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Title - Study of factors affecting sales of ICICI Prudential mutual fund and promotion and competition analysis of its

popular schemes

Industry Mutual Fund

Area of focus Factor analysis and competition analysis

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Study of factors affecting sales of ICICI Prudential mutual fund and promotion and competition analysis of its popular schemes

An internship report submitted in partial fulfillment of the programme.

Prepared by: AVIJIT ARORA PGDM 2009-2011 Roll No. 166 BIMTECH

Corporate Guide: Mr. Junaid Ahmad (NCR Head SBI Mutual Fund)

Academic Guide: Prof. Gagan Katiyar (Senior Faculty Marketing BIMTECH)


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Summer Project Certificate

This is to certify that Mr. AVIJIT ARORA Roll No. 09DM166 a student of PGDM has worked on a summer project titled Study of factors affecting sales of ICICI Prudential mutual fund and promotion and competition analysis of its popular schemes at ICICI Prudential Mutual Fund Bhilwara after

Trimester-III in partial fulfillment of the requirement for the Post Graduate Diploma in Management

programme. This is his/her original work to the best of my knowledge.


Date:___________ Signature ________________ ( Prof. Gagan Katiyar ) Name of Faculty BIMTECH SEAL

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DECLARATION

I hereby declare that the project report titled Study of factors affecting sales of ICICI Prudential mutual fund and promotion and competition analysis of its popular schemes at ICICI Prudential Mutual Fund Bhilwara is my own work and has been carried out under the able guidance of Mr. JUNAID AHMAD (NCR HEAD), and Prof. GAGAN KATIYAR, Senior Faculty, BIMTECH. All care has been taken to keep this report error free and I sincerely regret for any unintended discrepancies that might have crept into this report. I shall be highly obliged if errors (if any) be brought to my attention.

Thanking You.

Date:____________

(Avijit Arora)

Place: Greater Noida

E-mail: avijit.arora11@bimtech.ac.in

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ACKNOWLEDGEMENT My Summer Internship Project with ICICI Prudential Mutual Fund has been an enriching experience for me. It would have been impossible to gain this experience without the help and guidance that I have received from different quarters. I am grateful to Mr. Suresh Chandra Sharma (Branch Head ICICI Prudential Mutual Fund Bhilwara) for giving me this opportunity to carry out my Summer Internship Project in their office in Bhilwara. I also wish to convey my deep regards to my project guide, Mr. Gagan Katiyar (Faculty at BIMTECH) who gave me permission to take up the project.

Avijit Arora PGDM (2009-11) Roll No. 09DM166 (BIRLA INSTITUTE OF MANAGEMENT TECHNOLOGY)

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Contents
Contents................................................................................................................ 6 Executive Summary...............................................................................................8 Introduction......................................................................................................... 10 ORGANISATION OF A MUTUAL FUND.................................................................12 Sponsor:........................................................................................................ 13 Trustees:........................................................................................................13 Asset Management Company(AMC):.............................................................13 Types of AMCs in Indian Context:..................................................................14 Custodian:..................................................................................................... 14 Registrars & Transfer Agent(R & T Agent):....................................................15 SEBI Securities and Exchange Board of India:.............................................15 ADVANTAGES OF MUTUAL FUND ........................................................................17 Disadvantage of Investing Through Mutual Funds...............................................18 TYPES OF MUTUAL FUND SCHEMES: ...................................................................18 VARIOUS CRITERIA TO EVALUATE THE MUTUAL FUNDS ......................................24 P/E Ratio........................................................................................................... 24 Turnover Ratio..................................................................................................25 Expense Ratio ..................................................................................................25 SHARPE RATIO..................................................................................................25 TREYNOR RATIO...............................................................................................26 Standard Deviation...........................................................................................27 BETA................................................................................................................. 27 NAV................................................................................................................... 28 Company profile:................................................................................................. 29 ICICI PRUDENTIAL MUTUAL FUND PRODUCTS:.....................................................31 MAIN EQUITY SCHEMES:..................................................................................31 MAIN DEBT SCHEMES:......................................................................................32 BALANCED SCHEMES:.......................................................................................32 CHANNELS OF SELLING MUTUAL FUNDS .............................................................33 Mutual Fund Office: .........................................................................................33 Intermediaries: ................................................................................................ 34 National Distributors .......................................................................................34 Page | 6

Banks .............................................................................................................. 35 Individual Financial Advisors ............................................................................36 The Internet .....................................................................................................36 Learnings from the internship ..........................................................................37 Competition Analysis of Various schemes...........................................................43 SBI Magnum MIP v/s Reliance MIP........................................................................45 Questionnaire...................................................................................................... 51 Factor Analysis through SPSS..............................................................................52 Analysis............................................................................................................ 57 Recommendations...............................................................................................59 LIMITATIONS........................................................................................................ 61 CONCLUSION....................................................................................................... 62 BIBLIOGRAPHY..................................................................................................... 63

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Executive Summary
Objective
1. To study and work in all the distribution channels of ICICI Prudential mutual fund.

2. To identify various factors that influences the decision of investors while investing in mutual fund.
3. To compare the popular schemes of ICICI Prudential mutual Fund with the most

popular schemes in the same segment.

Scope of the project The project can prove to be very useful to the company as it can help to identify the most important factors that influence the decision of investor while investing in mutual fund and working on these factors to improve sales and also communicating these factors to the sales force so that they can focus on them while convincing the customers. This project will also help the company to get information about the performance of schemes of its competitors in the same segment.

Methodology
1. 2. 3.

Study all about mutual fund and various schemes. Sell mutual fund through various channels. Identify various factors that influence the investors decision while investing

in mutual fund.
4. 5. 6.

Listing down of all the factors identified. Develop a questionnaire using these factors on Likert Scale. Take a survey through various distribution channels and also among internal

customers of the company.

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7. 8.

Analyze primary data collected through SPSS (factor analysis) Study the distribution channel thoroughly and take feedback from various

intermediaries about various schemes of ICICI Prudential MF and that of its competitors.
9.

Based on feedback and ranking given by various organizations identify best

schemes of ICICI Prudential and its competitors and do a comparative analysis. 10. Make recommendations based on findings.

Sampling Sample size 60 Since the questionnaire is long and not easy for anybody to understand so the respondents were mostly who knoe about mutual i.e. investors and internal customers etc.

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Introduction
Mutual funds: Mutual funds, as the name indicates is the fund where in numerous investors come together to invest in various schemes of mutual fund. Mutual funds are dynamic institution, which plays a crucial role in an economy by mobilizing savings and investing them in the capital market, thus establishing a link between savings and the capital market. A mutual fund is an institution that invests the pooled funds of public to create a diversified portfolio of securities. Pooling is the key to mutual fund investing. Each mutual fund has a specific investment objective and tries to meet that objective through active portfolio management. Mutual fund as an investment company combines or collects money of its shareholders and invests those funds in variety of stocks, bonds, and money market instruments. The latter include securities, commercial papers, certificates of deposits, etc. Mutual funds provide the investor with professional management of funds and diversification of investment. Investors who invest in mutual funds are provided with units to participate in stock markets. These units are investment vehicle that provide a means of participation in the stock market for people who have neither the time, nor the money, nor perhaps the expertise to undertake the direct investment in equities. On the other hand they also provide a route into specialist markets where direct investment often demands both more time and more knowledge than an investor may possess. The price of units in any mutual fund is governed by the value of underlying securities. The value of an investors holding in a unit can therefore, like an investment in share, can go down as well as up. Hence it is said that mutual funds are subjected to market risk. Mutual fund cannot guarantee a fixed rate of return. It depends on the market condition. If a particular scheme is performing well then more return can be expected. It also depends on the fund manager expertise knowledge. It is also seen that people invest in particular funds depending on who the fund manager is.

