sbi mutual fund

SUMMER TRAINING

TRAINING REPORTUNDERTAKEN AT

“STATE BANK OF INDIA”

IN

“ THE STUDY OF PREFERENCES OF CONSUMERS REGARDING INVESTMENT IN MUTUAL FUND ”

SUBMITTED IN PARTIAL FULFILLMENT

OF

PG DEGREE IN MASTERS OF COMMERCE

Submitted By:Name:

Mcom semester IIRoll No.:

GOSWAMI GANESH DUTTA SANATAN DHARAM COLLEGESECTOR -32, CHANDIGARH

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CERTIFICATE OF ORIGINALITY

This is to certify that the project titled “THE STUDY OF PREFERENCES OF CONSUMERS REGARDING INVESTMENT IN MUTUAL FUNDS” is an original project done by a under my supervision and guidance, is submitted on the partial fulfillment of the requirement for the award of degree of Masters in Commerce .

I further declare that this project is the result of my own efforts and this project has not been submitted to any other university.

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PREFACE

In order to achieve the positive and concrete results, along with theoretical concepts, the exposure of real life situation existing in corporate world is very much needed. To fulfill this need, the practical training is required.

I took training in the “STATE BANK OF INDIA”. It was my pleasure to get training in a very healthy atmosphere. I got ample opportunity to view the overall working of the bank.

The subject of my project is “THE STUDY OF PREFERENCES OF CONSUMERS REGARDING INVESTMENT IN MUTUAL FUNDS”

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ACKNOWLEDGEMENT

“Expression of feelings by words make them less significant when it comes to statement of gratitude”

With regard to my Summer Project with SBI Mutual Fund, I would like to thanks each and every one who offered help, guidelines and support whenever required.

First and foremost I like to express my gratitude to the staff of the bank for their support and guidance in the project. I am extremely grateful to my for their valuable guidance and timely suggestions. I would like to extend my thanks to my friends for their support.

I extend my gratitude to my parents who have been a source of encouragement. I must not forget the generosity accorded by them. Last but not the least, I bow in gratitude to the almighty God, whose grace enabled me to complete this project.

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TABLE OF CONTENT

Sr.No Particulars Page no

1 INTRODUCTION TO MUTUAL FUNDS

8-21

2 COMPANY PROFILE 22-32

3 WEEKLY REPORT 33-35

4 OBJECTIVES AND SCOPE 36-38

5 RESEARCH METHODOLOGY 39-41

6 ANALYSYIS AND INTERPRETATION

42-54

7 FINDINGS AND CONCLUSIONS 55-58

8 SUGGESTIONS AND RECOMMENDATIONS

59-60

9 BIBLIOGRAPHY 61-62

10 QUESTIONNAIRE 63-65

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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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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.

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Chapter - 1

Introduction

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1. Concept of Mutual Funds

“….Mutual funds are popular among all income levels. With a mutual fund, we get a diversified basket of stocks managed by a Professional……”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 fund’s 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. When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder.

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Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.

1.1 What Is Mutual Fund

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investible surplus of as little as a few hundred rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy.

The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the scheme’s stated objectives. The income earned through these investments and the capital appreciations realized by the scheme are shared by its unit 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.

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1.2 ADVANTAGES OF MUTUAL FUND

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.

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.

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.

Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want.

Simplicity - 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.50 per month basis.

Well-Regulated- All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

Affordability- Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

Transparency- You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

Choice of Schemes- Mutual Funds offers a family of schemes to suit your varying needs over a lifetime.

1.3DIS-ADVANTAGES OF MUTUAL FUND

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Professional Management- Some funds don’t perform in neither the market, as their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professionals are any better than mutual fund or investor himself, for picking up stocks.

Costs – The biggest source of AMC income is generally from the entry & exit load which they charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon.

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 money

1.4 HISTORY OF MUTUAL FUND:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases

First Phase - 1964-1987

Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under management.

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

1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.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 all mutual

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funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase - 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, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. At the end of September 2004, there were 29 funds which manage assets of rs153108 crores under 421 schemes

1.5 TYPES OF MUTUAL FUND

BY STRUCTURE:

Open Ended Schemes: 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.

Close Ended Schemes: A closed-end fund has a stipulated maturity period which generally ranging from 3 to15 years. The fund is open for subscription only during a specified period. Investors can investing 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 tothe 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.

Interval Schemes: Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the

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stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.

