1

Chapter : 1
1. INTRODUCTION TO THE INDUSTRY
A mutual fund is a professionally-managed form of collective investments that
pools money from many investors and invests it in stocks, bonds, short-term
money market instruments, and/or other securities. In a mutual fund, the fund
manager, who is also known as the portfolio manager, trades the fund's
underlying securities, realizing capital gains or losses, and collects the dividend
or interest income. The investment proceeds are then passed along to the
individual investors. The value of a share of the mutual fund, known as the net
asset value per share (NAV) is calculated daily based on the total value of the
fund divided by the number of shares currently issued and outstanding.
Mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. This pool of money is invested in accordance with a
stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund
belongs to all investors. The money thus collected is then invested in capital
market instruments such as shares, debentures and other securities. The income
earned through these investments and the capital appreciations realized are shared
by its unit holders in proportion the number of units owned by them. Thus a
Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities
at a relatively low cost.
A Mutual Fund is an investment tool that allows small investors access to a welldiversified portfolio of equities, bonds and other securities. Each shareholder
participates in the gain or loss of the fund. Units are issued and can be redeemed
as needed. The fund Net Asset value (NAV) is determined each day.

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

sectors and thus the risk is reduced. Diversification reduces the risk because all
stocks may not move in the same direction in the same proportion at the same
time. Mutual fund issues units to the investors in accordance with quantum of
money invested by them. Investors of mutual funds are known as unit holders.
When an investor subscribes for the units of a mutual fund, he becomes part
owner of the assets of the fund in the same proportion as his contribution
amount put up with the corpus (the total amount of the fund). Mutual Fund
investor is also known as a mutual fund shareholder or a unit holder. Any
change in the value of the investments made into capital market instruments
(such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of
the scheme. NAV is defined as the market value of the Mutual Fund
scheme's assets net of its liabilities. NAV of a scheme is calculated by
dividing the market value of scheme's assets by the total number of units
issued to the investors.
GROWTH OF MUTUAL FUNDS IN INDIA
The Indian Mutual Fund has passed through three phases. The first phase was
between 1964 and 1987 and the only player was the Unit Trust of India, which
had a total asset of Rs. 6,700 crores at the end of 1988. The second phase is
between 1987 and 1993 during which period 8 Funds were established (6 by
banks and one each by LIC and GIC). The total assets under management had
grown to 61,028 crores at the end of 1994 and the number of schemes was 167.
The third phase began with the entry of private and foreign sectors in the Mutual
Fund industry in 1993. Kothari Pioneer Mutual Fund was the first Fund to be
established by the private sector in association with a foreign Fund. As at the end
3

of financial year 2000(31st march) 32 Funds were functioning with Rs. 1, 13,005
crores as total assets under management. As on august end 2000, there were 33
Funds with 391 schemes and assets under management with Rs 1, 02,849 crores.
The securities and Exchange Board of India (SEBI) came out with comprehensive
regulation in 1993 which defined the structure of Mutual Fund and Asset
Management Companies for the first time. Several private sectors Mutual Funds
were launched in 1993 and 1994. The share of the private players has risen
rapidly since then.
Currently there are 34 Mutual Fund organizations in India managing 1,02,000
crores.
VALUATION OF MUTUAL FUND
The net asset value of the Fund is the cumulative market value of the assets Fund
net of its liabilities. In other words, if the Fund is dissolved or liquidated, by
selling off all the assets in the Fund, this is the amount that the shareholders
would collectively own. This gives rise to the concept of net asset value per unit,
which is the value, represented by the ownership of one unit in the Fund. It is
calculated simply by dividing the net asset value of the Fund by the number of
units. However, most people refer loosely to the NAV per unit as NAV, ignoring
the per unit. We also abide by the same convention.

CALCULATION OF NAV
The most important part of the calculation is the valuation of the assets owned by
the Fund. Once it is calculated, the NAV is simply the net value of assets divided
by the number of units outstanding. The detailed methodology for the calculation
of the net asset value is given below.The net asset value is the actual value of a
unit on any business day. NAV is the barometer of the performance of the
scheme.
The net asset value is the market value of the assets of the scheme
minus its liabilities and expenses. The per unit NAV is the net asset value of the
scheme divided by the number of the units outstanding on the valuation date.

Chapter: 2 HISTORY OF MUTUAL FUND INDUSTRY IN INDIA

The origin of Mutual Fund industry in India is with the introduction of the
concept of mutual fund by UTI in the year 1963. Though the growth was slow,
but it accelerated from the year 1987 when non-UTI players entered the industry.
In the past decade, Indian Mutual Fund industry had seen dramatic
improvements, both quality wise as well as quantity wise. Before, the Monopoly
of the Market had seen an ending phase; the Assets Under Management (AUM)
was Rs. 67bn. The private sector entry to the fund family raised the AUM to Rs.
470 bn in March 1993 and till April 2004; it reached the height of 1,540 bn.
Putting the AUM of the Indian Mutual Funds Industry into comparison, the total
of it is less than the deposits of SBI alone, constitute less than 11% of the total
deposits held by the Indian banking industry. The main reason of its poor growth
is that the Mutual Fund industry in India is new in the country. Large sections of
Indian investors are yet to be intellectuated with the concept. Hence, it is the
prime responsibility of all mutual fund companies, to market the product
correctly abreast of selling. The Mutual Fund industry can be broadly put into
four phases according to the development of the sector. Each phase is briefly
described as under.
FIRST PHASE - 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was
set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked
from the RBI and the Industrial Development Bank of India (IDBI) took over the
6

regulatory and administrative control in place of RBI. The first scheme launched
by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of
assets under management.
SECOND PHASE - 1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS)
Entry of non-UTI mutual funds. SBI Mutual Fund was the first 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 in 1989 and GIC in 1990. The end of 1993 marked
Rs.47, 004 as assets under management.
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. The number of mutual fund houses went
on increasing, with many foreign mutual funds setting up funds in India and also
the industry has witnessed several mergers and acquisitions. As at the end of
January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805

crores. The Unit Trust of India with Rs.44, 541 crores of assets under
management was way ahead of other mutual funds.
FOURTH PHASE - SINCE FEBRUARY 2003
This phase brought bitter experience for UTI. It was bifurcated into two separate
entities. One is the Specified Undertaking of the Unit Trust of India with AUM of
Rs.29, 835 crores (as on January 2003). 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 AUM and with the setting up of a UTI Mutual
Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers
taking place among different private sector funds, the mutual fund industry has
entered its current phase of consolidation and growth. As at the end of September,
2004, there were 29 funds, which manage assets of Rs.153108 crores under 421
scheme

