A Project on Mutual Fund

(SBI)
Padmashree Dr. D.Y. Patil University
In partial fulfillment of the requirements for the award of the

Degree of
MASTERS IN BUSINESS ADMINISTRATION
Submitted by:
ALTAF SHAIKH
(Roll.No.012175)

Research Guide:

NEETU SHARMA
Assistant Professor
Department of Business Management
Padmashree Dr. D.Y. Patil University
CBD Belapur, Navi Mumbai

FEBRUARY 2014

1
 “PROJECT ON
MUTUAL FUND”
(SBI)

2
 DECLARATION

I hereby declare that the dissertation “PROJECT ON MUTUAL FUND of

SBI” submitted for the MBA Degree at Padmashree Dr. D.Y. Patil University’s
Department of Business Management is my original work and the dissertation
has not formed the basis for the award of any degree, associate ship, fellowship
or any other similar titles.

3
 CERTIFICATE

This is to certify that the dissertation entitled “A Project on Mutual Fund of

SBI” is the bona fide research work carried out by Mr. ALTAF SHAIKH
student of MBA (Finance), at Padmashree Dr. D.Y. Patil University’s
Department of Business Management during the year 2012 -2014, in partial
fulfillment of the requirements for the award of the Degree of Master in
Business Management and that the dissertation has not formed the basis for
the award previously of any degree, diploma, associate ship, fellowship or
any other similar title.

Dr. R. Gopal, Ms. Neetu Sharma

Dean, Director and HOD Assistant Professor
Department of Business Management,
Padmashree Dr. D.Y. Patil University

Place: Navi Mumbai

Date:

4
 ACKNOWLEDGEMENT

In the first place, I thank the Padmashree Dr. D. Y. Patil University,

Department of Business Management, Navi Mumbai for giving me an
opportunity to work on this project. I would also like to thank Ms. Neetu
Sharma, Assistant Professor, Department of Business Management,
Padmashree Dr. D.Y. Patil University, Navi Mumbai for having given me
her valuable guidance for the project. Without her help it would have been
impossible for me to complete the project.

I would like to thank the various people who have provided me with a lot of
information and in fact even sharing some of the confidential data many of
which I have used in this report and without which this project could not
have been completed.

I would also like to thank the Librarian staff for their co-operation in
providing me with the necessary reference materials.

I would be failing in my duty if I do not acknowledge with a deep sense of

gratitude the sacrifices made by my parents and thus have helped me in
completing the project work successfully.

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 TABLE OF CONTENTS

SR.NO. TITLE PAGE NO.

Chapter 1 Executive Summary 8

Chapter 2 Introduction 10

Chapter 3 History of Mutual Fund 20

Chapter 4 Types of Mutual Fund 24

Chapter 5 Literature Review 34

Chapter 6 Objectives of the study 42

Chapter 7 Research Methodology: 44

Chapter 8 Company Profile 46

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Chapter 9 SEBI Regulation on Mutual Fund 54

Chapter 10 Association of Mutual Fund 63

Chapter 11 Investment Perspective 69

Chapter 12 Rules of Mutual Fund Investment 75

Chapter 13 Performance & Risk measurement of 79

Mutual Fund
Chapter 14 Data Analysis and Interpretation 85

Chapter 15 Suggestion and Conclusion 97

Chapter 16 Questionnaire 100

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 CHAPTER 1

EXECUTIVE SUMMARY

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

being. Mutual Funds have not only contributed to the India growth story but have

also helped families tap into the success of Indian Industry. As information and

awareness is rising more and more people are enjoying the benefits of investing

in mutual funds. The main reason the number of retail mutual fund investors

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

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

opportunities, the number who decide to invest in mutual funds increases to as

many as one in five people. The trick for converting a person with no knowledge

of mutual funds to a new Mutual Fund customer is to understand which of the

potential investors are more likely to buy mutual funds and to use the right

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

relevant to their decision.

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

enough scope to implement my analytical ability. The analysis and advice

presented in this Project Report is based on market research on the saving and

investment practices of the investors and preferences of the investors for

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

Preferences in Mutual Fund means Are they prefer any particular Asset

8
Management Company (AMC), Which type of Product they prefer, Which

Option (Growth or Dividend) they prefer or Which Investment Strategy they

follow (Systematic Investment Plan or One time Plan). This Project as a whole

can be divided into two parts.

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

Company Profile, Objectives of the study, Research Methodology. One can

have a brief knowledge about Mutual Fund and its basics through the Project.

The second part of the Project consists of data and its analysis collected through

survey done on 200 people. For the collection of Primary data I made a

questionnaire and surveyed of 200 people. I also taken interview of many

People those who were coming at the SBI Branch where I done my Project. I

visited other AMCs in Mumbai to get some knowledge related to my topic. I

studied about the products and strategies of other AMCs in Mumbai to know

why people prefer to invest in those AMCs. This Project covers the topic “A

STUDY ON MUTUAL FUND.” The data collected has been well organized

and presented. I hope the research findings and conclusion will be of use.

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 CHAPTER- 2

INTRODUCTION

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 INTRODUCTION TO 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
schemes. These could range from shares to debentures to money market
instruments. The income earned in these investments and the capital appreciation
realized by the scheme is shared by its unit holders in proportion to the number
of units owned by them. Thus a Mutual Fund is the most suitable investment for
the common man as it offers an opportunity to invest in a diversified,
professionally managed portfolio at a relatively low cost. Anybody with an
investment able surplus of a few thousand rupees can invest in Mutual Funds.
Each Mutual Fund scheme has a defined investment objective and strategy.

A mutual fund is the ideal investment vehicle for today’s complex and modern
financial scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events
occurring in faraway places. A typical individual is unlikely to have the
knowledge, skills, inclination and time to keep track of events, understand their
implications and act speedily.

A mutual fund is answer to all these situations. It appoints professionally

qualified and experienced staff that manages each of these functions on a fulltime
basis. The large pool of money collected in the fund allows it to hire such staff at
a very low cost to each investor. In fact, the mutual fund vehicle exploits
economies of scale in all three areas –research, investment and transaction
processing.

A draft offer document is to be prepared at the time of launching the fund.

Typically, it pre specifies the investment objective of the fund, the risk
11
associated, the cost involved in the process and the broad rules for entry into and
exit from the fund and other areas of operation. In India, as in most countries,
these sponsors need approval from a regulator, SEBI in our case. SEBI looks at
track records of the sponsor and its financial strength in 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 and perhaps a third one to handle registry
work for the unit holders of the fund. In the Indian context, the sponsors promote
the Asset Management Company also, in which it holds a majority stake. In
many cases a sponsor can hold a 100% stake in the Asset Management Company
(AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life Asset
Management Company Ltd., which has floated different mutual funds schemes
and also acts as an asset manager for the funds collected under the schemes.

As per SEBI regulations, mutual funds can offer guaranteed returns for a
maximum period of one year. In case returns are guaranteed, the name of the
guarantor and how the guarantee would be honored is required to be disclosed in
the 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.

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 THE CONCEPT OF MUTUAL FUND IN DETAIL

A mutual fund uses the money collected from investors to buy those assets
which are specifically permitted by its stated investment objective. Thus, an equity
fund would buy equity assets – ordinary shares, preference shares, warrants etc. A
bond fund would buy debt instruments such as debentures, bonds or government
securities. It is these assets which are owned by the investors in the same
proportion as their contribution bears to the total contributions of all investors put
together.

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.
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 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.

When an investor subscribes to a mutual fund, he or she buys a part of the

assets or the pool of funds that are outstanding at that time. It is no different from
buying “shares” of joint stock Company, in which case the purchase makes the

14
 investor a part owner of the company and its assets. However, whether the
investor gets fund shares or units is only a matter of legal distinction.

A Mutual Fund is a trust that pools the savings of a number of investors

who share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities. The
income earned through these investments and the capital appreciation realized is
shared by its unit holders in proportion to the number of units owned by them.
Thus Mutual fund is 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.

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MUTUAL FUND OPERATION FLOW CHART
CHART

From the above chart, it can be observed that how the money from the
investors flow and they get returns out of it. With a small amount of fund,
investors pool their money with the funds managers. Taking into consideration the
market strategy the funds managers invest this pool of money into reliable
securities. With ups and downs in market returns are generated and they are
passed on to the investors. The above cycle should be very clear and also
effective.
The fund manager while investing on behalf of investors takes into
consideration various factors like time, risk, return, etc. so that he can make
proper investment decision.

