A Project Study Report On

Systematic Investment Plan

(The Better Way to Invest In Mutual Funds) AT

SBI MUTUAL FUND

Submitted in Partial Fulfillment for The Award of Degree of Master of Business Administration

2011-2013
Submitted by:

Submitted to: Dr.Sunita Agarwal Professor

Chanchal Salvi MBA Semester III

Advent Institute of Management Studies Udaipur

PREFACE

There are four steps to Accomplishment & Success Plan, Purposefully, Prepare thoroughly, Proceed Positively & Pursue Persistently. In this development and changing world, I feel proud for being a student of M.B.A programmed at Advent Institute of Management Studies UDAIPUR. The summer training in the MBA course is the major event that gives you an insight into the expectations that a company has from the MBAs. It provides a pre working experience for a student and gives enough exposure so that one can give his/her best in the organization which he/she joins in the future. Due to ever increasing competitiveness in the market today the specific skills of management are always called for. For this project my training place was State Bank of India. Udaipur. During my study I got enough information. This report is purely based on what I worked and analyzed during my training. In preparing this report I have drawn a vast amount of literature Naturally, I owe an intellectual debt to numerous lectures that enrich the stream of my study. This project is a summary of the information gathered during the study. I Confident that my sincere effort and special attention will justify the subjects in the report.

ACKNOWLEDGEMENT

I express my sincere thanks to Dr. R.K. Balyan, Director, Advent Institute of Management Studies and my project guide Dr. Sunita Agrawal, Professor, Deptt AIMS, for guiding me right from the inception till the successful completion of the project. I sincerely acknowledge her for extending their valuable guidance, support for literature, critical reviews of project and the report and above all the moral support she had provided to me with all stages of this project. I would also like to thank the supporting staff of Advent Institute of Management Studies for their help and cooperation throughout our project.

Chanchal salvi

Executive Summary

Mutual funds have emerged as a strong financial intermediary and are the fastest growing segment of the financial services sector in India. Mutual funds play a very significant role in channelizing the savings of millions of individuals. A mutual fund is the most suitable investment for the common person as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. There are wide varieties of mutual fund schemes that cater to investor needs. Whether as the foundation of ones investment programme or as a supplement, mutual fund schemes can help the investors to meet their financial goals. A host of factors has contributed to this explosive growth of the industry. The industry has made significant strides in terms of its variety, sophistication and regulation. Due to the economic boom, entry of foreign asset management companies, favorable stock markets and aggressive marketing by mutual funds, the asset management industry in India is witnessing dramatic growth in terms of new fund openings, the number of mutual fund families, and in the total assets under management in recent years. Despite various attractions offered, the total net assets of mutual funds are very less as compared to other developed countries. In the product offering too, the Indian fund industry is not close to the developed countries. Indias 32 member fund industry has to scale new heights to narrow the gap with the other developed countries. To achieve this, the Indian mutual fund industry needs to widen its range of products with affordable and competitive schemes that combine various elements of liquidity, return and security in making mutual fund products the best possible alternative for the small investors in the Indian market. Besides, mutual funds can survive only if they perform well and satisfy the expectations of the investors. In this context a sincere attempt has been made by the researcher to examine the steady growth of the industry, the innovations and the development that has taken place in India. This research on Mutual Fund industry will specifically focus on the SBI Mutual Funds.

Table of Contents

Sr. No:1. 2. 3.

Chapter

Name of content

Page no

Introduction Profile of company Research methodology

1.1 An overview

1-15 16-

2.1 Title of the study

30

2.2 Duration of the project 2.3 Objective of the study 2.4 Simple size &method 2.5 Scope of the study 2.6 Limitation of the study 4. 5. 6. Findings & Facts Data Analysis SWOT analysis of the company 7. 8. Conclusion Suggestions Recommendations 9. 10. Appendix Bibliography 3.1 Findings