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The following diagram shows the working of mutual fund

This diagram signifies the importance of Mutual Fund. 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 invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the schemes 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 person as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. Since small investors generally do not have adequate time, knowledge, experience &
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resources for directly accessing the capital market, they have to rely on an intermediary, which undertakes informed investment decisions & provides consequential benefits of professional expertise. The advantage of Mutual Funds to the investors is professionally managed, low transaction cost, liquidity, transparency, well regulated, diversified portfolios & tax benefits. By pooling their assets through mutual funds, investors achieve economies of scale. A collected corpus can be used to procure a diversified portfolio indicating greater returns has also create economies of scale through cost reduction. This principle has been effective worldwide as more & more investors are going the mutual fund way. This portfolio diversification ensures risk minimization. The criticality of such a measure comes in when you factor in the fluctuations that characterize stock markets. The interest of the investors is protected by the SEBI, which acts as a watchdog. Mutual funds are governed by SEBI (Mutual Funds) regulations, 1996.

ORGANISATION OF A MUTUAL FUND


There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:

Mutual funds have a unique structure not shared with other entities such as companies or firms. It is important for employees & agents to be aware of the special nature of this structure, because it determines the rights & responsibilities of the funds constituents viz., sponsors, trustees, custodians, transfer agents & of course, the fund & the Asset Management Company(AMC) the legal structure also drives the inter-relationships between these constituents.

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The structure of the mutual fund India is governed by the SEBI (Mutual Funds) regulations, 1996. These regulations make it mandatory for mutual funds to have a structure of sponsor, trustee, AMC, custodian. The sponsor is the promoter of the mutual fund,& appoints the trustees. The trustees are responsible to the investors in the mutual fund, & appoint the AMC for managing the investment portfolio. The AMC is the business face of the mutual fund, as it manages all affairs of the mutual fund. The mutual fund & the AMC have to be registered with SEBI. Custodian, who is also registered with SEBI, holds the securities of various schemes of the fund in its custody. Sponsor: The sponsor is the promoter of the mutual fund. The sponsor establishes the Mutual fund & registers the same with SEBI. He appoints the trustees, Custodians & the AMC with prior approval of SEBI, & in accordance with SEBI regulations. He must have at least five year track record of business interest in the financial markets. Sponsor must have been profit making in at least three of the above five years. He must contribute at least 40% of the capital of the AMC. Trustees: The Mutual Fund may be managed by a Board of trustees of individuals, or a trust company a corporate body. Most of the funds in India are managed by board of trustees. While the board of trustees is governed by the provisions of the Indian trust act, where the trustee is the corporate body, it would also be required to comply with the provisions of the companies act, 1956. the board of trustee company, as an independent body, act as protector of the unitholders interest. The trustees dont directly manage the portfolio of securities. For this specialist function, they appoint an AMC. They ensure that the fund is managed by AMC as per the defined objectives & in accordance with the trust deed & SEBI regulations. The trust is created through a document called the trust deed i.e., executed by the fund sponsor in favor of the trustees. The trust deed is required to be stamped as registered under the provision of the Indian registration act & registered with SEBI. The trustees begin the primary guardians of the unit-holders funds & assets, a trustee has to be a person of high repute & integrity. Asset Management Company(AMC): The role of an Asset management companies is to act as the investment manager of the trust. They are the ones who manage money of investors. An AMC takes decisions, compensates
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investors through dividends, maintains proper accounting & information for pricing of units, calculates the NAV, & provides information on listed schemes. It also exercises due diligence on investments & submits quarterly reports to the trustees. AMCs have been set up in various countries internationally as an answer to the global problem of bad loans. Bad loans are essentially of two types: bad loans generated out of the usual banking operations or bad lending, and bad loans which emanate out of a systematic banking crisis. It is in the latter case that banking regulators or governments try to bail out the banking system of a systematic accumulation of bad loans which acts as a drag on their liquidity, balance sheets and generally the health of banking. So, the idea of AMCs or ARCs is not to bail out banks, but to bail out the banking system itself. Types of AMCs in Indian Context: The following are the various types of AMCs we have in India: AMCs owned by banks. AMCs owned by financial institutions. AMCs owned by Indian private sector companies. AMCs owned by foreign institutional investors. AMCs owned by Indian & foreign sponsors. Custodian: Often an independent organization, it takes custody all securities & other assets of mutual fund. Its responsibilities include receipt & delivery of securities collecting incomedistributing dividends, safekeeping of the unit & segregating assets & settlements between schemes. Mutual fund is managed either trust company board of trustees. Board of trustees & trust are governed by provisions of Indian trust act. If trustee is a company, it is also subject Indian Company Act. Trustees appoint AMC in consultation with the sponsors & according to SEBI regulation. All mutual fund schemes floated by AMC have to be approved by trustees. Trustees review & ensure that net worth of the company is according to stipulated norms, every quarter.

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Though the trust is the mutual fund, the AMC is its operational face. The AMC is the first functionary to be appointed, & is involved in appointment of all other functionaries. The AMC structures the mutual fund products, markets them & mobilizes fund, manages the funds & services to the investors. A draft offer document is to be prepared at the time of launching the fund. Typically, it prespecifies investment objectives of the fund, the risk associated, the cost involved in the process & the broad rules to enter & to exit from the fund & other areas of operation. In India as in most countries, these sponsors need approval from a regulator, SEBI in our case. SEBI looks at track records of the sponsor & its financial strength granting approval to the fund for commencing operations. A sponsor then hires an asset management company to invest the funds according to the investment objective. It also hires another entity to be the custodian of the assets of the fund & perhaps the third one to handle registry work for the unit holder of the fund. Registrars & Transfer Agent(R & T Agent): The Registrars & Transfer Agents(R & T Agents) are responsible for the investor servicing function, as they maintain the records of investors in mutual funds. They process investor applications; record details provide by the investors on application forms; send out to investors details regarding their investment in the mutual fund; send out periodical information on the performance of the mutual fund; process dividend payout to investor; incorporate changes in information as communicated by investors; & keep the investor record up-to-date, by recording new investors & removing investors who have withdrawn their funds. SEBI Securities and Exchange Board of India: Securities and Exchange Board of India (SEBI) is a board (autonomous body) created by the Government of India in 1988 and given statutory form in 1992 with the SEBI Act 1992 with its head office at Mumbai. The Securities and Exchange Board of India is perhaps the most important regulatory body. Similar to the Securities Exchange Commission in the US, it is the authority that has to always be on its toes. More so, when the markets are doing well and there are a spate of IPOs (initial public offerings) or FPOs (follow-on public offerings) like now.

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Its main mandate is to protect the interest of investors in the securities markets and to promote the development of and to regulate the securities markets so as to establish a dynamic and efficient securities market. When investors have complaints against listed companies or registered intermediaries, and if they are not solved directly between the parties concerned, or if the investor is not happy with the response then SEBI acts as the nodal agency for addressing these complaints. SEBI has listed certain categories of grievances for which investors can file complaints with it. These include:

Non-receipt of refund order or allotment advice in case of investment in IPO's, FPO's and rights issues

Non-receipt of dividend from listed companies Non-receipt of share certificates after transfer from listed companies Non-receipt of debentures after transfer or non-receipt of interest or principal on redemption and non-receipt of interest on delayed repayment

Non-receipt of rights offer letter

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ADVANTAGES OF MUTUAL FUND

S. No.

Advant age Portfoli

Particulars

1.

o Diversif ication Professi

Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small).

2.

onal Manage ment

Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own.

3.

Less Risk

Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities.

Low 4. Transac tion Costs Liquidit y

Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors. An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid. Mutual funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the regulator. Investors also benefit from the convenience and flexibility offered

5.

Choice 6. of Scheme s

7.

Transpa rency

8.

Flexibili ty

by Mutual Funds. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes.

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Mutual Fund industry is part of a well-regulated investment 9. Safety environment where the interests of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.