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 BENEFITS OF MUTUAL FUNDS

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

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

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

RETURN POTENTIAL:
Over a medium to long-term, Mutual Funds have the potential to provide a
higher net return as they invest in a diversified basket of selected securities.

ECONOMIES:
Mutual Funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage,
custodial and other fees translate into lower costs for investors.

LIQUIDITY:
17
In open-end schemes, the investor gets the money back promptly at net NAV
pegged prices. In closed-end schemes, the units can be sold on a stock exchange
at the prevailing market price. The fund also repurchases from the investors at
NAV pegged prices. There is scope to speedily disinvest assets and obtain
disinvestments proceeds.

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

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

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

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

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

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

Fees and commissions:

All funds charge administrative fees to cover their day-to-day expenses. Some
funds also charge sales commissions or “loads” to compensate brokers, financial
consultants, or financial planners. Even if you don’t use a broker or other
financial adviser, you will pay a sales commission if you buy shares in a load
fund.

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

Management Risk:
When you invest in a mutual fund, you depend on the fund manager to make the
right decisions regarding the fund’s portfolio. If the manager does not perform as
well as you had hoped, you might not make as much money on your investments
as you expected. Of course, if you invest in Index Funds, you forego
management risk, because these funds do not employ managers.
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 CHAPTER 3

HISTORY OF MUTUAL FUND

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HISTORY OF THE INDIAN MUTUAL FUND

INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust

of India, at the initiative of the Government of India and Reserve Bank. 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

21
Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under

management.

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

1987 marked the entry of non- UTI, public sector mutual funds set up by public

sector banks and Life Insurance Corporation of India (LIC) and General

Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI

Mutual Fund established in June 1987 followed by 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 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.
22
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.

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 CHAPTER 4

TYPES OF MUTUAL FUND

24
 CATEGORIES OF MUTUAL FUND:

Types of Mutual Funds Schemes in India

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. thus mutual funds has Variety
of flavors, Being a collection of many stocks, an investors can go for picking a
mutual fund might be easy. There are over hundreds of mutual funds scheme to
choose from. It is easier to think of mutual funds in categories, mentioned below.

25
Overview of existing schemes existed in mutual fund
category:

BY STRUCTURE

1. Open - Ended Schemes:

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

2. Close - Ended Schemes:

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

3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-
ended and close-ended schemes. The units may be traded on the stock
exchange or may be open for sale or redemption during pre-determined
intervals at NAV related prices.

26
BY NATURE

1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The
structure of the fund may vary different for different schemes and the fund
manager’s outlook on different stocks. The Equity Funds are sub-classified
depending upon their investment objective, as follows:
Diversified Equity Funds
Mid-Cap Funds
Sector Specific Funds
Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank
high on the risk-return matrix.

2. Debt funds:
The objective of these Funds is to invest in debt papers. Government
authorities, private companies, banks and financial institutions are some of the
major issuers of debt papers. By investing in debt instruments, these funds ensure
low risk and provide stable income to the investors. Debt funds are further
classified as:
Gilt Funds: Invest their corpus in securities issued by Government, popularly
known as Government of India debt papers. These Funds carry zero Default risk
but are associated with Interest Rate risk. These schemes are safer as they invest
in papers backed by Government.

Income Funds:
Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities.

MIPs:
Invest maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market.
These scheme ranks slightly high on the risk-return matrix when compared with
other debt schemes.

Short Term Plans (STPs):

Meant for investment horizon for three to six months. These funds primarily
invest in short term papers like Certificate of Deposits (CDs) and Commercial
Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds:
Also known as Money Market Schemes, These funds provide easy liquidity and
preservation of capital. These schemes invest in short-term instruments like
Treasury Bills, inter-bank call money market, CPs and CDs. These funds are
27
meant for short-term cash management of corporate houses and are meant for an
investment horizon of 1day to 3 months. These schemes rank low on risk-return
matrix and are considered to be the safest amongst all categories of mutual funds.

3. Balanced funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in
both equities and fixed income securities, which are in line with pre-defined
investment objective of the scheme. These schemes aim to provide investors with
the best of both the worlds. Equity part provides growth and the debt part
provides stability in returns.

Further the mutual funds can be broadly classified on the basis of

investment parameter viz Each category of funds is backed by an investment
philosophy, which is pre-defined in the objectives of the fund. The investor can
align his own investment needs with the funds objective and invest accordingly.

By investment objective:
Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These
schemes normally invest a major part of their fund in equities and are willing to
bear short-term decline in value for possible future appreciation.
Income Schemes: Income Schemes are also known as debt schemes. The aim of
these schemes is to provide regular and steady income to investors. These
schemes generally invest in fixed income securities such as bonds and corporate
debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes:
Balanced Schemes aim to provide both growth and income by periodically
distributing a part of the income and capital gains they earn. These schemes
invest in both shares and fixed income securities, in the proportion indicated in
their offer documents (normally 50:50).
Money Market Schemes:
Money Market Schemes aim to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer, short-term
instruments, such as treasury bills, certificates of deposit, commercial paper and
inter-bank call money.

Others

Dividend Re-investment plan

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Here the dividend accrued on the mutual funds is automatically re-invested in the
purchasing additionally units in the open ended funds. In most cases mutual funds
offer the investor an option of collecting dividends or re-investing the same.

Systematic investment Plan

In this type of plan the investor is given the option of preparing a predetermined
number of post-dated cheques in favour of the fund. He will get the units on the
date of cheques at the existing NAV.
For instances , if on the 5th March ,he has given a post dated cheques for June 5th
2006, he will get units on 5th June 2006 at the existing NAV.

Systematic Withdrawal Plan:

As opposed to SIP, the systematic withdrawal plan allows the investor the facility
to withdraw predetermined amount/units from his fund at a pre-determined
interval. The investor’s units will be redeemed at the existing NAV as on that day.
The unit holder may set-up a systematic Withdrawal plan on a monthly, quarterly
or semi annually or on an annual basis to redeem a fixed number of units or
redeem enough units to provide a fixed amount of money.

Retirement Pension Plan

Some schemes are linked with retirement pension. Individuals participate in these
plans for themselves, and corporate for their employees.

Insurance Plan:
Some schemes launched by UTI and LIC offer insurance cover to
investor.
Like ULIP plans

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Tax Savings Scheme
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, eg: Equity Linked Saving Scheme (ELSS). Pension schemes
launched by the mutual fund also offer tax benefits. These schemes are growth-
oriented and invest pre-dominantly in equities. Their growth opportunities and
risk associated are like any equity-oriented scheme.

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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WHY INVESTOR NEEDS MUTUAL FUND :-

Mutual funds offer benefits, which are too significant to miss out. Any
investment has to be judged on the yardstick of return, liquidity and safety.
Convenience and tax efficiency are the other benchmarks relevant in mutual
fund investment. In the wonderful game of financial safety and returns are the
tows opposite goals and investors cannot be nearer to both at the same time. The
crux of mutual fund investing is averaging the risk.

Many investors possibly don’t know that considering returns alone, many
mutual funds have outperformed a host of other investment products. Mutual
funds have historically delivered yields averaging between 9% to 25% over a
medium to long time frame. The duration is important because like wise, mutual
funds return taste bitter with the passage of time. Investors should be prepared to
lock in their investments preferably for 3 years in an income fund and 5 years in
an equity funds. Liquid funds of course, generate returns even in a short term.

MUTUAL FUND RISK:-

Mutual funds face risks based on the investments they hold. For example, a
bond fund faces interest rate risk and income risk. Bond values are inversely
related to interest rates. If interest rates go up, bond values will go down and
vice versa. Bond income is also affected by the changes in interest rates. Bond
yields are directly related to interest rates falling as interest rates fall and rising
as interest rates.
Similarly, a sector stock fund is at risk that its price will decline due to
developments in its industry. A stock fund that invests across many industries is
more sheltered from this risk defined as industry risk.
Followings are glossary of some risks to consider when investing in mutual
funds:-

31
• COUNTRY RISK :-
The possibility that political events (a war, national election), financial problems
(rising inflation, government default), or natural disasters will weaken a country’s
economy and cause investments in that country to decline.

