CHAPTER 1

Executive

Summary

EXECUTIVE SUMMARY

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In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being. Mutual

Funds have not only contributed to the India growth story but have also helped families tap into

the success of Indian Industry. As information and awareness is rising more and more people are

enjoying the benefits of investing in mutual funds. The main reason the number of retail mutual

fund investors remains small is that nine in ten people with incomes in India do not know that

mutual funds exist. But once people are aware of mutual fund investment opportunities, the

number who decide to invest in mutual funds increases to as many as one in five people. The

trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer

is to understand which of the potential investors are more likely to buy mutual funds and to use

the right arguments in the sales process that customers will accept as important and relevant to

their decision.

This Project gave me a great learning experience and at the same time it gave me enough scope

to implement my analytical ability. The analysis and advice presented in this Project Report is

based on market research on the saving and investment practices of the investors and preferences

of the investors for investment in Mutual Funds. This Report will help to know about the

investors’ Preferences in Mutual Fund means Are they prefer any particular Asset Management

Company (AMC), Which type of Product they prefer, Which Option (Growth or Dividend) they

prefer or Which Investment Strategy they follow (Systematic Investment Plan or One time Plan).

This Project as a whole can be divided into two parts.

The first part gives an insight about Mutual Fund and its various aspects, the Company Profile,

Objectives of the study, Channel Management and Research Methodology. One can have a brief

knowledge about Mutual Fund and its basics through the Project.

The second part of the Project consists of data and its analysis the collection of Primary data I

SBI Magnum global fund, NAV values & BSE 100 index study to return . Study on all BSE 100

companies & all Indian Mutual fund companies .

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CHAPTER 2

Introduction

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INTRODUCTION

MUTUAL FUNDS –

CONCEPT, ORGANISATIONAL STRUCTURE & A

DVANTAGES & TYPES:

Concept :-

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 :

Mutual Fund Operation Flow Chart

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Investors

Fund Manager

Securities

Returns

Pool their money with

Passed back to

Invest inGenerates

Organization of Mutual Funds:-

There are many entities involved and the diagram below illustrates the organizational set

up of a mutual fund:

Organization of a Mutual Fund

Advantages of Mutual Funds:-

The advantages of investing in a Mutual Fund are:

Professional Management

Diversification

Convenient Administration

Return Potential

Low Costs

Liquidity

Transparency

Flexibility

Choice of schemes

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TYPES OF MUTUAL FUNDS

BY STRUCTURE

Open - Ended Schemes

Close - Ended Schemes

Interval Schemes

BY NATURE

Equity Fund

Debt Funds

Balanced Funds

BY INVESTMENT OBJECTIVE

Growth Schemes

Income Schemes

Balanced Schemes

Money Market Schemes

OTHER SCHEMES

Tax Saving Schemes

Index Schemes

Sector Specific Schemes

TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

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

position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors,

Being a collection of many stocks, an investors can go for picking a mutual fund might be easy.

There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual

funds in categories, mentioned below.

A). BY STRUCTURE

1. Open - Ended Schemes:

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.

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2. Close - Ended Schemes:

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.

3. Interval Schemes:

Interval Schemes are that scheme, which combines the features of open-ended and close-

ended schemes. The units may be traded on the stock exchange or may be open for sale or

redemption during pre-determined intervals at NAV related prices.

B) BY NATURE

1. Equity Fund:

These funds invest a maximum part of their corpus into equities holdings. The structure

of the fund may vary different for different schemes and the fund manager’s outlook on different

stocks. The Equity Funds are sub-classified depending upon their investment objective, as

follows:

Diversified Equity Funds

Mid-Cap Funds

Sector Specific Funds

Tax Savings Funds (ELSS)

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2. Debt Funds:

The objective of these Funds is to invest in debt papers. Government authorities, private

companies, banks and financial institutions are some of the major issuers of debt papers. By

investing in debt instruments, these funds ensure low risk and provide stable income to the

investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as

Government of India debt papers.

Income Funds: Invest a major portion into various debt instruments such as bonds,

corporate debentures and Government securities.

MIPs: Invests maximum of their total corpus in debt instruments while they take

minimum exposure in equities.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These

funds primarily invest in short term papers like Certificate of Deposits (CDs) and

Commercial Papers (CPs).

Liquid Funds: Also known as Money Market Schemes, These funds provides easy

liquidity and preservation of capital. These schemes invest in short-term instruments like

Treasury Bills, inter-bank call money market, CPs and CDs..

3. Balanced Funds:

As the name suggest they, are a mix of both equity and debt funds. They invest in both

equities and fixed income securities, which are in line with pre-defined investment objective of

the scheme.

.

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B). BY INVESTMENT OBJECTIVE:

Growth Schemes:

Growth Schemes are also known as equity schemes. The aim of these schemes is to

provide capital appreciation over medium to long term.

\

Income Schemes:

Income Schemes are also known as debt schemes. The aim of these schemes is to provide

regular and steady income to investors. These schemes generally invest in fixed income

securities such as bonds and corporate debentures. Capital appreciation in such schemes may be

limited.

Balanced Schemes:

Balanced Schemes aim to provide both growth and income by periodically distributing a

part of the income and capital gains they earn.

Money Market Schemes:

Money Market Schemes aim to provide easy liquidity, preservation of capital and

moderate income. These schemes generally invest in safer, short-term instruments, such as

treasury bills, certificates of deposit, commercial paper and inter-bank call money.

Load Funds:

A Load Fund is one that charges a commission for entry or exit. That is, each time you

buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range

from 1% to 2%.

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No-Load Funds:

A No-Load Fund is one that does not charge a commission for entry or exit. That is, no

commission is payable on purchase or sale of units in the fund.

OTHER SCHEMES

Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time

to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings

Scheme (ELSS) are eligible for rebate.

Index Schemes:

Index schemes attempt to replicate the performance of a particular index such as the BSE

Sensex or the NSE 50.

Sector Specific Schemes:

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

specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods

(FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of

the respective sectors/industries..

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ADVANTAGES OF MUTUAL FUNDS:

If mutual funds are emerging as the favorite investment vehicle, it is because of the many

advantages they have over other forms and the avenues of investing, particularly for the investor

who has limited resources available in terms of capital and the ability to carry out detailed

research and market monitoring. The following are the major advantages offered by mutual

funds to all investors:

1. Portfolio Diversification:

Each investor in the fund is a part owner of all the fund’s assets, thus enabling him to

hold a diversified investment portfolio even with a small amount of investment that would

otherwise require big capital.

2. Professional Management:

Even if an investor has a big amount of capital available to him, he benefits from the

professional management skills brought in by the fund in the management of the investor’s

portfolio. The investment management skills, along with the needed research into available

investment options, ensure a much better return than what an investor can manage on his own.

