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A Project Report

Awareness & Perception about SBI Mutual Fund


Mr. Gajendra Gupta
( Faculty Guide)
Submitted By:
Roll No. 14076101030

( 2015-2016)


Gaura, Mohanlal Ganj, Raibarelly Road, Lucknow, Uttar Pradesh 227305

I m Rajkapoor KUshwaha, Roll no. 14076101030, a student of BBA From Surya College of
Business Management, Lucknow hereby declares that I have successfully completed project
report on Awareness & Perception about SBI Mutual Fund SBI, I hereby declare that all
the information provided in this project report are true to the fullest of my knowledge and it bear
no resemblance to any other written material whatsoever. In the event of any information
provided in this report being found incorrect or misleading, I shall be liable to any outcome at
any at any given day.


Roll No 14076101030

Project Report is the most vital part of an BBA course, I therefore, consider myself
fortunate to receive this Research report yet the opportunity could not have been
utilized without the guidance and support of many individuals who although held
varied positions, but were equally instrumental for successful completion of my
research report.
I would like to express gratitude to the respected MR. GAJENDRA GUPTA
Faculty Guide SCBM for their valuable inputs and direction that rendered success

to the project.
I owe a deep intellectual debt to all of them who through their rich &varied
contribution have greatly improved my understanding of various concepts of my


The Indian capital market has been increasing tremendously during last few
years. With the reforms of economy, reforms of industrial policy, reforms of
public sector and reforms of financial sector, the economy has been opened up
and many developments have been taking place in the Indian money market and
capital market. The Sensex first crossed 6,000 on February 11, 2000, fuelled by
the IT boom, but closed below that mark. On November 23, 2004, it closed
above 6,000 for the first time. In order to help the small investors, SBI Mutual
Fund industry has come to occupy an important place. The spread of the
banking system has been a major factor in promoting financial intermediation in
the economy and in the growth of financial savings. With progressive
liberalization of economic policies, there has been a rapid growth of capital
market, money market and financial services industry including merchant
banking, leasing and venture capital. Consistent with this evolution of the
financial sector, the SBI Mutual Fund industry has also come to occupy an
important place.
In the FY2006 capital market has been riding on a roller coaster. In the month of
April this year the bullish run in the stock market has pushed the Sensex up
above the 12000 mark. On the 10th day of next month the Sensex touched its
best ever closing level of 12612. However, the slide started soon after it and the
Sensex fall from peak to trough in May with 2214 points.
This project, titled, Awareness & Perception about SBI Mutual Fund
examines the effect these changes in stock markets are having on the SBI Mutual
Funds, and to evaluate the performance of some SBI Mutual Fund schemes and

to suggest what should be done to avoid any negative effects the market is
having on the SBI Mutual Funds and the investors. In this project we will also
examine the role of distributors in influencing investors decisions.

1. Introduction
2. Transformation Journey In State Bank Of India
3. Introduction To Sbi Mutual Funds
4. Mutual Expectations And Benefits
5. Types Of Sbi Mutual Funds
6. Sbi Mutual Funds Trust
7. Advantages Of Investing Trhourgh Sbi Mutual Funds
8. Performance Measures Of Sbi Mutual Funds
9. History Of The Indian Sbi Mutual Fund Industry
11.Scope Of The Study
12.Limitations Of Study
13.Hypothesis Testing
14.Research Objective
15.Research Methodology
16.Data Analysis
19.Swot Analysis
20.Suggestion & Recommendation


Industry & company profile of SBI
State Bank of India is Indias largest commercial bank. State Bank of India has a
vast domestic network of over 9000 branches (approximately 14% of all bank

branches) and commands one fifth of deposits and loans of all scheduled
commercial bank of India. The State Bank Group includes a network of eight
banking subsidiaries and several non banking subsidiaries offering merchant
banking services, fund management, factoring services, primary dealership in
government securities, credit cards and insurance.

State bank of India traces its roots to the first decade of 19 th century. When the
Bank of Calcutta, later renamed the Bank of Bengal, was established on 2June
1806.The government amalgamated namely the Bank of BoBBAy lei corporate on
15 April 1848 and the Bank of Madras 27 Jan 1921 and named the recognized
banking entity the Imperial Bank of India.

Time line
June, 2 1806 the Bank of Calcutta established.


The State Bank of India, the countrys oldest Bank and a premier in terms of
balance sheet size, number of branches, market capitalization and profits is today

going through a momentous phase of Change and Transformation the two

hundred year old Public sector behemoth is today stirring out of its Public Sector
legacy and moving with an agility to give the Private and Foreign Banks a run for
their money.
The bank is entering into many new businesses with strategic tie ups Pension
Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking,
Point of Sale Merchant Acquisition, Advisory Services, structured products etc
each one of these initiatives having a huge potential for growth.
The Bank is forging ahead with cutting edge technology and innovative new
banking models, to expand its Rural Banking base, looking at the vast untapped
potential in the hinterland and proposes to cover 100,000 villages in the next two
It is also focusing at the top end of the market, on whole sale banking capabilities
to provide Indias growing mid / large Corporate with a complete array of products
and services. It is consolidating its global treasury operations and entering into
structured products and derivative instruments. Today, the Bank is the largest
provider of infrastructure debt and the largest arranger of external commercial
borrowings in the country. It is the only Indian bank to feature in the Fortune 500
The Bank is changing outdated front and back end processes to modern customer
friendly processes to help improve the total customer experience. With about 8500
of its own 10000 branches and another 5100 branches of its Associate Banks
already networked, today it offers the largest banking network to the Indian

customer. The Bank is also in the process of providing complete payment solution
to its clientele with its over 21000 ATMs, and other electronic channels such as
Internet banking, debit cards, mobile banking, etc.
With four national level Apex Training Colleges and 54 learning Centers spread all
over the country the Bank is continuously engaged in skill enhancement of its
employees. Some of the training programs are attended by bankers from banks in
other countries.
The bank is also looking at opportunities to grow in size in India as well as
internationally. It presently has 82 foreign offices in 32 countries across the globe.
It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP Securities, SBI
DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the
Indian Banking scenario. It is in the process of raising capital for its growth and
also consolidating its various holdings.
Throughout all this change, the Bank is also attempting to change old mindsets,
attitudes and take all employees together on this exciting road to Transformation.
In a recently concluded mass internal communication programmed termed
Parivartan the Bank rolled out over 3300 two day workshops across the country
and covered over 130,000 employees in a period of 100 days using about 400
Trainers, to drive home the message of Change and inclusiveness. The workshops
fired the imagination of the employees with some other banks in India as well as
other Public Sector Organizations seeking to emulate the programmed.

The CNN IBN, Network 18 recognized this momentous transformation journey,

the State Bank of India is undertaking, and has awarded the prestigious Indian of
the Year Business, to its Chairman, Mr. O. P. Bhatt in January 2008.
The elephant has indeed started to dance.


The origin of the State Bank of India goes back to the first decade of the
nineteenth century with the establishment of the Bank of Calcutta in Calcutta on
2 June 1806. Three years later the bank received its charter and was re-designed
as the Bank of Bengal (2 January 1809). A unique institution, it was the first
joint-stock bank of British India sponsored by the Government of Bengal. The
Bank of BoBBAy (15 April 1840) and the Bank of Madras (1 July 1843)
followed the Bank of Bengal. These three banks remained at the apex of modern
banking in India till their amalgamation as the Imperial Bank of India on 27
January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into existence
either as a result of the compulsions of imperial finance or by the felt needs of
local European commerce and were not imposed from outside in an arbitrary
manner to modernize India's economy. Their evolution was, however, shaped by
ideas culled from similar developments in Europe and England, and was
influenced by changes occurring in the structure of both the local trading
environment and those in the relations of the Indian economy to the economy of
Europe and the global economic framework.

