A

Project Report
On

S.B.I MUTUAL FUND

Submitted in partial fulfillment for the Award of degree
Of

Master of Business Administration

SUBMITTED TO:
Dr.BIMAL ANJUM
HEAD OF DEPTT.
DEPTT.OF BUSINESS ADMN.

SUBMITTED BY:
NAVEEN SHARMA
UNI.ROLL NO.1175301
M.B.A (IVth SEM.)
RIMT-I.E.T

At RIMT-INSTITUTE OF ENGINEEING AND TECHNOLOGY

MANDI GOBINDGARH (PB.)

CERTIFICATE
This is to certify that NAVEEN SHARMA, have completed this project under the
supervision of Dr.BIMAL ANJUM, my guide and profess or. He/She undertook the
project and analyzed S.B.I MUTUAL FUND. He has successfully completed the
analysis and the report is submitted in the form of present Project Report.
It is further certified the project submitted by him has not been submitted elsewhere for
a award of any degree, diploma or fellowships reflects my own work based on the
work carried out for the project and that the present Project Report.

Dr.BIMAL ANJUM
( HEAD OF DEPTT.)
RIMT-IET

ACKNOWLEDGEMENT
With regard to my Project with Mutual Fund I would like to thank each and every one who
offered help, guideline and support whenever required.
First and foremost I would like to express gratitude to Manager SBI MUTUL FUND
Mr.Charanpreet Singh and other staffs for their support and guidance in the Project work. I
am extremely grateful to my guide,for their valuable guidance and timely suggestions. I would
like to thank all faculty of State Bank of India for the valuable guidance & support.
I would also like to extend my thanks to my members and friends for their support.

NAVEEN SHARMA

PREFACE
This project report has been prepared as per the requirement of the syllabus of MBA
course structure under which the students are the required to undertake project.
It was a first hand experience for us as that we were exposed to the professional set-up
and were facing the market, which was really a great experience.
During project period, I had very touching experiences. When business is involved,
experiences counts a lot, as we know, experience are an instrument, which leads
towards success.
Now I take this opportunity to present the project report and sincerely hope that it will
be as much knowledge enhancing to the readers as it was to use during the fieldwork
and the compilation of the report.

EXECUTIVE SUMMARY
In few years Mutual Fund has emerged as a tool for ensuring ones financial well-being. Mutual
Funds have not only contributed to the India growth story but have also helped families tap into
the success of Indian Industry. As information and awareness is rising more and more people
are enjoying the benefits of investing in mutual funds. The main reason the number of retail
mutual fund investors remains small is that nine in ten people with incomes in India do not
know that mutual funds exist, but once people are aware of mutual fund investment
opportunities, the number who decide to invest in mutual funds increases to as many as one in
five people. The trick for converting a person with no knowledge of mutual funds to a new
Mutual Fund customer is to understand which of the potential investors are more likely to buy
mutual funds and to use the right arguments in the sales process that customers will accept as
important and relevant to their decision.
This Project gave me a great learning experience and at the same time it gave me enough scope
to implement my analytical ability. The analysis and advice presented in this Project Report is
based on market research on the saving and investment practices of the investors and
preferences of the investors for investment in Mutual Funds. This Report will help to know
about the investors Preferences in Mutual Fund means Are they prefer any particular Asset
Management Company (AMC), Which type of Product they prefer, Which Option (Growth or
Dividend) they prefer or Which Investment Strategy they follow (Systematic Investment Plan or
One time Plan). This Project as a whole can be divided into two parts.
The first part gives an insight about Mutual Fund and its various aspects, the Company Profile,
Objectives of the study, Research Methodology. One can have a brief knowledge about Mutual
Fund and its basics through the Project.

ABBREVIATIONS USED IN THE STUDY

NAVNet Asset Value

AMC- Asset Management Company
SEBI- Security Exchange Board of India
AMFI- Association of Mutual Funds in India
UTI- Unit Trust of India
MF- Mutual Fund
ELSS- Equity Linked Saving Scheme

NO. OF

PAGE
LIST OF CONTENTS

CONTENT

NO.

CHAPTER-I

COMPANY PROFILE

CHAPTER-II

INTRODUCTION

CHAPTER-III

OBJECTIVE & SCOPE

CHAPTER-IV

REVIEW OF LITRATURE

CHAPTER-V

RESEARCH METHODOLOGY

CHAPTER-VI

DATA ANALYSIS & INTERPRETATION

CHAPTER-VII

FINDING OF STUDY

CHAPTER-VIII

SUGGESTIONS AND RECOMMANDATIONS

CONCLUTION
BIBLIOGRAPHY
QUESTIONNAIRE

NO. OF

LIST OF TABLES

6.15
6.16
6.17
6.18
6.19
6.20
6.21
6.22
6.23
6.24
6.25
6.26
6.27
6.28
6.29
6.30
6.31
6.32

Age distribution of the Investors of Barnala

Educational Qualification of investors of Barnala
Occupation of the investors of Barnala
Monthly Family Income of the Investors of Barnala
Investors invested in different kind of investments.
Preference of factors while investing
Awareness about Mutual Fund and its Operations
Source of information for customers about Mutual Fund
Investors invested in Mutual Fund
Reason for not invested in Mutual Fund
Investors invested in different Assets Management Co. (AMC)
Reason for invested in SBIMF
Reason for not invested in SBIMF
Preference of Investors for future investment in Mutual Fund
Mode of Investment Preferred by the Investors
Preferred Portfolios by the Investors
Option for getting Return Preferred by the Investors
Preference of Investors whether to invest in Sectorial Funds

PAGE
NO.

NO.OF
NNNNN
FIG

LIST OF FIGURES

6.15

Age distribution of the Investors of Barnala

6.16

Educational Qualification of investors of Barnala

6.17

Occupation of the investors of Barnala

6.18

Monthly Family Income of the Investors of Barnala

6.19

Investors invested in different kind of investments.

6.20

Preference of factors while investing

6.21

Awareness about Mutual Fund and its Operations

6.22

Source of information for customers about Mutual Fund

6.23

Investors invested in Mutual Fund

6.24

Reason for not invested in Mutual Fund

6.25

Investors invested in different Assets Management Co. (AMC)

6.26

Reason for invested in SBIMF

6.27

Reason for not invested in SBIMF

6.28

Preference of Investors for future investment in Mutual Fund

6.29

Mode of Investment Preferred by the Investors

6.30

Preferred Portfolios by the Investors

6.31

Option for getting Return Preferred by the Investors

6.32

Preference of Investors whether to invest in Sectorial Funds

PAGE
NO.

