A

Project Report On

“Portfolio Management and Mutual Fund Analysis

for SBI Mutual fund & Securities Ltd.”
Submitted to

Rashtrasant Tukdoji Maharaj Nagpur University

Partial fulfillment of
Degree of Master of Business Management
For the academic year 2016-2017
Specialization

FINANCIAL MANAGEMENT

Submitted By

MIS. Reshma Y. Kamatkar

Under the guidance of

“Backward Class Youth Relief Committee’s”

KDK COLLEGE OF ENGINEERING & MANAGEMENT

UMRER DIST:- NAGPUR
NAGPUR -441204 [M.S.]

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 B.C.Y.R.C.’s

KDK COLLEGE OF ENGINEERING, UMRER

DEPARTMENT OF M.B.A

Certificate

Certified that the project report entitled “Portfolio Management and Mutual Fund Analysis for SBI
Mutual fund & Securities Ltd.” is a bonafied work done under my guidance , by Mis.Reshma
Yashwant Kamatkar and is submitted to Rashtrasant Tukdoji Maharaj Nagpur University,
Nagpur in partial fulfillment of the requirements for the award of degree of Master of Business
Administration during the session 2016-17.

Project Guide Professor, Co-coordinator

Prof. Hitesh M. Dongardeo

KDK COLLEGE., Umred
Dist.- Nagpur

Dr. Atul C.Waghmare

Principal
KDK COLLEGE.,umre
Dist.-Nagpur

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 Acknowledgements

I take this opportunity with a great pleasure to express our sincere regards and deep
sense of gratitude to our guid for his valuable guidance, Practical suggestions and
encouragement to bring about the completion of project.

It is through his proficient knowledge, valuable guidance and support that this project
report has been set right.

I also thankful to all faculty of M.B.A. Department of KDK COLLEGE Umrer who
have alwase co-operated while carrying out the project work.

I also express gratitude towards Prof. Hitesh M. Dongardeo, co-ordinate, dept of

M.B.A, and Dr. Atul C. Waghmare, Principal KDK COLLEGE Umrer for their encouragement
and timely suggestions.

Finally, I would like to thanks our well wisher, critics who helped directly or indirectly
in the compilation of this work.

Reshma Y. Kamatkar

MBA IV Sem., KDK Collage

of engineering & MBA

umrer, Nagpur.

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 DECLARATION

I Reshma Y. Kamatkar hereby declare that the Project report submitted for R.T.M.N.U. Nagpur,
Examination of Summer M.B.A. SEM IV project entitled

“Portfolio Management and Mutual Fund Analysis

for SBI Mutual fund & Securities Ltd.”
is the outcome of my own preliminary analytical work based on personal study and has not been
submitted by me previously for award of any degree or diploma to this university or another university.

Place:-

Reshma Y. Kamatkar

Date: - / / 2016

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 INDEX

Sr. No. CONTENTS Pg. No.

1 6
EXECUTIVE SUMMARY
2 7
COMPANY PROFILE
3 16
OBJECTIVE
4 17
THEREOTICAL BACKGROUND
5 27
RESEARCH METHODOLOGY
6 28
PRODUCT PROFILE
7 29
DATA ANALYSIS
8 40
IDEAL PORTFOLIO
9 42
OBSERVATION AND FINDINGS
10 46
LIMITATIONS
11 47
CONCLUSION
12 48
BIBLIOGRAPHY

5
 INTRODUCTION
An Overview

The mutual fund industry in India began with the setting up of the Unit Trust of India (UTI) in
1963 by the Government of India. Till the year 2000, UTI has grown to be a dominant player in the
industry with the assets of over Rs. 76,547 Cr 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.

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 the joint sectors.

Growth of Mutual Funds

The Indian Mutual Fund has passed through three phases. The first phase was between 1964 and
1987 and the only player was the Unit Trust of India, which had a total assets of Rs. 6700 crores at the
end of 1988. The second phase is between 1987 and 1993 in which period 8 funds were established (6
by banks and one each by LIC and GIC). The total assets under management had grown to Rs. 61028
crores at the end of 1994 and the number of schemes were 167.

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 History of the Indian Mutual Fund Industry

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

First Phase – 1964-87 (UTI MONOPOLY)

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

Second Phase – 1987-1993 (Entry of Public Sector Funds)

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

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 Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which
the first Mutual Fund 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.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)
Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up
funds in India and also the industry has witnessed
Several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total
assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management
was way ahead of other mutual funds.

Fourth Phase – Since February 2003

In February 2003,following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two
separate entities.One is the specified Undertaking of the Unit trust of India with assets under
management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64
scheme, assured return and certain other schemes.The Specified Undertaking of Unit Trust of India,
function under an administrator and under the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations.The second is the UTI Mutual Fund Ltd, sponsored
by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000
crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the
SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector
funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end
of June 30, 2003, there were 31 funds, which manage assets of Rs. 104762 crores under 376 schemes.

8
Trend in Mutual Funds Industry

The Indian Mutual fund industry, despite all that has been said about it is still
in a nascent stage and has extremely bright future ahead. The industry is still one-tenth size of the
banking deposits in the country.

The private sector mutual fund industry in its resent ‘avatar’ is barely 7 years
old. The total asset under management over the past 4 to 5 tears has almost remain stagnant around the
Rs 100, 000 crore mark.

This has put a question mark in front of the claims that mutual funds
are growing part of the financial savings and planning industry in India. It holds scope for growth. In
India this industry began with the setting up of the Unit Trust Of India (UTI) in 1964 by the government
of India in order to mobiles small saving. During the past 37 years, UTI has grown to be a dominant
player in the industry with assets with over Rs 76,547 Cr as of March 2000. However, trouble hit UTI
has lost its dominant position in the industry and the asset under management has slipped drastically to
Rs 46,396 Cr.

Private sector mutual funds, which were permitted along with foreign partners in 1993, now
enjoy a dominant position in the country. Kothari Pioneer Mutual fund was the first fund to be
established in the private sector with foreign fund. The private sector now controls around Rs 45,818 Cr
assets under management, almost half the size of the industry.

The mutual fund industry has become a fastest growing sector in the country’s
capital and financial market with an average compounded growth rate of 20 percent over the past five
years. This is despite increasing competition with more than 30 asset management companies for
investor’s money. As on June 2002, the industry has Rs 100,703 Cr asset under management spread
across 36 funds with more than 390 schemes.

Exchange Board of India (SEBI) came out with comprehensive regulation in 1993, which defined the
structure of the mutual fund and asset management, Companies for the first time. “The industry is in the
process of evolving into a bigger and better investment medium for all market segment”, Say Kavita
Hurry, CEO ING Investment Management, further, currently, ING Investments manages around Rs.364
Cr as on June 2002.

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 Drastic Transformation:

The industry is undergoing a transformation and is witnessing large number of mergers,

acquisitions and takeovers in the schemes and asset management companies. Mutual fund products are
competing with the banks deposits, Reserves Banks of India (RBI) bonds, pension funds and post offices
schemes that provide not only guaranteed return but also tax-free returns. However, mutual funds are
unable to provide assured return since they are investing in financial markets and returns from them are,
by definition, uncertain. These transformation benefiting the investor friendly open-ended schemes,
increasing the range of funds to choose from, enhanced transparency and improvement regulation.

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Market Trends:

A lone UTI with just one scheme in 1964 now competes with as many as 400 odd
products and 34 players in the market. In spite of the stiff competition and losing market share, UTI still
remains a formidable force to reckon with.

Last six years have been the most turbulent as well as exiting ones for the industry. New players
have come in, while others have decided to close shop by either selling off or merging with others.
Product innovation is now passé with the game shifting to performance delivery in fund management as
well as service. Those directly associated with the fund management industry like distributors, registrars
and transfer agents, and even the regulators have become more mature and responsible.

The industry is also having a profound impact on financial markets. While UTI has always been
a dominant player on the bourses as well as the debt markets, the new generations of private funds,
which have gained substantial mass, are now seen flexing their muscles. Fund managers by their
selection criteria for stocks have forced corporate governance on the industry. By rewarding honest and
transparent management with higher valuations, a system of risk-reward has been created where the
corporate sector is more transparent then before.

Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and
technology sector. Funds performances are improving. Funds collection, which averaged at less than
Rs100 billion per annum over five-year period spanning 1993-98 doubled to Rs210 billion in 1998-99.
In the current year mobilization till now have exceeded Rs300 billion. Total collection for the current
financial year ending March 2000 is expected to reach Rs450 billion.

What is particularly noteworthy is that bulk of the mobilization has been by the private sector
mutual funds rather than public sector mutual funds. Indeed private MFs saw a net inflow of Rs. 7819.34
Cr during the first nine months of the year as against a net inflow of Rs. 604.40 Cr in the case of public
sector funds.

Mutual funds are now also competing with commercial banks in the race for retail investor’s
savings and corporate float money. The power shift towards mutual funds has become obvious. The
coming few years will show that the traditional saving avenues are losing out in the current scenario.
Many investors are realizing that investments in savings accounts are as good as locking up their
deposits in a closet. The fund mobilization trend by mutual funds in the current year indicates that
money is going to mutual funds in a big way. The collection in the first half of the financial year 1999-
2000 matches the whole of 1998-99.

