Project Report

( Submitted for the Degree of B.Com. Honours in Accounting & Finance under the University of
Calcutta)

SBI MUTUAL FUND

Submitted by

Name of the Candidate: DIPAK KUMAR RANKA

Registration No. 017-1121-2331-11
Name of the College: THE BHAWANIPUR EDUCATION SOCIETY COLLEGE
Roll No.0555

Supervised by

Name of the Supervisor:

Name of the College: THE BHAWANIPUR EDUCATION SOCIETY COLLEGE
Year & Date of Submission:

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Annexure- IA

Supervisor's Certificate

This is to certify that Mr Dipak Kumar Ranka a student of B.Com. Honours in Accounting &

Finance of THE BHAWANIPUR EDUCATION SOCIETY COLLEGE under the

University of Calcutta has worked under my supervision and guidance for his Project Work and

prepared a Project Report on SBI Mutual Fund which he is submitting, is his genuine and

original work to the best of my knowledge.

Signature

Place: Kolkata Name:

Date: Designation:

Name of the College: The Bhawanipur

Education Society College.

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Annexure- IB
Student's Declaration
I hereby declare that the Project Work with the title SBI MUTUAL FUND

submitted by me for the partial fulfilment of the degree of B.Com. Honours in Accounting & Finance

under the University of Calcutta is my original work and has not been submitted earlier to any other

University /Institution for the fulfilment of the requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in part has been incorporated in this report

from any earlier work done by others or by me. However, extracts of any literature which has been used

for this report has been duly acknowledged providing details of such literature in the references.

Signature

Name: Dipak Kumar Ranka

Registration No. 017-1121-2331-11

Place: Kolkata

Date:

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 ACKNOWLEGEMENT

I take immense pleasure in expressing of sincere thanks to my respected principal who has always been

a source of inspiration for all of us.

I express my gratitude to my supervisor for his/her guidance and timely suggestions that helped me to

go through the tough times of this project.

I express my heartfelt thanks to my parents who supported us in all efforts which we took for successful

completion of my project as well as my Bachelor degree.

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 Executive summary

It is beyond doubt, that within a few years mutual funds have emerged as a major 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 are rising,

more and more people are enjoying the benefits of investing in mutual funds.

One of the reasons why mutual funds have become so popular with the common Indian investor

because it has opened a new avenue of investing their small savings more fruitfully .It is beyond doubt

that mutual funds are an essential investment for fulfilling one’s dream. If used with the right expertise,

it is the best way to make money work for investor.

Knowing how to secure your financial well being is one of the most important things one will ever need

in life. But with so many mutual funds to choose form, most of the investors faces problem in selecting

funds. Investment strategy and managerial styles are qualities of funds. Past performance also is a good

indicator of the funds but it alone cannot indicate future performance as well. However it is the only

quantitative method to assess the fund at present market condition. Hence, the past performance of the

mutual fund needs to be assessed properly.

In this project I have tried to assess the competitive strength of mutual funds in relation to one another

by using risk return relationship. Here i have taken six funds in the equity diversified sector and have

tried to analyze them on parameters like Standard Deviation ,Beta , ratio and have tried to judge the

best fund among the six in the current scenario.

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 TABLE OF CONTENTS

CHAPTERS TOPIC PAGE NO.

1 INTRODUCTION 7
2 LITERATURE REVIEW 9
3 OBJECTIVE OF STUDY 12
4 RESEARCH METHODOLOGY 13
4 CONCEPTUAL FRAMEWORK 18
5 ANALYSIS & FINDINGS 29
6 CONCLUSION 40
RECOMMENDATION 43
BIBLIOGRAPHY 46

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INTRODUCTION:-

BACKGROUND OF THE STUDY

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an enviable track record in

judicious investments and consistent wealth creation. The fund traces its lineage to SBI – India’s largest

banking enterprise. The institution has grown immensely since its inception and today it is India’s

largest bank, 7rganizers 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 Societe General 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

5.4 million investors have reposed their faith in the wealth generation expertise of the Mutual Fund.

Schemes of the Mutual fund have consistently outperformed benchmark indices and have emerged as

the preferred investment for millions of investors and HNI’s. Today, the fund manages over Rs. 34,441

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, 28 investor service centers, 46 investor service desks and 56 district

7rganizers.

