Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Project Report is the most vital part of an MBA course, I therefore, consider myself
fortunate to receive this Research report yet the opportunity could not have been
utilized without the guidance and support of many individuals who although held
varied positions, but were equally instrumental for successful completion of my
research report.
I would like to express gratitude to the respected M r S h i s h i r S h r i v a s t a v a
F a c u l t y G u i d e IGNU for their valuable inputs and direction that rendered
Preface
The Indian capital market has been increasing tremendously during last few
years. With the reforms of economy, reforms of industrial policy, reforms of
public sector and reforms of financial sector, the economy has been opened up
and many developments have been taking place in the Indian money market and
capital market. The Sensex first crossed 6,000 on February 11, 2000, fuelled by
the IT boom, but closed below that mark. On November 23, 2004, it closed
above 6,000 for the first time. In order to help the small investors, SBI SBI
Mutual Fund industry has come to occupy an important place. The spread of the
banking system has been a major factor in promoting financial intermediation in
the economy and in the growth of financial savings. With progressive
liberalization of economic policies, there has been a rapid growth of capital
market, money market and financial services industry including merchant
banking, leasing and venture capital. Consistent with this evolution of the
financial sector, the SBI SBI Mutual Fund industry has also come to occupy an
important place.
In the FY2006 capital market has been riding on a roller coaster. In the month of
April this year the bullish run in the stock market has pushed the Sensex up
above the 12000 mark. On the 10th day of next month the Sensex touched its
best ever closing level of 12612. However, the slide started soon after it and the
Sensex fall from peak to trough in May with 2214 points.
This project, titled, Awareness & Perception about SBI SBI SBI Mutual
Fund examines the effect these changes in stock markets are having on the
SBI SBI Mutual Funds, and to evaluate the performance of some SBI SBI
Mutual Fund schemes and to suggest what should be done to avoid any negative
effects the market is having on the SBI SBI Mutual Funds and the investors. In
this project we will also examine the role of distributors in influencing investors
decisions.
STUDENTS DECLARATION
I hereby declare that this project work is the result of our own research and no part
of it has been presented for another degree in this university or elsewhere. We are
solely responsible for any errors in the work.
DATE:
SIGNATURE:
INTRODUCTION
Industry & company profile of SBI
State Bank of India is Indias largest commercial bank. State Bank of India has a
vast domestic network of over 9000 branches (approximately 14% of all bank
branches) and commands one fifth of deposits and loans of all scheduled
commercial bank of India. The State Bank Group includes a network of eight
banking subsidiaries and several non banking subsidiaries offering merchant
banking services, fund management, factoring services, primary dealership in
government securities, credit cards and insurance.
Roots
State bank of India traces its roots to the first decade of 19 th century. When the
Bank of Calcutta, later renamed the Bank of Bengal, was established on 2June
1806.The government amalgamated namely the Bank of Bombay lei corporate on
15 April 1848 and the Bank of Madras 27 Jan 1921 and named the recognized
banking entity the Imperial Bank of India.
Time line
June, 2 1806 the Bank of Calcutta established.
The State Bank of India, the countrys oldest Bank and a premier in terms of
balance sheet size, number of branches, market capitalization and profits is today
going through a momentous phase of Change and Transformation the two
hundred year old Public sector behemoth is today stirring out of its Public Sector
legacy and moving with an agility to give the Private and Foreign Banks a run for
their money.
The bank is entering into many new businesses with strategic tie ups Pension
Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking,
Point of Sale Merchant Acquisition, Advisory Services, structured products etc
each one of these initiatives having a huge potential for growth.
The Bank is forging ahead with cutting edge technology and innovative new
banking models, to expand its Rural Banking base, looking at the vast untapped
potential in the hinterland and proposes to cover 100,000 villages in the next two
years.
It is also focusing at the top end of the market, on whole sale banking capabilities
to provide Indias growing mid / large Corporate with a complete array of products
and services. It is consolidating its global treasury operations and entering into
structured products and derivative instruments. Today, the Bank is the largest
Parivartan the Bank rolled out over 3300 two day workshops across the country
and covered over 130,000 employees in a period of 100 days using about 400
Trainers, to drive home the message of Change and inclusiveness. The workshops
fired the imagination of the employees with some other banks in India as well as
other Public Sector Organizations seeking to emulate the programmed.
The CNN IBN, Network 18 recognized this momentous transformation journey,
the State Bank of India is undertaking, and has awarded the prestigious Indian of
the Year Business, to its Chairman, Mr. O. P. Bhatt in January 2008.
The elephant has indeed started to dance.
EVOLUTION OF SBI
The origin of the State Bank of India goes back to the first decade of the
nineteenth century with the establishment of the Bank of Calcutta in Calcutta on
2 June 1806. Three years later the bank received its charter and was re-designed
as the Bank of Bengal (2 January 1809). A unique institution, it was the first
joint-stock bank of British India sponsored by the Government of Bengal. The
Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed
the Bank of Bengal. These three banks remained at the apex of modern banking
in India till their amalgamation as the Imperial Bank of India on 27 January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into existence
either as a result of the compulsions of imperial finance or by the felt needs of
local European commerce and were not imposed from outside in an arbitrary
Establishment of SBI
The establishment of the Bank of Bengal marked the advent of limited liability,
joint-stock banking in India. So was the associated innovation in banking, viz. the
decision to allow the Bank of Bengal to issue notes, which would be accepted for
payment of public revenues within a restricted geographical area. This right of
note issue was very valuable not only for the Bank of Bengal but also its two
siblings, the Banks of Bombay and Madras. It meant an accretion to the capital of
the banks, a capital on which the proprietors did not have to pay any interest. The
concept of deposit banking was also an innovation because the practice of
accepting money for safekeeping (and in some cases, even investment on behalf
of the clients) by the indigenous bankers had not spread as a general habit in most
parts of India. But, for a long time, and especially upto the time that the three
presidency banks had a right of note issue, bank notes and government balances
Business
The business of the banks was initially confined to discounting of bills of
exchange or other negotiable private securities, keeping cash accounts and
receiving deposits and issuing and circulating cash notes. Loans were restricted to
Rs. one lakh and the period of accommodation confined to three months only.