Disadvantage of Investing Through Mutual Funds

S. No.

Disadva ntage Costs Control Not in

Particulars

Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units), irrespective of the performance of the fund.

1.

the Hands of an Investo r No Customi

The portfolio of securities in which a fund invests is a decision taken by the fund manager. Investors have no right to interfere in the decision making process of a fund manager, which some investors find as a constraint in achieving their financial objectives.

2.

zed Portfoli os Difficult y in Selectin

Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. For this, they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.

3.

ga Suitable Fund Scheme

TYPES OF MUTUAL FUND SCHEMES:


By Structure o Open-ended schemes o Close-ended schemes o Interval schemes
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By Investment Objective o Growth schemes o Income schemes o Balance schemes o Money Market schemes

Other types of schemes o Tax Saving schemes o Special schemes o Index schemes o Sector specific schemes

Schemes according to maturity period: A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open-ended Fund / Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity. Close-ended Fund / Scheme A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor
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i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

Interval scheme Interval funds combine the features of open-ended & closed ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices. Schemes according to Investment Objective: A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows: Growth / Equity Oriented Schemes The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. Income / Debt Oriented Scheme The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.

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Balanced Fund The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. Money Market or Liquid Fund These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. Other Schemes Tax Saving Schemes These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.

Gilt Fund These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes. Index Funds
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Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc these schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges. Sector specific funds / 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. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.

R e t u r n s Risk
Floaters Money Market Funds Gilt Funds Income Funds MIPs

Diversified Equity Funds Balanced Funds

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VARIOUS CRITERIA TO EVALUATE THE MUTUAL FUNDS


The most important and widely used measures of performance are:Basic criterions to evaluate the mutual fund schemes P/E ratio Turnover ratio Expense ratio Standard deviation

P/E Ratio
A valuation ratio of a company's current share price compared to its per-share earnings. (EPS). Calculated as:

EPS is the profit that a company makes on a per share basis. So, if EPS is one, the PE ratio will reflect the price that an investor will pay for this one rupee of the company's profits. Higher PE ratio signifies that investor expectation from these shares is higher. This is because the growth in share price is expected to follow earnings growth. In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E.

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Turnover Ratio
The turnover ratio is the lower of the total sales or total purchases over the period divided by the average of the net assets. Higher the turnover ratio, greater is the volume of trading carried out by the fund. The turnover ratio is more important for equity and balanced funds where the trading cost of equities is substantial. So, each time a fund manager buys and sells, he has to keep in mind that the cost of buying and selling will eat into the fund's returns. Dynamic equity funds, which can move rapidly between sectors, will obviously have a higher turnover ratio. Here risk will not be just of the fund manager making a wrong call on a sector but also that of turnover risk. In comparison a passively managed fund, such as an index fund, will have a lower turnover rate compared to an active fund as it has to just mirror the index. The only trading here will be due to investments, redemptions and changes in the index. Also, it is not meaningful to use turnover ratio for new schemes, which are not fully invested. As the scheme is deploying its assets there will be more transactions, at least buy orders, as compared to a fund` which is fully invested. Turnover ratio is less relevant for income funds as brokerage costs are much lower, and hence they will have a lower potential to eat into returns. So, even though gilt funds may have equally high turnover as compared to equity funds, the impact of this turnover is much less. In Short, Turnover ratio is a measure of how a fund's portfolio changes in a year. This ratio indicates how much a fund is trading. Understanding turnover ratio helps in gaining insights into a fund's performance.

Expense Ratio
Expense ratio is the percentage of total assets that are spent to run a mutual fund. As returns from bond funds tend to be similar, expenses become an important factor while comparing bond funds.

SHARPE RATIO
St= Rp --Rf S.D WHERE
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Rp Avereage return to portfolio RfRisk free rate of interest S.D- Standard Deviation Sharpes performce index gives a single value to be used for the performance ranking of various funds or portfolios. Sharpe index measures the risk premium of the portfolio relative to the total amount of risk in the portfolio. The risk premium is the difference between the portfolios average rate of return and the risk less rate of return. The standard deviation of the portfolio indicates the risk. Higher the value of sharpe ratio better the fund has performed. Sharpe ratio can be used to rank the desirability of funds or portfolios. The fund that has performed well comapred to other will be ranked first then the others.

TREYNOR RATIO
Ty= RpRf B WHERE Rp- Average return to portfolio Rf- Risk less rate of interest. B- Beta coeffecient Treynor ratio is based on the concept of characteristic line. Characteristic line gives the relation between a given market return and funds return. The funds performance is measured in relation to market performance. The ideal funds return rises at a faster rate than the market performance when the market is moving upwards and its rate of return declines slowly than the market return, in the decline. Treynors risk premium of the portfolio is the difference between the aveage return and the risk less rate of return. The risk premium depends on the systematic risk assumed in a portfoilo.

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Standard Deviation
Standard Deviation is the most common statistical measure of judging a fund's volatility and risk. It gives you a 'quality rating' of an average. A measure of the total volatility of a fund is based on the trailing three-year monthly returns. For debt and gilt funds it is based on average weekly return over the past one and a half years. The Standard Deviation of an average is the amount by which the numbers that go into an average deviate from that average. It tells us how closely an average represents the underlying numbers. A high Standard Deviation may be a measure of volatility, but it does not necessarily mean that such a fund is worse than one with a low Standard Deviation. If the first fund is a much higher performer than the second one, the deviation will not matter much.

BETA
Beta describes the relationship between the stocks return and index returns. There can be direct or indirect relation between stocks return and index return. Indirect relations are very rare. 1) Beta =+1.0 It indicates that one percent change in market index return causes exactly one percent change in the stock return. It indicates that stock moves along with the market. 2) Beta= + 0.5 One percent changes in the market index return causes 0.5 percent change in the stock return. It indicates that it is less volatile compared to market. 3) Beta=2.0 One percent change in the market index return causes 2 percent change in the stock return. The stock return is more volatile. The stocks with more than 1 beta value are considered to be very risky. 4) Negative beta value indicates that the stocks return move in opposite direction to the market return. Beta= Where
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N*XY- (X) (Y/ N(X*X) * (x)

N- No of observation X- Total of market index value Y- Total of return to Nav

NAV
Net Asset Value or NAV of a mutual fund is the value of one unit of investment in the fund, in net asset terms. NAV = Net Assets of the scheme / Number of Units Outstanding Where Net Assets are calculated as:(Market value of investments + current assets and other assets + Accrued income current liabilities and other liabilities less accrued expenses) / No. of Units Outstanding as at the NAV date

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Company profile:
ICICI Prudential Asset Management Company Ltd. is a joint venture between ICICI Bank, Indias second largest commercial bank & a well-known and trusted name in the financial services in India, & Prudential Plc, one of the United Kingdoms largest players in the financial services sectors. In a span of over 18 years since inception and just over 13 years of the Joint Venture, the company has forged a position of preeminence as one of the largest Asset Management Companys in the country, contributing significantly towards the growth of the Indian mutual fund industry. The company manages significant Mutual Fund Assets under Management (AUM), in addition to our Portfolio Management Services (PMS) and International Advisory Mandates for clients across international markets in asset classes like Debt, Equity and Real Estate with primary focus on risk adjusted returns. As an Asset Management Company, we have over 18 years of experience and are currently managing a comprehensive range of schemes of more than 46 Mutual fund schemes and a wide range of PMS Products for our investors spread across the country. We service this investor base with our own branch network of around 168 branches and a distribution reach of over 42,000 channel partners. Sponsors

ICICI Bank

ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91 billion) at March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year ended March 31, 2011. The Bank has a network of 2,538 branches and about 6,810 ATMs in India, and has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Center and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). Page | 29

Prudential Plc (formerly known as Prudential Corporation plc)

Prudential plc is an international financial services group with significant operations in Asia, the US and the UK. They serve approximately, 25 million customers and have 290 billion in assets under management. They are among the leading capitalized insurers in the world with an Insurance Groups Directive (IGD) capital surplus estimated at 3.4 billion (as at 31 December 2009). The Group is structured around four main business units:

Prudential Corporation Asia (PCA)


PCA is a leading life insurer in Asia with presence in 12 markets and a top three position in seven key locations: Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, and Vietnam. PCA provides a comprehensive range of savings, protection and investment products that are specifically designed to meet the needs of customers in each of its local markets. PCAs asset management business in Asia has retail operations in 10 markets and it independently manages assets on behalf of a wide range of retail and institutional investors across the region.