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 DEFINITION OF MUTUAL FUND
The securities and Exchange Board of India (Mutual Funds) Regulation, 1993 defines a
mutual fund “a fund established in the form of a trust by a sponsor, to raise monies by the trustees
through the sale of units to the, public, under one or more schemes, for investing in securities in
accordance with these regulations”

TYPES OF MUTUAL FUNDS

Open-ended Funds

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

Closed-ended Funds

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

Interval Funds

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

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 INVESTMENT OBJECTIVE

Equity Funds Dividend

The aim of Equity Funds Dividend is to provide capital appreciation over the medium
to long- term. Such schemes normally invest a majority of their corpus in equities. It has been proven
that returns from stocks, have outperformed most other kind of investments held over the long term.

Equity Funds Growth

The aim of Equity Funds growth is to provide capital appreciation over the medium
to long- term. Such schemes normally invest a majority of their corpus in equities. It has been proven
that returns from stocks, have outperformed most other kind of investments held over the long term.

Balanced Funds Dividend

The aim of balanced funds dividend is to provide both dividend and regular
income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed
income securities in the proportion indicated in their offer documents.

Balanced Funds Growth

The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income securities in
the proportion indicated in their offer documents.

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 OTHER SCHEMES:
Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian Income
Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made
in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the
Income Tax Act, 1961.

SPECIAL SCHEMES:

Industry Specific Schemes

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

Index Schemes

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

Spectral Scheme

Spectral Funds are those, which invest exclusively in a specified industry or a group of industries
or various segments such as 'A' Group shares or initial public offerings.

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 ASSET MANAGEMENT COMPANIES
Asset management companies are the companies involved in the mutual fund
business. These companies manage all the transaction of mutual funds from the beginning to the end.

 UTI Asset management company (P) ltd

 Bank sponsored
 BoB asset management company ltd
 Can bank investment management services ltd
 PNB asset management company ltd
 SBI funds management company ltd
 Institutions
 GIC asset management company ltd
 IDBI principal asset management co ltd
 IL&FS asset management co ltd
 Jeevan bima sahayoge asset management co ltd
 Private sector
1. Indian
 Benchmark asset management co ltd
 Cholamandalam asset management co ltd
 Escort asset management co ltd
 JM capital management ltd
 Kotak Mahindra asset management ltd
 Sundaram asset management co ltd
 Reliance capital asset management ltd
2. Joint ventures - Pre dominantly Indian
 Burlap sun life insurance management co ltd
 Credit capital asset management co ltd
 DSP Merrill Lynch fund manager pvt ltd
 First Indian management co ltd
 Tata TD water house asset management pvt ltd
 HDFC asset management pvt ltd
3. Joint ventures - Pre dominantly Foreign
 Alliance capital asset management (India) pvt ltd
 Deut she asset management (India) pvt ltd
 Dundee investment management research pvt ltd
 HSBC asset management (India) pvt ltd
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 UTI (Unit Trust of India)
UTI Asset management company private limited, established in Jan 14 2003, manages
the UTI mutual fund with the support of UTI Trustee Company private limited. UTI asset management
company presently manages corpus of over Rs 20000 Cr. The sponsor of UTI mutual funds are Bank of
Board (BOB) Punjab national Bank (PNB), State Bank of India (SBI) and life insurance Corporation of
India (LOIC). The schemes of UTI mutual fund are liquid funds, asset management funds, index funds,
equity funds and balance Fund.

SBI (State Bank of India) Mutual Fund:

SBI mutual funds is the first Bank sponsored mutual fund to lunch offshore fund
,the India magnum fund with a corpus of Rs 225cr. Approximately. Today it is the largest Bank
sponsored mutual funds in India They have already launched 35 schemes out of which 15 have already
yielded handsome returns to investors. SBI mutual fund has more than RS 5500 cores as AUM. Now it
has an investor base over 8lakhs spread over 18 schemes.

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 Financial planning

Financial planning is the key to a secure future. Every individual must take it upon himself to chalk out
his goals and accordingly back it up with a sound financial plan.

No matter which stage of life he is in –

A young adult (between 25 and 35 years),

Middle aged (between 35 and 55 years) or

A retired individual (55 and beyond)

- It is imperative to have the right financial portfolio which combines all the asset classes that an
individual can invest in. As a person ages, his responsibilities increase and so do his expenses with the
rise in the number of dependants.

For instance

A young adult would not have as many responsibilities when he starts out with a career and begins
investing, as he would when he raises a family after marriage. In such situations, making apt investments
would ease the financial burden on the individual. Of the different investment options available to a
retail investor, mutual funds are quite advantageous over others.

The pooled investment avenue gives an individual the benefit of investing in equities, debt, and liquid
funds. An individual cannot randomly invest in mutual funds. Depending on the financial goals and
investment objectives of the investor, a particular type of fund that will suit him must be selected.

17
A risk-averse individual will prefer equity schemes to debt while a person with a short- term horizon will
prefer liquid funds to equity schemes. An individual with growth and capital appreciation as his
investment objective would look at equity schemes as compared to others. Age plays an important role
in getting the right balance between the different mutual fund schemes. A sweet and simple thumb rule
to be followed by every individual investor in choosing the right mix of equity and debt is to calculate it
on the basis of the age of the investor.

When calculating the debt to equity allocation, the age of the investor should be subtracted from 100.

For example if the investor is 30 years old, then 30 should be subtracted from 100.

This gives 70 as the remainder. This illustrates that the portfolio of the 30-year-old investor should
comprise of 30% debt and fixed instruments and 70% of equities and equity-related products.

A simple logic to justify this is that as an individual grows older his risk-taking capacity reduces as
compared to what it would be in his younger days. So debt and fixed instruments are more sought after.
As the age increases, so does the percentage of debt funds.

Jacob's Four Step Programme is also widely used in selecting the right fund and taking the basis for a
model portfolio. Though the model portfolio differs from person to person, taking this as the basis
simplifies the process of Mutual Fund investing.

According to Jacob's Four Step Programme every investor must:

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 Develop long-term goals:
Once the goals are decided, separating long-term goals from the short-term ones should be next on the
agenda. With long-term goals in place, planning the finances to achieve them becomes easier. He must
be realistic about the kind of returns an asset class can offer as the returns differ from time to time
depending on the market scenario and other factors affecting it. Determine the asset allocation: Be it
equities, debt or money market instruments, the right mix or allocation can be done depending on the
income of the individual investor and his risk-taking capacity. The goals also help in deciding the right
investment allocation. Once the investment advisor under- stands what kind of an investor he is dealing
with and knows his investment goals, he will be able to offer proper advice on asset allocation.

Therefore, understanding the needs of the investor - income, growth of capital or liquidity - is equally
important. Determine sector distribution: An advisor needs to plan the right mix of investments, one that
differs from individual to individual. Sector distribution should be done in accordance with the long-
term goals to meet the needs of the investor. If the investor is looking at easy liquidity then money
market schemes should be allocated more than equity or debt funds. If capital growth is aiming for then
the proportion of equity funds should be more than the other options. Debt funds are suitable for an
individual with income needs. This is how sector distribution of mutual funds can be done.

19
 Select specific fund managers and their schemes:

Once the long-term goals are decided, assets allocated and sector distribution done, the next obvious
thing to do is to decide on the fund managers and the schemes in which investments are to be made.
With an array of choices at his disposal, the investor needs to choose a star performer, which has given
maximum returns. The basic criteria that holds true for any mutual fund scheme selection is the fund
size, history of the fund house and the fund manager, schemes' investment objective, portfolio
characteristics to name a few. While selecting an equity scheme factors like dividend, cash position of
the fund, beta of the scheme, etc come into play. For debt or income funds, scheme selection can be done
on the basis of past returns, tax implications, yield, average maturity, etc. A money market or liquid fund
can be selected on the basis of yields, costs and portfolio quality, which is very important as investment
in such funds is for a short-term horizon.

Jacob's Model Portfolio:

This model is used to portray the model portfolio for investors according to the different stages in their
life cycle. As the investor ages, his financial goals increase, and the number of dependents also grow. It
is thus very essential to keep a constant watch and make changes accordingly to the existing portfolio of
the investor.

Young Unmarried Professionals:

50% in aggressive equity funds 25% in high yield bond funds, growth funds and income funds 25% in
conservative money market funds.

Young Couple With Two Incomes And Two Children:

35% in municipal bond funds 30% in aggressive equity funds 25% in high yield bond funds and long-
term growth funds10% in money market funds.

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 Older Couple with Single Income:
35% in long-term municipal funds 30% in short-term municipal funds 25% in moderately aggressive
equity funds 10% in emerging growth equity funds.

Recently Retired Couple:

40% in money market funds 35% in equity funds for capital preservation or income 25% in moderately
aggressive equity funds for modest capital growth.