The security for such loans was public securities, commonly called Company's
Paper, bullion, treasure, plate, jewels, or goods 'not of a perishable nature' and no
interest could be charged beyond a rate of twelve per cent. Loans against goods
like opium, indigo, salt woolens, cotton, cotton piece goods, mule twist and silk
goods were also granted but such finance by way of cash credits gained
momentum only from the third decade of the nineteenth century. All
commodities, including tea, sugar and jute, which began to be financed later,
were either pledged or hypothecated to the bank. Demand promissory notes were
signed by the borrower in favour of the guarantor, which was in turn endorsed to
the bank. Lending against shares of the banks or on the mortgage of houses, land
or other real property was, however, forbidden.
Indians were the principal borrowers against deposit of Company's paper, while
the business of discounts on private as well as salary bills was almost the
exclusive monopoly of individuals Europeans and their partnership firms. But the
main function of the three banks, as far as the government was concerned, was to
help the latter raise loans from time to time and also provide a degree of stability
to the prices of government securities.
and many of the inland trade centers in India. While the Bank of Bengal had
eighteen branches including its head office, seasonal branches and sub agencies,
the Banks of Bombay and Madras had fifteen each.
Bank of Madras
The decision of the Government to keep the surplus balances in Reserve
Treasuries outside the normal control of the presidency banks and the connected
decision not to guarantee minimum government balances at new places where
branches were to be opened effectively checked the growth of new branches after
1876. The pace of expansion witnessed in the previous decade fell sharply
although, in the case of the Bank of Madras, it continued on a modest scale as the
profits of that bank were mainly derived from trade dispersed among a number of
port towns and inland centers of the presidency.
India witnessed rapid commercialization in the last quarter of the nineteenth
century as its railway network expanded to cover all the major regions of the
country. New irrigation networks in Madras, Punjab and Sind accelerated the
process of conversion of subsistence crops into cash crops, a portion of which
found its way into the foreign markets. Tea and coffee plantations transformed
large areas of the eastern Terais, the hills of Assam and the Nilgiris into regions
of estate agriculture par excellence. All these resulted in the expansion of India's
international trade more than six-fold. The three presidency banks were both
beneficiaries and promoters of this commercialization process as they became
involved in the financing of practically every trading, manufacturing and mining
activity in the sub-continent. While the Banks of Bengal and Bombay were
engaged in the financing of large modern manufacturing industries, the Bank of
Madras went into the financing of large modern manufacturing industries; the
Bank of Madras went into the financing of small-scale industries in a way which
had no parallel elsewhere. But the three banks were rigorously excluded from any
business involving foreign exchange. Not only was such business considered
risky for these banks, which held government deposits, it was also feared that
these banks enjoying government patronage would offer unfair competition to the
exchange banks which had by then arrived in India. This exclusion continued till
the creation of the Reserve Bank of India in 1935.
Bank of Bombay
and the public on terms stipulated by the Reserve Bank. It also acted as a bankers'
bank by holding their surplus cash and granting them advances against authorized
securities. The management of the bank clearing houses also continued with it at
many places where the Reserve Bank did not have offices. The bank was also the
biggest tendered at the Treasury bill auctions conducted by the Reserve Bank on
behalf
of
the
Government.
and
trustee
business
for
the
first
time.
Imperial Bank
The Imperial Bank during the three and a half decades of its existence recorded
an impressive growth in terms of offices, reserves, deposits, investments and
advances, the increases in some cases amounting to more than six-fold. The
financial status and security inherited from its forerunners no doubt provided a
firm and durable platform. But the lofty traditions of banking which the Imperial
Bank consistently maintained and the high standard of integrity it observed in its
operations inspired confidence in its depositors that no other bank in India could
perhaps then equal. All these enabled the Imperial Bank to acquire a pre-eminent
position in the Indian banking industry and also secure a vital place in the
country's economic life.
offices
extending
all
over
the
country.
1955. More than a quarter of the resources of the Indian banking system thus
passed under the direct control of the State. Later, the State Bank of India
(Subsidiary Banks) Act was passed in 1959, enabling the State Bank of India to
take over eight former State-associated banks as its subsidiaries (later named
Associates).
The State Bank of India was thus born with a new sense of social purpose aided
by the 480 offices comprising branches, sub offices and three Local Head Offices
inherited from the Imperial Bank. The concept of banking as mere repositories of
the community's savings and lenders to creditworthy parties was soon to give
way to the concept of purposeful banking sub serving the growing and diversified
financial needs of planned economic development. The State Bank of India was
destined to act as the pacesetter in this respect and lead the Indian banking system
into the exciting field of national development.
INTRODUCTION TO SBI SBI MUTUAL FUNDS:-
A SBI SBI Mutual Fund is a trust that pools the savings of a number of investors
who share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities. The
income earned through these investments and the capital appreciations realized
are shared by its unit holders in proportion to the number of units owned by them.
