SUMMER TRAINING REPORT

ON
“A STUDY ON EVALUATION OF MUTUAL FUNDS
PERFORMANCE AND
INVESTOR BEHAVIOUR”

Submitted to
For the partial fulfillment of the requirement of
Master in Business Administration

(MBA -2017-2019)

SCIENCE AND TECHNOLOGY ENTERPRENEURS’ PARK

HARCOURT BUTLER TECHNOLOGICAL INSTITUTE, NAWABGANJ,
KANPUR-208002

Under the Supervision of: Submitted By:

Dr. PRABHAT
KUMAR DWIVEDI Purnima
Sharma
Batch: MBA (2017-19)
ROLL NO.1718170038
 ACKNOWLEDGEMENT

I would like to extend my sincere gratitude to all college faculty members &
specially to my Internal guide Dr. PRABHAT KUMAR DWIVEDI
for giving their valuable suggestions in completing this project.

I am indebted to my company mentors Mr. ABHSIHEK PRASAD(Cluster Manager) ,

Mrs.sarika Sharma (Relationship Manager) and Miss shweta azad (Marketing Exceutive)
MR.Amarjeet singh(Team leader) at karvy for their continuous valuable support and
encouragement to successfully complete this project.

With regards
Purnima sharma
MBA(2017-19)
 CERTIFICATE

I Dr. PRABHAT KM DWIVEDI hereby certify that Purnima Sharma student of

Post Graduate Degree In

Management at, SCIENCE AND TECHNOLOGY ENTREPRENEUR’S PARK,

HARCOURT BUTLER TECHNOLOGICAL INSTITUTE, Kanpur has completed the

Project Report on A STUDY ON EVALUATION OF MUTUAL FUNDS

PERFORMANCE AND INVESTOR BEHAVIOUR under my guidance.

Dr. PRABHAT KM DWIVEDI

Associate professor
 DECLARATION

I PURNIMA SHARMA student of MBA Batch (2017-19) SCIENCE AND

TECHNOLOGY ENTREPRENEUR`S PARK- HARCOURT BUTLER
TECHNOLOGICAL INSTITUTE, NAWABGANJ, KANPUR, have conducted an
empirical research study and prepared this research project on “A STUDY ON
EVALUATION OF MUTUAL FUNDS PERFORMANCE AND INVESTOR
BEHAVIOUR” in the specialization area of marketing. It is an original research work
carried by me under the guidance and supervision of MR.Prabhat driwedi faculty of
STEP-HBTI, NAWABGANJ, KANPUR, and the report or any part of the report has not
been previously submitted or published.

Whatever, information furnished in this project report is true to best of my knowledge.

Signature of student:
Name of student: Purnima sharma
PLACE: Kanpur
2
 PREFACE

The evaluation of financial planning has been increased through decades, which is best
seen in customer rise. Now a day’s investment of saving has assumed of great
importance. According to the study of markets, it is being observed that there are lots of
financial instruments available in the markets and some of them are really doing well.
In future a proper financial planning is required to invest money in all types of financial
products because there is good potential in the market to invest.
In this project the great emphasis is given to the investors mind in respect to investment
all types of financial instrument where he can maximize his wealth. The needs and
wants of client are taken into consideration. The main objective of this project is to
know the awareness of financial instruments among investors and also to know the
investing pattern of people in different financial instruments.
The study is done by taking all types of Age, Group, Income class and different levels of
people. After analyzing the feedback the conclusion has been made that the Indian
Financial Market is having a lots of potential customers. The only thing is to give a
proper guidance to the prospective customers in the current scenario.
1
 Summary

The field of investment has received considerable attention from academic

researchers keen on understanding issues like:

 How should risk be measured?

 What is the relationship between risk and return?
 What is the importance of assets allocation?

The following risks are being measured by different risk ratios which help to
understand the risk premium and volatility of market.

From the analysis it is clear that risk is directly proportional of return. The greater risk
the greater return.

By diversifying our money to different sectors reduces the risk and increases the return.
This whole pooling of money is done by the different Financial Advisors.

Debt Funds are the funds which has less risk with definite return
2
OBJECTIVES OF THE STUDY

 To find out the Preference of the investors for Asset Management of company.
 To get insight knowledge about mutual funds.
 To know why one has invested in SBI Mutual Funds.
 To know the mutual fund performance levels in the present market.
 To evaluate consumer feedback on mutual fund.

OBJECTIVE OF THE PROJECT REPORT

Managing money has always been difficult. You require a great deal of expertise to
evaluate various savings and investment plans you simply don’t have the time to do it
yourself. Until and Unless the investment bears large it might also turn out to be
expensive trying to set up your own investment wing. It might be prudent asking a
professional to manage your funds for a small fee. You are sure that your money will be
deployed after scientifically analyzing pros & cons.

The part an insight about mutual fund industry and its various aspects. Individuals and
Institutions should be considered to know the fact that how much individuals contribute
in the growth of mutual fund industry so as institutions. Subsequently, the effect on the
various AMCs growth in comparison to previous year.

Scope of the study

A big boom has been witnessed in Mutual Fund Industry in resent times. A large
number of new players have entered the market and trying to gain market share in
this rapidly improving market.
3
 The study will help to know the preferences of the customers, which company, portfolio,
mode of investment, option for getting return and so on they prefer. This project report
may help the company to make further planning and strategy.

Significance of Research

“All process is born of inquiry. Doubt is often better than overconfidence, for it leads to
inquiry and inquiry leads to invention.” Is a famous Hudson Maxim in context of which
the significance of research can well be understood? Increased amounts of research make
progress possible.

Research inculcates scientific and inductive thinking and it promotes the development of
logical habits of thinking and organization.

The role of research in several fields of applied economics, whether related to business or
to the economy as a whole, has greatly increased in modern times. The increasing
complex nature of business and government has focused attention on the use of research
in solving operational problems. Research, as an aid to economic policy, has gained
added importance, both for government and business.
4
 TABLE OF CONTENTS

CHAPTER 1

INDUSTRY PROFILE 7-38

COMPANY PROFILE 39-52

CHAPTER 2

RESEARCH METHODOLGY 53-58

CHAPTER 3

ANALYSIS AND INTERPRETATION 58-70

CHAPTER 4

FINDINGS 71

LIMITATIONS 71
CHAPTER 5
CONCLUSION 74

RECOMMENDATIONS / SUGGESTIONS 74

ANNEXURE

QUESTIONNAIRE 77
BIBLIOGRAPHY 81
5
CHAPTER 1
INDUSTRY
PROFILE
COMPANY
PROFILE
6
 INDUSTRY PROFILE
MUTUAL FUNDS

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 of India. UTI
enjoyed a monopoly in the Indian mutual fund market until 1987, when a host of other
government-controlled Indian financial companies established their own funds,
including State Bank of India, Canara Bank, and Punjab National Bank. This market was
made open to private players in 1993, as a result of the historic constitutional
amendments brought forward by the then Congress-led government under the existing
regime of Liberalization, Privatization and Globalization (LPG). The first private sector
fund to operate in India was Kothari Pioneer, which later merged with Franklin
Templeton. In 1996, SEBI, the regulator of mutual funds in India, formulated the Mutual
Fund Regulation which is a comprehensive regulatory framework.

Mutual fund investments are sourced both from institutions (companies) and individuals.
Since January 2013, institutional investors have moved to investing directly with the
mutual funds since doing so saves on the expense ratio incurred. Individual investors
are, however, served mostly by Investment advisor and banks. Since 2009, online
platforms for investing in Mutual funds have also evolved.

There are mutual funds that invest in equity or stocks, and are managed to achieve a
range of goals. Some equity mutual funds are designed to generate long-term capital
gains through growth or value investing strategies, while others are focused on
generating dividend income for shareholders. Indian mutual funds may also invest in
bonds and other debt securities with the goal of generating regular interest income.

There are also Indian balanced funds that invest in both equity and debt instruments to
create portfolios that offer a degree of stability without completely ignoring the
potential for big gains in the stock market. Just like in the American market, the Indian
market offers mutual funds that specialize in certain sectors, only invest in government
or inflation-protected debt, track a given index or are designed to maximize tax-
efficiency.
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

7
 these investments and the capital appreciation realised are shared by its unitholders
in proportion to the number of units owned by them.

AN INVESTMENT COMPANY

A corporation or trust engaged in the business of investing the pooled capital of investors
in financial securities. This is most often done either through a closed-end fund or an
open-end fund (also referred to as a mutual fund). In the U.S., most investment
companies are registered with and regulated by the Securities & Exchange Commission
under the Investment Company Act of 1940.

INVESTMENT FLOW

In simple words, Mutual Fund is a mechanism for pooling resources by issuing units
to the investors & investing their funds in securities in accordance with objectives as
disclosed in offer document. Investments in securities are spread across a wide cross-
section of industries & sectors & thus the risk is reduced.

ROLE OF MUTUAL FUND

The fund sponsor raises money from the investing public, who become fund shareholders. It
then invests the proceeds in securities (stocks, bonds and money market instruments) related
to the fund's investment objective. The fund provides shareholders with professional
investment management, diversification, liquidity and investing convenience. For these
services, the fund sponsor charges fees and incurs expenses for operating the fund, all of
which are charged proportionately against a shareholder's assets in the fund.

The most prevalent and well-known type of mutual fund operates on an open-ended basis. This
means that it continually issues (sells) shares on demand to new investors and existing
shareholders who are buying. It redeems (buys back) shares from shareholders who are selling.
Mutual fund shares are bought and sold on the basis of a fund's net asset value (NAV). Unlike a
stock price, which changes constantly according to the forces of supply and demand, NAV is
determined by the daily closing value of the underlying securities in a fund's portfolio (total net
assets) on a per share basis.

This graph shows the 4-Phases of mutual fund industry from (1965-2015)-
8
First Phase (1963-1987):

UTI was formed and they launched their first scheme Unit Scheme in 1964).Unit Trust
of India (UTI) was established in 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 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.

Third Phase (1993-2003):

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.
1. 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.
2. 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
9
 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 (2003-Present year):

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. The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC.
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 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, 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 assets under
management 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.

The graph indicates the growth of assets over the years.

