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Summer Training Project

Report On

Submitted by:-
BBA 2nd
Sekhawati College Of
Management and IT

Executive summary
A mutual fund is a fund in which an investor's money is
combined with the money of many other investors. The total
amount of money is invested by a professional manager
according to the specific mutual fund's investment objective.
Each investor holds a share of the total fund, and is entitled to a
portion of the profits of the fund (and, of course, would share in
any investment losses).
Life is full of surprises, some pleasant and some not so
pleasant. Our families and we have to live with these
uncertainties. Preparing for the uncertainties of life is what
Insurance is all about. Why waste precious moments
contemplating tomorrow, when we have to live today?
Insurance is a tool, a solution for delegating the worries
concerning tomorrow onto a trustworthy institution so that you
can start living today.
My project aims to the understanding Market Study Of SBI
Mutual Fund as compare to Unit Linked Plan of Life Insurance
and how are Mutual Fund’s products different from Unit
Linked Life Insurance.

Achieving a milestone for any person is extremely difficult.

However, there are motivations, which come across the
curvaceous path like twinkling stars in the sky and make our
task much easier. It becomes my humble and foremost duty to
acknowledge all of them.

I am deeply indebted to and express my sincere appreciation

and gratitude to Mr. Sameer Saxena, Mr. Praveen Saini of
SBI mutual fund private limited and Mr. Sunil Arora of State
Bank Of India for providing their valuable guidance and
encouragement through out the summer training for keeping my
morale up and making it possible to complete and submit this
project of mine in time. In addition to allow me to study the
mutual fund sector. They provided me in depth details and
enlightened me in the preparation of the study report.

It would be unfair on my part if do not thank my heartful

thanks to my parents and colleagues for their unstinting help
without which this work could never have been accomplished
they made me realized the importance of a team, teamwork and
also the leadership skills. I am grateful to all of them for
standing with me and supporting me in this project.

Words can not be adequately expressed my sense of gratitude

and indebtedness to Sekhawati College of Management and IT
for giving me an opportunity.

Ashutosh Suthar

Only Theoretical knowledge stands nowhere and cannot give

positive and meaningful result unless supplemented with the
real practice of Business Environment. Summer training is the
implementation of the theory in practice that makes real
meaning to what exactly is management

The researcher was assigned to SBI mutual fund, Jaipur for

summer training, which constitute an integral part of three years
BBA program. The training period consists of 45-60 days. It
was really a great opportunity of getting practical insight into
the corporate world. The researcher contacted directly to the
customers in their Home in Jaipur city to obtain relevant

The company was interested to know to assess the customer

acquisition and market position of the SBI Mutual fund
schemes in the jaipur.

After the analysis of collected data, the main findings of this

study and suggestion are presented in the report.



”Mutual Fund are a pool of savings collected from a number
of small investors, sharing a common financial goal. The
money thus collected is invested by experienced
professionals called fund managers, according to the pre-
decided objectives in diverse types of securities like
Government sponsored Debentures and Bonds, shares of
public and private sector companies, bank guaranteed
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 investible
surplus of as little as 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 implication and speedily. An
individual also finds it difficult to keep track of ownership of
his assets, investment, brokerage dues and bank
transaction etc.
A mutual fund is the answer to all
these situations.It appoints professionally qualified
experience staff that manages each of these functions on a
full time basis. The large pool of money collected in the fund
allows it to hire such staff at a very low cost to each investor.
What are the different types of Mutual Funds?
On the basis of the objective, mutual funds can be divided
into Growth, Income and Balanced Funds.
Growth or Equity Schemes aim at capital appreciation over
the medium to long term period. Typically these funds would
invest a majority of their corpus in shares or equity of
Income or Debt Schemes aim at providing a steady and
regular income and hence would invest in fixed interest
securities issued by the Government, corporate bonds and
debentures and money market instruments.
Balanced or Hybrid Funds, invest in a combination of Equity
and Debt Instruments in varying proportions. These are
mostly funds with about 60% invested in Equity and
remaining 40% in Debt.





• Open ended fund: An open ended fund is one that is
available for subscription all through the year. These
don’t have a fixed maturity. Investors can conveniently
buy and sell units at Net Asset Value (NAV) related
prices. The key feature of open ended schemes is

• Close ended fund: A close end 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 public issue and
thereafter they can buy or sell the units of the scheme
on the stock exchanges where they 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 Funds through periodic repurchase at NAV
related prices. SEBI regulations stipulate that at least
one of the two exit routes is provided to the investors.
What is the difference between an open ended and close ended scheme?
Open ended funds can issue and redeem units any time during the life of the
scheme while close ended funds can not issue new units except in case of bonus or
rights issue. Hence, unit capital of open ended funds can fluctuate on daily basis
while that is not the case for close ended schemes. Other way of explaining the
difference is that new investors can join the scheme by directly applying to the
mutual fund at applicable net asset value related prices in case of open ended
schemes while that is not the case in case of close ended schemes. New investors
can buy the units from secondary market only.

• Interval funds: interval Funds combine the features of

open-ended & close-ended schemes. They are open
for sale or redemption during predetermined interval at
NAV related prices.


• GROWTH FUNDS (Equity Funds or Stock):- The aim

of growth funds is to provide capital appreciation over
the medium to long term. Such scheme normally
invests a majority of corpus in equities. It has been
proven that returns from stocks have outperformed
most other kind of investment held over the long term.
Growth scheme are ideal for investors having a long–
term outlook seeking growth over a period of time.
Money is invested in the stocks of corporations.Long-
term investment returns range from moderate to high,
depending on the types of stocks held in the fund.
Investment returns result from stock dividends as well
as the growth in value of the stock itself. For example,
emerging growth companies may issue no dividends
but may show a large increase in the value of the stock
• INCOME FUNDS :- The aim of income fund is to
provide regular and steady income to investors. Such
schemes generally invest in fixed income securities
such as bonds, corporate debenture and government
securities. Income Funds are ideal for capital stability
and regular income.