SBIMF like other asset management companies has various channels for the sale of different mutual

fund schemes. The different channels it relies on for sale of schemes is as follows -:

• Sale through tie ups with Private and Foreign Banks

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• Sale through Agents referred to as the retail channel

• Sales made directly through customers directly

• Sales made through SBI by way of Cross Selling (SBI is treated as a separate channel altogether.

Among the above mentioned channels the retail channel is the most revenue generating. The SBI

channel comes a close second. The third position is that of private and foreign banks. The latest bank

with which SBIMF has tied up is the Citibank. Among the private and foreign banks the biggest

distributor is the ABN Amro bank. ABN Amro bank has been giving SBI bank stiff competition and is

nearly on the verge of outperforming SBI in terms of AUM. SBI Branch has around 750 branches

across Kolkata, a network which is easily more extensive than any other bank. Despite some optimistic

statistics (such as 100% growth etc.) the reality is that not enough is being done to tap the potential of

SBI. SBI Bank has a vibrant customer base of 3.5 million, however this extensive network is not being

utilized to its maximum potential.

For the requirement of the study our data is concerned on the 4 types of mutual funds-

I have chosen 1 from each category for this analysis

7 Equity funds (SBI Magnum Equity Growth)

2. Debt/Income funds (SBI dynamic bond fund)

3.Balanced funds or hybrid funds (SBI – Magnum Balanced Fund – Growth)

4.Liquid funds/ Money market fund (SBI Magnum Insta Cash Fund – Liquid Floater

Plan (G))

LITERATURE REVIEW

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Literature on mutual fund performance evaluation is enormous. A few research studies that have

influenced the preparation of this paper substantially are discussed in this section.

Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio

performance. Drawing on results obtained in the field of portfolio analysis, economist

Jack L. Treynor has suggested a new predictor of mutual fund performance, one that differs from

virtually all thoseused previously by incorporating the volatility of a fund’s return in a

simple yet meaningful manner.

Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance

(Jensen’salpha) that estimates how much a manager’s forecasting ability contributes to fund’s returns.

Asindicated by Statman (2000), the e SDAR of a fund portfolio is the excess return of the portfolio

over the return of the benchmark index, where the portfolio is leveraged to have the benchmark index’s

standard deviation.

S. Narayan Rao , evaluated performance of Indian mutual funds in a bear market through

r e l a t i v e p e r f o r m a n c e i n d e x , r i s k - r e t u r n a n a l y s i s , Tr e y n o r ’s r a t i o , S h a r p e ’s

r a t i o , S h a r p e ’s measure , Jensen’s measure, and Fama’s measure. The study used 269 open-ended

schemes (out of total schemes of 433) for computing relative performance index. Then after excluding

funds whose returns are less than risk-free returns, 58 schemes are finally used for further analysis. The

results of performance measures suggest that most of mutual fund schemes in the sample of 58 were

able to satisfy investor’s expectations by giving excess returns over expected returns based on both

premium for systematic risk and total risk. Bijan Roy, conducted an empirical study on

conditional performance of Indian mutual funds. This paper uses a technique called

conditional performance evaluation on a sample of eighty-nine Indian mutual fund schemes .This paper

measures the performance of various mutual funds with both unconditional and conditional

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f o r m o f C A P M , Tr e y n o r- M a z u y m o d e l a n d H e n r ik s s o n - M e r t o n mo d e l.

T h e e f f e c t o f incorporating lagged information variables into the evaluation o

f m u t u a l f u n d m a n a g e r s ’ performance is examined in the Indian context. The results suggest that

the use of conditioning lagged information variables improves the performance of mutual fund

schemes, causing alphasto shift towards right and reducing the number of negative timing

coefficients. Mishra,(2002) measured mutual fund performance using lower partial moment. In this

paper, measures of evaluating portfolio performance based on lower partial moment are developed.

Risk from the lower partial moment is measured by taking into account only those states in

which return is below a pre-specified “target rate” like risk-free rate. Kshama Fernandes(2003)

evaluated index fund implementation in India. In this paper, tracking error of index funds in

India is measured. The consistency and level of tracking errors obtained by some well-run index

fund suggests that it is possible to attain low levels of tracking error under Indian

conditions. At the same time, there do seem to be periods where certain index funds

appear to depart from the discipline of indexation. K. Pendaraki , studied construction of mutual

fund portfolios, developed a multi

criteria methodology and applied it to the Greek market of equity mutu

a l f u n d s . T h e methodology is based on the combination of discrete and continuous multi-criteria

decision aid methods for mutual fund selection and composition. UTADIS multi-criteria decision aid

method is employed in order to develop mutual fund’s performance models. Goal programming model

is employed to determine proportion of selected mutual funds in the final portfolios.