32 34 36 37 41 45 60 62

63 64

65 67

Chapter 1 Introduction to the Industry

Introduction
The financial system is a set of institutional arrangements through which financial surpluses available in the economy are mobilized. A financial system, which is inherently strong, functionally diverse and displays efficiency and flexibility, is critical in creating a market-driven, productive and competitive economy. A mature financial system has to gear up and undergo varied and comprehensive changes in order to achieve rapid economic development. The financial sector reforms in India in the early nineties has resulted in explosive growth of the economy, opening up of the Indian financial market to foreign and private Indian players, large inflow of Foreign Ninth AIMS International Conference on Management Institutional Investors, increased competition and better product

offerings to consumers. One of the major developments of this decade has been the take-off of mutual funds. Mutual funds have emerged as a strong financial intermediary and are the fastest growing segment of the financial services sector in India. It aims at promoting a diversified, efficient and competitive financial sector increasing the return on investment and promoting and accelerating the growth of the economy. It is a medium of investment suitable to the small investors, who are not able to invest in stock market directly. Mutual funds now play a very significant role in channelizing the savings of millions of individuals. The mutual fund industry in India over the years has seen dramatic improvements in terms of quantity as well as quality of product and service offerings in recent years. The tremendous growth of Indian Mutual Funds industry is an indicator of Indias efficient financial market and the trust which investors have on the regulatory Environment. Millions of investors rely on mutual funds as their primary investments because they offer a convenient, cost-effective and easy way to invest in the financial markets. The Securities Exchange Board of India (SEBI) regulates this fast growing industry and it is the representative body of all mutual funds in the country. Every mutual fund has a goal - either growing its assets (capital gains) and/or generating income (dividends) for its investors. Distribution in the form of capital gains (short-term and long-term) and dividends may be passed on (paid) to the shareholders

as income or reinvested to purchase more shares. A mutual fund is valued daily and reports a price known as a Net Asset Value (NAV) per share. In its simplest Form, a NAV is the total value of all the securities held in a fund divided by the total number of shares owned by its shareholders. As the price of the NAV increases or decreases, the shareholder's value will increase or decrease.

Current Scenario of Mutual Funds

The global economic environment was conducive and this led to the explosive growth of mutual funds in most countries particularly since 1980s. This growt h can be attributed to the strong emergence of the market economy which depends more on the growth led by the stock market. Mutual funds found increasing acceptance in the developed countries when compared to the developing countries in the early and mid 90s but gradually it found its place even in the developing countries because of its advantages. Gradually the number of mutual funds increased significantly worldwide and many developed countries started designing country specific funds to match the trend prevailing in other developed countries.

Evolution of Mutual Fund Industry in India

The mutual fund revolution that was sweeping the other countries bypassed India also. The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India. UTI commenced its operations from July 1964 and different provisions of the UTI Act laid down the structure of management, scope of business, powers and functions of the trust as well as accounting, disclosures and regulatory requirements for the trust. Even though the growth of the mutual fund industry was very slow in the beginning, it accelerated when the public sector and private sector mutual funds entered the market after the year 1987. The mobilization of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds. Investors' interests were safeguarded by SEBI and the Government offers tax benefits to the investors in order to encourage them. SEBI also introduced SEBI

(Mutual Funds) Regulations, 1996 and set uniform standards for all mutual funds in India.

History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Though the Growth was slow, but it accelerated from the year 1987 when non-UTI players entered the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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 mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores. Third Phase 1993-2003 (Entry of Private Sector Funds)

1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector Mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive And revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33 Mutual funds with total assets of Rs. 1,21,805 crores.

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 second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is Registered with SEBI and functions under the Mutual Fund Regulations. Consolidation And growth. As at the end of September, 2004, there were 29 funds, which manage Assets of Rs.153108 crores under 421 schemes.