Can I get fixed monthly income by investing in mutual fund units?

Yes, there are a number of mutual fund schemes which give you fixed monthly
income. Further, you can also get monthly income by making a single
investment in an open ended scheme and redeeming fix value of units at regular

• BALANCED FUNDS(Mix of stocks & Bonds):-

Money is invested in a combination of stocks and
bonds. Balanced investment funds differ in the
proportion and types of stocks and bonds they hold.
Balanced investment funds are considered to have
moderate risk due primarily to short-term changes in
stock and bond values. Since bonds are generally less
volatile then stocks, they help to moderate the changes
in stock values.
Investment returns result from dividend
and interest income, as well as change in the market
value of the stocks and bonds. This type of investment
is generally considered to have moderate to high
potential long-term investment returns.
• MONEY MARKET FUNDS:-The aim of money market
funds is 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 deposits, commercial paper and inter-
bank call money. Returns on these schemes may
fluctuate depending upon the interest rates prevailing in
the markets. These are ideals for corporate and
individual investors as a means to park their surplus for
short periods.

• Load funds: - A load fund is one that charges a

commission for entry or exit. That is, each time you buy
or sell units in the fund, a commission will be payable.
Typically entry and exit loads range from 1% to 2.25%.
It could be worth paying the load, if the fund has a good
performance history.

• No load fund: - A no load fund is one that dose not

charge a commission is payable on purchase or sale of
units in the fund. The advantage of a no load fund is
that the entire corpus is put to work.



What are the tax benefits for investing in mutual fund units?

These schemes offer tax rebates to the investors under

specific provisions of the Indian Income Tax laws as
the government as the government offers tax
incentives for investment made in equity linked savings
schemes (ELSS) and pension schemes are allowed as
deduction U/S 88 of the income tax Act, 1961.
The act also provides opportunities to investors to save
capital gains U/S 54 EA and 54 EB by investing in
mutual funds, provided the capital asset has been sold
prior to April 1, 2006 and the amount is invested before
September 30, 2006.



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

Sectorial funds are those, which invest exclusively in a
specified industry or a group of industries or various
segments such as ‘A’ group shares or initial public

Index funds attempt to replicate the performance of a
particular index such as the BSE sensex or the NSE
What is BSE & NSE?
BSE is an abbreviation of the Bombay Stock Exchange. Of the 22 stock exchanges
in India, Bombay Stock Exchange is the largest with over 6,000 stocks listed. The
BSE accounts for over two thirds of the total trading volume in the country.
Established in 1875, the exchange is also the oldest in Asia. It was the first one to
be recognised by the Government of India under the Securities Contracts
(Regulation) Act, 1956 and it is the only one that had the privilege of getting
permanent recognition ab-initio. The market capitalization of the BSE is Rs.5
trillion. The BSE `Sensex' is a widely used market index for the BSE.
The Exchange provides an efficient and transparent market for trading in equity,
debt instruments and derivatives. It aims to promote, develop and maintain a
well-regulated market for dealing in securities and to safeguard the interest of
members and the investing public having dealings on the Exchange.
The origin of mutual fund industry in India is with the
introduction of the concept of mutual fund by UTI in the year
1963. Though the growth was slow, but it accelerated from
the year 1987 when non-UTI player entered the industry. In
the past decade, Indian mutual fund industry had seen
dramatic improvements, both quality wise as well as quantity
wise. Before, the monopoly of the market had seen an
ending phase; the Assets under Management (AUM) were
Rs. 67bn.

The private sector entry to the fund family raised AUM to
Rs. 470 bn in March 1993 and till April 2004; it reached the
height of 1,540 bn.Putting the AUM of the Indian Mutual
Funds Industry into comparison, the total of it is less than
the deposits of SBI alone, constitute less than 11% of the
total deposits held by the Indian banking industry.
The main reason of its poor growth is that the mutual fund
industry in India is new in the country. Large sections of
Indian investors are yet to be intellectuated with the concept.
Hence, it is the prime responsibility of all mutual fund
companies, to market the product . 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. It was set up
by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank
of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The
first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6,700 crores of assets under
Second Phase1987-1993(Entry of Public Sector Funds):-

Entry of non-UTI mutual funds. SBI Mutual Fund was the

first followed by Can bank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual
Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The
end of 1993 marked Rs.47, 004 as assets under

Third Phase1993-2003(Entry of Private Sector Funds):-

With the entry of private sector funds in 1993, a new era

started in the Indian mutual fund industry, giving the Indian
investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Fund Regulations came into
being, under which all mutual funds, except UTI were to be
registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private
sector mutual fund registered in July 1993.The 1993 SEBI
(Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in
1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.
The number of mutual fund houses
went on increasing, with many foreign mutual funds setting
up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January
2003, there were 33 mutual funds with total assets of Rs. 1,
21,805 crores. The Unit Trust of India with Rs.44, 541 crores
of assets under management was way ahead of other
mutual funds.
Fourth Phase (February2003):- This phase had bitter
experience for UTI. It was bifurcated into two separate
entities. One is the Specified Undertaking of the Unit Trust of
India with AUM of Rs.29, 835 crores (as on January 2003).

The Specified Undertaking of Unit Trust

of India, functioning under an administrator and under the
rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund

Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations.

With the bifurcation of the erstwhile

UTI which had in March 2000 more than Rs.76,000 crores of
AUM and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with
recent mergers taking place among different private sector
funds, the mutual fund industry has entered its current
phase of consolidation and growth. As at the end of
September, 2004, there were 29 funds, which manage
assets of Rs.153108 crores under 421 schemes.