As Municipal Funds are not offered in India, one can invest in Bank Fixed Deposits, Government Bonds
and other similar Debt instruments. It is never too late to begin investing in mutual funds. But when an
investor actually gets to the act of investing he must bear in mind the implications that different schemes
have on his financial plan in different stages of his life. If an individual is not able to make a financial
plan by himself, it is advisable to take help of a financial planner as it will make the entire investment
process a lot simpler and quicker.

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 COMPANY PROFILE

STATE BANK OF INDIA - MUTUAL FUND

A partner for life

SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country with an investor
base of over 4.6 million. With over 20 years of rich experience in fund management, SBI MF
brings forward its expertise in consistently delivering value to its investors.

Proven Skills in wealth generation:

SBI Mutual Fund is India‟s 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 - India‟s 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 Société General Asset
Management, one of the world‟s leading fund management companies that manages over US$
500 Billion worldwide.

Exploiting expertise, compounding growth:

In twenty years of operation, the fund has launched 38 schemes and successfully redeemed
fifteen of them. In the process it has rewarded it‟s investors handsomely with consistently high
returns.

A total of over 5.4 million investors have reposed their faith in the wealth generation expertise
of the Mutual Fund.

22
Schemes of the Mutual fund have consistently outperformed benchmark indices and have
emerged as the preferred investment for millions of investors and HNI‟s.

Today, the fund manages over Rs. 51,461 crores of assets and has a diverse profile of investors
actively parking their investments across 36 active schemes.

The fund serves this vast family of investors by reaching out to them through network of over
130 points of acceptance, 28 investor service centers, 46 investor service desks and 56 district
organizers.

SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent India
Opportunities Fund.

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

Fund house expertise:

The investment environment is becoming increasingly complex. Innumerable parameters need

to be factored in to generate a clear understanding of market movement and performance in
the near and long term future.

At SBIMF, we devote considerable resources to gain, maintain and sustain our profitable
insights into market movements. We consistently push the envelope to ensure our investors
get the maximum benefits year after year.

Research - the backbone of our Performance

Our expert team of experienced and market savvy researchers prepare comprehensive
analytical and informative reports on diverse sectors and identify stocks that promise high
performance in the future.

This team works in tandem with a compliance and risk-monitoring department, which ensures
minimization of operational risks while protecting the interests of the investors.

Quite naturally many of our equity funds have delivered consistent returns to investors and
have repeatedly out performed benchmark indices by wide margins.
23
 Risk Factors

Mutual Funds and Securities Investments are subject to market risks and there is no assurance
or guarantee that the objective of scheme(s)/plan(s) will be achieved. As with any other
investment in securities, the NAV of the Magnums/Units issued under the scheme(s)/plan(s)
can go up or down depending on the factors and forces affecting the securities market. Past
performance of the Sponsor/AMC/Mutual Fund/Scheme(s)/Plan(s) and their affiliates do not
indicate the future performance of the scheme(s) of the Mutual Fund.

Statutory details:

SBI Mutual Fund has been set up as a trust under the Indian Trusts Act, 1882. State Bank of
India („SBI‟), the sponsor is not responsible or liable for any loss resulting from the operation of
the schemes beyond the initial contribution made by it of an amount of Rs. 5 lakhs towards
setting up of the mutual fund.

Trustee Company: SBI Mutual Fund Trustee Company Pvt. Ltd. Please read the offer document
of the respective schemes carefully before investing

24
 AWARDS AND ACHIEVEMENTS
SBI- MUTUAL FUND has been performing excellently since its inception. The fund has received
lot of appreciation for its performance from the mutual fund industry. It has been awarded by
ICRA on line award 8 times, CNBC- TV 18 CRISIL 4 AWARDS, the Lipper award (year 05-06) and
most recently the CNBC TV 18 Crisil Mutual Fund Award of the year 2007 and 5 award.

2012 ICRA Mutual Fund Awards 2012 For Various Schemes

2011 Readers Digest Awards 2011 For Trusted Brand in Fund

Management category

ICRA Mutual Fund Awards 2011 For Magnum Income Fund -

Floating Rate Plan - LongTerm Plan

2010 ICRA Mutual Fund Awards 2010 For Magnum Global Fund

2009 ICRA Mutual Funds Awards 2009 For Magnum Tax Gain Scheme
1993

The Lipper India Fund Awards 2009 For Various Schemes

2008 Outlook Money NDTV Profit Awards 2008

The Lipper India Fund Awards 2008 For Magnum Balanced Fund –
Dividend

ICRA Mutual Fund Awards 2008 For Various Schemes

2007 Outlook Money NDTV Profit Awards 2007

CNBC Awaaz Consumer Awards 2007

The Lipper India Fund Awards 2007 For Various Schemes

ICRA Mutual Funds Awards 2007 For Various Schemes

CNBC TV18 - CRISIL Mutual Fund of the Year Award 2007 for
various schemes.

25
 RISK MANAGEMENT TEAM

The Risk Management unit is a separate division within the organization headed by the Chief
Risk Officer (CRO). A Risk Management Committee, comprising the MD, Deputy CEO, CRO,
COO, CIO and the CMO meets on a regular basis to manage risk within the organization.

The CRO is responsible for risk management over all the functions within the organization
including Investments, Marketing, Operations, etc. Currently, the CRO is an experienced
investment professional and is assisted by a two-member team, one being an investment
Professional with an MBA in Finance and the other being an investment professional deputed
from SGAM.

26
 SBI- MUTUAL FUND PRODUCTS:


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.

27
1) Equity / Growth Fund
 SBI Magnum Equity Fund
 SBI Magnum Global Fund
 SBI BlueChip Fund
 SBI Magnum Multicap Fund
 SBI Magnum Multipier Fund
 SBI Small and Midcap Fund
 SBI Magnum Midcap Fund
 SBI Emerging Businesses Fund
2) Sectoral Funds
 SBI Contra Fund
 SBI FMCG Fund
 SBI IT Fund
 SBI Pharma Fund
 SBI Banking & Financial Services Fund
3) Thematic Funds
 SBI Magnum COMMA Fund
 SBI Infrastructure Fund
 SBI PSU Fund
4) ELSS Fund
 SBI Magnum Tax gain Scheme 1993
 SBI Tax Advantage Fund – Series I
 SBI Tax Advantage Fund – Series II
 SBI Tax Advantage Fund – Series III
5) Index Fund
 SBI Nifty Index Fund
6) Market Neutral Strategy
 SBI Arbitrage Opportunities Fund

28

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.

1) SBI Saving Fund

2) SBI Corporate Bond Fund
3) SBI Magnum Income Fund
4) SBI Treasury Advantage Fund
5) SBI Dynamic Bond Fund
6) SBI Magnum Gilt Fund – Short Term Plan
7) SBI Magnum Gilt Fund – Long Term Plan
8) SBI Magnum Term Debt Fund
9) SBI Ultra Short Term Debt Fund









29



HYBRID SCHEMES

These funds caters to both the investment needs of the prospective investors –
namely fixed income as well as growth orientation. Therefore, investment target of these mutual
funds are judicial mix of both the fixed income securities like bonds and debentures and also
sound equity scrips. In fact, these funds utilize the concept of balanced investment management.
These funds also known as “ balanced funds”.

1) SBI Magnum Children’s Benefit Plan

2) SBI Magnum Balanced Fund
3) SBI Regular Saving Fund
4) SBI Magnum Monthly Income Plan
5) SBI Magnum Monthly Income Plan – Floater
6) SBI Dynamic Assets Allocation Fund

30
 SBI MUTUAL FUND

MUTUAL FUND

EQUITY FUND &

HYBRID SCHEME
SCHEME

DEBT/INCOME
FUND & SCHEME

Equity Fund & Scheme:-

The primary objective of the equity asset class is to provide capital growth / appreciation by
investing in the equity and equity related instruments of companies over medium to long term.

For example:-

31
SBI Magnum Equity Fund:-

SBI Magnum Equity Fund seeks capital appreciation through investment in diversified portfolio
of equities of high growth companies, along with liquidity of an open ended scheme.

This product is suitable for investors who are seeking:-

1) Long term investment

2) Investment in high growth companies along with the liquidity of an open ended scheme through
investment primarily in equities.
Objectives:-

To provide the investor long-term capital appreciation by investing in high growth companies along with the
liquidity of an open – ended scheme through investments primarily in equities and the balance in debt and
money market instrument .

Assets Allocation:-

Instrument Normal Allocation (% of Net Risk Profile

Assets)
Equity and related instruments Not less than 70% Medium to high
Debt instrument Not more than 30% Low to medium
Securities Debt Not more than 10% of the Medium to high
investment in debt instrument
Money market instrument Balance Low

Date of inception:- 01/01/1991

Minimum Application:- Rs. 5000/- & in multiples of Rs. 1.

Entry Load:- Not allowed

Exit Load:- 1) For exit within 1 year from the date of allotment – 1%

2) For exit after 1 year from the date of allotment - Nil

SIP:- 1) Monthly:- Minimum Rs. 1000/- & in multiples of 1 thereafter for

maximum six months (or) minimum Rs. 500/- & in multiples of 1 thereafter for minimum One year.