Mutual Fund
A mutual fund is a company that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings A mutual fund is a professionally managed investment product that sells shares to investors and pools the capital it raises to purchase investments A fund typically buys a diversified portfolio of stock, bonds, and money market securities, or a combination of stock and bonds, depending on the investment objectives of the fund. Mutual funds may also hold other investments, such as derivatives. A fund that makes a continuous offering of its shares to the public and will buy any shares an investor wishes to redeem, or sell back, is known as an openend fund. An open-end fund trades at net asset value (NAV). An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Advantages of Mutual Funds

Diversification Professional Management Regulatory oversight Liquidity Convenience Low cost Transparency Flexibility Choice of schemes Tax benefits Well regulated

Working of Mutual Funds:

The following figure explains the working of Mutual funds

The important terms of the figure are explained as follows:

Fund Sponsor:
The sponsor is the company which sets up the mutual fund. It means anybody corporate acting alone or in combination with another body corporate established a

mutual fund after initiating and completing the formalities Trust:

MF or trust can either be managed by the Board of Trustees, which is a body of individuals, or by a Trust Company, which is a corporate body. Most of the funds in India are managed by Board of Trustees. The trustee being the primary guardian of the unit holders funds and assets has to be a person of high repute and integrity. The trustees, however, do not directly manage the portfolio securities. The portfolio is managed by the AMC as per the defined objectives, accordance with Trust Deed and SEBI (Mutual Funds) Regulations.

Asset (AMC):

Management

Company

The AMC, which is appointed by the sponsor or the trustees and approved by SEBI, acts like the investment manager of the trust. The AMC functions under the supervision of its own Board of Directors, and also under the direction of the trustees and SEBI. AMC, in the name of the trust, floats and manages the different investment schemes as per the SEBI Regulations and as per the Investment Management

Agreement signed with the Trustees. Other Apart from these, the MF has some other fund constituents, such as

custodians and depositories, banks, transfer agents and distributors. The custodian is appointed for safe keeping of securities and participating in the clearing system through approved depository. The bankers handle the financial dealings of the fund. Transfer redemption of units of agents MF. are responsible for issue and

RiskReturnMatrix: The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vice versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investor opts for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases. Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesnt mean mutual fund investments are risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns.

Mutual funds can be classified as follow:

 Based on their structure:

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

Based on their investment objective:

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

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weight ages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund: Their investment portfolio includes both debt and equity. As
a result, on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes.

i.)Debt-oriented funds -Investment below 65% in equities. ii.)Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

Debt fund: They invest only in debt instruments, and are a good option for
investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs.

i)Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government securities of
and T-bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.

IV)Arbitrage fund- They generate income through arbitrage opportunities due to

mispricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government
Securities.

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in
long-term debt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with
that of the fund.

Investment Strategies:

1. Systematic Investment Plan: under this a fixed sum is invested each month
on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund
and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual

fund then he can withdraw a fixed amount each month.

Options Available To Investors:

Each plan of every mutual fund has three options Growth, Dividend and dividend reinvestment. Separate NAV are calculated for each scheme.

Dividend Option

Under the dividend plan dividend are usually declared on quarterly or annual basis. Mutual fund reserves the right to change the frequency of dividend declared.

Dividend reinvestment option

Instead of remittances of units through payouts, Units holder may choose to invest the entire dividend in additional units of the scheme at NAV related prices of the next working day after the record date. No sales or entry load is levied on dividend reinvest.

Growth Option

Under this, plan returns accrue to the investor in the form of capital appreciation as reflected in the NAV. The scheme will not declare the dividend under the Growth plan and investors who opt for this plan will not receive any income from the scheme. Instead of income earned on their units will remain invested within the scheme and will be reflected in the NAV.

Risk Return Hierarchy of Different Funds

BANKS V/S MUTUAL FUNDS:

Mutual Funds are now also competing with commercial banks in the race for retail investors savings and corporate float money. The power shift towards mutual funds has become obvious. The coming few years will show that the traditional saving avenues are losing out in the current scenario. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The fund mobilization trend by mutual funds indicates that money is going to mutual fund in a big way.