Bank of Bengal H.O.

Establishment of SBI
The establishment of the Bank of Bengal marked the advent of limited liability,
joint-stock banking in India. So was the associated innovation in banking, viz. the
decision to allow the Bank of Bengal to issue notes, which would be accepted for
payment of public revenues within a restricted geographical area. This right of
note issue was very valuable not only for the Bank of Bengal but also its two
siblings, the Banks of BoBBAy and Madras. It meant an accretion to the capital
of the banks, a capital on which the proprietors did not have to pay any interest.
The concept of deposit banking was also an innovation because the practice of
accepting money for safekeeping (and in some cases, even investment on behalf
of the clients) by the indigenous bankers had not spread as a general habit in most
parts of India. But, for a long time, and especially upto the time that the three
presidency banks had a right of note issue, bank notes and government balances
made up the bulk of the investible resources of the banks.
The three banks were governed by royal charters, which were revised from time
to time. Each charter provided for a share capital, four-fifth of which were
privately subscribed and the rest owned by the provincial government. The
members of the board of directors, which managed the affairs of each bank, were
mostly proprietary directors representing the large European managing agency

houses in India. The rest were government nominees, invariably civil servants,
one of whom was elected as the president of the board.

Group Photograph of Central Board (1921)

The business of the banks was initially confined to discounting of bills of
exchange or other negotiable private securities, keeping cash accounts and
receiving deposits and issuing and circulating cash notes. Loans were restricted to
Rs. one lakh and the period of accommodation confined to three months only.
The security for such loans was public securities, commonly called Company's
Paper, bullion, treasure, plate, jewels, or goods 'not of a perishable nature' and no
interest could be charged beyond a rate of twelve per cent. Loans against goods
like opium, indigo, salt woolens, cotton, cotton piece goods, mule twist and silk
goods were also granted but such finance by way of cash credits gained
momentum only from the third decade of the nineteenth century. All
commodities, including tea, sugar and jute, which began to be financed later,
were either pledged or hypothecated to the bank. Demand promissory notes were
signed by the borrower in favour of the guarantor, which was in turn endorsed to
the bank. Lending against shares of the banks or on the mortgage of houses, land
or other real property was, however, forbidden.

Indians were the principal borrowers against deposit of Company's paper, while
the business of discounts on private as well as salary bills was almost the
exclusive monopoly of individuals Europeans and their partnership firms. But the
main function of the three banks, as far as the government was concerned, was to
help the latter raise loans from time to time and also provide a degree of stability
to the prices of government securities.

Old Bank of Bengal

Major change in the conditions

A major change in the conditions of operation of the Banks of Bengal, BoBBAy
and Madras occurred after 1860. With the passing of the Paper Currency Act of
1861, the right of note issue of the presidency banks was abolished and the
Government of India assumed from 1 March 1862 the sole power of issuing
paper currency within British India. The task of management and circulation of
the new currency notes was conferred on the presidency banks and the
Government undertook to transfer the Treasury balances to the banks at places
where the banks would open branches. None of the three banks had till then any

branches (except the sole attempt and that too a short-lived one by the Bank of
Bengal at Mirzapore in 1839) although the charters had given them such
authority. But as soon as the three presidency bands were assured of the free use
of government Treasury balances at places where they would open branches, they
eBBArked on branch expansion at a rapid pace. By 1876, the branches, agencies
and sub agencies of the three presidency banks covered most of the major parts
and many of the inland trade centers in India. While the Bank of Bengal had
eighteen branches including its head office, seasonal branches and sub agencies,
the Banks of BoBBAy and Madras had fifteen each.

Bank of Madras Note Dated 1861 for Rs.10

Presidency Banks Act

The presidency Banks Act, which came into operation on 1 May 1876, brought
the three presidency banks under a common statute with similar restrictions on
business. The proprietary connection of the Government was, however,
terminated, though the banks continued to hold charge of the public debt offices
in the three presidency towns, and the custody of a part of the government
balances. The Act also stipulated the creation of Reserve Treasuries at Calcutta,
BoBBAy and Madras into which sums above the specified minimum balances
promised to the presidency banks at only their head offices were to be lodged.
The Government could lend to the presidency banks from such Reserve

Treasuries but the latter could look upon them more as a favour than as a right.

Bank of Madras
The decision of the Government to keep the surplus balances in Reserve
Treasuries outside the normal control of the presidency banks and the connected
decision not to guarantee minimum government balances at new places where
branches were to be opened effectively checked the growth of new branches after
1876. The pace of expansion witnessed in the previous decade fell sharply
although, in the case of the Bank of Madras, it continued on a modest scale as the
profits of that bank were mainly derived from trade dispersed among a number of
port towns and inland centers of the presidency.
India witnessed rapid commercialization in the last quarter of the nineteenth
century as its railway network expanded to cover all the major regions of the
country. New irrigation networks in Madras, Punjab and Sind accelerated the
process of conversion of subsistence crops into cash crops, a portion of which
found its way into the foreign markets. Tea and coffee plantations transformed
large areas of the eastern Terais, the hills of Assam and the Nilgiris into regions
of estate agriculture par excellence. All these resulted in the expansion of India's
international trade more than six-fold. The three presidency banks were both
beneficiaries and promoters of this commercialization process as they became
involved in the financing of practically every trading, manufacturing and mining
activity in the sub-continent. While the Banks of Bengal and BoBBAy were

engaged in the financing of large modern manufacturing industries, the Bank of

Madras went into the financing of large modern manufacturing industries; the
Bank of Madras went into the financing of small-scale industries in a way which
had no parallel elsewhere. But the three banks were rigorously excluded from any
business involving foreign exchange. Not only was such business considered
risky for these banks, which held government deposits, it was also feared that
these banks enjoying government patronage would offer unfair competition to the
exchange banks which had by then arrived in India. This exclusion continued till
the creation of the Reserve Bank of India in 1935.

Bank of BoBBAy

Presidency Banks of Bengal

The presidency Banks of Bengal, BoBBAy and Madras with their 70 branches
were merged in 1921 to form the Imperial Bank of India. The triad had been
transformed into a monolith and a giant among Indian commercial banks had
emerged. The new bank took on the triple role of a commercial bank, a banker's
bank and a banker to the government. But this creation was preceded by years of
deliberations on the need for a 'State Bank of India'. What eventually emerged
was a 'half-way house' combining the functions of a commercial bank and a
quasi-central bank.

The establishment of the Reserve Bank of India as the central bank of the country
in 1935 ended the quasi-central banking role of the Imperial Bank. The latter
ceased to be bankers to the Government of India and instead became agent of the
Reserve Bank for the transaction of government business at centers at which the
central bank was not established. But it continued to maintain currency chests
and small coin depots and operate the remittance facilities scheme for other banks
and the public on terms stipulated by the Reserve Bank. It also acted as a bankers'
bank by holding their surplus cash and granting them advances against authorized
securities. The management of the bank clearing houses also continued with it at
many places where the Reserve Bank did not have offices. The bank was also the
biggest tendered at the Treasury bill auctions conducted by the Reserve Bank on
behalf of the Government.
The establishment of the Reserve Bank simultaneously saw important
amendments being made to the constitution of the Imperial Bank converting it
into a purely commercial bank. The earlier restrictions on its business were
removed and the bank was permitted to undertake foreign exchange business and
executor and trustee business for the first time.