10
Important Characteristics of a Mutual Fund

• A Mutual Fund actually belongs to the investors who have pooled their Funds.

• A Mutual Fund is managed by investment professional and other Service providers,

who earns a fee for their services, from the funds.

• The pool of Funds is invested in a portfolio of marketable investments.

• The value of the portfolio is updated every day.

11
• The investor‘s share in the fund is denominated by ―units‖. The value of the units

changes with change in the portfolio value, every day. The Value of one unit of

investment is called net asset value (NAV).

• The investment portfolio of the mutual fund is created according to The stated

Investment objectives of the Fund.

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.

• There are several risks. The first is a credit risk - the companies in which the fund
has invested might perform poorly, suffer mismanagement or otherwise meet with
misfortune. Another big risk is that some economic, political or other development
will cause the overall market to fall, dragging down with it the holdings of your
particular fund. These are risks you would face investing in individual stocks as
well; at least, mutual funds can offer diversification.

• There are some risks unique to mutual funds. The fund management, for instance, may be
doing things you don't know about. What you think is a conservative diversified equity
fund might, in order to boost returns, invest heavily in a particular stock or sector, thereby
exposing it to the risk of a downtrend in that particular stock.
12
TERMS OF MUTUAL FUNDS

Sponsor

The sponsor initiates the idea to set-up a mutual fund. It could be a registered company,
scheduled bank or financial institution. The sponsor appoints the trustees, AMC (Asset
Management Company) and the custodian. Once the AMC is formed, the sponsor is just
a stakeholder. However, sponsors could play a key role in bailing out an AMC (Asset
Management Company) during a crisis.

Trustee

Trustees protect the interests of unitholders. Sometimes, trustees and sponsors are the
same. Trustees float and market schemes, and secure necessary approvals. They check if
the AMC's investments are within defined limits, whether fund's assets are protected,
and also ensure that unitholders get their due returns. For major decisions concerning the
fund, they have to take unitholders’ consent. They submit reports every six months to
SEBI (Securities Exchange Board of India).

AMC (asset management company)

• The AMC manages your money. It takes investment decisions, compensates investors
through dividends, maintains proper accounting and information for pricing of units,
calculates the NAV, and provides information on listed schemes and secondary market
transactions.
• It is a highly regulated charge a small management fee, which is normally 1.5 per cent
of the total funds managed.

Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent
to the Mutual Fund. The Registrar processes the application form, redemption requests
and dispatches account statements to the unit holders.
13
Custodian

Mutual fund is required by law to protect their portfolio securities by splicing them with
a custodian. Nearly all mutual funds use qualified bank custodians. Only a registered
custodian under the SEBI regulation can act as a custodian to a mutual fund. A custodian
handles the investment back office of a mutual fund.

Responsibility of Custodians

 Receipt and delivery of securities

 Holding of securities.

 Collecting income

 Holding and processing cost

 Corporate actions etc

Fee structure:-

Custodian charges range between 0.15% to 0.20% on the net value of the customer‘s holding
for custodian services space is one important factor which has fixed cost element.

Tax Implications in Mutual Fund

Dividend income from mutual funds is exempt from tax in the hands of the investor,
however the mutual fund pays tax on such distributions if the scheme holds less than 50 per
cent in equity. Capital gains tax applies on funds held for more than a year.
Dividend Reinvestment Plan
A dividend reinvestment plan allows investors to reinvest their regular dividends in the
mutual fund's units. In such a case, the mutual fund won't send in a regular dividend cheque.
Instead, the money will be used to purchase additional units on your behalf.
14
Most common mistakes people make when choosing mutual funds
• These are some of the common mistakes made when choosing a mutual fund: buying
only on past performance. In any market environment, some funds produce phenomenal
returns. However, last year's best performers can be this year's laggards. One must take
other considerations into account before buying into a fund.
• Acting on tips and hunches. Since no one can consistently forecast market trends
one needs to develop a consistent, disciplined approach and stick to it.
• Over diversifying. Two or three mutual funds would offer instant cost-effective
diversification. Investing in more schemes will mean losing the benefits of
diversification.
• Short-term horizon. for some time-periods, the market will favour diversified funds, or
sector funds. When a style goes out of favour, fund performance in that group will suffer,
but those funds will rebound when the style returns to favour.
Net Asset Value
 NAV or Net Asset Value of the fund is the cumulative market value of the assets of the
fund net of its liabilities. NAV per unit is simply the net value of assets divided by the
number of units outstanding. Buying and selling into funds is done on the basis of NAV-
related prices. NAV is calculated as follows:

 NAV= Market value of the fund's investments + Receivables + Accrued Income-

Liabilities- Accrued Expenses - Number of Outstanding units
 The per unit NAV is the net asset value of the scheme divided by the number of units
outstanding on the Valuation Date.

How often is the NAV declared?

The NAV of a scheme has to be declared at least once a week. However many Mutual
Fund declare NAV for their schemes on a daily basis. As per SEBI Regulations, the NAV
of a scheme shall be calculated and published at least in two daily newspapers at
intervals not exceeding one week. However, NAV of a close-ended scheme targeted to a
specific segment or any monthly income scheme (which is not mandatorily required to be
listed on a stock exchange) may be published at monthly or quarterly intervals.
15
Price of a 'unit'Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a
sales load.
Repurchasing Price
Repurchase price is the price at which a close-ended scheme repurchases its units.
Repurchase can either be at NAV or can have an exit load. This is also called Bid Price

Exit Load
The non refundable fee paid to the Asset Management Company at the time of
redemption/ transfer of units between schemes of mutual funds is termed as exit load. It
is deducted from the NAV (selling price) at the time of such redemption/ transfer.

Redemption Price
Redemption price is the price received on selling units of open-ended scheme. If the
fund does not levy an exit load, the redemption price will be same as the NAV. The
redemption price will be lower than the NAV in case the fund levies an exit load.

Switch
Some Mutual Funds provide the investor with an option to shift his investment from
one scheme to another within that fund. For this option the fund may levy a switching
fee. Switching allows the Investor to alter the allocation of their investment among the
schemes in order to meet their changed investment needs, risk profiles or changing
circumstances during their lifetime.

Shut-Out Period
After the closure of the Initial Offer Period, on an ongoing basis, the Trustee reserves a
right to declare Shut-Out period not exceeding 5 days at the end of each
month/quarter/half-year, as the case may be, for the investors opting for payment of
dividend under the respective Dividends Plans. The declaration of the Shut-Out period is
envisaged to facilitate the AMC/the Registrar to determine the Units of the unit holders
eligible for receipt of dividend under the various Dividend Options. Further, the Shut-
Out period will also help in expeditious processing and dispatch of dividend warrants.
During the Shut-Out period investors may make purchases into the Scheme but the
Purchase Price for subscription of units will be calculated using the NAV as at the end of
the first Business Day in the following month/quarter/half-year as the case may be,
depending on the Dividend Plan chosen by the investor.

Therefore, if investments are made during the Shut -Out period, Units to the credit of the Unit
holder's account will be created only on the first Business Day of the following month/
quarter/half year, as the case may be, depending on the dividend plan chosen by the investor.
The Shut-Out period applies to new investors in the Scheme as well as to Unit holders
16
 making additional purchases of Units into an existing folio. The Trustee reserves the right to
change the Shut-Out period and prescribe new Shut- Out period, from time to time.

Minimum lock-in period for investment

There is no lock-in period in the case of open-ended funds. However in the case of tax
saving funds a minimum lock-in period is applicable. The lock-in period for different
tax saving schemes are as follows:
Section minimum lock-in period
U/s 88 3 yrs
. U/s 54EA 3 yrs
U/s 54EB 7 yrs.

Systematic Investment Plan

SIP is an investment option that is presently available only with mutual funds. The other
investment option comparable to SIPs is the recurring deposit schemes from Post office
and banks. Basically, under an SIP option an investor commits making a regular
(monthly/quarterly) investment in a particular mutual fund/deposit. Investor can now
use auto debit (ECS) facility from Banks to automatically debit SIP amount from your
account. There is no need to give bulk of cheques for SIP. For that you should have
account in nationalized banks. For SIP through ECS, you have to provide bank details
like account no., branch name, MICR no. etc.

Issuers of Mutual Funds in India

Unit Trust of India was the first mutual fund which began operations in 1964. Other
issuers of Mutual funds are Public sector banks like SBI, Canara Bank, Bank of India,
Institutions like IDBI, ICICI, GIC, LIC, and Foreign Institutions like Alliance, Morgan
Stanley, Templeton and Private financial companies like Kothari Pioneer, DSP Merrill
Lynch, Sundaram, Kotak Mahindra, and Cholamandalam etc. there are many new
upcoming fund houses like Edelweiss, J.P. Morgan, Axis,

Signals for Monitoring Mutual Fund's Performance

• Investors can sometimes spot potential problems and take evasive action before
their mutual fund sinks in value. These could be: the fund's management changes.
• Its performance slips compared to similar funds.
• The fund's expense ratios climb.
• Its beta, a technical measure of risk, also climbs.
17
 • Independent rating services reduce their ratings of the fund.
• It merges into another fund.
• There's a change in management style or a change in the objective of the fund. Generally,
any of these single factors automatically means a fund is slipping. But a combination of
these factors calls on you to take a closer look and consider a switch.

TAX BENEFITS IN MUTUAL FUNDS

When we talk about a mutual fund for taxation purposes, we mean the legally constituted
trust that holds the investors‟ money”. It is trust that earns and receives income from
investments it makes on behalf of the investors. Most countries do not impose any tax on
this entity – the trust – because the income it earns is meant for the investors. The trust is
considered to be only a pass-through vehicle. It would amount to double taxation if the
trust first pays a tax and then investor also is made to pay. Generally, the trust that is
exempted and the investor pay the taxes on his share of the income. After the 1999-2000
Budget, the investors are totally exempt from paying any tax on the dividend income
they receive from the mutual funds, while certain types of schemes pay some taxes. This
section explains what the fund or the trust pays by way of tax.

Tax Provision

 Generally, income earned by mutual fund registered with SEBI is exempt from tax.