Thus a SBI SBI Mutual Fund is the most suitable investment for the common
man as it offers an opportunity to invest in a diversified, professionally managed
basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a SBI SBI Mutual Fund.
A SBI SBI Mutual Fund is a body corporate registered with the Securities and
Exchange
Board
of
India
(SEBI)
that
pools
up
the
money
from
(SEBI) which regulates securities markets before it can collect funds from the
public.
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 SBI SBI Mutual Fund
Regulations.
Liquidity: It's easy to get your money out of a SBI SBI Mutual Fund. Write
a check, make a call, and you've got the cash.
Convenience: You can usually buy SBI SBI Mutual Fund shares by mail,
phone, or over the Internet. It reduces paperwork, saves time and makes
investment easy.
Low cost: SBI SBI Mutual Fund expenses are often no more than 1.5
percent of your investment. Expenses for Index Funds are less than that,
because index funds are not actively managed. Instead, they automatically
buy stock in companies that are listed on a specific index
Transparency: SBI SBI Mutual Funds transparently declare their portfolio
every month. Thus, an investor knows where his/her money is being
deployed and in case they are not happy with the portfolio they can
withdraw at a short notice.
Flexibility: SBI SBI Mutual Funds offer a family of schemes, and investors
have the option of transferring their holdings from one scheme to other.
Tax benefits: SBI SBI Mutual Fund investors now enjoy income tax
benefits. Dividends received from SBI SBI Mutual Funds debt schemes are
tax exempt to the overall limit of Rs 9000 allowed under section SOL of the
Income Tax Act.
Examples of such costs include sales charges, annual fees, and other
expenses; and depending on the timing of their investment, investors may
also have to pay taxes on any capital gains distribution they receive even
if the fund went on to perform poorly after they bought shares.
Lack of control: Investors typically cannot ascertain the exact make-up
of a fund's portfolio at any given time, nor can they directly influence which
securities the fund manager buys and sells or the timing of those trades.
Dilution: Because funds have small holdings in so many different
companies, high returns from a few investments often don't make much
difference on the overall return. Dilution is also the result of a successful
fund getting too big. When money pours into funds that have had strong
success, the manager often has trouble finding a good investment for all the
new money.
Price Uncertainty: With an individual stock, one can obtain real-time (or
close to real-time) pricing information with relative ease by checking
financial websites or through a broker, as can one observe stock price
changes by the hour or minute. By contrast, with a SBI SBI Mutual Fund,
the price at which one purchases or redeems shares will typically depend on
the fund's NAV, which the fund might not calculate until many hours after
the order has been placed. In general, SBI SBI Mutual Funds must calculate
their NAV at least once every business day, typically after the major U.S.
exchanges close.
INVESTORS PROFILE:
An investor normally prioritizes his investment needs before undertaking an
investment. So different goals will be allocated to different proportions of the
total disposable amount. Investments for specific goals normally find their way
into the debt market as risk reduction is of prime importance, this is the area for
the risk-averse investors and here, SBI SBI Mutual Funds are generally the best
option. One can avail of the benefits of better returns with added benefits of
anytime liquidity by investing in open-ended debt funds at lower risk, this risk of
default by any company that one has chosen to invest in, can be minimized by
investing in SBI SBI Mutual Funds as the fund managers analyze the companies
financials more minutely than an individual can do as they have the expertise to
do so.
Moving up the risk spectrum, there are people who would like to take some risk
and invest in equity funds/capital market. However, since their appetite for risk is
also limited, they would rather have some exposure to debt as well. For these
investors, balanced funds provide an easy route of investment, armed with
expertise of investment techniques, they can invest in equity as well as good
quality debt thereby reducing risks and providing the investor with better returns
than he could otherwise manage. Since they can reshuffle their portfolio as per
market conditions, they are likely to generate moderate returns even in
pessimistic market conditions.
Next comes the risk takers, risk takers by their nature, would not be averse to
investing in high-risk avenues. Capital markets find their fancy more often than
not, because they have historically generated better returns than any other avenue,
provided, the money was judiciously invested. Though the risk associated is
generally on the higher side of the spectrum, the return-potential compensates for
the risk attached.
portfolio compositions, the bear phases certainly did. NAVs of most of these funds
plummeted raising questions on the extent of portfolio diversification.
When the bull phase came to an end and when most of the funds stood stripped
with the downslide of most of the TMT stocks, most fund managers moved to
quality portfolio levels and reduced their IT exposure to reasonable levels. Most
equity diversified funds, today, maintain IT exposure at 20% to 37% while
simultaneously picking up both old and new economy stocks. But fund managers
still are willing to bet on TMT stocks despite the tumultuous experience they have
had in Y2K. While accepting the possibility of a downward revision of their
growth rate, they foresee no indications of a significant slowdown from at least
India based companies. They concur that the fundamentals of IT sector are strong
with future growth, however, being at a modest pace. They are now of the view
that a mixture of old and new economy scrips would form an ideal portfolio.
While the crash in IT share prices has resulted in a re-balancing of portfolios,
action on the old economy front would further narrow the gap between the so
called click and mortar and brick and mortar companies-bring with it a greater
diversification in MF portfolios.
MF Industry in India, like any other Industry, has had its nascent stage and is still
trying to grapple with several inconsistencies. The Industry is now approaching a
stage where a cross section of investing community has begun to comprehend that
MFs provide and ideal investment vehicle to meet their varied investment
objectives in the long run with adequate emphasis on portfolio diversification. All
in all, MFs have had their share of lessons in Y2K and are waiting for newer
horizons in Y2K+1 with abated breath.
