A STUDY OF SBI MUTUAL FUNDS

Project submitted to

S.A.V ACHARYA INSTITUTE OF MANAGEMENT STUDIES

In partial fulfillment of the requirements for

Master in Management Studies

By

VIJAYALAXMI.V. SHARDHI
Roll No:49
Specialization-FINANCE
Batch: 2013 - 2015

Under the guidance of

(PROF. KHUSHBOO SATARDEKAR)

A STUDY OF SBI MUTUAL FUNDS

Project submitted to

S.A.V ACHARYA INSTITUTE OF MANAGEMENT STUDIES

In partial fulfillment of the requirements for

Master in Management Studies

By

VIJAYALAXMI.V. SHARDHI
Roll No:49
Specialization- FINANCE
Batch: 2013 - 2015

Under the guidance of

(PROF. KHUSHBOO SATARDEKAR)

S.A.V ACHARYA INSTITUTE OF MANAGEMENT STUDIES

SHELU
DECEMBER 2014

Students Declaration
I hereby declare that this report submitted in partial fulfillment of the requirement of
MMS Degree of University of Mumbai to S.A.V ACHARYA INSTITUTE OF
MANAGEMENT STUDIES. This is my original work and is not submitted for award of
any degree or diploma or for similar titles or prizes.

Name

: VIJAYALAXMI.V.SHARDHI

Class

: MMS-2nd year- Finance

Roll No. : 49
Place

: SHELU

Date

Students Signature :

Certificate
3

This is to certify that the dissertation submitted in partial fulfillment for the award of MMS
degree of University of Mumbai to S.A.V ACHARYA INSTITUTE OF MANAGEMENT
STUDIES

is

result

of

the

bonafide

research

work

carried

out

by

Miss.vijayalaxmi.v. shardhi. under my supervision and guidance, no part of this report

has been submitted for award of any other degree, diploma or other similar titles or
prizes. The work has also not been published in any journals/Magazines.

Date
Place: SHELU

Faculty Guide
Prof. Khushboo Satardekar
(Name of Faculty)

Director

(Dr. ASHOK GOWDA)

TABLE OF CONTENTS:

Chapter
No.

Particulars

Page No.

1
2

3
4

5
6
7
8

Executive Summary
Introduction
Introduction a study of sbi mutual
funds
Introduction to the industry/sector
Introduction to the company
Literature Review (Secondary Data)
Research Methodology
Problem Definition
Objectives
Research design
Limitations
Analysis and Findings
Suggestions/Recommendations
Conclusions
Bibliography and References

EXECUTIVE SUMMARY

6
7

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.

INTRODUCTION
7

2.1 Introduction on A study of Sbi Mutual Funds

A Mutual Fund is a trust that pools the savings of a number of investors who share
a common financial goal. The money thus collected is invested by the fund
manager in different types of securities depending upon the objective of the
scheme.These could range from shares to debentures to money market instruments.
The income earned in these investments and the capital appreciation realized by
the scheme is shared by its unit holders in proportion to the number of units owned
by them. Thus a Mutual Fund is the most suitable investment for the common man
as it offers an opportunity to invest in a diversified, professionally managed
portfolio at a relatively low cost. Anybody with an invest able surplus of a few
thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a
defined investment objective and strategy.
A mutual fund is the ideal investment vehicle for todays complex and modern
financial scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events
occurring in faraway places. A typical individual is unlikely to have the
knowledge, skills, inclination and time to keep track of events, understand their
implications and act speedily.
A mutual fund is answer to all these situations. It appoints professionally qualified
and experienced staff that manages each of these functions on a fulltime basis. The
large pool of money collected in the fund allows it to hire such staff at a very low
cost to each investor. In fact, the mutual fund vehicle exploits economies of scale
in all three areas research, investment and transaction processing.
A draft offer document is to be prepared at the time of launching the fund.
Typically, it pre specifies the investment objective of the fund, the risk associated,
the

cost involved in the process and the broad rules for entry into

and exit from the fund and other areas of operation. In India, as in most countries,
8