An attempt was made for first time in SEBI GUIDELINES,

1992 to spell out for managing the affairs of mutual funds
ensuring arm’s length distance between the sponsor and the
fund. The four constituents are the sponsoring company, the
fund, the custodians and the asset management company.
Moreover in reality, pooled funds of small investors were
being put to use for the advantage of the sponsors. Four
constituents for the management of mutual funds are shown
in below chart:

(A Trust)
Management of fund
company etc.)
(Managing the
investment of fund)
Sponsors: It refers to anybody corporate which initiates the
launching of a mutual fund. It is this agency which of its own
or in collaboration with other body corporate comply the
formalities of establishing a mutual fund. The sponsor
should have a sound track record and expertise in the
relevant field of financial services for a minimum period of
say five years. SEBI ensure that sponsors should have
professional competence, financial soundness and general;
reputation of fairness and integrity in the business
transactions. Sponsors is normally not responsible for any
loss or shortfall resulting from the operations of any scheme
of the fund beyond it’s initial contribution towards the
constitution of the trust fund.

TRUSTEES: A trustee is a person who holds the property

of the mutual fund in trust for the benefits of the units
holders. A company is appointed as a trustee to manage the
mutual. To ensure fair dealings, mutual fund regulation
require that one cannot be a trustee or a director of a trustee
company in more than one mutual fund.
Further at least fifty percent of the trustees are to be
independent of the sponsors. Asset management company
or its directors or employee shall not act as trustee if any
mutual fund. It is the duty of the trustee to provide
information to units holders as well as to SEBI about the MF
schemes. Trustees are to appoint AMC to investment
management agreement to be entered into with AMC. It is
trustee’s duty to observe and ensure that AMC is managing
schemes in accordance with the trust deed. Trustee can
dismiss the appointed AMC. It is the responsibility of the
trustees to supervise the collection of any income due to be
paid to the scheme. Trustees for their services are paid
trusteeship fee, which is to be specified in the trust deed.
CUSTODIANS: In a mutual fund depending on its size there is
substantial work involved for managing the scrip bought from the

Their safe study custody and ready availability is to be

ensured. SEBI requires that each MF shall have a custodian
who is not in any way associated with the AMC. Such
custodian cannot act as sponsor or trustee of any mutual
fund. Further custodian is not permitted to act as a custodian
of more than one mutual fund without the prior approval of
Custodian’s main assignment is safekeeping of the
securities or participation in any clearing system on behalf of
the client to effect deliveries of the securities. Custodian,
depending on the terms of the agreement, also collects
income/ dividends on the securities. Some of other
associated assignments of custodians are:
• Ensuring delivery of scrip’s only on receipt of payment
and payment only upon receipt of scrip’s.
• Regular reconciliation of assets to accounting records.
• Timely resolution on discrepancies and failures.
• Securities are properly registered or recorded.

Depending on the volume there can be co- custodian for a

mutual fund. These custodians are entitled to receive
custodianship fee based on the average weekly value of net
assets or sale and purchase of securities along with per
certificate custody charges.
Assets Management Company as the name implies is to be
a body corporate whose memorandum and article of
association are to be approved by SEBI. The sponsors of
the trustees appoint AMC to manage the affairs of the
mutual fund. It is the AMC, which operates all the schemes
of the fund. Any Assets Management Company
Cannot act as a trustee of any other mutual fund. Assets
Management Company can act as AMC of only one mutual

To ensure efficient management SEBI desires that existing

Assets Management Company should have a sound track
record ( good net worth, dividend paying capacity and
profitability etc.), general reputation and fairness and in
transaction. The directors of the AMC should be expert in
relevant fields like portfolio management, investment
analysis and financial administration because any AMC is
basically involved in these three activities. An AMC is
expected to operate independently. Regulation requires that
at least fifty percent of the direction should be such who do
not have any association with the sponsors or the trustees.

Working Of An Asset Management Company: It is not required

that AMC performs all its functions of its own. It can hire
services of outside agencies as per its requirement or
perform all function of its own. The main agencies, services
of which an AMC may require are depicted in the chart.
Registrar and Transfer agents are assigned the
jobs of receiving processing the application forms of
investors, issuing units certificates, sending refund orders,
according all transfers of units, redemption of units, issuing
dividend or income warrants.




Fund accounting again depending on the size of the fund, its
age and number of expected transactions may be assigned
to specialized agencies. All accounting transaction are
recorded and maintained by such agencies.
Lead managers select and co-ordinate activities of
intermediaries such as advertising agency, printers,
collection centers and marketing the services. They get
collection centers and marketing the services. They get fees
on the basis of funds mobilized they are normally engaged
by AMC for extensive campaign about the scheme to attract
the investors. They are also called marketing associates.
They assist AMC in approach potential investors through
personal promotion (meeting, exhibition, contacts) as well as
through impersonal promotion (adverting, publicity, sales
Investment advertising may be
appointed by AMC if it cannot afford to cope up with the
workload of its own. Investment advisors analysis the market
and strategies on a continuous basis. Majority of Indian
mutual funds have their own market analyses who design
their own investment strategies.
Legal advisors are also sometimes appointed to get legal
guidance about planning and execution of different
schemes. A group of advocates and solicitors may be
appointed as legal advisors. Assets Management Company
is also required to have an auditor who is not auditor of the
mutual fund, to undertake independent inspection and
verification of its accounting of its accounting activities.
Assets management companies may also appoint a
separate fund manager for each scheme. His basic function
is to produce investment securities from the market and also
to dispose them off at appropriate time. Such assets
manager adheres to the guidelines evolved by AMC of its
own or designed through investment advisors.
The major strength of any AMC lies in its investment function.
Investment function is specialized function which, depending on
operational strategies of AMCs, can further be divided into
specialized categories. The investment department may be classified
in four segments. These can be
1. Fund manager
2. Research and Planning cell
3. Dealer
4. Underwriter

