the control of investors.

62
GILT FUND ANALYSIS
ABSOLUTE RETURNS
2ND 3RD
1ST YEAR YEAR YEAR
85.2064 125.881
NIFTY 9.715344 6 3
SBI 5.36 8.88 13.07
ICICI
PRU 8.09 11.34 16.65

140

120

100

80
NIFTY SBI ICICI PRU
60

40

20

0
1ST YEAR 2ND YEAR 3RD YEAR
ABSOLUTE RETURNS

63
The above diagram exhibits he absolute return from Gilts funds. These are the funds, which
are known for their high consistency. The consistent appraisal is assured in this type of funds.
This type of fund is suitable for retired people, dependants on income from fund invested.
It is clear from the diagram that the performance of ICICI Prudential is marginally higher than
SBI Mutual fund at different point of time Gilt Fund.

64
 ICICI
SBI PRU
BETA 0.0004 0.00035
1ST
YEAR -0.0001 0.00003
RISK 2ND
PREMIUM YEAR -0.0002 -0.002
3RD
YEAR -0.0002 -0.001

SHARPE INDEX
RANKING
ICICI
SBI PRU
1ST YEAR -0.86 0.03
2ND YEAR -1.51 -1.4
3RD YEAR -1.35 -0.91
AVERAGE -0.45 -0.76

0.2
0
-0.2
-0.4
-0.6 1ST YEAR 2ND YEAR 3RD YEAR Average Sharp Ratio
-0.8
-1
-1.2
-1.4
-1.6
SBI ICICI PRU

65
Sharpe Ratio, which measures risk free return from the fund, is favorable in case of ICICI
Prudential Fund when compared to SBI.Higher the Sharpe Ratio indicates higher safety. So
depending on Sharpe Ratio SBI is safer than SBI.
Standard Deviation of SBI is lower than ICICI Prudential. It indicates lower risk profile of
SBI when compared to ICICI Prudential.

Beta, which measures impact of market condition on funds, is lower in case of ICICI
Prudential when compared to SBI. It indicates lower risk profile of ICICI Prudential than SBI.

TREYNOR INDEX
RANKING

ICICI
SBI PRU
1ST YEAR -2.64 0.09
2ND YEAR -4.66 -4.99
3RD YEAR -4.15 -3.23
AVERAGE -3.82 -2.71

1
0
-1
-2 1ST YEAR 2ND YEAR 3RD YEAR Average Treynor Ratio

-3
-4
-5
SBI ICICI PRU

66
 1ST 2ND 3RD
ABSOLUTE RETURNS YEAR YEAR YEAR

9.71534 85.2064 125.881

NIFTY 4 6 3
SBI BALANCED FUND 25.96 91.85 172.5
ICICI PRU A measure of a
BALANCED FUND 23.16 77.69 148.41
portfolio's excess return per
unit of risk, equal to the portfolio's rate of return minus the risk-free rate of return, divided by
the portfolio's beta.

ICICI Prudential Mutual Fund is having a higher Treynor ratio of -2.71% as compared to SBI
Mutual Fund which is having a Treynor Ratio of -3.82%. A high Treynor Index indicates that
we're getting a good deal in terms of the return-to-risk ratio.

BALANCED FUND ANALYSIS

67
 200

150

100
NIFTY SBI ICICI PRU

50

0
1ST YEAR 2ND YEAR 3RD YEAR

The above Diagram exhibits the absolute return of SBI and ICICI Prudential Balance Funds.
Both the funds are fluctuating. But in many a point of time returns from SBI Balance Fund are
higher than ICICI Prudential Balance Fund
Balance funds are known for their consistent return and are suitable for the investors who can
bear moderate risk and investors seeking consistent return.

