ACKNOWLEDGEMENT

At the successful completion of summer internship program, I wish to express my true regards to individuals who supported and directed me throughout this internship. First, My Sincere thanks to Mr.Amir khan(Head Manager Agra-Region),for giving me an opportunity to work in the Banking Channel and to learn from the practical challenges that a manager faces while on the job like. He also gave me his valuable time in initial days of my training to make feel me comfortable about organization and various other aspect like products, staff etc. Who not only encouraged me to do my work positively but also gave me freedom to do my work in my own way. Secondly, My Sincere thanks to my Faculty Guide, Dr. Ashok Kumar who always gave me her valuable feedback on my efforts, results, activities that I performed during the training. She also gave me the direction in which my project had to move which was very crucial for successful completion of the project. At last I want to thank God, my Parents and family without whom I would not be able to have courage and determination to do whatever I am planning in my professional as well as personal life.

CONTENTS
SNo. Topic Page No.

Synopsis...... 4 Introduction....6 What is Mutual Fund9 Types of Mutual fund10 Advantage of MF.17 Disadvantage of MF.18 Introduction to SBI.19 Introduction to SBI Mutual Fund 21 Procedure23 Funds comparison with special reference to SBIMF.24 7.1) Magnum Tax Gain... 26 7.2) Magnum Global Fund. 30 7.3) MSFU Contra 34 7.4) Magnum Comma. 38 7.5) Magnum Multiplier... 41 7.6) SBI Arbitrage.. 44 7.7) MSFU IT Fund.. 47 Analysis of Individual investor.. 51 Relationship Building 64 Analysis II (Bankers). 67 Direct Selling.. 71 Learning at SBI Mutual Fund 73 SWOT Analysis of SBI MUTUAL FUNDS.. 75 Recommendations 76 Annexure 81
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References...87

SYNOPSIS
The size of the Mutual Fund market in India is quite significant. Mutual Funds are A trust that pools the savings of a number of investors who share a common financial goal. The money collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by investors. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. SBI Mutual Fund is celebrating 20 years of rich experience in fund management. SBI is a joint venture between State Bank of Indiaone of India's largest banking enterprises and Socit General Asset Management (France)one of the world's Leading fund management companies The huge potential of this market can certainly benefit the investors through professional expertise & consistent returns and also generate enhanced business for SBI MUTUAL FUND in the process. The investment environment is becoming increasingly complex. Innumerable parameters need to be factored in to generate a clear understanding of market movement and performance in the ear and long term
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future. The basic purpose here is finding an opportunity, designing an approach and checking for its financial viability. Analyzing the S.B.I-Mutual Fund schemes, formulation of questionnaire etc is the first step followed. Fundamental analysis of five best performing schemes of S.B.I-M.F has been done. Then the thorough analysis is made on the basis of response attained with the help of the questionnaire designed. Then, the respondents were categorized on the basis of Age, Income and Occupation and findings were made on the basis of that categorization. The analysis is also made with investment philosophy, N.A.V and factors influencing N.A.V of respective schemes. The final step is, designing the final approach and analysis of its financial viability, being done.

OBJECTIVE:
The main objective is to study about the different plans of SBI mutual fund . To study about the market which effect the decision of investing the fund To study about the operations in SBI mutual fund To study Portfolio Analysis To study about Performance analysis of SBI mutual fund as compare to the other AMCs To do the analysis what type of investors invest in the Mutual Fund

FINDINGS:
Mutual fund should be a rated star mutual fund with an average rate of return Portfolio is analyzed by the level of risk contain in a plan In operation the procedure is being explained that how the folio number is generated. To compare the performance level with other AMCs in order to prepare the pie chart for the better comparison.
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INTRODUCTION
MUTUAL FUND
An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. mutual funds raise money by selling shares of the fund to the public, much like any other type of company can sell stock in itself to the public. Mutual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds and money market instruments. In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect, in each of its underlying securities. For most mutual funds, shareholders are free to sell their shares at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the performance of the securities held by the fund. Benefits of mutual funds include diversification and professional money management. Mutual funds offer choice, liquidity, and convenience, but charge fees and often require a minimum investment. A closed-end fund is often incorrectly referred to as a mutual fund, but is actually an investment trust. There are many types of mutual funds, including aggressive growth fund, asset allocation fund, balanced fund, blend fund, bond fund, capital appreciation fund, clone fund, closed fund, crossover fund, equity fund, fund of funds, global fund, growth fund, growth and income fund, hedge fund, income fund, index fund, international fund, money market fund, municipal bond fund, prime rate fund, regional fund, sector fund, specialty fund, stock fund, and tax-free bond fund.
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HISTORY OF INDIAN MUTUAL FUND INDUSTRY From a humble beginning in 1963 to playing a significant role in the capital market, the Indian mutual fund industry has come a long way. The growth in size as reflected in the assets under management, speaks for its growing prominence. First Phase: 1964 1987 An Act of Parliament established Unit Trust of India (UTI) in 1963. 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 (December 87), Punjab National Bank Mutual Fund (August 89), Indian Bank Mutual Fund (November 89), Bank of India (June 90), Bank of Baroda Mutual Fund (October 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores. Third Phase: 1993 - 2003 (Entry of Private Sector Funds) 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
6

all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs 1, 21, 805 crores. Fourth Phase: Since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the specified undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.

A brief history of mutual fund industry:

PERIOD

DESCRIPTION

1963

Formation of Unit Trust of India

1964-87

Monopoly of U.T.I-M.F (Phase-I)

1987

Entry of S.B.I-Mutual Fund

1987-93

Entry of Public Sector Funds (Phase-II)

1993-2003

Entry of other Private Sector Funds (Phase-III)

Feb, 2003

Bifurcation of U.T.I into separate entities (Phase-IV)

Till now

Increase in A.U.M through capturing of huge potential market

WHAT IS MF AND ITS TYPES

What is a Mutual Fund? A mutual fund, also called an investment company, is an investment vehicle which pools the money of many investors. The fund's manager uses the money collected to purchase securities such as stocks and bonds. The securities purchased are referred to as the fund's portfolio. When you give your money to a mutual fund, you receive shares of the fund in return. Each share represents an interest in the fund's portfolio. The value of your mutual fund shares will rise and fall depending upon the performance of the securities in the
8

portfolio. Like a shareholder in a corporation, you will receive a proportional share of income and interest generated by the portfolio. You can receive these distributions either in cash or as additional shares of the fund. As a shareholder, you also have certain shareholder voting rights. A mutual fund's portfolio is managed by a professional money manager. The manager's business is to choose securities which are best suited for the portfolio. Be aware, however, that even a professional money manager cannot insure against a loss of principal.

The mutual fund manager will invest in many different securities. This diversification of portfolio assets means that you as an investor have not pinned all your hopes on one company's success. Also, because the portfolio holds many securities, the negative impact that any one company may have on the fund is diminished. While diversification is a benefit of mutual fund investing, a mutual fund is still impacted, either favorably or unfavorably, by the ups and downs of the market in general. Mutual funds provide a relatively easy way to invest. Most funds have a minimum investment of $1000. In addition, a mutual fund stands ready to buy back, or redeem, your shares at any time. This liquidity allows you to get your money when needed. There is no guarantee, however, that your shares at the time of redemption will not have decreased in value.
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TYPES OF MUTUAL FUND SCHEMES

Mutual fund schemes may be classified on the basis of its structure and its investment objective. By Structure: Open ended Funds: An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. Closed ended Funds: A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. By Investment Objective Growth Funds: The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proved that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time. Income Funds:
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The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income. Balanced Fund: The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. MoneyMarketFunds: The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. Fixed Maturity Plan (FMP) FMPS are close ended funds with a maturity period ranging from 1 month to not more than a year. They are open in the market for maximum of 3 days. Minimum investment is more than Rs. 50, 000. They bear interest rates more than bank fixed deposit and are ideal for short term investments. These funds invest in money market instruments, government bonds etc and has no exposure to equity. Other Schemes Tax Saving Schemes:

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These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds. Special Schemes

Industry Specific Schemes

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

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50.

