PROJECT REPORT

ON

CONSUMER PREFERENCES FOR SBI MUTUAL FUND

Undertaken At

Submitted in partial fulfilment of the requirements For the award of the degree of BACHELOR OF BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF:

MS. PREETI SEHGAL
LECTURER

SUBMITTED BY:
KARNI MAAN SINGH Roll No.: 81005320087

CHANDIGARH BUSINESS SCHOOL

Affiliated to

PUNJAB TECHNICAL UNIVERSITY

2008-2011

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DECLARATION

I hereby declare that this Project Report entitled CONSUMER PREFERENCES FOR SBI MUTUAL FUND submitted by me to the PTU, is a bonafide work undertaken and it is not submitted to any other University or Institution for the award of any degree certificate or published any time before.

Name : Student :

Signature of the

Date

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ACKNOWLEDGEMENT
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First of all, I express my profound gratitude to the management of CONSUMER PREFERENCES FOR SBI MUTUAL FUND for giving me the opportunity to do my project training at their esteemed organization. I am highly obliged to Mr. MUNISH SABARWAL (H.O.D.) CHANDIGARH, who provided me such a training, which made me able to gain knowledge about the field of paints and without his encouraging and helping attitude this project could not have attained its present shape. It was only due to his support & guidance that I am able to gain maximum knowledge that helps me to deliver the best.

Lastly I would like to thank all the respondents who offered their opinions and suggestions through the survey that was conducted by me. Finally the support and encouragement to accomplish a major piece of work comes from friends and family. To them I am indebted beyond words.

KARNI MAAN SINGH

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CONTENTS
CERTIFICATE ACKNOWLEGEMENTS DECLARATION PREFACE LIST OF TABLES CHAPTER -1: INTRODUCTION What is Mutual Fund Advantages and Disadvantages Why to invest in Mutual Fund Other Investment Options

CHAPTER -2: COMPANY PROFILE

Profile Of SBI Mutual Fund Products Of SBI Mutual Fund Main Schemes Of SBI Mutual Fund Competitors Of SBI Mutual Fund

CHAPTER 3: OBJECTIVES AND RESEARCH METHODOLGY Objectives Of Study Research Methodology Limitations Of Study Respondents Profile CHAPTER -4: DATA ANALYSIS AND INTERPRETATION CHAPTER-5: FINDINGS AND CONCLUSIONS CHAPTER-6: SUGGESTIONS BIBILIOGRAPHY ANNEXURE
QUESTIONNARIE

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CHAPTER 1 INTRODUCTION

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INTRODUCTION TO MUTUAL FUND

Mutual funds, as the name indicates is the fund where in numerous investors come together to invest in various schemes of mutual fund. Mutual funds are dynamic institution, which plays a crucial role in an economy by mobilizing savings and investing them in the capital market, thus establishing a link between savings and the capital market. A mutual fund is an institution that invests the pooled funds of public to create a diversified portfolio of securities. Pooling is the key to mutual fund investing. Each mutual fund has a specific investment objective and tries to meet that objective through active portfolio management. Mutual fund as an investment company combines or collects money of its shareholders and invests those funds in variety of stocks, bonds, and money market instruments. The latter include securities, commercial papers, certificates of deposits, etc. Mutual funds provide the investor with professional management of funds and diversification of investment. Investors who invest in mutual funds are provided with units to participate in stock markets. These units are investment vehicle that provide a means of participation in the stock market for people who have neither the time, nor the money, nor perhaps the expertise to undertake the direct investment in equities. On the other hand they also provide a route into specialist markets where direct investment often demands both more time and more knowledge than an investor may possess.

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PASSED BACK TO

POOL THEIR MONEY WITH

GENERATES

INVEST IN

Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well- diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds 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
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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.

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ADVANTAGES OF MUTUAL FUND

The advantages of investing in mutual fund are: Professional ManagementThe primary advantage of funds (at least theoretically) is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive way for a small investor to get a full time manager to make and monitor investments. DiversificationDiversification is an investing strategy that can be neatly summed up as "Don't put all your eggs in one basket." Spreading your investments across a wide range of companies and industry sectors can help lower your risk if a company or sector fails. Some investors find it easier to achieve diversification through ownership of mutual funds rather than through ownership of individual stocks or bonds. Affordability Some mutual funds accommodate investors who don't have a lot of money to invest by setting relatively low dollar amounts for initial purchases, subsequent monthly purchases, or both. Economies of scaleBecause a mutual fund buys and sells large amount of securities at a time, its transaction costs are lower than you as an individual would pay. Convenient AdministrationInvesting in mutual fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with the brokers and companies. Mutual funds save your time and make investing easy and convenient. Return Potential[10]

Over a medium to long term, Mutual funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
Liquidity -

Mutual time.

fund

investors

can

readily

redeem

their

shares

at

the current NAV plus any fees and charges assessed on redemption

at any

Choice of SchemesMutual funds offer a family of schemes to suit your varying needs over a lifetime.

FlexibilityMutual Funds offering multiple schemes allow investors to switch easily between various schemes. This flexibility gives the investor a convenient way to change the mix of his portfolio over time.