Asset Management Company manages the investment of
fund through a fund manager. AMC may evolve its own
criterion for number off fund managers. His basic function is
to decide about which, when, how much and at what rate
securities are to be sold or bought. To a great extent the
success of any scheme depends on the caliber of the fund
Many mutual funds especially in bank sponsored funds; the
entire investment exercise is not left to one individual. They
have created committees to handle their investments. One
such mutual fund has created two committees. First is
‘investment committee’ which is broad based committee
having even nominees of the sponsor? It collectively
decides about the primary market investment. This
committee in times to come has a prominent role to play in
the success of mutual funds especially in light of
institutionalization of public issues. Another line which
mutual funds are curiously looking to is fund participation in
a venture even before it goes public. Another line
participation in a venture even before it goes public. The
intense competition in securing bid for good new issue, has
also led mutual funds to finance the companies at embryonic
having the assignment of disinvestment and interacting with
secondary market.
It is normally an in-house committee. These committees also
make their judgment on the basis of data provided by the
research wing.
This department plays a crucial role. It performs a very
sensitive and technical assignment. Depending again on the
operational policies, such unit can be borrowed. The
research can be with respect of securities as well as
perspective investors. The fund manager can co0ntribute to
the bottom line of mutual fund by spotting significant
changes insecurities ahead of the crowd. Mutual funds may
not appreciate the presumptions made by outside research
agency while analysis data, selecting securities to be bought
or sold, this section also assists planning new schemes and
designing innovations in schemes.

To execute the sale and purchase transaction in capital or
money market, a separate section may be created under the
charge of a person called dealer having deep understanding
of stock market operations. Sometimes, this division is
under the charge of marketing division of AMC. Dealer is to
comply with all formalities of sale and purchase through
brokers. Such brokers are to be approved by board of
directors of AMC.

Recently mutual funds have been permitted by SEBI to go in
for understanding of public issues to generate additional
income for their schemes. Activity will be subject to the
following understanding restrictions:
• For the purpose of the SEBI underwriter’s regulations,
the capital adequacy of the mutual fund shall be the
original corpus of any of the schemes and the
undistributed gains lying to the credit of the schemes.
• The total underwriting obligations of the scheme shall
not exceed the total value of the corpus of any scheme
together with undistributed profits lying to the credit of
the scheme.
• No understanding commitment may be undertaken in
respect of the scheme during the period of six months
prior to the date of redemption of any scheme.

Underwriter studies the potentials of the issue vis-à-vis

preference of public. Decreased limit of minimum offer to
public at large to 25 percent of the issue has made
underwriting a comparatively comfortable assignment. But
on the other hand to get underwriting business is going
tough since almost every public issue is being
oversubscribed these days.


What is ULIP?
Unit linked life insurance plan provides you the opportunity
to participate in market linked returns while enjoying the
valuable benefits of life insurance.This plan enables you to
protect your loved ones, while making your money grow.
Your premiums are invested in units of the investment fund
(equity, debt, money market, security bonds etc.)of your
choice, based on the prevailing unit price.On maturity you
receive the value of your units.On death you receive the
greater of the value of your units and your selected basic
sum assured.A policy,which provides for life insurance
where the policy value at any time varies according to the
value of the underlying assets at the
Funds of ULIP

• Equity based funds

• Money Market based funds
• Debt Funds
• Balanced Fund
What are unit-linked life insurance products?
Unit-linked life insurance products are those where the
benefits are expressed in terms of number of units and unit
price. They can be viewed as a combination of insurance
customer and mutual funds. The number of units, which the
would get would depend on the unit price when he pays his
premium. The daily unit price is based on the market value
of the underlying assets (equities, bonds, government
securities etc.) and computed from the net asset value.

How do unit-linked products work?

The unit-linked plans work as under:

The premium paid by the client, less any charges to be

deducted, is used to buy units in the fund selected by the
client at that day's unit price. So more units are added to
the client's account each time he pays a premium. If the
unit price on that day is relatively high the client gets less
number of units and if the unit price is relatively low then
he gets more number of units.
In order to pay the regular monthly costs an equivalent
numbers of units are cancelled and are computed as cost
to be deducted divided by unit price on that day.
The value of the fund depends on the unit price, which in
turn is determined from the market value of the underlying
assets as seen earlier. Thus, Fund Value = Unit Price x
Number of Units
Mutual funds are essentially short to medium term products.
The liquidity that these products offer is valuable for
investors. ULIPs, in contrast, are now positioned as long-
term products and going ahead, there will be separate
playing fields for ULIPS and MFs, with the product
differentiation between them becoming more pronounced.
ULIPs do not seek to replace mutual funds, they offer
protection against the risk of dying too early, and also help
people save for retirement. Insurance has to be an integral
part of one's wealth management portfolio. Further,
exposure of Indian households to capital markets is limited.
ULIPs and mutual funds are, therefore, not likely to
cannibalise each other in the long run. While ULIPs as an
investment avenue is closest to mutual funds in terms of
their functioning and structure, the first and foremost
purpose of insurance is and will always be 'protection'. The
value that it provides cannot be downplayed or
As per IRDA's new guidelines, which
came into effect on July 1, there has to be a minimum lock-
in period of three years for ULIPs, a minimum term of atleast
five years and the death benefit payable or sum assured
under the single-premium product has to be at least 125 per
cent of the single premium paid, among other major policy
changes. The new guidelines will stop ULIPs being
positioned as short term investments products, and they will
look less like mutual funds and more like insurance policies.
New ULIPs now come with a minimum term value of five
years, whereas in mutual fund’s ELSS there is a lock-in
period of just three years. If an investor decides to withdraw
money from ULIP after three years, the amount depends on
the surrender value given by the company.
Are ULIPs similar to MUTUAL FUND?
In structure, yes; in objective, no. Because of the high first-
year charges, mutual funds are a better option if you have a
five-year horizon.
Main differences between ULIP and ordinary mutual funds is
variation in expenses — administrative charges, mortality
charges and, of course, fund management fees. We are
going to compare the two products to suggest that, over a
longish period, ULIP's expenses work out to be lower than
that of an equity mutual fund, and so you end up getting
more of your money to work for you.