Sectoral Schemes

Sectoral Funds are those which invest exclusively in a specified sector. This could be an industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.

Systematic Investment Plan (SIP) SIP is a method or mode of investing in mutual funds. Here the investor can deposit money in installments. SIP can be compared to Bank RD (Recurring Deposit). An amount of installment is fixed and is deposited for a specified period of time. SIP is very useful for those investors you wants to invest in mutual funds but dont have enough money to invest in one go.

12

STRUCTURE OF MF IN INDIA

13

Like other countries, India has a legal framework within which mutual funds must be constituted. In India, open and closed-end funds operate under the same regulatory structure, i.e. in India; all mutual funds are constituted along one unique structure-as unit trust. A mutual fund in India is allowed to issue open-end and close end schemes under a common legal structure. Therefore, a mutual fund may have different schemes (open and closed-end) under it i.e. under one unit trust, at any point of time. The structure, which is required to be followed by mutual funds in India, lay down under SEBI (Mutual Fund) Regulations, 1996.

14

The Fund Sponsor 'Sponsor" is defined under SEBI regulations as any person who, acting alone or in combination with another body corporate, establishes a, mutual fund. The sponsor of a fund is akin to the promoter of companies he gets the fund registered with SEBI. The sponsor will form a Trust and appoint a board of Trustees. The sponsor will also generally appoint 11 Asset management Company (AMC) as fund managers. The sponsor ill also appoint a Custodian to hold the fund assets. All these appointment are made in accordance with the SEBI regulations. Per the existing SEBI regulations, for a person to qualify as a sponsor, must contribute at least 40% of the net worth of the AMC and issues a sound financial track over five years prior to registration. Mutual Funds as Trusts Mutual fund in India is constituted in the form of a Public Trust under the Indian Trusts Act 1882.The fund invites investors. Contribute their money in the common pool by subscribing to units Issued by various schemes established by the trust as evidence of their be neficial interest in the fund. The trust or fund has no legal capacity itself rather it is the Trustee(s) who have legal capacity and therefore the trustees take all acts in relation to the trust on its behalf. Trustees A board of trustees - a body of individuals, or a Trust company - a corporate body, may manage the Trust corporate body, . Board of Trustees manages most of the funds in India .4 The Board or the Trustee Company (body of individuals, , for managing the portfolio, appoints an Asset Management Company . The Trust is created through a document called the Trust Deed that is executed by the Fund Sponsor in favors of the trustees. They are the primary guardian of the unit holder's funds and assets. that AMC's operations are along professional lines. They ensure

15

Asset Management Company The role of an Asset Management Company (AMC) is to act as the investment manager of the trust under the Board supervision. Transfer Agents Transfer agents are responsible for issuing and redeeming units of the mutual fund and provide other related services such as preparation of transfer documents updating investors' records. A fund may choose to out this activity in-house or by an outside transfer agent. Distributors AMCs usually appoint Distributors or Brokers, who sell units on behalf of the fund. Some funds require that all transactions to be routed through such brokers. In India, besides brokers, independent individuals are appointed as agents for the purpose of selling the fund scheme to the investors. While individual constitute the largest segment in the category of mutual fund distributors, other distributors include banks, NBFCs and corporate. Bankers A fund's activities involve dealing with the money on a continuous basis primarily with respect to buying and selling units, paying for investment made, receiving the proceeds on sale of investment and discharging its obligations towards operating expenses. A funds banker therefore plays a crucial role with respect to its financial dealings by holding its bank account and providing it with remittance services

16

Custodian and Depository The custodian is appointed by the Board of Trustees for safekeeping of securities in terms of physical delivery and eventual safe keeping or participating clearing the system fund through and approved must fulfill depository companies on mutual in behalf the of

its responsibilities in accordance with its

agreement with the mutual fund. The Indian markets are moving away from having physical certificates for securities, to ownership of these securities in dematerialized form with a depository. Thus, a Depository Participant will hold a mutual funds dematerialized securities holdings. A fund's physical securities will continue to be held by a custodian.

ADVANTAGES
The advantages of investing in a Mutual Fund are: Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value. Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell. Regulatory oversight: Mutual funds are subject to many government regulations that protects investors from fraud. Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call and you've got the cash. Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet. Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are
17

listed on a specific index Transparency Flexibility Choice of schemes Tax benefits Well regulated

DRAWBACKS
Mutual funds have their drawbacks and may not be for everyone:
No

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

Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.

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

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

INTRO TO SBI
State Bank of India (SBI) The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on 27 January 1921. An important turning point in the history of State Bank of India is the launch of the first Five Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in general and the rural sector of the country, in particular. Until the Plan, the commercial banks of the country, including the Imperial Bank of India, confined their services to the urban sector. Moreover, they were not equipped to respond to the growing needs of the economic revival taking shape in the rural areas of the country. Therefore, in order to serve the economy as a whole and rural sector in particular, the All India Rural Credit Survey Committee recommended the formation of a state-partnered and state-sponsored bank. The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was established on 1 July 1955. This resulted in making the State Bank of India more powerful, because as much as a quarter of the resources of the Indian banking system were controlled directly by the State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959. The 19

Act enabled the State Bank of India to make the eight former State-associated banks as its subsidiaries. The State Bank of India emerged as a pacesetter, with its operations carried out by the 480 offices comprising branches, sub offices and three Local Head Offices, inherited from the Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to creditworthy parties, the State Bank of India catered to the needs of the customers, by banking purposefully. The bank served the heterogeneous financial needs of the planned economic development. Branches The corporate center of SBI is located in Mumbai. In order to cater to different functions, there are several other establishments in and outside Mumbai, apart from the corporate center. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices, located at major cities throughout India. It is recorded that SBI has about 10000 branches, well networked to cater to its customers throughout India. ATM Services SBI provides easy access to money to its customers through more than 8500 ATMs in India. The Bank also facilitates the free transaction of money at the ATMs of State Bank Group, which includes the ATMs of State Bank of India as well as the Associate Banks State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, etc. You may also transact money through SBI Commercial and International Bank Ltd by using the State Bank ATM-cum-Debit (Cash Plus) card. Subsidiaries The State Bank Group includes a network of eight banking subsidiaries and several non-banking subsidiaries. Through the establishments, it offers various services including merchant banking services, fund management, factoring services, primary dealership in government securities, credit cards and insurance. The eight banking subsidiaries are: State Bank of Bikaner and Jaipur (SBBJ) State Bank of Hyderabad (SBH) State Bank of India (SBI) State Bank of Indore (SBIR) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Saurashtra (SBS) State Bank of Travancore (SBT)

Products And Services Personal Banking 20

SBI Term Deposits SBI Loan For Pensioners SBI Recurring Deposits Loan Against Mortgage Of Property SBI Housing Loan Loan Against Shares & Debentures SBI Car Loan Rent Plus Scheme SBI Educational Loan Medi-Plus Scheme Agriculture/Rural Banking NRI Services ATM Services Demat Services Corporate Banking Internet Banking Mobile Banking International Banking Safe Deposit Locker RBIEFT E-Pay E-Rail SBI Vishwa Yatra Foreign Travel Card Broking Services Gift Cheques

Other Services

INTRO TO SBI MF
SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has grown immensely since its inception and today it is India's largest bank, patronized by over 80% of the top corporate houses of the country. SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset Management, one of the worlds leading fund management companies that manages over US$ 500 Billion worldwide. At SBI Mutual Fund,
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resources are considerably devoted to gain, maintain and sustain profitable insights into market movements. The trust reposed on SBI-MF by over 5.4 million investors is a genuine tribute to its expertise in Fund Management. SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation.