TransparencyOpen-ended mutual funds disclose their Net Asset Value (NAV) daily and the entire portfolio monthly. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument. Thus the investor is in the know of the quality of the portfolio and can invest further or redeem depending on the kind of the portfolio that has been constructed by the investment manager.

Well Regulated Unlike the company fixed deposits, where there is little control with the investment being considered as unsecured debt from the legal point of view, the Mutual Fund industry is very well regulated. All investments have to be accounted for, decisions judiciously taken. SEBI acts as a true watchdog in this case and can impose penalties on the AMCs at fault. The regulations, designed to protect the investors interests are also implemented effectively.

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DISADVANTAGES OF MUTUAL FUNDS:

The disadvantages of investing in a Mutual Fund are: Professional ManagementDid you notice how we qualified the advantage of professional management with the word "theoretically"? Many investors debate over whether or not the so-called 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. 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. 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 had strong success, the manager often has trouble finding a good investment for all the new money. Taxes When making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

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WHY TO INVEST IN MUTUAL FUNDS:

A proven principle of sound investment is do not put all eggs in one basket. Investment in mutual funds is beneficial due to following reasons.

They help in pooling of funds and investing in large basket of shares of different

companies. Thus by investing in diverse companies, mutual funds can protect against unexpected fall in value of investment. An average investor does not have enough time and resources to develop professional

attitude towards their investment. Here professional fund managers engaged by mutual funds take desirable investment decision on behalf of investors so as to make better utilization of resources. Investment in mutual funds is comparatively more liquid because investor can sell the

units in open market or can approach mutual fund to repurchase the units at net asset value depending upon the type of scheme. Investors can avail tax rebates by investing in different tax saving schemes floated by

these funds, approved by the government. Operating cost is minimized per head because of large size of investible funds, there by

realizing more net income of investors.

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OTHER INVESTMENT OPTIONS

Bank Fixed Deposits (FD) Fixed Deposit or FD is the most preferred investment option today. It yields up to 8.5% annual return depends on the Bank and period. Minimum period is 15 days and maximum is 5 years and above. Senior citizens get special interest rates for Fixed Deposits. This is considered to be a safe investment because all banks operated under the guidelines of Reserve Bank of India. National Saving Certificate (NSC) NSC is backed by Govt. of India so it is a safe investment method. Lock in period is 6 years. Minimum amount is Rs100 and no upper limit. You get 8% interest calculated twice a year. NSC comes under Section 80C so you will get an income tax deduction up to Rs 1, 00,000. From FY 2005-'06 onwards interest accrued on NSC is taxable. Public Provident Fund (PPF) PPF is another form of investment backed by Govt. of India. Minimum amount is Rs500 and maximum is Rs70, 000 in a financial year. A PPF account can be opened in a head post office, GPO and selected branches of nationalized banks. PPF also comes under Section 80C so individuals could avail income tax deduction up to Rs 1, 00,000. Lock in period for PPF is 15 years and interest rate is 8%. Unlike NSC, PPF interest rate is calculated annually. Both PPF and NSC considered being best investment option as it is backed by Government of India. Stock Market Investing in share market is another investment option to get more returns. But share market investment is volatile to market conditions. Before investing you should have a thorough knowledge about its operation. There are many investment options available like investing in Gold, Real Estate etc.

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CHAPTER 2 COMPANY PROFILE

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Introduction to SBI Mutual Fund

SBI Mutual Fund, India's largest bank sponsored mutual fund, is a joint venture between the State Bank of India and Societe Generale Asset Management (France), one of the world's top-notch fund management companies. Over the years, SBI Mutual Fund has carved a niche for itself through prudent investment decisions and consistent wealth creation. Since its inception, SBI Funds Management Private Ltd. has launched thirty-two schemes and successfully redeemed fifteen of them. Throughout this journey, SBI Mutual Fund has profusely rewarded the 2, 00,000 investors who have reposed their faith in it. SBI Mutual Fund, one of the country's premier fund houses, with over 20 years of rich experience in fund management, is a joint venture between the State Bank of India, Indias largest bank and Societe Generale Asset Management, one of the world's leading fund management companies. Today, SBI Mutual Fund is one of the largest AMCs in the country, managing assets over Rs. 39,826.34 crore (as on April 30th, 2010.). The fund house serves its vast family of over 5.5 million investors (Calculated on the basis of live folios as on 30/04/2010) by reaching out to them through a network of over 200 points of contact. Today, the SBI fund boasts of an expertise of managing assets over Rs. 13,000 crores and has a diverse profile of investors actively parking their investments across 28 active schemes. A vast network of 82 collection branches, 26 investor service centers, 21 investor service desks and 21 district organizers helps the SBI Mutual Fund to reach out to their investors.SBI Mutual is the first bank- sponsored fund to launch an offshore fund Resurgent India Opportunities Fund. Growth through innovation and stable investment policies is the SBI MF credo.