Jackson National Life Insurance Company


Jackson is one of the largest life insurance companies in the US, providing retirement savings and income solutions to more than 2.8 million customers. It is also one of the top five providers of variable and fixed index annuities in the US. Founded nearly 50 years ago, Jackson has a long and successful record of providing effective retirement solutions for their clients.

Prudential UK & Europe (PUE)


PUE is a leading life and pensions provider to approximately 7 million customers in the UK.It has a number of major competitive advantages including significant longevity experience, multi-asset investment capabilities, a strong investment track record, a highly respected brand and financial strength. PUE continues to focus on its core strengths including its annuities, pensions and investment products where it can maximize the advantage it has in offering with-profits and other multi-asset investment funds.

M&G
M&G is Prudentials UK and European fund management business with total assets under management of 174 billion (as at December 31, 2009).M&G has been investing money for individual and institutional clients for nearly 80 years. Today it is among the largest investors in the UK stock market, as well as being a powerhouse in fixed-income investments

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ICICI PRUDENTIAL MUTUAL FUND PRODUCTS:


MAIN 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.
ICICI Prudential Focused Bluechip Equity Fund ICICI Prudential Discovery Fund ICICI Prudential Dynamic Plan ICICI Prudential Infrastructure Fund ICICI Prudential MidCap Fund ICICI Prudential Top 100 Fund ICICI Prudential Top 200 Fund

ICICI Prudential Target Returns Fund ICICI Prudential FMCG Fund ICICI Prudential Technilogy Fund ICICI Prudential Index Fund ICICI Prudential Banking & Financial Services Fund

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MAIN 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.
ICICI Prudential Child care plan ICICI Prudential Gilt Fund ICICI Prudential Income Plan

ICICI Prudential Flexible income plan


ICICI Prudential Liquid fund ICICI Prudential Short term plan ICICI Prudential Monthly Income Plan

ICICI Prudential MIP-25

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

ICICI Prudential Balanced Fund

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CHANNELS OF SELLING MUTUAL FUNDS


Mutual funds are emerging as an important financial intermediary for the investing public in India. Conceptually and operationally they are different. The investors need to understand the working of a mutual fund and the increasingly diverse and complex investment options brought to them by a large number of mutual funds. The key channel in bringing the mutual funds to a large number of investors all over the country is the network of INTERMEDIARIES/DISTRIBUTORS. In this industry we have five different channels through which mutual fund are sold: 1 2 3 4 5 Mutual Fund Company National Distributors (NDs) & Intermediaries Banks Individual Financial Advisors (IFAs) Internet

Each one has its own customer base. Their way of dealing with them is totally different from other. Every one attracts in their own way. How they attract we will study. There are many industries here. The urgency to keep increasing in size has led mutual funds to use marketing hooks to draw investors. As we rely only on channel partners, our relation with them really is going to play a vital role. How different companies lure the partners, well study that. As to start with we will first study about the intermediaries in brief by describing who they are and how they help a direct investor.

Mutual Fund Office:


Anyone can walk into a mutual funds office, and buy/sell units of its schemes. Its a simple process, and there are employees of the fund house on hand to guide you through. If you are buying units, you will have to fill up an application form and hand over a cheque equivalent to your investment. The fund house will give you an acknowledgement of your investment in its scheme(s) and subject to your cheque being cleared, send you an account statement within three to seven days. Since a fund house market only its schemes and not those of its competitors, buying directly means knowing which fund house we want to invest in. If we are selling units, the relevant document is the redemption form, which sometimes forms part of
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your account statement and can be torn off it, or can be had from the fund houses office. The fund house mails the cheque within three days. The problem with transacting through fund house is that they have a very thin presence. Most fund houses have just an office or two in the big cities; moreover, since such offices are located in the central business district, for most investors, this means travelling a fair distance. Its worse in smaller centres-only a few fund houses have a scattered presence. But as the industry grows and gains greater investor acceptance. Mutual funds are bound to expand beyond cities.

Intermediaries:
Distributors such as agents, banks and stockbrokers are present in much greater numbers, which makes them the preferred option among investors. While dealing with the intermediaries, make sure they have the AMFI (Association of Mutual Fund in India) certification-a SEBI precondition; since September 2003, for selling mutual funds, intended t ensure that only qualified distributors dispense mutual fund advice. AMFI issues photo identity cards to registered intermediaries, which is proof of their having acquired the certification.

National Distributors
The big agents are one-stop sellers of financial products. Agents score over mutual funds on convenience, choice and quality of service. They operate from multiple locations-for example, national distributors like Bajaj Capital has more outlets than most mutual funds-and are supported by an army of registered agents, some of whom are willing to come to our doorstop and sell schemes to you. Further, while a mutual fund offer its schemes, a big agent has the biggest stock among all mutual fund sellers, selling virtually all schemes of virtually every fund house, as well as other investment products. For us, this means more choice. If we know the scheme we want to invest in, go to an agent, fill up the schemes form and give in a cheque. Even if we dont know which scheme we want to invest in, a good agent will understand our need and help you pick a scheme. The agent should understand our reasons for investing in a mutual fund and based on that offer us appropriate options, and let us make a choice. An agent is supposed to be impartial and not show a preference towards a particular fund house. The very nature of the relationship between an intermediary and fund houses opens up the possibility of bias. Fund houses pay intermediaries a commission linked to the business they bring in. If fund house X pays a higher commission than fund house Y, an intermediary might push scheme X, as it stands to earn more. How do we know that we are
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being misguided or not? The entry load charged by a scheme can offer us some clues. The entry load represents the upfront costs an investor pays to invest in a scheme, and the agents commission tends to flow out of it. The higher the entry load, chances are, the higher the agents commission. If the agent is pushing the higher load scheme, perhaps he is more interested in maximizing his commission than our returns. Hence always know the entry load being charged by a scheme. Till mid 2002, intermediaries passed on a part of their commission to investors, as an incentive to invest. The amount of cash paid depended largely on much they got from a fund house. Obviously the more they got form the fund house, the more they passed on to investors. This often created an unhealthy situation, where cash incentives, and not investment-worthiness, determined which scheme, an agent recommended. In June 2002, to stop such abuse, SEBI made it illegal for intermediaries to give money and gifts to investors. Although intermediaries cant lure you with money now (legally speaking that is), their commission-based earnings structure means a distributor could still be a partial to a fund house. Which is why, listen to what an intermediary to say but also do the homework, and use your judgement to make an informed decision.

Banks
A number of banks, especially the private and foreign ones, are into marketing the mutual fund schemes. Many of them market not only their own schemes, but also those of their rivals as a point of purchase; banks are a good option because of their fantastic reach-banks can be founded in every neighborhood. This wide reach has enabled banks to emerge as a major distributor. In 1999, barely 10 percent of fresh mutual fund sales were made through banks; during 2003, various estimates put the share of banks in mutual fund sales at between 30 percent and 50 percent. In terms of scope of service, banks are a notch below agents. Whatever your profile or investment amount might be, an agent will offer you personalized service-he will listen to your investment needs, offer you information on various schemes as asked by you, and suggest investment options. However, typically a bank will not give you this option or attention, unless you are a big money client and subscribe to its wealth management services. What banks will do, unconditionally, is help you through the investment formalities like filling up a form and offering basic information. But things are changing and banks are also giving personalized service to its retail investors also.