2) Quarterly:- Minimum Rs.1500/- & in multiples of 1 thereafter for

minimum One year.

SWP:- Rs. 500/- per month or per quarter.

32
 NAV (Net Assets Value)

Plan Nav Date

SBI magnum Equity Fund – Regular 29.9697
Plan - Dividend
SBI Magnum Equity Fund – Regular 69.2468
Plan - Growth
SBI Magnum Equity Fund – Direct 34.9292
Plan – Dividend
SBI Magnum Equity Fund – Direct 70.7135
Plan - Growth

33
 Debt / Income Fund & Scheme:-
The schemes in this assets class generally invest in fixed income securities such as bonds,
corporate debenture, government securities (gilts), money market instrument, etc. and provide regular
and steady income to investors.

For example:-

SBI Saving Fund:-

The scheme endeavour to generate returns by maintaining a superior quality credit portfolio but with
limited duration risk. Investment in corporate bonds and debenture in the floating rate short term plan
will be in securities with maturities not exceeding 3 years.

This product is suitable for investors who are seeking:-

1) Regular income from medium term.

2) Investment in Debt/Money Market securities.

34
 Objectives:-
To endeavour to mitigate interest rate risk and seek to generate regular income along with
opportunities for capital appreciation through a portfolio investing in Floating rate debt securities, Fixed
rate securities, Derivative instruments as well as in Money Market instruments.

Assets Allocation:-
Instrument Assets Allocation (% of Net Risk Profile
Assets)
Floating rate debt, money market At least 65% Low to Medium
and derivatives instruments
Fixed rate debt, money market Not exceeding 35% Low to Medium
and derivatives instruments

Date of inception:- 19/07/2004

Minimum Investment:- Rs. 5000/- & in multiple of Rs. 1

Additional Investment:- Rs. 1000/- & in multiple of Rs. 1

Entry Load:- Not allowed

Exit Load:- 1) For exit within 3 business days from the date of allotment -0.10%.

2) For exit after 3 business days from the date of allotment - Nil

SIP:- 1) Monthly – Minimum Rs. 1000/- & in multiples of Rs. 1 thereafter for minimum six months
or minimum Rs. 500/- & in multiples of Rs. 1 thereafter for minimum 1 year.

2) Quarterly – Minimum Rs. 1500/- & in multiples of Rs. 1 thereafter for minimum One year.

STP:- Rs. 500 per month or quarter.

35
 NAV (Net Assets Value)

Plan Nav (Net Assets Value) Date

SBI Saving fund – Direct plan – 11.6237
Weekly dividend
SBI Saving Fund – Regular Plan- 10.0622
Daily Dividend
SBI Saving fund – Direct Plan – 23.6830
Growth
SBI Saving fund – Regular Plan- 11.4117
Dividend
SBI Saving fund – Direct Plan- 11.5785
Dividend
SBI Saving fund – Direct Plan- 10.0622
Daily Dividend
SBI Saving fund – Regular Plan- 23.3140
Growth
SBI Saving fund – Regular Plan- 11.5336
Weekly Dividend

36
 Hybrid Scheme:-

These schemes invest in a mixture of debt and equity securities in different proportions as
prescribed in the scheme information document.

For example:-

SBI Magnum Children’s Benefits Plan:-

Investment in the scheme can be made on behalf of children less than 15 years of age. The
scheme will provide group accident insurance cover to the Magnum holders / unit holders or either
parent against accidental death or permanent total disability relating to these accidents. In addition to
this, on the accidental death of either parent the Magnum holder / Unit holder will stand to receive an
additional 10% of claim amount towards educational expenses. The cost of providing insurance cover
would be borne by the AMC (Asset Management Company).

SBI Magnum Children’s Benefit Plan (SBI MCBP) is hybrid debt oriented scheme which
invest in equity, Government debt, corporate debt and money market instruments. SBI Magnum
Children’s Benefit Plan (SBI MCBP) invest the equity portion across market capitalization and aims to
optimize returns through a well diversified portfolio.

SBI Magnum Children’s Benefit Plan (SBI MCBP) is an open ended scheme which invests in
G Sec, corporate and money market instruments while the flexibility to invest up to 25% of the portfolio
in equity.

This product is suitable for investors who are seeking:-

1) Long term capital appreciation and current income.

2) Investment in equity and equity related instruments as well as fixed income securities (debt
and money market securities).

37
 Objectives:-
To provide attractive returns to the Magnum holders / Unit holders by means of capital
appreciation through an actively managed portfolio of debt, equity and money market instruments.

Assets Allocation:-

Instrument Normal allocation(% of Net Risk Profile

Assets)
Equity and related instruments Not more than 25%* Medium to High
Debt instruments (including Up to 100% Low to Medium
securitized debt) and Govt.
Securities and Money market
instruments
Securities Debt Not more than 10% of Medium to High
investment in debt

*The scheme however intends to invest only 20% of the corpus in equity and equity related instruments.
Any investment in equity and equity related instruments above 20% but within 25% would depend on
market conditions if it is deemed to be in the larger interest of the Magnum holders/ Unit holders and
would be with the prior approval of the Managing Director.

Date of Inception:- 21/02/2002

Minimum Application:- Rs. 5000/- & in multiples of Rs. 1

Additional Investment:- Rs. 1000/- & in multiples of Rs. 1

Entry Load:- Not allowedExit Load:- Exit within 1 year: 3%, Exit within 2
year: 2%, Exit within 3 year: 1%

SIP:- 1) Monthly – Minimum Rs.1000/- & in multiples of Rs. 1 thereafter for six
month (or) minimum Rs. 500/- & in multiples of Rs.1 thereafter for minimum one year.

2) Quarterly – Minimum Rs.1500/- & in multiples of Rs.1 thereafter for

minimum one year.

SWP:- Rs 500/- per month or quarter.

38
 NAV (Net Assets Value)

Plan Nav Date

SBI Magnum Children’s Benefit 38.8257
Plan – Direct Plan - Growth
SBI Magnum Children’s Benefit 37.7366
Plan – Regular Plan - Growth

39
 KEY PERSONNEL OF SBI MUTUAL FUND
Mr. Dinesh Kumar Khara Managing Director

Mr. Nicolas Simon Dy. CEO

Mr. L. Pattabhiraman Chief Operating Officer

Mr. Navneet Munot Chief Investment Officer

Mr. R. S. Srinivas Jain Chief Marketing Officer

Mr. C A Santosh Chief Manager - Customer Service

Ms. Aparna Nirgude Chief Risk Officer

Ms. Vinaya Datar Company Secretary & Compliance Officer

Mr. Parijat Agarwal Head – Fixed Income

40
From the Managing Director’s Desk
Dear Friends,

The year 2016 was one of the best years for the Indian equity markets and the
mutual fund industry. The BSE Sensex touched the 30,000 mark and saw increased participation from
retail investors especially through mutual funds. Global factors and promise of domestic reforms led the
way in shaping the Indian economy’s trajectory with lower oil prices proving to be a major boost to the
economy, especially
consumption. Strong participation from retail investors and robust inflows into equity schemes helped
the mutual fund industry’s asset base soar to over Rs. 13.4 lakh crore with 4.2 crore folios and over 86
lakh active SIPs. Mutual Funds have been net buyers of equities over the last entire year providing a
much needed counter-balance to Foreign Portfolio Investors (FPIs) in the domestic markets.

Lastly, one of the key highlights of the year was the new investment
pattern approved by Ministry of Labour & Ministry of Finance mandating minimum 5% of the fresh
flows to be invested into equity mutual funds and the Employee Provident Fund Trusts’ started investing
their incremental flows into SBI Mutual Fund’s equity-based ETFs, providing a major boost to the
industry and the equity markets.

The year ahead looks promising for mutual funds, given the sagging real
estate market and continuing fall in gold prices. In addition, mutual funds can help in creating value for
investors in a volatile market scenario. One advice I would like to give to retail investors coming into
equities in 2016(directly or through mutual funds) is to look at asset allocation. Each asset class – equity,
debt, gold or real estate – has its own role in your portfolio and only an appropriate mix depending on
your goals will help you meet them. Getting this part right and sticking to it is half the job done while the
individual investments inside can keep changing depending on your risk appetite and time horizon.

This part of the year is crucial for a lot of salaried individuals finalising and

41
submitting documents for taxation purposes. Ideally, investments for saving tax should be done at the
beginning of the fiscal year as investing small amounts regularly can make the task of saving 1.5 lakh
(under Section 80C of the Income Tax Act) easier. Investing for tax should be looked at from all
perspectives such as the ease of investing, taxation of returns whether dividends or capital appreciation,
and lock-in period, should you require access to these funds in future. ELSS funds score high on all these
parameters. The SBI Magnum Tax gain Scheme, with a proven track record of over 22 years is one of
the largest ELSS funds in the country. Our New Fund Offering – SBI Long Term Advantage Fund –
Series III (10 years close ended scheme) is another ELSS offering we have and is ideal for investors
looking to reap the potential of long-term equity investments along with tax benefits.