Imperial Bank
The Imperial Bank during the three and a half decades of its existence recorded
an impressive growth in terms of offices, reserves, deposits, investments and
advances, the increases in some cases amounting to more than six-fold. The
financial status and security inherited from its forerunners no doubt provided a
firm and durable platform. But the lofty traditions of banking which the Imperial
Bank consistently maintained and the high standard of integrity it observed in its

operations inspired confidence in its depositors that no other bank in India could
perhaps then equal. All these enabled the Imperial Bank to acquire a pre-eminent
position in the Indian banking industry and also secure a vital place in the
country's economic life.

Stamp of Imperial Bank of India

When India attained freedom, the Imperial Bank had a capital base (including
reserves) of Rs.11.85 crores, deposits and advances of Rs.275.14 crores and
Rs.72.94 crores respectively and a network of 172 branches and more than 200
sub offices extending all over the country.

First Five Year Plan

In 1951, when the First Five Year Plan was launched, the development of rural
India was given the highest priority. The commercial banks of the country
including the Imperial Bank of India had till then confined their operations to the
urban sector and were not equipped to respond to the emergent needs of
economic regeneration of the rural areas. In order, therefore, to serve the
economy in general and the rural sector in particular, the All India Rural Credit

Survey Committee recommended the creation of a state-partnered and statesponsored bank by taking over the Imperial Bank of India, and integrating with it,
the former state-owned or state-associate banks. An act was accordingly passed in
Parliament in May 1955 and the State Bank of India was constituted on 1 July
1955. More than a quarter of the resources of the Indian banking system thus
passed under the direct control of the State. Later, the State Bank of India
(Subsidiary Banks) Act was passed in 1959, enabling the State Bank of India to
take over eight former State-associated banks as its subsidiaries (later named
The State Bank of India was thus born with a new sense of social purpose aided
by the 480 offices comprising branches, sub offices and three Local Head Offices
inherited from the Imperial Bank. The concept of banking as mere repositories of
the community's savings and lenders to creditworthy parties was soon to give
way to the concept of purposeful banking sub serving the growing and diversified
financial needs of planned economic development. The State Bank of India was
destined to act as the pacesetter in this respect and lead the Indian banking system
into the exciting field of national development.

A SBI Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities. The
income earned through these investments and the capital appreciations realized
are shared by its unit holders in proportion to the number of units owned by them.
Thus a SBI Mutual Fund is the most suitable investment for the common man as

it offers an opportunity to invest in a diversified, professionally managed basket

of securities at a relatively low cost.
The flow chart below describes broadly the working of a SBI Mutual Fund.

A SBI Mutual Fund is a body corporate registered with the Securities and











individual/corporate investors and invests the same on behalf of the investors/unit

holders, in Equity shares, Government securities, Bonds, Call Money Markets
etc, and distributes the profits. In the other words, a SBI Mutual Fund allows
investors to indirectly take a position in a basket of assets.
SBI Mutual Fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as
disclosed in offer document. Investments in securities are spread among a wide
cross-section of industries and sectors thus the risk is reduced. Diversification
reduces the risk because all stocks may not move in the same direction in the
same proportion at same time. Investors of SBI Mutual Funds are known as unit

The investors in proportion to their investments share the profits or losses. The
SBI Mutual Funds normally come out with a number of schemes with different
investment objectives which are launched from time to time. A SBI Mutual Fund
is required to be registered with Securities Exchange Board of India (SEBI)
which regulates securities markets before it can collect funds from the public.
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI
was bifurcated into two separate entities. One is the Specified Undertaking of the
Unit Trust of India with assets under management of Rs.29,835 crores as at the end
of January 2003, representing broadly, the assets of US 64 scheme, assured return
and certain other schemes. The Specified Undertaking of Unit Trust of India,
functioning under an administrator and under the rules framed by Government of
India and does not come under the purview of the SBI Mutual Fund Regulations.


There are many entities involved and the diagram below illustrates the
organizational set up of a SBI Mutual Fund:

(For detailed definitions in the above chart refer to annexure 1)

SBI Mutual Funds diversify their risk by holding a portfolio of instead of only
one asset. This is because by holding all your money in just one asset, the entire
fortunes of your portfolio depend on this one asset. By creating a portfolio of a
variety of assets, this risk is substantially reduced.
SBI Mutual Fund investments are not totally risk free. In fact, investing in SBI
Mutual Funds contains the same risk as investing in the markets, the only
difference being that due to professional management of funds the controllable
risks are substantially reduced. A very important risk involved in SBI Mutual
Fund investments is the market risk. However, the company specific risks are
largely eliminated due to professional fund management.


A SBI Mutual Fund actually belongs to the investors who have pooled their
Funds. The ownership of the SBI Mutual Fund is in the hands of the
A SBI Mutual Fund is managed by investment professional and other
Service providers, who earns a fee for their services, from the funds.
The pool of Funds is invested in a portfolio of marketable investments.
The value of the portfolio is updated every day.
The investors share in the fund is denominated by units. The value
of the units changes with change in the portfolio value, every day. The
value of one unit of investment is called net asset value (NAV).
The investment portfolio of the SBI Mutual Fund is created according to
The stated
Investment objectives of the Fund.


Diversification: An investor undertakes risk if he invests all his funds in a

single scrip. SBI Mutual Funds invest in a number of companies across
various industries and sectors. This diversification reduces the risk of the
Professional Management: An investor lacks the knowledge of the capital
market operations and does not have large resources to reap the benefits of
investment. Hence, he requires the help of an expert. SBI Mutual Funds are
managed by professional managers who have the requisite skills and
experiences to analyse the performance and prospectus of companies.
Regulatory oversight: SBI Mutual Funds are subject to many government
regulations that protect investors from fraud.
Liquidity: It's easy to get your money out of a SBI Mutual Fund. Write a
check, make a call, and you've got the cash.
Convenience: You can usually buy SBI Mutual Fund shares by mail, phone,
or over the Internet. It reduces paperwork, saves time and makes investment
Low cost: SBI Mutual Fund expenses are often no more than 1.5 percent of
your investment. Expenses for Index Funds are less than that, because index
funds are not actively managed. Instead, they automatically buy stock in
companies that are listed on a specific index
Transparency: SBI Mutual Funds transparently declare their portfolio every
month. Thus, an investor knows where his/her money is being deployed and

in case they are not happy with the portfolio they can withdraw at a short
Flexibility: SBI Mutual Funds offer a family of schemes, and investors have
the option of transferring their holdings from one scheme to other.
Tax benefits: SBI Mutual Fund investors now enjoy income tax benefits.
Dividends received from SBI Mutual Funds debt schemes are tax exempt to
the overall limit of Rs 9000 allowed under section SOL of the Income Tax


Hidden costs: The SBI Mutual Fund industry tactfully buries costs under
layers of jargon. These costs come despite of negative returns. Examples of
such costs include sales charges, annual fees, and other expenses; and
depending on the timing of their investment, investors may also have to pay
taxes on any capital gains distribution they receive even if the fund went
on to perform poorly after they bought shares.
Lack of control: Investors typically cannot ascertain the exact make-up
of a fund's portfolio at any given time, nor can they directly influence which
securities the fund manager buys and sells or the timing of those trades.
Dilution: Because funds have small holdings in so many different
companies, high returns from a few investments often don't make much
difference on the overall return. Dilution is also the result of a successful
fund getting too big. When money pours into funds that have had strong
success, the manager often has trouble finding a good investment for all the
new money.

Price Uncertainty: With an individual stock, one can obtain real-time (or
close to real-time) pricing information with relative ease by checking
financial websites or through a broker, as can one observe stock price
changes by the hour or minute. By contrast, with a SBI Mutual Fund, the
price at which one purchases or redeems shares will typically depend on the
fund's NAV, which the fund might not calculate until many hours after the
order has been placed. In general, SBI Mutual Funds must calculate their
NAV at least once every business day, typically after the major U.S.
exchanges close.