• INCOME RISK :-
The possibility that political events (a war, national election), financial problems
(rising inflation, government default), or natural disasters will weaken a country’s
economy and cause investments in that country to decline.

• MARKET RISK :-
The possibility that stock fund or bond fund prices overall will decline over short
or even extended periods. Stock and bond markets tend to move in cycles, with
periods when prices rise and other periods when prices fall.

32
GRAPH :- RISK RETURN REWRAD IN MUTUAL
FUND

Equity Fund

Balance Fund
MIP

Income Fund
Short Term
Fund

Liquid Fund

This graph shows risk and return impact on various mutual funds. There is a
direct relationship between risks and return, i.e. schemes with higher risk also
have potential to provide higher returns.

33
 CHAPTER 5

LITERATURE REVIEW

34
 LITERATURE REVIEW

Roy Subrata Ghosh, International Journal of Financial Management (2013):

The present study seeks to examine the marketing performance of the open-ended
income and growth mutual fund schemes' managers in India over the period from
January 2001 to December 2011. The data for the proposed study are obtained
from the website of Association of Mutual Funds in India (AMFI). Here, Treynor
and Mazuy model is used. However, the empirical findings bring out that the
market-timing performances of both types of schemes are not statistically
significant. It is also observed from the analysis that eight schemes are
statistically significant. Consequently, the average market-timing performance is
also unsatisfactory for the income (0.007) as well as growth (-0.095) schemes.
But, the mean test reveals that they are approximately equal performers. On the
whole, owing to the insignificant market-timing performance, the fund managers
of both types of schemes have failed to earn abnormal rate of return by applying
the strategy of market outguessing from the volatile capital market. This speaks
against the superior market-timing ability of the open-ended mutual fund
managers in India.

Gatzert, Nadine. The Journal of Risk Finance14.5 (2013):

Purpose - In financial planning, customers are typically confronted with choosing

a premium payment scheme when investing in a mutual fund, which is often
equipped with an investment guarantee to provide downside protection.
Guarantee costs may thereby also be charged differently depending on the
provider. The paper aims to investigate the impact of the premium payment
method on different performance measures for a mutual fund with an investment
guarantee. Design/methodology/approach - The paper compares a fund with
annual and upfront premiums as well as constant guarantee costs versus the
guarantee price as an annual percentage fee of the fund value, always ensuring
that the present value of premium payments is the same for all product variants.

35
The paper further studies the relevance of the guarantee level and the contract
term. Findings - The results emphasize that even though the present value of
premiums paid into the contract is the same, the type of premium (upfront versus
annual) as well as the type of guarantee cost (upfront versus annual fee) has a
considerable impact on the performance. Practical implications - Providers can
thus make a product more attractive for consumers by individually adjusting the
premium scheme depending on their preferences and by making the resulting
risk-return-profile transparent, while keeping the other contract characteristics
unchanged (e.g. extent of the guarantee). Originality/value - To date, there has
been no comprehensive analysis with specific focus on the impact of different
premium payment schemes (in particular with respect to savings premiums and
guarantee costs) on risk and return of a mutual fund with otherwise given contract
characteristics such as the underlying fund strategy and the investment guarantee,
even though the premium scheme itself can already have a considerable impact
on the terminal payoff distribution and thus risk-return profiles. In addition, such
an analysis can provide important information for consumers and providers in
designing and choosing attractive products by simply adjusting the premium
scheme (if possible) instead of or in addition to changing other product features.

Elizabeth A. Business and Economics Journal 2013 (2013):

The purpose of this paper is to determine if active mutual fund managers provide
value over passive fund managers through their stock picking ability. I examine
the performance of funds that are "closet indexers" and I have developed several
variables that measure how similar a fund is to the S&P 500 Index (as proxied by
the Vanguard 500 Index). I regress fund returns on these measures, along with
control variables. I use raw returns, characteristic benchmarked returns and four-
factor model excess returns as the dependent variables in panel regressions. I use
returns from the Center for Research in Security Prices mutual fund database,
both before and after fees, as well as calculating fund returns using holdings data
from Thompson Financial's CDA database. My main result is that active

36
managers add value over the S&P 500 Index. The average active fund
outperforms the S&P 500 Index by 1.29 to 1.96 percent per year before fees. The
outperformance remains positive and significant after fees.

Dawood Ashraf. International Journal of Islamic and Middle Eastern Finance

and Management (2013):
Purpose - This paper seeks to review and extend previous research on the
performance of Islamic mutual funds (IMFs) by evaluating the relative
performance of IMFs and conventional funds during the global economic crisis in
the context of the Saudi Arabian capital market. Design/methodology/approach -
This paper compares the market timing and stock selection abilities of 159 mutual
funds listed on the Saudi Arabian stock market from 2007 to 2011 by using the
CAPM regression and Treynor and Mazuy models. The paper addresses the
benchmark problem from which most prior IMFs studies suffered by using
appropriate regional benchmarks. As a robustness check, coefficients of IMFs
and conventional funds are compared by using the differences in mean and
standard deviation analysis obtained from the standard CAPM model on
individual funds. Findings - The empirical results show evidence of better
performance of IMFs relative to conventional funds during periods of economic
crisis. In addition, although there is no evidence of relative superiority in market
timing ability, managers of IMFs appear to have better stock selection ability
during times of economic crisis. Research limitations/implications - The
combination of superior stock selection ability of IMFs and the negative market
timing ability of conventional funds suggest that IMFs offer better hedging
opportunities for investors during periods of economic downturn. Practical
implications - The findings of this paper suggest that IMFs can provide hedging
benefits during adverse economic conditions - an issue of great importance due to
the current and forecast insecurity surrounding the global capital markets. By
holding a portion of their investment portfolio in IMFs, investors can experience
a higher degree of confidence in terms of investment security, growth and returns.
Similarly, managers of conventional funds can improve risk adjusted

37
performance by following similar screening criteria as IMFs during economic
slowdowns. Originality/value - This paper represents the first comprehensive
study on the comparative performance of Islamic and conventional mutual funds
during the current financial crisis by including all fund managers listed on the
Saudi Arabian stock market. The paper extends the knowledge of the emerging
literature of Islamic finance and mutual fund performance.

Franck, Alexander; Walter, Andreas; Witt, Johannes F. Financial Markets and

Portfolio Management (Sep 2013):
The existence of the momentum effect in stock returns has been documented for
the US (e.g., Jegadeesh and Titman in J. Finance 48(1), 65-91, 1993 ) and many
other national equity markets worldwide (e.g., Griffin et al. in J. Finance 58(6),
2515-2547, 2003 ). However, little is known about the active employment of
momentum strategies among institutional investors outside the US. This paper
provides first evidence of momentum behavior among German mutual funds. We
find the fund trades to follow stock returns on an aggregated institutional level.
Moreover, we detect significant momentum behavior among funds with a
European and global equity focus, as well as among funds predominantly
investing in Asia. In contrast, German funds do not seem to engage in momentum
strategies when trading domestic stocks. While only half the funds in our sample
trade in accordance with past returns, 66 % of the funds within the largest size
quintile follow momentum strategies. Finally, we do not find momentum trading
funds to outperform the other funds.

38
Measuring the Mutual Fund Industry Risk Management and Performance
Sustainability
-
Quantile Regression Model

We apply the Quantile Regression Model to observe the rank correlation between
bond fund performance and asset, volatility, management fee, Sharpe index and
show that fund performance between volatility as a negative significant
relationship, implied extreme values have been generated risk coefficient and fund
performance change relations. The extreme value of the display the risk coefficient
fund
performance has changed the relationship, show that enhance the risk coefficient,
resulting in lower fund performance, tells us that the mutual fund industry pursuit
of short-term fund performance through operating the transition risks lever, but
cannot afford a long-term test of the market. Finally, we recommend that the
mutual fund industry needs to strengthen risk management professional and
pursuit of performance
sustainability.

