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CHAPTER 1 1.

1 INTRODUCTION

1.1.1 MEANING OF MUTUAL FUND


Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. 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 appreciations realized are shared by its unit holders in proportion 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. A Mutual Fund is an investment tool that allows small investors access to a well diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The SEBI Regulation act 1993 defines Mutual Fund as a fund established in the form of a trust by a sponsor to raise monies by the trustees through the sale of units to the public under one or more schemes for investing in securities The Mutual Fund was the Massachusetts Investors Trust introduced in 1924. At the end of it's first year, the fund had 200 investors with $63,600 in assets. At the end of 1995, the fund

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grew to73, 500 investors with assets totaling $1.8 billion! Now there are over 7000 different mutual funds available. In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross -section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of Mutual funds are known as unit holders. The profits or losses are shared by the investors in proportion to their investments. The Mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. In India, A Mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. In Short, a Mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc. Mutual fund is a 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.

1.1.2 History/ Origin

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The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the AUM to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.

First Phase 1964-87


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

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


1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General InsuranceCorporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its

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mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

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


1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.

Fourth Phase since February 2003


In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes . The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. Consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

1.1.3 CONCEPT
When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total

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amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors. When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors. A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. In other words we can say that A Mutual Fund is a trust registered with the Securities and Exchange Board of India (SEBI), which pools up the money from individual / corporate investors and invests the same on behalf of the investors /unit holders, in equity shares, Government securities, Bonds, Call money markets etc., and distributes the profits. The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. The value of all the securities in the portfolio in calculated daily. From this, all expenses are deducted and the resultant value divided by the number of units in the fund is the funds NAV. Page 5

Total value of the fund. NAV= No. of shares currently issued and outstanding

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Concept of mutual fund

MANY INVESTORS WITH COMMON FINANCIAL OBJECTIVE POOL THEIR MONEY

INVESTORS ON PROPORTIONATE BASIS GET MUTUAL FUND UNITS FOR THE SUM CONTRIBUTED TO THE POOL

THE MONEY COLLECTED FROM INVESTORS IS INVESTED INTO SHARE, DEBENTURE AND OTHER SECURITIES BY THE FUND MANAGER

THE FUND MANAGER REALISES GAINS OR LOSSES, AND COLLECTS DIVIDEND OR INTEREST INCOME

ANY GAIN OR LOSS FOR SUCH INVESTMENT ARE PASSED ON TO THE INVESTORS IN THE PROPORTION OF THE NUMBER OF UNITS HELD BY THEM

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1.1.4 GUIDELINES OF SEBI FOR MUTUAL FUND COMPANIES


To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody. According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees must be independent. The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework. Its objective is to increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading professional standards and in promoting best industry practices in diverse areas such as valuation, disclosure, transparency etc. Documents required (PAN mandatory):
Proof of identity:

1. Photo PAN Card. 2. In case of non-photo PAN card in addition to copy of PAN card any one of the following: Driving license/passport copy/ voter id/ bank photo pass book. Proof of address (any of the following):latest telephone bill, latest electricity bill, Passport, latest bank passbook/bank account statement, latest Demat account statement, voter id, driving license, ration card, rent agreement.

1.1.5 CLASSICAFICATION OF MUTUAL FUND

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MUTUAL FUNDS

BASED ON THEIR STRUCTURE

BASED ON INVESTMENT OBJECTIVE

EQUITY FUND Open Ended Funds Closed Ended Funds BALANCED FUND

DEBT FUND
TAX SAVING SCHEME

SPECIAL SCHEME

Based on their structure:


Open-ended funds: Investors can buy and sell the units from the fund, at any point of time. Page 9

Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity.

Based on their investment objective:

Equity funds: These funds invest in equities and equity related instruments. With
Fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weightage.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading
across different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest in
companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related through
some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will
invest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
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Balanced fund: Their investment portfolio includes both debt and equity. As a result,
on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments.

Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities. ii) Equity- oriented funds - Invest at least 65% in equities, remaining in debt.

Debt fund: They invest only in debt instruments, and are a good option for investors
averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large
portion being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills. iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.

iv) Arbitrage fund- They generate income through arbitrage opportunities due to mispricing
between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government
securities.

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term
debt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities. Page 11

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with
that of the fund.