BY INVESTMENT OBJECTIVE

Under this the mutual fund is categorized on the basis of Investment Objective. By nature themutual fund is categorized as follow:

. Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure ofthe fund may vary different for different schemes and the fund manager’s outlook on differentstocks. The Equity Funds are sub-classified depending upon their investment objective, asfollows:

· Diversified Equity Funds· Mid-Cap Funds· Sector Specific Funds· Tax Savings Funds (ELSS)Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix.

Debt funds: The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but areassociated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

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Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.

MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

Balanced Funds: As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter viz,Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly.

Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).

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Money Market Schemes: Money Market Schemes aim 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.

OTHER SCHEMES

Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock tothe total holding will be identical to the stocks index weight age. And hence, the returns from such schemes would be more or less equivalent to those of the Index.

Sector Specific Schemes: 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.

1.6 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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1.7 RISK V/S. RETURN:

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Association Of Mutual Funds In India

Association of Mutual Funds in India (AMFI): Association of Mutual Funds in India (AMFI)

was incorporated on 22nd August, 1995. AMFI is an apex body of all Asset Management

Companies (AMC) which has been registered with SEBI.

AMFI has brought down the Indian Mutual Fund Industry to a professional and healthy

market with ethical lines enhancing and maintaining standards. It follows the principle of

both protecting and promoting the interests of Mutual Funds as well as their unit holders.

The Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian

Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain

standards in all areas with a view to protect and promot the interests of mutual funds and

their unit holders.

Objectives Of AMFI

It recommends and promotes the top class business practices and code of conduct.

AMFI interacts with SEBI and works according to SEBIs guidelines in the Mutual Fund

industry.

AMFI represent the Government of India, the RBI a and other related bodies on matters

relating to the Mutual Fund Industry.

It develops a team of well qualified and trained Agent distributors. AMFI undertakes all

India awareness programme.

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Guidelines of the SEBI for Mutual Fund Companies :

To protect the interest of the investors, SEBI formulates policies and regulates the Mutual

Funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time

to time.

SEBI approved Asset Management Company (AMC) manages the funds by making

investments in various types of securities. Custodian, registered with SEBI, holds the

securities of various schemes of the fund in its custody.

According to SEBI Regulations, two thirds of the directors of Trustee Company or board of

trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units of Mutual

Funds that the Mutual Funds function within the strict regulatory framework. Its objective is

to increase public awareness of the Mutual Fund industry. AMFI also is engaged in

upgrading professional standards and in promoting best industry practices in diverse areas

such as valuation, disclosure, transparency etc.

Documents required (PAN mandatory):

Proof of Identity :

1. Photo PAN card

2. In case of non-photo PAN card in addition to copy of PAN card any one of the following:

driving license/passport copy/ voter id/ bank photo pass book.

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Proof of address (any of the following) : Latest telephone bill, latest electricity bill, Passport,

latest bank passbook/bank account statement, latest Demat account statement, voter id, driving

license, ration card, rent agreement.

Offer document: An offer document is issued when the AMCs make New Fund Offer (NFO). It

is advisable to every investor to ask for the offer document and read it before investing. An offer

document consists of the following:

Standard Offer Document for Mutual Funds (SEBI Format)

Summary Information

Glossary of Defined Terms

Risk Disclosures

Legal and Regulatory Compliance

Expenses

Condensed Financial Information of Schemes

Constitution of the Mutual Fund

Investment Objectives and Policies

Management of the Fund

Offer Related Information.

Loads:

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Entry Load/Front-End Load (0-2.25%) - It is the commission charged at the time of

buying the fund to cover the cost of selling, processing etc. But w.e.f 2010 this has been

stopped.

Exit Load/Back- End Load (0.25-2.25%) - It is the commission or charged paid when an

investor exits from a Mutual Fund, it is imposed to discourage withdrawals. It may reduce to

zero with increase in holding period.

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Chapter – 2

Company Profile

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2. COMPANY PROFILE

2.1. INTRODUCTION TO SBI MUTUAL FUNDSBI 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, patronised 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 SociétéGénérale Asset Management, one of the world’s leading fund management companies that manages over US$ 500 Billion worldwide.

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 consistent returns.

A total of over 5.8 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 HNI’s.

Today, the fund manages over Rs. 42,100 crores of assets and has a diverse profile of investors actively parking their investments across 38 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, 59 investor service desks and 6 Investor Service Points.

SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent India Opportunities Fund.