these sponsors need approval from a regulator, SEBI in our case. SEBI looks at
track records of the sponsor and its financial strength in granting approval to the
fund for commencing operations.
A sponsor then hires an asset management company to invest the funds according
to the investment objective. It also hires another entity to be the custodian of the
assets of the fund and perhaps a third one to handle registry work for the unit
holders of the fund.In the Indian context, the sponsors promote the Asset
Management Company also,in which it holds a majority stake. In many cases a
sponsor can hold a 100% stake in the Asset Management Company (AMC). E.g.
Birla Global Finance is the sponsor of the Birla Sun Life Asset Management
Company Ltd., which has floated different mutual funds schemes and also acts as
an asset manager for the funds collected under the schemes.
As per SEBI regulations, mutual funds can offer guaranteed returns for a maximum
period of one year. In case returns are guaranteed, the name of the guarantor and
how the guarantee would be honored is required to be disclosed in the offer
document.
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.

1.1 THE CONCEPT OF MUTUAL FUND IN DETAIL

A mutual fund uses the money collected from investors to buy those assets
which are specifically permitted by its stated investment objective. Thus, an equity
fund would buy equity assets ordinary shares, preference shares, warrants etc. A
bond fund would buy debt instruments such as debentures, bonds or government
securities. It is these assets which are owned by the investors in the same proportion
as their contribution bears to the total contributions of all investors put together.

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.
10

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.

When an investor subscribes to a mutual fund, he or she buys a part of the

assets or the pool of funds that are outstanding at that time. It is no different from
buying shares of joint stock Company, in which case the purchase makes the
investor a part owner of the company and its assets. However, whether the investor
gets fund shares or units is only a matter of legal distinction.
11

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

1.1

MUTUAL FUND OPERATION FLOW

CHART
CHART 1.2

12

From the above chart , it can be observed that how the money from the
investors flow and they get returns out of it. With a small amount of fund, investors

1.4 Advantages and disadvantages of mutual funds :

ADVANTAGES OF MUTUAL FUND

Professional management

Portfolio Divercification

Reduction / Diversification of Risk

Liquidity

Flexibility & Convenience

Reduction in Transaction cost

Safety of regulated environment

Choice of schemes

Transparency

DISADVANTAGE OF MUTUAL FUND

No control over Cost in the Hands of an Investor

13

No tailor-made Portfolios

Managing a Portfolio Funds

Difficulty in selecting a Suitable Fund Scheme

2.2 Introduction to the industry/sector

The insurance sector was opened up in the year 1999 facilitating the entry of private players into
the industry. With an annual growth rate of 24.31 percent and thelargest number of life insurance
policies in force, the potential of the Indian insuranceindustry is huge. The year 1999 saw a
revolution in the Indian insurance sector, as major structural changes took place with the ending
of
Government
monopoly
and
the
passageof the Insurance Regulatory and Development Authority (IRDA) Bill, lifting entryrestrict
ions for private players and allowing foreign players to enter the market with somelimits on
direct foreign ownership.According to the CSO, the insurance and banking services contribution
to
thecountrys GDP is 7.1 percent out of which the gross premium collection forms asignificant pa
rt. Life insurance penetration in India was less than 1 percent till 1990-91.During the 90s, it was
between 1 and 2 percent and from 2001 it was over 2 percent. In2003-04 it was 2.4 percent. In
2007-08 it was 14percent
The impetus for increase is due to the active role played by IRDA in licensing private players
and taking positive steps in increasing the insurance awareness among the people. Besides, the
insurance companies in general and private insurance companies
in particular, are reaching out to untapped potential in rural areas with aggressivecampaigns.Inno
vative products, smart marketing, and aggressive distribution have enabledfledgling private
insurance companies to sign up Indian customers faster than anyoneexpected. Life insurance is
viewed as a tax saving device. People are now turning to the private sector for providing them
with new products and greater variety for their choice.The improvement in FDI flows reflected
the impact of recent initiatives aimed at creatingan enabling environment for FDI and for
encouraging infusion of new technologies
andmanagement practices. The Governments proposal to increase the FDI cap in theinsurance
sector from the present 26 percent to 49 percent has raised expectations amongthe international
insurance companies.
1.1.1Definition
14