 However, income distributed to unit-holders by a closed-end debt fund is liable to a

dividend distribution tax at a rate stipulated by the Government. This tax is not
applicable to distributions made by open-end equity-oriented funds.

Impact on the Fund and the Investor

 It should be noted that although this tax is payable by the fund on its distributions and out of
its income, the investor are indirectly since the fund‟s NAV, and therefore the value of his
investment will come down by the amount of tax paid by the fund. For example, if a closed-
end or debt fund declares a dividend distribution of Rs. 100, Rs. 10.20, if tax rate is 10.20%)
will be the tax in the hands of the fund. While the investor will get Rs.
100, the fund will have Rs. 10.20 less to invest. The fund‟s current cash flow will
diminish by Rs. 10.20 paid as tax, and its impact will be reflected in the lower value
of the fund‟s NAV and hence investor‟s investment on a compounded basis in future
periods.
18
  Also, the tax bears no relationship to the investor‟s tax bracket and is payable by the
fund even if the investor‟s income does not exceed the taxable limit prescribed by the
Income Tax Act.
 In fact, since the tax is on distributions, it makes income schemes less attractive in
comparison to growth schemes, because the objective of income schemes is to pay
regular dividends.
 The fund cannot avoid the tax eve if the investor chooses to reinvest the distribution back
into the fund. For example, the fund will still pay Rs. 10.20 tax on the announced
distribution, even if the investor chooses to reinvest his dividends in the concerned
scheme.

Tax benefits to the Investor

Dividends Received From Mutual Funds

 Income distributed by a fund is exempted in the hands of investors
 No TDS on any income distribution by mutual fund

Capital Gains on Sale of Units

However, if the investor sells his units and earns “Capital Gains”, the investor is subject
to the Capital Gains Tax as under:

 If units are held for not more than 12 months, they will be treated as short term
capital asset, otherwise as long term capital asset.
 Tax law definition of Capital Gains = Sale consideration – (Cost of Acquisition + Cost
of Improvements + Cost of transfer)
 If the units were held for over one year, the investor gets the benefit of “Indexation”,
which means his purchase price is marked up by an inflation index, so his capital
gains amount is less than otherwise. Purchase Price of a long term capital asset after
Indexation is computed as,
Cost of acquisition or improvement = actual cost of acquisition or improvement *
cost inflation index for year of transfer / cost inflation index for year of acquisition or
improvement or for 1981, whichever is less.

Since, April 1, 2003, all dividends, declared by debt-oriented mutual funds (i.e. mutual
funds with less than 50% of assets in equities), are tax-free in the hands of the investor. A
dividend distribution tax of 12.5% (including surcharge) is to be paid by the mutual fund
on the dividends declared by the fund. Long-term debt funds, government securities funds
(G-sec/gilt funds), monthly income plans (MIPs) are examples of debt-oriented funds.
19
 Dividends declared by equity-oriented funds (i.e. mutual funds with more than 50% of
assets in equities) are tax-free in the hands of investor. There is also no dividend distribution
tax applicable on these funds under section 115R. Diversified equity funds, sector funds,
balanced funds are examples of equity-oriented funds. Amount invested in tax-saving funds
(ELSS) would be eligible for deduction under Section 80C, however the aggregate amount
deductible under the said section cannot exceed Rs 100,000.

Section 2(42A):

Under Section 2(42A) of the Act, a unit of a mutual fund is treated as short term capital asset if
the same is held for less than 12 months. The units held for more than twelve months are
treated as long-term capital asset.

Section 10(38):

Under Section 10(38) of the Act, long term capital gains arising from transfer of a unit of mutual
fund is exempt from tax if the said transaction is undertaken after October 1, 2004 and the
securities transaction tax is paid to the appropriate authority. This makes long-term capital gains on
equity-oriented funds exempt from tax from assessment year 2005-06. Short-term capital gains on
equity-oriented funds are chargeable to tax @10% (plus education cess, applicable surcharge).
However, such securities transaction tax will be allowed as rebate under Section 88E of the Act, if
the transaction constitutes business income. Long-term capital gains on debt-oriented funds are
subject to tax @20% of capital gain after allowing indexation benefit or at 10% flat without
indexation benefit, whichever is less. Short-term capital gains on debt-oriented funds are subject to
tax at the tax bracket applicable (marginal tax rate) to the investor.

Section 112:

Under Section 112 of the Act, capital gains, not covered by the exemption under Section 10(38),
chargeable on transfer of long-term capital assets are subject to following rates of tax:
 Resident Individual & HUF -- 20% plus surcharge, education cess.
 Partnership firms & Indian companies -- 20% plus surcharge.
 Foreign companies -- 20% (no surcharge).

Capital gains will be computed after taking into account the cost of acquisition as adjusted
by Cost Inflation Index, notified by the central government. 'Units' are included in the
proviso to the sub-section (1) to Section 112 of the Act and hence, unit holders can opt for
being taxed at 10% (plus applicable surcharge, education cess) without the cost inflation
index benefit or 20% (plus applicable surcharge) with the cost inflation index benefit,
whichever is beneficial. Under Section 115AB of the Income Tax Act, 1961, long term
capital gains in respect of units, purchased in foreign currency by an overseas financial,
held
20
 for a period of more than 12 months, will be chargeable at the rate of 10%. Such gains will
be calculated without indexation of cost of acquisition. No surcharge is applicable for
taxes under section 115AB, in respect of corporate bodies.

Offset the capital loss on a mutual fund investment after a dividend declaration

This is a practice that is popularly referred to as 'dividend stripping.' The capital loss from a
dividend declaration can be offset if you have remained invested in the mutual fund 3
months before and 9 months after the dividend declaration. If you haven't adhered to this
guideline then you cannot offset the capital loss arising from a dividend declaration.

Avoid payment of capital gains on mutual fund investments

The capital gain, which is not exempt from tax as explained above, can be invested in
the specified asset, mentioned below, within 6 months of the sale. Specified asset means
any bond redeemable after 3 years:
 Issued on or after April 1, 2000 by NABARD (National Bank for Agriculture and Rural
Development or NHA (National Highways Authority of India
 Issued on or after April 1, 2001 by the Rural Electrification Corporation Ltd.
 Issued on or after April 1, 2002 by the National Housing Bank or by the Small Industries
Development Bank of India. Such capital gains can also be invested in any residential
house property in accordance with Section 54F of the Act and one can claim exemption
from capital gains.
TAX ARBITRAGE

The complexity of tax codes often allows for many incentives which drive
individuals to restructure their transactions in the most advantageous way in
order to pay the least amount of tax. Some forms of tax arbitrage are legal while
others are illegal.
Tax arbitrage can, for example, involve recognizing revenues in a low tax region
while recognizing expenses in a high tax region. Such a practice would minimize
the tax bill by maximizing deductions while minimizing taxes paid on earnings.
It is suspected that tax arbitrage is extremely widespread but it is difficult to give
precise figures as to what extent tax arbitrage is employed.

How it works:

Tax shelters are often used to take advantage of tax arbitrage opportunities.
For example, a person or business might open an account in a certain country or
create a certain legal structure so that the income that flows from these
investments is taxed at a more favorable tax rate.
21
The simple fact that the IRS taxes different types of income streams at different
rates & creates tax arbitrage opportunities every day.
For example, investors might choose to put extra cash into stocks rather than
bonds because the tax rate on capital gains is lower than the tax rate on earned
interest. In the broadest sense of the word, any tax planning can be viewed as
tax arbitrage.

Why it Matters:

Tax rules and guidelines are complex, and few people want to pay more taxes than
they have to. Many people and organizations structure transactions and accounts
in the most advantageous way possible.
However, there is a fine line between tax avoidance and tax evasion.
Some types of tax arbitrage are illegal, which is why interested parties
should always get advice from qualified tax advisors.

THE RIGHTS OF INVESTORS

As per SEBI Regulations on Mutual Funds, an investor is entitled to

1. Receive Unit certificates or statements of accounts confirming your title within 6 weeks
from the date your request for a unit certificate is received by the Mutual Fund.
2. Receive information about the investment policies, investment objectives,
financial position and general affairs of the scheme;
3. Receive dividend within 42 days of their declaration and receive the
redemption or repurchase proceeds within 10 days from the date of
redemption or repurchase
4. The trustees shall be bound to make such disclosures to the unit holders as are essential in
order to keep them informed about any information which may have an adverse bearing on
their investments
5. 75% of the unit holders with the prior approval of SEBI can terminate the AMC of the fund.
6. 75% of the unit holders can pass a resolution to wind-up the scheme.
7. An investor can send complaints to SEBI, who will take up the matter with the
concerned Mutual Funds and follow up with them till they are resolved.

SELECTION OF BEST MUTUAL FUND

Choice of any scheme would depend to a large extent on the investor preferences. For an investor
willing to undertake risks, equity funds would be the most suitable as they offer the maximum
returns. Debt funds are suited for those investors who prefer regular income and safety. Gilt
funds are best suited for the medium to long-term investors who are averse to risk. Balanced
funds are ideal for medium- to long-term investors willing to take moderate risks. Liquid funds
are ideal for Corporates, institutional investors and business houses who invest
22
their funds for very short periods. Tax Saving Funds are ideal for those investors who want to avail
tax benefits. An important aspect while selecting a particular scheme is the duration of the
investment. Depending on your time horizon you can select a particular scheme. Besides all this,
factors like promoter's image, objective of the fund and returns given by the funds on different
schemes should also be taken into account while selecting a particular scheme. When your
investment purpose is for saving for retirement, then risk minimization should be your mantra. And
one of the best avenues for you to invest now is mutual funds as they have an average of 50 stocks
in each portfolio for diversification and cushioning the risks. Selecting best mutual funds mean a
lot more than deciding by indices and their past performances. However, you need to remember
one thing that there is no quick gratification in investments of any kind. Let us discuss the dos and
don'ts of selecting the best mutual funds. These points should serve as guidelines for making
decision on whether your pick is among the best in the industry or not.