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SBI- MUTUAL FUND PRODUCTS:

EQUIT Y SCH EM ES: The investments and from they markets high of the are and these will higher also hence schemes be to to be returns should capacities will which the chosen are predominantly investors stock only willing and by to be the in can the stock to of who term.

markets benefit However stock have

endeavour

provide

opportunity risks

markets such

provide.

exposed

volatility

attendant think

investors long

risk

taking

and

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

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SBI Arbitrage Opportunities Fund

SBI Blue chip Fund SBI Infrastructure Fund - Series I SBI Magnum Taxgain Scheme 1993 SBI ONE India Fund SBI Tax Advantage Fund Series 1

DEBT SCHEMES: Debt Funds invest only in debt Money instruments Market such as Corporate either Bonds, completely

Government

Securities

and

instruments

avoiding any investments in the stock markets as in Income Funds or Gilt Funds or having a small exposure to equities as in Monthly Income Plans or Children's Plan. Hence they are safer than equity funds. At the same time the expected returns from debt funds would be lower. Such investments are advisable for the risk-averse investor and as a part of the investment portfolio for other investors. Magnum Childrens Benefit Plan Magnum Gilt Fund Magnum Gilt Fund (Long Term) Magnum Gilt Fund (Short Term)

Magnum Income Fund

Magnum Income Plus Fund

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Magnum Income plus Fund (Saving Plan) Magnum Income plus Fund (Investment Plan)

Magnum Insta Cash Fund Magnum InstaCash Fund -Liquid Floater Plan Magnum Institutional Income Fund Magnum Monthly Income Plan Magnum Monthly Income Plan Floater Magnum NRI Investment Fund SBI Capital Protection Oriented Fund - Series I SBI Debt Fund Series SDFS 15 Months Fund SDFS 90 Days Fund SDFS 13 Months Fund SDFS 18 Months Fund SDFS 24 Months Fund SDFS 30 DAYS SDFS 30 DAYS SDFS 60 Days Fund SDFS 180 Days Fund SDFS 30 DAYS

SBI Premier Liquid Fund SBI Short Horizon Fund SBI Short Horizon Fund - Liquid Plus Fund SBI Short Horizon Fund - Short Term Fund

BALANCED SCHEMES:
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Magnum

Balanced

Fund

invests

in

mix

of

equity

and

debt

investments.

Hence they are less risky than equity funds, but at the same time provide commensurately lower returns. They provide a good investment opportunity to investors who do not wish to be completely exposed to equity markets, but is looking for higher returns than those provided by debt funds. Magnum Balanced Fund Magnum NRI Investment Fund - Flexi Asset Plan

MAIN SCHEMES OF SBI MUTUAL FUND

SBI MAGNUM TAXGAIN SCHEME Magnum TaxGain Scheme is an Equity Linked Savings Scheme (ELSS) from SBI Mutual Fund which offers investors tax benefits on an investment up to Rs 1 Lakh under Section 80C of Indian Income Tax Act 1961. The fund was launched in the year 1993 and is one of the top performers in the ELSS category.SBI Magnum Taxgain Scheme 1993 ranks No.1 offering 29.98% 5-year returns as on December 31, 2009.Magnum Taxgain is No. 1 in terms of AUMs at Rs. 5,386 crore, and in terms of investors - at over 17 lakh investors (as on 31/12/2009). The objective of the scheme is "to deliver the benefit of investment in a portfolio of equity shares, while offering deduction on such investments made in the scheme under Section 80 C of the Income-tax Act, 1961. It also seeks to distribute income periodically depending on distributable surplus." The fund invests 80-100% in equity & equity related securities and remaining 0-20% in money market instrument. "The sole focus of the fund for the last 15 years has been on generating consistent returns. The investment philosophy of the fund is aligned to the fact that most of the investor's are retail investors and that there is lock in for investment. Thus the strategy is to take long term calls in stocks and sectors which will minimize the volatility and risk in the fund. At this point in time, the focus is on bottom up stock picking irrespective of the stock being a large

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cap or a mid cap name which have a proven track record and better visibility going ahead.", says Jayesh Shroff, fund manager, Magnum Taxgain Scheme.

SBI Mutual Fund which manages Magnum Taxgain Scheme has fund management expertise of over 20 years managing assets worth Rs.37,900crore.(as on 31.12. 2009).

Some Important features of this scheme are as follows: Entry Load Investments below Rs. 5crores then entry load is 2.25%, Investments of Rs.5crores and above then entry load is nil. Exit Load :NIL SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter 4 Quarters STP : Minimum amount Rs.1000/- month - 6 months, Rs.3000/ Quarter - 6 months Asset Allocation 80-100% in Equity, partly convertible debentures and fully convertible debentures and bonds & 0 20% in Money market instruments. Minimum Application Amount Rs 500 for purchase & Multiples of Rs 500 for additional purchase. Plans & Options Dividend option with payout and reinvestment facility. The total asset based in the scheme is 5000 cr. It is the biggest tax saving scheme. BSE 100 is the index. There is lock in period of 3 years. Enter Section 8OC Section 88 was scrapped in Finance Bill 2005. Instead, Section 80C has been introduced. All avenues that were eligible for tax benefits under Section 88 were brought under the Section 80C fold. However, instead of offering tax rebates, investments (up to Rs 100,000) under Section 80C qualify for deduction from gross total income. Hence a new system of claiming tax benefits is now in place. How have Equities performed as compared to other asset classes?
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Track record of the last 15 years shows that equity investments give better returns over the long term. Other asset classes such as Fixed Deposits & Gold have given returns of 5.7% & 10.3% respectively as compared to 15.6% provided by equities (BSE Sensex). (Cumulative annualized returns from 1984to 2004). We believe that a 3 year horizon is ideal for getting a reasonable return from equity. Investment strategy of Magnum taxgain scheme Magnum TaxGain Scheme follows the bottom up investment strategy. We have also kept the portfolio size limited to about 35 stocks in all. While we believe that India is a growth story, we feel that our strength lies in our ability to identify promising stocks and take them in the portfolio. This strategy has worked in favour of the funds in the last couple of years and we intend to pursue this strategy in future also. Awards & Achievements: Magnum TaxGain Scheme has been ranked CPR 1 by CRISIL which indicates very good performance It has recently bagged 2 gold awards in the 1 year & 3 year category for performance in the ICRA Online Awards. Magnum TaxGain Scheme has consistently given dividends and the last dividend given was 102% in June 2005.