Finally, our new investor education initiative ‘Today Is The Day’ is a step towards getting investors to
start investing today in mutual funds for their goals, rather than finding excuses to postpone them.
Mutual Funds have become the most convenient and transparent investment option with a wide-range of
schemes for every need. With reach in low single digits, we still have a long way to go in making mutual
funds, the preferred and first investment choice of millions of savers, not only as an organization but as
an industry working together. As always, we value your investments and look forward to your continued
patronage.
Warm Regards,
Dinesh Kumar Khara
Managing Director& Chief Executive Officer
Form SBI Funds Management Private Ltd.

42
 OBJECTIVE OF STUDY

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.

1. Primarily, to understand the basic concepts of Portfolio management and Mutual funds and its benefits
as an investment avenue.

2. Secondly, to compare and evaluate the performance of different equity mutual fund schemes of
different companies on the basis of risk, return and volatility.

3. Thirdly, to suggest the schemes which are out performers and laggards.

4. Finally, to create and ideal portfolio in which risk will be distributed towards different schemes and
will earn higher rate of return.

43
 THEREOTICAL BACKGROUND
INVESTMENT OPTIONS:

Savings form an important part of the economy of any nation. With the savings invested in various
options available to the people, the money acts as the driver for growth of the country. Indian financial
scene too presents a plethora of avenues to the investors. Though certainly not the best or deepest of
markets in the world, it has reasonable options for an ordinary man to invest his savings. Let us examine
several of them:

Banks

Considered as the safest of all options, banks have been the roots of the financial systems in India.
Promoted as the means to social development, banks in India have indeed played an important role in the
rural upliftment. For an ordinary person though, they have acted as the safest investment avenue where
in a person deposits money and earn interest on it.

The two main modes of investment in banks, savings accounts and Fixed deposits have been effectively
used by one and all. However, today the interest rate structure in the country is headed southwards,
keeping in line with global trends. With the banks offering little above 9 percent in their fixed deposits
for one year, the yields have come down substantially in recent times. Add to this, the inflationary
pressures in economy and you have a position where the savings are not earning. The inflation is
creeping up, to almost 8 percent at times, and this means that the value of money saved goes down
instead of going up. This effectively mars any chance of gaining from the investments in banks.

Post Office schemes

Just like banks, post offices in India have a wide network. Spread across the nation, they offer financial
assistance as well as serving the basic requirements of communication. Among all saving options, Post
office schemes have been offering the highest rates. Added to it is the fact that the investments are safe
with the department being a Government of India entity. So, the two basic and most sought for features,
those of return safety and quantum of returns were being handsomely taken care of. Though certainly not
the most efficient systems in terms of service standards and liquidity, these have still managed to attract
the attention of small, retail investors. However, with the government announcing its intention of
reducing the interest rates in small savings options, this avenue is expected to lose some of the investors.
Public Provident Funds act as options to save for the post retirement period for most people and have
been considered good option largely due to the fact that returns were higher than most other options and
also helped people gain from tax benefits under various sections. This option too is likely to lose some of
its sheen on account of reduction in the rates offered.

44
 Company Fixed Deposits
Another oft-used route to invest has been the fixed deposit schemes floated by companies. Companies
have used fixed deposit schemes as a means of mobilizing funds for their operations and have paid
interest on them. The safer a company is rated, the lesser the return offered has been the thumb rule.
However, there are several potential roadblocks in these.

First of all, the danger of financial position of the company not being understood by the investor lurks.
The investors rely on intermediaries who more often than not, don t reveal the entire truth.

Secondly, liquidity is a major problem with the amount being received months after the due dates.
Premature redemption is generally not entertained without cuts in the returns offered and though they
present a reasonable option to counter interest rate risk (especially when the economy is headed for a
low interest regime), the safety of principal amount has been found lacking. Many cases like the Kuber
Group and DCM Group fiascoes have resulted in low confidence in this option.

The options discussed above are essentially for the risk-averse, people who think of safety and then
quantum of return, in that order. For the brave, it is dabbling in the stock market. Stock markets provide
an option to invest in a high risk, high return game. While the potential return is much more than 10-11
percent any of the options discussed above can generally generate, the risk is undoubtedly of the highest
order. But then, the general principle of encountering greater risks and uncertainty when one seeks
higher returns holds true. However, as enticing as it might appear, people generally are clueless as to
how the stock market functions and in the process can endanger the hard-earned money.

For those who are not adept at understanding the stock market, the task of generating superior returns at
similar levels of risk is arduous to say the least. This is where Mutual Funds come into picture.

Mutual Funds are essentially investment vehicles where people with similar investment objective come
together to pool their money and then invest accordingly. Each unit of any scheme represents the
proportion of pool owned by the unit holder (investor). Appreciation or reduction in value of investments
is reflected in net asset value (NAV) of the concerned scheme, which is declared by the fund from time

45
to time. Mutual fund schemes are managed by respective Asset Management Companies (AMC).
Different business groups/ financial institutions/ banks have sponsored these AMCs, either alone or in

collaboration with reputed international firms. Several international funds like Alliance and Templeton
are also operating independently in India. Many more international Mutual Fund giants are expected to
come into Indian markets in the near future.

The benefits on offer are many with good post-tax returns and reasonable safety being the hallmark that
we normally associate with them. Some of the other major benefits of investing in them are:

Number of available options

Mutual funds invest according to the underlying investment objective as specified at the time of
launching a scheme. So, we have equity funds, debt funds, gilt funds and many others that cater to the
different needs of the investor. The availability of these options makes them a good option. While equity
funds can be as risky as the stock markets themselves, debt funds offer the kind of security that is aimed
for at the time of making investments.

Money market funds offer the liquidity that is desired by big investors who wish to park surplus funds
for very short-term periods. Balance Funds aster to the investors having an appetite for risk greater than
the debt funds but less than the equity funds. The only pertinent factor here is that the fund has to be
selected keeping the risk profile of the investor in mind because the products listed above have different
risks associated with them. So, while equity funds are a good bet for a long term, they may not find
favors with corporate or High Net worth Individuals (HNIs) who have short-term needs.

46
 ADVANTAGES OF INVESTING IN MUTUAL FUNDS

Diversification

Investments are spread across a wide cross-section of industries and sectors and so the risk is reduced.
Diversification reduces the risk because all stocks don t move in the same direction at the same time.
One can achieve this diversification through a Mutual Fund with far less money than one can on his
own.

Professional Management
Mutual Funds employ the services of skilled professionals who have years of experience to back them
up. They use intensive research techniques to analyze each investment option for the potential of returns
along with their risk levels to come up with the figures for performance that determine the suitability of
any potential investment.

47
 Potential of Returns

Returns in the mutual funds are generally better than any other option in any other avenue over a
reasonable period of time. People can pick their investment horizon and stay put in the chosen fund for
the duration. Equity funds can outperform most other investments over long periods by placing long-
term calls on fundamentally good stocks. The debt funds too will outperform other options such as
banks. Though they are affected by the interest rate risk in general, the returns generated are more as
they pick securities with different duration that have different yields and so are able to increase the
overall returns from the portfolio.

Liquidity
Fixed deposits with companies or in banks are usually not withdrawn premature because there is a penal
clause attached to it. The investors can withdraw or redeem money at the Net Asset Value related prices
in the open-end schemes. In closed-end schemes, the units can be transacted at the prevailing market
price on a stock exchange. Mutual funds also provide the facility of direct repurchase at NAV related
prices. The market prices of these schemes are dependent on the NAV of funds and may trade at more
than NAV (known as Premium) or less than NAV (known as Discount) depending on the expected
future trend of NAV which in turn is linked to general market conditions. Bullish market may result in
schemes trading at Premium while in bearish markets the funds usually trade at Discount. This means
that the money can be withdrawn anytime, without much reduction in yield. Some mutual funds
however, charge exit loads for withdrawal within a period. Besides these important features, mutual
funds also offer several other key traits. Important among them are:

48
 Well Regulated

Unlike the company fixed deposits, where there is little control with the investment being considered as
unsecured debt from the legal point of view, the Mutual Fund industry is very well regulated. All
investments have to be accounted for, decisions judiciously taken. SEBI acts as a true watchdog in this
case and can impose penalties on the AMCs at fault. The regulations, designed to protect the investors
interests are also implemented effectively.

Transparency Being under a regulatory framework, mutual funds have to disclose their holdings,
investment pattern and all the information that can be considered as material, before all investors. This
means that the investment strategy, outlooks of the market and scheme related details are disclosed with
reasonable frequency to ensure that transparency exists in the system. This is unlike any other
investment option in India where the investor knows nothing as nothing is disclosed.

49
 Flexible, Affordable and a Low Cost affair

Mutual Funds offer a relatively less expensive way to invest when compared to other avenues such as
capital market operations. The fee in terms of brokerages, custodial fees and other management fees are
substantially lower than other options and are directly linked to the performance of the scheme.
Investment in mutual funds also offers a lot of flexibility with features such as regular investment plans,
regular withdrawal plans and dividend reinvestment plans enabling systematic investment or withdrawal
of funds. Even the investors, who could otherwise not enter stock markets with low inventible funds, can
benefit from a portfolio comprising of high-priced stocks because they are purchased from pooled funds.

