Project Mf - Kuldeep Singh

A PROJECT REPORTON

“MUTUAL FUNDS AS BETTER INVESTMENT PLAN”

Submitted in Partial Fulfillment of

MASTER OF BUSINESS ADMINISTRATION

Two Year program of

KURUKSHETRA UNIVERSITYKURUKSHETRA

Batch 2008-10

Submitted By: - Under Guidance: -KULDEEP SINGH Mr. KULDEEPAK KATYALRoll No. 03 Senior ManagerMBA (General) SBI Mutual Fund

LHO Chandigarh

UNIVERSITY SCHOOL OF MANAGEMENTKURUKSHETRA UNIVERSITY

KURUKSHETRA

SBI Mutual Fund

ACKNOWLEDGEMENT

With regard to my Project with Mutual Fund I would like to thank each and every one

who offered help, guideline and support whenever required.

First and foremost I would like to express gratitude to Mr. Kuldeepak Katyal, Senior

Manager SBI Chandigarh and other staffs for their support and guidance in the

Project work

I would also like to extend my thanks to my members and friends for their support

specially.

KULDEEP SINGH

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SBI Mutual Fund

DECLERATION

I hereby declare that this Project Report entitled “THE MUTUAL FUND AS

BETTER INVESTMENT PLAN in SBI Mutual Fund submitted in the partial

fulfillment of the requirement of Master of Business Administration (MBA) of

KURUKSHETRA UNIVERSITY, KURUKSHETRA is based on primary &

secondary data found by me in various departments, books, magazines and websites

& Collected by me in under guidance of Mr. Kuldeepak Katyal.

DATE: 11-08-2009 KULDEEP SINGH

MBA (Two Years)

Roll No. 03

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SBI Mutual Fund

EXECUTIVE SUMMARY

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

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

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

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

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

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

exist. But once people are aware of mutual fund investment opportunities, the number

who decide to invest in mutual funds increases to as many as one in five people. The

trick for converting a person with no knowledge of mutual funds to a new Mutual

Fund customer is to understand which of the potential investors are more likely to

buy mutual funds and to use the right arguments in the sales process that customers

will accept as important and relevant to their decision.

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

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

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

practices of the investors and preferences of the investors for investment in Mutual

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

Fund means Are they prefer any particular Asset Management Company (AMC),

Which type of Product they prefer, Which Option (Growth or Dividend) they prefer

or Which Investment Strategy they follow (Systematic Investment Plan or One time

Plan). This Project as a whole can be divided into two parts.

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SBI Mutual Fund

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

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

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

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

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

and surveyed of 200 people. I also taken interview of many People those who were

coming at the SBI Branch where I done my Project. I visited other AMCs in

Chandigarh to get some knowledge related to my topic. I studied about the products

and strategies of other AMCs in Chandigarh to know why people prefer to invest in

those AMCs. This Project covers the topic “THE MUTUAL FUND AS BETTER

INVESTMENT PLAN.” The data collected has been well organized and presented. I

hope the research findings and conclusion will be of use.

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SBI Mutual Fund

CONTENTS

Acknowledgement

Declaration

Executive Summary

Chapter - 1 INTRODUCTION

Chapter - 2 COMPANY PROFILE

Chapter - 3 OBJECTIVES AND SCOPE

Chapter - 4 RESEARCH METHODOLOGY

Chapter - 5 DATA ANALYSIS AND INTERPRETATION

Chapter - 6 FINDINGS AND CONCLUSIONS

Chapter - 7 SUGGESTIONS & RECOMMENDATIONS

BIBLIOGRAPHY

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SBI Mutual Fund

Chapter - 1

Introduction

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INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS

ASPECTS.

Mutual fund is a trust that pools the savings of a number of investors who share a

common financial goal. This pool of money is invested in accordance with a stated

objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to

all investors. The money thus collected is then invested in capital market instruments

such as shares, debentures and other securities. The income earned through these

investments and the capital appreciations realized are shared by its unit holders in

proportion the number of units owned by them. Thus a Mutual Fund is the most

suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost. A

Mutual Fund is an investment tool that allows small investors access to a well-

diversified portfolio of equities, bonds and other securities. Each shareholder

participates in the gain or loss of the fund. Units are issued and can be redeemed as

needed. The funds Net Asset value (NAV) is determined each day.

  Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks

may not move in the same direction in the same proportion at the same time. Mutual

fund issues units to the investors in accordance with quantum of money invested by

them. Investors of mutual funds are known as unit holders.