SBI MAGNUM CONTRA FUND It is under the Magnum sector funds umbrella. And there are 5 high growth sectors which are as follows.

I.T Fund FMCG Fund Pharma Fund Contra Fund Emerging Businesses Fund

Investment Objective:
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To provide the investors maximum growth opportunity through equity investments in stock of growth-oriented sectors of the economy .Contra derives from Contrarian which means that investment is made when the stocks are currently out of favour of market for short term but it doesnt consider bad debts. SBI MUTUAL FUND is the first one who launched the Contra fund. And it gives the spectacular performance. It is the one of the best scheme. And the total asset based in this scheme are3500 cr. It is an open ended scheme.

Some Important features of this scheme are as follows: Launched on 14 August 1999 Minimum investment required is Rs.2000 and additional purchase can be made in multiples of one. Benchmark is BSE 100. Entry Load Investments below Rs. 5 crores then entry load is 2.25%, Investments of Rs.5 crores and above then entry load is nil. Exit Load For exit within 1 year from the date of allotment -1% For exit after 1 year from the date of allotment NIL

SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter 4 Quarters There is no Lock in period.

The objective of the Fund is to invest in undervalued scrips, which may be currently out of favour but are likely to show attractive growth in the long term. Thus, this fund provides an alternative to investors for investing in the growth scrips of the future. The funds collected under this scheme will be invested in the equities of: Companies that are fundamentally sound, but generally are undervalued at the time of investment due to lack of investor interest.

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Companies that have embarked on the path of turnaround by restructuring of operations, hiving off unrelated business, etc. And where the results of the turnaround are likely to accrue in the long term.

Companies with strong management, but operating in commodities where there are signs of bottoming out of the business cycle.

Magnum Multiplier Plus 1993

Investment Objective: Magnum Multiplier Plus is an open-ended diversified equity fund and the investment objective of the scheme is to provide investors long term capital appreciation along with the liquidity of an open-ended scheme. The scheme will invest in a diversified portfolio of equities of high growth companies.

ASSET ALLOCATION Instrument Equity and related instruments Debt Instruments(including Securitized debt) and govt securities Money market instruments Balance Low Not more than 30% Low to medium % of portfolio of plan A and B Not less than 70% Medium to High Risk profile

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Scheme Highlights: 1. An open-ended equity scheme aiming for aggressive growth from investments in equities. 2. Scheme opens for Resident Indians, Trusts, and Indian Corporates and on a fully repatriable basis for NRIs, FIIs & Overseas Corporate Bodies. 3. Facility to reinvest dividend proceeds into the scheme at NAV. 4. Easy entry and exit on the basis of sales and repurchase prices determined daily.NAV will be declared on every business day. 5. Nomination facility available for individuals applying on their behalf either singly or jointly upto three.

Launch Date Minimum Investment NAVS Entry Load PLAN Exit Load MAGNUM MULTIPLIER PLUS 1993 GROWTH MAGNUM SIP MULTIPLIER PLUS 1993 DIVIDEND 58.99 LATEST NAV 83.09

Feburary 28,1993 Rs.1000 N.A DATE For exit within 1 year from the date of 23 JULY 2010 the allotment-1% For exit after 1 year from the date of the allotment-NIL 23 JULY 2010 Rs.500/month-12 months Rs 1000/month- 6 months Rs 1500/quarter-4 quarters

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 PUBLIC SECTOR UNDERTAKING (PSU) FUND SBI Mutual Fund has launched of its SBI PSU Fund. It is an open-ended equity fund. The fund will mainly invest in a basket of stocks of Public Sector Undertakings (PSUs) and a small portion in debt instruments issued by PSUs. While it will invest up to 100 per cent in equities of PSU, it may also allocate up to 35 per cent in debt. Through this fund, the fund house aims at capitalizing on stored value through disinvestment. Disinvestment tends to improve price discovery, valuation and liquidity of such stocks. The fund will cherry pick PSUs that are likely to emerge as more robust and vibrant players in different industries of the economy as the disinvestment process takes place. The new fund offer opened on May 17, 2010 and closed on June 14, 2010. The net asset value (NAV) would be disclosed on every business day. Speaking at the launch, Achal Kumar Gupta, MD and CEO, SBI Mutual Fund, said: Public sector undertakings play a very important role in the economic development of our country. They have helped in creating a diversified industrial base for the country, with their strong fundamentals and sound financials, they offer good investment avenue. Added to this is the divestment opportunity to unlock the value of the PSUs. We believe that SBI MFs PSU fund will help our investors in creating wealth for them. The industries where PSUs have a strong presence are infrastructure, exploration and exploitation of oil and natural resources, technology development and capital goods