As has been discussed, mutual funds offer several benefits that are unmatched by other investment
options. Post liberalization, the industry has been growing at a rapid pace and has crossed Rs. 100000 Cr
size in terms of its assets under management. However, due to the low key investor awareness, the
inflow under the industry is yet to overtake the inflows in banks. Rising inflation, falling interest rates
and a volatile equity market make a deadly cocktail for the investor for whom mutual funds offer a route
out of the impasse.

The investments in mutual funds are not without risks because the same forces such as regulatory
frameworks, government policies, interest rate structures, performance of companies etc. that rattle the
equity and debt markets, act on mutual funds too. But it is the skill of the managing risks that investment
managers seek to implement in order to strive and generate superior returns than otherwise possible that
makes them a better option than many others.

50
 Importance of Mutual Fund

Small investors face a lot of problems in the share market, limited resources, lack of professional
advice, lack of information etc. Mutual funds have come as a much needed help to these investors. It is a
special type of institutional device or an investment vehicle through which the investors pool their
savings which are to be invested under the guidance of a team of experts in wide variety of portfolios of
corporate securities in such a way, so as to minimize risk, while ensuring safety and steady return on
investment. It forms an important part of the capital market, providing the benefits of a diversified
portfolio and expert fund management to a large number, particularly small investors. Now days, mutual
fund is gaining its popularity due to the following reasons.

With the emphasis on increase in domestic savings and improvement in deployment of investment
through markets, the need and scope for mutual fund operation has increased tremendously.

The basic purpose of reforms in the financial sector was to enhance the generation of domestic
(Tripathy, Mutual Fund in India: A Financial Service in Capital . . . 87) resources by reducing the
dependence on outside funds. This calls for a market based institution which can tap the vast potential of
domestic savings and canalize them for profitable investments. Mutual funds are not only best suited for
the purpose but also capable of meeting this challenge.

An ordinary investor who applies for share in a public issue of any company is not assured of any firm
allotment. But mutual funds who subscribe to the capital issue made by companies get firm allotment of
shares. Mutual fund latter sell these shares in the same market and to the Promoters of the company at a
much higher price. Hence, mutual fund creates the investors confidence.

51
The phyche of the typical Indian investor has been summed up by Mr. S. A. Dave, Chairman of UTI, in
three words; Yield, Liquidity and Security. The mutual funds, being set up in the public sector, have
given the impression of being as safe a conduit for investment as bank deposits. Besides, the assured
returns promised by them have investors had great appeal for the typical Indian investor.

As mutual funds are managed by professionals, they are considered to have a better knowledge of
market behaviors. Besides, they bring a certain competence to their job. They also maximize gains by
proper selection and timing of investment.

Another important thing is that the dividends and capital gains are reinvested automatically in mutual
funds and hence are not fritted away. The automatic reinvestment feature of a mutual fund is a form of
forced saving and can make a big difference in the long run.

The mutual fund operation provides a reasonable protection to investors. Besides, presently all Schemes
of mutual funds provide tax relief under Section 80 L of the Income Tax Act and in addition, some
schemes provide tax relief under Section 88 of the Income Tax Act lead to the growth of importance of
mutual fund in the minds of the investors.

As mutual funds creates awareness among urban and rural middle class people about the benefits of
investment in capital market, through profitable and safe avenues, mutual fund could be able to make up
a large amount of the surplus funds available with these people.

The mutual funds attracts foreign capital flow in the country and secure profitable investment avenues
abroad for domestic savings through the opening of off shore funds in various foreign investors. Lastly
another notable thing is that mutual funds are controlled and regulated by SEBI and hence are considered
safe. Due to all these benefits the importance of mutual fund has been increasing.

52
 Portfolio Management

What is Portfolio Management?

An investor considering in securities is faced with the problem of choosing from among a large number
of securities. His choice depends upon the risk return characteristics of individual securities. He would
attempt to choose the most desirable securities and like to allocate his funds over this group of securities.
Again he is faced with problem of deciding which securities to hold and how much to invest in each. The
investor faces an infinite number of possible portfolios or groups of securities. The risk and return
characteristics of portfolios differ from those of individual securities combining to form a portfolio. The
investor tries to choose the optimal portfolio taking into consideration the risk return characteristics of
all possible portfolios.

Phases of Portfolio Management

Security Analysis
Portfolio Analysis
Portfolio Selection
Portfolio Revision
Portfolio Evaluation

Security Analysis
(a) Fundamental analysis:
This analysis concentrates on the fundamental factors affecting the company such as EPS (Earning
per share) of the company, the dividend payout ratio, competition faced by the company, market
share, quality of management etc.

(b) Technical analysis:

The past movement in the prices of shares is studied to identify trends and patterns and then tries to
predict the future price movement. Current market price is compared with the future predicted price
to determine the misprision. Technical analysis concentrates on price movements and ignores the
fundamentals of the shares.

(c) Efficient market hypothesis:

This is comparatively more recent approach. This approach holds that market prices instantaneously
and fully reflect all relevant available information. It means that the market prices will always be
equal to the intrinsic value.

53
 Portfolio Analysis
A portfolio is a group of securities held together as investment. It is an attempt to spread the risk allover.
The return & risk of each portfolio has to be calculated mathematically and expressed quantitatively.
Portfolio analysis phase of portfolio management consists of identifying the range of possible portfolios
that can be constituted from a given set of securities and calculating their risk for further analysis.

Portfolio Selection
The goal of portfolio construction is to generate a portfolio that provides the highest returns at a given
level of risk. Harry Markowitzh portfolio theory provides both the conceptual framework and the
analytical tools for determining the optimal portfolio in a disciplined and objective way.

Portfolio Revision
The investor/portfolio manager has to constantly monitor the portfolio to ensure that it continues to be
optimal. As the economy and financial markets are highly volatile dynamic changes take place almost
daily. As time passes securities which were once attractive may cease to be so. New securities with
anticipation of high returns and low risk may emerge.

Portfolio Evaluation
Portfolio evaluation is the process, which is concerned with assessing the performance of the portfolio
over a selected period of time in terms of return & risk. The evaluation provides the necessary feedback
for better designing of portfolio the next time around.

Measurement of risk

Risk refers to the possibility that the actual outcome of an investment will differ from the expected
outcome. In other words we can say that risk refers to variability or dispersion. If any investment is said
to invariable it means that it is totally risk free. Whenever we calculate the mean returns of an
investment we also need to calculate the variability in the returns.

Variance and Standard Deviation

The most commonly used measures of risk in finance are variance or its square root the standard
deviation. The variance and the standard deviation of a historical return series is defined as follows:
n–1

Beta
A measure of risk commonly advocated is beta. The beta of a portfolio is computed the way beta of an
individual security is computed. To calculate the beta of a portfolio, regress the rate of return of the
portfolio on the rate of return of a market index. The slope of this regression line is the portfolio beta. It
reflects the systematic risk of the portfolio.

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 SYSTEMATIC PORTFOLIO MANAGEMENT
The goal of portfolio management is to assemble various securities and other
assets into portfolios that address investor needs and then to manage those protfolios so as to achieve
investment objectives. The investor’s needs are defined in term of risk, and the portfolio manager
maximizes return for investment undertaken.

Asset allocation

Security selection within asset classes asset allocation can best be characterized as the blending
together of major asset classes to obtain the highest long-run return at the lowest risk.Managers can
make opportnistic shifts in asset class weightings in order to improve return prospects over the long-term
objective. Also managers can improve return prospects by selecting securities that have above average
expected return within the individual asset classes.

Investment managers

Multitudes of investment management organization offer portfolio management services to

clients including mutual funds. Investments organization differ not only in size and degree of
specialization but also in their approaches to investment analysis and portfolio management. On the
whole, however the business portfolio management has tended toward greater structure and discipline in
the investment process and toward greater use of systematic approaches to investing. Those
organizations at the forefront in implementing systematic approaches to portfolio management have
gained market share at the expense of other firms, in large part because they have been more effective in
addressing client needs and achieving investment objectives.

Participants

Several groups other than professional portfolio managers are important participants in the
portfolio management process. In marketing the asset allocation decision, major portfolio investors
employ the service of investment management consultants. These are organizations that specialize in
not only advising on asset allocation but other critical aspects, such as setting of goal and selection of
investment managers.

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Asset classes

Developing the appropriate asset allocation is a critical phase of the portfolio management
process. Equities, bonds and money market instruments are major asset categories that are large, are
generally highly marketable and have tradionally been used extensively by long term portfolio investors.