Dos In Selecting the Best Mutual Fund

1. Draw down your investment objective. There are various schemes suitable for different
needs. For example retirement plan, capital growth etc. Also get clear about your time
frame for investment and returns. Equity funds are not advisable for short term because
of their long term nature. You can consider money market and floating rate funds for
short term gains. This equals asking - What kind of mutual fund is right for me?
2. Once you have decided on a plan or a couple of them, collect as much information as
possible on them from different sources offering them. Funds' prospectus and advisors
may help you in this.
3. Get a clear picture of fees & associated cost, taxes (for non-tax free funds) for all your
short listed funds and how they affect your returns. Best mutual funds have lower cost
out go.
4. Best mutual funds maximize returns and minimize risks. A number called as Sharpe
Ratio explains whether a fund is risk free based on its expected returns compared
against a risk free money market fund.
5. Some funds have the advantage of low minimum initial investments. You can start
investing even with Rs. 1000 a month. This is advisable for building asset bases over a
long period with small regular investment

Don'ts In Selecting Best Mutual Funds

Like there are pit falls in every investment sphere you must be careful about even
while investing in mutual funds. Here is a list of don'ts you must consider for selecting
best performing mutual funds
23
  Don't go by the past performance alone. For, an average of performance over a period
will not tell you whether the performance is growing or at least maintained in the
recent years.
 Don't go by hearsay about the reputations of a fund. There are various rating
agencies which index the mutual funds regularly based on multiple factors. It forms
your first step in finding the best performing mutual funds.
 Don't invest huge sums of money in a single fund or all the money in one go. Spread
out your investments rationally. For example: Index funds for high returns, bond funds
for lower risks, 401 (k) retirement plans and so on.
 Don't ignore absolute returns. NAVs and percentage growths don't factor-in the taxes and
charges. Higher loads can diminish you in absolute returns. Some of the funds load you at
both buying as well as selling. Even no load funds have fees such as Rule 12-b fees.
 Don't chase a mutual fund because it is performing great in a bull run in the stock
market. Once the market stagnates or the trend reverses these funds will follow suit.
 Don't compare a mutual fund across the category. This means a diversified fund should
not be compared with index fund. While choosing a best one compare funds from the
same category regardless of the promoting companies. It is definitely not easy to pick
a few best mutual funds from those in the market. It is like searching for the proverbial
needle in the stack of hay. However, a best mutual fund is one that charges low fees,
that sticks to principles and investment styles, which puts your interest on top of
everything else. The most important character of best mutual funds is they don't just
know how to ride a bull run but also a bear market.
PRODUCT AND SERVICES

Products:

 Insurance
 Bonds
 Company FD’s
 Shares
 PPF(Public Provident Fund)
 Wills
 Mutual Funds:
 Debt Fund
 Equity Fund
 Money Market

Types of Debt Funds they offer:

24
  Gilt Funds
 Monthly Income Plan (MIP’s)
 Short Term Plan (STP’s)
 Liquid Funds
 Fixed Maturity Plans (FMP’s)
 Mid-Term Plans
 Types of Equity Funds they offer:
 Diversified Equity Fund
 Sector Funds
 Thematic Funds

Services:

 They are cradle to grave business. They give service to investors and their family for a
lifetime just as they have been working with families for last 10 to 15 years. They are
in the business of offering mutual funds which invest across asset classes - real estate:
Commercial and Residential, Equity, Fixed Income, Arbitrage, Gold.
 They also help investors to do the following better :-
1. Save money for children’s future.
2. Save money to buy dream house and car.
3. Create a nest of savings for retirement, holiday in Paris, scuba diving in Hawaii, a visit
to Nepal Himalayas etc.
4. Create wealth for investors so that they can spend more time with your family, Golf
etc.
5. Help to live a comfortable retired life.

ADVANTAGES AND DISADVANTAGES OF MUTUAL FUND

ADVANTAGES

 Professional Management
 Diversification
 Convenient Administration
 Return Potential
 Low costs
25
  Liquidity
 Transparency
 Flexibility
 Choice of schemes
 Tax benefit
 Well Regulated

DISADVANTAGE

 No control over Cost in the Hands of an Investor

 No tailor-made Portfolios

 Managing a Portfolio Funds

 Difficulty in selecting a Suitable Fund Scheme

RATE OF RETURN ON MUTUAL FUNDS

An investor in mutual fund earns return from two sources:

 Income from dividend paid by the mutual fund.

 Capital gains arising out of selling the units at a price higher than the acquisition

price. Formation and regulations Mutual funds are to be established in the form of

Trusts under the Indian trusts act and are to be operated by separate asset
management companies
(AMC s)
 AMC‘s shall have a minimum Net worth of Rs. 5 crores;

 AMC‘s and Trustees of Mutual Funds are to be two separate legal entities and that an AMC
or its affiliate cannot act as a manager in any other fund;
26
 Mutual funds dealing exclusively with money market instruments are to be regulated by
the Reserve Bank Of India

 CATEGORIES OF MUTUAL FUND:

Mutual funds can be classified as follow:

27
 Differentiation on the basis of investment objectives

Schemes can be classified by way of their stated investment objectives such as Growth
Fund, Balanced Fund, Income Fund etc.

 Equity/Growth Schemes

 These schemes seek to invest a majority of their funds in equities and a small portion
in money market instruments. Such schemes have the potential to deliver superior
returns over the long term. However, as they invest in equities, these schemes are
exposed to fluctuations in value especially in the short-term. Equity schemes are hence
not suitable for investors seeking regular income or needing to use their investment in
short term. They are ideal for investors who have a long-term investment horizon. The
NAV prices of equity fund fluctuates with market value of the underlying stocks which
are influenced by external factors such as social, political as well as economic. HDFC
Equity Fund and HDFC Top200 Fund are examples of equity schemes.

 Income/Debt-Schemes

 These schemes invest in money markets, bonds and debentures of corporate

companies with medium and long-term maturities. These schemes primarily target
current income instead of capital appreciation. Hence, a substantial part of the
distributable surplus is given back to the investor by way of dividend distribution. These
schemes usually declare quarterly dividends and are suitable for conservative investors
who have medium to long term investment horizon and are looking for regular income
through dividend or steady capital appreciation.
 These schemes, also known as Income schemes, invest in debt securities such as
corporate bonds, debentures and government securities. The prices of these schemes tend
to be more stable compared with equity schemes and most of the returns of the investors
are generated through dividends or steady capital appreciation. These schemes are ideal
for conservative investors or those who are not in a position to take higher risks.
However, as compared to the money market schemes they do have a higher price
fluctuation risk and compared to a Gilt fund they have a higher credit risk. HDFC
Income Fund is an example of bond schemes.

 Hybrid/Balanced Schemes
 These schemes are also commonly called balanced schemes. These invest in both
equities as well as debt. By investing in a mix of this nature, balanced schemes seek to
attain the objective of income and moderate capital appreciation. Such schemes are ideal
for investors with a conservative, long-term orientation. HDFC Prudence Fund and
HDFC Balance Fund are perfect examples of such hybrid schemes.
28
 Other Schemes

 Tax-Saving Schemes

 Investors [individuals and Hindu Undivided Families (HUFs)] are being encouraged
to invest in equity markets through Equity Linked Savings Scheme (ELLS) by offering
them a tax rebate. Units purchased cannot be assigned / transferred / pledged /
redeemed / switched-out until completion of 3 years from the date of allotment of the
respective units. The Scheme is subject to Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996 and the notifications issued by the Ministry of
Finance (Department of Economic Affairs), Government of India regarding ELSS.
Subject to such conditions and limitations, as prescribed under Section 88 of the Income-
tax Act, 1961, subscriptions to the Units not exceeding Rs.10,000 would be eligible to a
deduction,

 Based on their structure:

 Open-ended funds: Investors can buy and sell the units from the fund, at any

point of time.

 Close-ended funds: These funds raise money from investors only once. Therefore,

after the offer period, fresh investments can not be made into the fund. If the fund is

listed on a stocks exchange the units can be traded like stocks (E.g., Morgan

Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended

funds provided liquidity window on a periodic basis such as monthly or weekly.

Redemption of units can be made during specified intervals. Therefore, such funds

have relatively low liquidity.

 Interval Schemes: These schemes combine the features of Open-ended and Closed-
ended schemes. They may be traded on the stock exchange or may be open for sale
or redemption during pre-determined intervals at NAV based prices.
29
 Based on their investment objective:

A) Equity funds: These funds invest in equities and equity related instruments. With

fluctuating share prices, such funds show volatile performance, even losses. However,

short term fluctuations in the market, generally smoothens out in the long term,

thereby offering higher returns at relatively lower volatility. At the same time, such

funds can yield great capital appreciation as, historically, equities have outperformed

all asset classes in the long term. Hence, investment in equity funds should be

considered for a period of at least 3-5 years. It can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or

Nifty is tracked. Their portfolio mirrors the benchmark index both in terms

of composition and individual stock weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities

spreading across different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds

except that they invest in companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related

through some theme.

e.g. -An infrastructure fund invests in power, construction, cements

sectors etc.
30
 v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A

banking sector fund will invest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

B) Balanced fund: Their investment portfolio includes both debt and equity. As a

result, on the risk-return ladder, they fall between equity and debt funds. Balanced

funds are the ideal mutual funds vehicle for investors who prefer spreading their

risk across various instruments. Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.

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

C) Debt fund: They invest only in debt instruments, and are a good option

for investors averse to idea of taking risk associated with equities. Therefore,

they invest exclusively in fixed-income instruments like bonds, debentures,

Government of India securities; and money market instruments such as

certificates of deposit (CD), commercial paper (CP) and call money. Put your
money into any of these debt funds depending on your investment horizon and

needs.
31
i) Liquid funds- These funds invest 100% in money market instruments, a

large portion being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government

securities of and T-bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in

debt instruments which have variable coupon rate.

iv) Arbitrage fund- They generate income through arbitrage opportunities

due to mis-pricing between cash market and derivatives market. Funds are

allocated to equities, derivatives and money markets. Higher proportion

(around 75%) is put in money markets, in the absence of arbitrage

opportunities.

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

government securities.

vi) Income funds LT- Typically, such funds invest a major portion of the

portfolio in long-term debt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and

an exposure of 10%-30% to equities.

32
 viii) FMPs- fixed monthly plans invest in debt papers whose maturity is

in line with that of the fund.

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.

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.
33
 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.