ICICI
SBI PRU
BETA 0.003 -0.0003
1ST
YEAR 0.05 -0.004
RISK 2ND
PREMIUM YEAR 0.23 -0.009
3RD
YEAR 0.09 -0.008

68
 ICICI
SHARPE RATIO SBI PRU
1ST YEAR 0.91 1.01
2ND YEAR 4.23 2.42
3RD YEAR 1.72 2.13
AVG 2.29 1.85

4.5
4
3.5
3
2.5
1ST YEAR 2ND YEAR 3RD YEAR Average Sharp Ratio
2
1.5
1
0.5
0
SBI ICICI PRU

Sharpe Ratio, which measures risk free return from the fund, is favorable in case of SBI
Mutual Fund when compared to ICICI Prudential Fund. Higher the Sharpe Ratio indicates
higher safety. So depending on Sharpe Ratio SBI Magnum Balanced Fund is safer than ICICI
Prudential Balanced Fund.
69
Standard Deviation of SBI Mutual Fund is higher than ICICI Prudential . It indicates lower
risk profile of ICICI Prudential Fund when compared to SBI Mutual Fund

Beta, which measures impact of market condition on funds on funds, is higher in case of SBI
Mutual Fund when compared to ICICI Prudential. It indicates lower risk profile of ICICI
Prudential Balanced Fund than SBI Magnum Balanced Fund.

70
 TREYNOR INDEX
RANKING
ICICI
SBI PRU
1ST YEAR 17.96 15.16
2ND YEAR 83.85 36.27
3RD YEAR 34.04 31.8
AVERAGE 34.95 27.74

90
80
70
60
50 1ST YEAR 2ND YEAR 3RD YEAR Average Treynor Ratio
40
30
20
10
0
SBI ICICI PRU

A measure of a portfolio's excess return per unit of risk, equal to the portfolio's rate of
return minus the risk-free rate of return, divided by the portfolio's beta.

71
SBI Balanced Fund is having a higher Treynor ratio of 34.95%. As Compared to ICICI
Prudential Balanced Fund having a Treynor Ratio of 27.74%. A high Treynor Index indicates
that we're getting a good deal in terms of the return-to-risk ratio.

72
EQUITY FUND ANALYSIS

1.ABSOLUTE RETURNS
1ST 2ND 3RD
AVERAGE RETURN YEAR YEAR YEAR
NIFTY 9.72 85.21 125.88
SBI MAGNUM
GLOBAL FUND 17.93 130.42 320.76
ICICI PRUDENTIAL
DYNAMIC 43.56 148.63 319.79

The above diagram exhibits the absolute return from Equity Funds for different point of time.
It is clear from the diagram that the returns from Equity Funds are very fluctuating. Only
moderate risk takers invest in this fund. ICICI Prudential Magnum Global Fund
comparatively has given more return compared to SBI Magnum Global Equity Fund.

ICICI
SBI PRU
BETA 0.08 0.01
1ST
YEAR 0.81 0.37
RISK 2ND
PREMIUM YEAR 7.16 0.68
3RD
YEAR 6.33 0.63

73
 SHARPE RATIO
SBI ICICI
GLOBAL PRU
1ST YEAR 0.07 1.4
2ND YEAR 0.58 2.58
3RD YEAR 0.51 2.4
AVG SHARPE
RATIO 0.387 2.127

2.5

1.5 1ST YEAR 2ND YEAR 3RD YEAR Av erage Sharp Ratio

0.5

0
SBI ICICI PRU

Sharpe Ratio, which measures risk free return from the fund, is favorable in case of
ICICIPrudential Dynamic Fund when compared to SBI Magnum Global Fund. Higher the
Sharpe Ratio indicates higher safety. So depending on Sharpe Ratio ICICI Prudential Dynamic
Fund is safer than SBI Magnum Global Fund.
Standard Deviation of SBI Mangnum Global Fund is higher than ICICI Prudential . It
indicates lower risk profile of ICICI Prudential Dynamic Fund when compared to SBI Mutual
Fund

74
Beta, which measures impact of market condition on funds on funds, is higher in case of SBI
Magnum Global Fund when compared to ICICI Prudential Dynamic Fund. It indicates lower
risk profile of ICICI Prudential Balanced Fund than SBI Magnum Balanced Fund.

