SUMMER TRAINING PROJECT REPORT ON SALE OF SBI MUTUAL FUND PRODUCTS BY SBI V/S OTHER PRIVATE BANKS At STATE BANK OF INDIA SUBMITTED IN PARTIAL FULFILMENT FOR THE AWARD OF THE DEGREE MASTER OF BUSINESS ADMINISTRATION (FINANCIAL MARKETS) 2012-2014 Under the guidance of Assistant Professor DR. SANCHITA BANSAL SUBMITTED BY SURAJ KUMAR KARN ENROLLMENT NO.: 07116659312 UNIVERSITY SCHOOL OF MANAGEMENT STUDIES 1
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
SUMMER TRAINING PROJECT REPORT
ON
SALE OF SBI MUTUAL FUND PRODUCTS BY SBI V/S OTHER
PRIVATE BANKS
At
STATE BANK OF INDIA
SUBMITTED IN PARTIAL FULFILMENT FOR THE AWARD OF THE DEGREE
MASTER OF BUSINESS ADMINISTRATION
(FINANCIAL MARKETS) 2012-2014
Under the guidance of Assistant Professor
DR. SANCHITA BANSAL
SUBMITTED BY
SURAJ KUMAR KARN
ENROLLMENT NO.: 07116659312
UNIVERSITY SCHOOL OF MANAGEMENT STUDIES
(GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY)
Dwarka, Delhi
1
DECLARATION
I hereby state that the Project Report titled “SALE OF SBI MUTUAL FUND PRODUCTS BY
SBI V/S OTHER PRIVATE BANKS ” submitted in partial fulfilment of the degree of Master
of Business Administration (Financial Markets) of Guru Gobind Singh Indraprastha
University, New Delhi is an original work done entirely by me and is based entirely on my own
observations. It has not previously formed the basis for the award of any other degree, diploma,
fellowship or any other similar title. The facts presented are true to the best of my knowledge.
SURAJ KUMAR KARN DATE:
Enrollment No. 07116659312
CERTIFICATE
2
This is to certify that the Summer Training Report title “SALE OF SBI MUTUAL FUND
PRODUCTS BY SBI V/S OTHER PRIVATE BANKS” is an original work submitted by
SURAJ KUMAR KARN, Enrollment No. 07116659312, student of MBA (Financial Markets)
2012-2014, student of University School of Management Studies (USMS), Sector-16 C, Dwarka,
Delhi (INDIA) for the partial fulfilment of Master of Business Administration (Financial
Markets) program of Guru Gobind Singh Indraprastha University under the guidance of PROF.
DR. SANCHITA BANSAL and the same has not been submitted to any other University or
Institute for award of any Degree/ Diploma.
He has worked under my guidance and I wish him well in all her future endeavours’.
Signature
(Dr. Sanchita Bansal)
Assistant Professor
USMS, GGSIPU
Acknowledgement
Research is a venture that requires co-operation of many people. I feel pleasure in taking this opportunity to express my sincere regards to all the respondents, who helped me in achieving the
3
objectives of my project. This project research could not have been possible without their dedication, patience, assistance and valuable time.
I would also like to thank my supervisor, Prof. SANCHITA BANSAL, New Delhi. Without her guidance, valuable suggestions, constructive criticisms and encouragement throughout the course of the project, the present shape of the work would not have been possible. I am also thankful to all teachers, non-teaching staff and all my friends of the institute for their kind help. And I am also thankful to my corporate guide and my mentor Mr. ASHOK KUMAR KATIYAL (REGIONAL MANAGER), RBO, Noida for their sincere guidance and inspiration in completing this project.
During the planning of this work the most difficult job was the stage of data collection. I want to convey my deepest regards to LALIT SINGH MAHAR, Relationship Manager at Noida, Sector-2 branch of SBI for his guidance and all the employees of STATE BANK OF INDIA, Noida. Without their help, data collection was impossible for the present study.