CATEGORY Returns Administrative exp. Risk Investment options Network Liquidity Quality of assets Interest calculation

BANKS Low High Low Less High penetration At a cost Not transparent Minimum balance between 10th & 30th of every month Maximum Rs.1 lakh on deposits

MUTUAL FUNDS High Low Moderate More Low but improving Better Transparent Everyday

Guarantee

None

Chapter 2 Profile of Company

Company profile
SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation SBI Mutual Fund Set up on 29 June 1987, SBI Mutual Fund is a joint venture between the State Bank of India, India's largest bank and Societe Generale Asset Management of France, one of the world's leading fund houses in the country with an investor base of over 4.6 million and over 20 years of rich experience in fund management consistently delivering value to its investors. SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank of India' one of India's largest banking enterprises, and Societe Generale Asset Management (France), one of the world's leading fund management companies that manages over US$ 500 Billion worldwide. Today the fund house manages over Rs 28500 crores of assets and has a diverse profile of investors actively parking their investments across 36 active schemes. In 20 years of operation, the fund has launched 38 schemes and successfully redeemed 15 of them, and in the process, has rewarded our investors with consistent returns. Schemes of the Mutual Fund have time after time outperformed benchmark indices, honored us with 15 awards of performance and have emerged as the preferred investment for millions of investors. The trust reposed on us by over 4.6 million investors is a genuine tribute to our expertise in fund management. SBI Funds Management Pvt. Ltd. serves its vast family of investors through a network of over 130 points of acceptance, 28 Investor Service Centers, 46 Investor Service Desks and 56 District Organizers.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.

MUTUAL F U N D S STRUCTURE
The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund established in the form of a trust by a sponsor to raise monies by the Trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations. These regulations have since been replaced by the SEBI (Mutual Funds) Regulations, 1996. The structure indicated by the new regulations is indicated as under. A mutual fund comprises four

separate entities, namely sponsor, mutual fund trust, AMC and custodian. The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be in the form of a deed registered under the provisions of the Indian Registration Act,1908. The Custodian maintains the custody of the securities in which the scheme invests. It also keeps a tab on corporate actions such as rights, bonus and dividends declared by the companies in which the fund has invested. The Custodian is appointed by the Board of Trustees. The Custodian also participates in a clearing and settlement system through approved depository companies on behalf of mutual funds, in case of dematerialized securities. The sponsor is required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the asset management company. The board of trustees manages the MF and the sponsor executes the trust deeds in favor of the trustees. It is the job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guidelines

Taxation of Mutual Funds and Investor

Finance Act 1999 radically changed taxation of Dividends received by investors in Mutual Funds. Mutual Fund as an entity is not taxed since it is a Pass through entity. Section 10(23d) of the IT Act. Finance Act 1999 made income (dividend) from UNITS totally exempt from tax u/s 10(33) in the hands of investors. Income (dividends) distributed by a debt fund was made liable to Dividend Distribution Tax at applicable rate. Open ended funds with more than 50% invested in equity do not pay any DDT (since changed to 65% in FY 06-07. Individuals 14.02% , Companies 22.44%. Security Transaction Tax (STT) is charged as applicable. 80 C benefits under ELSS up to Rs 1 lack.

Types of Investment in Mutual Fund

Lump Sum Systematic Investment Plan

Lump Sum Payment

A lump sum is a single payment of money, as opposed to a series of payments made over time (such as an annuity) This means investing the entire sum of money at one go. For instance, if you have Rs 1 lakh which you are willing to fully invest in stocks or MFs, it is a lump-sum investment.

Systematic Investment Plan

SBI Mutual Fund on Wednesday, April 15th started its equity based micro systematic investment plan (Micro SIP) at Alibaug, near Mumbai. Micro SIP has been launched to offer long-term investment benefits in equity to low income households residing in the rural and semi-urban areas. "This plan is aimed at getting in low income households in rural and semi-urban areas to benefit from long-term investment in equity as an asset class," said Achal Gupta, Managing Director, SBI Mutual Fund.