2.2 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

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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 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 Tax gain 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 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

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Magnum NRI Investment Fund SBI Premier Liquid Fund

BALANCED SCHEMES

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

MAIN SCHEMES OF SBI MUTUAL FUND:

Investment Objective: To provide the investor Long-term capital appreciation by investing in high growth companies along with the liquidity of an open-ended

scheme through investments primarily in equities and the balance in debt and money market instruments.

Date of inception: 2/1/1991

Minimum investment:Rs. 1000

Exit load: Investments below Rs. 5 crores < = 6months- 1%

> 6 months but < 12 months- 0.50%

Entry load: Investments below Rs. 5 crores- 2.25%

Options: Growth and Dividend

Magnum Tax Gain Scheme is an Equity Linked Savings Scheme (ELSS) from SBI Mutual Fund which offers investors tax benefits on an investment up to Rs 1 Lakh under Section 80C

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of Indian Income Tax Act 1961. The fund was launched in the year 1993 and is one of the top performers in the ELSS category.

Scheme Highlights:

Entry Load – Investments below Rs. 5 crores – 2.25%,Investments of Rs.5 crores and above – NIL" SIP/STP Entry Load - 2.25% Exit Load : NIL SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - 6 months, Rs.3000/ Quarter - 6 months Asset Allocation – 80-100% in Equity, partly convertible debentures and fully convertible debentures and bonds & 0 – 20% in Money market instruments. Minimum Application Amount – Rs 500 for purchase & Multiples of Rs 500 for additional purchase. Plans & Options – Dividend option with payout and reinvestment facility.

Magnum Index Fund invests only in the 50 stocks that constitute S&P CNX Nifty index in proportion to each stock's weightage in the index. Hence, who the portfolio Manager is or what his style is does not really matter in such funds. Volatility of such schemes will be in synchronization with the index. This investment is ideal for:

Entry load: Investments below Rs. 50 Lakhs – 1.25% Investments of Rs.50 Lakhs and above – NIL SIP/STP - 1.00% Exit Load: Nil SIP /STP- < 12 months from the date of investment of each installment - 1.00% Systematic Investment Plan (SIP) : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months

Systematic Transfer Plan (STP): Minimum

amount Rs.1000/- month - 6 months ,Rs.3000/ Quarter - 6 months Dividend Option Available

Systematic Withdrawal Plan (SWP):

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SWP available for a minimum of Rs. 500/- subject to maintaining the minimum investment payable on a monthly basis.

Launched in August 1999 Minimum investment of Rs. 2000 per sector Entry Load : Investments below Rs. 5 crores – 2.25% Investments of Rs.5 crores and

above – NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months

- 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each installment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months,

Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/

Quarter - minimum period of 6 months

Magnum Multiplier Plus Scheme:

A diversified equity fund, focusing on steady growth Open-ended from April 1998 Minimum application of Rs. 1000 Entry Load : Investments below Rs. 5 crores – 2.25% Investments of Rs.5 crores and above – NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each installment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months

Midcap companies are those companies whose market capitalization at the time of investment is lower than the last stock in the S&P CNX Nifty Index less 20% (upper range) and above Rs. 200 crores.

The latest investment option from SBI Mutual Fund enables you to benefit from our expertise in the intricacies of Midcap stocks. So you can leave the hard part of choosing the right stock to grow with and concentrate on enjoying your returns, now and in the long run:

Open-ended growth scheme

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Entry Load : Investments below Rs. 5 crores – 2.25% Investments of Rs.5 crores and above – NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each installment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/ Quarter - minimum period of 6 months Inter scheme switches to other equity schemes will not carry an Entry Load. However exit load will be applicable.

Scheme objective: To provide investors with opportunities for long-term growth in capital through an active management of investments in a diversified basket of equity stocks of companies whose market capitalization is at least equal to or more than the least market capitalized stock of BSE 100 Index.

Launch date - 23rd December 2005 NFO open from 23rd December 2005 to 20th January 2006 Minimum investment - Rs. 5000 and in multiples of Rs. 1000 Dividend and Growth options available. Reinvestment and payout facility available Dividends will be completely tax-free. Long term capital gains to be completely tax-free. Short -term capital gains to be taxed at 10% (plus applicable surcharge and cess)

This Open-end debt fund has

investments of at least in 85% in debt instruments and not more than 15% in equity. Endeavor to provide regular income to investors, this fund is suitable, both as a source of monthly income or to supplement regular income. The main features of the scheme are:

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Open-end debt fund investing at least in 85% debt and not more than 15% in equity Entry Load : Nil Exit Load : Investment up to Rs. 50 lacs : 0.50% for exit within 6 months from date of investment investments above Rs. 50 lacs : Nil SIP/STP- As applicable to the normal transaction in the respective Debt Schemes SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - 6 months ,Rs.3000/ Quarter - 6 months

COMPETITORS OF SBI MUTUAL FUND

Some of the main competitors of SBI Mutual Fund are as Follows:

i. ICICI Mutual Fund

ii. Reliance Mutual Fund

iii. UTI 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

29

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.