Tax Saving Schemes


Investors are being encouraged to invest in equity markets through Equity Linked Savings Scheme (ELSS) by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed / switched out until completion of 3 years from the date of allotment of the respective Units. The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations, 1996 and the notifications issued by the Ministry of Finance (Department of Economic Affairs), Government of India regarding ELSS. Subject to such conditions and limitations, as prescribed under Section 88 of the Income-tax Act, 1961.

1.1.6 ADVANTAGES OF MUTUAL FUNDS


Liquidity.
You can liquidate your investments within 3 to 5 working days (mutual funds dispatch redemption cheques speedily and also offer direct credit facility into your bank account i.e. Electronic Clearing Services).

Transparency.
Mutual funds offer daily NAVs of schemes, which help you to monitor your investments on a regular basis. They also send quarterly newsletters, which give details of the portfolio, performance of schemes against various benchmarks, etc. They are also well regulated and SEBI monitors their actions closely.

Tax benefits.
You do not have to pay any taxes on dividends issued by mutual funds. You also have the advantage of capital gains taxation. Tax-saving schemes and pension schemes give you the added advantage of benefits under section 88. Page 12

Affordability
Mutual funds allow you to invest small sums. For instance, if you want to buy a portfolio of blue chips of modest size, you should at least have a few lakhs of rupees. A mutual fund gives you the same portfolio for meager investment of Rs.1,000-5,000. A mutual fund can do that because it collects money from many people and it has a large corpus.

Professional Management.
The major advantage of investing in a mutual fund is that you get a professional money manager to manage your investments for a small fee. You can leave the investment decisions to him and only have to monitor the performance of the fund at regular intervals.

Diversification.
Considered the essential tool in risk management, mutual funds make it possible for even small investors to diversify their portfolio. A mutual fund can effectively diversify its portfolio because of the large corpus. However, a small investor cannot have a well- diversified portfolio because it calls for large investment. For example, a modest portfolio of 10 blue chip stocks calls for a few a few thousands.

Convenient Administration

Mutual funds offer tailor-made solutions like systematic investment plans and systematic withdrawal plans to investors, which is very convenient to investors. Investors also do not have to worry about investment decisions, they do not have to deal with brokerage or depository, etc. for buying or selling of securities. Mutual funds also offer specialized schemes like retirement plans, childrens plans, industry specific schemes, etc. to suit personal preference of investors. These schemes also help small investors with asset allocation of their corpus. It also saves a lot of paper work.

Costs Effectiveness
A small investor will find that the mutual fund route is a cost-effective method (the AMC fee is normally 2.5%) and it also saves a lot of transaction cost as mutual funds get concession from brokerages. Also, the investor gets the service of a financial professional for a very small fee. If he Page 13

were to seek a financial advisor's help directly, he will end up paying significantly more for investment advice. Also, he will need to have a sizeable corpus to offer for investment management to be eligible for an investment advisers services.

1.1.7 DISADVANTAGES OF MUTUAL FUNDS


Professional Management- Many investors debate over whether or not the so-called professionals are any better than you or I at picking stocks. Management is by no means infallible, and, even if the fund loses money, the manager still takes his/her cut. We'll talk about this in detail in a later section. Costs - Mutual funds don't exist solely to make your life easier--all funds are in it for a profit. The Mutual fund industry is masterful at burying costs under layers of jargon. These costs are so complicated that in this tutorial we have devoted an entire section to the subject. Dilution - It's possible to have too much diversification. Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money. Taxes - When making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

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1.1.8 HOW TO INVEST IN MUTUAL FUNDS:


Step One - Identify the Investment needs: Our financial goals will vary, based on the age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess the needs. We can begin by defining the investment objectives and needs, which could be regular income, buying a home or finance a wedding or educate children etc. Step Two - Choose the right mutual Fund: The important thing is to choose the right mutual fund scheme, which suits our requirements. The offer document of the scheme tells us its objectives and provides supplementary details like the track record of other schemes managed by the same Fund Manager. Some factors to evaluate before choosing a particular mutual Fund are the track record of the performance of the fund over the last few years. Other factors could be the portfolio allocation, the dividend yield and the degree of transparency etc. Step Three - Select the ideal mix of Schemes: Investing in just one Mutual Fund scheme may not meet all the investment needs. We may consider investing in a combination of schemes to achieve our specific goals. Step Four - Invest regularly: The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, we buy fewer units when the price is higher and more units when the price is low, thus bringing down the average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. We can also avail the systematic investment plan facility offered by many openend fund . Step Five- Start early: It is desirable to start investing early and stick to a regular investment plan. If we start now, we will make more than if we wait and 37 invest later. The power of compounding lets us earn income on income and our money multiplies at a compounded rate of return. Page 15

Step Six - The final step: Finally we need to fill in the application forms of various fund schemes and start investing. We may reap the rewards in the years to come. Mutual fund are suitable for every kind of investor - whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking.