Insurance is a contract in which sum of money is paid to the assured

inconsideration of insurers incurring risk of paying a large sum upon a givencontingency.
--Justice Tindall
1.1.2Evolution of Insurance
In the days of yore insurance was in its crude form and was cooperative andvoluntary in nature.
When, where and how it originated is still a matter of research in oneway or the other was
prevalent in olden days. We can trace its history from the evolutionsociety from hunting stage to
the modern industrial age. A word YAGCHHEM occursin the worlds most ancient Hindu
Scripture Rig Veda.The word YAGCHHEM means insurance. It clearly indicated that about
four thousand years ago insurance was prevalent in its crude form. It was cooperative

andvoluntary in

nature. People formed different groups of organizations to share the

lossamong themselves incase of a particular risk. Each member contributed some amount to a
common fund to meet the unforeseen losses. Sometimes they also contributed equally
tocompensate person as and when he suffered a loss. Traces of insurance in the ancient world are
also found in the form of marino trade loans or carriers contracts which included an element of
insurance.Evidence is on records that arrangements embodying the idea of insurance were made
in Babylonia and India at quite an early period. References were made to theconcept of insurance
in Manus code Manu Smrity. It was akin to Yagakshemo of Rigveda in which the well
being and security of the community was aimed at. However,there is no evidence that insurance
in its present farm was practiced prior to twelfth century.
1.1.3Nature of Insurance
The insurance has the following characteristics which are observed in cases of life, marine, fire
and general insurance.
1.Sharing of risks:
Insurance is a cooperative device to share the financial losseswhich might befall on an individual
or his facility on the occurrence of
specifiedevent such as sudden death of the bread winner, marine perils in marineinsurance, fire
in the fire insurance and theft insurance etc. in the case of general insurance.
2.Cooperative device:
A large number of persons agree to share the loss arisingsue to a particular risk. Thus, insurance
is a cooperative device.
3.Value of risk:
The risk is evaluated before insuring to charge the amount of share called premium.
4.Payment made at contingency:
15

The payment is made at a certain contingency insured. The Contingency may be death, fire,
marine perils etc.
5.Amount of payment:
The amount of payment depends upon policy insured.
1.1.4 Functions of Insurance
A)Primary Functions1)Insurance provides certainty: Insurance provides certainty of payments atthe uncertainty of
losses. The element of uncertainty is reduced by better planning and administration.
2)Insurance provides protection: The risk will occur or not, when will occur and how much loss
will be there. There are uncertainties of happening of time and amount of losses. The main
function of the insurance is to provide protection against the losses.
3)Risk sharing: Risk is uncertain and therefore, the loss arising from the risk is also uncertain.
All business concern faces the problem of the risk and if the concern is big enough the handling
of risk becomes a specializedfunction. Insurance, as a device is the outcome of the existence of
various
B)Secondary Functions1)Prevention of loss: Prevention is always better than cure.Prevention is by far the best solution
to the problem of risk. It is moreeffective and cheapest method to avoid the unfortunate
consequence. Butsometimes prevention is not always possible and Effective.
2)Provides capital: It provides the capital to the society. For plandevelopment of country there is
a great need for huge amount of capital. Now days, the insurance companies are rendering
positive help in thedevelopment of trade, commerce and industry of the country.
3)Improves efficiency: Achievement of goals, it improves not onlyhis efficiency of the masses is
also advanced. The insurance eliminatesworries and miseries of losses as death and destruction
of property carefree person can devote his energies for better.
4)Ensures the welfare of society: Insurance is a saga of service
andsecurity to thee society. Security of the life and property given byinsurance bring peace of
mind to the insured. The investment in LIC inwelfare schemes like electricity, housing, water
supply, agro industryestates are able to solve many problems in India.

16

2.3 Introduction to the company

State Bank of India is an Indian multinational, Public Sector banking and financial services
company. It is a government-owned corporation with its headquarters in Mumbai, Maharashtra.
As of December 2013, it had assets of US$388 billion and 17,000 branches, including 190
foreign offices, making it the largest banking and financial services company in India by assets.
State Bank of India is one of the Big Four banks of India, along with Bank of Baroda, Punjab
National Bank and Bank of India.
The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding,
in 1806, of the Bank of Calcutta, making it the oldest commercial bank in the Indian
Subcontinent. Bank of Madras merged into the other two "presidency banks" in British
India, Bank of Calcutta and Bank of Bombay, to form the Imperial Bank of India, which in turn
became the State Bank of India. Government of India owned the Imperial Bank of India in 1955,
with Reserve Bank of India (India's Central Bank) taking a 60% stake, and renamed it the State
Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India.
State Bank of India is a regional banking behemoth and has 20% market share in deposits and
loans among Indian commercial banks.