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The reasons why one could look at an NFO based on PSUs are as follows: PSUs have strong fundamentals, are generally a leading players in their industries and in many cases are near monopolies. These companies also showed greater resilience than their private sector counterparts during the economic downturn. Hence the PSU investment theme looks promising. SBI PSU Fund will be managed by Rama Iyer Srinivasan, who holds 16 years of experience in the area of financial services, apart from holding an M.Com and MFM degree. Presently Srinivasan is also the fund manager of Magnum Equity Fund , Magnum Global Fund Magnum Sector Funds Umbrella - Emerging Business Fund and SBI Infrastructure Fund Series I. Market Dominance Top 18 PSUs total Income is equal to 15% of Indias GDP. PSUs paid over 35% of net profits as dividend in 2008.

Big Players NTPC accounts for 30% of power generation ONGC and OIL manage 90% of oil production PSU bank accounts for about 73% for entire banking system assets. (Source: RBI) BHEL is the market leader in Power equipments.

INVESTMENT OBJECTIVE

The objective of the scheme would be to provide investors with opportunities for long term growth in capital along with the liquidity of an open ended scheme through an active management of investment in a diversified basket of equity stocks of domestic Public Sector Undertakings and in debt and money market instruments issued by PSUs and others. ASSET ALLOCATION:

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Instrument Equity and equity related instruments covered under the universe of PSU companies including derivatives Debt and Money Market Securities

% of Portfolio of Plan A & B 65%-100% 0% - 35%

Risk Profile

Medium to High Low to Medium

BENCHMARK - BSE PSU index The offer of units of Rs.10 each for cash during the NFO period Entry Load - NIL Exit Load Exit within 3 years from the date of the allotment-1% Exit after 3 years from the date of the allotment-NIL

Minimum investment size is Rs.5000 and in the multiples of Re.1.Additional Purchase:Rs.1000 and in the multiples of Re.1 Plans And Options There are 2 plans which are as follows. 1. Growth Option 2. Dividend Option

Under the dividend option, facility for payout and reinvestment is also available. Why should I invest in SBI PSU Fund?

PSU are the wealth creators of the nation, with strong fundamentals, and moreover they are available at attractive valuations compared to broader markets. There may arise several disinvestment opportunities too, which will lead to unlocking of the value in these companies. Wealth Creators:
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Out of the 30 companies which constitute the BSE sensex, 4 companies with a combined weightage of 13.54% are from the PSU space (BHEL, NTPC, ONGC and SBI). The BSE PSU index outperforms the BSE Sensex index over the years by a substantial margin. Disinvestment Opportunity:

Disinvestment is high on the governments agenda to increase the threshold limit for nonpromoter public shareholding for the private sector as well as public sector companies.PSU companies, other than the listed ones lined up for disinvestment could be Coal India, LIC India, BSNL, Nuclear Power Corporation etc. SBI PSU Fund would also identify investment opportunities in IPOs of these companies. Privatisation has brought out significant value unlocking and greater efficiencies in the past, which lead to re-rating of those companies and eventually leading to wealth creation.

Strong Dividends Payouts:

While the Growth potential clearly exists, there is another aspect that adds to the need to look at the PSU companies closely; that is they have a strong dividend payout history.

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Main Competitors of SBI Mutual Fund

Some of the main competitors of SBI mutual fund are as follows:

i. ii. iii. iv. v. vi. vii.

RELIANCE Mutual Fund KOTAK Mutual Fund ICICI Mutual Fund UTI Mutual Fund BIRLA SUN LIFE Mutual Fund HDFC Mutual Fund LIC Mutual Fund

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CHAPTER 3: OBJECTIVES OF STUDY & RESEARCH METHODOLOGY

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OBJECTIVES OF THE STUDY

The objective of this report is to gain an in-depth knowledge about the components of a Portfolio in Mutual Fund schemes and the gap that exists between the perceived concept and the actuality of it, in order to market these products successfully.

1. To find out the Preferences of the customers or investors for Asset Management Company. 2. To know the Preferences for the portfolios. 3. To know why one has invested or not invested in SBI Mutual fund. 4. To find out the most preferred channel. 5. To find out what should be done to boost Mutual Fund Industry.

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RESEARCH METHODOLOGY

The first stage included gathering information about the SBI Mutual Fund in India and getting acquainted with the working of the various Mutual Fund Schemes. The next stage involved determining the objective of the study, knowing the target audience and drafting a questionnaire. The questionnaire was designed keeping in mind the target audience and objectives of the study. It was non-disguised in nature and will include a few open-ended questions.