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SBI Mutual Fund

Concept of Mutual Funds

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

common financial goal. The money thus collected is then invested in capital market

instruments such as shares, debentures and other securities. The income earned

through these investments and the capital appreciation realised are shared by its unit

holders in proportion to the number of units owned by them. Thus a Mutual Fund is

the most suitable investment for the common man as it offers an opportunity to invest

in a diversified, professionally managed basket of securities at a relatively low cost.

The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart

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SBI Mutual Fund

Organisation of Mutual Fund

There are many entities involved and the diagram below illustrates the organisational

set up of a mutual fund:

ADVANTAGES OF MUTUAL FUND

1. Professional Management - The basic advantage of funds is that, they are professional

managed, by well qualified professional. Investors purchase funds because they do not have

the time or the expertise to manage their own portfolio. A mutual fund is considered to be

relatively less expensive way to make and monitor their investments.

2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks

or bonds, the investors risk is spread out and minimized up to certain extent. The idea

behind diversification is to invest in a large number of assets so that a loss in any particular

investment is minimized by gains in others.

3. Tax Advantage - There are certain schemes of mutual funds which provide tax advantage under the Income Tax Act. Thus the tax liability of an investor is also reduced when he invest in these schemes of mutual fund.

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SBI Mutual Fund

Capital Gain EQUITY DEBT

LTCG NIL 10% or 20% without indexation

STCG 10% Added in the total income and then assessed to tax

4. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time,

thus help to reducing transaction costs, and help to bring down the average cost of the unit

for their investors.

5. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate

their holdings as and when they want.

6. Flexibility & Convenience - Investments in mutual fund is considered to be easy,

compare to other available instruments in the market, and the minimum investment is

small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000,

where SIP start with just Rs.100 per month basis.

7. Safety of regulated environment - All mutual funds are registered with SEBI and

they function within the provisions of strict regulations designed to protect the

interest of investors. The operation of mutual fund is regulatory monitored by SEBI.

9. Transparency - The investor gets regular information on the value of his investment in addition to disclosure on the specific investment made by the fund, the proportion invested in each class of assets and the fund manager’s investment strategy and outlook.

DISADVANTAGE OF MUTUAL FUND

1. Professional Management- Some funds doesn’t perform in neither the market, as their

management is not dynamic enough to explore the available opportunity in the market, thus

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SBI Mutual Fund

many investors debate over whether or not the so-called professionals are any better than

mutual fund or investor himself, for picking up stocks.

2. Costs – The biggest source of AMC income, is generally from the entry & exit load

which they charge from an investors, at the time of purchase. The mutual fund industries

are thus charging extra cost under layers of jargon. There is no control over Cost in the

Hands of invester.

3. Dilution - Because funds have small holdings across different companies, high returns

from a few investments often don't make much difference on the overall return. Dilution is

also the result of a successful fund getting too big. When money pours into funds that have

had strong success, the manager often has trouble finding a good investment for all the new

money.

4. Taxes - when making decisions about your money, fund managers don't consider your

personal tax situation. For example, when a fund manager sells a security, a capital-gain tax

is triggered, which affects how profitable the individual is from the sale. It might have been

more advantageous for the individual to defer the capital gains liability.

5. Difficulty in selecting a Suitable Fund Scheme – There are multiples Schemes floats in

the market of various Asset Management companies and most of them seems similar to the

investor.

It might confuse Investor to select right Scheme for proper utilization of his money.

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

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

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

growth was slow, but it accelerated from the year 1987 when non-UTI players

entered the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement,

both qualities wise as well as quantity wise. Before, the monopoly of the market had

seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The

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SBI Mutual Fund

private sector entry to the fund family raised the Aum to Rs. 470 billion in March

1993 and till April 2004; it reached the height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the

mutual fund industry can be broadly put into four phases according to the

development of the sector. Each phase is briefly described as under.

 First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the

Reserve Bank of India and functioned under the Regulatory and administrative

control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and

the Industrial Development Bank of India (IDBI) took over the regulatory and

administrative control in place of RBI. The first scheme launched by UTI was Unit

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

management.

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

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

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

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

established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab

National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of

India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual

fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end

of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

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

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SBI Mutual Fund

1993 was the year in which the first Mutual Fund Regulations came into being, under

which all mutual funds, except UTI were to be registered and governed. The

erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first

private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now

functions under the SEBI (Mutual Fund) Regulations 1996. As at the end of January

2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit

Trust of India with Rs.44,541 crores of assets under management was way ahead of

other mutual funds.