History[edit]

17

Seal of Imperial Bank of India.

The roots of the State Bank of India lie in the first decade of the 19th century, when the Bank of
Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal
was one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15
April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were
incorporated as joint stock companies and were the result of royal charters. These three banks
received the exclusive right to issue paper currency till 1861 when, with the Paper Currency Act, the
right was taken over by the Government of India. The Presidency banks amalgamated on 27 January
1921, and the re-organised banking entity took as its name Imperial Bank of India. The Imperial
Bank of India remained a joint stock company but without Government participation.
Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which
is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 1 July 1955,
the Imperial Bank of India became the State Bank of India. In 2008, thegovernment of India acquired
the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is
the country's banking regulatory authority.
In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. This made SBI
subsidiaries of eight that had belonged toprincely states prior to their nationalization and operatonal
take-over between September 1959 and October 1960, which made eight state banks associates of
SBI. This acquisition was in tune with the first Five Year Plan, which prioritised the development of
rural India. The government integrated these banks into the State Bank of India system to expand its
rural outreach. In 1963 SBI merged State Bank of Jaipur (est. 1943) and State Bank of Bikaner
(est.1944).
SBI has acquired local banks in rescues. The first was the Bank of Bihar (est. 1911), which SBI
acquired in 1969, together with its 28 branches. The next year SBI acquired National Bank of Lahore

18

(est. 1942), which had 24 branches. Five years later, in 1975, SBI acquired Krishnaram Baldeo Bank,
which had been established in 1916 in Gwalior State, under the patronage of Maharaja Madho Rao
Scindia. The bank had been the Dukan Pichadi, a small moneylender, owned by the Maharaja. The
new bank's first manager was Jall N. Broacha, a Parsi. In 1985, SBI acquired the Bank of Cochin
in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of
Travancore, already had an extensive network in Kerala.
There has been a proposal to merge all the associate banks into SBI to create a "mega bank" and
streamline the group's operations.[10]
The first step towards unification occurred on 13 August 2008 when State Bank of Saurashtra merged
with SBI, reducing the number of associate state banks from seven to six. Then on 19 June 2009 the
SBI board approved the absorption of State Bank of Indore. SBI holds 98.3% in State Bank of
Indore. (Individuals who held the shares prior to its takeover by the government hold the balance of
1.7%.)[11]
The acquisition of State Bank of Indore added 470 branches to SBI's existing network of branches.
Also, following the acquisition, SBI's total assets will inch very close to the 10 trillion mark (10
billion long scale). The total assets of SBI and the State Bank of Indore stood at 9,981,190 million
as of March 2009. The process of merging of State Bank of Indore was completed by April 2010, and
the SBI Indore branches started functioning as SBI branches on 26 August 2010. [12]
On October 7, 2013, Arundhati Bhattacharya became the first woman to be appointed Chairperson of
the bank.[13]

Operations[edit]
SBI provides a range of banking products through its network of branches in India and overseas,
including products aimed at non-resident Indians (NRIs). SBI has 14 regional hubs and 57 Zonal
Offices that are located at important cities throughout India.

Domestic presence[edit]
SBI has 14,816 branches in India, as on 31 March 2013, of which 9,851 (66%) were in Rural and
Semi-urban areas.[2] In the financial year 2012-13, its revenue was INR 200,560 Crores (US$36.9
billion), out of which domestic operations contributed to 95.35% of revenue. Similarly, domestic
operations contributed to 88.37% of total profits for the same financial year. [2]

19

Under the Pradhan Mantri Jan Dhan Yojana of financial inclusion launched by Government in
August 2014, SBI held 11,300 camps and opened over 30 lakhs accounts by September, which
included 21.16 lakh accounts in rural areas and 8.8 lakh accounts in urban areas. [14]

International presence[edit]

The Israeli branch of the State Bank of India located in Ramat Gan.