I am also extremely thankful to all those persons who have positively helped me and customers who responded my questionnaire, around whom the whole project cycle revolves.
I also thank all my friends who have more or less contributed to the preparation of this project report. I will be always indebted to them
EXECUTIVE SUMMARY
4
The study on “SALE OF SBI MUTUAL FUND PRODUCTS BY SBI V/S OTHER PRIVATE
BANKS” has been taken at State Bank of India, at their sector 19 Noida Regional Business
Office, in their SBI MUTUAL FUND PVT.LTD branch. This project tries to understand the
brand SBI which has been established for quite a long time and how Bank can use that brand to
enhance its mutual fund market share. In India, there are many banks offering attractive and
viable mutual fund schemes. Among these, State Bank of India has emerged as the biggest player
in providing different mutual fund products.
The purpose of this study is to understand the brand of SBI and to study the sale of mutual
fund product by SBI and other private banks. And to understand what customers experienced
while taking mutual fund product from SBI and how SBI can enhance its market share of mutual
fund.
The several key areas of the research would be the study of the demographic characteristics of
the customers, analysis of the factors that determine their thought about SBI and their experience
of taking mutual fund and the hindrances caused by them while taking mutual fund.
TABLE OF CONTENTS
5
Declaration
Industry Mentor Certificate
Summer Training Appraisal
Certificate of Completion
Acknowledgement
Executive Summary
Particulars Page No(s)
CHAPTER 1: INTRODUCTION
1.1 Introduction to Mutual Fund 8
1.2 Organisation of a Mutual Fund 10
1.3 Advantage of Mutual Fund 14
1.4 Disadvantage of Mutual Fund 15
1.5 Types of Mutual Fund Schemes 16
1.6 Various criteria to evaluate Mutual Fund 22
1.7 About SBI Mutual Fund 26
1.7.1 SBI – Mutual Fund Product 28
1.8 Channel of selling Mutual Funds 31
1.9 Objectives 37
1.10 SWOT Analysis of Mutual Fund 40
CHAPTER 2: RESEARCH DESIGN AND RESEARCH METHODOLOGY 42
2.1 Research Design
2.2 Research Methodology
6
CHAPTER 3: COMPANY PROFILE 43
CHAPTER 4: DATA ANALYSIS AND INTERPRETATION 48
May month data of Noida Region
CHAPTER 5: QUESTIONAIRE & ITS INTERPRETATION 54
CHAPTER 6: RECOMMENDATION 66
CHAPTER 7: CONCLUSION 68
CHAPTER 8: BIBLIOGRAPHY 70
Chapter- 1
7
Introduction
1.1 Introduction to Mutual Fund
An investment vehicle that is made up of a pool of funds collected from many investors for the
purpose of investing in securities such as stocks, bonds, money market instruments and similar
assets. Mutual funds are dynamic institution, which plays a crucial role in an economy by
mobilizing savings and investing them in the capital market, thus establishing a link between
savings and the capital market.
A mutual fund is an institution that invests the pooled funds of public to create a diversified
portfolio of securities. Pooling is the key to mutual fund investing. Each mutual fund has a
specific investment objective and tries to meet that objective through active portfolio
management.
Mutual fund as an investment company combines or collects money of its shareholders and
invests those funds in variety of stocks, bonds, and money market instruments. The latter
include securities, commercial papers, certificates of deposits, etc. Mutual funds provide the
investor with professional management of funds and diversification of investment.
Investors who invest in mutual funds are provided with units to participate in stock markets.
These units are investment vehicle that provide a means of participation in the stock market for
people who have neither the time, nor the money, nor perhaps the expertise to undertake the
direct investment in equities. On the other hand they also provide a route into specialist markets
where direct investment often demands both more time and more knowledge than an investor
may possess.
The price of units in any mutual fund is governed by the value of underlying securities. The
value of an investor’s holding in a unit can therefore, like an investment in share, can go down as
well as up. Hence it is said that mutual funds are subjected to market risk. Mutual fund cannot
guarantee a fixed rate of return. It depends on the market condition. If a particular scheme is
performing well then more return can be expected.