1.1.9 INVESTMENT STRATEGIES


1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date
of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: Under this an investor invest in debt oriented fund and give
instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund.

3. Systematic Withdrawal Plan: If someone wishes to withdraw from a mutual fund then he
can withdraw a fixed amount each month.

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1.2 COMPANIES PROFILE

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has grown immensely since its inception and today it is India's largest bank, patronized by over 80% of the top corporate houses of the country. SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the country with an investor base of over 5.8 million and over 20 years of rich experience in fund management consistently delivering value to its investors. SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank of India' one of India's largest banking enterprises, and Socit Gnrale Asset Management (France), one of the world's leading fund management companies that manages over US$ 500 Billion worldwide. A total of over 5.8 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 HNIs. Today, the fund manages over Rs. 42,100 crores of assets and has a diverse profile of investors actively parking their investments across 38 active schemes. The fund serves this vast family of investors by reaching out to them through network of over 130 points of acceptance, 29 investor service centers, 59 investor service desks and 6 Investor Service Points. 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.

1.2.1 PRODUCTS OF SBI MUTUAL FUND


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Equity schemes
The investments of these schemes will predominantly be in the stock markets and endeavor will be to provide investors the opportunity to benefit from the higher returns which stock markets can provide. However they are also exposed to the volatility and attendant risks of stock markets and hence should be chosen only by such investors who have high risk taking capacities and are willing to think long term. Equity Funds include diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds invest in various stocks across different sectors while sectoral funds which are specialized Equity Funds restrict their investments only to shares of a particular sector and hence, are riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a particular index and the performance of such funds move with the movements of the index. Magnum COMMA Fund Magnum Equity Fund Magnum Global Fund Magnum Index Fund Magnum Midcap Fund Magnum Multicap Fund Magnum Multiplier plus 1993 Magnum Sectoral Funds Umbrella MSFU- Emerging Business Fund MSFU- IT Fund MSFU- Parma Fund MSFU- Contra Fund MSFU- FMCG Fund

SBI Arbitrage Opportunities Fund SBI Blue chip Fund SBI Infrastructure Fund - Series I Page 18

SBI Magnum Tax gain Scheme 1993 SBI ONE India Fund SBI TAX ADVANTAGE FUND SERIES

Debt schemes
Debt Funds invest only in debt instruments such as Corporate Bonds, Government Securities and Money Market instruments either completely avoiding any investments in the stock markets as in Income Funds or Gilt Funds or having a small exposure to equities as in Monthly Income Plans or Children's Plan. Hence they are safer than equity funds. At the same time the expected returns from debt funds would be lower. Such investments are advisable for the risk-averse investor and as a part of the investment portfolio for other investors. Magnum Childrens benefit Plan Magnum Gilt Fund Magnum Income Fund Magnum Insta Cash Fund Magnum Income Fund- Floating Rate Plan Magnum Income Plus Fund Magnum Insta Cash Fund -Liquid Floater Plan Magnum Monthly Income Plan Magnum Monthly Income Plan - Floater Magnum NRI Investment Fund SBI Premier Liquid Fund

BALANCED SCHEMES
Magnum 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. Page 19

Magnum Balanced Fund

1.2.2 COMPETITORS OF SBI MUTUAL FUND


Some of the main competitors of SBI Mutual Fund are as follows : ICICI Mutual Fund Reliance Mutual Fund UTI Mutual Fund Birla Sun Life Mutual Fund Kotak Mutual Fund HDFC Mutual Fund Sundaram Mutual Fund LIC Mutual Fund Principal Franklin Templeton

1.2.3 AWARDS AND ACHIEVEMENTS YEAR 2006


CNBCAWAAZ CONSUMER AWARD 2006 LIPPER AWARDThe Lipper India fund award 2006 CNBC TV18- CRISIL Mutual Fund of the year award 2006

YEAR 2007
OUTLOOK MONEYNDTV Profit Award 2007 CNBCAWAAZ CONSUMER AWARD 2007 Page 20