RISK RETURN REWARD 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.
34
RISK V/S. RETURN

35
3
6
MUTUAL FUND OPERATION FLOW 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.

37
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.

Return Safety Volatility Liquidity Convenience

Equity High Low High High Moderate

Bonds Moderate High Moderate Moderate High

Corporate Moderate Moderate Moderate Low Low

Debentures

Corporate Moderate Low Low Low Moderate

FDs

Bank Low High Low High High

Deposits

PPF Moderate High Low Moderate High

Life Low High Low Low Moderate

Insurance

Gold Moderate High Moderate Moderate Gold

Real Estate High Moderate High Low Low

Mutual High High Moderate High High

Funds

38
 COMPANY PROFILE

ABOUT COMPANY

“SBI Mutual Fund is India’s one of the largest bank sponsored mutual fund. With
28years of rich experience in fund management, it brings forward our expertise by
consistently delivering value to our investors. It has a strong and proud lineage that
traces back to the State Bank of India (SBI) - India's largest bank.

It is a Joint Venture between SBI and AMUNDI (France), one of the world's leading fund
management companies. With our network of over 222 points of acceptance across India,
we deliver value and nurture the trust of our vast and varied family of investors.

Excellence has no substitute. And to ensure excellence right from the first stage of
product development to the post-investment stage and stable investment policies.
This dedication is what helps our customers achieve their financial objectives.

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.

VISION

“To be the most preferred and the largest fund house for all asset classes, with a
consistent track record of excellent returns and best standards in customer
service, product innovation, technology and HR‘ practices.”

SBI-MF believes in
 Proven Skills in Wealth Generation
 Exploiting expertise, compounding growth

39
SBI Mutual Fund

Key Information

• Mutual Fund - SBI Mutual Fund

• Setup Date- Jun-29-1987
• Incorporation Date- Feb-07-1992
• Sponsor- State Bank of India
• Trustee - SBI Mutual Fund Trustee Company Private Limited
• Chairman- Mrs. Arundhati Bhattacharya
• CEO / MD - Mrs. Anuradha Rao
• CIO - Mr. Navneet Munot
• Compliance Office - Ms. Vinaya Datar
• Investor Service Officer - Mr. Rohidas Nakashe
• Assets Managed - Rs. 157025.28 crore (Mar-31-2017)

SERVICES

Mutual Funds Investors are our priority. Our mission has been to establish Mutual Funds
as a viable investment option to the masses in the country. Working towards it, we
developed innovative, need-specific products and educated the investors about the added
benefits of investing in capital markets via Mutual Funds.

Today, we have been actively managing our investor's assets not only through our
investment expertise in domestic mutual funds, but also offshore funds and portfolio
management advisory services for institutional investors. This makes us one of the largest
investment management firms in India, managing investment mandates of over 5.4
million investors.

Portfolio Management and Advisory Services SBI Funds Management has emerged as one
of the largest player in India advising various financial institutions, pension funds, and
local and international asset management companies. We have excelled by understanding
our investor's requirements and terms of risk / return expectations, based on which we
suggest customized asset portfolio recommendations. We also provide an integrated end-
to-end customized asset management solution for institutions in terms of advisory service,
discretionary and non-discretionary portfolio management services.

Offshore Funds SBI Funds Management has been successfully managing and advising
India's dedicated offshore funds since 1988. SBI Funds Management was the 1st bank
40
 sponsored asset management company fund to launch an offshore fund called 'SBI
Resurgent India Opportunities Fund' with an objective to provide our investors with
opportunities for long-term growth in capital, through well-researched investments in
a diversified basket of stocks of Indian Companies.

COMPETITORS

As it’s a big investment firm then its common to have rivals. Here is the some of the rivals
of this firm.
 ICICI Mutual Fund
 Reliance Mutual Fund
 UTI Mutual Fund
 Birla Sun Life Mutual Fund
 Kotak Mutual Fund
 HDFC Mutual Fund
 LIC Mutual Fund
 Franklin Templeton

PRODUCT PORTFOLIO

Mutual Fund know that every investor has unique financial goals and requires a different set of
products which is why they have a wide range of schemes which fulfill every kind of
investor’s requirement. Each scheme is managed by devising a different strategy which is
reflective of the investor profile and carries with it different risks and rewards.

There are basic asset classes which we manage and variation of these six asset classes
from various products are as follows:

 Equity Schemes: The primary objective of the equity asset class is to provide
capital growth / appreciation by investing in the equity and equity related
instruments of companies over medium to long term.

 The following are equity based funds:

41
 Equity / Growth Funds SBI Magnum Global Fund
SBI Magnum MidCap Fund
SBI BlueChip Fund
SBI Magnum Multicap Fund

Sectoral Funds SBI Emerging Business Fund

SBI FMCG Fund

Thematic Funds SBI Magnum COMMA Fund

SBI Infrastructure Fund

ELSS Funds SBI Magnum Taxgain Scheme 1993

SBI Tax Advantage Fund – Series I
SBI Tax Advantage Fund – Series II

Index Fund SBI Nifty Index Fund

Market Neutral Strategy SBI Arbitrage Opportunities Fund

Hybrid Schemes: These schemes invest in a mixture of debt and equity securities
in different proportions as prescribed in the Scheme Information Document.
1. SBI EDGE Fund
2. SBI Magnum Balanced Fund
3. SBI Regular Savings Fund
4. SBI Magnum Monthly Income Plan
5. SBI Magnum Monthly Income Plan – Floater
6. SBI Dynamic Asset Allocation Fund

42
Debt / Income Schemes: The schemes in this asset class generally invest in fixed
income securities such as bonds, corporate debentures, government securities (gilts),
money market instruments, etc. and provide regular and steady income to investors.

1. SBI Dynamic Bond Fund

2. SBI Magnum Gilt Fund – Short Term Plan
3. SBI Magnum Gilt Fund – Long Term Plan
4. SBI Short Term Debt Fund
5. SBI Ultra Short Term Debt Fund

Exchange Traded Schemes: Exchange Traded Funds/ Schemes (ETFs) are a basket of
securities that are traded on the stock exchange.

1. SBI Gold Exchange Traded Scheme

2. SBI SENSEX ETF
3. SBI ETF Banking
4. SBI ETF BSE 100
5. SBI ETF Nifty Junior

Balanced Funds: Magnum Balanced Fund invests in a mix of equity and debt
investment. Hence they are risky than equity funds, but at the same time provide
commensurately lower returns. They provide good investment opportunity to the
investor who do not wish to be completely exposed to equity market, but is looking for
higher returns than those provided in debt funds.

SERVICE NETWORK

CAMS has set up service centers that are connected in real-time to the back office at
Channel. This connectivity allows service centers to access the database for transaction
acceptance as well as query handling. Thus, enabling same day transaction processing
and across the counter servicing. At service center, you may submit transaction, service
requests and make enquires about your balance, valuation or ask for a statement,
investor can submit transactions till 3 pm and there will be directly passed to CAMs.

43
TYPES OF MUTUAL FUND

 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, investors can go for picking a
mutual find 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:

 I. Open-Ended Funds, Close-Ended Funds and Interval Funds

 II. Actively Managed Funds and Passive Funds

 III. Debt, Equity and Hybrid Funds

I.Debt funds
On the basis of Issuer On the basis of Tenor On the basis of
Investment Strategy
 Gilt funds  Diversified debt
 Corporate bond  Liquid schemes or funds or Income
funds money market fund
schemes  Junk bond schemes
 Short term debt or high yield bond
schemes schemes
 Ultra short-term  Dynamic debt
plans funds
 Short Term Plans  Fixed maturity
 Long-term debt plans
schemes  Floating rate funds

44
 II. Equity funds III. Hybrid funds

 Diversified equity fund  Debt-oriented Hybrid funds

 Market Segment based fund :  Monthly Income Plan
 Large Cap  Equity-oriented Hybrid funds
 Mid Cap  Capital Protected Schemes
 Small Cap  Arbitrage funds
 Sector funds
 Thematic funds
 Strategy-based Schemes:
 Equity Income / Dividend
Yield Schemes
 Growth Funds
 Focused funds
 Equity Linked Savings
Schemes (ELSS)
 Rajiv Gandhi Equity Savings
Schemes (RGESS)

IV. Real Estate Funds / Real Estate Investment Trusts.

V. Commodity Funds
VI. Infrastructure Debt Schemes
VII. Exchange Traded Funds
VIII. Fund of Funds
IX. International Funds

NEW FUND OFFER (NFO)

SBI DUAL ADVANTAGE FUND – SERIES XXII ( Close-ended Hybrid Scheme)

NFO PERIOD- May 8 - May 22, 2017

SBI Dual Advantage Fund - Series XXII is a 1100 days’ close-ended hybrid scheme. The
primary investment objective of the scheme is to generate income by investing in a portfolio
of fixed income securities maturing on or before the maturity of the scheme. The secondary

45
objective is to generate capital appreciation by investing a portion of the scheme corpus in
Equity and Equity-related instruments. However, there can be no assurance that the investment
objective of the Scheme will be realized.

FUND FACTS
Type of Scheme A close-ended hybrid scheme

Tenure of Scheme 1100 days

Benchmark Crisil MIP Blended Fund Index
The scheme would have two plans, viz.
Plans / options offered Direct Plan & Regular Plan. Both plans
will have two options -- Growth and
Dividend. Dividend option has the
facility of payout & transfer. Dividend
transfer facility will be available to NFO
investors only.
Minimum Application Amount Rs 5,000/- and in Multiples of Rs 1/-
thereafter.
Fund will be listed on BSE Ltd
Exchange Listing.

THE FUND IS SUITABLE FOR

 Investors with moderately high risk appetite.
 High net worth individuals.
 First--time mutual fund investors who would like to enjoy the
debt returns with an additional equity upside.
 An investor who is looking for income as well as capital
appreciation.