It also depends on the fund manager expertise knowledge. It is also seen that people invest in
particular funds depending on who the fund manager is.
8
The following diagram shows the working of mutual fund
This diagram signifies the importance of Mutual Fund.
A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is invested by the fund manager in different types of
securities depending upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned through these investments and the
capital appreciations realized by the schemes 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 person as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a relatively
low cost.
Since small investors generally do not have adequate time, knowledge, experience & resources
for directly accessing the capital market, they have to rely on an intermediary, which undertakes
informed investment decisions & provides consequential benefits of professional expertise.
9
The advantage of Mutual Funds to the investors is professionally managed, low transaction cost,
liquidity, transparency, well regulated, diversified portfolios & tax benefits. By pooling their
assets through mutual funds, investors achieve economies of scale.
The portfolio diversification ensures risk minimization. The criticality of such a measure comes
in when you factor in the fluctuations that characterize stock markets. The interest of the
investors is protected by the SEBI, which acts as a watchdog. Mutual funds are governed by
SEBI (Mutual Funds) regulations, 1996.
1.2 ORGANISATION OF A MUTUAL FUNDThere are many entities involved and the diagram below illustrates the organizational set up of a
mutual fund:
Mutual funds have a unique structure not shared with other entities such as companies or firms.
It is important for employees & agents to be aware of the special nature of this structure, because
it determines the rights & responsibilities of the fund’s constituents viz., sponsors, trustees,
custodians, transfer agents & of course, the fund & the Asset Management Company(AMC) the
legal structure also drives the inter-relationships between these constituents.
The structure of the mutual fund India is governed by the SEBI (Mutual Funds) regulations,
1996. These regulations make it mandatory for mutual funds to have a structure of sponsor,
trustee, AMC, custodian. The sponsor is the promoter of the mutual fund,& appoints the trustees.
The trustees are responsible to the investors in the mutual fund, & appoint the AMC for
managing the investment portfolio. The AMC is the business face of the mutual fund, as it
manages all affairs of the mutual fund. The mutual fund & the AMC have to be registered with
10
SEBI. Custodian, who is also registered with SEBI, holds the securities of various schemes of the
fund in its custody.
Sponsor:
The sponsor is the promoter of the mutual fund. The sponsor establishes the Mutual fund &
registers the same with SEBI. He appoints the trustees, Custodians & the AMC with prior
approval of SEBI, & in accordance with SEBI regulations. He must have at least five year track
record of business interest in the financial markets. Sponsor must have been profit making in at
least three of the above five years. He must contribute at least 40% of the capital of the AMC.
Trustees:
The Mutual Fund may be managed by a Board of trustees of individuals, or a trust company – a
corporate body. Most of the funds in India are managed by board of trustees. While the board of
trustees is governed by the provisions of the Indian trust act, where the trustee is the corporate
body, it would also be required to comply with the provisions of the companies act, 1956. the
board of trustee company, as an independent body, act as protector of the unit-holders interest.
The trustees don’t directly manage the portfolio of securities. For this specialist function, they
appoint an AMC. They ensure that the fund is managed by AMC as per the defined objectives &
in accordance with the trust deed & SEBI regulations.
Asset Management Company(AMC):
The role of an Asset management companies is to act as the investment manager of the trust.
They are the ones who manage money of investors. An AMC takes decisions, compensates
investors through dividends, maintains proper accounting & information for pricing of units,
calculates the NAV, & provides information on listed schemes. It also exercises due diligence on
investments & submits quarterly reports to the trustees. AMCs have been set up in various
countries internationally as an answer to the global problem of bad loans.
Bad loans are essentially of two types: bad loans generated out of the usual banking operations or
bad lending, and bad loans which emanate out of a systematic banking crisis.