Asset classes for portfolio investment

Corporate

Common stocks

Domestic equities

Large-capitalization

Small-capitalization

International equities

Major-country markets

Emerging markets

Bonds

Government and agencies

AAA-rated

Highly-yield (junk) bonds

Mortgage-backed securities

International bonds

Money market instruments

Treasury bills

CDs and commercial paper

Guaranteed investment contracts

Real estate

Venture capital

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The portfolio management industry has evolved over the last two decades into a structure with several
distinct groupings of highly professional participants. Although the current structure differs from the
past, the critical components of the investment decision process remain the same. Investors need to
establish goals and be aware of the capital market tradeoff in developing an asset allocation that the best
meets the return target at an acceptable level.

There are three based are as which investing styles differ. All influence the risk, returns and
period of investment and involve finding a sport between the extremes that suits the fund and investors
the best.

Attitude: does it follow a top-down approach (first list industries or sectors for investment and then
select specific companies within these industries) or a bottom-up approach (individual stocks which are
likely to outperform the market are identified first and only then study the industry or macro level
factors)?

Intensity of management: is the scheme actively (review the portfolios regularly) or passively (less
intensely managed stocks)?

Distribution network:

The rapid accumulation in assets of mutual funds creates more challenges, most important among
them being the distribution network. For the long-term health of the industry, it is crucial that investors
who come into a fund come with a full understanding of the risks involved in the investment. And
distributors play an important role in dissemination of such information. At present, the majority of
funds rely on branch network of banks in order to sell their products since the branch network of most
fund houses is restricted to a few cities.

After-sales service:

In India typically the distributor’s role comes to an end as soon as the product is sold to the
investor. For subsequent transactions-redemption or switchovers-the investors often has to get back to
the fund itself. An investor’s interface with a fund would be simpler if the whole range of services, from
deciding on the right product to processing the final redemption request, is handled by a singled entity.

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 SCOPE OF STUDY:
The study was carried out for a period of 60 days, in which the main focus was to follow the
performance of the different-different mutual fund companies and assent management companies. Since
different companies come out with similar themes in the same season, it becomes crucial for the
company to constantly perform well so as to survive the competition and provide maximum capital
appreciation or return as the case may be. Other than the market the performance of the fund depends on
the kind of stock chosen by the fund managers of the company.

The analysis is done on the performance of funds with the same theme or sector and reason out why a
fund performs better than the others in the lot.

NEED FOR THE STUDY:

The study first tries to understand the composition of the selected funds which determines the scope of
performance for the funds, followed by use of ratios that are relevant in quantifying and understanding
the risk and return relationships for each mutual fund scheme under consideration. Then a comparative
analysis of the mutual fund schemes is done to see which fund has performed the best.

This study is significant to the company as it looks into the minute details that differentiate the
performances of funds of different companies with same theme or sector under similar market
conditions. This would help the company to develop.

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 PRODUCT PROFILE
CONCEPT OF MUTUAL FUNDS

A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such as shares,
debentures and other securities. The income earned through these investments and the capital
appreciation realized 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. The flow
chart below describes broadly the working of a mutual fund:

What are the benefits of investing in Mutual Funds?

Qualified and experienced professionals manage Mutual Funds. Generally, investors, by themselves,
may have reasonable capability, but to assess a financial instrument, a professional analytical approach is
required, in addition to access to research and information as well as time and methodology to make
sound investment decisions and to keep monitoring them.

Since Mutual Funds make investments in a number of stocks, the resultant diversification reduces risk.
They provide small investors with an opportunity to invest in a larger basket of securities.

The investor is spared the time and effort of tracking investments, collecting income, etc. from various
issuers, etc. It is possible to invest in small amounts as and when the investor has surplus funds to invest.
Mutual Funds are registered with SEBI. SEBI monitors the activities of Mutual Funds. In case of open-
ended Funds, the investment is very liquid as it can be redeemed at any time with the fund unlike direct
investment in stocks / bonds.

Risk 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 and deposits. All these investments involve an element of risk. The
unit value may vary depending upon the performance of the company and companies may default in
payment of interest / principal on their debentures / bonds / deposits. Besides this, the government may
come up with new regulations, which may affect a particular industry or class of industries. All these
factors influence the performance of Mutual Funds.

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 Tax Benefits
Many people invest mutual funds with a view to saving taxes. So what are the benefits investors get on
investing in mutual fund? What tax rates are applicable? What are the benefits to overseas investors.

What are the tax benefits investors get by investing in mutual funds?

Since, April 1, 2003, all dividends declared by debt – based mutual funds are tax free in the hands of
the investors. A divided distribution tax of 12.5% (including surcharge) is be paid by the mutual fund on
the dividends declared by the fund.

Investors in ELSS (equity – linked savings schemes) can avail rebate under section 88 of the
Income Tax Act, 1961 on investment up to Rs. 10000/- subject to the various conditions laid down in the
said section. The actual amount of rebate depends on the level of income of the investor.

Is a capital gain on sale / transfer of units of mutual fund liable to tax? If yes, at what rate?

Section 2(42A):- under section 2(42A) of the act, a unit of a mutual fund is treated as short term capital
assets if the same is held for less than 12 months. The unit held for more than 12 months are treated as
long term capital assets.

Section 10(38):- under section 10(38) of the act, long term capital gains arising from transfer of a unit of
mutual fund is exempt from tax if the said transaction is undertaken after October 1, 2004 and the
securities transaction tax is paid to the appropriate authority.

Section 111A:- under section 111A of the act, short term capital gains arising from transfer of a unit of
mutual fund is chargeable to tax @ 10% (plus applicable surcharge) if the said transaction is undertaken
after October 1, 2004 and the securities transaction tax is paid.

However, such securities transaction tax will be allowed as rebate under section 88E of the act if the
transaction constitutes business income.

Section 112:- under section 112 of the act, capital gains, not covered by the exemption under section
10(38), chargeable on transfer of long term capital assets are subject to following rates of tax:

Resident Individual & HUF- 20% plus surcharge.

Partnership Firm & Indian Companies – 20% (no surcharge).

Foreign Companies – 20% (no surcharge).

Capital gain will be computed after talking into account cost of acquisition as adjusted by cost inflation
index notified by the central government.

‘Units’ are including in the proviso to the sub section (1) to section 112 of the act and hence unit holders
can opt for being taxed at 10% (plus applicable surcharge) without the cost inflation index benefit or
20% (plus applicable surcharge) with the cost inflation index benefits whichever is beneficial.

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 Net Assets Value (NAV)

The net asset value of the fund is the cumulative market value of the asset fund net of its
liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund,
this is the amount that the shareholders would collectively own. This gives ride to the concept of net
asset value per unit, which is the value, represented by the ownership of one unit in the fund.
It is calculated simply by dividing the net asset value of the fund by the number of units.
However, most people refer loosely to the NAV per unit as NAV, ignoring the “per unit”. We also abide
by the same convention.

CALCULATION OF NAV

The most important part of the calculation is the valuation of the assets owned by the fund. Once
it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding.
The detailed methodology for the calculation of the asset value is given below.

Asset value is equal to

(Sum of market value of shares/debentures + liquid assets/cash held, if any + dividend/interest accrued

Amount due on unpaid assets, Expenses accrued but not paid)

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 Details on the above items:

For liquid shares/debentures, valuation is done on the basis of the last or closing market price on the
principal exchange where the security is traded.

For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be estimated. For shares,
this could be the book value per share or an estimated market price. If suitable benchmarks are available.
Fore debentures and bonds, value is estimated on the basis of yields of comparable liquid securities after
adjusting for illiquidity. The value of fixed interest bearing securities moves in a direction opposite to
interest rate changes valuation of debentures and bonds is a big problem since most of them are unlisted
and thinly traded. This gives considerable leeway to the AMC’s on valuation and some of the AMC’s are
believed to take advantage of this and adopt flexible valuation policies depending on the situation.

Interest is payable on debentures/bonds on periodic basis say every 6 months. But, with every passing
day, interest is said to be accrued, at the daily interest rate, which is calculated by dividing the periodic
interest payment with the number of days in each period. Thus, accrued interest on a particular day is
equal to the daily interest rate multiplied by the number of days since the last interest payment date.
Usually, dividends are proposed at the time of annual general meeting and become due on the record
date. There is a gap between the dates on which it becomes due and the actual payment date. In the
immediate period, it is deemed to be “Accrued”. Expenses including management fees, custody charges
etc .Are calculated on daily basis.

Net value of Assets

NAV = ---------------------------
No. unit outstanding

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 MUTUAL FUND INVESTING STRATEGIES

Systematic investment plan (SIP’s):

These are best suited for young people who have started there careers and needs to built there
wealth. Sips entail the investor to invest a fixed sum of money at regular intervals in the mutual fund
schemes the investor as chosen, an investor opting for sip in xyz mutual fund scheme will need to invest
certain sum on money every month/quarter/half yearly in the scheme. By investing through sip, one ends
up buying more units when the price is low and fewer units when the price is high. However, over a
period of time these market fluctuations are generally averaged. And the average cost of the investment
is often reduced. It is far better to invest small amount of money regularly, rather than save up to make a
large investment. This is because while saving is in the lump sum, it may not earn much interest.