Chapter : 3
INTRODUCTION TO THE ORGANIZATION

SBI MUTUAL FUND

SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country
with an investor base of over 4.6 million. With over 20 years of rich
experience in fund management, SBI MF brings forward its expertise in
consistently delivering value to its investors.
PROVEN SKILLS IN WEALTH GENERATION:
SBI Mutual Fund is Indias 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 - Indias 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
Socit General Asset Management, one of the worlds leading fund
management companies that manages over US$ 500 Billion worldwide.
History of SBIMF:

SBI mutual fund was setup on June 29th, 1987 and incorporated on
February 7th, 1992. It is a result of joint venture between State Bank of India and
Societe Generale Asset Management of France. This is a bank sponsored mutual
fund and has a base of 3.5 million investors (approx). Over the years it has carved
a niche for itself through prudent investment decisions and consistent wealth
creation for its customers. They offer Mutual Fund products in Equity Funds,
Index Funds, Balanced Funds, Debt Funds, etc.

The assets under management are Rs 33,727.90 crores as of June, 30, 2010.

Investment Yogi analyses the best performing SBI mutual fund in the
Balanced Fund, Equity Fund and Equity Linked Savings Scheme (ELSS)
categories.
SBI Mutual Fund operates under State Bank of India and Socit Gnrale Asset
Management of France and has asset management experience of more than 25
years. SBI Mutual Fund offers different kinds of products like growth based
products, income based products and balanced funds.

The SBI Mutual Fund operates under State Bank of India and Society Gnrale
Asset Management of France. With over twenty years of experience in asset
management, the company has grown immensely since its establishment.
SBI Mutual Funds offer innovative mutual fund products to its wide pool of
customers and its products are available across India. It has a wide portfolio
of products that meet the requirements of different types of investors. The
SBI Mutual Fund is headed by Mr Syed Shahabuddin, Managing Director
of the company.
10

SBI Mutual Funds Investor's Service Center are located at Ahmedabad,

Bangalore, Bhillai, Bhubaneshwar, Bhopal, Chandigarh, Chennai,
Coimbatore, Cochin, Goa, Guwahati, Hyderabad, Indore, Jaipur, Kanpur,
Kolkata, Lucknow, Ludhiana, Mumbai, New Delhih, Patna, Pune, Ranchi,
Siliguri, Vadodara, and Vijaywada.
SBI MUTUAL FUND

Mutual Fund
SBI Mutual Fund
Setup Date
Jun-29-1987
Incorporation DateFeb-07-1992
Sponsor
State Bank of India
Trustee
SBI Mutual Fund Trustee Company Private Limited
Chairman
Ms.Arundhati Bhattacharya
CEO / MD
Mr. Dinesh Kumar Khara

11

ORGANISATIONAL STRUCTURE OF
SBI MUTUAL FUND

BCN
REA
AOT
NO
CN
HA
L
MS
AA
NL
AE
GS
EH
RE
SA
D

AWARDS AND ACHIEVEMENTS

1. SBI Mutual Fund (SBIMF) has been the proud recipient of the
ICRA Online Award - 8 times.
2. CNBC TV - 18 Crisil Award 2006 - 4 Awards.
3. The Lipper Award (Year 2005-2006) .
12

4. Most recently with the CNBC TV - 18 Crisil Mutual Fund of

the Year Award 2007 and 5 Awards for our schemes.

13

SBI- MUTUAL FUND PRODUCTS:

EQUITY SCHEMES:
14

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

and endeavor will be to provide investors the opportunity to benefit from the
higher returns which stock markets can provide. However they are also
exposed to the volatility and attendant risks of stock markets and hence
should be chosen only by such investors who have high risk taking
capacities and are willing to think long term. Equity Funds include
diversified Equity Funds, Sectoral Funds and Index Funds. Diversified
Equity Funds invest in various stocks across different sectors while Sectoral
funds which are specialized Equity Funds restrict their investments only to
shares of a particular sector and hence, are riskier than Diversified Equity
Funds. Index Funds invest passively only in the stocks of a particular index
and the performance of such funds move with the movements of the index.

Magnum COMMA Fund

Magnum Equity Fund

Magnum Global Fund

Magnum Index Fund

Magnum MidCap Fund

Magnum Multicap Fund

Magnum Multiplier Plus 1993

Magnum Sector Funds Umbrella

MSFU - FMCG Fund

MSFU - Emerging Businesses Fund
MSFU - IT Fund
MSFU - Pharma Fund
MSFU - Contra Fund
15

SBI Arbitrage Opportunities Fund

SBI Blue chip Fund

SBI Infrastructure Fund - Series I

SBI Magnum Taxgain Scheme 1993

SBI ONE India Fund

State Bank of India

100%

SBI Mutual Fund Trustee Company Pvt. Ltd

State Bank of India

63%

Socit Gnrale Asset Management

37%

SBI Funds Management Pvt. Ltd

(Asset Management Company)

SBI Mutual Fund

16

Chapter : 4
SWOT ANALYSIS
STRENGTHS:1.) Brand Name:
The biggest strength is the tag of SBI is going to be the largest banking
group of finance industries.
1. Compatible Price:
Prices of different schemes of SBI Mutual Funds are much more compatible
than others.
2. Diversified Schemes:
Have diversified schemes which are an exception case of SBI Mutual Fund.
3. Less Risk:
Debt schemes are 100% free form market risk. Even as portfolio
Is that diversified so equities are also less risky than others.
1. Easy procedures of redemption & registration too:
They have open ended schemes so Mutual funds are easily redeemable.
WEAKNESS:1. Prone to Market Risk:
Mutual Funds depend on overall macroeconomic condition and market
scenario.
17

2. Tough Competitions:
There is a very tough competition because of large number of Asset
Management Companies.

OPPORTUNITIES:1. Hoarding:
Most of the Indians have black money that too in huge amount i.e. the do not have money in
banks, so approaching them is beneficial.
2. Indian Capital Market is Growing:
So more & more new investors are interested in investments.
3. Tailor Made Products:
Have tailor made products like sector specified schemes & even diversified schemes.
4. Branch Expansion:
Large no. of branches are opening day by day and even we are trapping the countries having
almost same type of socio-economic condition & even same culture etc.