Thus SBI-MF believes in

Proven Skills in Wealth Generation Exploiting expertise, compounding growth

Operations In twenty years of operation, the fund has launched thirty-eight schemes and successfully redeemed fifteen of them. In the process it has rewarded its investors handsomely with consistently high returns. A total of over 5.4 million investors have reposed their faith in the wealth generation expertise of the Mutual Fund. Schemes of the Mutual fund have consistently outperformed benchmark indices and have emerged as the preferred investment for millions of investors and HNIs. Today, the fund manages take care of almost over Rs. 31,794 crores of assets and has a diverse profile of investors actively parking their investments across 36 active schemes. The fund serves this vast family of investors by reaching out to them through network of over 130 points of acceptance, 28 investor service centers, 46 investor service desks and 56 district organizers. HISTORICAL VIEW SBI MUTUAL FUNDS 1987- SBI mutual fund was the first bank sponsored mutual fund in India, incorporated by SBI bank in June 1987. 1987- SBI mutual fund launches the fist scheme Magnum regular income scheme1987

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1993- May 1993, SBI took over the principal trustee of the fund. The investment management function was entrusted to SBI Funds Management Pvt Ltd. 1993- SBI mutual funds launches SBI magnum Taxgain on March 31 1993. The fund is now the largest managed schemes and is a flagship ELSS scheme in industry. 1999- SBI mutual funds launches magnum sector fund umbrella in July 1999. The fund includes sub funds like MSFU FMCG, MSFU Pharma, MSFU IT, MSFU emerging business and MSFU contra fund (Indias 1st contrarian based equity fund) 2002- SBI mutual fund launches its investors education initiative to reach out to the investors and to educate about them mutual funds as interactive investment option. 2004- SBI mutual funds launches dedicated fund targeted to the NRI investors. NRI investment fund to provide attractive returns through periodic dividends or through capital appreciation. 2004- SBI mutual funds formalises its joint venture with Socit Gnrale asset management of France in December 2004. 2005- SBI mutual fund launches magnum COMMA on August 17 2005, invests in stocks of commodity based companies. 2006- Most preferred mutual fund 2006-awared by CNBC awaaz. 2006- SBI mutual fund launches SBI ONE INDIA fund, 1st equity based fund on regional focus. 2007- Mutual fund of the year -2007 CNBC TV 18 CRISIL 2007- Record mobilisation in NFO- SBI INFRASTRUCTURE FUND- SERIES 1.

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Fresh Purchase: After deciding on the type of scheme, the investor will have to fill in the Application form, attach a payment instrument and submit it at any of the funds' collection centers before the cut off time. The investor has to invest in rupees and units will be allotted to him in fractions depending upon the NAV. Additional Purchase: Buying more units either of the same scheme or of a different Scheme under the SAME FOLIO is an additional purchase, which can be done through Additional Purchase slips provided along with the account statement. After filling the Same, the investor will have to attach a cheque with it and submit it at any of the collection centers before the cut-off time. Switch Units: A switch request will have to be filled in and submitted at any of the Collection centers before the cut off time. SWITCH can be done with either partial or all Units under a particular scheme to another scheme as specified by him under the same Folio. Redeem / Repurchase Units: If the fund is open ended, the investor has to send the Repurchase requisition slip, duly completed and signed, to any of our branches. It is Possible to lodge repurchase requests on the Internet also. The redemption can be done for all units, partial units, or for an amount. ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI) AMFI is a trade body of all the mutual funds in India. It was incorporated in August 1995 as a non-profit organization to promote and protect the interests of mutual funds and their unit holders, define and maintain high ethical and professional standards and enhance public awareness of mutual funds. All mutual funds in India are members of the association. AMFI works through committees and working groups.

PROCEDURE

FUND COMPARISON:
24

WITH SPECIAL REFERENCE TO SBI MUTUAL FUND

Project Title: Comparison of Mutual Fund Schemes: with special reference to SBI Mutual Fund FUNDS OFFERED BY SBI MF EQUITY SCHEMES The investments of these schemes will predominantly be in the stock markets and endeavor will be to provide investors the opportunity to benefit from the higher returns which stock markets can provide. However they are also exposed to the volatility and
25

attendant risks of stock markets and hence should be chosen only by such investors who have high risk taking capacities and are willing to think long term. Equity Funds include diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds invest in various stocks across different sectors while sectoral funds which are specialized Equity Funds restrict their investments only to shares of a particular sector and hence, are riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a particular index and the performance of such funds move with the movements of the index.

Magnum Comma Fund Magnum Equity Fund Magnum Global Fund Magnum Index Fund Magnum Midcap Fund

Magnum Multicap Fund

Magnum Multiplier plus 1993 Magnum sector Umbrella fund MSFU-FMCG Fund MSFU-Emerging Business Fund MSFU-IT Fund

MSFU-Pharma Fund

MSFU-Contra Fund SBI Arbitrage Opportunities Fund SBI Blue Chip Fund SBI Infrastructure Fund-Series I

SBI Magnum Taxgain Scheme 1993 SBI One India Fund

SBI Tax Advantage Fund- Series I

26

Magnum Tax Gain Scheme 1993

Structure: An Open Ended Equity Linked Saving Scheme Date of Inception: March31, 1993 Corpus as on March 31, 2008: Rs. 3154.82 crores The portfolio of Magnum Tax Gain will comprise predominantly of Equity and Equity Related instruments and there would be Moderate to High risk on account of Price Fluctuations and Volatility. Since some portion of the portfolio may be invested in Debt and Money market securities, there would be moderate Credit risk and moderate to Low Interest rate/Price risk. SBI Magnum TaxGain performance continues to be impressive and it remains at the top of the charts among the tax-saving funds over one- and three-year periods. It Is the best tax saving fund in India and third best all over the world. Over the past year, it has delivered a return of 110 per cent, almost matching the returns of its diversified counterparts such as Magnum Multiplier Plus and Magnum Global. Magnum TaxGain appears to have a flexible investment strategy. From being a largely mid-cap fund, it has over the year, increased its allocation to large-cap stocks, as have other funds in the Magnum fold. It now sports a blend of large- and mid-cap stocks and bears a risk profile akin to that of a typical diversified fund. Investments in the fund will, however, be subject to a three-year lock-in period.
27

Sectoral Breakdown

Investment Objective: The prime objective of scheme is to deliver the benefit of investment in a portfolio of equity shares, while offering tax rebate on such investments made in the scheme under section 80 C of the Income-tax Act, 1961. It also seeks to distribute income periodically depending on distributable surplus. Entry Load a) Investments below Rs. 5 crores- 2.25% b) Investments of Rs. 5 crores & above - Nil Exit Load - Nil Minimum Investment: Rs. 500 Additional Purchase: Multiples of Rs.500 Options: Growth, Dividend Payout & Dividend Re-investment options Fund Manager: Mr.Jayesh Schroff & Mr.Sudanshu Asthana

28

Systematic Investment Plan Rs.500 per month 12 months Rs.1000 per month 6 months Rs.1500 per quarter 12 months

Performance Report Benchmark:BSE 100

YTD
Fund Benchmar k 25.59% 26.19%

1m
11.98 % 12.46 %

3m
25.59 % 26.19 %

6m
8.26% 8.19%

1y
20.23 % 24.83 %

3y
41.58 % 33.19 %

5y
69.18 % 40.50 %

S.Inc
21.41 % 14.92 %

Magnum Global Fund: Structure: An Open Ended Growth Scheme

29

Date of Allotment: September30, 1994 Corpus as on March 31, 2008: Rs.1433.90 crores The funds portfolio currently comprises more than 35% debt and other instruments, while the rest is in equities. Within the equity portfolio, over 93% consists of mid-cap stocks, with an emphasis on sectors like construction, engineering and technology. The fund has the BSE 100 as its benchmark. The fund is known for its aggressiveness and dynamic reshuffling between sectors to capture the opportunities in the market. It currently has assets worth Rs 1,362 crore. In the latest ET Quarterly MF Tracker, the fund house was adjudged the best equity fund house. It bagged the maximum number of Platinum ratings for its equity funds. Recently, the portfolio strategy of the fund has undergone some changes. While on one hand, the fund is looking at newly listed mid-cap companies as an investment avenue, on the other hand, it has expanded its portfolio base from 30-35 to 50-55 stocks. While the newly listed potential companies enable the fund to capture reasonable opportunities at the right time, Mr. Sinha (Fund Manager) believes that diversification of the portfolio base will help to overcome problems of low liquidity, usually associated with mid-cap stocks, especially in a turbulent market.