Zakri Y. BELLO(2005) matched a sample of socially responsible stock mutual funds matched to

randomly selected conventional funds of similar net assests investigate differences in characteristics of

assests held, degree of portfolio diversification on investment performance. The study found that

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socially responsible funds do not differ significantly from conventional funds in terms of any of these

attributes. Moreover, the effect of diversification on investment performance is not different between

two groups. Both group[s underperformed the Domini 400 Social Index and S & P 500 during the study

period.

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OBJECTIVES OF THE STUDY
 To understand the working & management of a Mutual Fund.
 To understand the calculation of Net-Asset Values of a Mutual Fund.
 To evaluate investment performance of mutual fund in terms of risk and return.
 To get an insight knowledge about mutual funds.
 To find the right mutual fund for a specific customer.
 To come out with conclusion and suggestions based on the analysis and the interpretation of

data.
 To understand the history behind mutual fund.
 To find out how individual think about mutual fund.
 To understand mutual fund as an investment avenue.

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RESEARCH METHODOLOGY
Methodology basically means the selection of the various methods and techniques in the research-

conducted.

The various steps includes: -

 Selection of a representative sample from the general population, which depicts the characteristics

of the complete population.

 Application of various tools and techniques to obtain relevant information related to a case.
 Collection of relevant data.
 Analysis and interpretation of the data.
 Generation of a final report.

The following are some of the tools used to analyze the performance of the selected mutual fund

schemes

BETA:

It measures the systematic risk and shows how prices of securities respond to market forces. It is

calculated by relating the return on a security with return for the market. By convention, stock market

has 1.0 beta. If beta of the respective mutual fund scheme is greater than 1 the scheme is said to be

riskier than market. If beta is less than 1, the indication is that stock is less risky in comparison to

market. If beta is zero then there is no risk

Beta is calculated as follows:

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Where,

Kj is the returns on port folio or stock-dependent variable

Km is the market returns or index – independent variable

Variance is the square of standard deviation

STANDARD DEVIATION
It is used to measure the variation in individual returns from the average expected return over a certain

period. Standard deviation is used in the concept of risk of portfolio of investments; higher standard

deviation means a greater fluctuation in expected return

Where,

P.T.O

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RATE OF RETURN:

Rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return,

is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the to

the amount of money invested. The amount of money gained or lost may be referred as interest,

profit/loss, gain/loss or net income/loss.

ROR

NET ASSET VALUE:

NAV or Net Asset Value of the fund is the cumulative market value of the assets of the scheme minus

its liabilities. The NAV per unit is the net asset value of the scheme divided by the number of units

outstanding on the Valuation date.

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The value of all securities in the portfolio is calculated daily. From this, all expenses are deducted and

the resultant value divided by the number of units in the fund is the fund’s NAV.

The formula for NAV is

LIMITATION OF THE STUDY

 This study is restricted to secondary data only

 Different tools used for analysis may suggest different results as the approach differs
 This study considers only present data
 This study is based on only 4 schemes of 1 mutual fund Company which does not allow us to

compare it with other companies

 Only a limited number of tools is being used.

CHAPTER PLANNING

Our study has been organized under the following chapters:

 Conceptual Framework – This chapter deals with the brief discussion on the definition of

SBI Mutual Fund, its advantages and disadvantages, an introduction to the SBI and a precise

summary on its national and international scenario.

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  Presentation of data, analysis and findings – This chapter sums up the facts about

investing in Mutual Fund of State Bank of India. We have also used various tools to analyze

the performance of the selected mutual fund schemes.

 Conclusions and recommendations -This chapter, ultimately, gives the conclusion of

our research project based on the findings and analysis of the data retrieved in the previous

chapter “Presentation of Data Analysis and Findings”. Some recommendations and

suggestions also, have been enlisted for the opportunities and threats to SBI for mutual fund.

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CONCEPTUAL FRAMEWORK :-

CONCEPT OF MUTUAL FUND

The securities and exchange board of India regulations 1993 defines a mutual fund as” a fund

established in the form of a trust by a sponsor, to raise money through the sale of units to the public,

under one or more schemes, for investing in securities in accordance with these regulations”.