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. 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 -

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SBI Mutual Fund

CATEGORIES OF MUTUAL FUND:

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SBI Mutual Fund

Mutual funds can be classified as follow :

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

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SBI Mutual Fund

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

funds have relatively low liquidity.

Based on their investment objective:

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

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

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

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

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

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

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

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

tracked. Their portfolio mirrors the benchmark index both in terms of composition

and individual stock 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.

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

sector fund will invest in banking stocks.

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

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Balanced fund: Their investment portfolio includes both debt and equity. As a result, on

the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal

mutual funds vehicle for investors who prefer spreading their risk across various instruments.

Following are balanced funds classes:

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

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

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

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

exclusively in fixed-income instruments like bonds, debentures, Government of India

securities; and money market instruments such as certificates of deposit (CD),

commercial paper (CP) and call money. Put your money into any of these debt funds

depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large

portion being invested in call money market.

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

and T-bills.

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

instruments which have variable coupon rate.

iv) Arbitrage fund- They generate income through arbitrage opportunities due to

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.

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SBI Mutual Fund

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.

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.

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SBI Mutual Fund

RISK V/S. RETURN:

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SBI Mutual Fund

Chapter – 2

Company Profile

INTRODUCTION TO SBI MUTUAL FUND

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SBI Mutual Fund

SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the

country with an investor base of over 5.4 million and over 20 years of rich

experience in fund management consistently delivering value to its investors.

SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank of

India' one of India's largest banking enterprises, and Société Générale Asset

Management (France), one of the world's leading fund management companies

that manages over US$ 500 Billion worldwide.

Today the fund house manages over Rs 28,076.63 crores of assets and has a

diverse profile of investors actively parking their investments across 36 active

schemes. In 20 years of operation, the fund has launched 38 schemes and

successfully redeemed 15 of them, and in the process, has rewarded our

investors with consistent returns. Schemes of the Mutual Fund have time after

time outperformed benchmark indices, honored us with 15 awards of

performance and have emerged as the preferred investment for millions of

investors.

SBI Funds Management Pvt. Ltd. serves its vast family of investors through a

network of over 130 points of acceptance, 28 Investor Service Centres, 46

Investor Service Desks and 56 District Organizers.SBI Mutual is the first bank-

sponsored fund to launch an offshore fund – Resurgent India Opportunities Fund.

Growth through innovation and stable investment policies is the SBI MF credo.

Details of Company:

Name of the Mutual Fund:

SBI Mutual Fund Date of Setup of Mutual Fund: June 29, 1987

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SBI Mutual Fund

Name of Sponsor: State Bank of India Name of Trustee Company:

SBI Mutual Fund Trustee Company Private Limited

Ownership Pattern: Domestic-63% (State Bank of India) Foreign - 37% (Société Générale Asset Management, France)

Name of the Asset Management Company:

SBI Funds Management Private Limited Date of Incorporation of AMC:

February 7, 1992

Registrar:

Computer Age Management Services (Private) Ltd., Chennai

About SBI Mutual Fund

Key Personals:

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SBI Mutual Fund

Chairman: Mr. O.P. Bhatt

Managing Director & CEO: Mr. Achal K. Gupta

Chief Operating Officer: Mr. Ashwini K. Jain

Dy. Chief Executive Officer: Mr. Didier Turpin

Chief Investment Officer: Mr. Navneet Munot

Name of Trustees Dr. Arvind Virmani – Chairman

Mr. Raj Nair

Mr. S. K. Hariharan

Prof. S. K. Barua

PRODUCTS OF SBI MUTUAL FUND

Equity schemes

The investments of these schemes will predominantly be in the stock markets

and endeavor will be to provide investors the opportunity to benefit from the

higher returns which stock markets can provide. However they are also

exposed to the volatility and attendant risks of stock markets and hence should

be chosen only by such investors who have high risk taking capacities and are

willing to think long term. Equity Funds include diversified Equity Funds,

Sectoral Funds and Index Funds. Diversified Equity Funds invest in various

stocks across different sectors while sectoral funds which are specialized

Equity Funds restrict their investments only to shares of a particular sector

and hence, are riskier than Diversified Equity Funds. Index Funds invest

passively only in the stocks of a particular index and the performance of such

funds move with the movements of the index.