It is in the latter case that banking regulators or governments try to bail out the banking system of
a systematic accumulation of bad loans which acts as a drag on their liquidity, balance sheets and
generally the health of banking. So, the idea of AMCs or ARCs is not to bail out banks, but to
bail out the banking system itself.
11
Types of AMCs in Indian Context:
The following are the various types of AMCs we have in India:
AMCs owned by banks.
AMCs owned by financial institutions.
AMCs owned by Indian private sector companies.
AMCs owned by foreign institutional investors.
AMCs owned by Indian & foreign sponsors.
Custodian:
Often an independent organization, it takes custody all securities & other assets of mutual fund.
Its responsibilities include receipt & delivery of securities collecting income-distributing
dividends, safekeeping of the unit & segregating assets & settlements between schemes.
Mutual fund is managed either trust company board of trustees. Board of trustees & trust are
governed by provisions of Indian trust act. If trustee is a company, it is also subject Indian
Company Act. Trustees appoint AMC in consultation with the sponsors & according to SEBI
regulation. All mutual fund schemes floated by AMC have to be approved by trustees. Trustees
review & ensure that net worth of the company is according to stipulated norms, every quarter.
Though the trust is the mutual fund, the AMC is its operational face. The AMC is the first
functionary to be appointed, & is involved in appointment of all other functionaries. The AMC
structures the mutual fund products, markets them & mobilizes fund, manages the funds &
services to the investors.
A draft offer document is to be prepared at the time of launching the fund. Typically, it pre-
specifies investment objectives of the fund, the risk associated, the cost involved in the process
& the broad rules to enter & to exit from the fund & other areas of operation. In India as in most
countries, these sponsors need approval from a regulator, SEBI in our case. SEBI looks at track
records of the sponsor & its financial strength granting approval to the fund for commencing
operations.
12
A sponsor then hires an asset management company to invest the funds according to the
investment objective. It also hires another entity to be the custodian of the assets of the fund &
perhaps the third one to handle registry work for the unit holder of the fund.
Registrars & Transfer Agent(R & T Agent):
The Registrars & Transfer Agents(R & T Agents) are responsible for the investor servicing
function, as they maintain the records of investors in mutual funds. They process investor
applications; record details provide by the investors on application forms; send out to investors
details regarding their investment in the mutual fund; send out periodical information on the
performance of the mutual fund; process dividend payout to investor; incorporate changes in
information as communicated by investors; & keep the investor record up-to-date, by recording
new investors & removing investors who have withdrawn their funds.
SEBI – Securities and Exchange Board of India:
Securities and Exchange Board of India (SEBI) is a board (autonomous body) created by the
Government of India in 1988 and given statutory form in 1992 with the SEBI Act 1992 with its
head office at Mumbai.
The Securities and Exchange Board of India is perhaps the most important regulatory body.
Similar to the Securities Exchange Commission in the US, it is the authority that has to always
be on its toes. More so, when the markets are doing well and there are a spate of IPOs (initial
public offerings) or FPO’s (follow-on public offerings) like now.
Its main mandate is to protect the interest of investors in the securities markets and to promote
the development of and to regulate the securities markets so as to establish a dynamic and
efficient securities market.
When investors have complaints against listed companies or registered intermediaries, and if
they are not solved directly between the parties concerned, or if the investor is not happy with the
response then SEBI acts as the nodal agency for addressing these complaints.
SEBI has listed certain categories of grievances for which investors can file complaints with it.
Non-receipt of refund order or allotment advice in case of investment in IPO's, FPO's and
rights issues
Non-receipt of dividend from listed companies
Non-receipt of share certificates after transfer from listed companies
Non-receipt of debentures after transfer or non-receipt of interest or principal on
redemption and non-receipt of interest on delayed repayment
Non-receipt of rights offer letter
1.3 ADVANTAGES OF MUTUAL FUND
S. No.
Advantage Particulars
1.Portfolio Diversification
Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small).
2.Professional Management
Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own.
3. Less RiskInvestors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities.
4.Low Transaction Costs
Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors.