The holders of the shares in the Fund can resell them to the issuing SBI SBI
Mutual Fund Company at the time. They receive in turn the net assets value
(NAV) of the shares at the time of re-sale. Such SBI SBI Mutual Fund Companies
place their funds in the secondary securities market. They do not participate in
new issue market as do pension funds or life insurance companies. Thus they
influence market price of corporate securities. Open-end investment companies
can sell an unlimited number of Shares and thus keep going larger. The open-end
SBI SBI Mutual Fund Company Buys or sells their shares. These companies sell
new shares NAV plus a Loading or management fees and redeem shares at NAV.
In other words, the target amount and the period both are indefinite in such funds
2.
A closedend Fund is open for sale to investors for a specific period, after which
further sales are closed. Any further transaction for buying the units or
repurchasing them, Happen in the secondary markets, where closed end Funds are
listed. Therefore new investors buy from the existing investors, and existing
investors can liquidate their units by selling them to other willing buyers. In a
closed end Funds, thus the pool of Funds can technically be kept constant. The
asset management company (AMC) however, can buy out the units from the
investors, in the secondary markets, thus reducing the amount of funds held by
outside investors. The price at which units can be sold or redeemed Depends on
the market prices, which are fundamentally linked to the NAV. Investors in closed
end Funds receive either certificates or Depository receipts, for their holdings in a
closed end SBI SBI Mutual Fund.
ORGANISATION AND MANAGEMENT OF SBI MUTUAL FUNDS:In India SBI SBI Mutual Fund usually formed as trusts, three parties are
generally involved viz.
Settler of the trust or the sponsoring organization.
The trust formed under the Indian trust act, 1982 or the trust company
registered under the Indian companies act, 1956
Fund managers or The merchant-banking unit
Custodians.
SBI MUTUAL FUNDS TRUST:SBI Mutual Fund trust is created by the sponsors under the Indian trust act,
1982
Which is the main body in the creation of SBI SBI Mutual Fund Trust?
The main functions of SBI SBI Mutual Fund trust are as follows:
Planning and formulating SBI SBI Mutual Funds schemes.
Seeking SEBIs approval and authorization to these schemes.
Marketing the schemes for public subscription.
Seeking RBI approval in case NRIs subscription to SBI SBI Mutual Fund
is Invited
Attending to trusteeship function. This function as per guidelines can be
assigned to separately established trust companies too. Trustees are
required to submit a consolidated report six monthly to SEBI to ensure that
the guidelines are fully being complied with trusted are also required to
submit an annual report to the investors in the fund.
FUND MANAGERS (OR) THE ASSES MANAGEMENT COMPANY
(AMC)
AMC has to discharge mainly three functions as under:
I. Taking investment decisions and making investments of the funds through
market dealer/brokers in the secondary market securities or directly in the
primary capital market or money market instruments
II. Realize fund position by taking account of all receivables and realizations,
moving corporate actions involving declaration of dividends,etc to
compensate investors for their investments in units; and
III. Maintaining proper accounting and information for pricing the units and
arriving at net asset value (NAV), the information about the listed schemes
and the transactions of units in the secondary market. AMC has to feed
back the trustees about its fund management operations and has to maintain
a perfect information system.
CUSTODIANS OF SBI MUTUAL FUNDS:SBI Mutual Funds run by the subsidiaries of the nationalized banks had their
respective sponsor banks as custodians like canara bank, SBI, PNB, etc.
Foreign banks with higher degree of automation in handling the securities
have assumed the role of custodians for SBI SBI Mutual Funds. With the
establishment of stock Holding Corporation of India the work of custodian
for SBI SBI Mutual Funds is now being handled by it for various SBI SBI
Mutual Funds. Besides, industrial investment trust company acts as subcustodian for stock Holding Corporation of India for domestic schemes of
UTI, BOI MF, LIC MF, etc
Fee structure:Custodian charges range between 0.15% to 0.20% on the net value of the
customers holding for custodian services space is one important factor
which has fixed cost element.
Collecting income
Holding and processing cost
Corporate actions etc
FUNCTIONS OF CUSTOMERS
Safe custody
Trade settlement
Corporate action
Transfer agents
RATE OF RETURN ON SBI SBI MUTUAL FUNDS:An investor in SBI SBI Mutual Fund earns return from two sources:
Income from dividend paid by the SBI SBI Mutual Fund.
Capital gains arising out of selling the units at a price higher than the
acquisition price
Formation and regulations:
1. SBI Mutual Funds are to be established in the form of trusts under the
Indian trusts act and are to be operated by separate asset management
companies (AMC s)
2. AMCs shall have a minimum Net worth of Rs. 5 crores;
3. AMCs and Trustees of SBI SBI Mutual Funds are to be two separate legal
entities and that an AMC or its affiliate cannot act as a manager in any
other fund;
4. SBI Mutual Funds dealing exclusively with money market instruments are
to be regulated by the Reserve Bank Of India
5. SBI Mutual Fund dealing primarily in the capital market and also partly
money market instruments are to be regulated by the Securities Exchange
Board Of India (SEBI)
6. All schemes floated by SBI Mutual Funds are to be registered with SEBI
Schemes:1. SBI SBI Mutual Funds are allowed to start and operate both closed-end
and open-end schemes;
2. Each closed-end schemes must have a Minimum corpus (pooling up) of
Rs 20 crore;
3. Each open-end scheme must have a Minimum corpus of Rs 50 crore
4. In the case of a Closed End scheme if the Minimum amount of Rs 20
crore or 60% of the target amount, which ever is higher is not raised then
the entire subscription has to be refunded to the investors;
5. In the case of an Open-Ended schemes, if the Minimum amount of Rs 50
crore or 60 percent of the targeted amount, which ever is higher, is no
raised then the entire subscription has to be refunded to the investors.