For instance:- ULIP and a mutual fund, giving the same return of 20% per
annum. The insurance company charges 40% of the first year's premium as
selling expenses and 5% of premium every year as administrative charges.
A person buys a unit-linked policy for 20 years, with a life coverage of Rs 20
lakh, and pays a premium of Rs 1 lakh per annum.
In first year, Rs 40,000 will be deducted from his premium as commission, and
Rs 5,000 as administrative charge. If the person's age is 30, the mortality
charge of Rs 2,763 will also be deducted.
But when his investment in Mutual Fund then
he pays only 2.25% as entry load.
When to choose investing in MF?
• If you don't need insurance, ULIP is not the best bet.

• ULIPs are hybrid products. that means, they have insurance

and investment component.

• You have to invest for atleast 3 years in ULIP, but MFs are
not like that

• ULIPs have lock-in period of 3 years where as MFs are not

(except tax saving MFs)

• ULIPs may or may not disclose the holding portfolio but

mutual funds have to disclose where they are investing.

• MFs generally have low expense ratio than ULIPs.

• ULIPs have additional charges called "Allocation charges".

And other charges like Administrative charges, Mortality
charges, Fund Management Charge.

Why Mutual Funds?

Mutual funds are a smart, convenient avenue for investing
your capital. Review the benefits:
Professional financial management. Your investment in
mutual funds is monitored by portfolio managers who study
the market for a living. By specializing in specific areas,
these individuals can take the time to really get to know
companies and assess their investment potential before
investing--something that's often harder for the individual
investor to do.
Your choice of investment strategies. Because mutual
funds are managed along a range of investment strategies,
you can select a fund that matches your investment goals.
Leave it to the portfolio manager to select the blend of
securities that is most likely to meet those goals.
Easy tracking. You'll find current prices and historical total
return figures for major mutual funds listed in the business
section of most newspapers.
Easy to do business with. You can complete most
transactions by phone or mail and receive clear, easy-to-
read confirmation statements a few days later.
Diversification for balanced investing. Most funds own
anywhere from 20 to 50 different securities, which cushions
your investment from sudden swings in a single security's
value. You can further diversify by buying shares in several
mutual funds that own different types of securities.
Diversification is designed to reduce market risk and does
not assure against market loss.

Structure of the Indian mutual fund industry:-


The Indian mutual fund industry is dominated by the UNIT

TRUSTOF INDIA which has a total corpus of is 700 bn
collected from more than 20 million investors. The UTI has
many funds/ scheme in all categories i.e. equity, balanced,
income etc. with some being open-ended and some being
close-ended. UTI was floated by financial institutions and is
governed by a special act of parliament. Most of its investors
believe that the UTI is government owned and controlled,
which, while legally incorrect, is true for all practical


The second categories of mutual funds are the ones floated

by nationalized banks. Can bank assets management
floated by Canara bank and SBI funds management floated
by the state bank of India are the largest of these. GIC AMC
floated by general insurance corporation and Jeeven Bima
Sahayog AMC floated by the LIC are some of the other
prominent ones. The aggregate corpus of funds managed
by this category of AMC’s is about Rs 150 bn.


The third largest categories of mutual funds are the ones

floated by the private sector and by foreign asset
management companies. The largest of these are Prudential
ICICI AMC’s, UTI AMC’s etc. The aggregate corpus of
assets managed by this category of AMC’s is in excess of
Rs.250 bn.

Future Scenario of Mutual Fund Industry:-

The asset base will continue to grow at an annual rate of

about 30 to 35 % over the next few years as investor’s shift
their assets from banks and other traditional avenues. Some
of the older public and private sector players will either close
shop or be taken over.

Out of ten public sector players five will sell out, close down
or merge with stronger players in three to four years. In the
private sector this trend has already started with two
mergers and one takeover. Here too some of them will down
their shutters in the near future to come.

But this does not mean there is no room for other players.
The market will witness a flurry of new players entering the
arena. There will be a large number of offers from various
asset management companies in the time to come. Some
big names like Fidelity, Principal, and Old Mutual etc. are
looking at Indian market seriously. One important reason for
it is that most major players already have presence here and
hence these big names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of
derivatives in India as this would enable it to hedge its risk
and this in turn would be reflected in it’s Net Asset Value
SEBI is working out the norms for enabling the existing
mutual fund schemes to trade in derivatives. Importantly,
many market players have called on the Regulator to initiate
the process immediately, so that the mutual funds can
implement the changes that are required to trade in
Global Scenario

Some basic facts-

• The money market mutual fund segment has a
total corpus of $ 1.48 trillion in the U.S. against a
corpus of $ 100 million in India.
• Out of the top 10 mutual funds worldwide, eight
are bank- sponsored. Only Fidelity and Capital are non-
bank mutual funds in this group.
• In the U.S. the total number of schemes is higher
than that of the listed companies while in India we have
just 277 schemes
• Internationally, mutual funds are allowed to go
short. In India fund managers do not have such leeway.

• In the U.S. about 9.7 million households will

manage their assets on-line by the year 2003, such a
facility is not yet of avail in India.
• On- line trading is a great idea to reduce
management expenses from the current 2 % of total
assets to about 0.75 % of the total assets.
• 72% of the core customer base of mutual funds in
the top 50-broking firms in the U.S. is expected to trade
on-line by 2003.

Internationally, on- line investing continues its meteoric rise.