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Individual Financial Advisors


Big brokers combine the attributes of agents (one-stop shop, personalized service) and banks (a team of analyst who crack the mutual fund industry). This service, though usually comes at a cost, and is reserved for their clients. Small brokers, on the other hand, welcome retail investors, but most of them market schemes of select fund houses only. These are independent professionals trained to advice you on all personal finance matters. They all sell financial products, as agents currently do. Unlike agents, though, CFPs might charge you for their services.

The Internet
At present, around 3 percent of mutual fund transactions are done online. This figure is bound to increase, with better Net connectivity are also expected to tie up with more banks, which will bring more investors into the loop.The other move that will provide a fillip to online transactions to be supplemented by physical documentation. At present, some fund houses enable buying-and in some instances, selling on three platforms: 1. Own websites-- Most of the mutual fund houses let you buy and sell the units of their schemes through their websites. All you need is a Net banking account with any of the banks the fund houses have tied up with. You log on to the funds site, choose your scheme and investment amount. A link on the website takes you to the website of the designated bank, where you make your payment. Money is transferred from your Net banking account to the mutual fund and units are allotted to you instantaneously. The transaction is also documented in the physical form-the fund houses send you the application form to sign, and send back. Once you have done an online transaction with a fund house, you can open an online account with it. This will enable you to sell your holdings, switch between the schemes and purchase additional units-at the click of a mouse. 2. Financial Portals-- You can also buy units of several mutual funds through financial portals as myiris.com, timesofmoney.com and indiainfoline.com among others. The process and requirements are similar to that of for buying through the funds site. However, most portals enable only purchase. 3. Online trading portals-- Share trading portals like ICICI Direct (icicidirect.com) and Sharekhan (sharekhan.com) too offer a fair number of mutual fund schemes on their
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platforms. Registered user can buy or sell their units on offer, just like a stock-at no extra cost.

ICICI Prudential Mutual Fund Bhilwara has 40 IFAs and NDs and some of the private banks like Axis bank, Indusind Bank, ICICI Bank, Yes Bank, Kotak Mahindra Bank, HDFC Bank etc also sell mutual funds. Some brokerage is charged by NDs and IFAs.

Learnings from the internship


I was put into the distribution channel of ICICI Prudential mutual Fund. Most of the time was spent selling and promoting mutual fund products through ICICI Bank Branches. I was asked to focus mainly on two schemes of equity segment of ICICI Prudential mutual fund ICICI Pruedntial focused bluechip equity fund & ICICI Prudential discovery fund. Both of these funds are five star rated by valueresearch. Most of the investors I came across had already heard about these funds. I gained a good knowledge of Mutual fund and also a nice experience of selling mutual funds through this internship. After spending some weeks in banks I visited other channels of Distribution. I was sent to various IFAs, National Distributors and Private Banks. Promotion of new brokerage plan for SIP and MIP was also done while visiting IFAs and national Distributors. Through interaction with them I found out that ICICI Prudential had a tough competition with Reliance, Birla SL, HDFC, SBI & UTI.. Services offered by Reliance & UTI were better than other players. I Compared top performing equity schemes in large cap & value segment.

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TTTOP 15 OPEN ENDED -DIVERSIFIED FUNDS - PERIOD (LAST 5 YEARS)

Open Ended - Equity: Large Cap - Three Year Return


Fund NAV Return (Date) Returns(%) as on
16.31 (11Nov) 15.83 (11Nov) 204.88 (11Nov) 28.43 (11Nov) 13.02 (11Nov) 17.94 (11Nov) 215.08 (11Nov) 12.53 (11Nov) 12.33 (11Nov) 94.62 (11Nov)

ICICI Prudential Focused Bluechip Equity Inst I ICICI Prudential Focused Bluechip Equity Retail Franklin India Bluechip

31.88 11/11/2011

30.76 11/11/2011

26.28 11/11/2011

ICICI Prudential Top 200 Inst I

24.14 11/11/2011

DSPBR Top 100 Equity Inst

23.26 11/11/2011

ICICI Prudential Top 100 Inst I

23.22 11/11/2011

HDFC Index Sensex Plus

23.05 11/11/2011

JP Morgan India Equity

22.99 11/11/2011

Reliance Quant Plus Retail

22.86 11/11/2011

DSPBR Top 100 Equity Reg

22.67 11/11/2011

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Source www.mutualfundsindia.com From the above table it is clear that magnum contra fund and HDFC Top 200 have been ranked in top 10 for the period of last 5 years with an average return of 26.6%.

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TOP 15 OPEN ENDED -DIVERSIFIED FUNDS - PERIOD (LAST 3 YEARS) Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Scheme Name IDFC Premier Equity Fund - Plan A - Growth Reliance Regular Savings Fund - Equity Growth ING Dividend Yield Fund - Growth Sundaram BNP Paribas SMILE Fund Growth ICICI Prudential Discovery Fund - IP- Growth Birla Sun Life Dividend Yield Plus - Growth UTI Dividend Yield Fund - Growth UTI Opportunities Fund - Growth ICICI Prudential Discovery Fund - Growth HDFC Top 200 - Growth Canara Robeco Equity Diversified - Growth Tata Dividend Yield Fund - Growth Reliance Growth - Growth Tata Equity P/E Fund - Growth HDFC Equity Fund - Growth Date May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 NAV (Rs.) 28.5311 28.2826 21.23 31.7935 19.59 75.73 28.64 23.86 44.26 183.755 50.52 29.3495 444.0182 44.2171 240.076 Last 3 Years % 23.4317 21.5581 21.3639 20.4443 19.8633 19.7577 18.9938 18.9221 18.3609 17.4927 17.1731 17.1138 16.4405 16.4259 16.4196

*Note:- Returns calculated for less than 1 year are Absolute returns and returns calculated for
more than 1 year are compounded annualized.

From the above table it is seen that none of the SBI schemes have been in top 15 if take last 3 years data, though HDFC top 200 is still there on 10th rank. Other schemes from different company have come up like ICICI prudential discovery fund Growth and Reliance regular savings fund growth.

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TOP 15 OPEN ENDED -DIVERSIFIED FUNDS - PERIOD (LAST 6 MONTHS) Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Scheme Name ICICI Prudential Discovery Fund - IP- Growth ING Dividend Yield Fund - Growth ICICI Prudential Discovery Fund - Growth ICICI Prudential Emerging STAR Fund - IP Growth Canara Robeco Emerging Equities - Growth DSP BlackRock Small and Midcap Fund Growth ICICI Prudential Emerging STAR Fund Growth Reliance Equity Opportunities Fund - Growth SBI Magnum Sector Umbrella - Emerging Businesses Fund - Growth Taurus Ethical Fund - Growth IDFC Small & Midcap Equity Fund - Growth Fortis Future Leaders Fund - Growth UTI Master Value Fund - Growth Escorts Growth Plan - Growth Religare Mid Cap Fund - Growth Date May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 May 14 , 2010 NAV (Rs.) 19.59 21.23 44.26 13.37 20.02 16.087 32.96 31.66 35.53 21.34 16.8373 8.785 46.72 74.9237 12.87 Last 6 Months % 21.7526 21.4531 21.0613 20.4505 20.3848 19.8198 19.637 18.9689 18.5519 18.031 17.2538 17.2115 17.1808 17.1356 16.7877

*Note:- Returns calculated for less than 1 year are Absolute returns and returns calculated for
more than 1 year are compounded annualized.

From the above table it is seen that neither HDFC top 200 nor Magnum contra fund and nor Reliance RSF growth are in top 15 but ICICI prudential Discovery fund growth is on 3rd rank and SBI MSFU emerging business fund has come up on 9th rank which was nowhere earlier.