Magnum COMMA Fund

Magnum Equity Fund

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Magnum Global Fund

Magnum Index Fund

Magnum Midcap Fund

Magnum Multicap Fund

Magnum Multiplier plus 1993

Magnum Sectoral Funds Umbrella

MSFU- Emerging Business Fund

MSFU- IT Fund

MSFU- Pharma Fund

MSFU- Contra Fund

MSFU- FMCG 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

Debt schemes

Debt Funds invest only in debt instruments such as Corporate Bonds,

Government Securities and Money Market instruments either completely

avoiding any investments in the stock markets as in Income Funds or Gilt

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Funds or having a small exposure to equities as in Monthly Income Plans or

Children's Plan. Hence they are safer than equity funds. At the same time the

expected returns from debt funds would be lower. Such investments are

advisable for the risk-averse investor and as a part of the investment portfolio

for other investors.

Magnum Children’s benefit Plan

Magnum Gilt Fund

Magnum Income Fund

Magnum Insta Cash Fund

Magnum Income Fund- Floating Rate Plan

Magnum Income Plus Fund

Magnum Insta Cash Fund -Liquid Floater Plan

Magnum Monthly Income Plan

Magnum Monthly Income Plan - Floater

Magnum NRI Investment Fund

SBI Premier Liquid Fund

BALANCED SCHEMES

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SBI Mutual Fund

Magnum Balanced Fund invests in a mix of equity and debt investments.

Hence they are less risky than equity funds, but at the same time provide

commensurately lower returns. They provide a good investment opportunity to

investors who do not wish to be completely exposed to equity markets, but is

looking for higher returns than those provided by debt funds.

Magnum Balanced Fund

Top 15 Mutual Funds in India:

Assets Under Management (AUM) as at the end of JUL-2009 (Rs in Lakhs)

Sr. No Mutual Fund Name

Average AUM For The Month

Excluding Fund of Fund Of Funds -

Funds - Domestic but Domestic

including Fund of  Funds - Overseas  

1. Birla Sun Life Mutual Fund 5733178.38 1781.192. Deutsche Mutual Fund 1430882.92 03. DSP Black Rock Mutual Fund 1726245.01 04. Franklin Templeton Mutual Fund 2763009.83 21548.365. HDFC Mutual Fund 8336610.28 06. ICICI Prudential Mutual Fund 7332855.79 2751.167. IDFC Mutual Fund 2270876.85 1279.438. Kotak Mahindra Mutual Fund 3124639.8 15674.939. LIC Mutual Fund 3509369.28 010.

Reliance Mutual Fund 10833438.02 011.

Religare Mutual Fund 1223954.32 012.

SBI Mutual Fund 3415791.97 013.

Sundaram BNP Paribas Mutual Fund 1334677.03 014.

Tata Mutual Fund 2059359.02 015.

UTI Mutual Fund 6725189.19 0 Grand Total 68994612.41 73328.38

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0

2000000

4000000

6000000

8000000

10000000

12000000

1

Asse

t Und

er M

anag

emen

t

Birla Sun Life MutualFund

Deutsche Mutual Fund

DSP BlackRock MutualFund

Franklin TempletonMutual Fund

HDFC Mutual Fund

ICICI Prudential MutualFund

IDFC Mutual Fund

Kotak Mahindra MutualFund

LIC Mutual Fund

Reliance Mutual Fund

Religare Mutual Fund

SBI Mutual Fund

Sundaram BNP ParibasMutual Fund

Tata Mutual Fund

UTI Mutual Fund

COMPETITORS OF SBI MUTUAL FUND

Some of the main competitors of SBI Mutual Fund in Dehradoon are as

Follows:

i. ICICI Mutual Fund

ii. Reliance Mutual Fund

iii. UTI Mutual Fund

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SBI Mutual Fund

iv. Birla Sun Life Mutual Fund

v. Kotak Mutual Fund

vi. HDFC Mutual Fund

vii. Sundaram Mutual Fund

viii. LIC Mutual Fund

ix. Principal

x. Franklin Templeton

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SBI Mutual Fund

AWARDS AND ACHIEVEMENTS

SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award -

8 times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year

2005-2006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the

Year Award 2007 and 5 Awards for our schemes.

2009

2008

2007

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2006

2005

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Chapter - 3

Objectives and scope

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OBJECTIVES OF THE STUDY

1. To find out the Preferences of the investors for Asset Management

Company.