Many have debated about the success of e- commerce and
its breakthroughs, but it is true that this aspect of technology
could and will change the way financial sectors function.
However, mutual funds cannot be left far behind. They have
realized the potential of the Internet and are equipping
themselves to perform better.
In fact in advanced countries like the U.S.A, mutual funds
buy- sell transactions have already begun on the net, while
in India the Net is used as a source of Information.

Such changes could facilitate easy access, lower

intermediation costs and better services for all. A research
agency that specializes in internet technology estimates that
over the next four years Mutual Fund Assets traded on- line
will grow ten folds from $ 128 billion to $ 1,227 billion;
whereas equity assets traded on-line will increase during the
period from $ 246 billion to $ 1,561 billion. This will increase
the share of mutual funds from 34% to 40% during the
period. Such increases in volumes are expected to bring
about large changes in the way Mutual Funds conduct their
Here are some of the basic changes that have taken place
since the advent of the Net.

• Lower Costs: Distribution of funds will fall in the online

trading regime by 2003. Mutual funds could ts to 0.75%
if trading is done on- line. As per SEBI regulations,
bond funds can charge a maximum of 2.25% and
equity funds can charge 2.5% as administrative fees.
Therefore if the administrative costs are low, the
benefits are passed down and hence Mutual Funds are
able to attract mire investors and increase their asset

• Better advice: Mutual funds could provide better

advice to their investors through the Net rather than
through the traditional investment routes where there is
an additional channel to deal with the Brokers. Direct
dealing with the fund could help the investor with their
financial planning.
• In India, brokers could get more Net savvy than
investors and could help the investors with the
knowledge through get from the Net.

• New investors would prefer online: Mutual funds

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

• India has around 1.6 million net users who are

prime target for these funds and this could just be the
beginning. The Internet users are going to increase
dramatically and mutual funds are going to be the best
beneficiary. With smaller administrative costs more
funds would be mobilized .A fund manager must be
ready to tackle the volatility and will have to maintain
sufficient amount of investments which are high
liquidity and low yielding investments to honor

• Net based advertisements: There will be more sites

involved in ads and promotion of mutual funds. In the
U.S. sites like AOL offer detailed research and financial
details about the functioning of different funds and their
performance statistics is witnessing a genesis in this
area .There are many sites such as indiainfoline.com
and indiafn.com that are doing something similar and
providing advice to investors regarding their

• In the U.S. most mutual funds concentrate only on

financial funds like equity and debt. Some like real estate
funds and commodity funds also take an exposure to
physical assets. The latter type of funds are preferred by
corporate who want to hedge their exposure to the
commodities they deal with.

• For instance, a cable manufacturer who needs 100

tons of Copper in the month of January could buy an
equivalent amount of copper by investing in a copper fund.
For Example, Permanent Portfolio Fund, a conservative U.S.
based fund invests a fixed percentage of it’s corpus in Gold,
Silver, Swiss francs, specific stocks on various bourses
around the world, short –term and long-term U.S. treasuries
In developed countries like the U.S.A there are funds to
satisfy everybody’s requirement, but in India only the tip of
the iceberg has been explored. In the near future India too
will concentrate on financial as well as physical funds.


SBI mutual fund is a well known mutual fund management

company in government sector. It is formed by joint venture
between SBI and Societe Generale Asset Management
Company of France.

Investment Managers:

Name of Trustees Company:

Name and Address of registrar:
SBI Mutual
100% Funds
SBI Mutual
37% Bank ofManagement
Générale India
India Trustee
Asset Pvt.
Management Pvt. Ltd
(Asset Management Company)

As like others mutual fund companies SBI mutual fund

company also has different types of schemes and these are
as shown below:
1. Magnum Multicap fund
2. Magnum Equity Fund
3. Magnum Index Fund
4. Magnum Multiplier Plus
5. Magnum SBI Blue-Chip Fund
6. Magnum Tax gain scheme
7. Magnum Comma Fund
8. Magnum Global Fund
9. Magnum MidCap Fund
10.Magnum Balanced Fund
11. Arbitrage fund


1. One India
2. Infrastructure


1. Contra Fund
2. Emerging Business Fund
3. FMCG Fund
4. IT Fund
5. Pharma Fund


1. Magnum Children Benefit Plan
2. Magnum Monthly Income Plan
3. Magnum Income Plus Fund (Investment)
4. Magnum Income Plus Fund (Saving)
5. Magnum Income Fund
6. Magnum NRI Investment Fund


1. Magnum Institutional Income Fund
2. Magnum InstaCash Fund
3. Magnum InstaCash Fund (Liquid floater)



1) Brand Name:
• The biggest strength is the tag of SBI is going to be the
largest banking group of finance industries.

1. Compatible Price:
Prices of different schemes of SBI Mutual Funds are much
more compatible than others.

2. Diversified Schemes:
We have diversified schemes which are an exception case of
SBI Mutual Fund.

3. Less Risk:
Our debt schemes are 100% free form market risk. Even as
our portfolio is that diversified so equities are also less risky
than others.
1. Easy procedures of redemption & registration too:
We have open ended schemes so Mutual funds are easily
1. Prone to Market Risk:
Mutual Funds depend on overall macro economic condition and
market scenario.

2. Tough Competitions:
There is a very tough competition because of large number of
Asset Management Companies.

1. Hoarding:
Most of the Indians have black money that too in huge
amount i.e. the do not have money in banks, so approaching
them is beneficial.

2. Indian Capital Market is Growing:

So more & more new investors are interested in investments.

3. Tailor Made Products:

We have tailor made products like sector specified schemes
& even diversified schemes.

4. Branch Expansion:
Large no. of branches are opening day by day and even we
are traping the countries having almost same type of socio-
economic condition & even same culture etc.