THREATS:1. Tough Competition:-As there are so many mutual fund companies having almost
same kind of schemes, so its tough to compete with.
2. Unawareness: Major % of population is not aware of mutual funds, so its hard to convince
people.
3. Changing Scenario: Its market scenario is changing day by day i.e. its market is fluctuating,
so this makes investor hard to invest
18

CONCEPT OF MUTUAL FUND

19

When an investor subscribes for the units of a mutual fund, he becomes part
owner of the assets of the fund in the same proportion as his contribution
amount put up with the corpus (the total amount of the fund). Mutual Fund
investor is also known as a mutual fund shareholder or a unit holder.
Any change in the value of the investments made into capital market
instruments (such as shares, debentures etc) is reflected in the Net Asset Value
(NAV) of the scheme. NAV is defined as the market value of the Mutual Fund
scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing
the market value of scheme's assets by the total number of units issued to the
investors. 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
appreciations realized are shared by its unit holders in proportion to the
number of units owned by them. Thus a Mutual Fund is the most suitable
investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low
cost.

20

Chapter : 5
ORGANIZATIONAL SETUP OF A MUTUAL FUND:

There are many entities involved and the diagram below illustrates the organizational
setup of a mutual fund:

THREE-TIER STRUCTURE OF MUTUAL FUNDS

21

The structure of Mutual Funds in India is governed by the SEBI (Mutual Fund)
Regulations, 1996 (hereinafter referred to as SEBI Regulations). These
regulations make it mandatory for Mutual Funds to have a Three-tier Structure of
Sponsor Trustee- Asset Management Company (AMC).

1)

SPONSOR
The sponsor is the promoter of the mutual fund. The sponsor establishes the mutual
fund and registers same with SEBI. It appoints the trustees, Custodians and the
AMC with prior approval of SEBI, and in accordance with SEBI Regulations.
Sponsor is required to contribute at least 40% of the capital of the AMC.

2)

TRUSTEES
The Mutual Fund, which is a trust, is managed by a Trust Company or a Board of
Trustees. Board of trustees and trust companies are governed by the provisions of
the Indian Trust Act. The appointment of all the trustees has to be done with the
prior approval of SEBI. There must be at least 4 members in the board of
Trustees and at least 213 of the members of the board of trustees must be
independent. One of the major tasks of the Trustees is to appoint AMC, in
consultation with the Sponsor and SEBI regulations.

3)

ASSET MANAGEMENT COMPANY (AMC)

Asset Management Company, registered with SEBI, can be appointed as
investment managers of mutual funds. AMC must have a minimum net worth of

22

10 crore at all times. An AMC cannot be an AMC or Trustee of another Mutual

Fund. AMC appoints the Fund Managers in consultation with trustees.

CATEGORIES OF MUTUAL FUND:

MUTUAL FUNDS CAN BE CLASSIFIED AS FOLLOW :

23

 Based on their structure:

1. Open-ended funds: Investors can buy and sell the units from the fund,
at any point of time.
2. Close-ended funds: These funds raise money from investors only once.
Therefore, after the offer period, fresh investments can not be made
into the fund. If the fund is listed on a stocks exchange the units can be
traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most
of the New Fund Offers of close-ended funds provided liquidity
window on a periodic basis such as monthly or weekly. Redemption of
units can be made during specified intervals. Therefore, such funds
have relatively low liquidity.

Based on their investment objective:

1) Equity funds: These funds invest in equities and equity related instruments.
With fluctuating share prices, such funds show volatile performance, even
losses. However, short term fluctuations in the market, generally smoothens
out in the long term, thereby offering higher returns at relatively lower
volatility. At the same time, such funds can yield great capital appreciation
as, historically, equities have outperformed all asset classes in the long term.
Hence, investment in equity funds should be considered for a period of at
least 3-5 years. It can be further classified as:

24

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

portfolio mirrors the benchmark index both in terms of

composition and individual stock weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading
across different sectors and stocks.
iii|) Dividend yield funds- it is similar to the equity diversified funds except that
they invest in companies offering high dividend yields.
iv) Thematic funds- Invest 100% of the assets in sectors which are related
through some theme.
e.g. -An infrastructure fund invests in power, construction, cements sectors
etc.
v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking
sector fund will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
2) BALANCED FUND: Their investment portfolio includes both debt and equity.
As a result, on the risk-return ladder, they fall between equity and debt
funds. Balanced funds are the ideal mutual funds vehicle for investors who
prefer spreading their risk across various instruments. Following are
balanced funds classes:
i) Debt-oriented funds -Investment below 65% in equities.
ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

25

3) DEBT FUND: They invest only in debt instruments, and are a good option for
investors averse to idea of taking risk associated with equities. Therefore,
they invest exclusively in fixed-income instruments like bonds, debentures,
Government of India securities; and money market instruments such as
certificates of deposit (CD), commercial paper (CP) and call money. Put
your money into any of these debt funds depending on your investment
horizon and needs.
i) Liquid funds- These funds invest 100% in money market instruments, a large
portion being invested in call money market.
ii) Gilt funds ST- They invest 100% of their portfolio in government securities of
and T-bills.
iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
iv) Arbitrage fund- They generate income through arbitrage opportunities due to
mis-pricing between cash market and derivatives market. Funds are
allocated to equities, derivatives and money markets. Higher proportion
(around 75%) is put in money markets, in the absence of arbitrage
opportunities.
v) Gilt funds LT- They invest 100% of their portfolio in long-term government
securities
vi) Income funds LT- Typically, such funds invest a major portion of the portfolio
in long-term debt papers.

26

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line
with that of the fund.

Chapter : 6
INVESTMENT STRATEGIES
1. Systematic Investment Plan: under this a fixed sum is invested each month on a
fixed date of a month. Payment is made through post dated cheques or direct
debit facilities. The investor gets fewer units when the NAV is high and
more units when the NAV is low. This is called as the benefit of Rupee Cost
Averaging (RCA)
2. Systematic Transfer Plan: under this an investor invest in debt oriented fund
and give instructions to transfer a fixed sum, at a fixed interval, to an equity
scheme of the same mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund
then he can withdraw a fixed amount each month.

27

TYPES OF MUTUAL FUND SCHEMES

Wide varieties of Mutual Fund Schemes exist to cater to the needs such as financial
position, risk tolerance and return expectations etc. Since the needs and
aspirations of different individuals vary from person to person, there are
absolutely different kinds of mutual funds for investment. There could be various
categories of mutual funds in India. The governing body for these funds being the
Securities Exchange Board of India (SEBI). All varieties of mutual funds are
governed by it in an all-pervasive manner.