Fricke, Eric. Managerial Finance (2013):

Purpose - The purpose of this paper is to examine how board compensation and
holdings are related to mutual fund expense ratios. Previous studies find that
compensation and expense ratios are positively correlated and argue that this
relationship is potential evidence of rent sharing, whereby excessively
compensated boards fail to negotiate with fund managers for lower shareholder
fees. Design/methodology/approach - Using a dataset of US open-end mutual
funds, the author examines how geographic-based salary data, director
profession, director fund holdings and fund returns might explain the relationship
between compensation and fees. Findings - The results provide additional support
for potential rent sharing between fund managers and directors and are robust to

39
 alternative measures of director compensation, fund sales loads, director holdings
and fund returns. Research limitations/implications - The findings are limited by
the sample size and the lack of time series data of the hand-collected dataset. Data
are collected from 598 funds in the year 2003. Practical implications - These
findings suggest that mutual fund expense ratios may be affected by potential
agency costs. Social implications - Mutual fund regulatory focus has been
predominantly focused on the independence of board chairmen, but this study
shows that compensation may also be a significant contributor to fund
governance. Originality/value - This study is unique in its recent focus on fund
expense ratios and board compensation and examining potential explanations for
this relationship.

Junarsin, Eddy. International Journal of Management (Mar 2013):

This study analyzes the characteristics of mutual fund holdings and empirically
examine mutual fund performance with characteristic-based benchmarks. Two
main approaches are used to test the hypotheses: (1) Grinblatt and Titman's
(1993) measure and (2) Daniel et al.'s (1997) and Wermers' (2000) characteristic
selectivity, characteristic timing, and average style measures. This study finds
that domestic equity funds had slightly higher total net assets (TNAs) until the
beginning of 2006, and afterwards had lower TNAs on average relative to all
funds. During the financial crisis (especially in the end of 2008), domestic equity
funds underperformed all funds with respect to returns. However, in 2009 when
the economy steadily recovered, domestic equity funds again outperformed the
all finds. The results of hypotheses testing indicate that GT measures are
significant but negative for G and GI funds. Overall, the test results are not in
favor of the assessment of fund managers' ability.

Edelen, Roger; Evans, Richard; Kadlec, Gregory. Financial Analysts Journal

(Jan/Feb 2013):
40
Industry observers have long warned of the "invisible" costs of fund trading, yet
evidence that these costs matter is mixed because many studies do not account for
the largest trading-cost component-price impact. Using portfolio holdings and
transaction data, the authors found that funds' annual trading costs are, on
average, higher than their expense ratio and negatively affect performance. They
also developed an accurate but computationally simple trading-cost proxy-
position-adjusted turnover.

41
 CHAPTER 6
OBJECTIVE OF TH STUDY

42
 OBJECTIVES OF THE STUDY

a. To find out the Preference of the investors for Asset Management of company.
b. To know the preference of the portfolios.
c. To know why one has invested in SBI Mutual Funds.
d. To find out the most preference channel.
e. To find out what should do to boost Mutual F und Industry.

43
 CHAPTER 7

RESEARCH METHODOLOGY

44
 RESEARCH METHODOLOGY

• This project is a study done through primary research (major portion) and secondary
sources.

• The primary data related to the study will be collected by conducting interviews of
various individuals through questionnaires.

• Sampling area will be Mumbai and Navi-Mumbai area.

• Secondary data will be collected through websites and from various books, magazines
and journals.

45
 CHAPTER 8
COMPANY PROFILE

46
 STATE BANK OF INDIA

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

The fund traces its lineage to SBI - India’s largest banking enterprise. The
institution has grown immensely since its inception and today it is India's
largest bank, patronised by over 80% of the top corporate houses of the
country.

SBI Mutual Fund is a joint venture between the State Bank of India and
Society General Asset
Management, one of the world’s leading fund management companies
that manages over
US$ 330 Billion worldwide.

In eighteen years of operation, the fund has launched thirty-two schemes

and successfully redeemed fifteen of them. In the process it has rewarded
it’s investors handsomely with consistently high returns.

A total of over 3.5 million investors have reposed their faith in the wealth
generation expertise of the Mutual Fund.

Schemes of the Mutual fund have consistently outperformed benchmark

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

Today, the fund manages over Rs. 20000 crores of assets and has a diverse
profile of investors actively parking their investments across 40 active
schemes.

47
 The fund serves this vast family of investors by reaching out to them
through network of over 100 points of acceptance, 26 investor service
centers, 33 investor service desks and 52 district organizers.

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

Resurgent India Opportunities Fund. Growth through innovation and stable
investment policies is the SBI MF credo.

PRODUCTS OF SBI MUTUAL FUNDS

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

• Magnum COMMA Fund

• Magnum Equity Fund
• Magnum Global Fund
• Magnum Index Fund
• Magnum MidCap Fund
• Magnum Multicap Fund
• Magnum Multiplier Plus 1993
• Magnum Sector Funds Umbrella
• MSFU - FMCG Fund
• MSFU - Emerging Businesses Fund
• MSFU - IT Fund

48
• MSFU - Pharma Fund
• MSFU - Contra Fund
• SBI Arbitrage Opportunities Fund
• SBI Blue chip Fund
• SBI Infrastructure Fund - Series I
• SBI Magnum Tax gain Scheme 1993
• SBI ONE India Fund
• SBI tax advantage fund – series.

Debt Fund Schemes

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

• Magnum Children’s Benefit Plan

• Magnum Gilt Fund
• Magnum Gilt Fund (Long Term)
• Magnum Gilt Fund (Short Term)
• Magnum Income Fund
• Magnum Income Plus Fund
• Magnum Income Plus Fund (Saving Plan)
• Magnum Income Plus Fund (Investment Plan)
• Magnum Insta Cash Fund
• Magnum Insta Cash Fund -Liquid Floater Plan
• Magnum Institutional Income Fund
• Magnum Monthly Income Plan
• Magnum Monthly Income Plan Floater
• Magnum NRI Investment Fund
• SBI Capital Protection Oriented Fund - Series I

49
• SBI Debt Fund Series
• SDFS 15 Months Fund
• SDFS 90 Days Fund
• SDFS 13 Months Fund
• SDFS 18 Months Fund
• SDFS 24 Months Fund
• SDFS 30 DAYS
• SDFS 30 DAYS
• SDFS 60 Days Fund
• SDFS 180 Days Fund
• SDFS 30 DAYS
• SBI Premier Liquid Fund
• SBI Short Horizon Fund
• SBI Short Horizon Fund - Liquid Plus Fund
• SBI Short Horizon Fund - Short Term Fund

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

• Magnum Balanced Fund

• Magnum NRI Investment Fund – Flexi Asset Plan

Competitors of SBI Mutual Fund

Some of the major competitors of SBI Mutual fund are as follows:-

ICICI Mutual Fund

50

Reliance Mutual Fund

UTI Mutual Fund

Birla Sun life Mutual Fund

Kotak Mutual Fund

HDFC Mutual Fund

LIC Mutual Fund

AWARDS AND ACHIEVEMENTS

SBI- MUTUAL FUND has been performing excellently since its inception. The fund
house expertise and excellent performance is frequently recognized by the mutual fund
industry. SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award
- 8 times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year 2005-2006)
and most recently with the CNBC TV - 18 Crisil Mutual Fund of the Year Award 2007 and 5
Awards for our schemes.

javascript:popup2('aboutus/awards/lipper_awards_07.htm')javascript:popup1('aboutus/awards/icra

51
javascript:popup2('aboutus/awards/lipper_awards_07.htm')javascript:popup1('aboutus/awards/icra

javascript:popup1('aboutus/awards/icra_awards_2007.htm')javascript:popup1('aboutus/awards/cris

javascript:popup1('aboutus/awards/crisil_awards_2007.htm')

52
53
 CHAPTER 9
SEBI REGULATION ON MUTUAL
FUND

54
 SEBI REGULATIONS ON MUTUAL FUND

SEBI’s regulatory reach has been extended to more areas and there is a
considerable change in the capital market. SEBI’s annual report for 97-98 has
stated that throughout its six years existence as a statutory body, it has sought to
balance the twin objectives of investor protection and market development. it has
formulated new rules and crafted regulations to foster development. Monitoring
and surveillance was put in the stock exchanges in 96-97 and strengthened 97-98.

OBJECTIVES OF SEBI
The promulgation of the SEBI ordinance in the parliament gave statutory
status to SEBI in 92. According to the preamble of the SEBI, the three main
objectives are:

To protect the interest of the investors in securities.

To promote the development of securities market

To regulate the securities market.