CHAPTER 1

COMPANY PROFILE

1 .1 INTRODUCTION TO SBI MUTUAL FUND

SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the country with
an investor base of over 5.4 million and over 25 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 Societies Generals 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 25 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 5.2 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.

1.2 PRODUCTS OF SBI MUTUAL FUND

1.2.1 Equity schemes
The investments of these schemes will predominantly be in the stock markets and
endeavor will be to provide investors the opportunity to benefit from the higher returns
which stock markets can provide. However they are also exposed to the volatility and
attendant risks of stock markets and hence should be chosen only by such investors who
have high risk taking capacities and are willing to think long term. Equity Funds
include diversified Equity Funds, Sectorial Funds and Index Funds. Diversified Equity
Funds invest in various stocks across different sectors while sectorial 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 Sectorial Funds Umbrella

MSFU- Emerging Business Fund
MSFU- IT Fund
MSFU- Pharma Fund
MSFU- Contra Fund

 MSFU- FMCG Fund

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 I

SBI GOLD

1.2.2 Debt schemes

Debt Funds invests only in debt instruments such as Corporate Bonds, Government
Securities and Money Market instruments either completely 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 Income Fund

Magnum Insta Cash Fund

Magnum Income Fund- Floating Rate Plan

Magnum Income Plus Fund

Magnum Insta Cash Fund -Liquid Floater Plan

Magnum Monthly Income Plan

Magnum Monthly Income Plan - Floater

Magnum NRI Investment Fund

SBI Premier Liquid Fund

1.2.3 BALANCED SCHEMES

Magnum Balanced Fund invests in a 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

1.3 COMPETITORS OF SBI MUTUAL FUND

Some of the main competitors of SBI Mutual Fund in Patiala are as Follows:
i. ICICI Mutual Fund
ii. Reliance Mutual Fund
iii. UTI Mutual Fund
iv. Birla Sun Life Mutual Fund
v. Kotak Mutual Fund
vi. HDFC Mutual Fund
vii. Sundaram Mutual Fund
viii. LIC Mutual Fund
ix. Principal

x. Franklin Templeton

1.4 AWARDS AND ACHIEVEMENTS

SBI Mutual Fund (SBIMF) Management, we devote considerable resources to gain, maintain
and sustain our profitable insights into market movements. The trust responds on us by millions
of investors is genuine tribute to expertise in fund Management and dedication to our singular
focus, and this has resulted in various awards and accolades for us from the fund industry.

ICRA Mutual fund Awards 2012 for various schemes.

Readers Digest Awards 2011 For Trusted Brand in Fund

Management category.

ICRA mutual Fund Awards 2011 For Magnum Income fundFloating rate plan - long term plan.

ICRA Mutual Fund Awards 2010 For Magnum Global Fund.

ICRA Mutual Fund Awards 2009 For magnum Tax Gain Scheme
1993.

The Lipper India Fund Awards 2009 For Various schemes.

Outlook Money NDTV Profit Awards 2007

CNBC Awaaz Consumer Awards 2007

Lipper India Fund Awards 2007 For Various Schemes

CNBC TV18- CRISIL Mutual Fund Of Year Award 2007 for

various schemes

1.5 KEY PERSONNEL OF SBI MUTUAL FUND

Mr. Deepak Kumar Chatterjee

Managing Director

Mr. C A Santosh

Chief Manager - Customer Service.

Mr. Didier Turpin

Dy. Chief Executive Officer

Ms.Aparna Nirgude

Chief Risk Officer

Mr. K.T Ravindran

Chief Operating Officer

Mr. Vinaya Datar

Company Secretary & Compliance Officer

Mr. Navneet Manout

Chief Investment Officer

Mr. D. P Singh

Head of Sales

Mr. R. S. Srinivas Jain

Chief Marketing Officer

CHAPTER 2

INTRODUCTION

2.1 INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS

ASPECTS.
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 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.

2.3 ADVANTAGES OF MUTUAL FUND

Portfolio Diversification

Professional management

Reduction / Diversification of Risk

Liquidity

Flexibility & Convenience

Reduction in Transaction cost

Choice of schemes

Transparency

2.3.1 DISADVANTAGE OF MUTUAL FUND

No control over Cost in the Hands of an Investor

No tailor-made Portfolios

Managing a Portfolio Funds

Difficulty in selecting a Suitable Fund Scheme

2.4 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.
2.4.1 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.
2.4.2 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 Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004
crors

2.4.3 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
2.4.4 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.

2.5 CATEGORIES OF MUTUAL FUND:

2.5 Mutual funds can be classified as follow:

2.5.1 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 closeended 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.

2.5.2 Based on their investment objective:

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

portfolio mirrors the benchmark index both in terms of composition

and individual stock weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading
across different sectors and stocks.
iii|) Dividend yield funds- it is similar to the equity diversified funds except that they
invest in companies offering high dividend yields.
iv) Thematic funds- Invest 100% of the assets in sectors which are related through
some

theme.

e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector
fund will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

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

i) Debt-oriented funds -Investment below 65% in equities.

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

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

i) Liquid funds- These funds invest 100% in money market instruments, a large
portion being invested in call money market.
ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and
T-bills.
iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
iv) Arbitrage fund- They generate income through arbitrage opportunities due to 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
vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities.

2.6 INVESTMENT STRATEGIES

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

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and
give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the
same mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund
then he can withdraw a fixed amount each month.

2.7 RISK V/S. RETURN:

CHAPTER - 3

OBJECTIVES & SCOPE

3.1 OBJECTIVES OF THE STUDY

1. To find out the Preferences of the 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.

3.2 Scope of the study

A big boom has been witnessed in Mutual Fund Industry in recent times. A large number of
new players have entered the market and trying to gain market share in this rapidly improving
market.
The research was carried on in Barnala. I had been sent at one of the branch of State Bank of
India Ba where I completed my Project work. I surveyed on my Project Topic A study of
preferences of the Investors for investment in Mutual Fund on the visiting customers of the
SBI Main Branch.
The study will help to know the preferences of the customers, which company, portfolio, mode
of investment, and option for getting return and so on they prefer. This project report may help
the company to make further planning and strategy.