Schemes can be differentiated by two broad parameters:

(a) Their constitution or structure.
(b) Their stated investment objective.
Differentiation on the basis of structure of schemes
Schemes are classified as Close-ended or Open-ended depending upon whether they
give the investor the option to redeem at any time (open-ended) or whether the
investor has to wait till maturity of the scheme.
Open-Ended-Schemes
The units offered by these schemes are available for sale and repurchase on any
business day at NAV based prices. Hence, the unit capital of the schemes keeps
changing each day. Such schemes thus offer very high liquidity to investors and
are becoming increasingly popular in India. Please note that an open-ended fund
is not obliged to keep selling/issuing new units at all times, and may stop issuing

28

further subscription to new investors. On the other hand, an open-ended fund

rarely denies to its investor the facility to redeem existing units.
Close-Ended-Schemes
The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed
number of units. These schemes are launched with an initial public offer (IPO)
with a stated maturity period after which the units are fully redeemed at NAV
linked prices. In the interim, investors can buy or sell units on the stock
exchanges where they are generally listed. Unlike open-ended schemes, the unit
capital in Close-ended schemes usually remains unchanged. After an initial
closed period, the scheme may offer direct compared to open-ended schemes and
hence trade at a discount to the NAV. This discount tends towards the NAV closer
to the maturity date of the scheme.
Interval-Schemes
These schemes combine the features of Open-ended and Close-ended schemes.
They may be traded on the stock exchange or may be open for sale or redemption
during pre-determined intervals at NAV based prices.

Differentiation on the basis of investment objectives

Schemes can be classified by way of their stated investment objective such as Growth
Fund, Balanced Fund, Income Fund etc.
Equity/Growth Schemes
These schemes, also commonly called Growth Schemes, seek to invest a majority of
their funds in equities and a small portion in money market instruments. Such
schemes have the potential to deliver superior returns over the long term.
However, because they invest in equities, these schemes are exposed to
29

fluctuations in value especially in the short term.

Equity schemes are hence not suitable for investors seeking regular income or
needing to use their investments in the short-term. They are ideal for investors
who have a long-term investment horizon. The NAV prices of equity fund
fluctuates with market value of the underlying stock which are influenced by
external factors such as social, political as well as economic. HDFC Equity Fund
and HDFC Top200 Fund are examples of equity schemes.

Income/Debt-Schemes
These schemes invest in money markets, bonds and debentures of corporate
companies with medium and long-term maturities. These schemes primarily
target current income instead of capital appreciation. Hence, a substantial part of
the distributable surplus is given back to the investor by way of dividend
distribution. These schemes usually declare quarterly dividends and are suitable
for conservative investors who have medium to long term investment horizon and
are looking for regular income through dividend or steady capital appreciation.

30

These schemes, also commonly known as Income Schemes, invest in debt

securities such as corporate bonds, debentures and government securities. The
prices of these schemes tend to be more stable compared with equity schemes
and most of the returns to the investors are generated through dividends or steady
capital appreciation. These schemes are ideal for conservative investors or those
who are not in a position to take higher equity risks. However, as compared to the
money market schemes they do have a higher price fluctuation risk and compared
to a Gilt fund they have a higher credit risk. HDFC Income Fund is an example
of bond schemes.
Money-Market-Schemes
These schemes invest in short term instruments such as commercial paper ("CP"),
certificates of deposit ("CD"), treasury bills ("T-Bill") and overnight money
("Call"). The schemes are the least volatile of all the types of schemes because of
their investments in money market instrument with short-term maturities. These
schemes have become popular with institutional investors and high net-worth
individuals having short-term surplus funds.
31

Hybrid/Balanced Schemes
These schemes are also commonly called balanced schemes. These invest in both
equities as well as debt. By investing in a mix of this nature, balanced schemes
seek to attain the objective of income and moderate capital appreciation. Such
schemes are ideal for investors with a conservative, long-term orientation. HDFC
Prudence Fund and HDFC Balance Fund are perfect examples of such hybrid
schemes.

Other Schemes:
Tax-Saving-Schemes
Investors (individuals and Hindu Undivided Families ("HUFs")) are being
encouraged to invest in equity markets through Equity Linked Savings Scheme
("ELSS") by offering them a tax rebate. Units purchased cannot be assigned /
transferred/ pledged / redeemed / switched - out until completion of 3 years from
the date of allotment of the respective Units. The Scheme is subject to Securities
& Exchange Board of India (Mutual Funds) Regulations, 1996 and the
32

notifications issued by the Ministry of Finance (Department of Economic

Affairs), Government of India regarding ELSS. Subject to such conditions and
limitations, as prescribed under Section 88 of the Income-tax Act, 1961,
subscriptions to the Units not exceeding Rs.10, 000 would be eligible to a
deduction, from income tax, of an amount equal to 20% of the amount
subscribed.
Special Schemes:
Sector-Specific-Equity-Schemes
These schemes restrict their investing to one or more pre-defined sectors, e.g.
technology sector. They depend upon the performance of these select sectors only
and are hence inherently more risky than general purpose equity schemes. These
schemes are ideally suited for informed investors who wish to take a risk on the
concerned sector.
Index-Schemes
An Index is too used as a measure of the performance of the market as a whole,
or a specific sector of the market. It also serves as a relevant benchmark to
evaluate the performance of mutual funds. Some investors are interested in
investing in the market in general rather than investing in any specific fund. Such
investors are happy to receive the returns posted by the markets. As it is not
practical to invest in each and every stock in the market in proportion to its size,
these investors are comfortable investing in a fund that they believe is a good
representative of the entire market. Index Funds are launched and managed for
such investors.

33

Chapter : 7 RISK V/S. RETURN

RISK RETURN ANALYSIS OF THE SCHEMES

A rational investor before investing his or her money in any stock analyses the risk
associated with the particular stock. The actual return he receives from a
stock may vary from the expected one and thus a investor is always cautious
about the rate of risk associated with the particular stock. Hence it becomes
very essential on the part of investors to know the risk as the hard earned
money is being invested with the view to earn good return on the investment.
Risk mainly consists of two components
Systematic risk
Unsystematic risk

34

Systematic risk
The systematic risk affects the entire market. The economic conditional,
political situations, sociological changes affect the entire market in turn
affecting the company and even the stock market. These situations are
uncontrollable by the corporate and investor.
Unsystematic risk
The unsystematic risk is unique to industries. It differs from industry to
industry. Unsystematic risk stems from managerial inefficiency,
technological change in the production process, availability of raw materials,
changes in the consumer preference, and labour problems. The nature and
magnitude of above mentioned factors differ from industry to industry and
company to company.
In a general view, the risk for any investor would be the probable loss for
investing money in any mutual fund. But when we look at the technical side
of it , we cant just say that these schemes/fund carry risk without any proof.
They are certain set of formulas to say the percentage of risk associated with
it.
There are certain tools or formulas used to calculate the risk associated with
the schemes. These tools help us to understand the risk associated with the

35

schemes. These schemes are compared with the benchmark BSE 100.