Asset Allocation
30

Sectoral Breakdown

Investment Objective SBI Magnum Global is known for its aggressiveness and dynamic reshuffling between sectors. It is a strategically oriented mid-cap fund and is likely to post healthy returns over a longer term of 3-5 years The prime objective is to provide the investors maximum growth opportunity through well researched investments in Indian equities, PCDs and FCDs from selected industries with high growth potential and Bonds. Entry Load a) Investments below Rs. 5 crores- 2.25% b) Investments of Rs. 5 crores & above - Nil Exit Load Investments below Rs. 5 crores <=6 months from date of investments-1% >6 months but<=12 months from date of investments- 0.50%

Investments of Rs. 5 crores & above - Nil

Minimum Investment: Rs. 5000

31

Additional Purchase: Multiples of Rs.500 Options: Growth, Dividend Payout & Dividend Re-investment options Fund Manager: Mr.Vivek Pandey & Mr.Ritesh Sheth

Systematic Investment Plan Rs.500 per month 12 months Rs.1000 per month 6 months Rs.1500 per quarter 12 months Performance: SBI Magnum Global is probably the only mid-cap-oriented fund to have found a place in this highly coveted arena. As on March 31, 07, the fund gave a return of 16.9% over the past one year period, while for the three-year period, it witnessed a compounded annual growth rate (CAGR) of 65.4%. Compare this with the returns of the indices: Sensex - 15.9% and 32.7%, Nifty - 12.3% and 29.2% and BSE 100 11.6% and 30.5% for one year and three years, respectively. Even the equity diversified category average has failed to beat this funds performance with 5% and 35.3% returns for one-year and three-year periods, respectively. The portfolio of the scheme is adequately diversified across 30 stocks, as per the latest portfolio of September 2005. The top ten holdings constitute 50.76% of the net assets. The top three sectors are Computers - Software & Education with 11.57%, Electrical & Electrical Equipments with 11.08% and Engineering & Industrial Machinery with13.82% exposure. Performance report Benchmark:BSE 100

YTD

1m

3m

6m
32

1y

3y

5y

S.Inc

Fund Benchmar k

32.93 26.19

15.58 12.46

32.93 26.19

13.20 8.19

9.75 24.83

37.61 33.19

60.71 40.50

15.38 10.89

The Figures in Red are Negative.

MSFU - Contra Fund:

Structure: An Open Ended Growth Scheme Date of Allotment: July14, 1999 Corpus as on March 31, 2007: Rs.1499.10 crores Magnum Contra Fund is the flagship fund of SBI Mutual fund. Heres a fund that thinks differently, goes against the grain of market thought and takes the road less traveled. It is an open ended scheme. This fund invests in undervalued scrips, which may be currently out of favour but is likely to show attractive growth in the long term. This fund offers you a possibility to invest in growth scripts of the future. It is ranked CPR 1 by CRISIL which indicates Very good performance

33

The portfolio of Magnum Contra is fairly diversified now with about 50 stocks in the portfolio as compared to 36 stocks a year back. The top 3 sectors contribute to 30% of the total portfolio while the top 10 stocks comprise of 37% of the portfolio. Industrial Manufacturing, Energy and Automobiles are the top 3 sectors the fund has invested in while Praj Industries, Reliance Industries, Hindustan Zinc, M & M, and Jaiprakash Associates form the top five stocks that the fund has bet upon. The fund has stuck to its investment theme of being a long term fund with most of the stocks remaining the same throughout the last one year without any bias towards a sector as has been the policy of most of SBI`s mutual fund schemes.

Asset Allocation

Sectoral Breakdown

Investment Objective SBI`s Magnum Contra Fund, belonging to the Magnum sector funds umbrella, is one such fund that has fairly stuck to its investment objective and succeeded in giving good returns to the investors. The main objective of the fund is to provide the investors with maximum growth opportunity through equity investments in growth oriented sectors. Launched in July 1999, the SBI Contra Fund is an open ended diversified equity scheme that can invest in large, mid and small cap stocks.
34

Entry Load a) Investments below Rs. 5 crores - 2.25%

b) Investments of Rs. 5 crores & above - Nil Exit Load Investments below Rs. 5 crores a) <=6 months from date of investments-1% b) >6 months but<=12 months from date of investments- 0.50%
c)

Investments of Rs. 5 crores & above - Nil

Minimum Investment: Rs. 2000 Additional Purchase: Multiples of Rs.500 Options: Growth, Dividend Payout & Dividend Re-investment options Fund Manager: Mr. Sanjay Sinha

Systematic Investment Plan Rs.500 per month 12 months Rs.1000 per month 6 months Rs.1500 per quarter 12 months Performance: Being contrarian in nature to focus on out-of-favour stocks, the fund had a very low exposure to technology in 1999. So no great returns that year and in the next. But, it fell by just 5.52 per cent in 2001. The next year, it gave a return of 32.74 per cent (category average: 19.43 per cent). The year 2003 saw it dipping from the top-quartile position when it gave a return just above the category average. In 2004, it shot to fame as the
35

second best-performing fund with a 64.49 per cent return (category average: 25.84 per cent). In 2005, it was the third best-performing fund with a 71 per cent return (category average: 46.70 per cent). Performance wise it has registered returns of 5.31% over a 6 months period and 15.77% over a year as compared to the category medians of 4.07% and 7.87% respectively. When looked at from a longer term horizon the fund has outperformed most of the funds in the equity diversified category with returns of 55.93% over a 3 year period and 51.85% over a 5 year period as compared to the benchmark (BSE 100 index) returns of 27.83% and 29.31%. When compared with other peer funds having the same investment objective, the fund has left behind every other fund in its category by miles.

PERFORMACE REPORT Benchmark:BSE 100 YTD Fund Benchmar k The figures in Red are Negative. 26.8 26.19 1m 11.36 12.46 3m 26.8 26.19 6m 7.53 8.19 1y 28.24 24.83 3y 41.85 33.19 5y 63.33 40.50 S.Inc 30.96 17.41

Investment Objective

36

The objective of the scheme would be to generate opportunities for growth along with possibility of consistent returns by investing predominantly in a portfolio of stocks of companies engaged in the commodity business within the following sectors - Oil& Gas, Metals, and Materials & Agriculture and in debt & money market instruments Scheme Highlights 1. An open-ended equity scheme investing in stocks of commodity based companies. 2. Minimum Investment Rs. 5000 and in multiples of Rs. 1000 Dividend and Growth options available. Reinvest and payout facility available. 3. Dividends will be completely tax-free. Long term capital gains to be completely tax-free. STT would be at the rate of 0.20% at the time of repurchase.

Launch Date August 17, 2005 .

Minimum Application Rs. 5000 and in multiples of Rs. 1000

Asset Allocation

37

Sectoral Breakdown

Performance Report Benchmark: BSE 200 YTD Fund Benchmar k 30.96 % 27.26 % 1m 15.58 % 12.86 % 3m 30.96 % 27.26 % 6m 5.66% 8.80% 1y 43.42 % 23.99 % 3y N.A N.A 5y N.A N.A S.inc 31.77 % 29.72 %

The figures in Red are Negative.

38

Investment Objective Magnum Multiplier Plus is an open-ended diversified equity fund and the investment objective of the scheme is to provide investors long term capital appreciation along with the liquidity of an open-ended scheme. The scheme will invest in a diversified portfolio of equities of high growth companies. Scheme Highlights 1. An open-ended equity scheme aiming for aggressive growth from investments in equities. 2. Scheme open for Resident Indians, Trusts, and Indian Corporates and on a fully reparable basis for NRIs, FIIs & Overseas Corporate Bodies. 3. Facility to reinvest dividend proceeds into the scheme at NAV. 4. Easy entry and exit on the basis of sales and repurchase prices determined daily. NAV will be declared on every business day. 5. Nomination facility available for individuals applying on their behalf either singly or jointly upto three.