1. Tough Competition:-As there are so many mutual fund

companies having almost same kind of schemes, so it’s tough
to compete with.

2. Unawareness: Major % of population is not aware of mutual

funds, so it’s hard to convince people.

3. Changing Scenario: Our market scenario is changing day by

day i.e. our market is fluctuating, so this makes investor hard to

Various Locations in India

SEBI’S Regulations for Mutual Fund Industry
There was no uniform regulation of the mutual funds
industry till a few years ago. The UTI was regulated by a
special Act of Parliament while funds promoted by public
sector banks were subject to RBI Guidelines of July 1989.
The Securities & Exchange Board of India (SEBI) was
formed in 1993 as a capital market regulator. One of its
responsibilities was to regulate the mutual fund industry and
it came up with comprehensive regulations for the industry in
1993. The rules for the formation, administration and
management of mutual funds in India were clearly laid down.
Regulations also prescribed disclosure requirements.

The regulations were thoroughly reviewed and re-notified in

December 1996. The revised guidelines tighten the
accounting and disclosure requirements in line with
recommendations of The Expert Committee on Accounting
Policies, Net Asset Values and Pricing of Mutual Funds. The
SEBI (Mutual Funds) Regulations, 1996 have been further
amended in 1997, 1998 and 1999. Today, all mutual funds
are regulated by SEBI. Efforts have been made to bring UTI
schemes under SEBI's ambit with the result that all
schemes, with the exception of Unit 64, are now regulated
by the capital market regulator.

Regulatory Aspects

Schemes of a Mutual Fund

• The asset management company shall launch no
scheme unless the trustees approve such scheme and
a copy of the offer document has been filed with the

• Every mutual fund shall along with the offer

document of each scheme pay filing fees.
• The offer document shall contain disclosures
which are adequate in order to enable the investors to
make informed investment decision including the
disclosure on maximum investments proposed to be
made by the scheme in the listed securities of the
group companies of the sponsor A close-ended
scheme shall be fully redeemed at the end of the
maturity period. "Unless a majority of the unit holders
otherwise decide for its rollover by passing a
• The mutual fund and asset management company
shall be liable to refund the application money to the
(i) If the mutual fund fails to receive the minimum
subscription amount referred to in clause (a) of
sub-regulation (1);
(ii) If the moneys received from the applicants for
units are in excess of subscription as referred to in
clause (b) of sub-regulation(1).

Rules Regarding Advertisement:

• The offer document and advertisement materials

shall not be misleading or contain any statement or
opinion, which are incorrect or false.

Investment Objectives and Valuation Policies:

• The price at which the units may be subscribed or

sold and the price at which such units may at any time
be repurchased by the mutual fund shall be made
available to the investors.

General Obligations:
• Every asset management company for each
scheme shall keep and maintain proper books of
accounts, records and documents, for each scheme so
as to explain its transactions and to disclose at any
point of time the financial position of each scheme and
in particular give a true and fair view of the state of
affairs of the fund and intimate to the Board the place
where such books of accounts, records and documents
are maintained.

• The financial year for all the schemes shall end as

of March 31 of each year. Every mutual fund or the
asset management company shall prepare in respect
of each financial year an annual report and annual
statement of accounts of the schemes and the fund as
specified in Eleventh Schedule.
• Every mutual fund shall have the annual
statement of accounts audited by an auditor who is not
in any way associated with the auditor of the asset
management company.
Procedure for Action In Case Of Default:
• On and from the date of the suspension of the
certificate or the approval, as the case may be, the
mutual fund, trustees or asset management company,
shall cease to carry on any activity as a mutual fund,
trustee or asset management company, during the
period of suspension, and shall be subject to the
directions of the Board with regard to any records,
documents, or securities that may be in its custody or
control, relating to its activities as mutual fund, trustees
or asset management company.

Restrictions on Investments:
• A mutual fund scheme shall not invest more than
15% of its NAV in debt instruments issued by a single
issuer, which are rated not below investment grade by
a credit rating agency authorized to carry out such
activity under the Act. Such investment limit may be
extended to 20% of the NAV of the scheme with the
prior approval of the Board of Trustees and the Board
of asset Management Company.
• A mutual fund scheme shall not invest more than
10% of its NAV in unrated debt instruments issued by a
single issuer and the total investment in such
instruments shall not exceed 25% of the NAV of the
scheme. All such investments shall be made with the
prior approval of the Board of Trustees and the Board
of asset Management Company.
• No mutual fund under all its schemes should own
more than ten per cent of any company's paid up
capital carrying voting rights.
• Such transfers are done at the prevailing market
price for quoted instruments on spot basis. The
securities so transferred shall be in conformity with the
investment objective of the scheme to which such
transfer has been made.
• A scheme may invest in another scheme under
the same asset management company or any other
mutual fund without charging any fees, provided that
aggregate inter scheme investment made by all
schemes under the same management or in schemes
under the management of any other asset
management company shall not exceed 5% of the net
asset value of the mutual fund.

• The initial issue expenses in respect of any

scheme may not exceed six per cent of the funds
raised under that scheme.
• Every mutual fund shall buy and sell securities on
the basis of deliveries and shall in all cases of
purchases, take delivery of relative securities and in all
cases of sale, deliver the securities and shall in no
case put itself in a position whereby it
has to make short sale or carry forward transaction or
engage in badla finance.
• Every mutual fund shall, get the securities
purchased or transferred in the name of the mutual
fund on account of the concerned scheme, wherever
investments are intended to be of long-term nature.
• Pending deployment of funds of a scheme in
securities in terms of investment objectives of the
scheme a mutual fund can invest the funds of the
scheme in short term deposits of scheduled
commercial banks.
• No mutual fund scheme shall make any
investment in;
i. Any unlisted security of an associate or group
company of the sponsor; or Any security issued by
way of private placement by an associate or group
company of the sponsor; or The listed securities of
group companies of the sponsor which is in
excess of 30% of the net assets [of all the
schemes of a mutual fund]
• No mutual fund scheme shall invest more than 10
per cent of its NAV in the equity shares or equity
related instruments of any company. Provided that, the
limit of 10 per cent shall not be applicable for
investments in index fund or sector or industry specific
• A mutual fund scheme shall not invest more than
5% of its NAV in the equity shares or equity related
investments in case of open-ended scheme and 10%
of its NAV in case of close-ended scheme.