36

COMPETITORS OF SBI MUTUAL FUND

Some of the main competitors of SBI Mutual Fund in Jaipur are as Follows:
i. ICICI Mutual Fund

ii. Reliance Mutual Fund

iii. UTI Mutual Fund

iv. Kotak Mutual Fund

v. HDFC Mutual Fund

vi. LIC Mutual Fund

37

Chapter: 8
VARIOUS INVESTMENT OPTIONS AVAILABLE TO THE INVESTORS
AND THEIR RESPECTIVE DISADVANTAGES

Savings form an important part of the economy of any nation. With the savings
invested in various options available to the people, the money acts as the driver
for growth of the country. Indian financial scene too presents a plethora of
avenues to the investors. Though certainly not the best or deepest of markets in
the world, it has reasonable options for an ordinary man to invest his savings. The
possible avenues for investment can be divided into following categories:

EQUITIES: Options available are secondary market (buying or selling shares in the
stock exchanges) or the primary market (IPOs). These are generally classified as
high risk high return asset.
FIXED INCOME INSTRUMENTS: This product class includes options such as
Fixed Deposits, Debentures, Bonds, Preference shares etc. These investments are
relatively safer but limited upside on returns.
FOREIGN CURRENCY INVESTMENTS: Wherever allowed by the govt.
regulations, investors particularly in developing countries will prefer to keep their
38

assets in foreign currency. Hard currencies like US Dollars or pound or Euro are
relatively stable. The risk of currency depreciation in case of economic /political
turmoil is high.
COMMODITIES: Investing in commodities on a large scale is typically done traders
or speculators who generally are skilled. Normally in commodities high risk
investors would invest for high returns in a short period. A proxy for this is the
way retail households stock up commodities in anticipation of price increase,
such as stocking sugar or wheat requirements for the full year.
ART/ANTIQUES: Art has proved to be an important investment avenue, particularly
for the rich and wealthy. However, one has to be an expert in evaluating the value
of art. Investment in paintings is illiquid and has a long gestation period, entails
high risk but high rewards too.
PROPERTY: This offers a limited option to investors as in India most people buy a
house to live in. only the very rich buy property as an investment. Real estate is
very illiquid investment option.

BULLION MARKET (GOLD): This is one avenue which has been a major area for
investing in the Indian society. The importance of gold and silver has been
prevalent through historic time. The importance of this market is due to the
liquidity it provides.
BANKS: Considered as the safest of all options, banks have been the roots of the
financial systems in India. Promoted as the means to social development, banks
in India have indeed played an important role in the rural upliftment. For an
ordinary person though, they have acted as the safest investment avenue wherein
a person deposits money and earns interest on it. The two main modes of
39

investment in banks, Savings accounts and fixed deposits have been effectively
used by one and all. However, today the interest rate structure in the country is
headed southwards, keeping in line with global trends. With the banks offering 9
percent in their fixed deposits for one year, the yields have come down
substantially in recent times. Add to this, the inflationary pressures in economy
and people have a position where the savings are not earning. The inflation is
creeping up, to almost 8 percent at times, and this means that the value of money
saved goes down instead of going up. This effectively mars any chance of
gaining from the investments in banks.
POST OFFICE SCHEMES: Just like banks, post offices in India have a wide
network. Spread across the nation, they offer financial assistance as well as
serving the basic requirements of communication. Among all saving options, Post
office schemes have been offering the highest rates. Added to it is the fact that the
investments are safe with the department being a Government of India entity. So
the two basic features, those of return safety and quantum of returns were being
handsomely taken care of. Though certainly not the most efficient systems in
terms of service standards and liquidity, these have still managed to attract the
attention of small, retail investors. However, with the government announcing its
intention of reducing the interest rates in small savings options, this avenue is
expected to lose some of the investors.
PUBLIC PROVIDENT FUNDS: Public Provident Funds act as options to save for the
post retirement period for most people and have been considered good option
largely due to the fact that returns were higher than most other options and also
helped people gain from tax benefits under various sections. This option too is
likely to lose some of its sheen on account of reduction in the rates offered. The
options discussed above are essentially for the risk-averse, people who think of
40

safety and then quantum of return, in that order. For the brave, it is dabbling in
the stock market. Stock markets provide an option to invest in a high risk, high
return game. While the potential return is much more than 10-11 percent any of
the options discussed above can generally generate, the risk is undoubtedly of the
highest order. But then, the general principle of encountering greater risks and
uncertainty when one seeks higher returns holds true. However, as enticing as it
might appear, people generally are clueless as to how the stock market functions
and in the process can endanger the hard-earned money. For those who are not
adept at understanding the stock market, the task of generating superior returns at
similar levels of risk is arduous to say the least. This is where Mutual Funds
come into picture. Mutual Funds are essentially investment vehicles where
people with similar investment objective come together to pool their money.

41

Chapter : 9
FACTORS TO BE CONSIDERED BEFORE SELECTING A MUTUAL FUND

1.

Making Risk- adjusted returns comparison. By doing this the investor will
know whether the returns generated by the scheme have been adequately
compensated for the extra risk undertaken by the scheme.

2.

The investor depending upon his risk appetite and preferences should subclassify the schemes on the basis of the characteristics of the schemes, which may
be defensive or aggressive in nature.

3.

Portfolio concentration is also an important factor to be considered. It is

always advisable to choose a scheme, which has a well-diversified portfolio
rather than a concentrated portfolio, as it carries lesser risk.

4.

Liquidity of the portfolio is also one of the critical parameters.

5.

The corpus size of the scheme is also of importance. A large corpus size
firstly denotes investors confidence in the scheme and its fund manger abilities
over the years and, secondly it allows the fund manager to diversify the portfolio,
which reduces the overall market risk.

6. Other factors like turnover rates, low expense ratio, load structure etc of the
schemes etc should also be considered before finally zeroing down on a scheme
of your choice.
42

7.