Investment norms:1. No SBI Mutual Fund, under all its schemes can own more than five percent
of any companys paid up capital carrying voting rights;
2. No SBI Mutual Fund, under all its schemes taken together can invest more
than 10 percent of its funds in shares or debentures or other instruments of
any single company;
3. No SBI Mutual Fund, under all its schemes taken together can invest more
than 15 percent of its fund in the shares and debentures of any specific
industry, except those schemes which are specifically floated for
Distribution:
SBI Mutual Funds are required to distribute at least 90 percent of their profits
annually in any given year. Besides these, there are guidelines governing the
operations of SBI Mutual Funds in dealing with shares and also seeking to ensure
greater investor protection through detailed disclosure and reporting by the SBI
Mutual Funds. SEBI has also been granted with powers to over see the
constitution as well as the operations of SBI Mutual Funds, including a common
advertising code. Besides, SEBI can impose penalties on SBI Mutual Funds after
due investigation for their failure to comply with the guidelines.
SBI MUTUAL FUND SCHEME TYPES:
Equity Diversified Schemes
These schemes mainly invest in equity. They seek to achieve long-term capital
appreciation by responding to the dynamically changing Indian economy by
moving across sectors such as Lifestyle, Pharma, Cyclical, Technology, etc.
Sector Schemes
These schemes focus on particular sector as IT, Banking, etc. They seek to
generate long-term capital appreciation by investing in equity and related
securities of companies in that particular sector.
Index Schemes
These schemes aim to provide returns that closely correspond to the return of a
particular stock market index such as BSE Sensex, NSE Nifty, etc. Such schemes
invest in all the stocks comprising the index in approximately the same weightage
as they are given in that index.
difference between these funds and equity-diversified funds is that they demand a
lock-in of 3 years to gain tax benefits.
Dynamic Funds
These schemes alter their exposure to different asset classes based on the market
scenario. Such funds typically try to book profits when the markets are
overvalued and remain fully invested in equities when the markets are
undervalued. This is suitable for investors who find it difficult to decide when to
quit from equity.
Balanced Schemes
These schemes seek to achieve long-term capital appreciation with stability of
investment and current income from a balanced portfolio of high quality equity
and fixed-income securities.
Medium-Term Debt Schemes
These schemes have a portfolio of debt and money market instruments where the
average maturity of the underlying portfolio is in the range of five to seven years.
investors who seek slightly higher return that pure long-term debt schemes at
marginally higher risk.
Growth Plan
In this plan, dividend is neither declared nor paid out to the investor but is built
into the value of the NAV. In other words, the NAV increases over time due to
such incomes and the investor realizes only the capital appreciation on
redemption of his investment.
Income Plan
In this plan, dividends are paid-out to the investor. In other words, the NAV only
reflects the capital appreciation or depreciation in market price of the underlying
portfolio.
Dividend Re-investment Plan
In this case, dividend is declared but not paid out to the investor, instead, it is
reinvested back into the scheme at the then prevailing NAV. In other words, the
investor is given additional units and not cash as dividend.
SBI MUTUAL FUND INVESTING STRATEGIES:
1. Systematic Investment Plans (SIPs)
These are best suited for young people who have started their careers and need to
build their wealth. SIPs entail an investor to invest a fixed sum of money at
regular intervals in the SBI SBI Mutual Fund scheme the investor has chosen, an
investor opting for SIP in xyz SBI SBI Mutual Fund scheme will need to invest a
certain sum on money every month/quarter/half-year in the scheme.
2. Systematic Withdrawal Plans (SWPs)
These plans are best suited for people nearing retirement. In these plans, an
investor invests in a SBI SBI Mutual Fund scheme and is allowed to withdraw a
fixed sum of money at regular intervals to take care of his expenses
3. Systematic Transfer Plans (STPs)
They allow the investor to transfer on a periodic basis a specified amount from
one scheme to another within the same fund family meaning two schemes
belonging to the same SBI SBI Mutual Fund. A transfer will be treated as
redemption of units from the scheme from which the transfer is made. Such
redemption or investment will be at the applicable NAV. This service allows the
investor to manage his investments actively to achieve his objectives. Many funds
do not even charge any transaction fees for his service an added advantage for
the active investor.
Percentage
Allocation
of
portfolio)
EQUITY:
State Bank
57%
of 15%
Fund
scheme (Rs. In
crores)
57
15
57,000
15,000
India
Infosys
12%
12
12,000
Technologies
ABB
10%
10
10,000
Reliance
9%
9,000
Industries
MICO
Tata Power
DEBT:
Govt. Securities
Company
7%
4%
43%
20%
10%
7
4
43
20
10
7,000
4,000
43,000
20,000
10,000
Debentures
Institution Bonds
Money Market
Total
9%
4%
100%
9
4
100
9,000
4,000
1,00,000
PROFESSIONALS AT WORK
Few investors have the time or expertise to manage their personal investments
every day, to efficiently reinvest interest or dividend income, or to investigate
TRANSPARENCY
The investor gets regular information on the value of his investment in
addition to disclosure on the specific investments made by the fund, the
proportion invested in each class of assets and the fund managers investment
strategy and outlook.