An investor normally prioritizes his investment needs before undertaking an
investment. So different goals will be allocated to different proportions of the
total disposable amount. Investments for specific goals normally find their way
into the debt market as risk reduction is of prime importance, this is the area for
the risk-averse investors and here, SBI Mutual Funds are generally the best
option. One can avail of the benefits of better returns with added benefits of
anytime liquidity by investing in open-ended debt funds at lower risk, this risk of
default by any company that one has chosen to invest in, can be minimized by
investing in SBI Mutual Funds as the fund managers analyze the companies
financials more minutely than an individual can do as they have the expertise to
do so.
Moving up the risk spectrum, there are people who would like to take some risk
and invest in equity funds/capital market. However, since their appetite for risk is
also limited, they would rather have some exposure to debt as well. For these
investors, balanced funds provide an easy route of investment, armed with
expertise of investment techniques, they can invest in equity as well as good
quality debt thereby reducing risks and providing the investor with better returns
than he could otherwise manage. Since they can reshuffle their portfolio as per
market conditions, they are likely to generate moderate returns even in
pessimistic market conditions.

Next comes the risk takers, risk takers by their nature, would not be averse to
investing in high-risk avenues. Capital markets find their fancy more often than
not, because they have historically generated better returns than any other avenue,
provided, the money was judiciously invested. Though the risk associated is
generally on the higher side of the spectrum, the return-potential compensates for
the risk attached.


Everyone expects the New year to usher an era of joy and prosperity and certainly
looks forward to a windfall in terms of good things to come. Investor is no
exception to this. But before one rushes to celebrate with new investments, it
would be appropriate to take a look at how Y2K treated SBI Mutual Funds (MFs) the investment vehicle of the small investor.
A happy-go-lucky-man turned investor would have nothing to write home about,
had he invested in the Year 2000 and stayed invested throughout the year. Positive
returns seemed like a state of utopia in Y2K. What a transformation in an Industry
that had witnessed almost triple digit returns in 1999 when BSE Sensex had
generated returns of about 65 percent.
What was common to MFs in Y2K was the presence of technology, media &
telecom sector scrips in portfolios of most funds, especially equity growth funds.

Birla Advantage Fund with and exposure of 67%, Alliance to the tune of 71% are
just to name a few. While the bull phases did not raise any questions about the
portfolio compositions, the bear phases certainly did. NAVs of most of these funds
plummeted raising questions on the extent of portfolio diversification.
When the bull phase came to an end and when most of the funds stood stripped
with the downslide of most of the TMT stocks, most fund managers moved to
quality portfolio levels and reduced their IT exposure to reasonable levels. Most
equity diversified funds, today, maintain IT exposure at 20% to 37% while
simultaneously picking up both old and new economy stocks. But fund managers
still are willing to bet on TMT stocks despite the tumultuous experience they have
had in Y2K. While accepting the possibility of a downward revision of their
growth rate, they foresee no indications of a significant slowdown from at least
India based companies. They concur that the fundamentals of IT sector are strong
with future growth, however, being at a modest pace. They are now of the view
that a mixture of old and new economy scrips would form an ideal portfolio.
While the crash in IT share prices has resulted in a re-balancing of portfolios,
action on the old economy front would further narrow the gap between the so
called click and mortar and brick and mortar companies-bring with it a greater
diversification in MF portfolios.
MF Industry in India, like any other Industry, has had its nascent stage and is still
trying to grapple with several inconsistencies. The Industry is now approaching a
stage where a cross section of investing community has begun to comprehend that
MFs provide and ideal investment vehicle to meet their varied investment
objectives in the long run with adequate emphasis on portfolio diversification. All

in all, MFs have had their share of lessons in Y2K and are waiting for newer
horizons in Y2K+1 with abated breath.




The holders of the shares in the Fund can resell them to the issuing SBI Mutual
Fund Company at the time. They receive in turn the net assets value (NAV) of the
shares at the time of re-sale. Such SBI Mutual Fund Companies place their funds
in the secondary securities market. They do not participate in new issue market as
do pension funds or life insurance companies. Thus they influence market price
of corporate securities. Open-end investment companies can sell an unlimited
number of Shares and thus keep going larger. The open-end SBI Mutual Fund
Company Buys or sells their shares. These companies sell new shares NAV plus a
Loading or management fees and redeem shares at NAV. In other words, the
target amount and the period both are indefinite in such funds


A closedend Fund is open for sale to investors for a specific period, after which
further sales are closed. Any further transaction for buying the units or
repurchasing them, Happen in the secondary markets, where closed end Funds are
listed. Therefore new investors buy from the existing investors, and existing
investors can liquidate their units by selling them to other willing buyers. In a
closed end Funds, thus the pool of Funds can technically be kept constant. The
asset management company (AMC) however, can buy out the units from the
investors, in the secondary markets, thus reducing the amount of funds held by
outside investors. The price at which units can be sold or redeemed Depends on
the market prices, which are fundamentally linked to the NAV. Investors in closed
end Funds receive either certificates or Depository receipts, for their holdings in a
closed end SBI Mutual Fund.
ORGANISATION AND MANAGEMENT OF SBI MUTUAL FUNDS:In India SBI Mutual Fund usually formed as trusts, three parties are generally
involved viz.
Settler of the trust or the sponsoring organization.
The trust formed under the Indian trust act, 1982 or the trust company
registered under the Indian companies act, 1956
Fund managers or The merchant-banking unit

SBI MUTUAL FUNDS TRUST:SBI Mutual Fund trust is created by the sponsors under the Indian trust act,

Which is the main body in the creation of SBI Mutual Fund Trust?
The main functions of SBI Mutual Fund trust are as follows:
Planning and formulating SBI Mutual Funds schemes.
Seeking SEBIs approval and authorization to these schemes.
Marketing the schemes for public subscription.
Seeking RBI approval in case NRIs subscription to SBI Mutual Fund is
Attending to trusteeship function. This function as per guidelines can be
assigned to separately established trust companies too. Trustees are
required to submit a consolidated report six monthly to SEBI to ensure that
the guidelines are fully being complied with trusted are also required to
submit an annual report to the investors in the fund.
AMC has to discharge mainly three functions as under:
I. Taking investment decisions and making investments of the funds through
market dealer/brokers in the secondary market securities or directly in the
primary capital market or money market instruments
II. Realize fund position by taking account of all receivables and realizations,
moving corporate actions involving declaration of dividends,etc to
compensate investors for their investments in units; and
III. Maintaining proper accounting and information for pricing the units and
arriving at net asset value (NAV), the information about the listed schemes
and the transactions of units in the secondary market. AMC has to feed

back the trustees about its fund management operations and has to maintain
a perfect information system.
CUSTODIANS OF SBI MUTUAL FUNDS:SBI Mutual Funds run by the subsidiaries of the nationalized banks had their
respective sponsor banks as custodians like canara bank, SBI, PNB, etc.
Foreign banks with higher degree of automation in handling the securities
have assumed the role of custodians for SBI Mutual Funds. With the
establishment of stock Holding Corporation of India the work of custodian
for SBI Mutual Funds is now being handled by it for various SBI Mutual
Funds. Besides, industrial investment trust company acts as sub-custodian
for stock Holding Corporation of India for domestic schemes of UTI, BOI
MF, LIC MF, etc
Fee structure:Custodian charges range between 0.15% to 0.20% on the net value of the
customers holding for custodian services space is one important factor
which has fixed cost element.