LIPPER AWARDThe Lipper India fund award 2007 ICRA Mutual Fund Award 2007 CNBC TV18- CRISIL Mutual Fund of the year award 2007

YEAR 2008
OUTLOOK MONEYLIPPER AWARDThe Lipper India fund award 2008 ICRA Mutual Fund Award 2008

NDTV Profit Award 2008

ICRA

YEAR 2009

Mutual Fund Award 2009 LIPPER AWARDThe Lipper India fund award 2009

YEAR 2010
ICRA Mutual Fund Award 2010

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CHAPTER 2 2.1 OBJECTIVE OF THE STUDY


Main objective:
To measure the level of awareness of the people of Tinsukia regarding Mutual Funds. To get the insight knowledge about mutual funds. To get the general view of SBI Mutual Fund. To check the preference of SBI Mutual Fund as compared to other private players in the mutual Fund market.

Sub Objective:
To check which mutual fund company the people of Tinsukia are mostly aware of. The customer of the company falls under which age. To know why one has invested or not invested in SBI Mutual fund.

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2.2 LIMITATION OF THE STUDY


Some of the persons were not so responsive.
Possibility of error in data collection because many of investors may have

not given actual answers of my questionnaire. The study was limited to town only. A sample size of 30 may not give a proper idea and reflection about the view of the whole population of Tinsukia.

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CHAPTER 3 3.1 RESEARCH AND METHODOLOGY


This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones.

Data sources:
Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites.

Sampling:
Sampling procedure: The sample was selected of them who are the customers/visitors of State Bank if India, irrespective of them being investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool. Sample size: The sample size of my project is limited to 30 people only. Out of which only 120 people had invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund. Page 24

Sample design: Data has been presented with the help of bar graph, pie charts, line graphs etc.

CHAPTER 4 4.1 ANALYSIS AND INTERPRETATION OF THE DATA


A total of 30 correspondent were asked different questions related only to the study , through the questionnaire . there were 5 personal question and 13 general questions provided. The following analysis is done according to the responses of the respondent.

ANALYSIS 1:
Q) Age: a) 20- 30 yrs b) 31- 40 yrs c) 41-50 yrs d) 51-60 yrs e) 61 and above Respondents age was asked in this question. The total percentage is shown below out of these 5 groups of the 30 respondents. AGE GROUP 20-30 YEARS 31-40 YEARS 41-50 YEARS 51-60 YEARS 61 AND ABOVE TOTAL RESPONDENT 7 10 9 3 1 PERCENTAGE % 23.3 33.3 30 10 3.33

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The highest number of respondents were from the age group 31- 40 and least number of respondent were from age 60 yrs and above .

ANALYSIS 2
Q) Sex: M F

The proportion of the male and the female in the sample size was determined by this equation. SEX Male Female 25 5 TOTAL 83.3 16.6 PERCENTAGE%

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Most of the respondents were male.

ANALYSIS 3: Q) Marital status : Married Single

The marital status of the respondents was determined by this question. MARITAL STATUS MARRIED SINGLE TOTAL 12 18 PERCENTAGE% 40 60

Majority of the respondents were single.

ANALYSIS 4:
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Q) Do you invest ? Yes No

The respondents were asked whether they invested. INVESTED Yes No TOTAL 28 2 PERCENTAGE 93.3 6.66

96% of the respondent invested their money .

ANALYSIS 5:
Q) What kind of investment do you prefer ? a. Savings account e. Mutual Funds b. Fixed Deposits f. Post Office /NSC c. Insurance d. Gold/ silver h. Real state g. Shares/ debentures

In this question the respondent were asked what kind of investment did they prefer.

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INVESTMENT PREFERENCE Savings account Fixed Deposits Insurance Gold/ silver Mutual Funds Post Office /NSC Shares/ debentures Real state

TOTAL 7 6 4 0 8 1 1 1

PERCENTAGE% 25 21.42 14.28 0 28.57 3.57 3.57 3.57

28.57% of the respondent invest in mutual fund , while 25% in savings account and 21.42% invest in fixed deposits and none of the respondent invested in gold/silver.

ANALYSIS 6:
Q) While investing your money , which factor will you prefer ? a. Liquidity b. Low Risk c. High Return d. Companies Reputation

In this questin the respondents were asked which factor they prefered whne they invested their money . FACTOR Liquidity TOTAL 8 PERCENTAGE% 28.57 Page 29

Low Risk High Return Companies Reputation

10 7 3

35.71 25 10.7

Most of the respondent invest in those securities where there is low risk.