Few investors have the skill and resources of their own to succeed in today’s fast moving, global

and sophisticated markets.

3. Reduction/Diversification Of Risk:

When an investor invests directly, all the risk of potential loss is his own, whether he

places a deposit with a company or a bank, or he buys a share or debenture on his own or in any

other from. While investing in the pool of funds with investors, the potential losses are also

shared with other investors. The risk reduction is one of the most important benefits of a

collective investment vehicle like the mutual fund.

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4. Reduction Of Transaction Costs:

What is true of risk as also true of the transaction costs. The investor bears all the costs of

investing such as brokerage or custody of securities. When going through a fund, he has the

benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit

passed on to its investors.

5. Liquidity:

Often, investors hold shares or bonds they cannot directly, easily and quickly sell. When

they invest in the units of a fund, they can generally cash their investments any time, by selling

their units to the fund if open-ended, or selling them in the market if the fund is close-end.

Liquidity of investment is clearly a big benefit.

6. Convenience And Flexibility:

Mutual fund management companies offer many investor services that a direct market

investor cannot get. Investors can easily transfer their holding from one scheme to the other; get

updated market information and so on.

7. Tax Benefits:

Any income distributed after March 31, 2002 will be subject to tax in the assessment of

all Unit holders. However, as a measure of concession to Unit holders of open-ended equity-

oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a

concessional rate of 10.5%.

In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from the

Total Income will be admissible in respect of income from investments specified in Section 80L,

including income from Units of the Mutual Fund. Units of the schemes are not subject to

Wealth-Tax and Gift-Tax.

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8. Choice of Schemes:

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

9. Well Regulated:

All Mutual Funds are registered with SEBI and they function within the provisions of strict

regulations designed to protect the interests of investors. The operations of Mutual Funds are

regularly monitored by SEBI.

10. Transparency:

You get regular information on the value of your investment in addition to disclosure on the

specific investments made by your scheme, the proportion invested in each class of assets

and the fund manager's investment strategy and outlook.

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DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS:

1. No Control Over Costs:

An investor in a mutual fund has no control of the overall costs of investing. The investor

pays investment management fees as long as he remains with the fund, albeit in return for the

professional management and research. Fees are payable even if the value of his investments is

declining. A mutual fund investor also pays fund distribution costs, which he would not incur in

direct investing. However, this shortcoming only means that there is a cost to obtain the mutual

fund services.

2. No Tailor-Made Portfolio:

Investors who invest on their own can build their own portfolios of shares and bonds and

other securities. Investing through fund means he delegates this decision to the fund managers.

The very-high-net-worth individuals or large corporate investors may find this to be a constraint

in achieving their objectives. However, most mutual fund managers help investors overcome this

constraint by offering families of funds- a large number of different schemes- within their own

management company. An investor can choose from different investment plans and constructs a

portfolio to his choice.

3. Managing A Portfolio Of Funds:

Availability of a large number of funds can actually mean too much choice for the

investor. He may again need advice on how to select a fund to achieve his objectives, quite

similar to the situation when he has individual shares or bonds to select.

4. The Wisdom Of Professional Management:

That's right, this is not an advantage. The average mutual fund manager is no better at

picking stocks than the average nonprofessional, but charges fees.

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5. No Control :

Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat

of somebody else's car

6. Dilution:

Mutual funds generally have such small holdings of so many different stocks that

insanely great performance by a fund's top holdings still doesn't make much of a difference in a

mutual fund's total performance.

7. Buried Costs:

Many mutual funds specialize in burying their costs and in hiring salesmen who do not make

those costs clear to their clients.

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SCOPE & IMPORTANCE OF MUTUAL FUND

Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a higher return

as they invest in a diversified basket of selected securities.

Low Costs

Mutual Funds are a relatively less expensive way to invest compared to directly investing

in the capital markets because the benefits of scale in brokerage, custodial and other fees

translate into lower costs for investors.

Liquidity

In open-end schemes, the investor gets the money back promptly at net asset value

related prices from the Mutual Fund. In close-end schemes, the units can be sold on a stock

exchange at the prevailing market price or the investor can avail of the facility of direct

repurchase at NAV related prices by the Mutual Fund.

Transparency

You get regular information on the value of your investment in addition to disclosure on

the specific investments made by your scheme, the proportion invested in each class of assets

and the fund manager’s investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans and dividend

reinvestment plans, you can systematically invest or withdraw funds according to your needs and

convenience.

Affordability

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Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual

fund because of its large corpus allows even a small investor to take the benefit of its investment

strategy.

Choice of Schemes

Mutual Funds offer a family of schemes to suit our varying needs over a lifetime.

Well Regulated

All Mutual Funds are registered with SEBI and they function within the provisions of

strict regulations designed to protect the interests of investors. The operations of Mutual Funds

are regularly monitored by SEBI.

Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of the assets 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 rise 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.

Note: - In order to understand the term NAV more accurately it is important to learn it’s

calculation which is explained as under: -

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 +

Dividends/interest accrued Amount due on unpaid assets Expenses accrued but not paid.

Details on the above items17

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. For 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 AMCs on valuation and some of the AMCs are believed to take

advantage of this and adopt flexible valuation policies depending on the situation.

Interest is payable on debentures/bonds on a 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 the 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 intermediate period, it is deemed to be ‘‘accrued’’.

Expenses including management fees, custody charges etc. are calculated on a daily basis.

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STRUCTURE OF INDIAN MUTUAL FUND INDUSTRY

The Indian mutual fund industry is dominated by the Unit Trust of India which has a total

corpus of Rs 700bn collected from more than 20 million investors. The UTI has many

funds/schemes in all categories ie equity, balanced income etc. with some being open-ended and

some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is a

balanced fund, is the biggest scheme with a corpus of about Rs 200 bn. UTI was floated by

financial institutions and is governed by a special act of Parliament. Most of its investors believe

that the UTI is government owned and controlled, which, while legally incorrect, is true for all

practical purposes.

The second largest category of mutual funds are the ones floated by nationalized banks.

Canbank Asset Management floated by Canara Bank and SBI Funds Management floated by the

State Bank of India are the largest of these. GIC AMC floated by General Insurance Corporation

and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones. The

aggregate corpus of funds managed by this category of AMCs is about Rs 150 bn.

The third largest category of mutual funds is the ones floated by the private sector and by foreign

asset management companies. The largest of these are Prudential ICICI AMC and Birla Sun Life

AMC>The aggregate corpus of assets managed by this category of AMCs is in excess of Rs 250

bn.

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Global Scenario

Some basic facts:

The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S.

against a corpus of $ 100 million in India.

Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and

Capital are non-bank mutual funds in this group.

In the U.S. the total number of schemes is higher than that of the listed companies while

in India we have just 277 schemes

Internationally, mutual funds are allowed to go short. In India fund managers do not have

such leeway.