75
 TREYNOR RATIO
ICICI
SBI PRU
1ST YEAR 9.93 35.56
2ND YEAR 87.39 65.19
3RD YEAR 77.21 60.84
AVG 58.177 53.87

100

80

60
1ST YEAR 2ND YEAR 3RD YEAR Average Treynor Ratio
40

20

0
SBI ICICI PRU

A measure of a portfolio's excess return per unit of risk, equal to the portfolio's rate of
return minus the risk-free rate of return, divided by the portfolio's beta. SBI Balanced Fund is
having a higher Treynor ratio of 58.17%. As Compared to ICICI Prudential Balanced Fund
having a Treynor Ratio of 53.87%. A high Treynor Index indicates that we're getting a good
76
deal in terms of the return-to-risk ratio.

PORTFOLIO COMPOSITION OF SBI GILT FUND

PORTFOLIO COMPOSITION OF BALANCED FUND

PORTFOLIO COMPOSITION
OF SBI Magnum Global Equity
Fund

77
 CHAPTER-9

FINDINGS & SUGGESTIONS

78
79
Balanced Funds
Returns from ICICI Prudential Balanced Fund for the past one year period is 23.16% and
returns from SBI Magnum Balanced Fund is higher at 25.96% for the same period
SBI Magnum Balance Fund is more consistently increasing than ICICI Balanced Funds and
its standard deviation is higher than ICICI Prudential Balanced Fund. SBI Magnum Balanced
Fun has standard deviation of 0.20% and ICICI Prudential Balanced Fund has standard
deviation of 0.15%.
Sharpe Ratio is comparatively favorable in case of ICICI Prudential Balance Fund. Treynor
ratio is comparatively favourable in case of SBI Magnum Balance Fund.Sharpe Ratio and
Treynor Ratio of SBI Magnum Balanced fund are 0.91, 34.95 respectively. Sharpe Ratio and
Treynor Ratio of ICICI Prudential Balanced Fund are 1.01, and 27.74% respectively.
Beta coefficient of ICICI Prudential Balanced Fund is -0.0003, which is lower than SBI
Magnum Balance Funds Beta coefficient of 0.003.

GILT FUNDS

The present NAV of SBI Magnum Gilt and ICICI Prudential are Rs. Rs.17.26 and Rs.22.62
respectively. Returns for the past one-year period for SBI Magnum Gilt Fund is 5.36%, which
is lower than ICICI Prudential Gilt Fund Returns 8.09%.
SBI Magnum Gilt Funds NAV is more consistently increasing than ICICI Prudential Gilt
Fund. Standard Deviation of SBI Magnum Gilt Fund and ICICI Prudential Gilt Fund is 0.35
and 0.31 respectively.
Sharpe Ratio is comparatively favorable in case of SBI Magnum Gilt Fund. ICICI Prudential
is having a good treynor ratio compared to SBI Magnum Fund. Sharpe Ratio and Treynor
Ratio of SBI Magnum Gilt Fund are -0.45, and -3.82. Sharpe Ratio and Treynor Ratio of ICICI
Prudential are -0.76 and -2.71 respectively.
Beta coefficient of SBI Magnum Gilt Fund 0.0004 which is lower than ICICI Prudential Gilt
Fund Beta coefficient of 0.00035

80
EQUITY FUND

NAV of SBI Magnum global Fund is Rs.48.48, and NAV of ICICI Prudential Dynamic Fund
is Rs.67.18.
Returns from SBI Magnum global Fund Fund are 17.93% and ICICI Prudential Dynamic
Fund returns are 43.56% for the past one year.
Returns and NAV of both the funds are very much fluctuating.
Sharpe Ratio and Treynor Ratio are comparatively favorable in case of ICICI Prudential
Dynamic Fund. Sharpe ratio and treynor ratio of SBI Mutual fund are 0.066 and 9.93
respectively. Sharpe ratio and treynor ratio of ICICI Prudential Dynamic fund are 1.40 and
35.5 respectively
Standard deviation of SBI Magnum Global Fund is 1.51 and ICICI Prudential has standard
deviation of 0.25
SUGGESTIONS

BALANCED FUNDS
It is favorable for the SBI Mutual fund to promote more of SBI Magnum Balanced Fund over
ICICI Prudential Balance Fund, because SBI Magnum balanced fund is giving consistent
returns since inception.