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

goal. The money thus collected is then invested in capital market instruments such as shares, debentures

and other securities. The income earned through these investments and the capital appreciation realized

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

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

professionally managed basket of securities at a relatively low cost.

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Though still at a nascent stage, Indian Mutual Fund industry offers a large number of schemes and

serves broadly all types of investors. The range of products includes equity funds, debt, liquid, gilt and

balanced funds. There are also funds meant exclusively for young and old, small and large investors.

Moreover, the setup of a legal structure, which has enough teeth to safeguard investor’s interest,

ensures that the investors are not cheated out of their hard earned money.

HISTORY OF MUTUAL FUNDS IN INDIA

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. The history of mutual funds in India can be

broadly divided into four distinct phases

FIRST PHASE1964-1987

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

Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of

India.

SECOND PHASE 1987-1993(Entry of Public Sector Funds)

The year 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.

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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 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.

FOURTH PHASE (SINCE FEBRUARY 2003)

In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was bifurcated into two

separate entities. One is the specified Undertaking of the Unit Trust of India with assets under

management of Rs.29, 835 crores as at the end of January 2003 representing broadly, the assets of US

64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India,

functioning under an administrator and under the rules framed by Government of India and does not

come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd. Sponsored by SBI, PNB, BOB and LIC. It is registered with

SEBI and functions under the Mutual Fund regulations. With the bifurcation of the erstwhile UTI which

had in March 2000 more than Rs 76,000 crores of assets under management and with setting up of a

UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations.

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FIFTH PHASE- Growth and Consolidation- 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of which are

acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB

Mutual Fund by Principal Mutual Fund. Simultaneously, more international Mutual Fund players have

entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 33 funds as at the end of

March 2010. This is a continuing phase of growth of the industry through consolidation and entry of

new international and private sector players.

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Graph 1: graph showing increase in asset under management of all Mutual Funds in India.

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TYPES OF MUTUAL FUND

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk

tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection of

many stocks, an investors can go for picking a mutual fund might be easy. There are over hundreds

of mutual funds scheme to choose from. It is easier to think of mutual funds in categories,

mentioned below.

Overview of existing schemes existed in mutual fund category: BY STRUCTURE

1. Open – Ended Schemes:

Open ended funds are ones that sell & repurchase units at all times. The Asset under management

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 keeps fluctuating depending on investors buying or selling units. An AMC might stop selling units

if the fund size becomes too big to manage. However repurchase of units is done at all times.

2. Close – Ended Schemes:

These schemes have a pre-specified maturity period. One can invest directly in the scheme at the

time of the initial issue. Depending on the structure of the scheme there are two exit options

available to an investor after the initial offer period closes. Investors can transact (buy or sell) the

units of the scheme on the stock exchanges where they are listed. The market price at the stock

exchanges could vary from the net asset value (NAV) of the scheme on account of demand and

supply situation, expectations of unit holder and other market factors. Alternatively some close-

ended schemes provide an additional option of selling the units directly to the Mutual Fund through

periodic repurchase at the schemes NAV; however one cannot buy units and can only sell units

during the liquidity window. SEBI Regulations ensure that at least one of the two exit routes is

provided to the investor.

Overview of existing schemes existed in mutual fund category: BY

INVESTMENT OBJECTIVE

 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

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 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).

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.

MERITS OF INVESTING IN MUTUAL FUNDS:

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

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

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

relatively less expensive way to make and monitor their investments.

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

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

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

minimized by gains in others.

3. 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.

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 4. Liquidity – Just like an individual stock, mutual fund also allows investors to liquidate their

holdings as and when they want.

5. 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.

6. Convenient Administration- Investing in a mutual fund reduces paperwork and helps you

avoid many problems such as bad deliveries, delayed payments and follow up with brokers and

companies. Mutual funds save your time and make investing easy and convenient.

7. AFFORDABILITY - With many mutual funds, you can begin buying units with a relatively

small amount of money(e.g., Rs 5000 for the initial purchase). Some mutual funds also let you buy

more units on a regular basis with even smaller installments (e.g., Rs 500 per month).

8. LIQUIDITY – Units or shares of mutual funds can be redeemed at any time.

DEMERITS OF INVESTING IN MUTUAL FUNDS:

1. Professional Management- Some funds do not perform in none of 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.

2. 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.

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 3. Dilution – Because funds have small holdings across different companies, high returns from a

few investments often don’t make much difference on the overall return. Dilution is also the result

of a successful fund getting too big. When money pours into funds that have had strong success, the

manager often has trouble finding a good investment for all the new money.