Research Plan The research was exploratory in nature and the goal was to gather preliminary data to shed light on the real nature of problems and to suggest possible solutions or new ideas. It involved getting a feel of the situation and lays emphasis on the discovery of ideas and possible insights.

Sample Size The sample size of my project is limited to 200 people only. Out of which only 120 people have invested in mutual fund. Other 80 people did not have invested in mutual fund.

Sampling Plan The sampling unit comprised of the customers/visitors present in the office of State Bank of India, Attawa Chandigarh Branch, irrespective of them being investors or not or availing the services or not. The samples were chosen on the basis of convenience sampling and these respondents belonged to middle and upper class salaried and self-employed people, students, professionals and housewives who have invested in Mutual Funds.

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Data Sources The research calls for gathering secondary data, primary data or both. Secondary data is the data that is collected for another purpose and already exists somewhere. Primary data is gathered for a specific purpose and is collected by the researcher himself.

Primary Data Primary data was collected from the existing customers of the MFs. The primary information was collected through Questionnaire and interviews presented to the investors. It was collected through personal visit to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using Averages and Percentages Methods.

Secondary data Secondary Data was collected from: a) Print articles on Mutual Funds. b) From the websites and books. c) Product and Service Brochures of the Mutual Funds.

Data Collection For the purpose of this project, a questionnaire was designed to collect data. The questionnaire was non-disguised because the objective and purpose was conveyed to the respondents before asking for their responses. The questions were structured open for general information and closed for collecting specific information.

Data Analysis Tools Simple averages Tabulation Data has been presented with the help of bar graphs, pie charts, line graphs etc.

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LIMITATIONS OF STUDY

Time and resource constraints: The survey was conducted in selective areas because of constraints of time and resources. Therefore, the findings cannot be generalized or claimed until further research has been carried out.

Dynamic industries: As this is one of the dynamic industries today in India and many changes are taking place in quick times. It is very important to keep an eye on this industry very regularly. There are a lot of schemes with various objectives, so the basic objective is used in making this report.

Sample size: The sample size taken was 200, which may not reflect a true picture of the consumers mind. Because of these constraints, the analysis may not be accurate and may vary, when tested in different places and time.

Some of the persons were not so responsive.

Possibility of error in data collection because many of investors may have not given actual answers of my questionnaire.

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(3).Respondents Profile:
3(a) Age distribution of the investors of Chandigarh.

Age group No. of investors

<= 30 31-35 18

36-40 30

41-45 24

46-50 20

>50 16

Interpretation:

According to this chart out of 120 Mutual Fund investors the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs.

3(b) Educational Qualification of investors.

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Educational Qualification Graduate/PG Under Graduate Others Total

No. of investors 88 25 7 120

Interpretation: Out of 120 Mutual Fund investors 73% of the investors are Graduate/Post Graduate, 21% are Under Graduate and 6% are others (under HSC).

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3(c).Occupation of the investors

Occupation
Government Service Private Service Business Agriculture Others

No. of investors
30 45 35 4 6

Interpretation: In occupation group out of 120 investors, 38% are private employees, 25% are Businessman, 29% are Government employees, 3% agriculture and 5% are in others.
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3(d.) Monthly family income of the investors

Income Group Upto10000 10001-15000 15001-20000 20001-30000 30000 and above

No. of investors 5 12 28 43 32

Interpretation:
In the income group of the investors, out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs.20, 001 to Rs.30, 000, Second one i.e. 27% investors are in the monthly income group of more than Rs.30, 000 and the minimum investors i.e. 4% are in the monthly income group of below Rs.10, 000.

[39]

CHAPTER 4: DATA ANALYSIS & INTERPRETATION

[40]

ANAYLSIS AND INTERPRETAION OF DATA

(4.1) Investors invested in different kind of investments. Kinds of Investments

Saving A/C Fixed Deposits Insurance Mutual Fund Post office-NSC Shares/Debentures Gold/Silver Real Estate

No. of Respondents
195 148 152 120 75 50 30 65

Interpretation: From the above graph it can be inferred that out of 200 people, 97.5% people have invested in Saving A/c, 76% in insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in post office-NSC, 25% in Shares and Debentures, 15% in Gold/Silver and 32.5% in Real Estate.

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(4.2)Preference of factors while investing.

Factors

a)Liquidity

b) Low Risk

c) Higher Return

d) Trust

No. of Respondents

40

60

64

36

Interpretation: Out of 200 people, 32% prefer to invest where there is higher return, 30% prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust.

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(4.3)Awareness about Mutual Fund and its Operations.

Response No. of Respondents Yes 135 No 65

Interpretation: From the above chart it can be inferred that 67% people are aware of Mutual Fund and its operations and 33% are not aware of Mutual Fund and its operations.

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(4.4) Source of Information for customers about Mutual Fund.

Source of Information
Advertisement Peer Group Banks Financial Advisors

No. Respondents
18 25 30 62

of

Interpretation:
From the above chart it can be inferred that Financial Advisors is the most important source of information of Mutual Fund. Out of 135 Respondents, 46% know about Mutual Fund

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through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement.

(4.5) Investors invested in Mutual Fund.