ANALYSIS 7:
Q) Are you aware about Mutaul Funds? Yes AWARNESS YES NO No TOTAL 30 PERCENTAGE% 100%

All the respondents are aware about mutual funds.

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ANALYSIS 8:
Q) How did you come to know about Mutual Funds? a. Advertisment Sources Adverstisment Banks Financial Advisor b. Banks Total 20 3 7 c. Financial Advisors Percentage% 66.6 10 23.3

66.66% of the respondent are aware about mutual funds through advertisment.

ANALYSIS 9:
Q) Have you ever invested in Mutual Funds? a. Yes Invested Yes No b. No Total 8 22 Percentage% 26.66 73.33

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8 out of 30 people invests in mutual funds .

ANALYSIS 10:
Q) If you have not invested in mutal fuds , then why ? a. High Risk b. Not Aware c. No specific reason

Reason High Risk Not Aware No specific Reason

Total 12 0 10

Percentage 54.54 45.45

12 people donot invest in mutual fund because of high risk and 9 of them do not have any specific reason for not investing.

ANALYSIS 11:
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Q) Where do you find yourself as a mutual fund investor ? a. Long time investor b. short time investor

Reason Long term investor Short term investor

Total 4 4

percentage 50 50

Some respondent are long term investors and some are short term investors.

ANALYSIS 12:
Q) In which type of mutual fund you like to invest ? a. Private b. Public Total 3 2 3 C. Both percentage 37.5 25 37.5

Private Public Both

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The respondents were intersted in investing in all kind of muatual funds.

ANALYSIS 13:
Q) In which mutual fund have you invested ? a. SBI g. OTHERS Mutual fund co.s SBI ICICI KOTAK UTI HDFC RELIANCE OTHERS Total 3 1 1 0 0 2 1 percentage 37.5 12.5 12.5 25 12.5 b. ICICI c. KOTAK d. UTI e. HDFC f. RELAINCE

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37.5% of the respondent invested in SBI mutual funds,25% invested in reliance mutual fund.

ANALYSIS 14: Q) If you have invested in SBI theni. Why did you invest in SBI mutual fund? a. Because it is related to state bank b. High Return c. Brokers advice

REASON Related to state bank High return Brokers advice

Total 1 0 2

percentage 33.3 66.66

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66.66% of the respondent invested in SBI mutual fund because of their brokers advice.

ii. If you have not invested in SBI then why ? a. Not aware d. No specific reason Reason Not aware Already Invested Less return No specific reason Total 0 2 0 3 percentage 40 60 b. Already invested c. less return

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60% of the respondent who did not invest in SBI mutal funds had no specific reason for not investing.

ANALYSIS 15 Q) How would you like to receive the return every year? a. Dividend Payout Ways Dividend payout Dividend reinvested Growth in NAV b. Dividend re-investment total 2 2 4 c. Growth in NAV percentage 25 25 50

Most of the respondent prefered growth in NAV

4.2 FINDING AT A GLANCE


The largest numbers of respondents were from Age Group of 31-40 years .The second most respondents were in the age group of 40-50 years and the least were in the age group of above 60 years. Most of the respondents were male. 60% of the respondents were single

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93.33% of the respondents invest in securities, while the rest dont invest in any kind of securities.

28.57% invest in mutual fund, 25% invest in savings account , 21.42% invest in fixed deposits, 14.28% invest in securities and the rest invest in shares/debentures, real estate, post office and NCS.

35.71% invest in those securities were the risk is low , 28.57 % invest in those securities which has easy liquidity, 25% in those having high return, and 10.7% in those securities whose company name is reliable.

All the investors were aware about mutual funds. 66.6% of the respondents were aware about mutual funds through advertisement, 10% through banks and 23.3% through financial advisors.

26.6% invest in mutual fund , and the rest 73.3% invest in some other securities. 54.54% dont invest in securities because of high risk , 45.45 % did not have a specific reason for not investing in mutual fund.

50% of the respondents are long term investors while 50% are short term investors. 37.5% of the respondent prefer private , 25% prefer public and 37.5% prefer both kind of securities.

37.5% invest in SBI mutual fund, 12.5 % invest in ICICI , 12.5 % invest in KOTAK, 25% invest in Reliance, 12.5 % invest in other mutual fund companies.