4. Taxes – when making decisions about your money, fund managers don’t consider your personal

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

which affects how profitable the individual is from the sale. It might have been more advantageous

for the individual to defer the capital gains liability

5. Fees and Commission-All funds charge administrator’s fees to cover their day to day

expenses some funds also charge commission to compensate brokers, financial consultants. Even if

an investor doesn’t uses a broker or other financial advisor, he will pay a sales commission if he

buys shares in a Load Fund.

6. No Guarantees- The return of any mutual fund scheme is not assured as the investment or the

corpus of the fund is invested in the capital market which may or may not generate returns. No

investment is risk free, if the entire stock market declines in value, the value of mutual fund shares

will go down as well, no matter how balanced the portfolio is but encounter fewer risks when they

invest in mutual funds than when they buy and sell stocks on their own.

7. TIME HORIZONS - Does the investment fit with your expected investment time horizon? For

example, if you re investing for a relatively short time, will sales charges and redemption fees offset

any possible gains? Might the value of the fund be down just when you need to redeem your

investment?

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 8. SERVICE PROVIDER: Do you know something about the mutual fund firm offering the

mutual funds for sale? Consider who operates the mutual fund and who provides the services

necessary for its operations. You ll also want to look at the performance history of the fund manager

who selects the securities to be held in the fund.

ANALYSIS AND FINDINGS:-

RESEARCH DESIGN

This report is based secondary data, however secondary data collection was given more importance

since it is overhearing factor in attitude studies. One of the most important users of research is that it

helps in identifying the problems, 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.

METHODOLOGY

The project is descriptive in nature and revolves around the information generated,

from various sources for the detailed analysis of SBI Mutual Fund.
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 SAMPLE PROFILE

Collection of Sample: For my convenience I have taken some of the best

performing funds offered by various AMCs and done the analysis on them. All the

funds chosen are equity growth funds. The following funds are chosen for the

analysis:

Reliance growth fund

ICICI Prudential Growth plan

UTI contra fund

HDFC growth fund

SBI magnum sector umbrella-contra-growth

Kotak contra- growth

Procedure: Study undertaken is both qualitative and quantitative in nature.

 Qualitative analysis required studying the profile of the of the investor portfolio

of the investor, etc.

 Quantitative analysis required analyzing the performance on various

parameters such as absolute returns, the risk involved and the risk adjusted

returns.

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DATA TYPE

The type of data used in this project is based particularly on secondary data.

DATA SOURCE

Data has been collected only from secondary sources as described below:

The secondary sources of data were taken from the –

 Various magazines and journals on mutual funds.

 Information collected from Internet.

 Sales brochures available at SBI mutual funds.

PERIOD OF STUDY:-

The study was carried out for a period of six weeks,from 1st December 2013 to 20th January 2014.

STATISTICAL DATA USED –

Different types of tools (such as Beta ,Standard deviation , Net asset value, Rate of return) and

graphs and charts (such as pie and bar charts) used to analyze mutual fund performance.

ANALYSIS OF THE DATA

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S
BI Mutual Fund is India’s largest bank sponsored mutual fund and has an enviable track

record in judicious investments and consistent wealth creation. The fund traces its lineage to

SBI – India’s largest banking enterprise. The institution has grown immensely since its

inception and today it is India’s largest bank, patronized by over 80% of the top corporate houses of the

country.

SBI Mutual Fund is a joint venture between the State Bank of India and Société Générale Asset

Management, one of the world’s leading fund management companies that manages over US$ 500

Billion worldwide

Vision

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

Performance
In twenty years of operation, the fund has launched 38 schemes and successfully redeemed fifteen of

them. In the process it has rewarded its 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.

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.

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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

Key Information

Incorporation Date: : 07-Feb-1992

Total Assets Managed (Cr.) 14,505.97

Trustee/s : Sandra Martyres

CIO: Navneet Munot

Fund Manager/s : Suchita Shah

Asset under Management Trend

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 This chart shows asset under management up to December 2012

BETA

The analysis of risk associated with the funds can be analyzed through BETA calculation. Beta

measures the volatility of a fund relative to a particular market benchmark i.e. how sensitive the fund is

to market movements. The higher the BETA, the higher the risk associated with such investment.