In the U.S. about 9.7 million households will manage their assets on-line by the year

2003, such a facility is not yet of avail in India.

On- line trading is a great idea to reduce management expenses from the current 2 % of

total assets to about 0.75 % of the total assets.

72% of the core customer base of mutual funds in the top 50-broking firms in the U.S. are

expected to trade on-line by 2003.    

(Source: The Financial Express September, 99)

Internationally, on-line investing continues its meteoric rise. Many have debated about the

success of e- commerce and its breakthroughs, but it is true that this aspect of technology could

and will change the way financial sectors function. However, mutual funds cannot be left far

behind. They have realized the potential of the Internet and are equipping themselves to perform

better.

In fact in advanced countries like the U.S.A, mutual funds buy- sell transactions have already

begun on the Net, while in India the Net is used as a source of Information.20

Such changes could facilitate easy access, lower intermediation costs and better services for all.

A research agency that specializes in internet technology estimates that over the next four years

Mutual Fund Assets traded on- line will grow ten folds from $ 128 billion to $ 1,227 billion ;

whereas equity assets traded on-line will increase during the period from $ 246 billion to $ 1,561

billion. This will increase the share of mutual funds from 34% to 40% during the period.

(Source: The Financial Express September ,99)

Such increases in volumes are expected to bring about large changes in the way Mutual Funds

conduct their business.

Here are some of the basic changes that have taken place since the advent of the Net.

Lower Costs: Distribution of funds will fall in the online trading regime by 2003 . Mutual

funds could bring down their administrative costs to 0.75% if trading is done on- line. As

per SEBI regulations , bond funds can charge a maximum of 2.25% and equity funds can

charge 2.5% as administrative fees. Therefore if the administrative costs are low , the

benefits are passed down and hence Mutual Funds are able to attract mire investors and

increase their asset base.

Better advice: Mutual funds could provide better advice to their investors through the Net

rather than through the traditional investment routes where there is an additional channel

to deal with the Brokers. Direct dealing with the fund could help the investor with their

financial planning.

In India , brokers could get more Net savvy than investors and could help the investors

with the knowledge through get from the Net.

New investors would prefer online : Mutual funds can target investors who are young

individuals and who are Net savvy, since servicing them would be easier on the Net.

India has around 1.6 million net users who are prime target for these funds and this could

just be the beginning. The Internet users are going to increase dramatically and mutual

funds are going to be the best beneficiary. With smaller administrative costs more funds

would be mobilized .A fund manager must be ready to tackle the volatility and will have

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to maintain sufficient amount of investments which are high liquidity and low yielding

investments to honor redemption.

Net based advertisements: There will be more sites involved in ads and promotion of

mutual funds. In the U.S. sites like AOL offer detailed research and financial details

about the functioning of different funds and their performance statistics. A is witnessing a

genesis in this area. 

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Future Scenario

The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few

years as investor’s shift their assets from banks and other traditional avenues. Some of the older

public and private sector players will either close shop or be taken over.

Out of ten public sector players five will sell out, close down or merge with stronger players in

three to four years. In the private sector this trend has already started with two mergers and one

takeover. Here too some of them will down their shutters in the near future to come.

But this does not mean there is no room for other players. The market will witness a flurry of

new players entering the arena. There will be a large number of offers from various asset

management companies in the time to come. Some big names like Fidelity, Principal, Old

Mutual etc. are looking at Indian market seriously. One important reason for it is that most major

players already have presence here and hence these big names would hardly like to get left

behind.

In the U.S. most mutual funds concentrate only on financial funds like equity and debt. Some

like real estate funds and commodity funds also take an exposure to physical assets. The latter

type of funds are preferred by corporate’s who want to hedge their exposure to the commodities

they deal with.

For instance, a cable manufacturer who needs 100 tons of Copper in the month of January could

buy an equivalent amount of copper by investing in a copper fund. For Example, Permanent

Portfolio Fund, a conservative U.S. based fund invests a fixed percentage of it’s corpus in Gold,

Silver, Swiss francs, specific stocks on various bourses around the world, short –term and long-

term U.S. treasuries etc.

In U.S.A. apart from bullion funds there are copper funds, precious metal funds and real estate

funds (investing in real estate and other related assets as well.).In India, the Canada based

Dundee mutual fund is planning to launch a gold and a real estate fund before the year-end.

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In developed countries like the U.S.A there are funds to satisfy everybody’s requirement, but in

India only the tip of the iceberg has been explored. In the near future India too will concentrate

on financial as well as physical funds.

The mutual fund industry is awaiting the introduction of DERIVATIVES in the country as this

would enable it to hedge its risk and this in turn would be reflected in it’s Net Asset Value

(NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes to trade in

Derivatives. Importantly, many market players have called on the Regulator to initiate the

process immediately, so that the mutual funds can implement the changes that are required to

trade in Derivatives.

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RISK FACTORS OF MUTUAL FUNDS :

1. The Risk-Return Trade-Off:

The most important relationship to understand is the risk-return trade-off. Higher the risk

greater the returns / loss and lower the risk lesser the returns/loss..

2. Market Risk:

Sometimes prices and yields of all securities rise and fall. Broad outside influences

affecting the market in general lead to this. This is true, may it be big corporations or smaller

mid-sized companies.

3. Credit Risk:

The debt servicing ability (may it be interest payments or repayment of principal) of a

company through its cashflows determines the Credit Risk faced by you.

4. Inflation Risk:

The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of times

people make conservative investment decisions to protect their capital but end up with a sum of

money that can buy less than what the principal could at the time of the investment. Interest

Rate Risk:

In a free market economy interest rates are difficult if not impossible to predict. Changes

in interest rates affect the prices of bonds as well as equities.

5. Political / Government Policy Risk:

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Changes in government policy and political decision can change the investment

environment. They can create a favorable environment for investment or vice versa.

6. Liquidity Risk:

Liquidity risk arises when it becomes difficult to sell the securities that one has

purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as

well as internal risk controls that lean towards purchase of liquid securities.

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WORKING OF MUTUAL FUNDS

The mutual fund collects money directly or through brokers from investors. The money is

invested in various instruments depending on the objective of the scheme. The income generated

by selling securities or capital appreciation of these securities is passed on to the investors in

proportion to their investment in the scheme. The investments are divided into units and the

value of the units will be reflected in Net Asset Value or NAV of the unit. NAV is the market

value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of

the scheme divided by the number of units outstanding on the valuation date. Mutual fund

companies provide daily net asset value of their schemes to their investors. NAV is important, as

it will determine the price at which you buy or redeem the units of a scheme. Depending on the

load structure of the scheme, you have to pay entry or exit load.

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STRUCTURE OF A MUTUAL FUND:

India has a legal framework within which Mutual Fund have to be constituted. In India

open and close-end funds operate under the same regulatory structure i.e. as unit Trusts. A

Mutual Fund in India is allowed to issue open-end and close-end schemes under a common legal

structure. The structure that is required to be followed by any Mutual Fund in India is laid down

under SEBI (Mutual Fund) Regulations, 1996.