66.6% invest in SBI Mutual fund because of their brokers advice and the rest 33.3% invested in SBI Mutual fund because it was related to State bank of india.

60% had no specific reason for not investing in SBI Mutual fund. 40 % did not invest in SBI mutual fund because they have already invested in some other AMC. Page 38

50% of the respondent need growth in NAV as a return every year. And the rest require dividend payout and dividend reinvested as a return every year .

CHAPTER 5
RECOMMENDATION AND SUGGESTIONS

The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing.

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Mutual funds offer a lot of benefit which no other single option could offer. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. Mutual Fund Company needs to give the training of the Individual Financial Advisors about the Fund/Scheme and its objective, because they are the main source to influence the investors. Before making any investment Financial Advisors should first enquire about the risk tolerance of the investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration. Younger people aged under 35 will be a key new customer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off. Customers with graduate level education are easier to sell to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality. Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.

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CHAPTER 6
CONCLUSION

Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, Channels etc. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of

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awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing. Brand plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are many AMCs but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and their Assets Under Management is larger than others whose Brand name are not well known like Principle, Sunderam, etc. Distribution channels are also important for the investment in mutual fund. Financial Advisors are the most preferred channel for the investment in mutual fund. They can change investors mind from one investment option to others. Many of investors directly invest their money through AMC because they do not have to pay entry load. Only those people invest directly who know well about mutual fund and its operations and those have time.

QUESTIONNAIRE
Respected sir/ madam, I am a student of B.com Part III. As per the requirement and partial fulfillment of the curriculum I am going through a project study on ANALYSIS OF MUTUAL FUND ". The questionnaire has been designed to find out the facts and figures relating to this topic. Your response will be kept strictly confidential and be used only for academic purpose. Your few minutes of time will help me in a great way. Naazla Fatima
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Personal details :
(a). Name:(b). Age:20-30 [ ] 31-40 [ ] 41-50 [ ] 51-60 [ ] 60 above [ ]

Please tick ()

(c). Gender : (d). Marital Status :

Male [ ] Married [ ]

Female [ ] single [ ]

1. Do you invest ?

Yes [ ]

No [ ]

2. what kind of investment do you prefer ?

a. Saving account [ ]

b. Fixed deposits [ ]

c. Insurance [ ]

d. Gold/ Silver [ ]

e. Mutual Fund [ ] f. Post Office-NSC, etc [ ] g. Shares/Debentures [ ] h. Real state [ ]


3. While investing your money, which factor will you prefer?

a. Liquidity [ ] b. Low Risk [ ] c. High Return [ ] d. Companies reputation [ ]

4. Are you aware about Mutual Funds and their operations?

a. Yes [ ]

b. No [ ] Page 43

5. If yes, how did you know about Mutual Fund?

a. Advertisement [ ]

b. Banks [ ]

c. Financial Advisors [ ]

6. Have you ever invested in Mutual Fund?

a. Yes [ ]

b.No [ ]

7. If not invested in Mutual Fund then why?

a. High risk [ ]

b. Not aware [ ]

c. Not any specific reason [ ]

8. where do you find yourself as a mutual fund investor ?

a. Long time investor [ ]

b. Short time investor [ ]

9. In which time of mutual fund you like to invest?

a. Private

[ ]

b. Public [ ]

c. both [ ]

10. In which mutual fund have you invested ? a. SBI [ ] b. ICICI [ ] c. Kotak [ ] d. UTI [ ] e. HDFC [ ] f. RELIANCE [ ]

g. OTHERS [ ] 12. IF YOU HAVE INVESTED IN SBI THEN i. why did you invest in SBI mutual fund ?

a. Because it is related to state bank

[ ]

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b. High return F c. Brokers advice


13. If you have not invested in SBI then why ?

[ ] [ ]

a. not aware [ ]

b. Already invested [ ] c. Less return [ ]

d. No specific reason [ ]
14. How would you like to receive the returns every year?

a. Dividend payout [ ] c. Growth in NAV [ ]

b. Dividend re-investment [ ]

THANK YOU

BIBLIOGRAPHY

WWW.SBIMF.COM WWW.GOOGLE.COM

WWW. WIKIPEDIA.COM

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WWW.SHAREMARKET.COM

WWW.MUTUALFUNDSINDIA.COM

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