39

Launch Date February 28, 1993

Minimum Application Rs. 1000

Asset Allocation

Sectoral Breakdown

Performance report Benchmark:BSE 100

YTD Fund Benchmar k 30.06 26.19

1m 13.21 12.46

3m 30.06 26.19

6m 12.38 8.19

1y 22.81 24.83

3y 41.63 33.19

5y 58.08 40.50

S.Inc 15.93 N.A

The figures in Red are Negative.

40

SBI Arbitrage Opportunities Fund Investment Objective To provide capital appreciation and regular income for unit holders by identifying profitable Arbitrage opportunities between the spot and derivative market segments as also through investment of surplus cash in debt and money market instruments.
41

Scheme Highlights 1. Investment in a diversified basket of equity & equity related instruments, derivative instruments and debt and money market instruments in accordance with the asset allocation pattern. 2. Liquidity: - Fresh Purchases and Redemptions at prices related to Applicable NAV. The interval day for redemption/switch would be the settlement Thursday (the settlement day for derivatives segment in the NSE which is currently last Thursday of the month) or any other day which is declared as the settlement day for derivatives segment by the NSE. 3. Benchmark Index: - CRISIL Liquid Fund Index 4. Options: Growth Option and Dividend Option available. Under the Dividend option, facility for reinvestment/ payout of dividend available. The dividend frequency is at the discretion of the Trustee. Dividends will be declared subject to availability and adequacy of surplus in the Scheme. 5. Cheques/Drafts to be in favour of "SBI Arbitrage Opportunities Fund" 6. Cut off times For Redemption Application:- All repurchase requests received under the scheme till upto 3:00 p.m. on the Friday (in case such Friday is a holiday, then the last business day) of the week preceding the interval day would be processed at the NAV (with applicable exit load) of the interval day. The interval day would be the settlement Thursday (the settlement day for derivatives segment in the NSE which is currently last Thursday of the month) or any other day which is declared as the settlement day for derivatives segment by the NSE. 7. For Purchase Application:- The purchase request received upto 3.00 p.m. on each Business Day would be processed at the NAV applicable for the same day and the purchase request received after 3.00 p.m. would be processed at the NAV applicable for the next business day Launch Date September 15, 2006 Minimum Application Rs. 25000 and in multiples of Rs. 1000
42

Asset Allocation

Sectoral Breakdown

Performance Report Benchmark :CRISIL Liquid Index

YTD Fund Benchmar k 2.69 1.71

1m 0.43 0.73

3m 2.69 1.71

6m 4.54 3.41

1y 9.04 7.43

3y N.A N.A

5y N.A N.A

S.Inc 9.60 7.30

43

MSFU - IT Fund Investment Objective To provide the investors maximum growth opportunity through equity investments in stocks of growth oriented sectors of the economy. There are five sub-funds dedicated to specific Investment themes viz. Information Technology, Pharmaceuticals, FMCG, Contrarian (investment in stocks currently out of favor) and Emerging Businesses Scheme Highlights 1. Open ended Equity Scheme. 2. Targeted at investors seeking high growth and comfortable with attendant volatility.

Launch Date July 14, 1999

Minimum Application Rs. 2000 per sector

44

Asset Allocation

Sectoral Breakdown

Performance Report Benchmark: BSE-IT

YTD Fund Benchmar k 26.34 21.68

1m 12.99 8.15

3m 26.34 21.68

6m 19.43 23.34

1y 22.76 27.46

3y 24.21 9.50

5y 32.55 22.00

S.Inc 14.09 11.53

The figures in Red are Negative.

45

OBJECTIVE OF THE STUDY:

To understand the Mutual Fund Industry in India. To understand and analyze the performance of SBI Mutual Funds in Mutual Fund Industry.

To educate customers the pros and cons of investing in SBI Mutual Funds.

LIMITATIONS OF THE STUDY: Being a trainee in the company and a new entrant to the mutual fund industry, the analysis is done only with the perspective of individual investors and institutional investors have been ignored in the process.

46

Analysis of Individual Investors

DATA ANALYSIS POPULATION:According to the data collection method adopted, the size of the population is 100. Thus, N=100 After collecting the data the following facts were found out:Out of the 100 people the following percentage composition were interested in the following products:-

MUTUAL FUNDS - 27% SHARE/BONDS- 21% LIFE INSURANCE-15% REAL ESTATE-6%

47

COMMODITIES-5% NSC (NATIONAL SAVING SCHEME)- 8% BANKS 16% OTHERS-2%

ANALYSIS OF THE PREFERENCES OF THE RESPONDENTS

The data collected above shows that approximately 48% of people are aware of the market in general and 27% are aware of Mutual Funds in particular. Thus further analysis is made on the basis of data collected; which categories of people are more aware and inclined towards Mutual Fund. Therefore, further analysis is made as below: Analysis according to Age Analysis according to Income Analysis according to Occupation

48

Analysis according to Age:

Findings:

As per the above analysis, 31% of respondents who are below 35 years are interested to invest in SBI-MF. The reasons being that there are more needs to be fulfilled for this age group viz. education, entertainment etc. and therefore these people do not have surplus funds to invest in saving schemes or Mutual Funds etc.

The persons within the age group of 35-50 years 53% of respondents are interested to invest in SBI-MF. These persons have more investing potential than their counterparts and they want to increase their income through investing in Mutual Funds.

The persons having the age equal to or above 50 years, only 16% of respondents are interested to invest in SBI-MF. The reasons being that these persons are more inclined to age-old principals and want to invest in schemes giving fixed returns as compared to investing in Mutual Fund.

Analysis according to Savings from income:

Income Low Medium High

Percentage (%) 18% 28% 54%

49

Findings:

The above analysis shows that Low income category is less interested to invest in SBI-MF as compared to high income category. The reason being that these people have to fulfill their basic needs first. The other reason is that low income category people are having more consumption as compared to their savings.

Among Medium income category people, 28% of the respondents want to invest in SBI-MF. The first and foremost reason behind this is that these people are risk averse and want to invest in those products from which they must get assured returns as compared to investing in Mutual Funds.

Among High income category people, 54% of the respondents want to invest in SBI-MF because these people have enough resources for their well being and it does not hurt them to invest a large chunk of their resources in Mutual Funds.

Analysis according to Occupation:

Findings:

From the above analysis, it has been learned that 57% of respondents who are in service are interested to invest in SBI-MF because these people are well
50

aware of Mutual Funds and Stock Market. Service category people want to secure their future and therefore showed interest in investing under risky ventures.

Businessmen are also interested to invest in SBI-MF. 32% of respondents who are in business invested in SBI-MF.These people invest more in Debt schemes than in Equity schemes. This is because Debt schemes promise a less, but secure return over equity schemes which are more risky. Moreover, the risk profile of business men is quite moderate.

Professional are much interested in investing the Mutual Funds as compared to their counterparts. The main reason for such thing is the complete knowledge of Stock markets Past performance Consistent returns Measurement of risk Finance knowledge

But with the current performance of Mutual Funds on the stock market, less people are willing to take the huge risk of losing money.

Analysis of different category persons about different schemes:SBI- MAGNUM TAX GAIN SCHEME (MTGS)

51

Tax Planning Mutual Funds have come into their own as a compelling cocktail of savings and returns, surpassing larger rivals such as equity funds in asset growth rates over the past year and-a-half. Thus, service category is more inclined towards MTGS because of the tax exemption and phenomenal returns. This scheme was equally supported by the SBI Tax Advantage series I (new NFO), a close ended fund offered by SBI MF.

SBI- MAGNUM GLOBAL FUND (MGLF)

MGLF is an open-ended equity scheme investing in stocks from selected industries with high growth potential. Due to the high growth potential and investing the resources in money market instruments, businessmen and professionals are more inclined towards MGLF.