2. To know the Preferences for the portfolios.

3. To know why one has invested or not invested in SBI Mutual fund

4. To find out the most preferred channel.

5. To find out what should do to boost Mutual Fund Industry.

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SBI Mutual Fund

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 research was carried on in Dehradoon. I had been sent at one of the branch of

State Bank of India Dehradoon where I completed my Project work. I surveyed on

my Project Topic “A study of preferences of the Investors for investment in Mutual

Fund” on the visiting customers of the SBI Boring Canal Road Branch.

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.

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SBI Mutual Fund

Chapter – 4

Research

Methodology

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RESEARCH METHODOLOGY

This report is based on primary as well secondary data, however primary data

collection was given more importance since it is overhearing factor in attitude

studies. One of the most important users of research methodology is that it helps in

identifying the problem, collecting, analyzing the required information data and

providing an alternative solution to the problem .It also helps in collecting the vital

information that is required by the top management to assist them for the better

decision making both day to day decision and critical ones.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the

reference. Research has been done by primary data collection, and primary data has

been collected by interacting with various people. The secondary data has been

collected through various journals and websites.

Duration of Study:

The study was carried out for a period of two months, from 30 th May to 30th July

2008.

Sampling:

Sampling procedure:

The sample was selected of them who are the customers/visitors of State Bank if

India, Bank Square, Sector-17, Chandigarh, irrespective of them being investors or

not or availing the services or not. It was also collected through personal visits to

persons, by formal and informal talks and through filling up the questionnaire

prepared. The data has been analyzed by using mathematical/Statistical tool.

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SBI Mutual Fund

Sample size:

The sample size of my project is limited to 200 people only. Out of which only 120

people had invested in Mutual Fund. Other 80 people did not have invested in Mutual

Fund.

Sample design:

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

Limitation:

Some of the persons were not so responsive.

Possibility of error in data collection because many of investors may have not given

actual answers of my questionnaire.

Sample size is limited to 200 visitors of State Bank of India, Bank Square, Sector-17,

Chandigarh, out of these only 120 had invested in Mutual Fund. The sample size may

not adequately represent the whole market.

Some respondents were reluctant to divulge personal information which can

affect the validity of all responses.

The research is confined to a certain part of Chandigarh.

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SBI Mutual Fund

Chapter – 5

Data Analysis &

Interpretation

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SBI Mutual Fund

ANALYSIS & INTERPRETATION OF THE DATA

1. (a) Age distribution of the Investors of Chandigarh

Age

Group

<= 30

31-35

36-40

41-45

46-50

>50

No. of

Investo

rs

16 20 30 24 18 12

Interpretation:

According to this chart out of 120 Mutual Fund investors of Chandigarh the most are

in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group

of 41-45yrs i.e. 20% and the least investors are in the age group of above 50 yrs.

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(b). Educational Qualification of investors of Chandigarh

Educational Qualification

Number of Investors

Graduate/ Post Graduate

88

Under Graduate 20

Others 12

Total 120

Interpretation:

Out of 120 Mutual Fund investors 73% of the investors in Chandigarh are

Graduate/Post Graduate, 17% are Under Graduate and 10% are others.

39

SBI Mutual Fund

c). Occupation of the investors of Chandigarh

Interpretation:

In Occupation group out of 120 investors, 25% are Govt. Employees, 30%

are Pvt. Employees, 37.5% are Businessman, 3% are in Agriculture and 4%

are in others.

(d). Monthly Family Income of the Investors of Chandigarh.

Income Group No. of Investors

<=10,000 5

10,001-15,000 12

Occupation No. of Investors

Govt. Service 30

Pvt. Service 36

Business 45

Agriculture 4

Others 5

40

SBI Mutual Fund

15,001-20,000 28

20,001-30,000 43

>30,000 32

Interpretation:

In the Income Group of the investors of Chandigarh, out of 120 investors,

43% investors that is the maximum investors are in the monthly income

group Rs. 20,001 to Rs. 30,000, Second one i.e. 32% investors are in the

monthly income group of more than Rs. 30,000 and the minimum

investors i.e. 5% are in the monthly income group of below Rs. 10,000

(2) Investors invested in different kind of investments.

Kind of Investments No. of Respondents

Saving A/C 195

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SBI Mutual Fund

Fixed deposits 134Insurance 152Mutual Fund 120Post office (NSC) 53Shares/Debentures 72Gold/Silver 125 Real Estate 107

Interpretation: From the above graph it can be inferred that out of 200 people,

97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits,

60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in

Gold/Silver and 32.5% in Real Estate.