Response
Yes No Total

No. of Respondents
120 80 200

Interpretation:
Out of 200 people, 60% have invested in Mutual Fund and 40% do not have invested in Mutual Fund.

(4.6)Reasons for not invested in Mutual Fund.

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Reason
Not Aware Higher Risk Not any specific reason

No. of Respondents
65 5 10

Interpretation:
Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any specific reason.

(4.7) Investors invested in different Asset Management Company (AMC).

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Name of AMC
SBIMF UTI HDFC RELIANCE ICICI PRU KOTAK OTHERS

No. of Investors
55 75 30 75 56 45 70

Interpretation:
In Chandigarh most of the investors preferred UTI and RELIANCE Mutual Fund. Out of 120 investors 62.5% have invested in each of them, only 46% have invested in SBIMF, 47% have invested in ICICI PRU, 37.5% in Kotak and 25% in HDFC.

(4.8) Reason for invested in SBIMF.

Reason

No. of Respondents
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Associated with SBI Better Return Agents Advice

35 5 15

Interpretation:
Out of 55 investors of SBIMF, 64% have invested because of its association with the brand name of State Bank of India, 27% have invested on agents advice, and 9% have invested because of better return.

(4.9) Reason for not invested in SBIMF.

Reason

No. of Respondents
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Not Aware Less Return Agents Advice

25 18 22

Interpretation:
Out of 65 people who have not invested in SBIMF, 38% were not aware with SBIMF, 28% do not invested due to less return, and 34% due to agents advice.

[49]

(4.10)Preference

of investors for future investment in

Mutual Fund.

Name of AMC
SBIMF UTI HDFC RELIANCE ICICI PRUDENTIAL KOTAK OTHERS

No. of Investors
76 45 35 82 80 60 75

Interpretation: Out of 120 investors, 68% prefer to invest in Reliance, 67% prefer to invest in ICICI PRU, 63% in SBIMF, 62.5% in others, 50% in kotak, 37.5% in UTI and 29% in HDFC Mutual Fund.

[50]

(4.11)Channel preferred by the investors for Mutual Fund.

Channel No. of Respondents

Financial Advisor 72

Bank 18

AMC 30

Interpretation:
Out of 120 investors, 60% investors prefer to invest through Financial Advisors, 25% through Bank, and 15% investors through AMC.

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(4.12)Mode of investment preferred by the Investor.

Mode of Investment No. of Respondents One Time Investment 78 Systematic Investment Plan 42

Interpretation:
Out of 120 investors, 65% preferred One Time Investment and 35% preferred through Systematic Investment Plan.

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(4.13) Preferred Portfolio by the Investors.

Portfolio
Equity Debt Balanced

No. of Investors
56 20 44

Interpretation:
From the above graph 46% preferred Equity portfolio, 37% preferred Balanced and 17% preferred Debt portfolio.

[53]

(4.14) Option for Getting Return Preferred by the Investors.

Option No. of Respondents

Dividend Payout 25

Dividend Re-invest 10

Growth 85

Interpretation:
From the above graph 71% preferred Growth option, 21% preferred Dividend Payout and 8% preferred Dividend Reinvestment Option.

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(4.15)Preference of Investors whether to invest in Sectorial Funds.

Response
Yes No

No. of Respondents
25 95

Interpretation:
Out of 120 investors, 79% investors do not prefer to invest in Sectorial Fund because there is maximum risk and 21% prefer to invest in Sectorial Fund.

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Basis for analyzing the performance of Mutual Fund

Net Asset Value (NAV) is the best parameter on which the performance of a mutual fund can be studied. We have studied the performance of the NAV based on the compounded annual return of the Scheme in terms of appreciation of NAV, dividend and bonus issues. WE have compared the Annual returns of various schemes to get an idea about their relative standings. 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.

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NAV= Assets (stock held)-Liabilities (Expenses incurred) Number of outstanding units

For e.g. if the market value of the securities of a mutual fund scheme is Rs.200 lakhs and the mutual fund has issued 10 lakhs units at Rs.10 to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis daily or weekly.

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CHAPTER- 5 FINDINGS AND CONCLUSION

[58]

Findings
In Chandigarh Investors in the age group of 36-40 years were more in numbers. The second most Investors were in the age group of 41-45 years and the least were in the age group of below 30 years. In Chandigarh most of the Investors were Graduate or Post Graduate and below HSC there were very few in numbers. In Occupation group most of the Investors were Govt. employees, the second most Investors were Private employees and the least were associated with Agriculture. In family Income group, between Rs.20,001- 30,000 were more in numbers, the second most were in the Income group of more than Rs.30,000 and the least were in the group of below Rs.10,000. Mostly all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits, Only 60% Respondents invested in Mutual fund.
Mostly Respondents preferred High Return while investment, the second most

preferred Low Risk then liquidity and the least preferred Trust. Only 67% Respondents were aware about Mutual fund and its operations and 33% were not. Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not have invested in Mutual fund. Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is not any specific reason for not invested in Mutual Fund and 6% told there is likely to be higher risk in Mutual Fund. Most of the Investors had invested in Reliance or UTI Mutual Fund ICICI Prudential has also good Brand Position among investors, SBIMF places after ICICI Prudential according to the Respondents. Out of 55 investors of SBIMF 64% have invested due to its association with the Brand SBI, 27% Invested because of Advisors Advice and 9% due to better return.
Most of the investors who did not invested in SBIMF due to not