MAGNUM SECTOR UMBRELLA- CONTRA FUND

Due to the maximum growth opportunity through equity investments in stocks of growth oriented sectors of the economy, professionals like the MSFU-Contra fund the most. Servicemen also like it because of huge untapped growth potential of the scheme. And businessmen like this scheme less as compared to their counterparts because businessmen cant block their money for long time and this scheme provides return in long term.

52

Analysis on the basis of purchase of investment

The above graph shows us that people purchase funds, when the price of the fund suddenly increases. This is because of their expectation for the fund to rise more in the future. Next are the investors who invest when the price (NAV) of the fund is slowly but steadily increasing. They do this, thinking that the fund will further raise in the future at the same pace. 24 % of the investors invest their money when the price of the fund suddenly decreases. They do this in order to take benefit of the decreased cost, in anticipation that they may sell it in the future for a higher price. FINANCIAL BEHAVIOR OF RESPONDENTS: INVESTMENT OBJECTIVES: It can be seen from the following graph that the main investment objective of most of the investors is good returns and capital appreciation.

CHANNELS USED BY RESPONDENTS FOR INVESTING: From study it can easily be inferred that majority of respondents (55%) invest in mutual funds through brokers. The no. of investors investing in mutual funds directly is also increasing especially after SEBI guidelines came recently that says there will not be no ENTRY LOAD for investors investing in mutual fund schemes directly. INVESTMENT HORIZON: From the study it can be concluded that majority of respondents invest in mutual funds from More than three year perspective (53%), thats means once a investor comes to your service he will be there for at least three
53

years, therefore it is very essential today that AMCs and especially SBI should focused on innovating new ways to serve the customers like giving SMS time to time, giving value added services like free insurance, debit cards etc. RISK PREFERENCES : The following chart explains that majority of investors (66%) were ready to take moderate level of risk by investing in mutual funds and also (27%) respondents go for High Risk and High Return category. Low risk and low return category (7%) were those investors who were elderly and wanted there money to be safe.

SCHEME PREFERENCES: ON THE BASIS OF ASSET CLASS: When it comes to scheme preferences majority of the investors prefer Equity Schemes (43%), followed by Balanced Schemes (34%) then debt (12%) and finally FMPs (11%). It shows that there is a huge potential for debt instruments in the market which is unearthed by investors due to its complexity, low awareness etc.

54

SCHEME PREFERENCES: ON THE BASIS OF STRUCTURE: When it come to scheme preference on the basis of its structure, majority of retail investors prefer Open Ended Scheme primarily due to flexibility of redemptions, investments, good return and liquidity. FMPs has been included in close ended schemes. None of the investors prefer Interval Scheme; in fact some of the retail investors were confused about the very name of Interval Schemes.

Most Popular Fund from SBI: Up till this stage the winner is MAGNUM TAX GAIN which is preferred by majority of respondents (60%), due to its three in one benefits which are as follows: Tax Benefit Good Return Capital Appreciation

55

SATISFATION LEVEL WITH SBI:

Form above chart it can be inferred that up to this stage majority of respondents (48%) are considerably satisfied when they were asked about overall experience with SBI Mutual Funds including funds, returns, services etc., As can be seen 26% of the investors are Reasonably Satisfied which means that there is more to do on SBI behalf for Customer Satisfaction.

56

RELATIONSHIP BUILDING

RELATIONSHIP BUILDING
Bank Visits
We were assigned the banking channel in SBI Mutual Fund and I was assigned the State Bank of India sub branches in Agra. Here we were assigned the task of relationship building. The responsibilities included going to various reputed banks like
State Bank Of India, Sadar Branch Agra State Bank Of India , Administrative Office Agra 57

 State Bank Of India, Tajganj Branch Agra State Bank of India, Medical College Branch Agra State Bank of India, Raja ki Mandi Branch Agra State Bank of India, Jaipur House Branch Agra

And meet the branch officials such as the branch managers, personel bankers, relationship managers, Investment & Services manager and other associates. These are the people who directly deal with the customers at their respective banks and hence bring business for SBI mutual fund. Maintaining relationship with them is an important aspect. I was personally assigned the all the sub branches of SBI in order to promote the SBI Mutual Fund plans. Here I visited all the banks in the assigned area and met the bank officials. I understood the need and demands of the bank officials and sincerely reciprocated it to my seniors and also provided a helping hand towards its solution. I used to motivate bank officials to sell our schemes (SBI Mutual Fund) by telling them their future benefits.

Tele-Calling
Information sharing activities such as making phone calls to bank officials and informing them about the upcoming dividend declaration in various schemes was done. This activity helped us build relationship with bankers as they could make the right move when dealing with the customers.

Back Office Work

I was also taking care of the forms being sent and received to and from the other area which cum under Agra region (i.e. Aligarh, Mathura, Tundla Kasganj etc.) Stationary updates at various banks were also looked after. Subsequent data entry was made as a regular practice which would update the visit calendar. I was also responsible for statement generation on request by bank officials for specific clients.
58

Training of Bank Officials

Another important aspect of my internship was that I have to train bank officials of different banks. Its been found that bank officials of other channels of SBI lack complete knowledge about mutual funds. As a result they were not able to convince customers to invest in SBI Mutual Funds. My task was to provide all necessary and important details regarding mutual funds and SBI in particular so that it may help them in convincing the customers. The analysis of the questionnaire has been done as follows.

ANALYSIS (ON BASIS OF BANKERS RESPONSE) 1) Age group of investors coming to bank The reason for more people investing in the 25 to 45 yrs bracket was that they had a lot of disposable income to invest into mutual funds. People with age over 65 years wanted their money to be invested in safe instruments like fixed deposits, debt schemes etc.People under 25 years were lacking the basic knowledge about mutual funds. People between 45 to 65 years were mainly
59

investing in real estate or did not have enough money to invest because of family responsibilities.

2) Best performing schemes in the market.

SBI mutual fund is the leader in its tax saving scheme i.e. Magnum TaxGain93.The fund also did well with the SBI Tax Advantage series I. It outplayed its counterpart Reliance Tax saver, launched by Reliance, another ELSS scheme after SBI.Magnum contra and Magnum Comma were the other popular and most selling funds for SBI. DSP merylynchs T.I.G.E.R had the highest return, because of which it was also popular among people. Reliance had its Reliance Growth fund topping the chart, and backed up with the services provided, it was also among the most popular and most sold funds. 3) Changes requested in the present or future schemes. Post sales services are an important issue when it comes to mutual funds. People were willing to compromise on the monetary gain factor, but did not want to compromise on the services provided by various fund houses. A lot of people also wanted the upcoming schemes to be in an open ended form, as that option allows them to exit the market when it is volatile, unlike the closed ended
60

scheme in which they have to continue their investment because of the Lock-in period, or else have to pay the exit load. 4) Approximate sales of best selling schemes The approximate sale for the best scheme comes out to be 3 to 4 lakh per month on an average. This includes systematic investment options and the one time investment options as well. 5) Grievances of Bank officials One of the main grievance of the bank officials was the service provided by the AMCs.As the bank officials were directly in contact with the customers, they were answerable to the customers regarding any query or discrepancy in their investment, which could spoil their relations with the customer. These services included

Issue of statement Inconsistent deduction of money from account

Second complain was regarding the delivery of material on time. As the forms and other stationary items were not reaching on time, they wasted a lot of time in complaining for the same. 6) Ways by which we can improve our relationship The ways suggested by various bankers were:

Frequent visits Sending the statements on time Forms and other stationary to be sent on time. Having adequate product knowledge. Making bank officials work easy

By providing them with only the forms, instead of the form booklet.

61

Helping them in getting the KYC (Know Your Customer) form filled and signed.

7) Facilities that other AMCs are providing. After several visit to various banks, it was found out that there were various measures that other AMCs were taking to strengthen their hold in the market. These include:

Regular incentives being provided to bank officials. Gifts being distributed to bank officials. Trainee posted at bank to help bank officials. Helping in getting the KYC form filled.