RESPONSIBILITY OF CUSTODIANS: Receipt and delivery of securities

Holding of securities.
Collecting income
Holding and processing cost
Corporate actions etc

Safe custody
Trade settlement
Corporate action
Transfer agents
RATE OF RETURN ON SBI MUTUAL FUNDS:An investor in SBI Mutual Fund earns return from two sources:
Income from dividend paid by the SBI Mutual Fund.
Capital gains arising out of selling the units at a price higher than the
acquisition price
Formation and regulations:
1. SBI Mutual Funds are to be established in the form of trusts under the
Indian trusts act and are to be operated by separate asset management
companies (AMC s)
2. AMCs shall have a minimum Net worth of Rs. 5 crores;
3. AMCs and Trustees of SBI Mutual Funds are to be two separate legal
entities and that an AMC or its affiliate cannot act as a manager in any
other fund;
4. SBI Mutual Funds dealing exclusively with money market instruments are
to be regulated by the Reserve Bank Of India
5. SBI Mutual Fund dealing primarily in the capital market and also partly
money market instruments are to be regulated by the Securities Exchange
Board Of India (SEBI)

6. All schemes floated by SBI Mutual Funds are to be registered with SEBI
Schemes:1. SBI Mutual Funds are allowed to start and operate both closed-end and
open-end schemes;
2. Each closed-end schemes must have a Minimum corpus (pooling up) of
Rs 20 crore;
3. Each open-end scheme must have a Minimum corpus of Rs 50 crore
4. In the case of a Closed End scheme if the Minimum amount of Rs 20
crore or 60% of the target amount, whichever is higher is not raised then
the entire subscription has to be refunded to the investors;
5. In the case of an Open-Ended schemes, if the Minimum amount of Rs 50
crore or 60 percent of the targeted amount, whichever is higher, is no
raised then the entire subscription has to be refunded to the investors.
Investment norms:1. No SBI Mutual Fund, under all its schemes can own more than five percent
of any companys paid up capital carrying voting rights;
2. No SBI Mutual Fund, under all its schemes taken together can invest more
than 10 percent of its funds in shares or debentures or other instruments of
any single company;
3. No SBI Mutual Fund, under all its schemes taken together can invest more
than 15 percent of its fund in the shares and debentures of any specific
industry, except those schemes which are specifically floated for
investment in one or more specified industries in respect to which a
declaration has been made in the offer letter.

4. No individual scheme of SBI Mutual Funds can invest more than five
percent of its corpus in any one companys share;
5. SBI Mutual Funds can invest only in transferable securities either in the
money or in the capital market. Privately placed debentures, securitized
debt, and other unquoted debt, and other unquoted debt instruments holding
cannot exceed 10 percent in the case of growth funds and 40 percent in the
case of income funds.

SBI Mutual Funds are required to distribute at least 90 percent of their profits
annually in any given year. Besides these, there are guidelines governing the
operations of SBI Mutual Funds in dealing with shares and also seeking to ensure
greater investor protection through detailed disclosure and reporting by the SBI
Mutual Funds. SEBI has also been granted with powers to oversee the
constitution as well as the operations of SBI Mutual Funds, including a common
advertising code. Besides, SEBI can impose penalties on SBI Mutual Funds after
due investigation for their failure to comply with the guidelines.
Equity Diversified Schemes
These schemes mainly invest in equity. They seek to achieve long-term capital
appreciation by responding to the dynamically changing Indian economy by
moving across sectors such as Lifestyle, Pharma, Cyclical, Technology, etc.

Sector Schemes
These schemes focus on particular sector as IT, Banking, etc. They seek to
generate long-term capital appreciation by investing in equity and related
securities of companies in that particular sector.
Index Schemes
These schemes aim to provide returns that closely correspond to the return of a
particular stock market index such as BSE Sensex, NSE Nifty, etc. Such schemes
invest in all the stocks comprising the index in approximately the same weightage
as they are given in that index.
Exchange Traded Funds (ETFs)
ETFs invest in stocks underlying a particular stock index like NSE Nifty or BSE
Sensex. They are similar to an index fund with one crucial difference. ETFs are
listed and traded on a stock exchange. In contrast, an index fund is bought and
sold by the fund and its distributors.
Equity Tax Saving Schemes
These work on similar lines as diversified equity funds and seek to achieve longterm capital appreciation by investing in the entire universe of stocks. The only
difference between these funds and equity-diversified funds is that they demand a
lock-in of 3 years to gain tax benefits.
Dynamic Funds
These schemes alter their exposure to different asset classes based on the market
scenario. Such funds typically try to book profits when the markets are

overvalued and remain fully invested in equities when the markets are
undervalued. This is suitable for investors who find it difficult to decide when to
quit from equity.
Balanced Schemes
These schemes seek to achieve long-term capital appreciation with stability of
investment and current income from a balanced portfolio of high quality equity
and fixed-income securities.
Medium-Term Debt Schemes
These schemes have a portfolio of debt and money market instruments where the
average maturity of the underlying portfolio is in the range of five to seven years.

Short-Term Debt Schemes

These schemes have a portfolio of debt and money market instruments where the
average maturity of the underlying portfolio is in the range of one to two years.

Money Market Debt Schemes

These schemes invest in debt securities of a short-term nature, which generally
means securities of less than one-year maturity. The typical short-term interestbearing instruments these funds invest in Treasury Bills, Certificates of Deposit,
Commercial Paper and Inter-Bank Call Money Market.

Medium-Term Gilt Schemes

These schemes invest in government securities. The average maturity of the
securities in the scheme is over three years.

Short-Term Gilt Schemes

These schemes invest in government securities. The securities invested in are of
short to medium term maturities.

Floating Rate Funds

They invest in debt securities with floating interest rates, which are generally
linked to some benchmark rate like MIBOR. Floating rate funds have a high
relevance when interest rates are on the rise helping investors to ride the interest
rate rise.

Monthly Income Plans (MIPS)

These are basically debt schemes, which make marginal investments in the range
of 10-25% in equity to boost the schemes returns. MIP schemes are ideal for
investors who seek slightly higher return that pure long-term debt schemes at
marginally higher risk.



SBI Mutual Funds offer three methods of receiving income:

Growth Plan
In this plan, dividend is neither declared nor paid out to the investor but is built
into the value of the NAV. In other words, the NAV increases over time due to
such incomes and the investor realizes only the capital appreciation on
redemption of his investment.
Income Plan
In this plan, dividends are paid-out to the investor. In other words, the NAV only
reflects the capital appreciation or depreciation in market price of the underlying

Dividend Re-investment Plan

In this case, dividend is declared but not paid out to the investor, instead, it is
reinvested back into the scheme at the then prevailing NAV. In other words, the
investor is given additional units and not cash as dividend.
1. Systematic Investment Plans (SIPs)
These are best suited for young people who have started their careers and need to
build their wealth. SIPs entail an investor to invest a fixed sum of money at
regular intervals in the SBI Mutual Fund scheme the investor has chosen, an

investor opting for SIP in xyz SBI Mutual Fund scheme will need to invest a
certain sum on money every month/quarter/half-year in the scheme.
2. Systematic Withdrawal Plans (SWPs)
These plans are best suited for people nearing retirement. In these plans, an
investor invests in a SBI Mutual Fund scheme and is allowed to withdraw a fixed
sum of money at regular intervals to take care of his expenses
3. Systematic Transfer Plans (STPs)
They allow the investor to transfer on a periodic basis a specified amount from
one scheme to another within the same fund family meaning two schemes
belonging to the same SBI Mutual Fund. A transfer will be treated as redemption
of units from the scheme from which the transfer is made. Such redemption or
investment will be at the applicable NAV. This service allows the investor to
manage his investments actively to achieve his objectives. Many funds do not
even charge any transaction fees for his service an added advantage for the
active investor.
There are several reasons that can be attributed to the growing popularity and
suitability of SBI Mutual Funds as an investment vehicle especially for retail
SBI Mutual Funds offer the investors a valuable tool Asset Allocation.
This is explained by an example.