SAVING TAXES
Tax saving schemes of SBI SBI Mutual Funds offer investor a tax rebate under
section 88 of the Income Tax Act. Under this section, an investor can invest up
to Rs.10,000 per Financial year in a tax saving scheme. The rate of rebate
under this section depends on the investors total income.
rates increase, the NAV of the scheme will fall because the scheme will be end up
holding debt offering lower interest rates.
4) BUSINESS RISK
Business risk is the uncertainty concerning the future existence, stability, and
profitability of the issuer of the security. Business risk is inherent in all business
ventures. The future financial stability of a company cannot be predicted or
guaranteed, nor can the price of its securities. Adverse changes in business
circumstances will reduce the market price of the companys equity resulting in
proportionate fall in the NAV of the SBI SBI Mutual Fund scheme, which has
invested in the equity of such a company.
5) ECONOMIC RISK
Economic risk involves uncertainty in the economy, which, in turn, can have an
adverse effect on a companys business. For instance, if monsoons fail in a year,
equity stocks of agriculture-based companies will fall and NAVs of SBI SBI
Mutual Funds, which have invested in such stocks, will fall proportionately.
All risk-averse investors would like to maximize this value. While a high and
positive Treynor's Index shows a superior risk-adjusted performance of a fund, a
low and negative Treynor's Index is an indication of unfavorable performance.
2) The Sharpe Measure :In this model, performance of a fund is evaluated on the basis of Sharpe Ratio,
which is a ratio of returns generated by the fund over and above risk free rate of
return and the total risk associated with it.
According to Sharpe, it is the total risk of the fund that the investors are
concerned about. So, the model evaluates funds on the basis of reward per unit of
total risk. Symbolically, it can be written as:
Sharpe Index (Si) = (Ri - Rf)/Si
Where,
Si is standard deviation of the fund,
Ri represents return on fund, and
Rf is risk free rate of return.
While a high and positive Sharpe Ratio shows a superior risk-adjusted
performance of a fund, a low and negative Sharpe Ratio is an indication of
unfavorable performance.
Comparison of Sharpe and Treynor
Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well-diversified portfolios. On the other
hand, the systematic risk is the relevant measure of risk when we are evaluating
less than fully diversified portfolios or individual stocks. For a well-diversified
portfolio the total risk is equal to systematic risk. Rankings based on total risk
(Sharpe measure) and systematic risk (Treynor measure) should be identical for a
well-diversified portfolio, as the total risk is reduced to systematic risk.
Therefore, a poorly diversified fund that ranks higher on Treynor measure,
compared with another fund that is highly diversified, will rank lower on Sharpe
Measure.
3)
Jenson Model:Jenson's model proposes another risk adjusted performance measure. This
measure was developed by Michael Jenson and is sometimes referred to as the
differential Return Method. This measure involves evaluation of the returns that
the fund has generated vs. the returns actually expected out of the fund1 given the
level of its systematic risk. The surplus between the two returns is called Alpha,
which measures the performance of a fund compared with the actual returns over
the period. Required return of a fund at a given level of risk (Bi) can be
calculated as:
Ri = Rf + Bi (Rm - Rf)
Where,
Ri represents return on fund, and
Rm is average market return during the given period,
Rf is risk free rate of return, and
Bi is Beta deviation of the fund.
After calculating it, Alpha can be obtained by subtracting required return
from the actual return of the fund.
Higher alpha represents superior performance of the fund and vice versa.
Limitation of this model is that it considers only systematic risk not the entire risk
associated with the fund and an ordinary investor cannot mitigate unsystematic
risk, as his knowledge of market is primitive.
4)
Fama Model:The Eugene Fama model is an extension of Jenson model. This model compares
the performance, measured in terms of returns, of a fund with the required return
commensurate with the total risk associated with it. The difference between these
two is taken as a measure of the performance of the fund and is called Net
Selectivity.
The Net Selectivity represents the stock selection skill of the fund manager, as it
is the excess returns over and above the return required to compensate for the
total risk taken by the fund manager. Higher value of which indicates that fund
manager has earned returns well above the return commensurate with the level of
risk taken by him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)
Where,
Ri represents return on fund,
Sm is standard deviation of market returns,
Rm is average market return during the given period, and
Rf is risk free rate of return.
At the end of 1993, the SBI SBI 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 SBI
SBI Mutual Fund industry, giving the Indian investors a wider choice of fund
families. Also, 1993 was the year in which the first SBI SBI Mutual Fund
Regulations came into being, under which all SBI SBI Mutual Funds, except UTI
were to be registered and governed. The erstwhile Kothari Pioneer (now merged
with Franklin Templeton) was the first private sector SBI SBI Mutual Fund
registered in July 1993.
The 1993 SEBI (SBI SBI Mutual Fund) Regulations were substituted by a more
comprehensive and revised SBI SBI Mutual Fund Regulations in 1996. The
industry now functions under the SEBI (SBI SBI Mutual Fund) Regulations 1996.
The number of SBI SBI Mutual Fund houses went on increasing, with many
foreign SBI SBI 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 SBI SBI 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 SBI SBI 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,
The present study has been undertaken with the object of examining, analyzing and inferring the
effect of capital market on mutual fund, which addresses the following issues:
To understand the effect of recent changes in stock market on the mutual funds.
To understand basic concepts of mutual funds
To analyze the NAVs of various mutual funds during the last few months.