Who can invest?

The following persons (subject, wherever relevant, to
purchase of units being permitted under their respective
constitutions and relevant State Regulations) are eligible to
subscribe to the units:
• Adult Resident Indian Individuals, either single or jointly
(not exceeding three).
• Non - resident Indians, Overseas Corporate Bodies,
and persons of Indian origin residing abroad, on a full
repatriation basis
• Parents / Lawful guardians on behalf of Minors
• Hindu Undivided Families (HUFs) in the name of HUF
or Karta
• Companies (including Public Sector Undertakings),
Bodies Corporate, Trusts (through Trustees ) and Co-
operative Societies
• Banks (including Regional Rural Banks) and Financial
• Religious and Charitable Trusts
• Foreign Institutional Investors registered with SEBI /
Special Purpose Vehicles (SPVs) approved by
appropriate authority ( subject to RBI approval )
• International Multilateral Agencies approved by the
Government of India
• Army/Navy/Air Force / Para Military Units and other
eligible institutions
• Unincorporated body of persons as may be accepted
• Partnership Firms Provident Fund, Pension Funds,
Superannuating Funds and Gratuity Funds can invest
only in Reliance Gilt Securities Fund.

How to Invest In Mutual Funds?

• STEP ONE- Identify your investment needs.
○ Your financial goals will vary, based on your age,
lifestyle, financial independence, family commitments,
level of income and expenses among many other
factors. Therefore, the first step is to assess your
needs. Here you need to be very categorical in the
investment objectives and needs. E.g. one may require
income to finance a wedding or education of children.
You need to analyze risk and the cash flow
requirements. By going through such an exercise, you
will know what you want out of your investment and
can set the foundation for second mutual Fund
investment strategy.
• STEP TWO- Choose the right Mutual Fund
○ Once you have a clear strategy in mind, you now have to
choose which Mutual Fund and scheme you want to invest
in. The offer document of the scheme tells you its objectives
and provides supplementary details like the track record of
other schemes managed by the same Fund Manager.
• STEP THREE-Select the ideal mix of schemes
○ Investing in just one mutual fund scheme may not meet all
your investment needs. You may consider investing in a
combination of scheme to achieve your specific goals.

• STEP FOUR-Invest regularly

○ For must of us, the approach that works best is to invest a
fixed amount at intervals, say every month. By investing a
fixed sum each month, you buy fewer units when the price is
higher and more units when the price is low, thus bringing
down you average cost per unit.

○ This is called rupee cost averaging and is a disciplined

investment strategy followed by investors all over the world.

• STEP FIVE- Keep your taxes in mind.

 If you are in a high tax bracket and have utilized fully the
exemptions under section 80L of the Income Tax Act,
investing in growth funds that do not pay dividends might
be more tax efficient and improve your post tax return.

• STEP SIX- Start early

 It is desirable to start investing early and stick to a regular
investment plan. If you start now, you will make more than
if you wait and invest later. The power of compounding
lets you earn income on income and your money multiplies
at a compounded rate of return

• STEP SEVEN- The final step

 All you need to do now is to get in touch with a Mutual
Fund or you agent/broker or a Bank Distributor (like IDBI
Bank) and start investing.


From the analysis of the compare of Mutual Fund and Unit

Linked Insurance Plan found thatUnit-linked life insurance
products are those where the benefits are expressed in
terms of number of units and unit price. They can be viewed
as a combination of insurance customer and mutual funds.
Main differences between ULIP and ordinary mutual funds is
variation in expenses — administrative charges, mortality
charges and, of course, fund management fees.


• Uncertainty of market:- Mutual Funds are securities

investments are subject to market risks and there is no
assurance or guarantee that the objectives of the
Scheme will be achieved. As with any investment in
securities, the NAV of the units issued under the
Scheme can go up or down depending on the factors
and forces affecting the capital markets.

• Lack of awareness:- In Jaipur Mutual Fund Industry is

in infantry stage so people are unaware of it. So people
are afraid to invest & they only trust of some
Government funds like UTI, SBI. They preferably like to
invest in Insurance specially in LIC. They generally ask
that Who will give them assured returns?

• High competition: Due to the existence of large number

of AMC’s the competition is high. Investors are
confused that where they have to invest and where not.
Other AMC’s offered the same type of
products/schemes which diversified the investors.

• Rigid and traditional structure:- People believe

investing in Bank FD’s and Post Office saving and are
reluctant to invest in Mutual Fund. People like to secure
money in terms of lending to the people on high
interest they meant their amount is safe.

• Socio-economic factor:- The standard of living is low

and people have low saving so investment in Mutual
Fund is low. The most of the people of this country are
agriculture dependent so they have less to invest.

• Political factors:- Due to volatile government & their

policies regarding investor & investment, the stock
market is not integrated which in turn affects the mutual
fund industry.
• Due to time constraint the survey was conducted only
in jaipur.

• Indifference and lack of interest disposed by a few

respondents leading to unauthentic response

• Sometimes biasness was shown by the respondents.



1. N. K. Sinha: Money Banking & Finance; BSC

Publishing Co. Pvt. Ltd.
2. C.R Kothari: Research Methodology; Wishva
Publication, New Delhi.


1 Business world.
2 Money Outlook
3 Business Today
4 Offer Documents of Different Schemes.


1. Economic Times.