INVESTMENT STRATEGY
Fixed Income / Debt Investments:
 Investments in securities, maturing on or before the data of the maturity of
the Scheme.
 Flexibility to invest in the entire range of debt instruments
 Investment in AA or above-rated securities
 Targeted investment between 80% -95% (including 0%-5% in Government
Securities)
46
 Equity & Equity related Instruments:
 Invest in diversified portfolio of Equity & Equity related Instruments
 Mix of bottom-up & top-down approach for stock-picking.
 Primarily focus on companies that have demonstrated characteristics such as
market leadership, strong financials and quality management.
 Targeted investment between 5% - 20%

WHY SBI DUAL ADVANTAGE FUND?

 Quality Debt Portfolio: High quality debt securities endeavour to minimize credit
risk & matching maturity reduces interest rate risk. Investment in AA & above-
rated securities only.
 Growth Potential: Primarily focus on companies that have demonstrated
characteristics such as market leadership, strong financials and quality
management. Equity portion will be actively managed.
 Tax Efficiency: Avail indexation benefits & thereby potential Tax-efficient returns
(as per current tax laws).

INVESTMENT OPPORTUNITY
 A hybrid scheme like SBI Dual Advantage Fund – Series XXII endeavours to
combine the benefits of different asset classes, viz. Equity & Debt. A hybrid
scheme endeavours to reduce the volatility of equity asset class (Ex. Nifty 50) and
low return of debt asset class (Ex. CRISIL Composite Bond Fund Index) which
can be seen in the graph, showing the daily three-year rolling returns of Nifty 50,
CRISIL Composite Bond Fund Index & CRISIL MIP Blended Fund Index.

POINTERS TO MEASURE MUTUAL FUND PERFORMANCE

MEASURES DESCRIPTION IDEAL RANGE

Standard Deviation Standard Deviation allows It should be near to its
the volatility of the fund. mean return.
It measures the risk by
measuring the degree to
which the fund fluctuates
in relation to its mean
return.

47
Beta Beta is commonly used as
a measure of risk. It
indicates the level of
volatility associated with
the fund as compared to
the benchmark.
R-Square R-Square measures the
correlation of a fund’ s
movement to that of an
index. It describes the
level of association
between the fund’ s
volatility & market risk.
Alpha Alpha is the difference
between the returns one
would expect from a fund,
given its beta & the return
actually produced. It also
measures the
unsystematic risk.
Sharpe Ratio Sharpe Ratio = Returns in
excess of risk free returns
/ Standard deviation of
fund. They are ideal for
comparing funds that have
mixed asset classes.
Beta > 1 = High Risk
Beta = 1 = Average
Beta < 1 = Low Risk
Its value ranges between 0
& 1, where 0 represents
no correlation & 1
represents full correlation.
If, Alpha is +ve = returns of
stock are better than
market returns.
Alpha is – ve = returns of
stock are worst than
market returns.
Alpha is 0 = returns of
stock are same to that of
market returns.
The higher the Sharpe ratio,
the better would be the fund
returns relative to the
amount of risk taken.
48
ANALYSIS OF MUTUAL FUND PERFORMANCE

Mutual fund performance can be analyzed through performance measurement ratios

which are use in portfolio analysis. We here are using Treynor, Sharpe, and Jensen ratio
to evaluate mutual funds and rank accordingly. Composite portfolio performance
measures have the flexibility of combining risk and return performance into a single
value. The most commonly used composite measures are: Treynor, Sharpe and Jensen
measures. While Treynor measures only the systematic risk summarized by beta, Sharpe
concentrates on total risk of the mutual fund
.
Treynor’s performance index

Treynor (1965) was the first researcher developing a composite measure of portfolio
performance. He measures portfolio risk with beta, and calculates portfolio‟s market
risk premium relative to its beta: Where:

Ti = Treynor‟s performance index

Rp = Portfolio‟s actual return during a specified time
period Rf = Risk-free rate of return during the same period
βp = beta of the portfolio

Whenever Rp> Rf and βp > 0 a larger T value means a better portfolio for all investors
regardless of their individual risk preferences. In two cases we may have a negative T
value: when Rp < Rf or when βp < 0. If T is negative because Rp < Rf, we judge the
portfolio performance as very poor. However, if the negativity of T comes from a
negative beta, fund‟s performance is superb. Finally when Rp- Rf, and βp are both
negative, T will be positive, but in order to qualify the fund‟s performance as good or bad
we should see whether Rp is above or below the security market line pertaining to the
analysis period (Reilly, 1992). Demonstration of Comparative Treynor Measures:

Assume we have the following data for three mutual funds; ZBY, with their respective
annual rate of return and systematic risk, Beta. The risk free rate is 8 %. The
systematic risk for M (market) is 1.0 and the rate of return for M is 14%. Investment

4
9
 Manager Rate of Return Beta
Z 0.12 0.90
B 0.16 1.05
Y 0.18 1.2
M 0.14 1.0

We can calculate the T values for each investment manager:

Tm (0.14-0.08)/1.00 =0.06
TZ: (0.12-0.08)/0.90 =0.044
TB: (0.16-0.08)/1.05 =0.076
TY: (0.18-0.08)/1.20 =0.083

These results show that Z did not even "beat-the-market." Y had the best performance,
and both B and Y beat the market.

Sharpe’s Performance index Sharpe

(1966) developed a composite index which is very similar to the Treynor measure, the
only difference being the use of standard deviation, instead of beta, to measure the
portfolio risk, in other words except it uses the total risk of the portfolio rather than
just the systematic risk:

Where:
Si = Sharpe performance index
σp = Portfolio standard deviation

This formula suggests that Sharpe prefers to compare portfolios to the capital market
line(CML) rather than the security market line(SML). Sharpe index, therefore,
evaluates funds performance based on both rate of return and diversification (Sharpe
1967). For a completely diversified portfolio Treynor and Sharpe indices would give
identical rankings. Demonstration of Comparative Sharpe Measures: Sample returns
and SDs for four portfolios (and the calculated Sharpe Index) are given below:

50
 Portfolio Avg. Annual SD of return Sharpe measure
RofR
B 0.13 0.18 0.278
O 0.17 0.22 0.409
P 0.16 0.23 0.348
Market 0.14 0.20 0.300

Thus, portfolio O did the best, and B failed to beat the market. We could draw the CML
given this information. The trouble with both Sharpe and Treynor techniques for
evaluating "risk-adjusted" returns is that they equate risk with short-term volatility.

Therefore these measures may not be applicable in evaluating the relative merits of
long-term investments.

Jensen’s Alpha:

Jensen (1968), on the other hand, writes the following formula in terms of realized
rates of return, assuming that CAPM is empirically valid:

Rjt = Rf + βj (Rm - Rf ) + ujt

Subtracting Rf from both side he obtains:

Rjt - Rf = βj (Rm - Rf ) + ujt

This formula says that risk premium earned on jth portfolio is equal to the market risk
premium times βj plus a random error term. In this form, one would not expect an
intercept for the regression equation, if all securities are in equilibrium. But if certain
superior portfolio managers can persistently earn positive risk premiums on their
portfolios, the error term ujt will always have a positive value. In such a case, an
intercept value which measures positive differences from the model must be included in
the equation as follows:

Rjt - Rf = αj + βj (Rm - Rf) + ujt

Jensen uses αj as his performance measure. A superior portfolio manager would have a
significant positive αj value because of the consistent positive residuals. Inferior
managers, on the other hand, would have a significant negative αj. Average portfolio
managers having no forecasting ability but, still, cannot be considered inferior would
earn
51
 as much as one could expect on the basis of the CAPM. Jensen performance criterion,
like the Treynor measure, does not evaluate the ability of portfolio managers to diversify,
since the risk premiums are calculated in terms of β. If the value is positive, then the
portfolio is earning excess returns. In other words, a positive value for Jensen's alpha
means a fund manager has beat the market with his or her stock picking skills

Analysis

While studying the performance measurement of mutual funds, one particular area
caught my attention. The fact that Sharpe uses STDV as a measurement of risk which is
the total risk and Treynor uses Beta or systematic risk, but yet it is claimed that, if we are
examining a well-diversified portfolio, the rankings should be similar for all three
methods. This interesting theory aroused my curiosity and made me think why not test
this hypothesis: Are there funds which are fully diversified? If such funds exist then they
ought to be ranked identically according to all three; Sharpe-, Treynor- and Jensen‟s
performance measurement.

DATA

For my analysis I have selected 10 mutual funds from Indian market. All funds are in
diversified category. I collect data from money control, value research online, and mutual
fund India web sites. I have selected such funds which are mostly preferable by
investors. Fix deposit return was selected as risk free return, that is 7.5% p.a. I have
collected NAV of funds of each month for 12 months and define return.

52
 CHAPTER 2
RESEARCH
METHODOLOGY
53
Meaning of Research

Redman and Mory define research as a “systemized effort to gain new knowledge.” Some
people consider research as a movement, a movement from the known to the unknown.
Research is an academic activity and as such the term should be used in a technical sense.
According to Clifford Woody, research comprises defining and redefining problems,
formulating hypothesis or suggested solutions; collecting, organizing and evaluating data;
making deductions and reaching conclusions; and at last carefully testing the conclusions to
determine whether they fit the formulating hypothesis.

Scope of the study

A big boom has been witnessed in Mutual Fund Industry in resent times. A large
number of new players have entered the market and trying to gain market share in
this rapidly improving market.

The study will help to know the preferences of the customers, which company, portfolio,
mode of investment, option for getting return and so on they prefer. This project report
may help the company to make further planning and strategy.

Significance of Research

“All process is born of inquiry. Doubt is often better than overconfidence, for it leads to
inquiry and inquiry leads to invention.” Is a famous Hudson Maxim in context of which
the significance of research can well be understood? Increased amounts of research make
progress possible.

Research inculcates scientific and inductive thinking and it promotes the development of
logical habits of thinking and organization.

54
 The role of research in several fields of applied economics, whether related to business or
to the economy as a whole, has greatly increased in modern times. The increasing
complex nature of business and government has focused attention on the use of research
in solving operational problems. Research, as an aid to economic policy, has gained
added importance, both for government and business.

Research Methodology
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically. In it we study the
various steps that are generally adopted by a researcher in studying his research problem
along with the logic behind them. It is necessary for the researcher to know not only the
research methods or techniques but also the methodology.

Data Collection Source

Information was collected through both primary and secondary sources.