Regular incentives were being provided to bank officials by various AMCs such as Reliance Mutual Fund, Franklin, and Morgan Stanley etc. Bank officials were offered 1 movie ticket on the sale of 5 systematic investment plans.Diaries, Carry bags were given as incentive plans.These incentive plans changed from time to time. AMCs like Reliance, Morgan Stanley had posted their trainees at various banks that helped enhance business by directly dealing with customers. These trainees also helped the bank officials in their office work thus making simpler for these officials and thereby improving their relationships with them. KYC forms can be filled at CAMS or at HDFC AMCs counters. These AMCs were helping banks to get these KYCs done thereby simplifying the bank officials job.

62

DIRECT SELLING

63

Direct selling to Customers

A very important part of my summer internship was direct selling. Apart from complete SBI channels I sold SBI Mutual Funds products to other people also that is all the relatives who are eligible to take the plans and neighbors and I also visited to other banks like Bikaner & Jaipur Sadar Branch and State Bank Of Bikaner & Jaipur, Sahaganj Branch. All other trainees who were posted to a specified branch of HDFC bank and other associate Banks of SBI were asked to directly deal with customers and promote & sell their brand (SBI mutual fund, in this case. Our main objective was:

Promote our brand (SBI Mutual Fund) Increase sales of our products. Provide knowledge to customers (walk-ins) about our product/Mutual Funds. To simplify the job of the bank officials.

Targets During my 8 weeks of Training In SBI Mutual Funds, I brought business worth Rs 7,33,000, which included SIPs, One time investment and FMPs. The business was collected in different schemes of SBI Mutual Funds. Apart from the business I got 13 KYC forms completed which means ready customers in times of new FMPs.

64

LEARNINGS AT SBI MUTUAL FUND

Learning from SBI Mutual Fund include

Dealing with corporate culture Dealing with bank officials Building and maintaining relationships

Apart from the on field work, we took part in activities conducted in SBI Mutual Fund office, which included discussions on
Money Market Instruments Market news updates

These discussions gave us an exposure in the field of finance, thereby enhancing our knowledge and allowing us to link it with the mutual fund industry. A brief overview of the discussion outlines have been given below.

RECENT DEVELOPMENTS:
1. Mutual fund ads: SEBI puts brakes on speed-reading: "Mutual fund investments are subject to market risks, read the offer document carefully before investing" - which is read out at a breakneck speed. As per the Securities and Exchange Board of India rules, this disclaimer is a must for every mutual fund product advertisement. While following the stipulation, the
65

advertisers apparently try to keep the public from hearing it by resorting to speed reading. SEBI has mandated that with effect from April 1, 2008, the time for display and voice over of the standard warning be enhanced to five seconds in audio visual advertisements. In case of audio advertisements, the standard warning shall be read in an easily understandable manner over a period of five seconds. This is the first investor-friendly move by SEBI after C. B. Bhave took over as its chairman on February 18. Previously the disclaimer takes around two or three seconds in a 10 or even a 20-second spot. An average mutual fund advertisement is about 10 to 30-second long. Mutual funds say that the SEBI move is likely to push up fund marketing costs of asset management companies by 20 to 50 per cent since half of the time in a 10-second ad and one-sixth of the time in a 30-second ad will be devoted to the mandatory disclaimer from April 1. For instance, if a 10-second ad costs Rs 100,000, Rs 50,000 would be spent on making the disclaimer. 2. KYC: KYC is an acronym for Know your Client, a term commonly used for Client Identification Process. SEBI has prescribed certain requirements relating to KYC norms for Financial Institutions and Financial Intermediaries including Mutual Funds to know their clients. This would be in the form of verification of identity and address, financial status, occupation and such other personal information. Applicant must be KYC compliant while investing with any SEBI registered Mutual Fund. Individual investors will have to produce his Proof of identity (Photo PAN card copy or PAN card copy and copy of the passport, driving license etc) and Proof of Address (any valid documents listed in section B of the KYC Application Form for Individuals). Non Individual Investors will have to produce certain documents pertaining to its constitution/registration to fulfill the KYC process. A list of Mandatory Certified

66

Documents to be submitted can be found in section C of the KYC application form for Non-Individual Investors. With effect from 01 February 2008, any investor investing Rs. 50,000 and above would be required to complete the KYC process. KYC norms are applicable to all investors. It is in the interest of all Investors to obtain KYC Acknowledgement and submit it to the Mutual Fund to avoid any inconvenience in future. Currently, KYC is done free of cost.

SWOT Analysis of SBI Mutual Fund STRENGTH

Being the 7th biggest AMC,SBI Mutual Fund has a cutting edge over other AMCs The name SBI is also associated with one of the largest public sector bank in India, and hence people show more faith in SBI Mutual Fund. SBI Mutual Fund is one of the oldest AMCs in private sector and schemes which are matured enough pull new investors because of high returns. Wide variety of funds, ranging from debt funds to equity and a mixture of both in various proportions, give ample amount of choice to customers. SBI Mutual Fund offers clear and non overlapping positioning of different funds. Winner of CNBC TV-18-CRISIL mutual fund of the year award.

WEAKNESS
Lack of promotional material, dispensers, banners. Proper training not being provided to bank officials.

OPPORTUNITIES

67

Untapped rural market offers huge potential. More focus on PSUs may enhance business. Training provided to investors may lead to more investments.

THREATS
Competitors like Reliance AMC, ICICI prudential are catching up fast on the market share. Share market slump may see downfall in investments.

RECOMMENDATIONS
A) THE GROUND RULES OF MUTUAL FUND INVESTING
The following are the 10 commandments that were to be followed till eternity. The world of investments too has several ground rules meant for investors who are novices in their own right and wish to enter the myriad world of investments. These come in handy for there is every possibility of losing what one has if due care is not taken.
1. Assess yourself: Self-assessment of ones needs; expectations and risk profile

is of prime importance failing which; one will make more mistakes in putting money in right places than otherwise. Irrational expectations will only bring pain.
2. Try to understand where the money is going: One can lose substantially if

one picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go through the literature such as offer document and fact sheets that mutual fund companies provide on their funds.
3. Don't rush in picking funds, think first: one first has to decide what he wants

the money for and it is this investment goal that should be the guiding light for all investments done. It is thus important to know the risks associated with the fund and align it with the quantum of risk one is willing to take. One should take a look
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at the portfolio of the funds for the purpose. Excessive exposure to any specific sector should be avoided, as it will only add to the risk of the entire portfolio.
4. Invest. Dont speculate: A common investor is limited in the degree of risk that

he is willing to take. It is thus of key importance that there is thought given to the process of investment and to the time horizon of the intended investment. One should abstain from speculating which in other words would mean getting out of one fund and investing in another with the intention of making quick money
5. Dont put all the eggs in one basket: This old age adage is of utmost

importance. No matter what the risk profile of a person is, it is always advisable to diversify the risks associated. So putting ones money in different asset classes is generally the best option as it averages the risks in each category.
6. Be regular: Investing should be a habit and not an exercise undertaken at ones

wishes, if one has to really benefit from them. As we said earlier, since it is extremely difficult to know when to enter or exit the market, it is important to beat the market by being systematic. The SIPs (Systematic Investment Plans) offered by all funds helps in being systematic. All that one needs to do is to give postdated cheques to the fund and thereafter one will not be harried later.
7. Do your homework: It is important for all investors to research the avenues

available to them irrespective of the investor category they belong to. This is important because an informed investor is in a better decision to make right decisions. Having identified the risks associated with the investment is important and so one should try to know all aspects associated with it. Asking the intermediaries is one of the ways to take care of the problem.
8. Find the right funds: Finding funds that do not charge much fees is of

importance, as the fee charged ultimately goes from the pocket of the investor. This is even more important for debt funds as the returns from these funds are not much. Funds that charge more will reduce the yield to the investor. Finding the right funds is important and one should also use these funds for tax efficiency.
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9. Keep track of your investments: Finding the right fund is important but even

more important is to keep track of the way they are performing in the market. If the market is beginning to enter a bearish phase, then investors of equity too will benefit by switching to debt funds as the losses can be minimized. One can always switch back to equity if the equity market starts to show some buoyancy.
10. Know when to sell your mutual funds: Knowing when to exit a fund too is of

utmost importance. One should book profits immediately when enough has been earned i.e. the initial expectation from the fund has been met with. Other factors like non-performance, hike in fee charged and change in any basic attribute of the fund etc. are some of the reasons for to exit.