The first 100 investors from the low income group in Alibaug were basically the daily wage earners who enrolled with the SIP in the presence of Mr. O. P. Bhatt, Chairman, State Bank of India. This was a part of the initiative taken by the bank. The bank plans to market the product through intermediaries like Self-Help Groups (SHGs), NGOs and Micro Credit/ Finance Institutions. "We plan to take this product to the masses partly through marketing by SBI Mutual Fund, and partly by setting targets for SBI branches for the sale of this product," said Bhatt. The plan is called as SBI Chota SIP and requires a minimum investment of only Rs 100 per month with minimum tenure of 5 years. The bank has also requested the government to remove the permanent account number (PAN) requirement, which is a must for all mutual fund investments, for this plan. Presently the investors who want to opt for this plan have the option of investing in SBI Mutual Fund's Magnum Balanced Fund, MMPS 93, MSFU Contra Fund, and SBI Blue Chip Fund and later on this plan would be extended to other schemes as well.SIP is actually a Systematic Investment Plan of investing in Mutual Fund. It is specially designed for those who aim to build wealth over a long period and want a better future for him and their dependants. The investment in a Mutual fund can be done in two ways. First way is onetime payment i.e. making payment to a fund at once and gets the units of the fund as per the Net Asset Value (NAV) of the fund on that day. A person wishes to invest in a fund Rs. 24,000/- . On the day of Investment, the NAV of the fund was Rs. 10/-. He gets 2400 units @ Rs. 10/- per unit. The other way of investment is making payment to the fund periodically, which is termed as Mutual Fund SIP. When you commit to invest a fixed amount monthly in a fund, it is called as Systematic Investment. It is actually beneficial for those investors who wish to invest a large amount in a fund and wishes to create a large chunk of wealth for long term but due to financial constraints are able to do so. Systematic Investment Plan in Mutual Fund is commonly named SIP is really getting popular in India. Systematic Investment Plan is such a beautiful tool, which if used properly can help you to achieve all your financial goals. Some time back we wrote Do you really understand Systematic Investment Plan which is one of the most popular articles of TFL, but readers requested that they want to read more about basics of Mutual Fund SIP.

What is Systematic Investment Plan?

Systematic Investment Plan (SIP) is a smart financial planning tool that helps you to create wealth, by investing small sums of money every month, over a period of time. Systematic Investment Plan (SIP) is a planned approach to investments and an investment technique that allows you to provide for the future by investing small amounts of money in Mutual Fund schemes of your choice. State Bank of India is one of the largest banking institutions in India. It is not only reliable but investing money is also safe with a guarantee that great returns can be obtained from here. Currently, investment in the mutual funds and in the SIP schemes of the mutual funds has become quite common. There are many companies that offer the opportunity of investment in the SIP. SBI is also one of them.

A SIP is a method of investing in mutual funds, by investing a fixed sum at a regular frequency, to buy units of a mutual fund schemes. It is quite similar to a recurring deposit of a bank or post office. For the convenience, an investor could start a SIP with as low as Rs 500; however this amount may differ from one fund house to other. The SIP provides them a way to invest in the fund of their choice in installments.

Here is an illustration using hypothetical figures indicating how the SIP can work for investors:
Suppose an investor would like to invest Rs.4,000 under the Systematic Investment Plan on quarterly basis.

Period

Invested Premium (Rs)

NAV of Maxi miser Fund (Rs per unit) 11.34 11.01 12.05 13.13 13.67

Units allocated

7th April10 7th May10 7th June10 7th July10 7th August10 7th Sept10 7th Oct10 7th Nov10 7th Dec10 7th Jan11 7th Feb11 7th March11
Total

4000 4000 4000 4000 4000

352.73 363.31 331.95 304.65 292.61

4000 4000 4000 4000 4000 4000 4000

15.81 16.78 18.28 18.71 21.48 21.49 21.98

253.00 238.38 218.82 213.79 186.22 186.13 181.98

48000

Actual average NAV= (11.34+11.01+12.05+13.13+13.67+15.81+16.78+18.28+18.71+21.48+21.49+21. 98) / 12 = 16.29 NAV for Mr. X (4,000 * 12) / (352.73+ 363.31 + 331.95 + 304.65 + 292.61 +

253.00+ 238.38 + 218.82 + 213.79 + 186.22 + 186.13+ 183.74) = Rs.15.36

Based on the historical analysis for BSE Sensex for last 10 to 12 years (i.e.1-Jan-1998 to 1-Jan- have 2010) we find that if an individual had invested Rs. 1000 ever year (SIP) he would by earned a return of 9% vis--vis 5% earned an individual who had invested Rs. 1000 at the beginning of 10 year period. Similarly over a five-year period (1-Jan1994 to 1-Jan-1999) SIP investment return would have been 16.52% compared to 14.09% for a one-time investment at the beginning of the period. Using the SIP strategy the investor can reduce his average cost per unit. The investor gets the advantage of getting more units when the market is turned down.