Supporting analysis for the above statement:

Returns of SBI Magnum Balanced Fund are marginally higher than ICICI Prudential Balance
Fund. Returns from SBI Magnum Balanced Fund for the past one-year period were 25.96%
and returns from ICICI Prudential Balanced Fund are lower at 23.16% for the same period.
Even the standard deviation of SBI Magnum Balanced Fund is higher than ICICIC Prudential
Balanced Funds Standard Deviation. SBI Magnum Balanced Fund has a standard deviation
of 0.20 where as ICICI Prudential Balanced Fund has standard deviation of 0.15. It shows
justified returns against risk in case of SBI Magnum Balance Fund, the high fluctuation,
higher the returns for SBI Magnum Balance Fund.

81
The Treynor ratio of SBI Magnum Balanced Fund is also high as compared to ICICI
Prudential Balanced Fund. The Treynor Ratio of SBI Magnum Balanced Fund and ICICI
Prudential Balanced Fund are 34.95 and 27.74 respectively.

GILT FUNDS
Its better to invest more in High yield Government Securities than investing in short term
Deposits with lower rate of interest

Supporting analysis for the above statement:

As everyone know the rate of return on short term deposits is obviously low however the only
advantage is the liquidity. It would, therefore, necessary to invest higher percentage of corpus
into Government Gilt Edged securities. With a view to maximize return on funds the fund may
consider to invest in certificate of deposits. The Portfolio of SBI Magnum global is showing
that 50% of the corpus is invested in short term deposits, the percentage should be brought
down, and invest more and more in High yield government securities.

EQUITY FUND
As the Portfolio of the SBI Magnum Global is holding More of cash balance, The cash balance
should be reduced and invest same in Mid Cap and Small Cap.

Supporting analysis for the above statement:

As the portfolio of SBI Magnum Global Fund is showing that lot cash is idle i.e 30% only
70% of the corpus is utilized. Portfolio composition of SBI Magnum Global is 11% in large
cap, 52% in small cap, 9% in small cap and rest of the 30% is cash. To yield more the cash
balance should be reduced and invest the same in mid cap and small cap which yield abnormal
returns.

82
 CHAPTER-10

CONCLUSION

83
 CONCLUSION OF BANKS

Banks provide security and convenience for managing your money and sometimes
allow you to make money by earning interest. Convenience and fees are two of the
most important things to consider when choosing a bank.

Writing and depositing checks are perhaps the most fundamental ways to move money
in and out of a checking account, but advancements in technology have added ATM
and debit card transactions and ACH transfers to the mix.

All banks have rules about how long it takes to access your deposits, how many debit
card transactions you're allowed in a day, and how much cash you can withdraw from
an ATM. Access to the balance in your checking account can also be limited by
businesses that place holds on your funds.

Debit cards provide easy access to the cash in your account, but can cause you to rack
up fees if you're not careful.

While debit cards encourage more responsible spending than credit cards, they do not
offer the same protection or perks to consumers.

Regularly balancing your checkbook or developing another method to stay on top of

your account balance is essential to successfully managing your checking account and
avoiding fees and bounced checks.

If you have more money than you need to manage your day-to-day expenses, banks
offer a variety of options for saving, including money market accounts, CDs, high-
interest online savings accounts and basic savings accounts.

To protect your money from electronic theft, identity theft, and other forms of fraud,
it's important to implement basic precautions such as shredding account statements,
having complex passwords and only doing online banking through secure internet
connections.
84
85
 BIBLIOGRAPHY

AMFI Work Book

Mutual Fund review by ICICI Bank Ltd.

Mutual Fund Insight by Value Researcher.

Marketing Management by Philip Kotler

www.mutualfundsindia.com

www.indiainfoline.com

www.valueresearcersonline.com

www.icicidirect.com

www.amfi.com

www.sbimf.com

86