The Fund Sponsor:

Sponsor is defined under SEBI regulations as any person who, acting alone or in

combination of another corporate body establishes a Mutual Fund.

Mutual Funds as Trusts:

A Mutual Fund in India is constituted in the form of Public trust Act, 1882. The Fund

sponsor acts as a settlor of the Trust, contributing to its initial capital and appoints a trustee to

hold the assets of the trust for the benefit of the unit-holders.

.

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Trustees:

A Trust is created through a document called the Trust Deed that is executed by the fund

sponsor in favour of the trustees. The Trust- the Mutual Fund – may be managed by a board of

trustees- a body of individuals, or a trust company- a corporate body. Most of the funds in India

are managed by Boards of Trustees.

The Asset Management Companies:

The role of an Asset Management Company (AMC) is to act as the investment manager

of the Trust under the board supervision and the guidance of the Trustees..

Custodian and Depositories:

.The custodian is appointed by the Board of Trustees for safekeeping of securities or

participating in any clearance system through approved depository companies on behalf of the

Mutual Fund and it must fulfill its responsibilities in accordance with its agreement with the

Mutual Fund.

.

Bankers:

A Fund’s activities involve dealing in money on a continuous basis primarily with respect

to buying and selling units, paying for investment made, receiving the proceeds from sale of the

investments and discharging its obligations towards operating expenses. Thus the Fund’s banker

plays an important role to determine quality of service that the fund gives in timely delivery of

remittances etc.

Transfer Agents:

Transfer agents are responsible for issuing and redeeming units of the Mutual Fund and

provide other related services such as preparation of transfer documents and updating investor

records.

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REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA:

The structure of mutual funds in India is guided by the SEBI. Regulations, 1996.These

regulations make it mandatory for mutual fund to have three structures of sponsor trustee and

asset Management Company. The sponsor of the mutual fund and appoints the trustees. The

trustees are responsible to the investors in mutual fund and appoint the AMC for managing the

investment portfolio. The AMC is the business face of the mutual fund, as it manages all the

affairs of the mutual fund. The AMC and the mutual fund have to be registered with SEBI.

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REGULATORY ASPECTS

Schemes of a Mutual Fund

The asset management company shall launch no scheme unless the trustees approve such

scheme and a copy of the offer document has been filed with the Board.

Every mutual fund shall along with the offer document of each scheme pay filing fees.

The offer document shall contain disclosures which are adequate in order to enable the

investors to make informed investment decision including the disclosure on maximum

investments proposed to be made by the scheme in the listed securities of the group

companies of the sponsor. A close-ended scheme shall be fully redeemed at the end of the

maturity period. “Unless a majority of the unit holders otherwise decide for its rollover

by passing a resolution”.

The mutual fund and asset management company shall be liable to refund the application

money to the applicants,-

(i) If the mutual fund fails to receive the minimum subscription amount referred to in clause

(a) of sub-regulation (1);

(ii) If the moneys received from the applicants for units are in excess of subscription as

referred to in clause (b) of sub-regulation (1).

The asset management company shall issue to the applicant whose application has been

accepted, unit certificates or a statement of accounts specifying the number of units

allotted to the applicant as soon as possible but not later than six weeks from the date of

closure of the initial subscription list and or from the date of receipt of the request from

the unit holders in any open ended scheme.

31

CHAPTER – 3

Introduction

of Industry

32

CORPORATE PROFILE

Our Identity

With 25 years of rich experience in fund management, we at SBI Funds Management Pvt. Ltd.

bring forward our expertise by consistently delivering value to our investors. We have a strong

and proud lineage that traces back to the State Bank of India (SBI) - India's largest bank. We are

a Joint Venture between SBI and AMUNDI (France), one of the world's leading fund

management companies.

With our network of over 222 points of acceptance across India, we deliver value and nurture the

trust of our vast and varied family of investors.

Excellence has no substitute. And to ensure excellence right from the first stage of product

development to the post-investment stage, we are ably guided by our philosophy of ‘growth

through innovation’ and our stable investment policies. This dedication is what helps our

customers achieve their financial objectives.

Our Vision

“To be the most preferred and the largest fund house for all asset classes, with a consistent track

record of excellent returns and best standards in customer service, product innovation,

technology and HR practices.”

Our Services

33

Mutual Funds

Investors are our priority. Our mission has been to establish Mutual Funds as a viable investment

option to the masses in the country. Working towards it, we developed innovative, need-specific

products and educated the investors about the added benefits of investing in capital markets via

Mutual Funds.

Today, we have been actively managing our investor's assets not only through our investment

expertise in domestic mutual funds, but also offshore funds and portfolio management advisory

services for institutional investors.

This makes us one of the largest investment management firms in India, managing investment

mandates of over 5.4 million investors.

Portfolio Management and Advisory Services

SBI Funds Management has emerged as one of the largest player in India advising various

financial institutions, pension funds, and local and international asset management companies.

We have excelled by understanding our investor's requirements and terms of risk / return

expectations, based on which we suggest customized asset portfolio recommendations. We also

provide an integrated end-to-end customized asset management solution for institutions in terms

of advisory service, discretionary and non-discretionary portfolio management services.

Offshore Funds

SBI Funds Management has been successfully managing and advising India's dedicated offshore

funds since 1988. SBI Funds Management was the 1st bank sponsored asset management

company fund to launch an offshore fund called 'SBI Resurgent India Opportunities Fund' with

an objective to provide our investors with opportunities for long-term growth in capital, through

well-researched investments in a diversified basket of stocks of Indian Companies.

34

INVESTMENT TEAM

Navneet Munot

Executive Director & Chief Investment Officer

Erwan Keraudy

VP – Investments

Fund Managers - Equity

R. Srinivasan

Head - Equities

Jayesh Shroff

Fund Manager

Sohini Andani

Fund Manager

Richard D’Souza

Fund Manager

Ajit Dange

Fund Manager

Ruchit Mehta

Fund Manager

Raviprakash Sharma

Chief Dealer & Fund Manager

Saurabh Pant

Fund Manager

Tanmaya Desai

Fund Manager

Neeraj Kumar

Dealer

35

Fund Managers - Fixed Income

Rajeev Radhakrishnan

Head - Fixed Income

Dinesh Ahuja

Fund Manager

R Arun

Fund Manager

Dinesh Balachandran

Fund Manager

Portfolio Management Services

Nipa Ladiwala

Vice President – PMS (Institutional)

Aashish Wakankar

Vice President – PMS (Offshore)