The rankings undertaken by ICRA are an initiative to inform the investorswho does not have the time or the expertise to undertake the analysis on their
own- about the relative performance of the schemes. It considers all important
parameters to arrive at a comprehensive rank with a view to help investors decide
the scheme which may suit their investment profile.

8.

Although much neglected, the due diligence in selection of the right mutual
fund scheme is of utmost importance as an investor cannot move in and out of a
particular scheme on a regular basis, because of the high costs involved, and
investments made into a particular scheme should be looked on a long-term basis
as a wealth creation tool.

5 EASY STEPS TO INVEST IN MUTUAL FUNDS

Where to look for if you want to begin savings in Mutual Funds

Mutual funds are much like any other product, in that there are manufacturers
who provide the product and there are dealers who sell them.

43

Large banks to organized brokerage houses to Individual Financial agents get

empanelled with Mutual Funds to provide advice and assistance to customers
who want to buy units. Mutual funds units can now also be bought over the
Internet.
Contacting an Investment advisor in a bank or a brokerage house or an Independent
Financial Advisor is the first step to gathering information.

1. Evaluation: choosing the right mutual fund for you

Each Mutual fund offers a variety of schemes to suit differing needs of investors. The
Bank/ Brokerage house/ Individual Financial Advisor help you make the choice
based on your needs. As an investor one may:
a) For the short term or long term want to invest.
b) Want regular income or growth.
c) Want to target lower risk or higher returns.
d) Be convinced of a particular sector and want to invest in it.
Remember, just like a salesman in a gift shop, your investment advisor can help you the
most if he knows what you are looking for.
2. Purchase
After you have decided to save, you may have to decide among the various investment
and withdrawal options that any fund offers to its investors.
Most of these schemes also offer various options to customize your operation of the
fund to your needs:

44

Systematic Investment Plan (SIP): Allows you to save a part of your income regularly. It
is also used to reduce risk when investing in schemes targeting aggressive
growth.
Systematic Withdrawal Plan (SWP): Allows you to withdraw a part of your investment
regularly. Used when you want to withdraw your investment for a specific
regular payment, like insurance premium payments of monthly/quarterly
frequency.
Automatic debit: Saves the hassle of writing a cheque when making an investment.
Your account is debited automatically for the amount invested.
Automatic credit: The reverse of Automatic Debit. It saves the hassle of enchasing a
cheque when withdrawing an investment. Your account is credited automatically
with the amount withdrawn.
Dividend plan: Allows you to get Tax-free dividends from your investment. (As per
current Tax laws).
Growth plan: Allows the income generated from investment to be ploughed back into
the scheme. Used by investor targeting growth in their investment.
Some funds carry an entry load, which is a percentage fee deducted from the amount
invested before investment. Thus a 2.5% entry load will mean that if you invest
Rs. 1 lakh in a Rs. 10 per unit IPO, instead of getting 10,000 units, you will be
allotted 9,750 units. Check for presence of such loads and other conditions before
investing.
After deciding the choice of mutual fund, investment and withdrawal, you are ready to
begin your savings. You need to now fill up an application form and attach a
cheque of the value of your investment or mention your account number to have
it automatically debited from your account.
3. Post Purchase Monitoring

45

Once you have invested in an ongoing fund, expect a period of two to three days before
you receive an account statement on the address mentioned by you in your
application form.
Your account statement indicates your current holding in the scheme that you have
invested. Please ensure that all your details have been correctly captured in
account statement. Please point out any discrepancies to your nearest CAMS
investor Service Centre or the Mutual Fund office. You can request an account
statement any time by calling up your nearest CAMS/ Mutual fund offices
usually mentioned on the back of the account statement.
The transaction slip at the end of the account statement can be used for additional
purchases, redemptions or to intimate the mutual fund on any change in bank
mandates/address. The NAVs of all the open-ended schemes are published at the
fund's website, financial newspapers and
AMFI (Association of Mutual Funds) web-site www.amfiindia.com.
4. Exit
While you should periodically monitor the performance of your investments, we
recommend you do not get swayed by short term considerations in deciding your
exit. If you have invested in a long term fund, you can spare yourself undue
worries by not monitoring the NAV every day or week. Checking the
performance once in a while along with your advisor should be fine. Most mutual
funds will provide you with a toll free number that works from 9 am to 5 am and
a website. For specific assistance you can also use your financial advisors help.
5. Redemption/ Withdrawal
Just submit your completed transaction within the transacted time for the scheme
that you are invested in and deposit the same at the nearest CAMS Investor
46

Service Centre or the office of the fund. You can either get a direct credit to your
bank account or you can generally collect the cheque at the CAMS Investor
Service Centre/ AMC offices. If you fail to do so then the cheque is couriered to
the address mentioned in your account statement. Most funds take 1-3 days to
credit your account with your redemption proceeds.
In case an exit load is applicable to your withdrawal and you have redeemed a
fixed amount, an additional number of units equivalent to the exit load amount
will be liquidated from your investment. You can check this amount with the
mentioned exit load when you get the account statement using a simple
calculator.

47

Chapter : 10
MERITS AND DEMERITS OF MUTUAL FUNDS
Merits of Mutual Funds
1. Professional Investment Management.
By pooling the funds of thousands of investors, mutual funds provide full-time,
high-level professional management that few individual investors can afford to
obtain independently. Such management is vital to achieving results in today's
complex markets. Your fund managers' interests are tied to yours, because their
compensation is based not on sales commissions, but on how well the fund
performs. These managers have instantaneous access to crucial market
information and are able to execute trades on the largest and most cost-effective
scale. In short, managing investments is a full-time job for professionals.
2. Diversification.
Mutual funds invest in a broad range of securities. This limits investment risk by
reducing the effect of a possible decline in the value of any one security. Mutual
fund shareowners can benefit from diversification techniques usually available
only to investors wealthy enough to buy significant positions in a wide variety of
securities.
48

3. Low Cost.
If you tried to create your own diversified portfolio of 50 stocks, you'd need at
least $100,000 and you'd pay thousands of dollars in commissions to assemble
your portfolio. A mutual fund lets you participate in a diversified portfolio for as
little as $1,000, and sometimes less. And if you buy a no-load fund, you pay no
sales charges to own them.
4. Convenience and Flexibility.
You own just one security rather than many, yet enjoy the benefits of a diversified
portfolio and a wide range of services. Fund managers decide what securities to
trade, clip the bond coupons, collect the interest payments and see that your
dividends on portfolio securities are received and your rights exercised. It's easy
to purchase and redeem mutual fund shares, either directly online or with a phone
call.
5. Quick, Personalized Service.
Most funds now offer extensive websites with a host of shareholder services for
immediate access to information about your fund account. Or a phone call
puts you in touch with a trained investment specialist at a mutual fund company
who can provide information you can use to make your own investment choices,
assist you with buying and selling your fund shares, and answer questions
about your account status.
6. Ease of Investing
You may open or add to your account and conduct transactions or business with
the fund by mail, telephone or bank wire. You can even arrange for automatic
monthly investments by authorizing electronic fund transfers from your checking
account in any amount and on a date you choose. Also, many of the companies
49

featured at this site allow account transactions online.