An investor investing Rs.1 lakh in a SBI Mutual Fund scheme, which has
collected Rs.100 crores and invested the money in various investment options,
will have Rs.1 lakh spread over a number of investment options as demonstrated
Investment Type


State Bank

of 15%

of Total portfolio Investors portfolio

(% of


total Mutual

SBI allocation (Rs.)


scheme (Rs. In










Tata Power
Govt. Securities




Institution Bonds
Money Market




Thus Asset Allocation is allocating your investments in to different investment

options depending on your risk profile and return expectations.

Diversification is spreading your investment amount over a larger number of
investments in order to reduce risk. For instance, if you have Rs.10,000 to
invest in Information Technology (IT) stocks, this amount will only buy you a
handful of stocks of perhaps one or two companies. A fall in the market price
of any of these company stocks will significantly erode your investment
amount instead it makes sense to invest in an IT sector SBI Mutual Fund
scheme so that your Rs.10,000 is spread across a larger number of stocks
thereby reducing your risk.

Few investors have the time or expertise to manage their personal investments
every day, to efficiently reinvest interest or dividend income, or to investigate
the thousands of securities available in the financial markets. Fund managers
are professionals and experienced in tracking the finance markets, having
access to extensive research and market information, which enables them to
decide which securities to buy and sell for the fund. For an individual investor
like you, this professionalism is built in when you invest in the SBI Mutual
While investing directly in securities, all the costs of investing such as
brokerage, custodial services etc. Borne by you are at the highest rates due to
small transaction sizes. However, when going through a fund, you have the

benefit of economies of scale; the fund pays lesser costs because of larger
volumes, a benefit passed on to its investors like you.


This is one of the most important benefits of a SBI Mutual Fund. Often you
hold shares or bonds that you cannot directly, easily and quickly sell. In such
situations, it could take several days or even longer before you are able to
liquidate his SBI Mutual Fund investment by selling the units to the fund itself
and receive his money within 3 working days.

The investor gets regular information on the value of his investment in
addition to disclosure on the specific investments made by the fund, the
proportion invested in each class of assets and the fund managers investment
strategy and outlook.

Tax saving schemes of SBI Mutual Funds offer investor a tax rebate under
section 88 of the Income Tax Act. Under this section, an investor can invest up
to Rs.10,000 per Financial year in a tax saving scheme. The rate of rebate
under this section depends on the investors total income.


Index schemes of SBI Mutual Funds give you the opportunity of investing in
scrips that make up a particular index in the same proportion of weightage that
these scrips have in the index. Thus, the return on your investment mirrors the
movement of the index.
Gilt and Money Market Schemes of SBI Mutual Funds also give you the
opportunity to invest in Government Securities and Money Markets (including
the inter banking call money market)
All SBI Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors.
The operations of SBI Mutual Funds are regularly monitored by SEBI.


SBI Mutual Funds offer their investors a number of facilities such as inter-fund
transfers, online checking of holding status etc, which direct investments dont

RISKS ASSOCIATED WITH SBI MUTUAL FUNDS:Investing in SBI Mutual Funds, as with any security, does not come without risk.
One of the most basic economic principles is that risk and reward are directly

correlated. In other words, the greater the potential risk the greater the potential
return. The types of risk commonly associated with SBI Mutual Funds are:
Market risk relates to the market value of a security in the future. Market prices
fluctuate and are susceptible to economic and financial trends, supply and
demand, and many other factors that cannot be precisely predicted or controlled.
Changes in the tax laws, trade regulations, administered prices, etc are some of
the many political factors that create market risk. Although collectively, as
citizens, we have indirect control through the power of our vote individually, as
investors, we have virtually no control.
Interest rate risk relates to future changes in interest rates. For instance, if an
investor invests in a long-term debt SBI Mutual Fund scheme and interest rates
increase, the NAV of the scheme will fall because the scheme will be end up
holding debt offering lower interest rates.
Business risk is the uncertainty concerning the future existence, stability, and
profitability of the issuer of the security. Business risk is inherent in all business
ventures. The future financial stability of a company cannot be predicted or
guaranteed, nor can the price of its securities. Adverse changes in business
circumstances will reduce the market price of the companys equity resulting in

proportionate fall in the NAV of the SBI Mutual Fund scheme, which has
invested in the equity of such a company.
Economic risk involves uncertainty in the economy, which, in turn, can have an
adverse effect on a companys business. For instance, if monsoons fail in a year,
equity stocks of agriculture-based companies will fall and NAVs of SBI Mutual
Funds, which have invested in such stocks, will fall proportionately.


SBI Mutual Fund industry today, with about 30 players and more than six
hundred schemes, is one of the most preferred investment avenues in India.
However, with a plethora of schemes to choose from, the retail investor faces
problems in selecting funds. Factors such as investment strategy and management
style are qualitative, but the funds record is an important indicator too.
Though past performance alone cannot be indicative of future performance, it is,
frankly, the only quantitative way to judge how good a fund is at present.
Therefore, there is a need to correctly assess the past performance of different
SBI Mutual Funds. Worldwide, good SBI Mutual Fund companies over are
known by their AMCs and this fame is directly linked to their superior stock
selection skills.
For SBI Mutual Funds to grow, AMCs must be held accountable for their
selection of stocks. In other words, there must be some performance indicator that
will reveal the quality of stock selection of various AMCs.

Return alone should not be considered as the basis of measurement of the

performance of a SBI Mutual Fund scheme, it should also include the risk taken
by the fund manager because different funds will have different levels of risk
attached to them. Risk associated with a fund, in a general, can be defined as
Variability or fluctuations in the returns generated by it. The higher the
fluctuations in the returns of a fund during a given period, higher will be the risk
associated with it. These fluctuations in the returns generated by a fund are
resultant of two guiding forces. First, general market fluctuations, which affect all
the securities, present in the market, called Market risk or Systematic risk and
second, fluctuations due to specific securities present in the portfolio of the fund,
called Unsystematic risk. The Total Risk of a given fund is sum of these two and
is measured in terms of standard deviation of returns of the fund.
Systematic risk, on the other hand, is measured in terms of Beta, which
represents fluctuations in the NAV of the fund vis--vis market. The more
responsive the NAV of a SBI Mutual Fund is to the changes in the market; higher
will be its beta. Beta is calculated by relating the returns on a SBI Mutual Fund
with the returns in the market. While Unsystematic risk can be diversified
through investments in a number of instruments, systematic risk cannot. By using
the risk return relationship, we try to assess the competitive strength of the SBI
Mutual Funds one another in a better way. In order to determine the risk-adjusted
returns of investment portfolios, several eminent authors have worked since
1960s to develop composite performance indices to evaluate a portfolio by
comparing alternative portfolios within a particular risk class.
The most important and widely used measures of performance are:
The TreynorMeasure

The Sharpe Measure

Jenson Model
Fama Model
1) The Treynor Measure:Developed by Jack Treynor, this performance measure evaluates funds on the
basis of Treynor's Index.
This Index is a ratio of return generated by the fund over and above risk free rate
of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and
systematic risk associated with it (beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Ri represents return on fund,
Rf is risk free rate of return, and
Bi is beta of the fund.
All risk-averse investors would like to maximize this value. While a high and
positive Treynor's Index shows a superior risk-adjusted performance of a fund, a
low and negative Treynor's Index is an indication of unfavorable performance.