As of 28 June 2013, the bank had 180 overseas offices spread over 34 countries. It has branches of
the parent in Moscow, Colombo,Dhaka, Frankfurt, Hong Kong, Tehran, Johannesburg, London, Los
Angeles, Male in the Maldives, Muscat, Dubai, New York, Osaka, Sydney, and Tokyo. It has offshore
banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape
Town.
The Canadian subsidiary, State Bank of India (Canada) also dates to 1982. It has seven branches, four
in the Toronto area and three in the Vancouver area.
SBI operates several foreign subsidiaries or affiliates. In 1990, it established an offshore bank: State
Bank of India (Mauritius). SBI (Mauritius) has 15 branches in major cities/towns of the country
including Rodrigues.
SBI Sri Lanka now has three branches located in Colombo, Kandy and Jaffna. The Jaffna branch was
opened on 9 September 2013. SBI Sri Lanka, the oldest bank in Sri Lanka, celebrated its 150th year
in Sri Lanka on 1 July 2014.

State Bank of India (S.B.I.) Branch at Tsim Sha Tsui, Hong Kong

In 1982, the bank established a subsidiary, State Bank of India (California), which now has ten
branches nine branches in the state of California and one in Washington, D.C. The 10th branch was

20

opened in Fremont, California on 28 March 2011. The other eight branches in California are located
in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and Bakersfield.
In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo-Nigerian Merchant
Bank and received permission in 2002 to commence retail banking. It now has five branches in
Nigeria.
In Hindu States of Nepal (Hindu Rajya Nepal), SBI owns 49% of SBI Nepal (State Bank in Nepal)
share with Nepal Government owing the rest and SBI NEPAL has branches throughout the country in
each and every city as banking has become the major part of daily life forNepalese people. In
Moscow, SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest.
In Indonesia, it owns 76% of PT Bank Indo Monex.
The State Bank of India already has a branch in Shanghai and plans to open one in Tianjin.[15]
In Kenya, State Bank of India owns 76% of Giro Commercial Bank, which it acquired for US$8
million in October 2005.[16]

Associate banks[edit]

Main Branch of SBI in Mumbai.

SBI now has five associate banks, down from the eight that it originally acquired in 1959. All use the
State Bank of India logo, which is a blue circle, and all use the "State Bank of" name, followed by
the regional headquarters' name:

State Bank of Bikaner & Jaipur

State Bank of Hyderabad

State Bank of Mysore

State Bank of Patiala

State Bank of Travancore

21

The State Bank of India and all its associate banks are identified by the same blue keyhole logo. The
State Bank of India wordmark usually has one standard typeface, but also utilises other typefaces.

State Bank of India Mumbai LHO.

Non-banking subsidiaries[edit]
Apart from its five associate banks, SBI also has the following non-banking subsidiaries:

SBI Capital Markets Ltd

SBI Funds Management Pvt Ltd

SBI Factors & Commercial Services Pvt Ltd

SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)

SBI DFHI Ltd

SBI Life Insurance Company Limited

SBI General Insurance

In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas (with 26% of the
remaining capital), to form a joint venture life insurance company named SBI Life Insurance
company Ltd. In 2004, SBI DFHI (Discount and Finance House of India) was founded with its
headquarters in Mumbai.

Other SBI service points[edit]

As of 31 March 2014: SBI has 43,515 ATMs and SBI group (including associate banks) has 51,491
ATMs. SBI has become the first bank to install an ATM at Drass in the Jammu & Kashmir Kargil
region. This was the Bank's 27,032nd ATM on 27 July 2012

22

3.0 Literature Review (Secondary Data)

A large number of studies on the growth and financial performance of mutual funds have been carried out
during the past, in the developed and developing countries. Brief reviews of the following research works
reveal the wealth of contributions towards the performance evaluation of mutual fund, market timing and
stock selection abilities of fund managers. In India, one of the earliest attempts was made by National