Benefits of SIP
1. SIP can be started with a minimum investment of Rs. 500/- per month or Rs. 1000/- per month. 2. It is good and effective way of creating wealth for long term. 3. ECS facility is available in case of Investment through SIP. 4. A small withdrawal from the account doesnt affect the bank balance of an individual as compared to a hefty withdrawal. 5. It can be for a year, two years, three years etc. if a person at any point of time couldnt be able to continue its SIP, he may give instructions at least 25 days before to the fund house. His SIP be discontinued. 6. All type of funds except Liquid funds, cash funds and other funds who invest in very short fixed return investments offers the facility of SIP. 7. Capital gains, if applicable, are taxed on a first-in first-out basis. 8. As the investment made through SIP are not at one time. Some units bought at high price and some at low price, so chances of making gain through SIP is higher than the one time investment.

In short, SIP is a simple and effective way to create wealth but to create such wealth, one should think about the investment in SIP for a period of at least for time frame of three years because it pays to invest in a longer run..

SBI and SIP:

The relationship between SBI and SIP is quite long and strong. SBI has introduced several SIPs because it is definitely one of the greatest and the smartest way of investment in the present scenario. Not only is it less risky but at the same time it also generates less return. Right from Rs 50 to Rs1500, different amounts can be invested in the SIP monthly scheme of SBI

Chapter 3 Research Methodology

Research Methodology
Title of the study
Systematic Investment Plan (The Better Way to Invest In Mutual Funds)

Duration of the Project The duration of the project is 45 days

Objective of the study

The purpose of choosing the project is to know: Investors option for entry into mutual fund Lump sum SIP Comparative analysis between Lump Sum and SIP Investors Delight when investment is through SIP Procedure for investment in SIP

Research Type
Conclusive and explorative approach has been adopted in the study. As here the topic of research problem has been explored so that hidden facts can come into the light and then the maximum allocation criteria in SIP are Rs. 1000-3000 i.e. the final conclusion is given 45%

SAMPLE SIZE
A sample size of 50 investors was chosen to meet the earlier mentioned objectives. The selection of sample was based on the following criteria: People belonging to different state of society.

Servicemen working in government organization & private organization. Professionals who includes doctors, lawyers, teachers etc

Research Design
This research is Explorative and conclusive in nature because it aims to collect the data about the behavior of investors in which way they invest in Mutual Funds. The research approach used is survey based and the analysis is largely based on the primary data.

Research Instrument
Structured questionnaire: open- ended and close- ended.

Contact Method
Personal interview

Research Approach
Any methodology includes the overall research design, the sampling procedure and data collection method. The methodology adopted by me for purpose of finding the investment behavior of investors was DIRECT SURVEY METHOD

POPULATION Udaipur City

Study scope of the

Udaipur only
This project will help existing/prospective investor to understand what the various mode of investment in Mutual Fund are and why Systematic Investment Plan gives better returns than Lump sum. So that investors can do better use of their hard earned money to earn more profit.

Types of data
1. Primary Data 2. Secondary Data Primary Data is that data which is collected by the researcher as per his/her needs Secondary Data is that data which is collected through references as websites, journals, books, magazines , etc.

LIMITATIONS TO THE SURVEY

Though research based decision-making is now considered but still there is a gap between the understanding of researcher and users. Research is there to help in decision-making, not a substitute of decision-making. Some of the following limitations have restricts the scope of survey to some extent :

Some respondents gave vague information and were not serious while responding. Some respondents were hesitant to reveal information about their finances because of income tax queries. It was difficult to find whether respondents actually participate in their financial planning. Research can provide number of facts but it does not provide actionable results. It cannot provide answer to any problem but can only provide a set of guidelines. Management rely more on the intuitions and judgments rather than research. Area of research was restricted to some location of the city and state.