2) The Sharpe Measure :-

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio,

which is a ratio of returns generated by the fund over and above risk free rate of
return and the total risk associated with it.
According to Sharpe, it is the total risk of the fund that the investors are
concerned about. So, the model evaluates funds on the basis of reward per unit of
total risk. Symbolically, it can be written as:
Sharpe Index (Si) = (Ri - Rf)/Si
Si is standard deviation of the fund,
Ri represents return on fund, and
Rf is risk free rate of return.
While a high and positive Sharpe Ratio shows a superior risk-adjusted
performance of a fund, a low and negative Sharpe Ratio is an indication of
unfavorable performance.
Comparison of Sharpe and Treynor
Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well-diversified portfolios. On the other
hand, the systematic risk is the relevant measure of risk when we are evaluating
less than fully diversified portfolios or individual stocks. For a well-diversified
portfolio the total risk is equal to systematic risk. Rankings based on total risk
(Sharpe measure) and systematic risk (Treynor measure) should be identical for a
well-diversified portfolio, as the total risk is reduced to systematic risk.
Therefore, a poorly diversified fund that ranks higher on Treynor measure,

compared with another fund that is highly diversified, will rank lower on Sharpe


Jenson Model:Jenson's model proposes another risk adjusted performance measure. This
measure was developed by Michael Jenson and is sometimes referred to as the
differential Return Method. This measure involves evaluation of the returns that
the fund has generated vs. the returns actually expected out of the fund1 given the
level of its systematic risk. The surplus between the two returns is called Alpha,
which measures the performance of a fund compared with the actual returns over
the period. Required return of a fund at a given level of risk (Bi) can be
calculated as:
Ri = Rf + Bi (Rm - Rf)
Ri represents return on fund, and
Rm is average market return during the given period,
Rf is risk free rate of return, and
Bi is Beta deviation of the fund.
After calculating it, Alpha can be obtained by subtracting required return
from the actual return of the fund.
Higher alpha represents superior performance of the fund and vice versa.
Limitation of this model is that it considers only systematic risk not the entire risk

associated with the fund and an ordinary investor cannot mitigate unsystematic
risk, as his knowledge of market is primitive.

Fama Model:The Eugene Fama model is an extension of Jenson model. This model compares
the performance, measured in terms of returns, of a fund with the required return
commensurate with the total risk associated with it. The difference between these
two is taken as a measure of the performance of the fund and is called Net
The Net Selectivity represents the stock selection skill of the fund manager, as it
is the excess returns over and above the return required to compensate for the
total risk taken by the fund manager. Higher value of which indicates that fund
manager has earned returns well above the return commensurate with the level of
risk taken by him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)
Ri represents return on fund,
Sm is standard deviation of market returns,
Rm is average market return during the given period, and
Rf is risk free rate of return.
The Net Selectivity is then calculated by subtracting this required return
from the actual return of the fund.

Among the above performance measures, two models namely, Treynor measure
and Jenson model use Systematic risk is based on the premise that the
Unsystematic risk is diversifiable. These models are suitable for large investors
like institutional investors with high risk taking capacities as they do not face
paucity of funds and can invest in a number of options to dilute some risks. For
them, a portfolio can be spread across a number of stocks and sectors. However,
Sharpe measure and Fama model that consider the entire risk associated with
fund are suitable for small investors, as the ordinary investor lacks the necessary
skill and resources to diversify. Moreover, the selection of the fund on the basis
of superior stock selection ability of the fund manager will also help in
safeguarding the money invested to a great extent. The investment in funds that
have generated big returns at higher levels of risks leaves the money all the more
prone to risks of all kinds that may exceed the individual investors' risk appetite.


The SBI Mutual Fund industry in India started in 1963 with the formation of Unit
Trust of India, at the initiative of the Government of India and Reserve Bank of
India. The history of SBI Mutual Funds in India can be broadly divided into four
distinct phases
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
regulatory and administrative control in place of RBI. The first scheme launched
by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of
assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector SBI 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
SBI Mutual Fund established in June 1987 followed by Canbank SBI Mutual Fund
(Dec 87), Punjab National Bank SBI Mutual Fund (Aug 89), Indian Bank SBI
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda SBI Mutual Fund
(Oct 92). LIC established its SBI Mutual Fund in June 1989 while GIC had set up
its SBI Mutual Fund in December 1990.
At the end of 1993, the SBI Mutual Fund industry had assets under management of
Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)

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

The present study has been undertaken with the object of examining, analyzing and
inferring the effect of capital market on mutual fund, which addresses the following
To understand the effect of recent changes in stock market on the mutual funds.
To understand basic concepts of mutual funds
To analyze the NAVs of various mutual funds during the last few months.
To analyze the average returns of various mutual funds during the last few months.
The secondary objective of this study is to understand the role of distributors in
influencing investors decision.


Subject matter is related to the investors approach towards mutual funds and
People of age between 20 to 60
People of income group between 10000 to 30000.
Area limited to Lucknow.
Demographics include names, age, qualification, occupation, marital status and
annual income.

The edifice of the study entirely stands up on the pillar of information given by
Limitations applicable to the questionnaire method may be applicable to this study, as
biased answers, memory access variation, in cooperative and doubtful approach.
The time for study was very short.
The secondary data available for comparative analysis is only for the period of 20082009
Due to various factors associated, the information provided by customer has its own bias.

Null hypothesis (H0) = Preference of investment of people in ULIP is
more than Mutual fund
Alternative Hypothesis (H1) = Preference of investment of people in
Mutual fund is more than ULIP

The study of capital market and its effect on mutual funds and ULIP is an arduous task in itself.
The keyword in handling such kind of problems is research. Gathering information from all
the possible sources, whether by different articles, press releases, company circulars or by direct
interaction with the clients or face to face interviews with the head of the department.
This project work is mainly based on Primary and Secondary data in which primary data was
collected and secondary data was available to us from the confidential office records of the
department, various magazines and newspapers published by concerned authorities. The data was
also collected from secondary sources; mainly from various internet sites related to capital
market and mutual funds and Key Information Memorandum of various fund houses. However
the information gathered was mainly from self analysis and from interaction with the senior
employees of the CMSD department as well as with the highly informed and experienced clients.
The interpretation of data and constructions of graphs was done using Microsoft Word Graph

Research was initiated by examining primary and secondary data to gain insight into the
problem. By analyzing primary and secondary data, the study aim is to explore the short comings
of the present system and primary data will help to validate the analysis of secondary data
besides on unrevealing the areas which calls for improvement.

Since it is not possible to study whole universe, it becomes necessary to take sample from the
universe to know about its characteristics.

SAMPLE TECHNIQUE: Convenience Sampling.


RESEARCH INSTRUMENT: Structured Questionnaire.


To study increasing trend of technology related services in banking industry in India

To identify and analyze the various components of the service rendered by SBI
To analyze the benefit of various deposit schemesoffered by SBI and technology related
services offered by different banks on customers

Project Usefulness in Future

This project will help us to give information about various deposit schemes offered by SBI,their
benefits and also knowledge about various technology related services offered by the bank. It
helps to compare the past & present services provided by banks .

Research Introduction
The activities of market research include defining marketing opportunities and problems,
generating and evaluating marketing ideas, monitoring performance, and understanding the
marketing process. The methodology of the study included selection of sample, study/survey of
library references, collation and compilation of the primary and secondary data and information
obtained through structured questionnaires, open ended interview.

Data Collection
We have collected two types of Data
a. Primary Data through Questionnaire and interaction.primary research is done for
studying customer preference towards various schemes offered by SBI
b. Secondary Data through internet, articles, magazines, bank visit,studying project
reports etc. our report contains mainly secondary data

Research Methodology :
Research Design:
The techniques used for research is Exploratory Research.
Research Tool :

Questionnaire and customer interaction( sample size 100)

Through internet, articles, magazines etc.

Q1) Education Qualification



Post graduate


Education Qualification


29% Post graduate


Half of the respondents are graduates and have their accounts in different banks. Undergraduate
also constitute 29% of the account holders.