3. Preference of factors while investing

Factors (a) (b) Low (c) High (d)

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SBI Mutual Fund

Liquidit

y

Risk Return Trust

No. of

Respondent

s

40 60 64 36

Interpretation:

Out of 200 People, 32% People prefer to invest where there is High Return, 30%

prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer

Trust.

4. Awareness about Mutual Fund and its Operations

Response Yes No

No. of Respondents 135 65

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SBI Mutual Fund

Interpretation:

From the above chart it is inferred that 67% People are aware of Mutual Fund and its

operations and 33% are not aware of Mutual Fund and its operations.

5. Source of information for customers about Mutual Fund

Source of information No. of Respondents

Advertisement 18

44

SBI Mutual Fund

Peer Group 25

Bank 30

Financial Advisors 62

Interpretation:

From the above chart it can be inferred that the Financial Advisor is the most

important source of information about Mutual Fund. Out of 135 Respondents, 46%

know about Mutual fund Through Financial Advisor, 22% through Bank, 19%

through Peer Group and 13% through Advertisement.

6. Investors invested in Mutual Fund

Response No. of Respondents

45

SBI Mutual Fund

YES 120

NO 80

Total 200

Interpretation:

Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested

in Mutual Fund.

7. Reason for not invested in Mutual Fund

Reason No. of

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SBI Mutual Fund

Respondents

Not Aware 65

Higher Risk 5

Not any Specific

Reason

10

Interpretation:

Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of

Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any

specific reason.

8. Investors invested in different Assets Management Co. (AMC)

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SBI Mutual Fund

Name of AMC No. of InvestorsSBIMF 53

UTI 70HDFC 30

Reliance 85ICICI Prudential 56

Kotak 40Others 70

Interpretation:

In Chandigarh most of the Investors preferred Reliance Mutual Fund and UTI. Out of

120 Investors 71% have invested in Reliance, 58% have invested in UTI, only 44%

have invested in SBIMF, 47% in ICICI Prudential, 33% in Kotak and 30% in HDFC.

9. Reason for invested in SBIMF

Reason No. of

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SBI Mutual Fund

Respondents

Associated with SBI 23

Better Return 15

Agents Advice 15

Interpretation:

Out of 53 investors of SBIMF 44% have invested because of its association with

Brand SBI, 28% invested on Agent’s Advice, 28% invested because of better return.

10. Reason for not invested in SBIMF

Reason No. of

Respondents

49

SBI Mutual Fund

Not Aware 25

Less Return 18

Agent’s Advice 22

Interpretation:

Out of 65 people who have not invested in SBIMF, 38% were not aware with

SBIMF, 28% do not have invested due to less return and 34% due to Agent’s Advice.

11. Preference of Investors for future investment in Mutual Fund

Name of AMC No. of InvestorsSBIMF 76

UTI 45

50

SBI Mutual Fund

HDFC 35Reliance 82

ICICI Prudential 71Kotak 60Others 75

Interpretation:

Out of 120 investors, 68% prefer to invest in Reliance, 59% in ICICI Prudential, 63%

in SBIMF, 62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual

Fund.

12. Channel Preferred by the Investors for Mutual Fund Investment

Channel Financial

Advisor

Bank AMC

51

SBI Mutual Fund

No. of

Respondents

72 18 30

Interpretation:

Out of 120 Investors 60% preferred to invest through Financial Advisors, 25%

through AMC and 15% through Bank.

13. Mode of Investment Preferred by the Investors

Mode of

Investment

One time

Investment

Systematic Investment Plan

(SIP)

52

SBI Mutual Fund

No. of

Respondents

78 42

Interpretation:

Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through

Systematic Investment Plan.

14. Preferred Portfolios by the Investors

Portfolio No. of InvestorsEquity 56

Debt 20

53

SBI Mutual Fund

Balanced 44

Interpretation:

From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and

17% preferred Debt portfolio

15. Option for getting Return Preferred by the Investors

Option Dividend

Payout

Dividend

Reinvestmen

t

Gr

ow

th

54

SBI Mutual Fund

No. of

Respondents

25 10 8

5

Interpretation:

From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout

and 8% preferred Dividend Reinvestment Option.

16. Preference of Investors whether to invest in Sectoral Funds

Response No. of Respondents

Yes 25

No 95

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SBI Mutual Fund

Interpretation:

Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because

there is maximum risk and 21% prefer to invest in Sectoral Fund.