55
 FUNCTIONS OF SEBI

a) Regulating the business in stock exchanges and any other securities Market.

b) Registering and regulating the working of stock brokers , sub brokers,

Share transfer agents, bankers to the issue, trustees of the trust deed
Underwriters, portfolio managers, investment advisors, and other such
intermediaries who may be associated with securities market in any manner.

c) Registering and regulating the working of collective investment schemes mutual

funds.
d) Promoting and regulating self-regulatory organization

e) Prohibiting fraudulent and unfair trade practices in the securities market

MUTUAL FUNDS AND SEBI

For the smooth conduct and regulation of the mutual fund several guidelines have
been issued by the SEBI regarding the investment, disclosure, accountability
distribution, of its profits to its members and the asset management companies.
SEBI has issued regulation and code of conduct in 93 that provided a basic legal
framework for the functioning of the mutual fund. The mutual fund regulation act
1996 has provided a sound footing and considerable leeway to fund management.
The new elements incorporated in the year 98, have placed the investors in a
better position with regard to proper asset management and disclosure.

DISCLOSURE NORMS
With the number of mutual funds schemes on the increase (in 97
alone 67 new of schemes of wide varieties were introduced in the market) the
investor should be kept well informed about the nature and functioning of the
mutual funds. It should start right from the offer document. The offer document
should provide essential information to assist the investors to informed and

56
 correct decision. According to SEBI regulations the standard offer document
should give the following information

 Standard and scheme specific risk factors. The latter may be related to investment
objective, investment strategy, asset allocation, risks from non diversification if any,
and from investing in closed ended schemes (range of discount, liquidity)

 Due diligence by the asset management company (AMC)

 Fundamental attributes such as type of schemes, investment objective (including the

tentative equity /debt/money market portfolio) and terms of issue (provision such as
listing, repurchase /redemption, fees, expenses, guarantee/safety net)

Details of the offer, such as sale, purchase, minimum corpus and pricing of units
in relation to NAV

 Likely initial issue expenses, actual issue expenses for schemes launched
during the last year, expenses borne by the AMC and annual recurring expenses
(as a percentage of average weekly net assets).

 Identification of AMC and background of fund managers.

 Asset allocation pattern (as a percentage of the assets) with indicative range
of investment or the maximum investment in a certain assets class.

 The policy of diversification or concentration to be pursued.

 The portfolio turnover policy and effects of investment techniques on total

portfolio turnover.

57
  The policy with respect to dividend and distributions, including any options for unit
holders.

 The policy of the fund regarding their scheme transfers.

 Associate transaction

 The borrowing policy including the intent and purpose of borrowing and stock
lending by the fund.

 Valuation of assets, accounting policies and NAV.

 The manner of determination of redemption and repurchase price of the units.

 Tax treatment of investments in mutual funds, investor rights, and services and
redressal of investor grievances.

The amendment in 1998 made a significant change in information disclosure

pertaining to litigation/penalties. SEBI has now mandated the disclosure of
information contained in reports of investigation and inspection conducted by it.
So far such information was neither disclosed in the offer document nor in the
annual reports. Now, all mutual funds have to disclose in the offer documents the
information pertaining to the following areas.

All cases of penalty awarded by the SEBI or any other regulatory body against
the sponsor of the mutual fund, the Trustee Company/ board of trustee, or any of
the directors or key personnel of the AMC and trustee company. The nature of
the penalty must be disclosed.

58

Pending material litigation proceedings including pending criminal and economic
cases against any of the mentioned parties. The name of the court or agencies in
which the proceedings are pending, the date instituted , the principal parties
thereto, a brief description of the factual basis alleged to underline the
proceedings and relief sought, if any shall be indicated.

Any deficiency in the system and operations of the sponsor of the mutual fund or
any company associated with the sponsor in any capacity such as the AMC or the
trustee company. This must pertain to matters that SEBI has specifically directed
disclosures. The full disclosure in the annual reports is mandatory.

INVESTMENT

The investment made issued by the mutual funds decides the return for the
investor. Improper management would land the investor in peril. To prevent this,
SEBI has tightened its control regarding the investment criteria. They are as
given below:-

Mutual funds cannot deal in option trade, short sale carry forward transaction in
securities. They can only invest in transferable securities in the money market
capital market, any privately placed debenture or debt securities.

Mutual funds required to form trust and managed separately by the asset
management companies. The minimum net worth of asset management should be
Rs 5 crores and 40% should be the sponsor’s contribution.

59
Investment under individual schemes should not cross the 5% of the corpus of
any company’s share and the investment under all schemes should not exceed
10% of the funds in the shares, debentures or securities of a single company.

Mutual fund shall not make investment in any privately placed securities issued
by the associates/group companies of the sponsors.
The aggregate investment of mutual funds in the listed or to be listed securities of
group companies of the sponsor shall not exceed 25% of the net assets of all
schemes of the fund.

The assets management companies (AMC) would be required to disclose in the

offer document maximum investment proposed to be made by the schemes in the
securities of the group companies of the sponsors and also aggregate investment
made by all schemes in the group companies.

The AMCs shall have to submit quarterly report to the trustees giving details
about the transactions in the securities of the group companies during the quarter
and the trustees have to make specific comments in their half yearly reports to the
SEBI on those investment.

The ‘group’ for this purpose would have the meaning as provided in the
Monopolies and Trade Practices Act in 1969.

An AMC cannot purchase or sell securities through a broker who is an associate

of the sponsor beyond 5% of the gross business of the mutual fund, which will be
monitored on a quarterly average than on a daily basis.

An AMC shall not in quarter purchase or sell securities for any of the schemes
through any broker beyond 5% of the aggregate business of the securities in a
quarter , unless the AMC records the justification for exceeding the limit and
reports such cases to the trustees on a quarterly basis.

60
 ACCOUNTABILITY:
Every mutual fund for each scheme should keep and maintain proper books of
accounts, records and documents to explain its transaction. The records should
disclose at any point of time financial position of the mutual fund in a true and
fair view of the state of affairs of the fund. The accounts should provide
information regarding the distribution or accumulation of income accruing to the
unit holder in a fair and true manner.

Short-term capital gains and long-term capital gains should be segregated in the
accounts. All the expenses should be clearly identified and appropriated to the
individual scheme. The AMC may charge the mutual fund with investment
management and advising fees that are fully disclosed in the prospectus subject to
the following viz,

• One and quarter of one per cent of the weekly average net assets outstanding in
each accounting year for scheme concerned as long as the net assets do not
exceed Rs. 100 crores and one percent of the excess amount over Rs.100 crores.

• The AMC can charge a) initial issue costs of sponsoring the fund and its schemes
b) recurring expenses related to marketing and selling expenses including agents
commission, brokerage and transaction costs and registrar services for transfer of
shares sold or redeemed, provided, the initial expenses in respect of any one
scheme shall not exceed 6% of the fund raised under the scheme.

The above mentioned expenses and fees payable to Asset management Company
shall be charged to the mutual fund.
DIVIDEND
Mutual funds after closing the accounts, distribute by way of
dividend the holders in accordance with the regulations, an amount not less than
90% of the profits earned during the year by that scheme. This does not apply to a
61
cumulative investment schemes or a growth oriented scheme where the nature of
the scheme has been made known to the investors at the time of offer.

MANAGEMENT
The sponsor should have a sound track record, experience in the relevant
field of financial services for a minimum period of five years, professional
competence, financial soundness and general reputation of integrity in all his
business transaction.
AMC shall be authorized for business by SEBI on the basis of certain criteria.
The memorandum and articles of association of the AMC would have to be
approved by the SEBI. The trustee board should be constituted with two thirds of
independent trustees to stand for the interest of the investors.

62
 CHAPTER 10

ASSOCIATION OF MUTUAL FUND

63
 ASSOCIATION OF MUTUAL FUNDS IN INDIA

With increase in Mutual Fund players in India, a need for mutual fund association
in India was generated to function as a non-profit organization.
Association of mutual funds in India (AMFI) was incorporated on 22nd August,
1995.

AMFI is an apex body of all Assets Management Companies (AMC) which

has been registered with Security Exchange Board of India (SEBI) .till date all
the AMCs are that have mutual fund schemes are its members. It functions under
the supervision and guidelines of its board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund
Industry to a professional and a healthy market with the ethical lines enhancing
and maintaining standards. It follows the principle of both protecting and
promoting the interests of mutual funds as well as their unit holders.

THE OBJECTIVES OF ASSOCIATION OF MUTUAL FUNDS

IN INDIA
The Association of Mutual Funds of India works with 30 registered
AMCS of the country. It has certain defined objectives which juxtaposes the
guidelines of its Board of Directors. The objectives are as follows.