Amruth Rao

Senior Fund Manager – PMS (Debt

BOARD OF DIRECTORS – AMC

Mr. Pratip Chaudhuri

Chairman & Associate Director

Mr. Deepak Kumar Chatterjee

Managing Director & CEO

Mr. Shishir Joshipura

Independent Director

Dr. H. Sadhak

Independent Director

Mrs. Madhu Dubhashi

Independent Director

Dr. H. K. Pradhan

Independent Director

Mr. Jashvant Raval Mr. Fathi Jerfel

36

Independent Director Associate Director

Mr. Thierry Raymond Mequillet

Associate Director

Mr. Philippe Batchevitch

Alternate Director to Mr. Jerfel

TRUSTEES

SBI Mutual Fund Trustee Company Private Limited (the “Trustee”), through its Board of Directors discharge its obligations as Trustee of the SBI Mutual Fund. The Board of Directors of SBI Mutual Fund Trustee Company Private Limited are as under:

Shri T.L. Palani Kumar

Independent

Shri C.M. Dixit

Independent

Ms. Sandra Martyres

Associate

Ms. Bharati Rao

Associate

Mr. Krishnamurthy Vijayan

Independent

Mr. Shriniwas Joshi

Independent

37

MANAGEMENT TEAM

Mr. Deepak Kumar Chatterjee

MD & CEO

Mr. Philippe Batchevitch

Deputy CEO

Mr. K. T. Ravindran

Executive Director & Chief Operating Officer

Mr. Navneet Munot

Executive Director & Chief Investment Officer

Mr. R. S. Srinivas Jain

Executive Director & Chief Marketing Officer

(Strategy and International Business)

Mr. D. P. Singh

Executive Director & Chief Marketing Officer (Domestic Business)

Ms. Aparna Nirgude

Chief Risk Officer

Mr. Rakesh Kaushik

Senior Vice President (Accounts & Administration)

Ms. Vinaya Datar

CS & Compliance Officer

Mr. C. A. Santosh

Head - Customer Service

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 associate

General Asset Management, one of the national leading fund management fund institute.

38

Exploiting expertise, compounding growth:

In eighteen years of operation, the fund has launched thirty-two 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 3.8 million investors have reposed their faith in the wealth

generation expertise of the Mutual Fund.

Schemes of the Mutual fund have consistently outperformed benchmark indices

and have emerged as the preferred investment for millions of investors and HNI’s.

Today, the fund manages over Rs. 20000 crore of assets and has a diverse profile

of investors actively parking their investments across 40 active schemes.

The fund serves this vast family of investors by reaching out to them through

network of over 100 points of acceptance, 26 investor service centers, 33 investor

service desks and 52 district organizers.

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

Resurgent India Opportunities Fund.

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

Our expertise and excellent performance is frequently recognized by the mutual fund

industry.

SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award - 8

times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year 2005-

2006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the Year Award

2007 and 5 Awards for our schemes.

39

SBI Magnum Global Fund

Fund Features

Scheme Particulars

Type Open Ended

Nature Equity (Equity: 95.44%, Debt: 0%, Cash: 4.56%)

Option Growth

Inception Date Sep 30, 1994

Face Value 10

Fund Size (Rs.Crore) 946.06 as on Jan 31, 2013

Fund Manager Rama Iyer Srinivasan .

SIP NA

STP NA

SWP NA

Expense ratio(%) 2.27

Portfolio Turnover Ratio(%)

62

Last Divdend Declared 24

Minimum Investment (Rs)

2000

Purchase Redemptions Daily

NAV Calculation Daily

Entry Load Entry Load is 0%. Entry Load is 0%.

Exit LoadIf redeemed bet. 0 Year to 1 Year; If redeemed bet. 0 Year to 1 Year; Exit load is 1%.

40

41

SBI Magnum Global Fund

42

BSE 100 Index

Sector Breakdown

25%

20%14%10%

10%

9%7% 5%

Oil & Gas Information TechnologyCapital GoodsFMCGMetal, Metal product & MiningTransport Equipment’sPowerTelecomHousing Related

Sector AllocationFinance 22.26Oil & Gas 17.55Information Technology 14.53Capital Goods 9.88FMCG 7.17Metal, Metal product & Mining 6.98Transport Equipment’s 6.59Power 5.12Telecom 4,26Housing Related 3.26

43

Some of the AMCs operating currently are :

Name of the AMC Nature of

ownership

Alliance Capital Asset management (I) Private Limited Private foreign

Birla Sun Life Asset Management Company Limited Private Indian

Mank of Baroda Asset management Company Limited Banks

Bank of India Asset Management Company Limited Banks

Canbank Investment Management Servies Limited Banks

Cholamanadalam Cazenove Asset Management Company Private foreign Limited

Dundee Asset Management Company Limited Private foreign

DSP Merrill Lynch Asset Management Company Limited Private foreign

Escorts Asset Management Limited Private Indian

First India Asset Management Limited Private Indian

GIC Asset Management Company Limited Institutions

IDBI Investment Management Company Limited Institutions

Indfund Management Limited Banks

ING Investment Asset Management Company Private Private foreign limited

JM Capital Management Limited Private Indian

Jardine Fleming (I) Asset Management Limited Private foreign

Kotak Mahindra Asset Management company Limited Private Indian

44

Jeevan Bima Sahayog Asset Management Company Institutions Limited

Morgan Stanley Asset Management Company Private Private foreign Limited

Punjab National Bank Asset Management Company Banks

Limited

Reliance Capital Asset Management Company Limited Private Indian

State Bank of India Funds Management Limited Banks

Shriram Asset Management company Limited Private Indian

Sun F and C Asset Management (I) Private Limited Private foreign

Sundaram Newton Asset Management Company Limited Private foreign

Tata Asset Management Company Limited Private Indian

Credit Capital Asset Management Company Limited Private Indian

Templeton Asset Management (India) Private Limited Private foreign

Unit Trust of India Institutions

Zurich Asset management Company (I) Limited Private foreign

45

CHAPTER – 4

Company Profile

46

State Bank of India State Bank of India (SBI) (हिं��दी� - भा�रतीय स्टे�टे बैं�क) is a multinational banking  and financial services company based in India. It is astate-owned corporation with its headquarters in Mumbai, Maharashtra. As at December 2012, it had assets of US$501 billion and 15,003 branches, including 157 foreign offices making it the largest banking and financial services company in India by assests.

The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks—Bank of Calcutta and Bank of Bombay—to form the Imperial Bank of India, which in turn became the State Bank of India. The Government of India nationalised the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India. SBI has been ranked 285th in the Fortune Global 500 rankings of the world's biggest corporations for the year 2012.

SBI provides a range of banking products through its network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). SBI has 14 regional hubs and 57 Zonal Offices that are located at important cities throughout the country.

SBI is a regional banking behemoth and has 20% market share in deposits and loans among Indian commercial banks.