To analyze the average returns of various mutual funds during the last few months.
The secondary objective of this study is to understand the role of distributors in influencing
investors decision.
Subject matter is related to the investors approach towards mutual funds and ulips.
Demographics include names, age, qualification, occupation, marital status and annual
income.
LIMITATIONS OF STUDY
The edifice of the study entirely stands up on the pillar of information given
by respondent
The secondary data available for comparative analysis is only for the period
of 2008-2009
HYPOTHESIS TESTING
Null hypothesis (H0) = Preference of investment of
people in ULIP is more than Mutual fund
Alternative Hypothesis (H1) = Preference of
investment of people in Mutual fund is more than
ULIP
RESEARCH METHODOLOGY
The study of capital market and its effect on mutual funds and ULIP is an arduous task in itself.
The keyword in handling such kind of problems is research. Gathering information from all
the possible sources, whether by different articles, press releases, company circulars or by direct
interaction with the clients or face to face interviews with the head of the department.
This project work is mainly based on Primary and Secondary data in which primary data was
collected and secondary data was available to us from the confidential office records of the
department, various magazines and newspapers published by concerned authorities. The data was
also collected from secondary sources; mainly from various internet sites related to capital
market and mutual funds and Key Information Memorandum of various fund houses. However
the information gathered was mainly from self analysis and from interaction with the senior
employees of the CMSD department as well as with the highly informed and experienced clients.
The interpretation of data and constructions of graphs was done using Microsoft Word Graph
chart.
RESEARCH DESIGN:
Research was initiated by examining primary and secondary data to gain insight into the
problem. By analyzing primary and secondary data, the study aim is to explore the short comings
of the present system and primary data will help to validate the analysis of secondary data
besides on unrevealing the areas which calls for improvement.
SAMPLING PLAN:
Since it is not possible to study whole universe, it becomes necessary to take sample from the
universe to know about its characteristics.
SAMPLE TECHNIQUE:
SAMPLE SIZE:
Convenience Sampling.
20
RESEARCH OBJECTIVE
i
ii
iii
RESEARCH METHODOLOGY
Research Introduction
The activities of market research include defining marketing opportunities and problems,
generating and evaluating marketing ideas, monitoring performance, and understanding the
marketing process. The methodology of the study included selection of sample, study/survey of
library references, collation and compilation of the primary and secondary data and information
obtained through structured questionnaires, open ended interview.
Data Collection
We have collected two types of Data
a. Primary Data through Questionnaire and interaction.primary research is done for
studying customer preference towards various schemes offered by SBI
b. Secondary Data through internet, articles, magazines, bank visit,studying project
reports etc. our report contains mainly secondary data
Research Methodology :
Research Design:
The techniques used for research is Exploratory Research.
Research Tool :
DATA ANALYSIS
Q1) Education Qualification
Undergraduate
Graduate
84
Post graduate
11
Education Qualification
21%
Undergraduate
Graduate
50%
COMMENT
Half of the respondents are graduates and have their accounts in different banks. Undergraduate
also constitute 29% of the account holders.
Marital Status
No of Respondents
Married
67
Single
33
Gender
33%
Married
Single
67%
COMMENT
67% respondents are married and this shows saving and investment habit increases after
marriage. Single persons are also increasingly saving their earnings in banks.
Q3) Occupation
S.No
1
2
3
4
Occupation
No of Respondents
Profession
18
Service
36
Business
26
Student
20
occupation
Profession
Service
26%
20%
18%
Business
36%
Student
COMMENT
It shows that service or salaried class constitute 36% of the population and availing the
advantage of a wide product range offered by different banks followed by business class and
proffesionals.
Household income
Respondents
35
Between 2 to 5 lack
54
Between 5 to 8 lack
11
Between 2 to 5 lack
35%
Between 5 to 8 lack
Between 5 to 8 lack
54%
COMMENT
It shows that between 2-5 lakh income group constitute largest segment of banks with 54% of
respondents followed by customer who belong to less than 2 lakh income group.
Existing customer
No of Respondents
Yes
83
No
17
customer of SBI
17%
yes
no
83%
COMMENT
From the total respondents 83% were already customers of SBI and availing the facilities of a
wide product range only 17% respondents are not current customers of SBI.
Q6) What is your perception about different products and services offered by SBI?
S.No
1
2
3
Customer perception
No of Respondents
Lucrative
53
Not lucrative
29
No idea
18
Not lucrative
29%
53%
No idea
COMMENT
Most people consider SBIs product range and services lucrative because of its wide reach ability
and creditworthiness. 29% respondents found it not lucrative because of slow technological up
gradation and entry of private banks
Q7) Do you have taken any of these taxes saving scheme provided by SBI?
S.No
1
2
3
No of Respondents
48
24
28
28%
Senior citizens savings scheme48%SBI Tax Savings Scheme, 2006
24%
COMMENT
48% respondents among all are benefitted by SBIs public provident fund, followed by those
customers who have invested in Senior citizens savings scheme, constitiute 24% and SBI Tax
Savings Scheme, 2006 holders constitute 28%
Q8) Do you want to open a Savings account or Current account with SBI? (If not an
existing customer)
S.No
1
2
3
No of Respondents
Yes
64
No
22
16
22%
No
COMMENT
A large number of respondents are willing to open an account in SBI in near future because of its
far reach ability and easy accessibility.
Q9) What is your main purpose to deposit money in various investment plans offered by
SBI?