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31

32

Chapter - 3

Weekly report

33

WEEK-1

On first day of the training there was an introductory session of trainees with the assistant vice

president Mr. Rupender Kumaria at SBI, local head office. He briefed us about the working of

the mutual fund industry .He gave us details about the various products and schemes of SBI

mutual fund. We were given booklet for basic introduction to mutual funds, fact sheets of

schemes and common application form booklet.

WEEK-2

In the second week of training all the trainees were sent to different branches of SBI.There I did

dummy investment and learned how to fill the application form, what are the requirements

of it.

WEEK-3

In the third week of training the task assigned to me was to convince the customers to make their

investment in the mutual funds.I was guided by Mrs Shikha Mittal Mam for this task. I

interacted with customer and helped them in filling their forms.

WEEK-4

In the fourth week of training I prepared a questionnaire on preferences regarding mutual

fund which is to be filled by the various customers as well as the bank employeses.

34

WEEK-5:

In the fifth week of training the task assigned to me was to doa survey on various

customers about their preferences regarding mutual funds and the questionnaire was filled

by 100 customers .

WEEK-6

In the sixth week of training , I was preparing the report under the guidance of SHIKHA

MITTAL MAM. I reported to the Head Office with the results of my research work for

further improvements and suggestions.

35

Chapter - 4

Objectives and Scope

36

4.1 OBJECTIVES OF THE STUDY

1. To find out the Awareness level of the investors of mutual fund

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.

37

4.2 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 Zirakpur. I had been sent at one of the branch of State

Bank of India,Zirakpur, 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 Branch.

The study will help to know the preferences of the customers, which company,

portfolio, mode of investment, and option for getting return and so on they prefer. This

project report may help the company to make further planning and strategy

38

Chapter – 5

Research

Methodology

39

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.

Sampling:

Sampling procedure:

The sample was selected of them who are the customers/visitors of State Bank of India, 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.

40

Sample size:

The sample size of my project is limited to 100 people only. Out of which only 63

people had invested in Mutual Fund.

Sample design:

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

LIMITATIONS:

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 100 visitors of State Bank of India ,

Branch,zirakpur out of these only 63 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.

41

Chapter – 6

Data Analysis &

Interpretation

42

Do you invest in mutual funds?

Yes 63%No 28%Earlier but stopped now 9%

yesno

earlier but stopped now

0%

10%

20%

30%

40%

50%

60%

70%63%

28%

9%

Column1

INTERPRETATION

Out of 100 respondents 63% respondents have invested in mutual funds,28% have not invested in it due to unawareness or some other factors ,where as there are 9% respondents who had earlier invested in it but stopped now due to less returns

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2. What is your Experience in the market?

Less than a year 26%1-4 years 21%More than 4 years 53%

26%

21%

53%

Experienceless than a year 1-4 years more than 4 years

INTERPRETATION

It is clear from the above data that out of 100 respondents 53% have invested in mutual funds for more than 4 years and there are 26% of people who have experience of less than a year

44

3.What is your trading experience?

Speculation 28%Investment 56%Both 16%

28%

56%

16%

trading preferencespeculation investment both

INTERPRETATION:

From the above data it has been observed that 56% of the people are interested in investment while 56% are interested in speculation.There are 16% of people whose trading experience was of both investment and speculation.

45

4. What is your average investment period?

Less than 3 months 23%3-9 months 10%9 months 42%More than 9 months 25%

23%

10%

42%

25%

average investment periodLess than 3 months 3-9 months 9 months More than 9 months

Interpretation:

From the above data it it is clear that 23% of people have invested less than 3 months

And there are 42% of people who are in the market for 9 months

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5. Factors influencing investment decisions

Brokers 32%News 10%Magzines 6%Friends 20%Self 30%Others 2%

Brokers News Magzines Friends Self Others0%

5%

10%

15%

20%

25%

30%

35%32%

10%

6%

20%

30%

2%

Interpretation

It is clear that brokers plays the important role in inluencing the decisions of investors

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How much risk are you willing to take?