CHAPTER-4

REVIEW OF LITERATURE

REVIEW OF LITERATURE:
Ippolito (1992) stats that investor is ready to invest in those fund or schemes which have resulted
good rewards and most investors is attracted by those funds or schemes that are performing better
over the worst.
Goetzman (1997) opined that investors psychology affects mutual fund selection for investment in
and to withdraw from fund.
De Bondt and Thaler (1985) submitted that mean reversion in prices of stock is backed by investors
retrogression which is based upon investors psychology to overvalue firms resent performance in
forming future expected results which is also known as endowment effect.
Gupta (1994) surveyed household investor for the objective to find investors preferences to invest in
mutual funds and other available financial assets. The findings of the study were more relevant, at that
time, to the policy makers and mutual funds to design the financial products for the future.
Kulshreshta (1994) in his study suggested some guidelines to the investors that can help them to
select needed mutual fund schemes.
Shanmugham (2000) worked a survey of individual investors with the object to study on what
information source does investor depends. The results explained that they are an economical,
sociological and psychological factor which controls investment decisions.
Madhusudhan V Jambodekar (1996) conducted his study to size-up the direction of mutual funds in
investors and to identify factors influence mutual fund investment decision. The study tells that openended scheme is most favoured among other things that income schemes and open-ended schemes
and income schemes are preferred over closed- ended and growth schemes. Newspapers are used as
information source, safety of principal amount and investor services are priority points for investing
in mutual funds.
Sujit Sikidar and Amrit Pal Singh (1996) conducted a survey to peep in to the behavioural aspects of
the investors of the North-Eastern region in direction of equity and mutual fund investment. The
survey resulted that because of tax benefits mutual funds are preferred by the salaried and selfemployed individuals. UTI and SBI schemes were catch on in that region of the country over any
other fund and the other fund had been proved archaic during the time of survey.

Syama Sunder (1998) conducted a survey with an objective to get an in-depth view into the
operations of private sector mutual fund with special reference to Kothari Pioneer. The survey tells
that knowledge about mutual fund concept was unsatisfactory during that time in small cities like
Visakapatanam. It also suggested that agents can help to catalyse mutual fund culture, open-ended
options are much popular than any other schemes, asset management companys brand is chief
consideration to invest in mutual fund.
Anjan Chakarabarti and Harsh Rungta (2000) emphasised to the importance of brand in ascertaining
competence of asset management companies.
Shankar (1996) suggested that for penetrating mutual fund culture deep in to society asset
management companies must have to work and steer the consumer product distribution model.
Raja Rajan (1997) underlined segmentation of investors and mutual fund products to increase
popularity of mutual funds.

CHAPTER 5

RESEARCH
METHODOLOGY

5.1 RESEARCH METHODOLOGY

This report is based on primary as well secondary data, however primary data collection was
given more importance since it is overhearing factor in attitude studies. One of the most
important users of research methodology is that it helps in identifying the problem, collecting,
analyzing the required information data and providing an alternative solution to the problem .It
also helps in collecting the vital information that is required by the top management to assist
them for the better decision making both day to day decision and critical ones.

5.1.1 Data sources:

Research is totally based on primary data. Secondary data can be used only for the reference.
Research has been done by primary data collection, and primary data has been collected by
interacting with various people. The secondary data has been collected through various
websites.

5.1.2 Duration of Study:

The study was carried out for a period of SIX weeks, from 4th June to 15th July 2012.

5.1.3 Sampling:
Sampling procedure:
The sample was selected of them who are the customers/visitors of State Bank of India,
Barnala, irrespective of them being investors or not or availing the services or not. It was also
collected through personal visits to persons, by formal and informal talks and through filling up
the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool.

 Sample size:
The sample size of my project is limited to 200 people only. Out of which only 120 people had
invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund.
Sample design:
Data has been presented with the help of bar graph, pie charts, line graphs etc.

5.2 Limitation:
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.
Sample size is limited to 200 visitors of State Bank of India, Main Branch, and
Barnala out of these only 120 had invested in Mutual Fund. The sample size may not
adequately represent the whole market.
Some respondents were reluctant to divulge personal information which can affect
the validity of all responses.

The research is confined to a certain part of Barnala

CHAPTER-6

DATA ANALYSIS
&
INTERPRETATION

6.1 Mutual Funds

Before we understand what is mutual fund, its very important to know the area in which mutual
funds works, the basic understanding of stocks and bonds.
Stocks: - Stocks represent shares of ownership in a public company. Examples of public companies
include Reliance, ONGC and Infosys. Stocks are considered to be the most common owned
investment traded on the market.
Bonds: - Bonds are basically the money which you lend to the government or a company, and in
return you can receive interest on your invested amount, which is back over predetermined amounts
of time. Bonds are considered to be the most common lending investment traded on the market. There
are many other types of investments other than stocks and bonds (including annuities, real estate, and
precious metals), but the majority of mutual funds invest in stocks and/or bonds.
6.2 What Is Mutual Fund
A mutual fund is just the connecting bridge or a financial intermediary that allows a group of
Investors to pool their money together with a predetermined investment objective. The mutual fund
will have a fund manager who is responsible for investing the gathered money into specific securities
(stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual
fund and thus on investing becomes a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to others
they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual
fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it
on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk &
maximizing returns.

6.3 Types of returns:

There are three ways, where the total returns provided by mutual funds can be enjoyed by investors:

Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all
income it receives over the year to fund owners in the form of a distribution.

If the fund sells securities that have increased in price, the fund has a capital gain. Most funds
also pass on these gains to investors in a distribution.

If fund holdings increase in price but are not sold by the fund manager, the fund's shares
increase in price. You can then sell your mutual fund shares for a profit. Funds will also
usually give you a choice either to receive a check for distributions or to reinvest the earnings
and get more shares.

5.4 Pros & cons of investing in mutual funds:

For investments in mutual fund, one must keep in mind about the Pros and cons of investments in
mutual fund.

5.5 Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they are professional managed,
by well qualified professional. Investors purchase funds because they do not have the time or the
expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive
way to make and monitor their investments.
2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds,
the investors risk is spread out and minimized up to certain extent. The idea behind diversification is
to invest in a large number of assets so that a loss in any particular investment is minimized by gains
in others.

3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to
reducing transaction costs, and help to bring down the average cost of the unit for their investors.
4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their
holdings as and when they want.
5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available
instruments in the market, and the minimum investment is small. Most AMC also have automatic
purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.

5.6 Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds dont perform in neither in the market, as their
management is not dynamic enough to explore the available opportunity in the market, thus many
investors debate over whether or not the so-called professionals are any better than mutual fund or
investor himself, for picking up stocks.
2. Costs The biggest source of AMC income is generally from the entry & exit load which they
charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost
under layers of jargon.
3. Dilution - Because funds have small holdings across different companies, high returns from a few
investments often don't make much difference on the overall return. Dilution is also the result of a
successful fund getting too big. When money pours into funds that have had strong success, the
manager often has trouble finding a good investment for all the new money.
4. Taxes - when making decisions about your money, fund managers don't consider your personal tax
situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which
affects how profitable the individual is from the sale. It might have been more advantageous for the
individual to defer the capital gains liability.