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Fund Ratings
As on : May 2010

Equity Diversified Birla SL Dividend Yield (G) Birla SL Long Term Adv.-Sr1(G) Birla SL Pure Value Fund (G) DSP-BR Micro Cap Fund - RP (G) DSP-BR Small & Mid Cap -RP (G) ICICI Pru Discovery Fund (G) ICICI Pru Emerging S.T.A.R.(G) IDFC Premier Equity - A (G) IDFC Small&Midcap Eqty -G Principal LT Equity 3yr Sr2(G) Reliance Equity Oppor - RP (G) Reliance RSF - Equity (G) SBI Magnum Emerging Busi (G) Sundaram S.M.I.L.E Fund (G) Sundaram Select Small Cap (G) UTI Dividend Yield Fund (G) UTI Master Value Fund (G) UTI Mid Cap (G)

Above is the 5 star rating given to various funds by www.moneycontrol.com. ICICI prudential discovery fund growth, Reliance RSF equity growth and SBI Magnum emerging Business fund Growth have been rated 5 star. Though HDFC top 200 has been rated 4 star and SBI magnum Contra fund has been rated 1 star. But at the same time valueresearch has rated Magnum contra fund with 4 stars.

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Competition Analysis of Various schemes


IC I IC Prudentia l D overy isc fund (G ) 1 /8 0 4 4 /2 0 1 0 91 4 7 .3 9 .5 5 8 S I MS R nce B FU elia S I MS H FC top B FU D em ing erg C ontra RF S business fund (G equity(G fund (G ) ) ) 2 0(G 0 ) 5 /1 9 9 /2 0 /7 9 9 /6 0 5 1 /9 0 4 1 /9 9 6 7 /2 0 1 /1 9 1 0 3 3 .3 62 4 7 .6 7 5 1 0 2 6 .9 69 8 19 9 6 .2 1 0 22 2 .8 1 .5 7 8 1 0 7 1 .5 29 30 6 6 .6

FAC S T

Inception D te a Fac Va e lue Fund S ize(in C r.) Increa in fund size se sinc 3 st m r 2 1 e 1 a 00 (in C r.) E xpense ra tio portfolio turnover ra tio la test 5 -week hig 2 h 5 -week low 2 1m onth 3m onths 6m onths 1yea r 3yea rs 5yea rs S ince inc eption S harpe B eta treynor Ma rket ca (in C p r.) L rg a e Mid S a m ll No. of stoc ks P/e ra tio equity D ebt C sh a equiva a nd lent

2 8 .0 23 2 4 .2 4 6 4 .1 5 6 2 .3 3 -0 9 .0 9 8 .8 2 .0 1 6 10 6 1 .1 1 .3 8 6 2 .2 5 7 2 .5 9 2 -0 1 .1 0 2 .8 -0 1 .7 3 ,4 2 1 5 5 .3 3 .0 1 6 4 .6 8 1 1 .4 0 4 5 6 2 .9 1 1 9 .9 0 6 0 9 4 .0

1 1 .9 11 1 5 .3 4 6 5 .2 7 8 4 .2 1 3 -4 9 .0 3 4 .9 3 4 .5 5 .4 2 4 1 .2 1 1 2 .6 6 4 1 .0 9 4 -0 1 .1 0 7 .8 -0 3 .6 8 ,7 8 6 1 9 .5 6 .7 3 2 2 .9 8 1 1 .1 8 0 2 .2 6 4 9 .7 3 3 0 7 .9 5 .3

1 .9 4 0 2 .2 8 8 2 .4 9 6 1 .8 8 7 -3 8 .5 4 2 .7 7 1 .7 7 .4 4 8 2 .5 1 6 NA 2 .4 3 1 -0 3 .1 0 8 .8 -0 5 .7 5 ,1 4 5 2 4 .2 4 .9 9 2 3 .9 1 9 2 8 .0 4 5 2 .2 0 9 .3 3 7 0 6 3 .6

2 8 .3 18 9 3 .5 5 3 3 .8 7 6 2 .0 1 2 -3 9 .1 8 2 .6 1 .5 8 5 9 .6 2 8 6 .5 1 .9 6 4 2 .1 5 2 -0 .2 0 9 .9 -1 5 .2 1 ,5 3 8 8 4 .0 8 6 .1 4 .8 9 6 3 .6 3 2 3 5 3 .7 5 4 9 .7 4 7 0 5 3 .2

1 .8 5 .9 0 5 13 6 8 .7 17 9 8 .8 11 9 3 .9 -1 2 .1 7 7 .8 3 3 .9 6 .5 2 7 1 .4 7 9 2 .4 8 9 2 .9 3 6 -0 7 .0 0 8 .8 -0 9 .3 7 ,6 0 6 9 1 .8 8 .4 0 2 1 .5 4 7 2 1 .4 6 6 2 .4 4 4 9 .4 7 1 0 2 9 .5

NAV

returns

R isk

Portfolio

Asset a lloca tion

From the above analysis it is observed that ICICI prudential discovery is giving highest returns since inception followed by emerging business fund and HDFC top 200, and contra is
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giving lowest returns amongst the following. If we look at Sharpe and Treynor ratio they are highest for HDFC top 200 followed by contra fund giving the proof of better management and better performance. Comparing Beta values indicate that emerging business funds moves exactly with the market compared to other funds amongst the following. Even in portfolio turnover ratio emerging business fund is second highest. As it is seen that though SBI schemes are performing very well but still investors go for schemes offered by other companies because of 1) Less brokerage given to IFAs and NDs, 2) Other companies provide better services comparatively. 3) Bad performance of schemes in the past. Eg. One India Fund. 4) Even the returns from Magnum Taxgain scheme which has the highest AUM and is one of the best schemes by SBI was less compared to tax saver schemes of HDFC and Reliance. 5) Complaints like dividend not received or statement not received were frequent.

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SBI Magnum MIP v/s Reliance MIP

TOP 10 -MIP FUNDS - PERIOD (LAST 3 MONTHS)

Rank 1 2 3 4 5 6 7 8 9 10

Scheme Name HDFC Multiple Yield Fund - Plan 2005 Growth Tata MIP Plus - Growth DWS Twin Advantage Fund - Growth HDFC Monthly Income Plan - Long Term Plan - Growth Canara Robeco Monthly Income Plan Growth HDFC Multiple Yield Fund - Growth Reliance Monthly Income Plan Growth LIC MF Floater - Monthly Income Plan Growth SBI Magnum Monthly Income Plan Growth ICICI Prudential Income Multiplier Fund Cumulative

NAV (Rs.) 15.4639 15.4206 15.8466 21.51 28 16.8201 20.5229 17.3964 19.3489 18.4546

Last 3 Months % 3.8633 3.1437 3.1277 2.9753 2.7523 2.5841 2.3351 2.244 2.1821 2.1397

*Note:- Returns calculated for less than 1 year are Absolute returns and returns
calculated for more than 1 year are compounded annualized.

Source www.mutualfundsindia.com From the above ranking it is concluded that SBI magnum MIP has gained good popularity and performed really well in the last three months. TOP 15 MIP FUNDS Period last 6 months

Rank 1 2

Scheme Name HDFC Multiple Yield Fund - Plan 2005 Growth HDFC Multiple Yield Fund - Growth

NAV (Rs.) 15.4639 16.8201

Last 6 Months % 6.0544 5.3007

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3 4 5 6 7 8 9 10 11 12 13 14 15

Canara Robeco Monthly Income Plan Growth HDFC Monthly Income Plan - Long Term Plan - Growth Tata MIP Plus - Growth DWS Twin Advantage Fund - Growth LIC MF Floater - Monthly Income Plan Growth UTI Monthly Income Scheme - Growth Reliance Monthly Income Plan Growth Baroda Pioneer Monthly Income Fund Growth HDFC Monthly Income Plan - Short Term Plan - Growth ICICI Prudential Income Multiplier Fund Cumulative Birla Sun Life Monthly Income - Growth SBI Magnum Monthly Income Plan Floater - Growth SBI Magnum Monthly Income Plan Growth

28 21.51 15.4206 15.8466 17.3964 18.8858 20.5229 12.5978 16.4407 18.4546 34.5834 12.3998 19.3489

4.5947 4.1929 4.1229 3.755 3.4699 3.4578 3.4024 3.3208 3.1263 3.0839 3.0498 2.9584 2.8059

*Note:- Returns calculated for less than 1 year are Absolute returns and returns
calculated for more than 1 year are compounded annualized.