Q2) Marital Status


Marital Status

No of Respondents







67% respondents are married and this shows saving and investment habit increases after
marriage. Single persons are also increasingly saving their earnings in banks.

Q3) Occupation


No of Respondents















It shows that service or salaried class constitute 36% of the population and availing the
advantage of a wide product range offered by different banks followed by business class and

Q4) Your annual household income.

No of

Household income



Less than 2 lack


Between 2 to 5 lack


Between 5 to 8 lack


More than 8 lack

annual household income

<than 2 lack

Between 2 to 5 lack


Between 5 to 8 lack

Between 5 to 8 lack

It shows that between 2-5 lakh income group constitute largest segment of banks with 54% of
respondents followed by customer who belong to less than 2 lakh income group.

Q5) You are a customer of SBI?


Existing customer

No of Respondents





customer of SBI


From the total respondents 83% were already customers of SBI and availing the facilities of a
wide product range only 17% respondents are not current customers of SBI.

Q6) What is your perception about different products and services offered by SBI?

Customer perception

No of Respondents



Not lucrative


No idea


products and services offered by SBI


Not lucrative



No idea

Most people consider SBIs product range and services lucrative because of its wide reach ability
and creditworthiness. 29% respondents found it not lucrative because of slow technological up
gradation and entry of private banks

Q7) Do you have taken any of these taxes saving scheme provided by SBI?

Tax saving schemes

No of Respondents

Public provident fund


Senior citizens savings scheme


SBI Tax Savings Scheme, 2006


taxes saving scheme provided by SBI

Public provident fund

Senior citizens savings scheme48%SBI Tax Savings Scheme, 2006


48% respondents among all are benefitted by SBIs public provident fund, followed by those
customers who have invested in Senior citizens savings scheme, constitiute 24% and SBI Tax
Savings Scheme, 2006 holders constitute 28%

Q8) Do you want to open a Savings account or Current account with SBI? (If not an
existing customer)

Want to open accounts

No of Respondents





Will tell later


want to open a Savings account or Current account




Will tell later


A large number of respondents are willing to open an account in SBI in near future because of its
far reach ability and easy accessibility.

Q9) What is your main purpose to deposit money in various investment plans offered by


Main purpose

No of Respondents







tax exemption


on demand payment


main purpose to deposit money in various investment plans


safety 32%

tax exemption on demand payment


The main purpose of depositing in various bank schemes is to avail tax exemptions on their
deposits, savings for future use and safety are two other main purpose followed by on demand
payment and liquidity.

Q10) Do you have your salary account in SBI?


Having salary accounts

No of Respondents





salary account in SBI



Mostly people who belongs to government and public sector maintains their salary account in
SBI which increases its deposits stock.

Q11) Are you availing any of these facilities offered by SBI?


Other facilities

No of Respondents



credit/debit card


Demat account

online banking

other facilities

Demat account

credit/debit card

online banking


SBI has a largest ATM network which offers computerized transactions where customers can
utilize the services whenever and wherever there is a need

Q12)Do you have your accounts in any other bank, if yes then in which bank?

Current customer of bank

Bank of Baroda
Union bank

No of Respondents


Allahabad Bank
Indian Overseas bank
Central Bank
Bank of India


accounts in any other bank



Bank of Baroda




Allahabad Bank




Indian Overseas bank



Bank of India


SBI holds 20% deposit market in INDIA. Private players like ICICI and HDFC had emerged two
leading banks following it, Bank Of India is also a leading public sector bank.

1) In recent years increase in disposable income and increased number of working women lead
to bulk deposits in SBI.
2) The main purpose of deposits is to enjoy tax exemptions and safety of their deposits.
Salaried class constitutes its largest segment.

3) ICICI, HDFC and Bank of India are the main competitors of SBI and giving it tough
4) SBI is still largest bank in INDIA due to its wide reach ability in all parts of India with its
wide range of products and services.
5) Most of the customers found its products lucrative because of attractive rates of interest on
their deposits, convenient and economical method of payment and means of transfer of fund
from one place to another
6) Customer prefer SBI bank because of its government backing and its working style
7) Reasons for high use of SBI advance product

biggest bank of India

attractive rate of returns
simple & fast processing
quick processing

From the analysis part it can be conclude that customers have a good respond towards SBI
advance products. SBI is in 1st position having large number of customers & providing good
services to them. The bank has a wide customer base, so the bank should concentrate on this to
retain these customers.
In present scenario SBI is the largest advance product issuer in India. Within a very short period
of time the achievement made by SBI is excellent, what a normal bank cannot expect,but it is

being done by SBI. It happens due to employee dedication towards the organization, fastest
growing Indian economy, & brand image.
To be the largest advance product issuer, SBI should focus on

Launch Innovative product

Customized advance products

Better customer services
Fastest customers problem solving techniques
Customer retention
Apart from all the above, SBI believe in providing good customer services to their customers
which is a key factor for success in future


Brand Name: SBI Bank has earned a reputation in the market over the period of
time(Being the oldest bank in India tracing history back to 1806)

Market Leader: SBI is ranked at 380 in 2008 Fortune Global 500 list, and ranked 219 in
2008 Forbes Global 2000. With an asset base of $126 billion and its reach, it is a
regional banking behemoth.

Wide Distribution Network: Excellent penetration in the country with more than 10000

core branches and more than 5100 branches of associate banks (subsidiaries).
Diversified Portfolio: SBI Bank has all the products under its belt, which help it to
extend the relationship with existing customer.SBI Bank has umbrella of products to
offer their customers, if once customer has relationship with the bank.

Government Owned: Government owns 60% stake in SBI. This gives SBI an edge over
private banks in terms of customer security.

Low Transition Costs-SBI offers very low transition costs which attracts small


The existing hierarchical management structure of the bank, although strength in some
respects, is a barrier to change.

Though SBI cards are the 2nd largest player in the credit card industry, it has the highest
non performing assets (NPAs) in the industry, which stand out to be at 16.28 % (Dec

Modernisation: SBI lags with respect to private players in terms of modernisation of its
processes, infrastructure, centralisation, etc.


Merger of associate banks with SBI: Merger of all the associate banks (like SBH, SBM,
etc) into SBI will create a mega bank which streamlines operations and unlocks value.

Planning to add 2000 branches and 3000 ATMs in 2008-2009. This will further increase
its reach.

Increasing trade and business relations and a large number of expatriate populations
offers a great opportunity to expand on foreign soil.


Advent of MNC banks: Large numbers of MNC banks are mushrooming in the Indian
market due to the friendly policies adopted by the government. This can increase the
level of competition and prove a potential threat for the market share of SBI bank.

Consumer expectations have increased many folds in last few years and the bank has not

been responsive enough to meet them on time.

Private banks have started venturing into the rural and semi-urban sector, which used to
be the bastion of the State Bank and other PSU banks


1) Customer awareness programme is required so that more people should attract


advance product.
2) Bank should more concern about physical verification rather than phone verification so it
will avoid fraud or cheating.
3) Advance product selling agents must not give any type of wrong informationregarding
advance product.
4)For the better service new offers would be require.
5) SBI customer care should more concern about the fastest settlement of customerproblems.

6) Agents should be trained, well educated & proper trained to convince the people
7) About different advance product
8) It is the duty of the bank to disclose all the material facts regarding advance product, like ROI,
repayment period and any types of charges, etc.
9) Special scheme should be implemented to encourage both customer and agents.
10) SBI should more focus on Retaining existing customers
11) Bank must focus on Segmentation based on customer knowledge Productoffering based on
customer demand.
12) customer should concentrate and should very precautionary while using modern technology
such as ATM, mobile banking facilty, etc

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