B) WHEN TO SELL YOUR MUTUAL FUND

While there are many investment consultants, some by profession, some selfprofessed, who suggest on when to invest in a particular avenue, there is a certain paucity of people who talk of when to exit. Here are some situations when the investor should consider withdrawing their investments from the funds. Fund is not performing

This reason for selling, although valid in certain conditions, is where most investors make a mistake. When calculating performance one shouldnt look at too short a period and make a mistake by comparing apples to oranges. One should compare the returns posted by his fund with that of the peers across various horizons such as 1-year, 3-year and above. A short-term view can often lead to committing hara-kiri, as it doesnt present the full picture. If it has underperformed the average of its peers in all cases, then it sure is one of the better reasons to exit from the fund. A change in life stage

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Investments are done with a certain objective in mind and life stages are often a determining factor of what a person needs. A young man can afford to take more risks than a person nearing his retirement can. In such cases, it pays to withdraw money from the equity investments made earlier and put them in safer, more conservative debt funds that offer stable returns without compromising on risk. So a change in life stages would be one such reason to consider switching into a fund that matches with ones needs. A major change in any basic attribute of the fund

When the fund changes any basic attribute as mentioned by it in its offer documents, the investors have a choice of getting out of it. Even SEBI has provided for an exit route being made available to the investors. Changes like a change in Asset Management Company or in investment style of fund or change of structure say from closed-end to open-end etc. are good enough reasons for an investor to consider switching or exiting from it as they are certainly likely to affect the fund in a major way. Fund doesnt comply with its objective One of the important parameters in the selection of the fund is alignment of the risk profiles of the investor and fund. The objective of the fund says a lot about how the fund plans to invest. If the objective is not being complied with, it is one of the exit points worth considering. The Funds Expense Ratio Rises A small rise in an expense ratio is not a big deal, however a significant rise can result in substantial reduction of yields and so it would be better to exit the fund. In the case of bond funds or money market funds, it is highly unlikely that the fund can increase its returns enough to justify an increase in the fund's expenses. The Fund Manager has changed

A simple change of fund managers, in itself, is not enough reason to sell a fund
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on a short-term basis. If it is a passively managed fund (index fund), then one has little to no reason to worry. However, if it is an actively managed fund, then has to keep the eyes open on the new manager.

Enough has been earned However, nothing is as important as to rein the horses in time. The primary principle behind safety of investment is to take risks that can be tolerated. The principle also is specific on the expectations that the investor must have from any investment. Just as it is important to set realistic targets that one hopes to achieve from the investment, it is also important to exit when target as expected has been achieved irrespective of the fact that it might be generating better returns in a short-term. Waiting longer might not prove beneficial, as one need not be lucky all the time.The above list is certainly not exhaustive and individuals will have other better reasons to quit as well. Its just that most dont know when to apply thought and so these would come in handy.

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ANNEXURE Questionnaire
(Individual Investor)

Q1) Gender Male Female Q2) Age in Years Under 25 yrs 25-35 yrs 35-45 yrs 45-55 yrs 55-65 yrs Over 65 yrs Q3) Marital Status Single Married 4) Academic Qualification School Final Graduate Postgraduate Professional degree 5) Occupation Salaried employee in govt/public sector Salaried employee in corporate Salaried employee in SME Self-employed businessman Self-employed professional Farmer/cultivator/Agriculture Others(please specify) 6) How much of your income are you able to save Below 5% 5-10 % 10-15 %
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 15-20% 20-25% Over 25% 7) Why do you save? Planning for retirement Tax saving Unforeseen expenses Education of children Marriage of children Purchase of property/Assets Starting/Expanding business Others(please specify) 8) Which of the following do you usually prefer for saving? Cash Bank deposit Post office deposits Life insurance Pension/provident funds Shares/bonds Mutual funds Property/real estate Gold/gem/jewellery Others (please specify) 9) If you invest in mutual funds, which is your favorite Equity funds Balanced funds Income fund Gilt fund Debt find Others(specify) 10) How were you attracted to stock market investment? Advertisement Recommendation from a friend/relative Recommendation from a broker/investment advisor Had some money so I invested in stock market Was fascinated by market performance Others(please specify) 11) What is your preferred mode of investment?
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 Primary market/IPO Secondary market/stock market Both 12) How long do you usually hold your investment? Until there is need for money Less than 1 year 1-2 years 2-5 years More than 5 years 13) Which type of companies do you prefer for investment? Newly established companies Well established/old companies Companies in emerging areas Others(please specify) 14) Which sector/industry do you prefer? Infrastructure Oil/gas and power Banking /finance /Insurance It/Computer/telecom FMCG Consumer durables Healthcare/Pharma Agro-based Automobile Media Textiles Others(please specify) 15) What is your risk preference? High risk and high return Moderate risk moderate return Low risk low return 16) How do you invest in stock market? Through online trading Through stock broker Through both
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17) What has been your expectation return on stock market investment? Less than 10% 10-15% 15-20% 20-25% Over 25%

18) Do you buy an investment when its value? Suddenly decreases Suddenly increases Is stable Has been slowly increasing Has been slowly decreasing 19) How satisfied are you with your experience of investing in mutual funds? Highly satisfied Moderately satisfied Not satisfied Highly dissatisfied 20) Rank the following attributes, in the context of your financial decision-making, from 1 (Highest Priority) to 4 (Lowest Priority). Attributes Rank Risk Returns Liquidity Security

21) Which SBI fund do you invest in & why?

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QUESTIONNAIRE
(For Bankers)

Q1) what is the age group of the investors? Under 25 yrs 25 to 45 yrs 45 to 65 yrs Over 65 yrs Q2) Which are the best performing schemes in the market? SBI Mutual Fund Reliance Mutual Fund Kotak Mahindra Mutual Fund Birla SunLife Mutual Fund DSP Mutual Fund HDFC Mutual Fund ICICI Mutual Fund Others (Please specify) Q3) Do they want any changes in the existing or future schemes? Services Dividends Portfolio Others(please specify) Q4) Suggest a portfolio for a dream scheme? IT sector FMCG sector Pharma sector Infrastructure
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Commodities Automobile Energy Telecom Financial services Media & Entertainment Others(Please specify)

Q5) What is the approx sales of the best seller scheme? Less than 10 lakh 10 to 20 lakh 20 to 30 lakh More than 30 lakh Q6) What are the facilities that other Banks/Mutual Fund houses are providing? Service Commission Product related information Others (Please Specify) Q7) What are your grievances, if any? __________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _______________________________________

Q8) What is the expected return in that scheme (any specific scheme)? Scheme name: ___________________ Less than 10% 10-15% 15-20% 20-25% Over 25% Q9) Suggest ways by which we can improve upon our relationship. __________________________________________________________________ _____________________________________________________________________
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_____________________________________________________________________ _____________________________________________________________________ _______________________________________

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REFERENCES
Websites www.sbimf.com : For Comparative Analysis: http://valueresearchonline.com/funds/newsnapshot.com http://www.valueresearchonline.com/funds/default.asp http://amfiindia.com/navreport.asp www.franklintempletonindia.com www.principalindia.com http://www.wikipedia.org To obtain general details on the companies and other terms To obtain definitions and description of financial terms http://www.investopedia.com http://www.google.com Advanced web search for scholarly articles and e-books on the subject http://www.amfiindia.com, To obtain the industry news. http://www.sbimf.com, To obtain the organization news. http://www.valueresearchonline.com, For Portfolio Analysis. Internal Sources: Factsheets, fund dossiers, common application forms etc.

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