Chapter – 6

56

SBI Mutual Fund

Findings and

Conclusion

Findings

In Chandigarh in the Age Group of 36-40 years were more in numbers.

The second most Investors were in the age group of 41-45 years and the

least were in the age group of above 50 years.

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SBI Mutual Fund

In Chandigarh most of the Investors were Graduate or Post Graduate and

below HSC there were very few in numbers.

In Occupation group most of the Investors were Businessman, the second

most Investors were Private employees, third were Govt. employees and

the least were associated with Agriculture.

In family Income group, between Rs. 20,001- 30,000 were more in

numbers, the second most were in the Income group of more than

Rs.30,000 and the least were in the group of below Rs. 10,000.

About all the Respondents had a Saving A/c in Bank, 67% Invested in

Fixed Deposits, Only 60% Respondents invested in Mutual fund.

Mostly Respondents preferred High Return while investment, the second

most preferred Low Risk then liquidity and the least preferred Trust.

Only 67% Respondents were aware about Mutual fund and its operations

and 33% were not.

Among 200 Respondents only 60% had invested in Mutual Fund and

40% did not have invested in Mutual fund.

Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told

there is not any specific reason for not invested in Mutual Fund and 6%

told there is likely to be higher risk in Mutual Fund.

Most of the Investors had invested in Reliance or UTI Mutual Fund,

ICICI Prudential has also good Brand Position among investors, SBIMF

places after ICICI Prudential according to the Respondents.

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SBI Mutual Fund

Out of 53 investors of SBIMF 44% have invested due to its association

with the Brand SBI, 28% Invested because of Advisor’s Advice and 28%

due to better return.

Most of the investors who did not invested in SBIMF due to not Aware

of SBIMF, the secondly due to Agent’s advice and Less Return.

For Future investment the maximum Respondents preferred Reliance

Mutual Fund, the second most preferred SBI Mutual Fund, ICICI

Prudential has been preferred after them.

60% Investors preferred to Invest through Financial Advisors, 25%

through AMC (means Direct Investment) and 15% through Bank.

65% preferred One Time Investment and 35% preferred SIP out of both

type of Mode of Investment.

The most preferred Portfolio was Equity, the second most was Balance

(mixture of both equity and debt), and the least preferred Portfolio was

Debt portfolio.

Maximum Number of Investors Preferred Growth Option for returns, the

second most preferred Dividend Payout and then Dividend Reinvestment.

Most of the Investors did not want to invest in Sectoral Fund, only 21%

wanted to invest in Sectoral Fund.

Conclusion

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SBI Mutual Fund

Running a successful Mutual Fund requires complete understanding of

the peculiarities of the Indian Stock Market and also the psyche of the

small investors. This study has made an attempt to understand the

financial behavior of Mutual Fund investors in connection with the

preferences of Brand (AMC), Products, Channels etc. I observed that

many of people have fear of Mutual Fund. They think their money will

not be secure in Mutual Fund. They need the knowledge of Mutual Fund

and its related terms. Many of people do not have invested in mutual

fund due to lack of awareness although they have money to invest. As the

awareness and income is growing the number of mutual fund investors

are also growing.

“Brand” plays important role for the investment. People invest in those

Companies where they have faith or they are well known with them.

There are many AMCs in Chandigarh but only some are performing well

due to Brand awareness. Some AMCs are not performing well although

some of the schemes of them are giving good return because of not

awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc.

they are well known Brand, they are performing well and their Assets

Under Management is larger than others whose Brand name are not well

known like Principle, Sunderam, etc.

Distribution channels are also important for the investment in mutual

fund. Financial Advisors are the most preferred channel for the

investment in mutual fund. They can change investors’ mind from one

60

SBI Mutual Fund

investment option to others. Many of investors directly invest their

money through AMC because they do not have to pay entry load. Only

those people invest directly who know well about mutual fund and its

operations and those have time.

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SBI Mutual Fund

Chapter – 7

Suggestions

And

Recommendations

Suggestions and Recommendations

The most vital problem spotted is of ignorance. Investors should be

made aware of the benefits. Nobody will invest until and unless he is

62

SBI Mutual Fund

fully convinced. Investors should be made to realize that ignorance is no

longer bliss and what they are losing by not investing.

Mutual funds offer a lot of benefit which no other single option could

offer. But most of the people are not even aware of what actually a

mutual fund is? They only see it as just another investment option. So the

advisors should try to change their mindsets. The advisors should target

for more and more young investors. Young investors as well as persons

at the height of their career would like to go for advisors due to lack of

expertise and time.