6.7 Guidelines of the SEBI for Mutual Fund Companies:

To protect the interest of the investors, SEBI formulates policies and regulates the mutual
funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to
time.
SEBI approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. Custodian, registered with SEBI, holds the securities
of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company or board of
trustees must be independent.
The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual
funds that the mutual funds function within the strict regulatory framework. Its objective is to
increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading
professional standards and in promoting best industry practices in diverse areas such as
valuation, disclosure, transparency etc.
Documents required (PAN mandatory):
Proof of identity :
1. Photo PAN card
2. In case of non-photo PAN card in addition to copy of PAN card any one of the following:
driving license/passport copy/ voter id/ bank photo pass book.
Proof of address (any of the following): latest telephone bill, latest electricity bill, Passport,
latest bank passbook/bank account statement, latest Demat account statement, voter id, driving

license, ration card, rent agreement.

Offer document: An offer document is issued when the AMCs make New Fund Offer (NFO).
Its advisable to every investor to ask for the offer document and read it before investing. An
offer document consists of the following:
Standard Offer Document for Mutual Funds (SEBI Format)
Summary Information
Glossary of Defined Terms
Risk Disclosures
Legal and Regulatory Compliance
Expenses
Condensed Financial Information of Schemes
Constitution of the Mutual Fund
Investment Objectives and Policies
Management of the Fund
Offer Related Information.
Key Information Memorandum: a key information memorandum, popularly known as KIM,
is attached along with the mutual fund form. And thus every investor gets to read it. Its
contents are:
1

Name of the fund.

2. Investment objective
3. Asset allocation pattern of the scheme.
4. Risk profile of the scheme
5. Plans & options
6. Minimum application amount/ no. of units
7. Benchmark index
8. Dividend policy
9. Name of the fund manager(s)

10. Expenses of the scheme: load structure, recurring expenses

6.8 Distribution channels:

Mutual funds possess a very strong distribution channel so that the ultimate customers dont
face any difficulty in the final procurement. The various parties involved in distribution of
mutual funds are:
1. Direct marketing by the AMCs: - the forms could be obtained from the AMCs directly.
The investors can approach to the AMCs for the forms. some of the top AMCs of India are;
Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, Sundaram, ICICI, Mirae
Assets, Canara Robeco, Lotus India, LIC, UTI etc. whereas foreign AMCs include: Standard
Chartered, Franklin Templeton, Fidelity, JP Morgan, HSBC, DSP Merill Lynch, etc.
2 .Broker/ sub broker arrangements: - the AMCs can simultaneously go for broker/subbroker to popularize their funds. AMCs can enjoy the advantage of large network of these
brokers and sub brokers.eg: SBI being the top financial intermediary of India has the greatest
network. So the AMCs dealing through SBI has access to most of the investors.
3. Individual agents:- Banks, NBFC: investors can procure the funds through individual
agents, independent brokers, banks and several non- banking financial corporations too,
whichever he finds convenient for him.

Costs associated:
Expenses:
AMCs charge an annual fee, or expense ratio that covers administrative expenses, salaries,
advertising expenses, brokerage fee, etc. A 1.5% expense ratio means the AMC charges
Rs1.50 for every Rs100 in assets under management. A fund's expense ratio is typically to the

size of the funds under management and not to the returns earned. Normally, the costs of
running a fund grow slower than the growth in the fund size.
Loads:
Entry Load/Front-End Load (0-2.25%) - its the commission charged at the time of buying
the fund to cover the cost of selling, processing etc.
Exit Load/Back- End Load (0.25-2.25%) - it is the commission or charged paid when an
investor exits from a mutual fund; it is imposed to discourage withdrawals. It may reduce to
zero with increase in holding period.

6.9 Measuring and evaluating mutual funds performance:

Every investor investing in the mutual funds is driven by the motto of either wealth creation or
wealth increment or both. Therefore its very necessary to continuously evaluate the funds
performance with the help of factsheets and newsletters, websites, newspapers and
professional advisors like SBI mutual fund services. If the investors ignore the evaluation of
funds performance then he can lose hold of it any time. In this ever-changing industry, he can
face any of the following problems:
1. Variation in the funds performance due to change in its management/ objective.
2. The funds performance can slip in comparison to similar funds.
3. There may be an increase in the various costs associated with the fund.
4. Beta, a technical measure of the risk associated may also surge.
5. The funds ratings may go down in the various lists published by independent rating
agencies.
6. It can merge into another fund or could be acquired by another fund house.

6.10 Performance measures:

Equity funds: the performance of equity funds can be measured on the basis of: NAV
Growth, Total Return; Total Return with Reinvestment at NAV, Annualized Returns and
Distributions, Computing Total Return (Per Share Income and Expenses, Per Share Capital
Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Turnover Rate, Fund Size,
Transaction Costs, Cash Flow, Leverage.
Debt fund: Likewise the performance of debt funds can be measured on the basis of: Peer
Group Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs,
besides NAV Growth, Total Return and Expense Ratio.
Liquid funds: The performance of the highly volatile liquid funds can be measured on the
basis of: Fund Yield, besides NAV Growth, Total Return and Expense Ratio.

6.11 Concept of benchmarking for performance evaluation:

Every fund sets its benchmark according to its investment objective. The funds performance is
measured in comparison with the benchmark. If the fund generates a greater return than the
benchmark then it is said that the fund has outperformed benchmark , if it is equal to
benchmark then the correlation between them is exactly 1. And if in case the return is lower
than the benchmark then the fund is said to be underperformed.

Some of the benchmarks are :

1. Equity funds: market indices such as S&P CNX nifty, BSE100, BSE200, BSE-PSU, BSE
500 index, BSE bankex, and other sectorial indices.
2. Debt funds: Interest Rates on Alternative Investments as Benchmarks, I-Bex Total Return

Index, JPM T-Bill Index Post-Tax Returns on Bank Deposits versus Debt Funds.
3. Liquid funds: Short Term Government Instruments Interest Rates as Benchmarks, JPM TTo measure the funds performance, the comparisons are usually done with:
I) With a market index.
ii) Funds from the same peer group.
iii) Other similar products in which investors invest their funds.

6.12 Financial planning for investors( ref. to mutual funds):

Investors are required to go for financial planning before making investments in any mutual
fund. The objective of financial planning is to ensure that the right amount of money is
available at the right time to the investor to be able to meet his financial goals. It is more than
mere tax planning.
Steps in financial planning are:
Asset allocation.
Selection of fund.
Studying the features of a scheme.
In case of mutual funds, financial planning is concerned only with broad asset allocation,
leaving the actual allocation of securities and their management to fund managers. A fund
manager has to closely follow the objectives stated in the offer document, because financial
plans of users are chosen using these objectives.

Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then we can find the
market flooded with a variety of investment options which includes mutual funds, equities,
fixed income bonds, corporate debentures, company fixed deposits, bank deposits, PPF, life
insurance, gold, real estate etc. All these investment options could be judged on the basis of

various parameters such as- return, safety convenience, volatility and liquidity. measuring
these

investment options on the basis of the mentioned parameters, we get this in a tabular

Return

Safety

Volatility

Liquidity

Convenienc

Equity

High

Low

High

High

e
Moderate

Bonds

Moderate

High

Moderate

Moderate

High

Co.

Moderate

Moderate

Moderate

Low

Low

Debentures
Co. FDs

Moderate

Low

Low

Low

Moderate

Bank

Low

High

Low

High

High

Deposits
PPF

Moderate

High

Low

Moderate

High

Life

Low

High

Low

Low

Moderate

Insurance
Gold

Moderate

High

Moderate

Moderate

Gold

Real Estate

High

Moderate

High

Low

Low

Mutual

High

High

Moderate

High

High

Funds

We can very well see that mutual funds outperform every other investment option. On three
parameters it scores high whereas its moderate at one. comparing it with the other options, we
find that equities gives us high returns with high liquidity but its volatility too is high with low
safety which doesnt makes it favourite among persons who have low risk- appetite. Even the
convenience involved with investing in equities is just moderate.
Now looking at bank deposits, it scores better than equities at all
fronts but lags badly in the parameter of utmost important ie; it scores low on return , so its
not an happening option for person who can afford to take risks for higher return. The other
option offering high return is real estate but that even comes with high volatility and moderate
safety level, even the liquidity and convenience involved are too low. Gold have always been a
favorite among Indians but when we look at it as an investment option then it definitely
doesnt gives a very bright picture. Although it ensures high safety but the returns generated
and liquidity are moderate. Similarly the other investment options are not at par with mutual
funds and serve the needs of only a specific customer group. Straightforward, we can say that
mutual fund emerges as a clear winner among all the options available.
The reasons for this being:
I) Mutual funds combine the advantage of each of the investment products: mutual fund is
one such option which can invest in all other investment options. Its principle of diversification
allows the investors to taste all the fruits in one plate. Just by investing in it, the investor can
enjoy the best investment option as per the investment objective.
II) Dispense the shortcomings of the other options: every other investment option has more
or less some shortcomings. Such as if some are good at return then they are not safe, if some
are safe then either they have low liquidity or low safety or both.likewise, there exists no
single option which can fit to the need of everybody. But mutual funds have definitely sorted
out this problem. Now everybody can choose their fund according to their investment
objectives.
III) Returns get adjusted for the market movements: as the mutual funds are managed by

experts so they are ready to switch to the profitable option along with the market movement.
Suppose they predict that market is going to fall then they can sell some of their shares and
book profit and can reinvest the amount again in money market instruments.
IV) Flexibility of invested amount: Other than the above mentioned reasons, there exists one
more reason which has established mutual funds as one of the largest financial intermediary
and that is the flexibility that mutual funds offer regarding the investment amount. One can
start investing in mutual funds with amount as low as Rs. 500 through SIPs and even Rs. 100
in some cases.

6.13 How do investors choose between funds?

When the market is flooded with mutual funds, its a very tough job for the investors to choose
the best fund for them. Whenever an investor thinks of investing in mutual funds, he must look
at the investment objective of the fund. Then the investors sort out the funds whose investment
objective matches with that of the investors. Now the tough task for investors start, they may
carry on the further process themselves or can go for advisors like SBI. Of course the investors
can save their money by going the direct route i.e. through the AMCs directly but it will only
save 1-2.25% (entry load) but could cost the investors in terms of returns if the investor is not
an expert. So it is always advisable to go for MF advisors. The mf advisors thoughts go
beyond just investment objectives and rate of return. Some of the basic tools which an investor
may ignore but an mf advisor will always look for are as follow:

1. Rupee cost averaging:

The investors going for Systematic Investment Plans (SIP) and Systematic Transfer Plans
(STP) may enjoy the benefits of RCA (Rupee Cost Averaging). Rupee cost averaging allows
an investor to bring down the average cost of buying a scheme by making a fixed investment
periodically, like Rs 5,000 a month and nowadays even as low as Rs. 500 or Rs. 100. In this
case, the investor is always at a profit, even if the market falls. In case if the NAV of fund falls,
the investors can get more number of units and vice-versa. This results in the average cost per
unit for the investor being lower than the average price per unit over time.
The investor needs to decide on the investment amount and the frequency. More frequent the
investment interval, greater the chances of benefiting from lower prices. Investors can also
benefit by increasing the SIP amount during market downturns, which will result in reducing
the average cost and enhancing returns. Whereas STP allows investors who have lump sums to
park the funds in a low-risk fund like liquid funds and make periodic transfers to another fund
to take advantage of rupee cost averaging.
2. Rebalancing:
Rebalancing involves booking profit in the fund class that has gone up and investing in the
asset class that is down. Trigger and switching are tools that can be used to rebalance a
portfolio. Trigger facilities allow automatic redemption or switch if a specified event occurs.
The trigger could be the value of the investment, the net asset value of the scheme, level of
capital appreciation, level of the market indices or even a date. The funds redeemed can be
switched to other specified schemes within the same fund house. Some fund houses allow such
switches without charging an entry load.
To use the trigger and switch facility, the investor needs to specify the event, the amount or the
number of units to be redeemed and the scheme into which the switch has to be made. This
ensures that the investor books some profits and maintains the asset allocation in the portfolio.

3. Diversification:

Diversification involves investing the amount into different options. In case of mutual funds,
the investor may enjoy it afterwards also through dividend transfer option. Under this, the
dividend is reinvested not into the same scheme but into another scheme of the investor's
choice.
For example, the dividends from debt funds may be transferred to equity schemes. This gives
the investor a small exposure to a new asset class without risk to the principal amount. Such
transfers may be done with or without entry loads, depending on the MF's policy.
4. Tax efficiency:
Tax factor acts as the x-factor for mutual funds. Tax efficiency affects the final decision of
any investor before investing. The investors gain through either dividends or capital
appreciation but if they havent considered the tax factor then they may end loosing.
Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and
education cess) on dividends paid out. Investors who need a regular stream of income have to
choose between the dividend option and a systematic withdrawal plan that allows them to
redeem units periodically. SWP implies capital gains for the investor.
If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax bracket.
Investors in higher tax brackets will end up paying a higher rate as short-term capital gains and
should

choose

the

dividend

option.