This Mutual Fund Association of India maintains high professional and ethical
standards in all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in activities

64
 of Mutual Fund and Assets Management. The agencies that are connected or
involved in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBI’s guidelines in the
mutual fund industry.

Association of Mutual Fund of India do represent the government of India , the

Reserve bank of India and other related bodies on matters relating to the Mutual
Fund Industry.

It develops a team of well qualified and trained agent distributors. It implements a

programme of training and certification for all intermediaries and other engaged
in the Mutual Fund Industry.
.

AMFI undertakes all India awareness programmes for investors in order to

promote proper understanding of the concept and working of mutual funds.

At last Association of mutual fund of India also disseminate information on

mutual fund industry and undertakes studies and research either directly or in
association with other bodies.

65
 The Sponsors of Association of Mutual Funds in India.
Bank sponsored
 SBI Mutual management Ltd.

 BOB asset management CO. Ltd.

 Canbank Investment Management Services. Ltd

 UTI Asset management Company Pvt, Ltd.

Institution

 GIC Asset management Co.Ltd

 Jeevan Bima sahayog asset management Company.

66
Private sector
Indian

 Benchmark asset management company

 Cholamandalam Asset Management Co.Ltd

 Credit Capital Asset Management Co.Ltd

 Escorts Asset Management Ltd

 JM Financial Mutual fund

 Kotak Mahindra asset management company

 Reliance capital Asset management Ltd

 Sahara Asset management Co.Ltd

 Sundaram Asset management Co.Ltd

 Tata Asset Management Private Ltd

67
 Indian joint ventures

 Birla Sun life Asset management company

 DSP Merill Lynch Fund Managers company

 HDFC Asset management company

Foreign joint ventures

 ABN AMRO Asset Management (I) Ltd.

 Alliance capital Asset management (India) Pvt.Ltd

68
 CHAPTER 11

INVESTMENT PERSPECTIVE

69
 INVESTMENT PERSPECTIVE

Investment is the employment of funds on assets with the aim of earning income
or capital appreciation. Investment has two attributes namely time and risk.
Present sacrificed to get a return in the future. The sacrifice that has to be borne is
certain but the return in the future may be uncertain. This attribute of investment
indicates the risk factor. The risk is undertaken with a view to reap some return
from the investment. For laymen. Investment means some monetary commitment.

Financial investment is the allocation of money to assets that are expected to

yield some gain over a period of time. It is an exchange of financial claims such
as stocks and bonds for money .they are expected to yield returns and experience
capital growth over the years

Investment objectives:-
The main investment objectives are increasing the rate of return and reducing the
risk. Other objectives like safety, liquidity, and hedge against inflation can be
considered as subsidiary objectives.
Return
Investor always expects a good rate of return from their investments. Rate of
return could be defined as the total income the investor receives during the
holding period stated as a percentage of the purchasing price at the beginning of
the holding period.

Capital appreciation & dividend

Return =
Purchase price
Risk

70
Risk of holding securities is related with the probability of actual return become
less than the expected return. An investment whose rate of return varies widely
from period to period is risky than whose return that does not change much.
Every one likes to reduce the risk of his investment by proper combination of
different securities.
Liquidity
Marketability of the investment provides liquidity to the investment. The
liquidity depends upon the marketing and trading facility. If a portion of the
investment could be converted into the cash without much loss of time, it would
help the investor meet the emergencies. Stocks are liquid only if they command
good market by providing adequate return through dividends and capital
appreciation.
Hedge against inflation
Since there is inflation in almost all the economy, the rate of return should
ensure a cover against the inflation. The return rate should be higher than the
rate of inflation, otherwise the investor will have loss in real terms. Growth
stocks would appreciate in their values overtime and provide a protection against
inflation. the return thus earned should assure the safety of the principal amount,
regular flow of income and be a hedge against inflation.

Safety
The selected investment avenue should be under the legal and regulatory
framework. If it is not under the legal framework, it is difficult to represent the
grievances, if any. Approval of the law itself adds a flavor of safety. Even
though approved by law, the safety of the principal differs from one mode of
investment to another. Investments done with the government assure more safety
than with the private party.

The investment process

71
 The investment process involves a series of activities leading to the purchase of
securities or other investment alternatives
The investment process can be divided in to
1. Framing of investment policy
2. Investment analysis
3. Valuation
4. Portfolio construction
5. Portfolio evaluation

Investment Process

Investment Policy Analysis Valuation Portfolio Construction Portfolio Evaluation

Investable fund Market Intrinsic value Diversification Appraisal

Knowledge Industry Future value Selection & Revision
Allocation
Objectives Company

Financial Planning

Whenever we talk of planning, the first question which comes to our mind is what is the
objective?
The first step of planning is setting up of objectives. the same applies with financial planning.
Every investor has needs at various stages in his life. For example we need money for our
education, for buying car, buying house etc. we have to ensure that we should have money
when we need it.

72
As we all need money to meet our needs, these needs can be the best objectives or goals for us
to plan finances. So, “financial planning is a process aimed at achieving investor’s goal in life.”

Life cycle stage of financial planning

Life cycle stage Features Priority Choice of investment

products.
Childhood stage This is a period Long term investment No immediate needs.
dependency which lasts of money received in Long-term investments.
till the full time the form of gifts at
education finishes. various occasions.
Most of the fulfillments
and requirements are
filled by parents.
Young Might still depend to They might not have Liquid plans and short
Unmarried some extent on parents. any dependents and term investments.
Relatively lower income hence might not need Investments for long
and would not be able to insurance. Main need term plans when
afford large amount to is to protect their adequate short term
financial planning. earnings against any savings have been
More risk taking ability. disability or long achieved.
sickness.
More immediate and
short term needs.

Young married Two incomes to meet To secure income Medium to long-term

stage both cost and save. loss of any partner investments. Ability to
partners earn Sufficient income and against any disability take risks. Fixed
surplus to meet financial
or sickness. income, insurance and
planning needs. Life insurance so that equity products.
Short and intermediate unfortunate events of
term Housing andany partner’s death
insurance needs.
that part of income
Consumer finance needs may be replaced
Need for emergency
fund.
Young married Two or more dependent Life insurance of Medium to long-term
stage one partner on just one earner. Less earning member is investments. lesser
with children potential to save must. ability to take risks and
earn Need to start for save.
pension provision at
an early stage is
immense.

73
Young married Arrival of kids changes Life assurance of Medium to long-term
with children the scenario. The earning member is investments. Ability to
expenditure starts raising must. Consumer take risks. Portfolio of
at a faster rate than finance needs are products, for growth
income children’s high. Financial needs and long term
education holidays and are highest as this
consumer finance stage is ideal for
housing. disciplining spending
and saving regularly
Married with Individuals are in mid- Higher saving ratio Medium term
elder children career and family has recommended. investments with
become bigger with more Priority would shift higher liquidity needs.
children. Improved from protection needs Portfolio of products
finance and better life to investment needs including equity, debts
style Medium term needs because of pension and pension plans.
for children’s education needs. Because of Major contribution to
and marriage. Need for loan repayment needs pension products
pension, insurance and requirement cash contribution to health
medical cover higher. flows is higher. insurance.
Post family /pre- Children’s have become Adequate income and Maximum investment
retirement stage. independent. Last chance savings in pension funds
to ensure adequate
income to maintain the
standards of living after
retirement.
Retirement stage As a thumb rule, after After retirement the The need would
retirement individual savings rate declines correspond to
rd
need 2/3 of their final substantially categories 1),2),3) of
years income. the previous column:
In general people would 1)continue to work
fall in one of the and/or produce fixed
following three income with no risk at
categories: all.
1) Low pension income 2)invest capital to
and low capital to produce additional
supplement it. income and can take
2) Relatively low pension any risk
income plus some 3) Wise people. need to
accumulated capital. preserve the value of
3)Sufficient pension savings against
income plus substantial inflation
assets and capital.

74
 CHAPTER 12
RULES OF MUTUAL FUND INVESTING

75
 Ground Rules of Mutual Fund Investing
Assess yourself: Self-assessment of one’s needs; expectations and risk profile
is of prime importance failing which one will make more mistakes in putting
money in right places than otherwise. One should identify the degree of risk
bearing capacity one has and also clearly state the expectations from the
investments. Irrational expectations will only bring pain.