Mutual Fund Company needs to give the training of the Individual

Financial Advisors about the Fund/Scheme and its objective, because

they are the main source to influence the investors.

Before making any investment Financial Advisors should first

enquire about the risk tolerance of the investors/customers, their need and

time (how long they want to invest). By considering these three things

they can take the customers into consideration.

Younger people aged under 35 will be a key new customer group into

the future, so making greater efforts with younger customers who show

some interest in investing should pay off.

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SBI Mutual Fund

Customers with graduate level education are easier to sell to and there is

a large untapped market there. To succeed however, advisors must

provide sound advice and high quality.

Systematic Investment Plan (SIP) is one the innovative products

launched by Assets Management companies very recently in the industry.

SIP is easy for monthly salaried person as it provides the facility of do

the investment in EMI. Though most of the prospects and potential

investors are not aware about the SIP. There is a large scope for the

companies to tap the salaried persons.

BIBLIOGRAPHY

NEWS PAPERS

64

SBI Mutual Fund

OUTLOOK MONEY

TELEVISION CHANNEL (CNBC AAWAJ)

MUTUAL FUND HAND BOOK

FACT SHEET AND STATEMENT

WWW.SBIMF.COM

WWW.MONEYCONTROL.COM

WWW.AMFIINDIA.COM

WWW.ONLINERESEARCHONLINE.COM

WWW. MUTUALFUNDSINDIA.COM

QUESTIONNAIRE

65

SBI Mutual Fund

A study of preferences of the investors for investment in mutual

funds.

1. Personal Details:

Name Contact No.Age

Address

Qualification: Please tick (√)

Occupation: Please tick (√)

Govt.

Ser

Pvt. Ser Business Agriculture Others

What is your monthly family income approximately? Please tick (√)

Up to Rs.10,000

Rs. 10,001 to 15000

Rs. 15,001 to 20,000

Rs. 20,001 to 30,000

Rs. 30,001 and above

2. What kind of investments you have made so far? Please tick (√) All applicable.

1. Saving

account

2. Fixed

deposits

3.

Insuranc

e

4. Mutual

Fund

5. Post Office-

NSC, etc

6.

Shares/Debent

ures

7. Gold/

Silver

8. Real

Estate

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

(a) Liquidity (b) Low Risk (c) High

Return

(d) Trust

Graduation/PG Under Graduate Others

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SBI Mutual Fund

4. Are you aware about Mutual Funds and their operations? Please tick (√). Yes No 5. If yes, how did you know about Mutual Fund? Please tick (√).

a).

Advertisemen

t

b). Peer

Group

c). Banks d). Financial

Advisors

6. Have you ever invested in Mutual Fund? Yes No 7. If not invested in Mutual Fund then why? Please tick (√).

A). Not aware of

MF

B). Higher Risk C). Not Any Specific

Reason

8. If yes, in which Mutual Fund you have invested? Please tick (√) All applicable.

a).

SBIM

F

b).

UT

I

c).

HDF

C

d).

Relianc

e

e).

Kota

k

f). Other. specify

9. If invested in SBIMF, you do so because (Please tick (√), all applicable).

a). SBIMF is associated with State Bank of India.

b). They have a record of giving good returns year after year.

c). Agent’ Advice

10. If NOT invested in SBIMF, you do so because (Please tick (√) all applicable).

a). You are not aware of SBIMF.

b). SBIMF gives less return compared to the others.

c). Agent’ Advice

11. When you plan to invest your money in asset management co. which AMC will you prefer?

67

SBI Mutual Fund

ASSET MANAGEMENT COMPANY (√)

a). SBIMF

b). UTI

c). Reliance

d). HDFC

e). Kotak

f). ICICI

g). other

Suggested

12. Which Channel will you prefer while investing in Mutual Fund? Please tick (√)

a). Financial Advisor b). Bank c). AMC

13. When you invest in Mutual Funds which mode of investment will you prefer? Please tick (√)

a). One Time Investment b). Systematic Investment Plan (SIP)

14. When you want to invest which type of funds would you choose?

a). Having Only Debt Portfolio

b). Having Debt & Equity Portfolio

c). Only Equity Portfolio.

15. How would you like to receive the returns every year? Please tick (√)

a). Dividend

payout

b). Dividend re-

investment

c). Growth in NAV

16. Instead of general Mutual Funds, would you like to invest in sectorial funds? Please tick (√). Yes No

68