If the capital gain is long-term (where the investment has been held for more than one year),
the growth option is more tax efficient for all investors. This is because investors can redeem
units using the SWP where they will have to pay 10 per cent as long-term capital gains tax
against the 12.50 per cent DDT paid by the MF on dividends.
All the tools discussed over here are used by all the advisors and have helped investors in
reducing risk, simplicity and affordability. Even then an investor needs to examine costs, tax
implications and minimum applicable investment amounts before committing to a service

What are the most lucrative sectors for mutual fund managers?

This is a question of utmost interest for all the investors even for those who dont invest in
mutual funds. Because the investments done by the MFs acts as trendsetters. The investments
made by the fund managers are used for prediction. Huge investments assure liquidity and
reflects appositive picture whereas tight investment policy reflects crunch and investors may
look forward for a gloomy picture.
Their investments show that which sector is hot? And will set the market trends. The expert
management of the funds will always look for profitable and high paying sectors. So we can
have a look at most lucrative sectors to know about the recent trends:

Sector name
automotive
banking & financial
services
cement & construction
consumer durables
conglomerates
chemicals
consumer
non
durables
engineering & capital
goods
food & beverages
information technology
media & entertainment
Manufacturing
metals& mining
Miscellaneous
oil & gas
Pharmaceuticals
Services
Telecom
Tobacco
Utility

No. of MFs betting on it

255
196
237
51
218
259
146
317
175
284
218
259
275
250
290
250
200
264
150
225

From the above data collected we can say that engineering & capital goods sector has emerged
as the hottest as most of the funds are betting on it. We can say that this sector is on boom and
presents a bright picture. Other than it other sectors on height are oil & gas, telecom, metals &
mining and information technology. Sectors performing average are automotive, cement &
construction,

chemicals,

media

&

entertainment,

manufacturing,

miscellaneous,

pharmaceuticals and utility. The sectors which are not so favorite are banking & financial
services, conglomerates, consumer non- durables, food & beverages, services and tobacco.
And the sector which failed to attract the fund managers is consumer durables with just 51
funds betting on it.
Thus this analysis not only gives a picture of the mindset of fund managers rather it also
reflects the liquidity existing in each of the sectors. It is not only useful for investors of mutual
funds rather the investors of equity and debt too could take a hint from it. Asset allocation by
fund managers are based on several researches carried on so, it is always advisable for other
investors too take a look on it. It can be further presented in the form of a graph as follow:

6.13 Systematic investment plan (in details)

We have already mentioned about SIPs in brief in the previous pages but now going into
details, we will see how the power of compounding could benefit us. In such case, every small
amounts invested regularly can grow substantially. SIP gives a clear picture of how an early
and regular investment can help the investor in wealth creation. Due to its unlimited
advantages SIP could be redefined as a methodology of fund investing regularly to benefit
regularly from the stock market volatility. In the later sections we will see how returns
generated from some of the SIPs have outperformed their benchmark. But that lets have a look
at some of the top performing SIPs and their return for 1 year:

Scheme
Reliance diversified power
sector retail
Reliance
regular
savings
equity
principal global opportunities
fund
DWS investment opportunities
fund
BOB growth fund

Amount

NAV

NAV Date

Total
Amount

1000

58.181

30/8/2011

14524.07

1000

18.2043

30/8/2011

13584.944

1000

19.919

30/8/2011

14247.728

1000

14.559

30/8/2011

13791.157

1000

38.307

30/8/2011

13769.152

In the above chart, we can see how if we start investing Rs.1000 per month then what return well get
for the total investment of Rs. 12000. There is reliance diversified power sector retail giving the
maximum returns of Rs. 2524.07 per year which comes to 21% roughly. Next we can see if anybody
would have undertaken the SIP in Principal would have got returns of app. 18%. We can see reliance

regular savings equity, DWS investment opportunities and BOB growth fund giving returns of 13.20%,
14.92%, and 14.74% respectively which is greater than any other monthly investment options. Thus we
can easily make out how SIP is beneficial for us. Its hassle free, it forces the investors to save and get
them into the habit of saving. Also paying a small amount of Rs. 1000 is easy and convenient for them,
thus putting no pressure on their pockets.

Now we will analyze some of the equity fund SIP s of Birla Sunlife with BSE 200 and bank fixed
deposits In a tabular format as well as graphical.
NO. OF
INSTALMENTS

Original
inv

Returns
200

144

144000

553190

1684008

114
Birla SL equity fund
Birla frontline equity
66
fund

114000

388701

669219

66000

156269

181127

Scheme Name
Birla SL tax relief '96

at

BSE

FUND
RETURNS

In the above case, we have taken three funds of Birla sunlife namely Birla sunlife tax relief 96, Birla
sunlife equity fund and Birla sunlife frontline equity fund. All these three funds follow the same
benchmark ie; BSE 200. Here, we have shown how one would have benefitted if he would have put his
money into these schemes since their inception. And the amount even is a meager Rs. 1000 per month.
Starting from Birla frontline equity fund, we could spot that if someone would have invested Rs. 1000
per month resulting into total investment of Rs. 66000 then it would have amounted to rs.156269 if
invested in BSE 200 whereas the fund would have given a total return of Rs 181127. Now moving next
to Birla sunlife equity fund, a total investment of 114000 for a total of 114 months at BSE 200 would
have given a total return of Rs. 388701 whereas the fund gave a total return of Rs. 669219, nearly
double the return generated at BSE 200. And now the cream of all the investments, Birla sunlife tax
relief 96. A total investment of Rs. 144000 for a period of 12 years at BSE 200 would have given total
returns of just Rs. 553190 but the Birla sunlife tax relief 96 gave an unbelievable total return of Rs
1684008.

Thus the above case very well explains the power of compounding and early investment. We have seen
how a meager amount of Rs. 144000 turned into Rs. 1684008. It may appear unbelievable for many but
SIPs have turned this into reality and the power of compounding is speaking loud, attracting more and
more investors to create wealth through SIPs.