Even in last six months SBI Magnum MIP is in top 15 Source www.mutualfundsindia.com TOP 10 MIP FUNDS LAST 12 months

Rank

Scheme Name

NAV (Rs.)

Last 12 Months % 17.382

HDFC Multiple Yield Fund - Plan 2005 Growth HDFC Monthly Income Plan - Long Term

15.4639

21.51

14.75

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Plan - Growth 3 4 HDFC Multiple Yield Fund - Growth Reliance Monthly Income Plan Growth HSBC MIP - Savings Plan - Growth UTI Monthly Income Scheme - Growth HDFC Monthly Income Plan - Short Term Plan - Growth Birla Sun Life MIP - Wealth 25 - Growth Birla Sun Life Monthly Income - Growth DSP BlackRock Savings Manager Fund Aggressive - Growth 16.8201 20.5229 14.1468 13.8807

5 6 7

18.4544 18.8858 16.4407

10.8725 10.2988 9.7701

8 9 10

16.9589 34.5834 18.4164

9.6535 9.2534 9.0205

*Note:- Returns calculated for less than 1 year are Absolute returns and returns
calculated for more than 1 year are compounded annualized.

Top 5 MIP funds in Last 3 years

Rank 1 2 3 4 5

Scheme Name Reliance Monthly Income Plan Growth L&T Monthly Income Plan - Growth HDFC Monthly Income Plan - Long Term Plan - Growth Canara Robeco Monthly Income Plan - Growth Birla Sun Life MIP - Savings 5 Growth

NAV (Rs.) 20.5229 18.8877 21.51 28 16.681

Last 3 Years % 14.7699 12.2357 12.1536 12.0961 12.0375

*Note:- Returns calculated for less than 1 year are Absolute returns and
returns calculated for more than 1 year are compounded annualized.

Source www.mutualfundsindia.com

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From the above data it is clear that Reliance MIP (G) has been performing consistently well from last three years. SBI Magnum MIP has been rated 3 star and Reliance MIP has been rated 5 star by moneycontrol.com. Comparison of the above two schemes
SBI Magnum MIP (G) FACTS Inception Date Face Value Fund Size(in Cr.) 9/4/2001 10 235.06 Reliance MIP (G) 13/1/20 04 10 4771.44

Increase in fund size since 30th april 2010 (in Cr.) 21.19 Expense ratio 1.73 portfolio turnover ratio Latest 52-week high 52-week low 1 month 3 months 6 months 1 year 3 years 5 years Since inception Sharpe Beta Treynor Market cap (in Cr.) Large Mid Small No. of stocks P/e ratio Equity Debt Cash and equivalent NA 19.35 19.39 17.73 -0.01 2.18 2.81 8.39 4.72 5.9 7.43 -0.13 0.78 -0.19 14,800.17 2.56 6.36 4.65 25 33.14 13.56 10.88 75.56

333.32 1.57 357 20.52 20.55 17.69 0.23 2.34 3.4 13.88 14.77 13.36 11.83 0.21 1.15 0.28 54,140. 31 13.69 4.33 0.16 70 22.98 18.82 46.45 34.74

NAV

returns

Risk

Portfolio

Asset allocation

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Sharpe and Treynor ratio of Reliance MIP is greater than that of SBI MIP giving a proof of better management and better performance. Though last three months returns have been almost similar but if we look at long run returns from Reliance MIP are far greater than SBI MIP. Since sales of SBI MIP is low so the fund size is very small comparatively and it is also increasing at a very low rate. No. of stocks invested in is also very low.

After continuous interaction with investors, IFAs and NDs I identified following factors which might affect customers decision while investing in mutual funds. I used these factors in form of a questionnaire on likert scale to identify the major factors.

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Questionnaire
Factors Affecting Customers Decision while investing in mutual Fund

S. Question Strongly Disagree Neutral Agree Strongly No. disagree Agree 1 R isk 2 R eturn 3 Inco me o f the investo r 4 A ge o f the investo r 5 B rand N ame 6 P o p ularity o f the scheme 7 P lans availab le fo r the sche me (eg. S IP , S TP , M IP ) 8 D a te o f incep tio n o f the scheme 9 N o . o f times D ivid end d eclared fo r a p articular sc heme 10 O p tio ns availab le in the scheme (eg.- gro w th, D ivid e nd , Lo ck in

p erio d ) 11Typ e o f o rganizatio n (P S U , P rivate etc.) 12 Investo r investing in mutua l fund fo r the first time 13 P ro mo tio n o f the b rand 14 C o nvincing ab ility o f the sales p erso n 15K no w led ge o f share mark et and sto c k s 16Inve sto r has mad e so me investments in share mark et 17Inve sto r has o ther mo d es o f savings (eg. - F D s, Life insurance) 18N o . o f d ep end e nts in the family 19 A vailab ility o f the mutual fund 20Inve sto r having a cco unt in a p articular b ank 21Tax saving 22F o r ho w lo ng d o es he /she w ant to invest 23C urre nt mark et situa tio n 24N A V o f the scheme 25Inve sto r's aw a reness o f the financial p ro d ucts 26Typ e o f jo b o f the investo r (p ub lic/go vt., p riva te, b usiness) 27 Investo r is living in ho meto w n o r aw ay 28 R eco mmend atio n o f family memb er o r friend 29F o r the time p erio d he/she has b ee n w o rk ing 30F und manager o f the scheme 31Time p erio d fo r w hich the o rganizatio n has b e en in b usiness
32S aving s o f the inve s tor 33P as t perfo rm a n c e of th e s c h e m e

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Factor Analysis through SPSS

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Total Variance Explained Initial Eigenvalues Comp onent 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Total 12.830 3.331 2.428 2.136 1.853 1.671 1.304 1.263 .950 .913 .727 .648 .577 .446 .425 .304 .266 .220 .180 .165 .108 .063 .052 .049 .043 .026 .012 .008 .004 4.173E-16 2.638E-16 4.339E-17 -9.012E-17 % of Variance 38.879 10.094 7.356 6.471 5.615 5.064 3.951 3.827 2.878 2.767 2.202 1.965 1.748 1.353 1.286 .920 .805 .667 .544 .500 .328 .192 .157 .149 .130 .080 .038 .024 .011 1.265E-15 7.994E-16 1.315E-16 -2.731E-16 Cumulative % 38.879 48.973 56.329 62.800 68.416 73.479 77.430 81.257 84.135 86.902 89.104 91.069 92.816 94.169 95.456 96.376 97.181 97.848 98.392 98.892 99.220 99.411 99.568 99.717 99.847 99.927 99.965 99.989 100.000 100.000 100.000 100.000 100.000 Total 12.830 3.331 2.428 2.136 1.853 1.671 1.304 1.263 Extraction Sums of Squared Loadings % of Variance 38.879 10.094 7.356 6.471 5.615 5.064 3.951 3.827 Cumulative % 38.879 48.973 56.329 62.800 68.416 73.479 77.430 81.257 Total 4.751 4.283 4.251 3.383 3.275 3.266 1.882 1.725 Rotation Sums of Squared Loadings % of Variance 14.396 12.977 12.882 10.251 9.923 9.897 5.702 5.229 Cumulative % 14.396 27.373 40.255 50.506 60.429 70.327 76.028 81.257

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In the above table as only first eight components are having their Eigen values more than one so only these components will be taken into consideration. Out of these eight components first three have highest variance and they form 56% of the total variance, therefore I will consider only these three components for my analysis.