7. Total Liquidity, Easy Withdrawal
You can easily redeem your shares anytime you need cash by letter, telephone,
bank wire or check, depending on the fund. Your proceeds are usually available
within a day or two.
8. Life Cycle Planning
With no-load mutual funds, you can link your investment plans to future
individual and family needs -- and make changes as your life cycles change. You
can invest in growth funds for future college tuition needs, then move to income
funds for retirement, and adjust your investments as your needs change
throughout your life. With no-load funds, there are no commissions to pay when
you change your investments.
9. Market Cycle Planning
For investors who understand how to actively manage their portfolio, mutual
fund investments can be moved as market conditions change. You can place your
funds in equities when the market is on the upswing and move into money market
funds on the downswing or take any number of steps to ensure that your
investments are meeting your needs in changing market climates. A word of
caution: since it is impossible to predict what the market will do at any point in
time, staying on course with a long-term, diversified investment view is
recommended for most investors.
10. Investor Information
Shareholders receive regular reports from the funds, including details of
transactions on a year-to-date basis. The current net asset value of your shares
(the price at which you may purchase or redeem them) appears in the mutual fund
price listings of daily newspapers. You can also obtain pricing and performance
50

results for the all mutual funds at this site, or it can be obtained by phone from
the fund.
11. Periodic Withdrawals
If you want steady monthly income, many funds allow you to arrange for
monthly fixed checks to be sent to you, first by distributing some or all of the
income and then, if necessary, by dipping into your principal.
12. Dividend Options
You can receive all dividend payments in cash. Or you can have them reinvested
in the fund free of charge, in which case the dividends are automatically
compounded. This can make a significant contribution to your long-term
investment results. With some funds you can elect to have your dividends from
income paid in cash and your capital gains distributions reinvested.
13. Automatic Direct Deposit
You can usually arrange to have regular, third-party payments -- such as Social
Security or pension checks -- deposited directly into your fund account. This puts
your money to work immediately, without waiting to clear your checking
account, and it saves you from worrying about checks being lost in the mail.
14. Recordkeeping Service
With your own portfolio of stocks and bonds, you would have to do your own
recordkeeping of purchases, sales, dividends, interest, short-term and long-term
gains and losses. Mutual funds provide confirmation of your transactions and
necessary tax forms to help you keep track of your investments and tax reporting.
15. Safekeeping
When you own shares in a mutual fund, you own securities in many companies
without having to worry about keeping stock certificates in safe deposit boxes or
sending them by registered mail. You don't even have to worry about handling the

51

mutual fund stock certificates; the fund maintains your account on its books and
sends you periodic statements keeping track of all your transactions.
16Retirement and College Plans
Mutual funds are well suited to Individual Retirement Accounts and most funds
offer IRA-approved prototype and master plans for individual retirement
accounts (IRAs) and Keogh, 403(b), SEP-IRA and 401(k) retirement plans.
Funds also make it easy to invest -- for college, children or other long-term goals.
Many offer special investment products or programs tailored specifically for
investments for children and college.
17. Online Services
The internet provides a fast, convenient way for investors to access financial
information. A host of services are available to the online investor including
direct access to no-load companies.
18. Sweep Accounts
With many funds, if you choose not to reinvest your stock or bond fund
dividends, you can arrange to have them swept into your money market fund
automatically. You get all the advantages of both accounts with no extra effort.
19. Asset Management Accounts
These master accounts, available from many of the larger fund groups, enable
you to manage all your financial service needs under a single umbrella from
unlimited check writing and automatic bill paying to discount brokerage and
credit card accounts.
20. Margin
Some mutual fund shares are marginable. You may buy them on margin or use
them as collateral to borrow money from your bank or broker. Call your fund
company for details.
52

Demerits of Mutual Funds:

1.

Professional Management.

Did you notice how we qualified the advantage of professional management with the
word "theoretically"? Many investors debate whether or not the socalled professionals are any better than you or I at picking stocks. Management is
by no means infallible, and, even if the fund loses money, the manager still takes
his/her cut. We'll talk about this in detail in a later section.
2. Costs.
Mutual funds don't exist solely to make your life easier - all funds are in it for a
profit. The mutual fund industry is masterful at burying costs under layers of
jargon. These costs are so complicated that in this tutorial we have devoted an
entire section to the subject.
3. Dilution.
It's possible to have too much diversification. 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.
4. Taxes.
53

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-gains 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.

Chapter : 11 Systematic Investment Plan

What is an SIP?
SIP, also known as Regular Savings Plan (RSP) in some countries, allows you to
invest a fixed amount at pre defined frequencies in mutual funds. A bank / post
office recurring deposit is the only other investment option that is similar to SIP.
There are basically two options that an investor could take when they are making
investments, one would be to invest lump sum into mutual funds and the other
would be to invest using an SIP. The following are some of the benefits
associated with investing in an SIP:
SIP is actually a Systematic Investment Plan of investing in Mutual Fund. It is
specially designed for those who aim to build wealth over a long period and want
a better future for him and their dependants.
The investment in a Mutual fund can be done in two ways. First way is one time
payment i.e. making payment to a fund at once and gets the units of the fund as
per the Net Asset Value (NAV) of the fund on that day.
A person wishes to invest in a fund Rs. 24,000/- . On the day of Investment, the
NAV of the fund was Rs. 10/-. He gets 2400 units @ Rs. 10/- per unit.
The other way of investment is making payment to the fund periodically, which is
54