Generally we find market to have a BETA of 1. A lower beta signifies that it has lower risk and vice

versa. BETA of 0 signifies no risk. For example, a Beta of 1.1 would indicate that if the market goes up

10%, the fund might rise 11% and vice versa in a down market. So I have made a comparison of 4 types of

fund offered by SBIMF on basis of BETA.

Type of Fund Name of Fund BETA

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Equity funds SBI Magnum Equity Growth 0.88

Debt/Income funds SBI dynamic bond fund 0.03

Balanced funds or hybrid funds SBI – Magnum Balanced Fund 1.08

– Growth
Liquid funds/ Money market SBI Magnum Insta Cash Fund 0.68

fund – Liquid Floater Plan (G)

Graph 2: graph showing Beta values of funds

Standard Deviation

The fluctuation of the return can be estimated through standard deviation of the returns of a fund. Here

the standard deviations of the return from the funds have been given from its inception date. Higher

standard deviation suggests high fluctuation in returns. So it is easily understood that riskier funds will

have higher standard deviation. It is denoted by symbol (σ). Here I have made a comparison of the same

four funds on basis of standard deviation.

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 Type of Fund Name of Fund Standard Deviation(σ)

Equity funds SBI Equity Magnum Growth 3.76

Debt/Income funds SBI dynamic bond fund 0.18

Balanced funds or hybrid SBI – Magnum Balanced Fund 2.97

funds – Growth
Liquid funds/ Money market SBI Magnum Insta Cash Fund 0.04

fund – Liquid Floater Plan (G)

Graph 3: Graph showing SD of all the funds.

Rate of Return
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The rate of return is one of the most important factors during study of Mutual Funds. As the investors

are mostly interested to know how much are they going to earn from an investment. So the position of a

Mutual Fund depends on the Rate of Return. So I have made a comparison of the four funds on basis of

Rate of Return. (All data on 10th January)

Type of Fund Name of Fund Rate of Return*

1 year 3 year**
Equity funds SBI Magnum Equity Growth 25.65 7.22

Debt/Income funds SBI dynamic bond fund 11.81 10.72

Balanced funds or hybrid SBI – Magnum Balanced Fund 33.31 6.13

funds – Growth
Liquid funds/ Money market SBI Magnum Insta Cash Fund 9.24 7.97

fund – Liquid Floater Plan (G)

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 Graph 4: Graph showing rate of return for 1 and 3 years respectively.

NAV

NAV means the market price of 1 unit of Mutual Fund depending on different schemes. So the growth

of NAV over a period of time can also be considered to be tool for analysis. So here I have shown the

growth of NAV of all the 4 Mutual Fund schemes over last 1 year (from 10 th January 2012 to 10th

January 2013.

Graph 5: Graph showing growth of NAV in last 1 year

A fast growth in value of NAV allows increasing the returns of an investor. So higher growth of NAV

shows increase of returns.

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As per the graph if 1 person has invested Rs 10000 in any bond then in last 1 year the NAV of
SBI – Magnum Balanced Fund – Growth has seen highest growth followed by SBI magnum equity

fund.

But the lowest growth has been of SBI dynamic bond fund.

CONCLUSION :-

FINDINGS AND CONCLUSION

FINDINGS
The analysis of the 4 types of funds on basis of Beta, SD and Absolute Returns yielded the following

results.

SBI Magnum Equity Growth is an equity based fund and so has shown very high returns in last

year (25.65%) but has not been a consistent performer. Its last 3 year annualized returns has been just

(7.22%). It also has inconsistent returns which is proved by the fact it has Highest SD of 3.76, though

it’s a equity based investment it is assuring to see that it has a lower Beta than 1(0.88). Though it has

generated nice returns this year it cannot be termed as a very good scheme due to high SD, moderate

Beta and low 3 year Annualized Return.

SBI dynamic bond fund is a debt related fund, and like all other debt related funds it has low SD,

Beta and nice returns. On a comparative basis it has generated lower return in last year (11.81%) but in

the last 3 year annualized Return category it has been the best performer, with an annualized return of

10.72%. It also has the lowest Beta of (0.03) and low SD of (0.18) which proves it is a consistent return

provider. It has though a low growth of NAV.

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SBI – Magnum Balanced Fund – Growth is a balanced fund which has investment in both

equity and debt funds. It has yielded the highest return of (33.31%) in last 1year which proves that the

fund managers of this fund have performed flawlessly. But it has certain drawbacks of having low

consistent performance as the annualized returns of last 3 year of this fund has been the lowest at

6.13%. It also has the problem of highest Beta of 1.08 and high SD of 2.76.