Primary Data: In some cases the researchers may realize the need for collecting the first
hand information. As in the case of everyday life, if we want to have first hand
information or any happening or event, we either ask someone who knows about it or we
observe it ourselves, we do the both. Thus, the two methods by which primary data can
be collected is observation and questionnaire.

Secondary Data: Any data, which have been gathered earlier for some other purpose, are
secondary data in the hands of researcher.

OBJECTIVES OF THE STUDY

 To find out the Preference of the investors for Asset Management of company.
 To get insight knowledge about mutual funds.
55
  To know why one has invested in SBI Mutual Funds.
 To know the mutual fund performance levels in the present market.
 To evaluate consumer feedback on mutual fund.

OBJECTIVE OF THE PROJECT REPORT

Managing money has always been difficult. You require a great deal of expertise to
evaluate various savings and investment plans you simply don’t have the time to do it
yourself. Until and Unless the investment bears large it might also turn out to be
expensive trying to set up your own investment wing. It might be prudent asking a
professional to manage your funds for a small fee. You are sure that your money will be
deployed after scientifically analyzing pros & cons.

The part an insight about mutual fund industry and its various aspects. Individuals and
Institutions should be considered to know the fact that how much individuals contribute
in the growth of mutual fund industry so as institutions. Subsequently, the effect on the
various AMCs growth in comparison to previous year.

Research Instrument A questionnaire was constructed for my survey. It consists of set of

questions to be filled by various respondents.

SAMPLING:

SAMPLE DESIGN:

Convenience sampling technique has been used to collect data. Convenience sampling is
a type of sampling where the first available primary data source will be used for the
research without additional requirements. In other words, this sampling method involves
getting participants wherever you can find them and typically wherever is convenient. In
convenience sampling no inclusion criteria identified prior to selection of subjects. All
subjects are invited to participate.

56
 RESEARCH OBJECTIVES

 To Know the usage & satisfaction level of online and digital investors over offline
investors.
 To know whether digitalization is impacting the growth of Mutual Fund Industry.
 To study the cost benefit analysis of online investments over offline investments
(Distribution cost of Mutual Fund Industry)
 To know how m-easy, and other online & digital facilities have proved beneficial to
investors.
 To know whether B-15 Cities (smaller cities) are contributing in digital & online mode of
investing or not.

SAMPLE SIZE:

The sample size of my project is limited to 50 investors only.

RESEARCH PROBLEM

To know how digitalization has impacted the increase in Assets under Management of
mutual fund industry & has changed the investing habits of the investors.

HYPOTHESIS

H1: Increasing number of investments through digital modes is a significant predictor

of satisfaction level of investors.

H2: There is a significant relation in cost reduction & digital investments.

H3: There is a significant relation between increasing assets under management of

Mutual Fund houses and digital means of investments.

RESEARCH DESIGN:

The following research design and techniques has been used to carry research:
 Qualitative research

57
  Quantitative research
 Indirect research (used in need)

SAMPLING PROCEDURE:

Convenience Sampling

COLLECTION OF DATA:

Research has been done by primary data collection, and primary data has been collected
by interacting with various people.

SAMPLE DESIGN:

Data has been presented with the help of bar graphs, pie charts, etc.

SAMPLE UNIT- I had completed my survey in Kanpur.

LIMITATION OF THE STUDY :-

1. Total coverage of the study is limited to factsheets available on websites.

2. Time is the one constraint of the survey

58
 CHAPTER 3
ANALYSIS AND
INTERPRETATIO
N
59
AGE GROUP

50% 45%
45%
40%
35%
28%
30%
25% AGE
20%
12%
15% 10%
10% 5%
5%
0%
25-30 yrs 30-35 yrs 35-40 yrs 40-45 yrs 45 & above yrs

INTERPRETATION- A survey has been done on 50 investors - we categorized the

respondents according to their ages and after the survey we found 45% respondents comes
under 25-30 yrs which will represent current scenario of youngster, at what extent they are
aware of mutual fund companies and to know whether they are tech savy or not. 28% ,
12%,10% and 5% comes under 30-35 yrs ,35-40 yrs, 40-45 yrs and 45 & above yrs interval
which will tell us the earlier approach by the investors.

OCCUPATION

70%
60%
60%
50%
40% Occupation
30% 25%
20%
10%
5%
10%
0%
Student Private service Government Service Business

60
 INTERPRETATION- As we all already aware that our Private Service sector is

proportionatly high now a days and people are getting more into it so therefore such affect can
also be seen in survey that 60% respondents are doing private service and remaining 40% are
students, businessmen, and Government Service.

EDUCATION

70%
60%
60%
50%
40%
30% Education
30%
20%
10%
10%
0%
Graduate Post Graduate Doctorate

INTERPRETATION- Almost 60% respondents are qualified as Post Graduate where as 30%
were completed their Graduation and remaining 10% has done Doctorate. As the proportion of
qualified respondents is high , we will get more appropriate responses cause they have
knowledge of the Financial product and services in the market .

61
ANNUAL INCOME

50% 46%
45%
40%
40%
35%
30%
25% Annual Income
20%
15%
10%
10%
5% 4%
0%
Below 2.5 lac 2.5-5 lac 5-8 lac 8 & above lac

INTERPRETATION - This question will help out in knowing the fact that how much

money they earn and susequently they invest in financial instruments. As you can see 46%
respondent are earning below rs 2.5 lac , 40% are earning rs 2.5- 5 lac , 10% are earning rs 5-8
lac and 4% are earning above rs 8 lac.

Q1. Are you aware of Mutual Funds?

70%
60%
60%
50%
40%
40%
Column 1
30%
20%
10%
0%
Yes No

62
INTERPRETATION- Around 40% of the respondents invest in mutual funds whereas 60%
still invest in other investment options the less investment is due to lack of knowledge .The
mutual fund company must spread awareness among the people to get more investment.

Q2. From which source you came to know about mutual fund?

70% 60%
60%
50%
40%
Column 1
30% 15% 15%
20%
5% 5%
10%
0% Friends/Relative

Tv/Newspaper

Assetmanagemntcompany
Broker

Bank

INTERPRETATION- Around 60% of the respondents came to know about mutual fund
from bank and rest 40% came to know from friends ,relative , broker, asset management
company and tv/newspaper.

63
Q3. What is the primary goal of your investment?

35%
30%
30%
25%
25%
20%
20%
15% Column 1
15%
10%
10%
5%
0%
meet child purchase meet post meet child capital gain
education house retirement marriage
need

INTERPRETATION- According to the current scenario, the 30% respondent invest in

mutual fund to get capital gain ,then 25% to buy a house and rest 45% invest in mutual
fund to meet there child education/marriage and post retirement need.

Q4. What percent of your income do you save per year?

45% 40%
40%
35%
30%
30%
25%
20% saving
20%
15%
10%
10%
5%
0%
10% or less 11%-25% 26%-40% above 41%

64
INTERPRETATION- 40% respondents prefer saving income per year 11%-25%, 30%
respondent try to save 10% orless saving in a year ,20% respondent try to save 26%-40% in a
year of there income which is earned by them and rest 10% are those respondent who try to
save from there income 41%.

Q5. In which type of mutual funds do you prefer to invest?

45% 40%
40% 35%
35%
30%
25%
20% fund
15%
15% 10%
10%
5%
0%
gold fund debt fund equity fund liquid fund

INTERPRETATION- Majority of the respondents prefers spending there investment in debt

fund as it is secure with minimal risk 40% respondent invest in debt fund, 35% invest in gold
fund ,15% invest in liquid fund and 10% invest in equity fund. Least investment made by
respondent is equity because of the risk which it has but it also providereturn more than
others and is always useful in long term benefit.

65
 Q6. Which mutual fund have you purchased?

60%
50%
50%

40%
30% Column 1
30%
20%
20%
10%
0%
open ended close ended interval

INTERPRETATION- Majority of the respondents that is 50% prefers Open ended scheme
so that withdrawal is easy when needed banks ,30% prefer close ended for more return and
saving that money and rest 20% invest in interval so that with time they can either invest
money or withdraw it.

Q7. Rank the format of investment you would prefer to invest:

( 1 most imp & 10-least imp)
12 9 10
10 8
7
8 6

6 5 ranking
3 4

4 2
1
2
0
governmentbonds/securities

life insurance

mutual fund

post ofce
bank FD

66
INTERPRETATION - Bank FD is ranked 1 in investment by respondent ,2 is post office
scheme,3 is gold, 4 is public provident fund, 5 real estate, 6 is general insurance, 7 is life
insurance, 8 is ranked mutual fund as due to the risk and also due to less awareness, 9 is
government securities and bonds and 10 is stocks and shares.

Q8. What type of benefit do you want from your investment?

35%
30%
30%
25%
25%
20%
20%
15% Column 1
15%
10%
10%

5%
0%
tax benefit fixed return risk cover high return liquidity

INTERPRETATION - Most of the respondent invest in mutual fund for availing tax benefit
that is 30% of respondent do that ,25% invest to cover there risk, 20% invest in mutual fund to
get fixed return , 15% invest for high return as there % is less because of the risk taken by
them is less and10% spend for liquidity that is easily convertible into cash.

Q9. What is your investment horizon?

67
 60%
50%
50%

40%
30%
30% years

20% 15%

10% 5%
0%
less than 1 yrs 1-5 yrs 5-10 yrs over 10 yrs

INTERPRETATION- Majority of the respondents that is 50% invest there money for 1-5
yrs,30% invest for less than 1 yrs rest 20 % only invest there money for above 5 yrs.

Q10. Describe your investment knowledge?

45% 40%
40%
35%
30% 25%
20%
25%
knowledge
20% 15%
15%
10%
5%
0%
highly knowledgeable little knowledge no knowledge
knowledgeable

68
INTERPRETATION- The awareness level of respondents regarding mutual fund is less as
40% have no knowledge about mutual fund ,20% and 25% have little knowledge and
knowledge about mutual fund that is having less knowledge and this is due to less awareness.
Only 15% respondent are highly knowledgeable in mutual fund because of continous
investment in it.

Q11. How would you like to receive the returns every year?