termed as Mutual Fund SIP. When you commit to invest a fixed amount monthly
in a fund, it is called as Systematic Investment.
It is actually beneficial for those investors who wish to invest a large amount in a
fund and wishes to create a large chunk of wealth for long term but due to
financial constraints are able to do so.
The SIP provides them a way to invest in the fund of their choice in installments.
Eg. A person wishes to invest Rs. 24000/- in a fund but due to other obligations,
it is not possible for him to invest such an amount in a fund. He takes the SIP
route and contributes to the fund Rs. 2000/- monthly for a year. At the end of the
year, hell have invested Rs. 24,000/- in the fund. When the NAV is high, he will
get the fewer units and when the NAV is low, hell get the more units. So, hell
get the benefit of averaging through the SIP route.
The NAV in the first month was Rs. 10/-, hell get 200 units in the first month
The NAV in the second month was Rs. 9.50/-, hell get 210.52 units in second
month
The NAV for the following month was Rs. 10, hell get 200 units in the next
month
So, at the end of the year he may get more units as compared to the units hell get
through single investment.
Systematic investment plans are a systematic and disciplined approach to
investment and wealth creation. Instead of making a large investment at one time,
in SIP you can invest small sums at regular intervals thus creating a habit of
regular savings. If you are a big spender and find your expenditures are more
than your earnings then go for SIP mutual funds. This will force you to spend at
least some part of your earnings every month. Mutual funds are a very safe way
of investing money and SIP mutual funds are even better. These are perfect
solutions to most of us who cannot afford to make a large investment at one go.
55

This is a good way to save for your child's education, marriage or comfortable
retirement for you and your spouse. The lowest start up investment amount is 500
rupees per month which is affordable by most people.
State Bank of India is one of the most trusted public sector banks in India. If you
are a beginner in investment then SBI SIP plans may be good option for you.
Here are some SBI SIP mutual funds available.
Magnum Equity Fund - Minimum application of thousand rupees is needed and
SIP is Rs. 500/month for 12 months.
Magnum Tax Gain - Minimum application amount is Rs 500 and minimum SIP
amount is Rs.500/month for12 months
Magnum Index Fund - Minimum SIP amount is Rs.500/month for12 months
Magnum Sector Funds Umbrella - Minimum investment amount is Rs. 2000
per sector and minimum SIP amount is Rs.500/month for12 months
Magnum Global Fund - Minimum SIP amount is Rs.500/month for12 months
Magnum Midcap Fund - Minimum SIP amount is Rs.500/month for12 months
Magnum Mutlicap Fund - Minimum SIP amount is Rs.500/month for12
months
Blue Chip Fund - Minimum investment - Rs. 5000 and in multiples of Rs.
1000
SBI mutual funds, has launched equity-based Micro Systematic Investment Plan
(Micro SIP) aimed at getting in low income households in rural and semi-urban
areas to benefit from the long-term investment in Equity as an asset class. This
plan will be called SBI Chota SIP.

56

For monthly investment as low as Rs. 100, investors from low-income group as
well as investors who intend to invest small portion of their savings would now
be able to participate in capital markets and be a part of India growth story.
Micro SIP facility will be available in respect of four equity diversified schemes
of SBI Mutual fund with effect from April 15, 2009. They are Magnum Balanced
Fund, Magnum Multiplier Plus Scheme 93, Magnum Sector Funds UmbrellaContra fund, and SBI Blue Chip fund.
The minimum investment amount will be Rs.100 and multiples of Rs.50/thereof. The minimum redemption amount will be Rs.500/-. Minimum tenure of
SIP will be 5 years.
Systematic Investment Plan is the best option for retail investors to invest in
Mutual Funds. SBI Mutual Fund is one of the best performing mutual fund
company in India. The investors feel more comfortable in SBI SIP plan. You can
make a SIP plans comparison and find the best SBI SIP fund.
There are many reasons for the investors feeling that SBI SIP fund is the best
systematic investment plan in india. Most of the schemes under SBI Systematic
investment plan has been generating returns more consistently. If you check the
returns for most of the SIP plans, they are generating consistent returns for the
past 6 months, 1 year and 3 years. This would prove that the SBI schemes are
performing well than the funds launched by the other companies.
Some of the best performing SBI SIP schemes are:

SBI Magnum Sector Funds Umbrella - Contra Fund

57

SBI Magnum Sector Funds Umbrella - Emerging Fund

SBI Magnum Sector Funds Umbrella - IT Fund

SBI Magnum Midcap Fund

SBI Magnum Taxgain Scheme 93

The minimum amount that has to be paid every month is Rs 500. Recently SBI
has launched another fund "SBI Chotta SIP Scheme" in which the minimum
investment amount is Rs 100. This scheme was introduced to encourage more
retail participation. The low income people will be more benefited from this
scheme as this type of investment is similar to investing in a recurring deposit
and they can get the benefits of the stock markets.

SBI Chota SIP:

Recently SBI has launched micro systematic investment plan called "SBI Chota
SIP", where you can make a minimum payment of Rs 100 every month. This
helps the low income people in the rural areas to invest their money in the equity.
There is also SIP auto debit facility for this plan. If you have opted for this
option, then your monthly installment will be withdrawn automatically from your
bank savings account each month. You can get the sip application form from the
various SBI Mutual fund offices available all over India or in the designated state
bank of india branches.

58

You have to fill the form and submit a PAN Card copy along with the application
form. If you apply for a sip auto debit facility, you should also fill a authorization
form for the banks. Once the application form is processed, you will get a
statement indicating the number of units allotted for you and also the price at
which it is allotted. This statement you will get every month when the monthly
payments are sent from the bank and credited to the fund account. The price at
which the new units are allotted will change depending on the latest NAV.

CONCLUSION
A small investor is the one who is able to correctly plan & decide in which
profitable & safe instrument to invest.
Mutual Funds are financial intermediaries concern with the mobilizing savings of
surplus income & channelization of these savings in those avenues where there is
demand of funds. The main purpose behind this study of investment preferences
in Mutual Funds is to see that how the investors are employing their resources in a
manner to afford, combine benefits to low risks, steady or consistent returns, high
liquidity & capital appreciation through diversification & Expert Management.
Therefore the activities of mutual funds have both short & long term impact on
the savings & capital market & the national economy. Mutual Funds, thus, assist
the process of financial depending & intermediation.

59

BIBILOGRAPHY
1. https://Www.Scribd.Com/Doc/13246827/Project-On-Mutual-Fund
2. http://hotspot.com/project-report-sbi-mutual-fund
3. http://www.sbimf.com/docs/default-source/statement-of-additional-informationsai/statement-of-additional-information
4. http://grietinfo.in/projects/Main/Mba2012/Cd-6-Mutul%20funds.pdf
5. http://issuu.com/sanjaykumarguptaa/docs/name32a884

60