The State Bank of India was named the 29th most reputed company in the world according to Forbes 2009 rankings  and was the only bank featured in the "top 10 brands of India" list in an annual survey conducted by Brand Finance and The Economic Times in 2010

47

Story

Seal of Imperial Bank of India.

The roots of the State Bank of India lie in the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal was one of three Presidency banks, the other two being the Bank of Bombay(incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint stock companies and were the result of the royal charters. These three banks received the exclusive right to issue paper currency till 1861 when with the Paper Currency Act, the right was taken over by the Government of India. The Presidency banks amalgamated on 27 January 1921, and the re-organized banking entity took as its name Imperial Bank of India. The Imperial Bank of India remained a joint stock company but without Government participation.

Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 30 April 1955, the Imperial Bank of India became the State Bank of India. The government of India recently acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority.

In 1959, the government passed the State Bank of India (Subsidiary Banks) Act, which made eight state banks associates of SBI. A process of consolidation began on 13 September 2008, when the State Bank of Saurashtra merged with SBI.

SBI has acquired local banks in rescues. The first was the Bank of Behar (est. 1911), which SBI acquired in 1969, together with its 28 branches. The next year SBI acquired National Bank of Lahore (est. 1942), which had 24 branches. Five years later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had been established in 1916 in Gwalior State, under the patronage of Maharaja Madho Rao Sc india. The bank had been the Dukan Pichadi, a small moneylender, owned by the Maharaja. The new banks first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of Travancore, already had an extensive network in Kerala.

48

Structure

Current Board of Directors

As on 14 January 2013, there are fifteen members in the SBI board of directors:- [6]

Pratip Chaudhuri  (Chairman) Hemant G. Contractor (Managing Director) Diwakar Gupta (Managing Director) A. Krishna Kumar (Managing Director) S. Visvanathan (Managing Director) S. Venkatachalam (Director) D. Sundaram (Director) Parthasarathy Iyengar (Director) Thomas Mathew (Director) S.K. Mukherjee (Officer Employee Director) Rajiv Kumar (Director) Jyoti Bhushan Mohapatra (Workmen Employee Director) Deepak Amin (Director) Harichandra Bahadur Singh (Director) D. K. Mittal (Director)

49

International presence

The Israeli branch of the State Bank of India located in Ramat Gan.

As of 31 March 2012, the bank had 173 overseas offices spread over 34 countries. It has branches of the parent in Moscow, Colombo ,Dhaka, Frankfurt, Hong Kong, Tehran, Johannesburg, London, Los Angeles, Male in the Maldives, Muscat, Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town. It also has an ADB in Boston, USA.

SBI operates several foreign subsidiaries or affiliates. In 1990, it established an offshore bank: State Bank of India (Mauritius).

State Bank of India (S.B.I.) Branch at Tsim Sha Tsui, Hong Kong

In 1982, the bank established a subsidiary, State Bank of India (California), which now has ten branches – nine branches in the state of California and one in Washington, D.C. The 10th branch was opened in Fremont, California on 28 March 2011. The other eight branches in California are

50

located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and Bakersfield.

The Canadian subsidiary, State Bank of India (Canada) also dates to 1982. It has seven branches, four in the Toronto area and three in British Columbia.

In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria.

In Nepal, SBI owns 55% of Nepal SBI Bank, which has branches throughout the country. In Moscow, SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest. In Indonesia, it owns 76% of PT Bank Indo Monex.

The State Bank of India already has a branch in Shanghai and plans to open one in Tianjin.[7]

In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired for US$8 million in October 2005.

Associate banks

Main Branch of SBI in Mumbai.

SBI has five associate banks; all use the State Bank of India logo, which is a blue circle, and all use the "State Bank of" name, followed by the regional headquarters' name:

State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore

51

Earlier SBI had seven associate banks, all of which had belonged to princely states until the government nationalised them between October 1959 and May 1960. In tune with the first Five Year Plan, which prioritized the development of rural India, the government integrated these banks into State Bank of India system to expand its rural outreach. There has been a proposal to merge all the associate banks into SBI to create a "mega bank" and streamline the group's operations.[9]

The first step towards unification occurred on 13 August 2008 when State Bank of Saurashtra merged with SBI, reducing the number of associate state banks from seven to six. Then on 19 June 2009 the SBI board approved the absorption of State Bank of Indore. SBI holds 98.3% in State Bank of Indore. (Individuals who held the shares prior to its takeover by the government hold the balance of 1.77%.)[10]

The acquisition of State Bank of Indore added 470 branches to SBI's existing network of branches. Also, following the acquisition, SBI's total assets will inch very close to the  10 trillion mark. The total assets of SBI and the State Bank of Indore stood at  9,981,190 million as of March 2009. The process of merging of State Bank of Indore was completed by April 2010, and the SBI Indore branches started functioning as SBI branches on 26 August 2010.

State Bank of India Mumbai LHO.

Non-banking subsidiaries

Apart from its five associate banks, SBI also has the following non-banking subsidiaries:

SBI Capital Markets  Ltd SBI Funds Management Pvt Ltd SBI Factors & Commercial Services Pvt Ltd SBI Cards  & Payments Services Pvt. Ltd. (SBICPSL) SBI DFHI Ltd SBI Life Insurance Company Limited SBI General Insurance

52

In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas (with 26% of the remaining capital), to form a joint venture life insurance company named SBI Life Insurance company Ltd. In 2004, SBI DFHI (Discount and Finance House of India) was founded with its headquarters in Mumbai.

Other SBI service points

SBI has 27,000+ ATMs (25,000th ATM was inaugurated by the then Chairman of State Bank Shri O.P. Bhatt on 31 March 2011, the day of his retirement); and SBI group (including associate banks) has about 45,000 ATMs. SBI has become the first bank to install an ATM at Drass in the Jammu & Kashmir Kargil region. This was the Bank's 27,032nd ATM on 27 July 2012.

Logo and slogan

The logo of the State Bank of India is a blue circle with a small cut in the bottom that depicts perfection and the small man the common man - being the center of the bank's business.

Slogans: "PURE BANKING, NOTHING ELSE", "WITH YOU - ALL THE WAY", "A BANK OF THE COMMON MAN", "THE BANKER TO EVERY INDIAN", "THE NATION BANKS ON US".

Recent awards and recognitions

Best Online Banking Award, Best Customer Initiative Award & Best Risk Management Award (Runner Up) by IBA Banking Technology Awards 2010

The Bank of the year 2009, India (won the second year in a row) by The Banker Magazine Best Bank – Large and Most Socially Responsible Bank by the Business Bank Awards 2009 Best Bank 2009 by Business India

53

The Most Trusted Brand 2009 by The Economic Times Most Preferred Bank & Most preferred Home loan provider by CNBC Visionaries of Financial Inclusion By FINO Technology Bank of the Year by IBA Banking Technology Awards SKOCH Award 2010 for Virtual corporation Category for its e-payment solution The Brand Trust Report  11th most trusted brand in Hindustan.