Systematic withdrawal plan (SWP’s):

These plans are suited for people nearing retirement .In these plans, an investor invest in a mutual fund
scheme and is allowed to withdraw a fixed sum of money at regular intervals to take care of its expenses.

Systematic transfer plan (STP’s):

They allows investor to transfer on a periodic basis a specified amount from one scheme to another
within the same fund family- meaning two schemes belonging to the same mutual fund. A transfer will
be treated as redemption of units from the scheme from which the transfer is made. Such redemption or
investment will be at the applicable NAV. This service allows the investor to manage his investments
actively to achieve his objectives. Many funds do not even charge any transaction fees for his service- an
added advantage for the active investor.

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 RESEARCH METHODOLOGY
Research methodology is a very organized and systematic way through which a particular case or
problem can be solved efficiently.

 It is a step-by-step logical process, which involves:

 Defining a problem

 Laying the objectives of the research

 Sources of data

 Methods of data collection

 Data analysis & processing

 Conclusions & Recommendations

 Research inculcates scientific and inductive thinking and it promotes the development of logical
habits of thinking and organization.

Methodology Used:

Descriptive Analytical Research

Under this type the researcher has to use the facts and information already available and analysis them to
make evaluation of the market.

In analytical research the researcher has to use the facts already available and analysis these to make the
critical evaluation data of the material.

Data has been collected from the Fact sheet of the various mutual fund schemes and used those data s for
the research. In fact sheet past returns were given of different funds.

Data also included value of risk measuring instruments like Standard Deviation, Beta etc from the
secondary data from the websites such as www.valueresearchonline.com.

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 OBSERVATION AND FINDINGS

FINDINGS

Most of the investors want guaranteed returns from the investment.

Every fund has some what percentage in debt product to avoid high risk of market.

The investors are aware of mutual funds they do not invest in proportionate.

Midcap fund has high risk but potential of high returns.

Most of the investors are interested in banks that too in saving deposit and it is very popular
tool of investment.

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 Ground Rules of Mutual Fund
Mutual Fund Investing

Moses gave to his followers 10 commandments that were to be followed till eternity. The world of
investments too has several ground rules meant for investors who are novices in their own right and wish
to enter the myriad world of investments. These come in handy for there is every possibility of losing
what one has if due care is not taken.

1) Assess yourself:
Self-assessment of one s 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.

2) 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 pick the wrong kind of mutual fund. In order to
avoid any confusion it is better to go through the literature such as offer document and fact sheets
that mutual fund companies provide on their funds.

3) Don't rush in picking funds, think first:

One first has to decide what he wants the money for and it is this investment goal that should be
the guiding light for all investments done. It is thus important to know the risks associated with
the fund and align it with the quantum of risk one is willing to take. One should take a look at the
portfolio of the funds for the purpose. Excessive exposure to any specific sector should be
avoided, as it will only add to the risk of the entire portfolio. 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.

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4) Invest. Don t 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.

5) Don t 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 one s 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.

6) Be regular:
Investing should be a habit and not an exercise undertaken at one s wishes, if one has to really
benefit from them. As we said earlier, since it is extremely difficult to know when to enter or exit
the market, it is important to beat the market by being systematic. The 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.

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

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8) Find the right funds:
Finding funds that do not charge much fees is of importance, as the fee charged ultimately goes
from the pocket of the investor. This is even more important for debt funds as the returns from
these funds are not much. Funds that charge more will reduce the yield to the investor. Finding
the right funds is important and one should also use these funds for tax efficiency. Investors of
equity should keep in mind that all dividends are currently tax-free in India and so their tax
liabilities can be reduced if the dividend payout option is used. Investors of debt will be charged
a tax on dividend distribution and so can easily avoid the payout options.

9) Keep track of your investments:

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

10) Know when to sell your mutual funds:

Knowing when to exit a fund too is of utmost importance. One should book profits immediately
when enough has been earned i.e. the initial expectation from the fund has been met with. Other
factors like non-performance, hike in fee charged and change in any basic attribute of the fund
etc. are some of the reasons for to exit. Investments in mutual funds too are not risk-free and so
investments warrant some caution and careful attention of the investor. Investing in mutual funds
can be a dicey business for people who do not remember tofollow these rules diligently, as
people are likely to commit mistakes by being ignorant or adventurous enough to take risks more
than what they can absorb. This is the reason why people would do well to remember these rules
before they set out to invest their hard-earned money.

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 LIMITATION

This report gives an insight about mutual funds and mutual fund schemes but with few limitations as
follows:

 The big question is how to judge a mutual fund before investing? It is important for an investor to
consider a fund s performance over several years.
 The report only analyses equity mutual fund schemes of only some funds and there are around 34
AMCs offering wide range of scheme but to analyze them is a tedious task.
 This information is mainly regarding of those mutual funds were collected to which SBI GROUP
is an advisor.
 Different fund managers adopt different strategies to improve performance. While one fund
manager may have invested in speculative stocks may over a period, another one who have
invested in speculative stocks may have struck gold in that year to outperform the former by a
long way.
 Lack of proper knowledge and awareness about advantages and disadvantages associated with
various schemes among the investor.
 Usually there is a tendency among investors to ignore the consistency of returns over a period of
time rather they focus on absolute returns generated in the short term.

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 CONCLUSION

After studying & analyzing different mutual fund schemes the following conclusions can be made:

Winning with stocks means performing at least as well as a major market index over the long haul. If
one can sidestep the common investor mistakes, then one has taken the first and biggest step in the right
direction.

Diversified stock portfolios have offered superior long term inflation protection. Equities are especially
important today with people living longer and retiring early. To understand stock funds one needs to be
familiar with the characteristics of the different types of companies they hold.

Portfolio managers have done a fairly good job in generating positive returns. It may lead to gain
investors confidence. Thus over all good performance of the funds is a sign of development in new era in
capital market.

On the basis of the analysis the performance of the schemes during the study period can be concluded to
be good.

Those who want to eliminate the risk element but still want to reap a better then it would be advisable to
go for debt or arbitrage schemes which ensure both safety and returns.

So the future of mutual funds in India is bright, because it meets investor s needs perfectly. This will
give boost to Indian investors and will attract foreign investors also. It will lead to the growth of strong
institutional framework that can support the capital markets in the long run.

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 BIBLIOGRAPHY

Websites

o www.mutualfundsindia.com

o www.moneycontrol.com

o www.google.com

o www.valueresearchonline.com

o www.amfiindia.com

o www.sbimf.com

o www.investmentz.com

Books and magazines

 Capital market & securities Law

 CS module

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 QUESTIONNAIRE
1) A study of preferences of the investors for investment in mutual fund?
a) Name
b)Phone
c)Age
d)Qualification

2) In which mutual fund you have invested ?Please tick .all applicable.
a) SBIMF
b)UTI
c)HDFC
d)Reliance
e)ICICI prudential funds
f)JM mutual fund
g)Other Specify

3) Where from you purchase mutual fund?

Directly from the AMCs ( )
Broken only ( )
Broken / sub-broken ( )
Other Sources ( )

4) When you invest in Mutual Fund which mode of investment will you
prefer?
a) One Time Investment b) Systematic Investment Plan (SIP)

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5) Which AMC (Asset Management Co.) will you prefer to invest ?
a) SBIMF
b) UTI
c) Reliance
d) HDFC
e) KOTAK
d)ICICI
e)JM Finance

6) What investing your money, which factor you prefermost? Any One.
a) Liquidity
b) Low Risk
c) High Return
d) Company Reputation

7) Have you ever invested your money in mutual fund?

a) Yes
b) No

8) In which kind of mutual fund you would like to invest?

a) Public b) Private

9) How would you like to receive the return every year?

a) Dividend Payout
b) Dividend re-investment
c) Growth in NAV

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10) Which types of investment procedure do you normally follow?
a) Lump SUM
b) systematic investment plan
c) Both

11) If not invested in mutual fund then why?

a) not aware of mf
b) high risk
c) Not any specific reason

12) If yes, in which mutual fund you have invested?

a) Axis MF
b) UTI
c) HDFC
d) Reliance
e) KOAK
f) Other Specific

13) A mutual fund is not ?

a) A portfolio of stock,bonds, and other securities
b) A company that manage investment portfolios
c) A pool of fund used to purchase securities on behalf of investors
d) A collective investment vehicle

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14) After UTI the first mutual fund were started by?
a) Private sector bank
b) Public sector bank
c) Financial institution
d) Non-banking Finance Companies

15) Mutual fund can benefit from economics of scale because of?
a) Portfolio diversification
b) Risk reduction
c) Large volume of trades
d) None of the above

16) A close ended mutual fund has a fixed?

a) NAC
b) Fund Size
c) Rate of Return
d) Number of Distributors

17) Of the following fund types, the higest risk is associated with?
a) Balanced fund
b) Gilt fund
c) Equity Growth Fund
d) Debt Fund

18) The customer of a mutual fund?

a) Is appointed for safekeeping of securities
b)Need not be an entity independent of the sponsors
c) Not required to be receive deliveries with SEBI
d) Does not give or receive deliveries of physical securities

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