6.14 Does fund performance and ranking persist?

This project has been a great learning experience for me. But the analyses that are carried
onward these pages are really close to my heart. After taking a look at the data presented
below, an expert might underestimate my efforts. One might think it as a boring task and can
go for recording historic NAVs since last 1 month instead of recording it daily.
But frankly speaking, while tracking the NAVs, I really developed some sentiments with these
funds. Really the ups and downs in the NAVs affected me as if Im tracking my own portfolio.
The portfolio consists of different types of funds. We can see some funds are 5- star rated but
their performances are below the unrated funds. We can also find some funds which performed
very well initially but gradually declined either in short- run or long run. Some funds have high
NAVS but the returns offered are low. We can also see some funds following same benchmark
and reflecting diverse NAV and returns. Even it can be seen that the expense ratios for various
funds varies which may affect the ultimate return.
Now before going into details, lets have a look at those funds: in this downgrading equity
market, we can easily make out that the 1 year return of the fund that was on 17 th of april could
not be sustained till 1 month. One can sort out that the present return of funds has decreased a
lot and subsequently its NAV too has come down. All the funds are showing negative returns
for the last 1 month. Even the two hybrid funds are showing negative monthly returns. That
means all those who bought these funds a month back must be experiencing a negative return.
Although the annual return of the funds have gone down in comparison to what it was offering
a month back. Still the total return is positive. On an average the equity funds are offering a
return of 30% annually, in spite of a week equity market.

Now checking the validity of funds ratings, we can see that some of the funds are 5 star or 4
star rated but their returns lag behind the unrated funds. Although, since the ratings include
both risk and return so it will not be a total justice to judge the funds purely on a return basis
but still we can go for it just to judge them on the basis of returns generated.
Looking at the funds, we have three 5 star rated funds, one 4star rated and six unrated funds. In
other way, we have seven equity diversified funds, one equity specialty, one hybrid: dynamic
asset allocation and one hybrid: debt oriented fund. It is not possible to compare each and
every fund in details. So I have compared 2 funds out of this list on the basis of their returns
and expenses.
Here DBS Chola opportunities and ICICI Pru infrastructure follows the same benchmark S&P
CNX NIFTY. In this case, DBS Chola opportunities is a 4 star rated fund whereas ICICI Pru
infrastructure is an unrated fund. The star rating definitely gives DBS a competitive advantage
but now lets have a look at other factors, we can see that ICICI Pru has really performed worse
in the last month. Its 1 month return is -5.8% whereas DBS gave a return of -3.07%. Even if
we consider 6 months return or yearly returns, definitely DBS is a winner. We can easily spot
the difference by change in their rankings even. Considering 1 yr return, we can spot DBS at
no.5 whereas ICICI at no.6 but when we look at the monthly ratings, to our ultimate shock,
DBS is at 52 and ICICI far behind at 172. But if we look at the yearly returns, then there is not
much difference between them, DBS offering returns of 35.17% whereas ICICI offering 34.27.
But looking at the expenses, the expenses charged by ICICI is lower to that of DBS, which
may act as the ultimate factor in choosing the fund in a long run.
Thus at last we can conclude that ratings are totally irrelevant for investors. Here is why
they are totally irrelevant to investor:
1. Mutual fund ratings are based on the returns generated, that is, appreciation of net asset
value, based on the historical performance. So they rely more on the past, rather than
the current scenario.
2. As returns play a key role in deciding the ratings, any change in returns will lead to re-

rating of the mutual fund. If you choose your mutual fund only on the basis of rating, it
will be a nuisance to keep realigning your investment in line with the revision of the
ratings.
3. The ratings dont value the investment processes followed by the mutual fund. As a
result, a fund following a certain process may lose out to a fund that has given superior
returns only because it has a star fund manager. But there is a higher risk associated
with a star fund manager that the ratings dont reflect. If the star fund manager quits, it
can throw the working of a mutual fund out of gear and thus affect its performance.
4. The ratings dont show the level of ethics followed by the fund. A fund or fund
manager that is involved in a scam or financial irregularities wont get poor ratings on
the basis of ethics. As the star ratings look at just returns, any wrongdoing carried out
by the fund or fund manager will be completely ignored.
5. Ratings also dont consider two very important factors: transparency and keeping
investors informed. There are no negative ratings awarded to the fund for being
investor-unfriendly.
6. Ratings dont match the investors risk-appetite with their portfolio. As a matter of fact,
investments should be done only after considering the risk appetite of the investor. For
example, equities may not be the best investment vehicle for a very conservative
investor. However ratings fail to take that into account.
Ratings should be the starting point for making an investment decision. They are not the be all
and end all of mutual fund investments. There are other important factors like portfolio
management, age of funds and more, which should be taken into account before making an
investment.

6.15 ANALYSIS & INTERPRETATION OF THE DATA

Investors invested in Mutual

Fund

Table 6.15:- (a)Age Distribution of Investors of Barnala

Age Group
No.

Investors

35
30

<= 30

of 12
25

31-35

36-40

41-45

46-50

>50

18

30

24

20

16

20
30

15

24

10
5

18

20

12

16

0
<=30

31-35

36-40

41-45

46-50

Age group of the Investors

>50

FIG.6.15:- (a) Age Distribution of Investors of Barnala

Interpretation:
According to this chart out of 120 Mutual Fund investors of Barnala 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.

Table 6.16:- (b). Educational Qualification of investors of Barnala

Educational Qualification

Number of Investors

Graduate/ Post Graduate

88

Under Graduate

25

Others

Total

120

6%
23%

71%

Graduate/Post Graduate

Under Graduate

Others

FIG.6.16:- Educational Qualification of investors of Barnala

Interpretation:
Out of 120 Mutual Fund investors 71% of the investors in Barnala are Graduate/Post Graduate,
23% are Under Graduate and 6% are others (under HSC).

Table 6.17:- (c). Occupation of the investors of Barnala

Occupation

No. of Investors

Govt. Service
Pvt. Service
Business
Agriculture
Others

30
45
35
4
6

No. of Investors

50
40
30
20

45

35

30

10
0
Govt.
Service

Pvt.
Service

Business

Agriculture

Others

Occupation of the customers

FIG 6.17:- Occupation of the investors of Barnala

Interpretation:
In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are
Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.

Table 6.18:- (d). Monthly Family Income of the Investors of Barnala

Income Group

No. of Investors

<=10,000
10,001-15,000

15,001-20,000
20,001-30,000
>30,000

12
28
43
32

No. of Investors

50
40
30
43

20
10
0

32

28
12

5
<=10

10-15

15-20

20-30

>30

Income Group of the Investorsn (Rs. in Th.)

FIG 6.18:- Monthly Family Income of the Investors of Barnala

Interpretation:
In the Income Group of the investors of Barnala, 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

Table 6.19:- Investors invested in different kind of investments.

Kind 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

Kinds of Investment

Gold/ Silver

30

Post Office(NSC)

65
50

75

Insurance

120

Saving A/ c
0

50

100

152
148

150

195
200

250

No.of Respondents

FIG 6.19:- Investors invested in different kind of investments.

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, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in
Real Estate.