Try to understand where the money is going: It is important to identify

the nature of investment and to know if one is compatible with the investment.
One can lose substantially if one picks the wrong kind of mutual fund. In order to
avoid any confusion it is better to go through the literature such as offer
document and fact sheets that mutual fund companies provide on their funds.

Don't rush in picking funds, think first: One first has to decide what he
wants the money for and it is this investment goal that should be the guiding light
for all investments done. It is thus important to know the risks associated with the
fund and align it with the quantum of risk one is willing to take. One should take
a look at the portfolio of the funds for the purpose. Excessive exposure to any
specific sector should be avoided, as it will only add to the risk of the entire
portfolio. Mutual funds invest with a certain ideology such as the "Value
Principle" or "Growth Philosophy". Both have their share of critics but both
philosophies work for investors of different kinds. Identifying the proposed
investment philosophy of the fund will give an insight into the kind of risks that it
shall be taking in future.

Invest. Don’t speculate: A common investor is limited in the degree of risk

that he is willing to take. It is thus of key importance that there is thought given to
the process of investment and to the time horizon of the intended investment. One

76
should abstain from speculating which in other words would mean getting out of
one fund and investing in another with the intention of making quick money. One
would do well to remember that nobody can perfectly time the market so staying
invested is the best option unless there are compelling reasons to exit.

Don’t put all the eggs in one basket: This old age adage is of utmost
importance. No matter what the risk profile of a person is, it is always advisable
to diversify the risks associated. So putting one’s money in different asset classes
is generally the best option as it averages the risks in each category. Thus, even
investors of equity should be judicious and invest some portion of the investment
in debt. Diversification even in any particular asset class (such as equity, debt) is
good. Not all fund managers have the same acumen of fund management and with
identification of the best man being a tough task, it is good to place money in the
hands of several fund managers. This might reduce the maximum return possible,
but will also reduce the risks.

Be regular: Investing should be a habit and not an exercise undertaken at one’s

wishes, if one has to really benefit from them. As we said earlier, since it is
extremely difficult to know when to enter or exit the market, it is important to
beat the market by being systematic.
The basic philosophy of Rupee cost averaging would suggest that if one invests
regularly through the ups and downs of the market, he would stand a better
chance of generating more returns than the market for the entire duration. The
SIPs (Systematic Investment Plans) offered by all funds helps in being systematic.
All that one needs to do is to give post-dated cheques to the fund and thereafter
one will not be harried later. The Automatic investment Plans offered by some
funds goes a step further, as the amount can be directly/electronically transferred
from the account of the investor.

77
Do your homework:
It is important for all investors to research the avenues available to them
irrespective of the investor category they belong to. This is important because an
informed investor is in a better decision to make right decisions. Having identified
the risks associated with the investment is important and so one should try to
know all aspects associated with it. Asking the intermediaries is one of the ways
to take care of the problem.
Find the right funds
Finding funds that do not charge much fees is of importance, as the fee charged
ultimately goes from the pocket of the investor. This is even more important for
debt
funds as the returns from these funds are not much. Funds that charge more will
reduce the yield to the investor.

78
 CHAPTER 13

PERFORMANCE & RISK

MEASUREMENT OF

MUTUAL FUND

79
 Performance Measures or Risk Measurement of Mutual
Funds
Mutual Fund industry today, with about 34 players and more than five hundred
schemes, is one of the most preferred investment avenues in India. However, with
a plethora of schemes to choose from, the retail investor faces problems in
selecting funds. Factors such as investment strategy and management style are
qualitative, but the funds record is an important indicator too. Though past
performance alone can not be indicative of future performance, it is, frankly, the
only quantitative way to judge how good a fund is at present. Therefore, there is a
need to correctly assess the past performance of different mutual funds.
Worldwide, good mutual fund companies over are known by their AMCs and this
fame is directly linked to their superior stock selection skills. For mutual funds to
grow, AMCs must be held accountable for their selection of stocks. In other
words, there must be some performance indicator that will reveal the quality of
stock selection of various AMCs.
Return alone should not be considered as the basis of measurement of the
performance of a mutual fund scheme, it should also include the risk taken by the
fund manager because different funds will have different levels of risk attached to
them. Risk associated with a fund, in a general, can be defined as variability or
fluctuations in the returns generated by it. The higher the fluctuations in the
returns of a fund during a given period, higher will be the risk associated with it.
These fluctuations in the returns generated by a fund are resultant of two guiding
forces. First, general market fluctuations, which affect all the securities present in
the market, called market risk or systematic risk and second, fluctuations due to
specific securities present in the portfolio of the fund, called unsystematic risk.
The Total Risk of a given fund is sum of these two and is measured in

terms of standard deviation of returns of the fund. Systematic risk, on the other
hand, is measured in terms of Beta, which represents fluctuations in the NAV of
the fund vis-à-vis market. The more responsive the NAV of a mutual fund is to
the changes in the market; higher will be its beta. Beta is calculated by relating the
80
returns on a mutual fund with the returns in the market. While unsystematic risk
can be diversified through investments in a number of instruments, systematic risk
can not. By using the risk return relationship, we try to assess the competitive
strength of the mutual funds vis-à-vis one another in a better way.
In order to determine the risk-adjusted returns of investment portfolios, several
eminent authors have worked since 1960s to develop composite performance
indices to evaluate a portfolio by comparing alternative portfolios within a
particular risk class.
The most important and widely used measures of performance
are:
Ø The Treynor Measure
Ø The Sharpe Measure
Ø Jenson Model
Ø Fama Model
The Treynor Measure
Developed by Jack Treynor, this performance measure evaluates funds on the
basis of Treynor's Index. This Index is a ratio of return generated by the fund over
and above risk free rate of return (generally taken to be the return on securities
backed by the government, as there is

no credit risk associated), during a given period and systematic risk associated
with it (beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of
the fund.
All risk-averse investors would like to maximize this value. While a high and
positive Treynor's Index shows a superior risk-adjusted performance of a fund, a
low and negative Treynor's Index is an indication of unfavorable performance.

The Sharpe Measure

81
In this model, performance of a fund is evaluated on the basis of Sharpe Ratio,
which is a ratio of returns generated by the fund over and above risk free rate of
return and the total risk associated with it. According to Sharpe, it is the total risk
of the fund that the investors are concerned about. So, the model evaluates funds
on the basis of reward per unit of total risk. Symbolically, it can be written as:
Sharpe Index (Si) = (Ri - Rf)/Si
Where, Si is standard deviation of the fund.
While a high and positive Sharpe Ratio shows a superior risk-adjusted
performance of a fund, a low and negative Sharpe Ratio is an indication of
unfavorable performance.
Comparison of Sharpe and Treynor
Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well-diversified portfolios. On the other
hand, the systematic risk is the relevant measure of risk when we are evaluating
less than fully diversified portfolios or individual stocks. For a well-diversified
portfolio the total risk is equal to systematic risk. Rankings based on total risk
(Sharpe measure) and systematic risk (Treynor measure) should be identical for a
well-diversified portfolio, as the total risk is reduced to systematic risk. Therefore,
a poorly diversified fund that ranks higher on Treynor measure, compared with
another fund that is highly diversified, will rank lower on Sharpe Measure.

Jenson Model
Jenson's model proposes another risk adjusted performance measure. This
measure was developed by Michael Jenson and is sometimes referred to as the
Differential Return Method. This measure involves evaluation of the returns that
the fund has generated vs. the returns actually expected out of the fund given the
level of its systematic risk. The surplus between the two returns is called Alpha,
which measures the performance of a fund compared with the actual returns over
the period. Required return of a fund at agiven level of risk (Bi) can be calculated
as:
82
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it
alpha can be obtained by subtracting required return from
t he actual return of the fund.

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

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

Among the above performance measures, two models namely, Treynor measure
and Jenson model use systematic risk based on the premise that the unsystematic

83
risk is diversifiable. These models are suitable for large investors like institutional
investors with high risk taking capacities as they do not face paucity of funds and
can invest in a number of options to dilute some risks. For them, a portfolio can
be spread across a number of stocks and sectors. However, Sharpe measure and
Fama model that consider the entire risk associated with fund are suitable for
small investors, as the ordinary investor lacks the necessary skill and resources to
diversified. Moreover, the selection of the fund on the basis of superior stock
selection ability of the fund manager will also help in safeguarding the money
invested to a great extent. The investment in funds that have generated big returns
at higher levels of risks leaves the money all the more prone to risks of all kinds
that may exceed the individual investors' risk appetite.