5. LiquidityAn investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid.
6.Choice of Schemes
Mutual funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options
14
7. TransparencyFunds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the regulator.
8. Flexibility
Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes.
9. SafetyMutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.
1.4 Disadvantage of Investing Through Mutual Funds
S. No.
Disadvantage Particulars
1.Risk Association
Risk is associated while investing in mutual fund.
2. No assurance Mutual funds, although regulated by the government, are not insured against losses.
3.
Difficulty in Selecting a Suitable Fund Scheme
Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. For this, they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.
15
1.5 TYPES OF MUTUAL FUND SCHEMES:
By Structure
o Open-ended schemes
o Close-ended schemes
o Interval schemes
By Investment Objective
o Growth schemes
o Income schemes
o Balance schemes
o Money Market schemes
Other types of schemes
Tax Saving schemes
Special schemes
Index schemes
Sector specific schemes
Schemes according to maturity period:
A mutual fund scheme can be classified into open-ended scheme or close-ended scheme
depending on its maturity period.
Open-ended Fund / Scheme
16
An open-ended fund or scheme is one that is available for subscription and repurchase on a
continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently
buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis.
The key feature of open-end schemes is liquidity.
Close-ended Fund / Scheme
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open
for subscription only during a specified period at the time of launch of the scheme. 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 the units 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 i.e. either repurchase facility or
through listing on stock exchanges. These mutual funds schemes disclose NAV generally on
weekly basis.
Interval scheme
Interval funds combine the features of open-ended & closed ended schemes. They are open for
sale or redemption during pre-determined intervals at NAV related prices.
Schemes according to Investment Objective:
A scheme can also be classified as growth scheme, income scheme, or balanced scheme
considering its investment objective. Such schemes may be open-ended or close-ended schemes
as described earlier. Such schemes may be classified mainly as follows:
Growth / Equity Oriented Schemes
The aim of growth funds is to provide capital appreciation over the medium to long- term. Such
schemes normally invest a major part of their corpus in equities. Such funds have comparatively
high risks.
17
These schemes provide different options to the investors like dividend option, capital
appreciation, etc. and the investors may choose an option depending on their preferences. The
investors must indicate the option in the application form. The mutual funds also allow the
investors to change the options at a later date. Growth schemes are good for investors having a
long-term outlook seeking appreciation over a period of time.
Income / Debt Oriented Scheme
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, Government
securities and money market instruments. Such funds are less risky compared to equity schemes.
These funds are not affected because of fluctuations in equity markets. However, opportunities
of capital appreciation are also limited in such funds. The NAVs of such funds are affected
because of change in interest rates in the country. If the interest rates fall, NAVs of such funds
are likely to increase in the short run and vice versa. However, long term investors may not
bother about these fluctuations.
Balanced Fund
The aim of balanced funds is to provide both growth and regular income as such schemes invest
both in equities and fixed income securities in the proportion indicated in their offer documents.
These are appropriate for investors looking for moderate growth. They generally invest 40-60%
in equity and debt instruments. These funds are also affected because of fluctuations in share
prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared
to pure equity funds.
Money Market or Liquid Fund
These funds are also income funds and their aim is to provide easy liquidity, preservation of
capital and moderate income.
18
These schemes invest exclusively in safer short-term instruments such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money, government securities, etc.
Returns on these schemes fluctuate much less compared to other funds. These funds are
appropriate for corporate and individual investors as a means to park their surplus funds for short
periods.
Other Schemes
Tax Saving Schemes
These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act,
1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity
Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax
benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth
opportunities and risks associated are like any equity-oriented scheme.
Gilt Fund
These funds invest exclusively in government securities. Government securities have no default
risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic
factors as is the case with income or debt oriented schemes.
Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P
NSE 50 index (Nifty), etc these schemes invest in the securities in the same weight age
comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or
fall in the index, though not exactly by the same percentage due to some factors known as
"tracking error" in technical terms. Necessary disclosures in this regard are made in the offer
document of the mutual fund scheme.