Chapter 4 Facts and Finding

Finding
The analysis is done based on the structured questions and we got following points:

55% investor invests in SIP mode. 84% got more profit in SIP The maximum duration of investment in SIP is 3 years i.e. 34%. The maximum allocation criteria in SIP are 1000-3000 i.e. 45%

Chapter 5 Analysis and Interpretation

Q 1: In which Financial Instrument do you invest into? Ans: Financial Instruments Mutual Bond Online Trading Derivatives Investment in % 76 15 07 02

Interpretation: From above pie chart, I have analyzed that 76% of investors invest in the analysis is done on the basis of the response of respondents, which is collected through the questions present in questionnaire.

Q 2: By structure in which type of schemes have you invested? Ans : Types of schemes on the basis of Investment in % structure Open ended funds Close ended funds Intervals funds 66 22 12

Interpretation: The above pie chart depicts that 66% investors invest in Open-ended
funds, 22% in Close-ended funds and 12% in Interval funds.

Q. 3: By investment objective In which type of schemes have you invested? Ans: Types of Investment on the basis of Investment in % objective Growth Schemes Income Schemes Balances Schemes 55 13 32

Interpretation: From the above pie chart, I conclude that there are 55 % investors
who invest in Growth Schemes, 13% investor invest in Income Schemes, and 32% investors invest in Balanced Funds.

Q.4. Ans :

In which type of fund you want to invest?

TYPES OF FUNDS

INVESTMENT %

IN

Index Fund Tax Saver Fund Sectoral fund

41 15 44

Interpretation: The above chart depicts that the maximum numbers of investor.i.e.41% investors invest in Sectoral Funds , 44% in Index Funds and 15% in Tax Saver Funds.

Q.5 Do you repeat your investment after initial investment? Ans : Repetition investment Yes No 68 32 of Investors in %

Interpretation: The above pie chart depicts that 68% of investors invest again after the initial investment

Q.6 What percentage of your earnings do you invest in Mutual Funds? Ans : % of earnings Upto 10% Upto 25% Upto 50% Above 50% Investors in % 43 32 15 10

Interpretation: The above chart depicts that 43% investor invest that up to 10% of their earning in Mutual Fund.

Q.7 :How many investors invested in SIP , Lump sum or both? Ans : Type of investment SIP Lump sum Both Investment in % 55 10 35

Interpretation: From above chart I have analyzed that 55% investors have invested SIP, 10% in lump sum and 35% in both the category.

Q.8 what is an allocation criteria of an investor in SIP? Ans :

Allocation criteria (in Rs) Less than 1000 1000-3000 3000-5000 More than 5000

Investment in % 9 45 36 10

50 45 40 35 30 25 20 15 10 5 0 less than 1000

Allocation criteria (in Rs)

investment in %

1000-3000

3000-5000

more than 5000

Interpretation: From above chart b I have analyzed that the allocation criteria of investment is 45% in the range Rs1000 to Rs 3000.

Q.9 What is the time duration of investment? Ans :

Time duration Less than or equal to 5 years Less than or equal to 4 years Less than or equal to 3 years Less than or equal to 2 years Less than or equal to 1 year

Investment in % 25 8 34 25 8

Interpretation: The above bar chart depicts that most of the investors (i.e. 33.33%) invest in less than 3 years.

Q.10 which has given more profit to investors? Ans : Investment in Lump sum SIP Profit in % 84 16

Interpretation: The above Pie chart depicts that 84% of investors have got more profit in Systematic Investment Plan.

Chapter 5 SWOT Analysis

SWOT ANALYSIS

STRENGTH A well known name in financial companies. Wide experience in this field. Dedicated employees. Tie up with many financial institutions. Ever growing distribution network. Good infrastructure. Experienced manager. Easy access to branch. fund

WEAKNESS No access to rural market. No direct link between investors and AMC.