84
 CHAPTER 14

DATA ANALYSIS

&

INTERPRETATION

85
 1. Age distribution of investors?

Frequency Percent
18-30 16 32
30-40 13 26
40-50 10 20
50 & above 11 22
Total 50 100

Interpretation:
Out of 50 respondents 32% are 18 to 30 age, 26% are 30 to 40, 20% are 40 to
50 and remaining 22% are of above 50. So Mutual funds should more
concentrate on young generation because they have less risk on family and they
will investment more because of career development and retirement benefits.

86
 2. Income of Person?

Income p.a Frequency Percentage

Up to 2,00,000 12 24
2,00,000 - 4,00,000 16 32
4,00,000 - 6,00,000 9 18
6,00,000 - 8,00,000 5 10
8,00,000 - 10,00,000 4 8
Above 10,00,000 4 8
Total 50 100

Interpretation:

Out of 50 respondants 24% have income upto 200000 p.a, 32% have income
between 200000-400000 p.a, 18% have income between 400000-600000 p.a,
10% have income between 600000-800000p.a, 8% have income between 800000-
1000000p.a, and remaining 8% have income above1000000p.a.

87
 3. In which company you have invested your money?

Frequency Percent
UTI 18 36
SBI 16 32
Reliance money 10 20
Others 6 12
Total 50 100

Interpretation:
Out of 50 samples 36% respondents have invested their money in UTI mutual
funds, 32% respondents have invested their money in SBI mutual fund, 20%
respondents have invested their money in reliance money and the remaining 12%
respondents have invested their money in other mutual fund.

88
 4. Which Mutual fund plan do you consider the best?

Frequency Percent
Debt fund 18 36
Equity 20 40
Others 12 24
Total 50 100

Interpretation:
Out of 50 samples 40% respondents have invested their money in equity
scheme mutual funds, 36% respondents have invested their money in debt scheme
mutual fund and the remaining 24% respondents have invested their money in
other scheme.

89
 5. Which amount you are contributing to mutual fund?

Frequency Percent
Upto 10000 16 32
10000-25000 20 40
25000-50000 11 22
50000-100000 3 6
Total 50 100

Interpretation:
Out of 50 respondents 32% of them have invested up to Rs.10,000 and 40% of
them have invested above Rs 10,000 and below Rs 25,000, 22% of them have
invested above Rs 25,000 and below Rs 50,000, and remaining 6% of them have
invested above Rs.50,000 and below Rs 1,00,000. Mutual fund companies should
give advertisement on T.V and other local medium to attract the customers.

90
6. Which are the primary sources of your knowledge about mutual fund as
an investment option?

Consult Frequency Percentage

Television 14 28%
Internet 16 32%
Newspaper 8 16%
Friends/Relatives 12 24%
Total 50 100%

Interpretation:

Out of 50 respondents 28% use television as a primary source of

knowledge about mutual fund as an investment option, 32% use

Internet,16% newspaper, 24% listen to friends and relatives.

91
 7. Kind of investment?

Kind of Investment Frequency Percentage

Long-term, Low-risk, Moderate- 20 40%
return
Long-term, High-risk, High- 15 30%
return
Short-term, No-risk, Stagnant- 11 22%
return
Short-term, High-risk, Moderate- 4 8%
return
Total 50 100%

Interpretation:
Out of 50 respondents 40% goes for long-term, low risk, moderate return kind
of investment. 30% goes for long-term, high-risk, high return kind of return. 22%
goes for short-term, no-risk, stagnant return kind of investment and 8% goes for
Short term, high risk, moderate return kind of investment.

92
 8. What factor influences your financial planning?

Frequency Percent
Discussion with family 11 22
members
Stock holder/Agent 22 44
Website 17 34
Total 50 100

Interpretation:
According to respondents the influencing factor to buy mutual funds was 22%
of them were influenced by Family member, 44% were influenced by stock
holder/agent, 34% of them influenced by website. People who have invested in
mutual funds they have influenced from family member, stock holder/agent,
website.

93
9. Which factor influences you while taking decision to invest in Mutual fund?

Frequency Percent
Returns 18 36
Saving 10 20
Liquidity 8 16
Others 14 28
Total 50 100

Interpretation:
The various attributes the investors look for while buying the mutual funds are
36% of them gives preference of Rate of Return, 20% of them gives preference of
saving, 16% of them gives preference of liquidity, 28% of them gives preference
of other (tax benefit) People will consider rate of return as a very high attribute
94
while investing in mutual funds compared to other attributes like saving, liquidity,
and other.

10. How do you rate mutual fund on the basis of returns?

Frequency Percentage
Highly Satisfactory 9 18
Satisfactory 14 28
Average 17 34
Dissatisfactory 10 20
Total 50 100

Interpretation:

95
 According to respondents 18% of them are highly satisfied, 28% of them are
satisfied, 34% of them are reasonably satisfied (average) and 20% of them are not
satisfied.

11. Would you like to invest in Mutual fund in future?

Frequency Percent
Yes 32 64
No 18 36
Total 50 100

Interpretation:
96
Out of 50 samples 64% respondents will invested their money in SBI mutual
fund, and remaining 36% respondents will not invested their money in SBI
mutual fund.

CHAPTER 15

SUGGESTION & CONCLUSION

97
 SUGGESTIONS

• The fund should not change its investment strategy of investing long period undervalued
stock and wait till they appreciate over period of time.

• The should introduce new schemes in real estate Fund as its going to be the most sort after
fund in future with lower minimum Investment limit.

• The SBI MF should expand its oversee investment to take advantage of globalize world
economy.

• The SBI MF should sell units more aggressively as it has advantage of large investor base
across the country.

• Investors are not very much aware of the investment opportunities, therefore they have to
be educated about this form of investments. In order to educate government as well as non
government employees, seminars and work shop should be held in these organization and
clear all their doubts and misconception about Mutual fund.

98
 CONCLUSION

The volatility in the market might have affected the returns of the schemes for
short period like 6 months or one year, but the performance of the schemes for 3
years and above seams to be consistent. The schemes have been the one of the
best schemes of SBI MF and hence have bagged many awards. With the Indian
stock markets growing at a frantic pace in investors who were willing to take on
risk have been rewarded rather handsomely for their efforts. While the smart
investor has been grounded, many an ecstatic investor has lost his bearings taking
on even higher dosage of risk for that additional return.

99
 CHAPTER 16

QUESTIONNAIRE

100
 ANNEXURE
SURVEY QUESTIONNAIRE FOR INVESTORS
Dear Sir/Mam,
This questionnaire is meant for educational purposes only.
The information provided by you will be kept secure and confidential.
1. Name: ___________________________________________
2. Age
a. Below 18 -30 c. Between 40- 50 Years

b. Between 30 – 40 Years d. 50 & above

3. Income per Annum

a. Up to 200000 d. 6,00,000 – 8,00,000

b. 200000 – 4,00,000 e. 8,00,000 - 1000000

c. 400000-600000 f. Above 1000000

4. In which company you have invested your money?

a. UTI c. Reliance Money

b. SBI d. Others

5. Which Mutual Fund plan do you consider the best?

a. Debt Fund

b. Equity Fund

c. If any Other specify others

6. Which amount you are contributing to mutual fund?

a. Up to 10000 c. 25000 - 50000

b. 10000 - 25000 d. 50000 - 100000

101
7. Which are the primary sources of your knowledge about mutual fund as an
investment option?

a. Television c. Newspapers

b. Internet d. Friends/ Relatives

8. Kind of Investment?
a. Long term, Low risk, Moderate return

b. Long term, High risk, High return

c. Short term, no risk, stagnant return

d. Short term, High risk, Moderate return

9. What factors influences your financial planning?

a. Discussion with b. Stock holder/ Agent

Family Member c. Website

10. Which factor influences you while taking decision to invest in mutual fund?
a. Returns
b. Savings
c. Liquidity
d. If any other specify

11. How do you rate mutual fund on the basis of returns?

a. Highly Satisfactory

b. Satisfactory

c. Average

d. Dissatisfied
12. Would you like to invest in Mutual fund in future?

a. Yes

b. No

102
103