High 24%Moderate 50%Low 26%

High Moderate Low05

101520253035404550

24%

50%

26%

Column1 Column2 Series 3

Interpretation:

It is clear that people neither want to take much nor less risk.

50% of the people prefer moderate risk

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7. How much appreciation do you expect from your investment?

Upto 15% 48%15-25% 32%25-35% 12%More than 35% 8%

48%

32%

12%

8%

expected risk in incomeUpto 15% 15-25% 25-35% More than 35%

Interpretation

15% of people expect 48% of appreciation while there are 8% of people who want more than 35%

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8. What is your preference in mutual funds?

Equity 19%Balanced 18%Income 20%Money market 9%ELSS 15%SIP 17%Others 2%

19%

18%

20%9%

15%

17%

Preference in Mutual Fundequity Balanced IncomeMoney Market ELSS SIP

Interpretation:

From the above data it is clear dat a 21% of the people want to invest in income schemes because of regular and steady returns and only 9% of the people want to invest in money market

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9. How much loss are you willing to take?

Less than 5% 53%5-10% 35%More than 10% 12%

Interpretation:

It is clear that much people do not want to take more risk due to certain constraints.

There are 12% of people who are willing to take more than 10% of risk

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0%

10%

20%

30%

40%

50%

60%

53%

35%

12%

Chart Title

10. Which type of Mutual Fund do you prefer?

Closed ended 56%Open ended 44%

56%

44%

Type of schemesClosed ended funds Open Ended funds

Interpretation:

Majority of people that is 56% prefer to invest in closed ended schemes because it require less investment.

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11. Do you get influenced by the name of Company promoting Mutual Funds?

Yes 56%No 23%Sometimes 21%

Yes No Sometimes0%

10%

20%

30%

40%

50%

60%56%

23% 21%

Interpretation:

56% of the respondents do agree that they get influenced by the goodwill of the company

While 21% of respondents do not get inluenced by them

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12. Do you get influenced by the returns given by a fund or by the current NAV of a fund?

By NAV 23%Returns 56%Both 21%

By NAVRETURNS

Both

0%

10%

20%

30%

40%

50%

60%

23%

56%

21%

Interpretation:

It is clear from the above data that majority of people that is 56% get influenced by the returns of the fund and only 23% of the people prefer returns by current NAV of a fund

54

Chapter – 7

Findings and Conclusion

55

FINDINGS

People with less experience were inclined towards investment in the mutual funds.

48% respondents reflected confidence and optimism in the context of their investment.

Mutual funds are more of an investment option than the speculative avenue.

Income funds and ELSS are among the few top funds. People are not willing to take much risk and bear loss. Brokers advise matters to as much as 32% of the people.

56

CONCLUSION

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 Patna 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 investment option to others. Many of investors directly

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

57

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

time.

58

Chapter – 8

Suggestions

And

Recommendations

59

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 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.

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.

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CHAPTER 9

BIBLIOGRAPHY

61

BIBLIOGRAPHY

NEWS PAPERS

OUTLOOK MONEY

TELEVISION CHANNEL (CNBC AAWAJ)

MUTUAL FUND HAND BOOK

WWW.SBIMF.COM

WWW.MONEYCONTROL.COM

WWW.AMFIINDIA.COM

WWW.ONLINERESEARCHONLINE.COM

WWW. MUTUALFUNDSINDIA.COM

62

QUESTIONNAIRE

A study of preferences of the investors for investment in mutual funds.

1. Personal Details:

(a). Name:-

(b) Phone:-

(c). Age:-

(d). Qualification:-

1. Do you invest in mutual funds Yes No Earlier,but stopped now

2.What is your experience in the market

Less than a year 1-4 years More than 4 years

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3.What is your trading Preferences?

Speculation Investment Both

4.What is you average investment period?

Less than 3 months 3-9months 9months to 2 year More than 2 years

5.Factors influencing the investment decisions

Advice from brokers Advice from friends self evaluation Current news Reviews in financial magazines

6. How much risk are you willing to take?

High low Moderate

7. What is your prefernce in mutual funds Equity income Money market funds ELSS Balanced Funds SIP others

8.How much appreciation do you expect from your investment?

Upto 15% 15-25% 25%-35% more than 35%

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9.How much loss you are willing to take?

High moderate Low

10.which type of mutual fund do you prefer

Open ended schemes closed ended schemes

11.Do you get influenced by the name of Company promoting mutual funds?

Yes No

12.Do you get influenced by the returns given by fund or by the current NAV of a fund?

By NAV BY Returns Both

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