Opportunities Positive outlook of People toward mutual funds. Untapped market.

THREATS Highly volatile and uncertain market. Large number of financial giants present in this market

Chapter 7 Conclusion

Conclusion: Findings:
Our findings during the training with State Bank of India (MF), Udaipur was good on the following grounds: State Bank is a top ranked company listed with NSDL and CDSL; provide trading through both NSE and BSE. Sis providing software to their prospective sub brokers and revisers. Cheque updating in 15 minutes and the credit limit up to 10 times.

There are some more points : Mutual fund advisors give emphasis on mutual funds than other investment options.

The awareness level of investor is low as advisors are interested in dealing in mutual funds.

Very less advisors are knowing about services provided by State Bank of India (Mutual Fund)

Mutual funds have given a new direction to the flow of personal saving and enable small and medium investors in remote rural and semi urban areas to reap the benefits of the stock market investments. Indian mutual funds are thus playing a very important role in allocation of scarce resources in the emerging economy.

Chapter 8 Suggestion

RECOMMENDATION AND SUGGESTIONS

Though the State Bank of India have a very good ascribed plan with exclusive band of opportunities but as nothing is free from the hurdles therefore there are few shortcomings which I felt makes SBI fail to achieve its target : There is high potential market for mutual fund advisors in Udaipur city but this market needs to be explored as investors are still hesitated to invest their money in mutual fund. In Udaipur investors have inadequate knowledge about mutual fund, so proper marketing of various schemes is required. Company should arrange more and more seminars on mutual funds. Awareness of mutual fund services among the investors are very low so Asset Management Company needs proper marketing of their all services by advertising , distribution of pamphlet , arranging seminars etc. Most advisors are not interested in dealing of mutual funds because they get very low commission. Company should also provide knowledge about the growth rate and expected growth rate of mutual fund industry in India. Most people are aware of Life Insurance , NSC and PPF for tax saving so company should market various tax saving scheme of mutual fund and their benefits.

Chapter 9 Annexure

QUESTIONNAIRE

(Hello, I am Chanchal Salvi. I need your spare time to fill up the questionnaire, as this is the part of my Summer Internship Training under MBA curriculum) NAME: ______________________________________ __________________ AGE 0-18_____ GENDER: 18-36_____ Male Female OCCUPATION: Businessman Govt. Employee Student [ ] [ ] [ ] Pvt. Employee Professional [ ] [ ] 36-54_____ 54-72______ 72 ABOVE______

other (specify):________

CONTACT NO: __________________________________ Q1. In which of these Financial Instruments do you invest into? Mutual Funds [ ] Derivatives [ ] Bonds [ ] Online trading [ ]

Q2 .By structure in which type of schemes did you invested? Open Ended Fund Close Ended Fund Interval Schemes [ ] [ ] [ ]

Q3.By investment objective in which type of schemes have you invested? Growth Schemes Income Schemes Balanced Schemes [ ] [ ] [ ]

Q4.In which type of funds you want to invest? Tax Saver Funds Index Funds Sactorial Funds [ ] [ ] [ ]

Q5. Did you repeat your investment after your initial investments? Yes [ ] No [ ]

Q6. What percentage of your earnings do you invest in Mutual Funds? Up to 10% Up to 25% Up to 50% Above 50%

Q7. In which you have invested? SIP [ ] Lump Sum [ ] Both [ ]

Q8. What is your allocation criterion? <1000b [ ] 1000-3000 [ ] 3000-5000 [ ] >5000b [ ]

Q9. For what time period you have invested? <= 1 yr. [ ] <= 2 yr. [ ] <= 3 yr. [ ] <= 4 yr. [ ] <= 5 yr. [ ]

Q10. Which has given you more profit? SIP [ ] Lump Sum [ ]

Chapter 10 Bibliography

Bibliography

1. Internet 2. Magazines and journal of the company 3. Book of financial Management 4. Website:-

www.sbimf.com www.amfi.coms www.moneycontrol.com www.valueresearch.com www.google.com www.mutaulfundsindia.com www.investopedia.com