Major competitor

Some of the major competitors for SBI in the banking sector are ICICI Bank, HDFC Bank, Axis Bank, Punjab National Bank, UCO Bank and Bank of Baroda. However in terms of average market share, SBI is by far the largest player in the market.

54

CHAPTER – 5

Objective of

The study

55

OBJECTIVE OF THE STUDY

1. To Study the mutual fund industry in detail.

2. To compare SBI Magnum Global Fund with BSE 100 (Benchmark).

3. To compare Return-wise performance of the Fund with BSE 100 (Benchmark).

4. To compare the sectoral Allocation of the Fund with BSE 100 (Benchmark).

5. To compare the periodic change in the Net Asset Value of the Fund with percentage

change in BSE 100 (Benchmark) Index.

Rationale of the study

This project study is related to the performance of SBI mutual fund and its

comparison with BSE’s performance. This project will remain more important for the SBI and

also other financial organization can take review for different considerations. This will help the

customers, financial planners, agents and the employees also.

Overall knowledge is one of the important contents of this project, which will be completed with lots of information

56

CHAPTER – 6

Research Design

57

RESEARCH METHODOLOGY

RESEARCH DESIGN

a) Type of Research:There are so many type of research but we most use i.e.

Exploratory Research.

Descriptive Research..

The design chosen for this project was “DESCRIPTIVE RESEARCH DESIGN”.

Which is used when the purpose of the research is to?

Describe the characteristics of the certain groups.

Estimate the proportion of the people in a specified population who behave in a certain

way.

Make specific predictions.

b) DATA COLLECTION

Secondary Data

The secondary data means the data which is available publicly and can be used for the study. The

data is secondary data and it is collected from the financial statements, the annual reports of the

company, some books and the websites of the company.

For secondary data collection the research instruments are.

Published material on internet

Annual report of SBI

Reports and record

Books58

EXPECTED CONTRIBUTION

This project will help organization and its stakeholders by following means

1. It can directly identify the overall performance of this fund.

2. To identify the importance of mutual fund in overall financial marker.

For which sector the investment of SBI Mutual fund is necessary So finally from this project it can drawn the importance of SBI mutual fund

59

CHAPTER – 7

Data analysis

and

Data interpretation

60

Table showing Return of SBI magnum global fund & BSE 100 INDEXDuring the year 2007-08

Month SBIBSE 100

Apr-07 6.83 8.80May-07 5.37 5.24Jun-07 2.08 1.37Jul-07 2.60 4.95

Aug-07 1.90 -1.00Sep-07 8.51 13.60Oct-07 8.61 15.59

Nov-07 6.14 -1.39Dec-07 10.19 6.35Jan-08 -18.34 -15.60Feb-08 -1.94 -1.20Mar-08 -12.24 -10.80

SD 8.72 9.09AVG RETURN 1.64 2.16

Interpretation :-

During the year 2007-08,the overall return of BSE 100 index is more than SBI Magnum global fund (BSE 100 generating monthly average return of 2.16% while SBI magnum fund is generating 1.64%). However, we notice that there is a negative trend in the market during the months Nov 2007, Jan to March 08 in the market. We notice that both the BSE and the SBI Magnum Global Fund have moved in tandem with each other based on the market reactions to the overall demand and supply factors. Major shares invested in the dominant sectors comprise industries like Infrastructure, Banking, Pharma, IT, which form a major part of the portfolio invested by both BSE 100 and the SBI Magnum Global Fund. The monthly average return of BSE 100 index while is relatively more than that of SBI Magnum Global Fund the risk as indicated through the S.D is marginally more in case of BSE 100 index.(BSE 100 index is showing an S.D of 9.08 while SBI Magnum global fund is showing an S.D. of 8.71)

61

Apr-07

May-07

Jun-07Jul-0

7

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

-25

-20

-15

-10

-5

0

5

10

15

20

Series1SBIBSE 100

Table showing Return of SBI magnum global fund & BSE 100 INDEXDuring the year 2008-09

Month SBIBSE 100

Apr-08 31.62 10.90May-08 -6.84 -6.98Jun-08 -17.84 -19.77Jul-08 8.27 6.26

Aug-08 0.51 3.65Sep-08 -13.77 -11.40Oct-08 -31.11 -26.73

Nov-08 -17.17 -10.60Dec-08 11.88 7.71Jan-09 -11.61 -4.61Feb-09 -48.66 -5.01

Mar-09110.3

9 11.09

SD 40.11 12.15AVG RETURN 1.31 -3.79

Interpretation :-

During the year 2008-09,the overall return of SBI Magnum global fund index is more than BSE 100 (SBI magnum fund is generating 1.31% while BSE 100 generating monthly average return of -3.79 %). However, we notice month of Feb. to Mar. 2009 the value of SBI Magnum global fund has increased tremendously. The monthly average return SBI Magnum global fund index while is relatively more than that of BSE 100 index the risk as indicated through the S.D is marginally more in case of SBI Magnum global fund.( SBI Magnum global fund is showing an S.D of 40.11 while BSE 100 index is showing an S.D. of 12.15)

62

Apr-08

May-08

Jun-08Jul-0

8

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

-60

-40

-20

0

20

40

60

80

100

120

Series1SBIBSE 100

Table showing Return of SBI magnum global fund & BSE 100 INDEXDuring the year 2009-10

Month SBIBSE 100

Apr-0910.6

8 17.07

May-0938.5

3 28.21Jun-09 -2.00 -2.11Jul-09 9.34 7.74

Aug-09 2.72 0.18Sep-09 5.97 8.14Oct-09 -1.60 -6.94

Nov-09 9.38 7.75Dec-09 6.97 2.95Jan-10 -5.19 -5.48Feb-10 -1.75 1.17Mar-10 4.64 5.12

SD11.3

6 9.79AVG 6.47 5.32

Interpretation :-

During the year 2009-10, the overall return of SBI Magnum global fund index is more than BSE 100 (SBI magnum fund is generating 6.47% while BSE 100 generating monthly average return of 5.32 %). However, We notice that both the BSE and the SBI Magnum Global Fund have moved in tandem with each other based on the market reactions to the overall demand and supply factors. Major shares invested in the dominant sectors comprise industries like IT, Infrastructure, Banking, Pharma, which form a major part of the portfolio invested by both BSE 100 and the SBI Magnum Global Fund.