There are also exchange traded index funds launched by the mutual funds which are
traded on the stock exchanges.
Sector specific funds / schemes
19
Risk
Money Market FundsFloaters
Income FundsGilt Funds
MIPsBalanced Funds
Diversified Equity FundsR
eturns
These are the funds/schemes which invest in the securities of only those sectors or industries as
specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods
(FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of
the respective sectors/industries. While these funds may give higher returns, they are more risky
compared to diversified funds. Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.
20
21
1.6 VARIOUS CRITERIA TO EVALUATE THE MUTUAL FUNDS
The most important and widely used measures of performance are:-
Basic criterions to evaluate the mutual fund schemes
P/E ratio
Turnover ratio
Expense ratio
Standard deviation
P/E Ratio
A valuation ratio of a company's current share price compared to its per-share earnings.
(EPS).
Calculated as:
EPS is the profit that a company makes on a per share basis. So, if EPS is one, the PE ratio will
reflect the price that an investor will pay for this one rupee of the company's profits. Higher PE
ratio signifies that investor expectation from these shares is higher. This is because the growth in
share price is expected to follow earnings growth.
In general, a high P/E suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story
by itself. It's usually more useful to compare the P/E ratios of one company to other companies
in the same industry, to the market in general or against the company's own historical P/E.
Turnover Ratio
The turnover ratio is the lower of the total sales or total purchases over the period divided by the
average of the net assets. Higher the turnover ratio, greater is the volume of trading carried out
by the fund.
22
The turnover ratio is more important for equity and balanced funds where the trading cost of
equities is substantial. So, each time a fund manager buys and sells, he has to keep in mind that
the cost of buying and selling will eat into the fund's returns. Dynamic equity funds, which can
move rapidly between sectors, will obviously have a higher turnover ratio. Here risk will not be
just of the fund manager making a wrong call on a sector but also that of 51turnover risk. In
comparison a passively managed fund, such as an index fund, will have a lower turnover rate
compared to an active fund as it has to just mirror the index. The only trading here will be due to
investments, redemptions and changes in the index. Also, it is not meaningful to use turnover
ratio for new schemes, which are not fully invested. As the scheme is deploying its assets there
will be more transactions, at least buy orders, as compared to a fund` which is fully invested.
Turnover ratio is less relevant for income funds as brokerage costs are much lower, and hence
they will have a lower potential to eat into returns. So, even though gilt funds may have equally
high turnover as compared to equity funds, the impact of this turnover is much less.
In Short, Turnover ratio is a measure of how a fund's portfolio changes in a year. This ratio
indicates how much a fund is trading. Understanding turnover ratio helps in gaining insights into
a fund's performance.
Expense Ratio
Expense ratio is the percentage of total assets that are spent to run a mutual fund. As returns from
bond funds tend to be similar, expenses become an important factor while comparing bond
funds.
SHARPE RATIO
St= Rp-R
S. D.
WHERE
Rp – Avereage return to portfolio
Rf—Risk free rate of interest
S.D- Standard Deviation
23
Sharpe’s performce index gives a single value to be used for the performance ranking of various
funds or portfolios. Sharpe index measures the risk premium of the portfolio relative to the total
amount of risk in the portfolio. The risk premium is the difference between the portfolio’s
average rate of return and the risk less rate of return. The standard deviation of the portfolio
indicates the risk.
Higher the value of sharpe ratio better the fund has performed. Sharpe ratio can be used to rank
the desirability of funds or portfolios. The fund that has performed well comapred to other will
be ranked first then the others.
TREYNOR RATIO
Ty= Rp—Rf
B
WHERE
Rp- Average return to portfolio
Rf- Risk less rate of interest.
B- Beta coeffecient
Treynor ratio is based on the concept of characteristic line. Characteristic line gives the relation
between a given market return and fund’s return. The fund’s performance is measured in relation
to market performance. The ideal fund’s return rises at a faster rate than the market performance
when the market is moving upwards and its rate of return declines slowly than the market return,
in the decline.