aware of

SBIMF, the second most due to Agents advice and rest due to Less Return.
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 For Future investment the maximum Respondents preferred Reliance Mutual Fund, the second most preferred ICICI Prudential, SBIMF has been preferred after them.
60% Investors preferred to Invest through Financial Advisors, 25%

through AMC

(means Direct Investment) and 15% through Bank. 65% preferred One Time Investment and 35% preferred SIP out of both type of Mode of Investment. The most preferred Portfolio was Equity, the second most was Balance (mixture of both equity and debt), and the least preferred Portfolio was Debt portfolio Maximum Number of Investors Preferred Growth Option for returns, the second most preferred Dividend Payout and then Dividend reinvestment. Most of the Investors did not want to invest in Sectorial Fund, only 21% wanted to invest in Sectorial Fund.

CONCLUSION

Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, and Channels etc. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing. Brand plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are many AMCs in Chandigarh but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and their Assets Under Management is larger than others whose Brand name are not well known like Principle, Sunderam, etc.

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Distribution channels are also important for the investment in mutual fund. Financial Advisors are the most preferred channel for the investment in mutual fund. They can change investors mind from one investment option to others. Many of investors directly invest their money through AMC because they do not have to pay entry load. Only those people invest directly who know well about mutual fund and its operations and those have time to others. Many of investors directly invest their money through AMC because they do not have to pay entry load. Only those people invest directly who know well about mutual fund and its operations and those have time.

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CHAPTER 6 SUGGESTIONS

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Suggestions
The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing. Mutual Fund offers a lot of benefits which no other single option could offer. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. Mutual Fund Company needs to give the training of the Individual Financial Advisors about the Fund/Scheme and its objectives, because they are the main source to influence the investors. Before making any investment Financial Advisors should first enquire about the risk tolerance of the investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration. Younger people aged fewer than 35 will be a key new customer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off. Customers with graduate level education are easier to sell to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality. Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.

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BIBLIOGRAPHY

During the research process, several books and various websites were referred for the collection of relevant information.

Books Referred: Kothari, C.R., Research Methodology, 2007

Websites and Links www.amfiindia.com www.sbimu.com www.nseindia.com

www.moneycontrol.com

www.mutualfundsindia.com

Other handbooks and reports used: Mutual Fund Handbook Factsheet and Statement

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ANNEXURE

[65]

QUESTIONNARIE

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

1. Personal Details: (a) .Name:(b) .Add:(c) Age:(d) Qualification:Graduation/PG Under Graduate Others Phone:-

(e) Occupation.Pl tick()

Govt. Service

Pvt.Job

Business

Agriculture

Others

(f) What is your monthly family income approximately? Pl tick (). Up to 000 Rs.10, Rs.10, 001 to Rs.15, 001 to Rs.20, 001 to Rs.30, 001 and 15000 20000 30000 above

2. What kind of investment you have made so far? Pl tick ().All applicable. a. e. Saving PostOffice. b. Fixed deposits f.Shares/ Debentures c. Insurance g. Gold/ Silver d. Mutual Fund h. Real Estate

account NSC etc.

3. While investing your money, which factor will you prefer?

a. Liquidity b. Low Risk c. Higher Return d. Trust

4. Are you aware about Mutual Funds and their operations? Pl tick (). Yes No
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5. If yes, how did you know about Mutual Fund? a. Advertisement b. Peer Group c. Banks d. Financial Advisors

6. Have you ever invested in Mutual Fund? Pl tick (). Yes No 7. If not invested in Mutual Fund then why? a. Not aware of MF b. Higher Risk c. Not any specific reason

8.

If yes, in which Mutual Fund you have invested? Pl tick ().All applicable. b.UTI c.HDFC d.Reliance e.Kotak f.Other.specify

a.SBIMF

9. If invested in SBIMF, you do so because (Pl tick (),all applicable)

a.SBIMF is associated with SBI b.They have a record of giving good returns year after year. c.Agents Advice

10. If NOT invested in SBIMF, you do so because (Pl tick (), all applicable).

a.You are not aware of SBIMF b.SBIMF gives less return compared to the others c.Agents Advice

11. When you plan to invest your money in asset management co. which AMC will you prefer?

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a.SBIMF b.UTI c.RELIANCE d.HDFC e.KOTAK f.ICICI

12. Which channel will you prefer while investing in Mutual Fund? a.Financial Advisor b.Bank c.AMC

13. When you invest in Mutual Funds which mode of investment will you prefer?

Pl tick (). a.One Time Investment b.Systematic Investment Plan(SIP)

14. When you want to invest which type of funds would you choose? a. Having only debt portfolio b.Having portfolio debt & equity c.Only equity portfolio

15. How would you like to receive the returns every year? Pl tick ().

a.Dividend payout

b.Dividend Re-investment

c.Growth in NAV

16. Instead of general Mutual Funds, would you like to invest in sectorial funds?

Pl tick ().

Yes

No.

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