S.N
o
1
Main purpose
No of Respondents
Savings
21
Safety
19
Liquidity
12
tax exemption
32
on demand payment
16
safety 32%
liquidity
21%
tax exemption on demand payment
12%
19%
COMMENT
The main purpose of depositing in various bank schemes is to avail tax exemptions on their
deposits, savings for future use and safety are two other main purpose followed by on demand
payment and liquidity.
No of Respondents
Yes
72
No
28
no
72%
COMMENT
Mostly people who belongs to government and public sector maintains their salary account in
SBI which increases its deposits stock.
Other facilities
No of Respondents
ATMs
47
credit/debit card
32
Demat account
online banking
other facilities
24%
ATMs
8%
3%
Demat account
credit/debit card
online banking
65%
COMMENT
SBI has a largest ATM network which offers computerized transactions where customers can
utilize the services whenever and wherever there is a need
Q12)Do you have your accounts in any other bank, if yes then in which bank?
S.NO
1
2
3
4
5
6
7
8
9
10
No of Respondents
14
9
5
11
14
22
3
0
21
1
21%
Bank of Baroda
3%
Union1%
bank
HDFC
14%
Allahabad Bank
9%
22%
5%
ICICI Bank
14%
Central11%
Bank
Bank of India
Others
COMMENT
SBI holds 20% deposit market in INDIA. Private players like ICICI and HDFC had emerged two
leading banks following it, Bank Of India is also a leading public sector bank.
FINDINGS
1) In recent years increase in disposable income and increased number of working women lead
to bulk deposits in SBI.
2) The main purpose of deposits is to enjoy tax exemptions and safety of their deposits.
Salaried class constitutes its largest segment.
3) ICICI, HDFC and Bank of India are the main competitors of SBI and giving it tough
competition.
4) SBI is still largest bank in INDIA due to its wide reach ability in all parts of India with its
wide range of products and services.
5) Most of the customers found its products lucrative because of attractive rates of interest on
their deposits, convenient and economical method of payment and means of transfer of fund
from one place to another
6) Customer prefer SBI bank because of its government backing and its working style
7) Reasons for high use of SBI advance product
CONCLUSION
From the analysis part it can be conclude that customers have a good respond towards SBI
advance products. SBI is in 1st position having large number of customers & providing good
services to them. The bank has a wide customer base, so the bank should concentrate on this to
retain these customers.
In present scenario SBI is the largest advance product issuer in India. Within a very short period
of time the achievement made by SBI is excellent, what a normal bank cannot expect,but it is
being done by SBI. It happens due to employee dedication towards the organization, fastest
growing Indian economy, & brand image.
To be the largest advance product issuer, SBI should focus on
SWOT ANALYSIS
Strengths:
Brand Name: SBI Bank has earned a reputation in the market over the period of
time(Being the oldest bank in India tracing history back to 1806)
Market Leader: SBI is ranked at 380 in 2008 Fortune Global 500 list, and ranked 219 in
2008 Forbes Global 2000. With an asset base of $126 billion and its reach, it is a
regional banking behemoth.
Wide Distribution Network: Excellent penetration in the country with more than 10000
core branches and more than 5100 branches of associate banks (subsidiaries).
Diversified Portfolio: SBI Bank has all the products under its belt, which help it to
extend the relationship with existing customer.SBI Bank has umbrella of products to
offer their customers, if once customer has relationship with the bank.
Government Owned: Government owns 60% stake in SBI. This gives SBI an edge over
private banks in terms of customer security.
Low Transition Costs-SBI offers very low transition costs which attracts small
customers.
Weaknesses:
The existing hierarchical management structure of the bank, although strength in some
respects, is a barrier to change.
Though SBI cards are the 2nd largest player in the credit card industry, it has the highest
non performing assets (NPAs) in the industry, which stand out to be at 16.28 % (Dec
2007).
Modernisation: SBI lags with respect to private players in terms of modernisation of its
processes, infrastructure, centralisation, etc.
Opportunities:
Merger of associate banks with SBI: Merger of all the associate banks (like SBH, SBM,
etc) into SBI will create a mega bank which streamlines operations and unlocks value.
Planning to add 2000 branches and 3000 ATMs in 2008-2009. This will further increase
its reach.
Increasing trade and business relations and a large number of expatriate populations
offers a great opportunity to expand on foreign soil.
Threats:
Advent of MNC banks: Large numbers of MNC banks are mushrooming in the Indian
market due to the friendly policies adopted by the government. This can increase the
level of competition and prove a potential threat for the market share of SBI bank.
Consumer expectations have increased many folds in last few years and the bank has not
towards
advance product.
2) Bank should more concern about physical verification rather than phone verification so it
will avoid fraud or cheating.
3) Advance product selling agents must not give any type of wrong informationregarding
advance product.
4)For the better service new offers would be require.
5) SBI customer care should more concern about the fastest settlement of customerproblems.
6) Agents should be trained, well educated & proper trained to convince the people
7) About different advance product
8) It is the duty of the bank to disclose all the material facts regarding advance product, like ROI,
repayment period and any types of charges, etc.
9) Special scheme should be implemented to encourage both customer and agents.
ANNEXURE
www.sbi.com
www.sbideposits.com
www.rbi.org.in
www.e-investing.in Financial Services
www.differencebetween.net/.../difference-between- rtgs-and-neft
en.wikipedia.org/wiki/CFMS - Cached
www.ecs.com.tw
en.wikipedia.org/wiki/Electronic_funds_transfer
en.wikipedia.org/wiki/Mobile_banking