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Rotated Component Matrixa Component 1 Risk Return Income of the investor Age of the investor Brand Name Popularity of the scheme Plans available for the scheme (eg. SIP, STP, MIP) Date of inception of the scheme No. of times Dividend declared for a particular scheme Options available in the scheme (eg.- growth, Dividend, Lock in period) Type of organization (PSU, Private etc.) Investor investing in mutual fund for the first time Promotion of the brand Convincing ability of the sales person Knowledge of share market and stocks Investor has made some investments in share market Investor has other modes of savings (eg. - FDs, Life .193 .520 .244 .157 .117 .614 .087 -.208 -.124 .075 .022 .804 .056 .012 .451 -.148 .309 -.224 .118 .585 .364 .505 -.065 -.045 .237 .395 .061 .078 .663 .610 .154 .116 .350 -.125 -.056 -.200 -.192 .057 .450 -.098 .506 .154 -.038 .160 .438 .077 .379 -.043 .793 .163 .250 .113 .085 .017 .058 .294 .116 .402 .240 .202 .760 .172 -.211 .085 .022 .161 -.119 .122 .814 .138 .308 -.041 .255 .160 .670 -.018 .357 .166 -.161 -.135 .573 .557 .304 -.288 .108 .210 .032 2 .585 .067 .759 .230 .291 .177 .139 3 .296 .143 .158 .747 .775 .817 .439 4 -.042 .187 .148 .179 .103 .070 -.039 5 .123 .458 .009 .098 -.113 .077 -.013 6 .343 .454 .152 .158 .372 .017 .192 7 .108 .113 .173 .370 -.042 -.213 -.166 8 -.120 .031 .091 -.015 .123 .230 .752

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Now looking at Rotation component matrix we can see that factors which are most influential i.e. factors which come under first component are Factors with their values more than .5 in first component 1. Risk 2. Return 3. Type of organization (PSU, Private etc.) 4. Investor investing in mutual fund for the first time 5. Investor having Account in particular Bank 6. Type of job of the investor 7. Past performance of the scheme 8. Recommendation of family member or friend 9. Savings of the investor

Second most important factors (second component) are 1. Risk 2. Income of the Investor 3. Investor has other modes of savings 4. No. of dependents in the family 5. Tax Savings 6. Time period for which the organization has been in business

Third most important factors (third component) are 1. Age of the investor 2. Brand name 3. Popularity of the scheme 4. Date of inception of the scheme 5. Promotion of the Brand 6. Convincing ability of the salesperson

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KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity Approx. Chi-Square Df Sig.

.683 431.796 201 .000

Since KMO and Bartletts ratio is more than .5 so the questionnaire was and well understood by the respondants.

Analysis

1. Risk it matters most to the investor as he/she is investing his/her hard earned money 2. Returns returns from the scheme matters most to the investor so SBI MF should try to increase returns as much as possible. 3. Brand Name brand name also matters a lot to the investor, since SBI itself has a good brand name so it was a plus point for the company. 4. No. of times dividend declared. for investors who want to invest in dividend option, no. of times dividend declared in the past is very important, so SBI MF should try to maximize its dividend declaration. 5. Tax saving is also very important for investors, many of them keep this on their first priority.

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6. Awareness of the financial product (Mutual Fund) is very important. Investors having

account in a particular bank is one of the major factors so SBI MF should try to tap the existing customers of SBI. 7. Type of organization is also very important as investors have a perception that if they are investing in PSU then their money wont go anywhere. 8. Type of job of the investor is also important as businessmen are more risk taking and govt. employees are risk averse.
9. Age of the investor is important as young investors are risk takers so they invest more

in mutual funds and old age investors are risk averse and they usually invest in FDs 10. Risk is a very important factor as investors always look for schemes with least risk eg. Schemes which have been giving consistent returns.
11. Investor investing for the first time wont invest a high amount as they are not sure

about it. 12. Savings is a very important factor higher the savings higher will be the investment as no one wants to keep his/her savings without any growth.
13. Past performance of the scheme is also very important as it gives a sense of security

and confidence while investing if the scheme has performed well. 14. Tax saving is also a major factor as most of the investors invests to save tax. 15. Date of inception is important as older the scheme more reliable it will be for the investor. 16. Promotion of the brand and popularity of the scheme is important as it also gives a sense of security to the investor.

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Recommendations
1. Convincing ability of the salesperson. since IFAs have a great convincing ability so SBI mutual fund should keep s good relationship with them by increasing brokerage and by having regular meetings with them. 2. Spreading awareness about Mutual fund is required, there is a large customer base of SBI who have no idea about mutual funds, and they need to be tapped. This can be done through advertisements, road shows etc.
3. Returns from scheme offered by SBI are very low compared to its competitors, so

fund managers should try to increase the returns by changing portfolio.


4. Most of the customers of SBI MF are not satisfied with its service, so organization

should focus on its operations and provide better service to its customers by sending regular statements and should train its employees to give first preference to customer satisfaction.
5. HNI segment usually ask for latest NAVs while investing so CREs or sales executive

should be regularly updated with latest NAVs of all the schemes. 6. People who come to SBI bank for investment in FDs, TDS etc should be convinced to invest in mutual funds as they give more returns comparatively.
7. Young customers having account with SBI should be convinced to invest in MF as

they are risk taking.


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8. Schemes like child benefit plan can be promoted to newly married couples or customers with small children.
9.

HNI investors usually invest in dividend option so SBI MF should try to increase no. of times dividend declared and be at par with the competitors.

10. Schemes which have performed well in past should be advertised and promoted as it gives a confidence to investors.

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LIMITATIONS
1. Research is limited to only Gurgaon Region.

2. Since questionnaire can only be understood by investors who invest in mutual find so sample mostly consisted of existing customers, internal customers and IFAs.
3. Sample size is only sixty.

4. This project focuses only on Mutual Funds and not on other financial products. 5. This project has mostly catered to the customers of SBI MF and not of other Mutual Fund companies. 6. Project has covered only well educated people with good knowledge of financial products.

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CONCLUSION
Mutual fund is very good for people who have less knowledge of stock market or who dont have enough time to keep a regular check on the market. Mutual Funds are managed by professionals, so investor doesnt need to take any tension about his/her money. Selling MF is a tough task as the product is intangible and the investor doesnt get anything tangible for the money he pays except an acknowledgement. Though Mutual Funds are popular but still there is a large number market who have no idea of mutual funds because awareness of mutual fund is less compared to life insurance and FDs. Mutual Fund is a service industry so it is very important for the company to provide good service and make sure it is at par with its competitors. Eg. easy process of investment and redemption, keeping investors updated with NAVs through email or statements etc. SBI MF has a good name in the mutual Fund industry because of the name SBI attached to it, since SBI is one of the oldest and biggest banks of India so it has a big hand in spreading awareness of SBI MF. SBI MF also has a strong distribution network with effective employees. In fact SBI MF Gurgaon has been awarded best investor desk for increasing the market share of SBI MF up to 33% in NCR. Mutual Fund is a good industry to work with because of its transparency and it also with growing literacy rate in India it has a good future.

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BIBLIOGRAPHY
1. www.wikipedia.com 2. www.sbimf.com 3. www.mutualfundsindia.com 4. www.amfiindia.com 5. www.moneycontrol.com 6. www.investopedia.com 7. www.economictimes.com 8. www.valueresearchonline.com 9. www.allenandunwin.com/spss.htm

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