70%
60%
60%
50%
40%
40%
Column 1
30%
20%
10%
0%
dividend payout growth in nav

INTERPRETATION- 60% of the respondents would

like to invest in mutual fund as a growth in nav and rest 40% would invest as dividend payout
in mutual fund.

Q12. Are you satisfied with your investment option?

69
 70%
60%
60%
50%
40%
40%
Column 1
30%
20%
10%
0%
yes no

INTERPRETATION- 60% of the respondents are satisfied by the investment made by them
in mutual fund and rest 40% are not satisfied from mutual fund investment made by them.

70
 CHAPTER 4
FINDINGS AND
LIMITATIONS
71
 FINDINGS

 Only 40% of the respondents were aware of mutual fund that means there is very
big Gap of unawareness
 The primary goal of the investment for the respondent was capital gain 30% said
capital Gain is the primary preference while 25% said there primary preference of
25% .
 70% respondent saves upto 25% of their income annually which is very big amount to
boast mutual fund industry.
 40% of all the respondent who are aware of mutual fund have first preference of that
fund Equity fund was least preference
 25% of the respondent wanted risk count from the investment while 30% wanted tax
benefit
 Investors are not ready to take risk for better return so often they keep their money
either in saving account or fixed deposits to earn risk free return. Yet, youngsters who
are in service industry using the instrument mutual fund for better return over risk.
 In current scenario, SBI MF is the most prioritized fund house for investment in mutual
fund follows with HDFC MF and it is because of vast distribution channel and
presence of SBI Branches across the country.
 If we talk about reason behind investment in mutual fund then diversification of
money and higher return are the top factors for those who invest where as respondents
who do not invest in mutual fund because of lack of knowledge and lack of trust.
 Most of the respondents do not check the NAV (Net Asset Value) of schemes in a month
not even a single time whereas few respondents use to go through details of various
schemes 1-3 times in a month.
 Half of the respondents never think of investing through App launched by various Asset
Management Companies where as remaining would think to invest later and few of
them do invest using App of specific AMCs.
 Investors use to do online transaction but they are not finding comfortable to invest in
mutual fund through online channel yet they are ready to invest online if they get
aware or provide online transaction at ease which includes convenience, time saving &
safe transaction.

72
 Most of the respondents would like to invest online rather than offline in SBI
Mutual Fund.
 Promotional activities is still playing a key role of awareness regarding mutual fund
because most of the investors got influence cause of the advertisement on
television/print media, popups on websites and circulation of brochures, etc.
 Most of the investors are not aware digital investment like from app and other sources
in mutual fund launched by SBI MF.

LIMITATIONS

 The scope was of research was limited to city Kanpur.

 Time is the one constraint of the survey.
 Some of the persons were not so responsive.
 Possibility of error in data collection because of investors may have not given actual
answers of my questionnaire.
 Sample size is limited to 50 respondents only so the sample size may not
adequately represent the whole market.
 Lack of analysis of data.

73
 CHAPTER 5
CONCLUSION AND
RECOMMENDATIONS /
SUGGESTIONS

74
 CONCLUSION

Running a successful Mutual Fund requires complete understanding of the peculiarities

of the India Stock Market and also the psyche of the small investors. This study has made
an attempt to understand the investor behavior towards mutual fund and evaluation of
mutual fund performance. I observed that many of people have fear of Mutual Fund.
They think their money will not be secure in Mutual Fund and those who invest are not
very sure about online investment. They need the knowledge of Mutual Fund and its
related terms. Many of people do not have invested in mutual fund due to lack of
awareness although they have money to invest. As the awareness and income is growing
the number of mutual fund investors are also growing so companies who are providing
apps and taking advantage of those investor . People invest in those companies where
they have faith or they are well known with them. There many AMCs in Kanpur but only
some are performing well due to Brand Awareness and it is because of promotional
activities they are performing is quite high where other companies. Some AMCs are not
performing well although some of the schemes of them are giving good return because of
not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc., they are well
known Brand, they are performing well and their Assets Under Management is larger
than others whose Brand name are not well known like Mirae, Principle, Sunderam, etc.
Distribution channels are also important for the investment in mutual fund. Many of
investors directly invest money through AMC because they do not have to pay entry
load. Only those people invest directly who know well about mutual fund and its
operations and those have time. If we talk about online investment then there is scope if
investor get aware of the process that can put their investment amount safe and
successful with no difficulties.

Impact of local and international developments

During the year we had two major political developments that affected the mutual fund
industry. The standoff between India and Pakistan at the beginning of the financial year
saw the debt market being extremely volatile. Investors pulled out of funds and this also
put pressure on fund managers to hold returns and at the same time meet redemption
commitments. The equity markets were equally subdued but the industry did not react
greatly to this since equity funds were in any case not a significant part of the mobilization
in the last few years. With the stand down on the Indian side, the debt markets recovered
and with that the inflow of funds into our industry soared once again.
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 But at the end of the year the industry was hit by another war – the impending US attack
on Iraq and consequent oil price pressures once again made the debt market volatile. It
is a mark of the maturing of the Indian investor that redemptions were only need based
and the industry did not see as much outflows as one feared.

A new Emphasis on Risk Management

The year also saw a tremendous emphasis on risk management. A number of mutual
funds were already taking steps to mitigate risks not only in operations as in the past,
but also in the area of management of funds. A committee constituted by AMFI carried
the initiative taken under the FIRE Project forward and developed a risk management
framework for the industry. The subsequent circular by SEBI is perhaps one of the most
comprehensive attempts to address the issue of risk in the mutual fund business and
carries with it the added advantage of phase wise escalation starting with mandatory
items and moving towards best practices.

AMFI and its role

One of the most effective industry bodies today is probably the Association of Mutual
Funds in India (“AMFI”). It has been a forum where mutual funds have been able to
present their views, debate and participate in creating their own regulatory framework.
The association was created originally as a body that would lobby with the regulator to
ensure that the fund viewpoint was heard. Today, it is usually the body that is consulted
on matters long before regulations are framed, and it often initiates many regulatory
changes that prevent malpractices that emerge from time to time. This year some of the
major initiatives were the framing of the risk management structure, a code of conduct
and registration structure for mutual fund intermediaries, which were subsequently
mandated by SEBI. In addition, this year AMFI was involved in a number of
developments and enhancements to the regulatory framework. AMFI works through a
number of committees, some of which are standing committees to address areas where
there is a need for constant vigil and improvements and other which are ad hoc
committees constituted to address specific issues. These committees consist of industry
professionals from among the member mutual funds. There is now some thought that
AMFI should become a self-regulatory organization since it has worked so effectively
as an industry body.

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SUGGESTIONS & RECOMMENDATIONS
 Younger people aged less than 30 years will be a key new customer group into the future
of digitalization, so making greater efforts with younger customers who show some
interest in investing should pay off.
 Customers with graduate level education are easier to sell once they get aware
regarding online investment and there is a large untapped market there to succeed.
 SBI MF has to launch App due to dynamic approach seeks digitalization in current
scenario cause most of the Top AMCs has already launched their apps to penetrate the
market.
 SBI MF has to ensure that promotional activities should take place in every SBI
Branch so as more people can easily get aware of SBI MF.
 “SBI MF has to arrange Investor’s awareness Program (IAP) more and more to increase
the reach of the customer by educating them about Mutual Fund.

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 QUESTIONNAIRE

TOPIC: -“A STUDY ON EVALUATION OF MUTUAL FUNDS PERFORMANCE

AND INVESTOR BEHAVIOR”

AGE GROUP –

(a) 25-30 (b) 30-35 (c) 35-40 (d) 40-45 (e) 45 and above

OCCUPATION –

(a) Student (b) Private Service (c) Government Service

(d)Business

EDUCATION –

(a) Graduate (b) Post Graduate (c) Doctorate

ANNUAL INCOME-

(a) Below 250000 (b) 250000-500000 (c) 500000-800000

(d) 800000 & above

Q1. Are you aware of Mutual Funds?

(a) yes (b) No

Q2. From which source you came to know about mutual fund?

(a) Broker (b) Bank (c) Friend/Relative (d) Tv/Newspaper

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 (e) Asset Management Company

Q3. What is the primary goal of your investment?

(a) To meet Child Education (b) To purchase House

(c) To meet post Retirement need (d) To meet Child Marriage
(e) Capital Gain
Q4. What percent of your income do you save per year?

(a) 10% or less (b) 11-25% (c) 26-40% (d) Above 41%

Q5. In which type of mutual funds do you prefer to invest?

(a) Gold fund (b) Debt fund (c) Equity fund (d) Liquid fund

Q6. Which mutual fund have you purchased?

(a) Open ended (b) Close ended (c) Interval

Q7. Rank the format of investment you would prefer to invest:

( 1 most imp & 10-least imp)
(a) Government Bonds & Securities
(b) Stock & Shares
(c) Life Insurance
(d) General Insurance
(e) Mutual funds
(f) Real Estate

(h) Gold
(i) Post Office scheme
(j) Public Provident Fund

Q8. What type of benefit do you want from your investment?

(a) Tax Benefit (b) Fixed returns (c) Risk cover

(d) High returns (e) Liquidity
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Q9. What is your investment horizon?

(a) Less than 1 year (b) 1-5 year (c) 5-10 year
(d) Over 10 years

Q10. Describe your investment knowledge?

(a) Highly Knowledgeable (b) knowledgeable

(c) Little knowledgeable (d) No knowledge

Q11. How would you like to receive the returns every year?

(a) Dividend payout (b) Growth in NAV

Q12. Are you satisfied with your investment option?

(a) Yes (b) No

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 BIBLIOGRAPHY

The above data is collected from the following sources:

Internet
 WWW.CRISIL.COM
 WWW.SBIMF.COM
 WWW.MONEYCONTROL.COM
 WWW.AMFIINDIA.COM
 WWW.MUTUALFUNDINDIA.COM
 WWW.MORNINGSTAR.IN

Books
 Kothari, C.R. Research methodology, 3rd edition, 1997, Vikas Publishing House Pvt. Ltd,
New Delhi.

 Graham R. Walden; Survey Research Methodology 1990-1991; Greenwood Publishing

House.

 Factsheet and statement

Magazine
 Outlook money
 Mutual fund handbook

Newspapers
 Economic Times

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