Treynor’s risk premium of the portfolio is the difference between the aveage return and the risk
less rate of return. The risk premium depends on the systematic risk assumed in a portfoilo.
Standard Deviation
Standard Deviation is the most common statistical measure of judging a fund's volatility and risk.
It gives you a 'quality rating' of an average.
24
A measure of the total volatility of a fund is based on the trailing three-year monthly returns. For
debt and gilt funds it is based on average weekly return over the past one and a half years.
The Standard Deviation of an average is the amount by which the numbers that go into an
average deviate from that average. It tells us how closely an average represents the underlying
numbers. A high Standard Deviation may be a measure of volatility, but it does not necessarily
mean that such a fund is worse than one with a low Standard Deviation. If the first fund is a
much higher performer than the second one, the deviation will not matter much.
BETA
Beta describes the relationship between the stock’s return and index returns. There can be direct
or indirect relation between stock’s return and index return. Indirect relations are very rare.
Beta =+1.0
It indicates that one percent change in market index return causes exactly one percent change in
the stock return. It indicates that stock moves along with the market.
Beta= + 0.5
One percent changes in the market index return causes 0.5 percent change in the stock return. It
indicates that it is less volatile compared to market.
Beta=2.0
One percent change in the market index return causes 2 percent change in the stock return. The
stock return is more volatile. The stocks with more than 1 beta value are considered to be very
risky.
1) Negative beta value indicates that the stocks return move in opposite direction to the
market return.
Beta= N*∑XY- (∑X) (∑Y/ N(X*X) * (∑x)
Where
N- No of observation
X- Total of market index value
25
Y- Total of return to Nav
NAV
Net Asset Value or NAV of a mutual fund is the value of one unit of investment in the fund, in
net asset terms.
NAV = Net Assets of the scheme / Number of Units Outstanding
Where Net Assets are calculated as:-
(Market value of investments + current assets and other assets + Accrued income – current
liabilities and other liabilities – less accrued expenses) / No. of Units Outstanding as at the NAV
date
1.7About SBI MUTUAL FUND
STATE BANK OF INDIA - MUTUAL FUND - A partner for life
SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country with an investor
base of over 4.6 million. With over 20 years of rich experience in fund management, SBI MF
brings forward its expertise in consistently delivering value to its investors
Proven Skills in wealth generation:
SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an enviable track record
in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI - India’s largest banking enterprise. The institution has grown
immensely since its inception and today it is India's largest bank, 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 Société General Asset
Management, one of the world’s leading fund management companies that manages over US$
500 Billion worldwide.
Exploiting expertise, compounding growth:
26
In twenty years of operation, the fund has launched 38 schemes and successfully redeemed
fifteen of them. In the process it has rewarded it’s investors handsomely with consistently high
returns.
A total of over 60 lakh investors have reposed their faith in the wealth generation expertise of
the Mutual Fund.
Schemes of the Mutual fund have consistently outperformed benchmark indices and have
emerged as the preferred investment for millions of investors and HNI’s.
Today, the fund manages over Rs. 51,461 crores of assets and has a diverse profile of investors
actively parking their investments across 37 active schemes.
The fund serves this vast family of investors by reaching out to them through network of over
130 points of acceptance, 29 investor service centers, 55 investor service desks and 45 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.
Fund house expertise:
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
near and long term future.
At SBIMF, we devote considerable resources to gain, maintain and sustain our profitable insights
into market movements. We consistently push the envelope to ensure our investors get the
maximum benefits year after year.
Research - the backbone of our Performance
Our expert team of experienced and market savvy researchers prepare comprehensive analytical
and informative reports on diverse sectors and identify stocks that promise high performance in
the future.
This team works in tandem with a compliance and risk-monitoring department, which ensures
minimization of operational risks while protecting the interests of the investors.