Table 6.20:- Preference of factors while investing

Factors

No.
Respondents

(a) Liquidity

of 40

(b) Low Risk

(c) High Return

(d) Trust

60

64

36

18%

20%

32%

30%

Liquidity

Low Risk

High Return

Trust

FIG 6.20:- Preference of factors while investing

Interpretation:
Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to
invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust

Table 6.21:- Awareness about Mutual Fund and its Operations

Response
No. of Respondents

Yes
135

No
65

33%

67%

Yes

No

FIG 6.21:- Awareness about Mutual Fund and its Operations

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

Table 6.22:- Source of information for customers about Mutual Fund

Source of information
Advertisement
Peer Group
Bank

No. of Respondents
18
25
30

No. of
Respondents

Financial Advisors

70
60
50
40
30
20
10
0

62

62
18

30

25

Advertisement Peer Group

Bank

Financial
Advisors

Source of Information

FIG 6.22:- Source of information for customers about Mutual Fund

Interpretation:
From the above chart it can be inferred that the Financial Advisor is the most important source
of information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund
Through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through
Advertisement.

Table 6.23:- Investors invested in Mutual Fund

Response

No. of Respondents

YES

120

NO

80

Total

200

No
40%

Yes
60%

FIG 6.23:- Investors invested in Mutual Fund

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

Table.6.24:- Reason for not invested in Mutual Fund

Reason
Not Aware
Higher Risk

No. of Respondents

65
5

Not any Specific Reason

10

6%

13%

81%
Not Aware

Higher Risk

Not Any

FIG.6.24:- Reason for not invested in Mutual Fund

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.

Table 6.25:- Investors invested in different Assets Management Co. (AMC)

Name of AMC
SBIMF
UTI
HDFC
Reliance

No. of Investors
55
75
30
75

ICICI Prudential
Kotak
Others

56
45
70

Others

70

Name of AMC

HDFC

30

Kotak

45

SBIMF

55

ICICI

56

Reliance

75

UTI

75
0

20

40

60

80

No. of Investors

FIG.6.25:- Investors invested in different Assets Management Co

Interpretation:
In Barnala 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% in ICICI
Prudential, 37.5% in Kotak and 25% in HDFC.

Table 6.26:- Reason for invested in SBIMF

Reason

No. of Respondents

Associated with SBI

Better Return
Agents Advice

35
5
15

27%

64%

9%

Associated with SBI

Better Return

Agents Advice

FIG.6.26:- Reason for invested in SBIMF

Interpretation:
Out of 55 investors of SBIMF 64% have invested because of its association with Brand SBI,
27% invested on Agents Advice, 9% invested because of better return.

Table 6.27:- Reason for not invested in SBIMF

Reason

No. of Respondents

Not Aware
Less Return
Agents Advice

25
18
22

34%

38%

28%
Not Aware

Less Return

Agent's Advice

FIG.6.27:- Reason for not invested in SBIMF

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

Table 6.28 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

75

Others

Name of AMC

Kotak

60

ICICI Prudential

80

Reliance

82
35

HDFC
UTI

45
76

SBIMF
0

20

40

60

80

100

No. of Investors

FIG.6.28:- Preference of Investors for future investment in Mutual Fund

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

Table 6.29:- Mode of Investment Preferred by the Investors

Mode of Investment

One time Investment

Systematic Investment Plan (SIP)

No. of Respondents

78

42

35%

65%

One time Investment

SIP

FIG.6.29:- Mode of Investment Preferred by the Investors

Interpretation:
Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through
Systematic Investment Plan.

Table 6.30:- Preferred Portfolios by the Investors

Portfolio
Equity
Debt
Balanced

No. of Investors
56
20
44

37%

46%

17%
Equity

Debt

Balance

FIG.5.30:- Preferred Portfolios by the Investors

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

Table 6.31:- Option for getting Return Preferred by the Investors

Option

Dividend Payout

Dividend

Growth

Reinvestment
No. of Respondents 25

10

85

21%

8%
71%
Dividend Payout

Dividend Reinvestment

Growth

FIG.6.31:- Option for getting Return Preferred by the Investors

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

Table 5.32:- Preference of Investors whether to invest in Sectorial Funds

Response
Yes
No

No. of Respondents
25
95

21%

79%

Yes

No

FIG.5.32:- Preference of Investors whether to invest in sectorial Funds

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.

CHAPTER 7

FINDING
OF
STUDY

6.1 Findings
In Barnala 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 Barnala 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.
About 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.

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 Sectoral Fund, only 21% wanted
to invest in Sectorial Fund.

CHAPTER 8

SUGGESTIONS
And
RECOMMENDATIONS

7.1 Suggestions and Recommendations

 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 funds offer a lot of benefit 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 objective, 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 prospects.

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 Barnala 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.
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

BIBLIOGRAPHY
NEWS PAPERS
OUTLOOK MONEY
TELEVISION CHANNEL (CNBC AAWAJ)
MUTUAL FUND HAND BOOK
FACT SHEET AND STATEMENT

WWW.SBIMF.COM

WWW.MONEYCONTROL.COM

WWW.AMFIINDIA.COM

WWW.ONLINERESEARCHONLINE.COM

WWW. MUTUALFUNDSINDIA.COM

QUESTIONNAIRE
A study of preferences of the investors for investment in mutual funds.
1. Personal Details:
(A). Name:(b). Add: -

Phone:-

(c). Age:-

(d). Qualification:Graduation/PG

Under Graduate

Others

(e). Occupation. Pl tick ()

Govt. Ser

Pvt. Ser

Business

Agriculture

Others

(g). what is your monthly family income approximately? Pl tick ().

Up
Rs.10,000

to Rs.

10,001

15000

to Rs.

15,001

20,000

to Rs.

20,001

30,000

to Rs. 30,001 and

above

2. What kind of investments you have made so far? Pl tick (). All applicable.
a. Saving account
e. Post Office-NSC, etc

b. Fixed deposits
f. Shares/Debentures

c. Insurance
g. Gold/ Silver

d. Mutual Fund
h. Real Estate

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

.
(a) Liquidity

(b) Low Risk

(c) High Return

(d) Trust

Yes

4. Are you aware about Mutual Funds and their operations? Pl tick ().

No

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 ().

7. if not invested in Mutual Fund then why?

(a) Not aware of MF (b) Higher risk (c) Not any specific reason

Yes

No

8. If yes, in which Mutual Fund you have invested? Please tick (). All Applicable.
a. SBIMF

b. UTI

c. HDFC

d. Reliance

e. Kotak

f. Other. Specify

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

a. SBIMF is associated with State Bank of India.
b. They have a record of giving good returns year after year.
c. Agent 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. Agent Advice

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

portfolio

debt

b. Having debt & equity c. Only equity portfolio.

portfolio.

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

a.

Yes

b.

No