SBI Magnum Insta Cash Fund – Liquid Floater Plan (G) is a money market fund and has

performed most poorly among the 4 schemes. It does not have a high last year return (9.24) and also a

low 3 year annualized return (7.97). But it has the lowest SD (0.04) and also a low Beta of 0.68.

Comparing the overall performance of all the selected Mutual Fund schemes, SBI dynamic bond

fund has been the best Mutual Fund scheme, as it has given highest returns in last 3 year annualized

return though having a low Beta and low SD.

CONCLUSION

Investors who want the highest returns and are willing to take the higher risk should invest their funds

in SBI – Magnum Balanced Fund – Growth as it has yielded highest return in last 1 year (33.31%)

among all 4 schemes.

Investors here should understand the basic fact that these investments are associated with high risk and

one can only get higher returns by taking a higher risk. It must also be mentioned that this investments

also should be done keeping in tune with the market, to get the highest returns.

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Investors who are interested in consistent returns should invest in SBI Magnum Insta Cash Fund –

Liquid Floater Plan (G) as it has the lowest Standard Deviation (0.04) among all 4 selected schemes

Investors who have lower risk appetite should invest in SBI dynamic bond fund. As it has the lowest

Beta (0.03) among all selected schemes. Beta measures the volatility of a fund relative to a particular

market benchmark. Therefore lower the Beta lower is the risk and vice versa.

It can be therefore rightly said that in last 3 years debt funds have performed most effectively but we

can surely feel that in last year equity and balanced funds have started to perform better and can be

highly expected to perform much better in future as the Indian share market is slowly reviving from the

recession.

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RECOMMENDATION:-

Study finds that mutual fund industry is growing at a very fast rate and the equity

funds are very popular in recent years but it is not correct to analyze them only on

the basis of their returns. The debt funds on the other hand are doing in bearish

market conditions and are gaining popularity now when markets are crashed. The

findings and recommendations of the study are as follows:

The most common way of looking at past performance and return is not correct;

other measures should also be analyzed.

Investment in a funds with spectacular returns (albeit in the recent past) just on

the basis of the returns without analyzing the risks is not correct.

Even the fact that debt also bears some risk, Debt funds are far better than equity

funds for a risk averse investor as they provide better risk adjusted returns.

Equity funds provide better returns on long term basis where debt on short term

as it is least affected by the short term fluctuations. Short term investor should

always look for investment in debt funds as money will not get blocked in a market

crash.

Investors are still not aware of the various risks associated with the investments.

One should analyze the risks in detail before investing the money.

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Risk can’t be diversified fully. Diversification is like ice cream: most people would

agree that both diversification and ice cream are “good” things. This doesn’t mean

you can’t have too much of a good thing. Eat too much ice cream and you’ll end up

with a stomach ache.

The proper information about the fund is not available to the common investor

regarding the risk adjusted performance of the funds and it’s compared returns to the

other similar ones or the benchmark index. Such information should be available to

the investor so that he can make the decision according to his risk taking capacity.

Earlier the benchmarks for the debt funds are not available, so it’s not easy to

evaluate the performance of the fund manager. But now the indexes for all types of

funds are available and one can compare the funds performance with its relative

index and can find whether the Fund manager have beaten the fund or just giving the

normal returns.

LIMITATION

Time Period Constraint – Since the duration of the summer project was 8 weeks,

my research was limited to only 6 diversified equity funds.

Analysis of the mutual funds was restricted to diversified equity funds only.

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Only comparative analysis of portfolios of mutual funds was done on the basis of

models available, fund manager’s view could not be looked into.

It is better to assess Equity Diversified Funds for a longer span since they are long-

term investments but my study was limited for values for 3 years.

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BIBLIOGRAPHY:-

With the help of various information, facts and knowledge we have gathered from internet I was able to

make this project. I got help from following websites and books –

WEBSITES

WWW.NSEINDIA.COM

WWW.BSEINDIA.COM

WWW.MONEYCONTROL.COM

WWW.MUTUALFUNDSINDIA.COM

WWW.AMFIINDIA.COM

WWW.INVESTOPEDIA.COM

WWW.SBIMF.COM

BOOKS

Donald E.Fischer/Ronald J.Jordan, 2006.Security Analysis and Portfolio

Management, Sixth Edition, Pearson Education, Inc.

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