27
Quite naturally many of our equity funds have delivered consistent returns to investors and have
repeatedly out performed benchmark indices by wide margins.
Risk Management Team:
The Risk Management unit is a separate division within the organization headed by the Chief
Risk Officer (CRO). A Risk Management Committee, comprising the MD, Deputy CEO, CRO,
COO, CIO and the CMO meets on a regular basis to manage risk within the organization.
The CRO is responsible for risk management over all the functions within the organization
including Investments, Marketing, Operations, etc. Currently, the CRO is an experienced
investment professional and is assisted by a two-member team, one being an investment
Professional with an MBA in Finance and the other being an investment professional deputed
from SGAM.
1.7.1 SBI- MUTUAL FUND PRODUCTS:
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 research design employed for the research involves numbers, so it becomes “Quantitative
Research” which refers to the systematic empirical investigation of social phenomena via
statistical, mathematical or computational techniques. The objective of quantitative research is to
develop and employ mathematical models, theories pertaining to that phenomenon. The process
of measurement is central to quantitative research because it provides the fundamental
connection between empirical observation and mathematical expression of quantitative
relationships. Quantitative data is any data that is in numerical form such as statistics,
percentages etc.
The research is also “Descriptive” in nature. Descriptive research refers to the data and
characteristics about the population being studied.
2.2 Research Methodology:
The research consists of primary data, which means the data collected is first hand in
nature. The method for the collection of primary data was by means of questionnaires designed
which were distributed to many individuals across Noida. The questionnaire was designed and
analyzed into 2 parts. The questionnaire was prepared using some part of opened ended with
maximum of close-ended questions for the generation of the experiences encountered by the
customers. The secondary data for the research was collected from various journals , research
papers and internet. The area of study for this particular project is limited to Noida Region and
for this very purpose, only four commercial bank named ICICI, RELIANCE, HDFC, CITI
BANK, KOTAK MAHINDRA have been selected.
My sample size regarding project is limited to 50 only.
42
CHAPTER-3
COMPANY PROFILE
STATE BANK OF INDIA
State Bank of India is the largest commercial bank in India in terms of assets, deposits,
profits, branches and employees. The origins of State Bank of India date back to 1806 when the
Bank of Calcutta (later called the Bank of Bengal) was established. In 1921, the Bank of Bengal
and two other banks (Bank of Madras and Bank of Bombay) were amalgamated to form the
Imperial Bank of India. In 1955, the Reserve Bank of India acquired the controlling interests of
the Imperial Bank of India and SBI was created by an act of Parliament to succeed the Imperial
Bank of India.
Logo and slogan
The logo of the State Bank of India is a blue circle with a small cut in the bottom that
depicts perfection and the small man the common man - being the center of the bank's
business.
Slogans: "PURE BANKING, NOTHING ELSE", "WITH YOU - ALL THE WAY", "A BANK OF THE COMMON MAN", "THE BANKER TO EVERY INDIAN", "THE NATION BANK ON US.”
43
At the end of 2012-13 figures in crore in Rs.
Total assets 15,66,261.04Total deposits 12,02,739.57Net profits 3,299.22Branches Approx 15,000 (This is not in crore only numbers.)ATMs Approx 27,000 (This is not in crore only numbers.)
The State Bank Group consist of the following Associates Banks.
State Bank of Bikaner & Jaipur
State Bank of Hyderabad
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
Non-Banking Subsidiaries
Apart from its five associate banks, SBI also has the following non banking subsidiaries:
SBI Capital Markets
SBI Cards & Payments Services Private Limited
SBI Life Insurance Company Limited
SBI General Insurance Company Limited
SBI Fund Management Private Limited
SBI Global Factor Limited
SBI Pension Fund Private Limited
SBISG Global Securities Services Private Limited
44
Capital and Shareholding Pattern of SBI
Shareholders % of shares heldPresident of India 61.58Non-residents (FIIs/OCBs/NRIs/GDRs) 11.39Financial Institutions including Insurance Companies/Banks etc.