The monthly average return SBI Magnum global fund index while is relatively more than that of BSE 100 index the risk as indicated through the S.D is marginally more in case of SBI Magnum global fund.( SBI Magnum global fund is showing an S.D of 11.36 while BSE 100 index is showing an S.D. of 9.79)

63

Apr-09

May-09

Jun-09Jul-0

9

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

-10

0

10

20

30

40

50

Series1SBIBSE 100

Table showing Return of SBI magnum global fund & BSE 100 INDEXDuring the year 2010-11

Month SBIBSE 100

Apr-10 -4.19 0.31May-10 -2.65 -3.09Jun-10 6.48 4.69Jul-10 3.90 1.75

Aug-10 2.65 0.01Sep-10 5.15 9.83Oct-10 -2.00 -0.36

Nov-10 -14.35 -4.27Dec-10 -0.17 3.76Jan-11 -11.71 -10.76Feb-11 -0.98 -3.66Mar-11 3.39 8.26

SD 6.45 5.70AVG -1.21 0.54

Interpretation :-

During the year 2010-11 ,the overall return of BSE 100 index is more than SBI Magnum global fund (BSE 100 generating monthly average return of 0.54 % while SBI magnum fund is generating -1.21%). However, we notice that there is a negative trend in the market during the months Nov 2010, Jan to Feb2011 in the market.

We notice that both the BSE and the SBI Magnum Global Fund have moved in tandem with each other based on the market reactions to the overall demand and supply factors. Major shares invested in the dominant sectors comprise industries like Infrastructure, Banking, Pharma, IT, which form a major part of the portfolio invested by both BSE 100 and the SBI Magnum Global Fund.

The monthly average return of BSE 100 index while is relatively more than that of SBI Magnum Global Fund the risk as indicated through the S.D is marginally less in case of BSE 100 index.(BSE 100 index is showing an S.D of 5.70 while SBI Magnum global fund is showing an S.D. of 6.45)

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Apr-10

May-10

Jun-10Jul-1

0

Aug-10

Sep-10

Oct-10

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

-20

-15

-10

-5

0

5

10

15

Series1SBIBSE 100

Table showing Return of SBI magnum global fund & BSE 100 INDEX

During the year 2011-12

Month SBIBSE 100

Apr-11 -4.90 -1.08May-11 0.05 -3.08Jun-11 0.96 0.74Jul-11 3.51 -3.25

Aug-11 -5.19 -9.09Sep-11 -3.88 -2.67Oct-11 3.74 7.76

Nov-11 -8.53 -8.75Dec-11 -3.14 -6.90Jan-12 7.69 12.70Feb-12 4.59 4.00Mar-12 3.08 -1.44

SD 4.91 6.50AVG -0.17 -0.92

Interpretation :-

During the year 20011-12, the overall return of SBI Magnum global fund and BSE 100 index is showing a slightly negative figure of -0.17 & -0.92 respectively. However, we notice that there is a negative trend in the market during the months Jul to Sep 2011 and Nov to Dec 2011. During the month Dec 2011 to Mar 2012 market is yielding positive returns.

The monthly average return of BSE 100 index while is relatively less than that of SBI Magnum Global Fund(while both show slightly negative return). The risk as indicated through the S.D is marginally more in case of BSE 100 index.(BSE 100 index is showing an S.D of 6.50 while SBI Magnum global fund is showing an S.D. of 4.91)

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Apr-11

May-11

Jun-11Jul-1

1

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

-15

-10

-5

0

5

10

15

Series1SBIBSE 100

CHAPTER – 8

Conclusion

66

Conclusion

Overall in finance about performance of mutual fund in India mutual fund have a lot of potential to grow. Mutual fund companies have to create and market innovative products and frame long term marketing strategies. Product innovation will be one of the key determinants to success.

The mutual fund industry has to bring many innovative concept such as high yield bond funds, principal protected fund long short term fund , arbitrage funds, dynamic funds and precious metal funds. The penetration of mutual funds can be increased through investor education, providing investor–oriented value added services, and innovative distribution channels. Mutual funds have failed during the bearish market conditions. To sell successfully during the bear market, there is a need to educate the investor about risk adjust return and total portfolio return to enable them to take an inform decision. Mutual funds need to develop a wide distribution network to increase its reach and tap investment from all concerns and segments. Increased use of internet time and development of alternative channels such as financial advisors can play a vital role in increasing the potential of mutual funds. Mutual funds in order to increase their reach need to form large capital. Mutual funds have equity capital upto around rupee 80 crore each which is quite low compared to insurance companies, which, on an average, have equity capital of close to 300 crore.

The retail participation in mutual fund is still low on account of incorrect positioning of mutual fund products, industry focus on wholesale market, investors preference for guaranteed return product and industry inability to make inroads into smaller towns. There is need for retail participation. Selling mutual funds require competence in identifying and matching investors needs. Moreover, they need to educate investors that mutual fund help to build capital, not to be become rich overnight. Mutual fund have come a long way, but a lot more can be done.

It is observed that I SBI Magnum global fund is performing on par with BSE 100 Index. It is slightly higher than the Index during year 2007-08 , 2008-09 & 2009-10.

However during the 2nd half of the 2011-12 . it is observed that the fund is slightly under performing the BSE 100 index.

On an overall basis it is appreciable to notice that the a fund has out performed the BSE 100 index during the period of the study. It is noticeable that up to Nov. 2009 the fund has performed more or less on par with the BSE 100index.

It is clearly observed that form NOV 2009 up to March 2012 the fund is clearly out performing the BSE 100 index.

67

CHAPTER – 9

Suggestions &

Recommendations

68

Suggestions

This analysis shows that the fund is worth considering investment by a moderate risk taking investor.

This is attested by the fact that on a long term basis the fund has generated a comparatively higher return to that of BSE 100 index.

An investor who has got significant amount that scheme during the a year 2007 -09, If , he has not redeemed the fund that there is a return of 20% plus a generated when compared to that of index which is about 17.5%.

It is suggested that they are profitable from the investment point of view. In case of equity fund the portfolio of SBI magnum global fund is in good income stocks.

69

CHAPTER – 10

Limitations of the study

70

LIMITATIONS

1. Samples sizes is limiting factor, only last five years of Data has been taken.

2. Past performance may not guarantee the future return.

3. Micro level data have been taken in analysis; Macro level data may affect the returns.

4. The statistical tools used have many inbuilt limitations in them.

5. SBI is a very large group but in this project only same part are studied.

6. All data collected is of secondary in nature. Any limitation in the accuracy of the

secondary data carries forward to the analysis made.

71

CHAPTER – 11

Bibliography

BIBLIOGRAPHY

Books :

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Indian capital market Shirin Rathore Publisher: Anmol Publications Pvt Ltd ISBN: 9788126114863

Mutual Funds : Management And Working -L.K. Bansal Publisher: Deep & Deep Publications P Ltd. Released: 1997

How mutual funds work -- Albert J. Fredman, Russ W

Indian Mutual Funds Handbooby Sankaran, Sundar

Research Methodology – C.R.kothalar- Publisher- New International Pvt. Ltd. year-1985

Business research methodology – J.K. Sachadev- publisher Himalaya publication,year-2008

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