23

Council of Applied Economics Research (NCAER) in 1964 when a survey of households was undertaken
to understand the attitude towards and motivation for savings of individuals.
Another NCAER study in 1996 analyzed the structure
of the capital market and presented the views and attitudes of individual shareholders. SEBI NCAER
Survey (2000) was carried out to estimate the number of households and the population of individual
investors, their economic and demographic profile, portfolio size, and investment preference for equity as
well as other savings instruments. Data was collected from 30, 00,000 geographically dispersed rural and
urban households.
Some of the relevant findings of the study are : Households preference
for instruments match their risk perception; Bank Deposit has an appeal across all income class; 43% of
the non-investor households equivalent to around 60 million households apparently lack awareness about
stock markets; and, compared with low income groups, the higher income groups have higher share of
investments in Mutual Funds signifying that Mutual funds have still not become truly the investment
vehicle for small investors.

Since 1986, a number of articles and brief essays have been published in financial dailies,
periodicals, professional and research journals, 20 explaining the basic concept of Mutual Funds
and highlighted their importance in the Indian capital market environment. They touched upon
varied aspects like regulation of Mutual Funds, Investor expectations, Investor protection, and
growth of Mutual Funds and some on the performance and functioning of Mutual Funds.
A few among them are Vidyashankar (1990), Sarkar (1991), Agarwal (1992), Sadhak (1991),
Sharma C. Lall (1991), Samir K. Barua et al., (1991), Sandeep Bamzai (2001), Atmaramani
(1995), Atmaramani (1996), Subramanyam (1999), Krishnan (1999), Ajay Srinivsasn (1999).
Segmentation of investors on the basis of their characteristics was highlighted by Raja Rajan
(1997). Investors characteristics on the basis of their investment size Raja Rajan (1997), and the
relationship between stages in life cycle of the investors and their investment pattern was studied
Raja Rajan (1998). Friend, et al., (1962) made an extensive and systematic study of 152 mutual
funds found that mutual fund schemes earned an average annual return of 12.4 percent, while
their composite benchmark earned a return of 12.6 percent.
Their alpha was negative with 20 basis points. Overall results did
not suggest widespread inefficiency in the industry. Comparison of fund returns with turnover
and expense categories did not reveal a strong relationship. Irwin, Brown, FE (1965) analyzed
issues relating to investment policy, portfolio turnover rate, performance of mutual funds and its
impact on the stock markets. They identified that mutual funds had a significant impact on the
price movement in the stock market

4.2 OBJECTIVES
a. To find out the Preference of the investors for Asset Management of company.
b. To know the preference of the portfolios.
24

c. To know why one has invested in SBI Mutual Funds.

d. To find out the most preference channel.
e. To find out what should do to boost Mutual F und Industry

4.0 Research Methodology

Financial analysis is mainly done to compare the growth, profitability and financial soundness of
the respective bank by diagnosing the information contained in the financial statements.
25

Financial analysis is done to identify the financial strengths and weaknesses of the two banks by
properly establishing relationship between the items of Balance Sheet and Profit & Loss
Account. It helps in better understanding of banks financial position, growth and performance by
analyzing the financial statements with various tools and evaluating the relationship between
various elements of financial statements. Sample Size In the present study, an attempt has been
made to evaluate and compare the financial performance of SBI and ICICI Bank. Data collection
The study is based on secondary data that has been collected from annual reports of the
respective banks. The study covers the period of 5 years i.e. from year 2008-09 to year 2012-13.
Data analysis Ratio Analysis was applied to analyze and compare the trends in banking business
and financial performance. Various ratios used are: 1. Credit Deposit Ratio 2. Operating
Expenses / Total Funds 3. Net Profit / Total funds 4. Cash Deposit Ratio 5. Return On Equity

CREDIT DEPOSIT RATIO: Credit-Deposit Ratio is the proportion of loan-assets created by a bank from the deposits
received. Credits are the loans and advances granted by the bank. In other words it is the amount
lent by the bank to a person or an organization which is recovered later on. Interest is charged
from the borrower. Deposit is the amount accepted by bank from the savers and interest if paid to
them.

OBJECTIVES

26

1-.Accepts deposit

2- Gives loans and advances

3- Invests and Borrows
4- Deals in bill of exchange
5- Deals in gold and silver
6- Deals in foreign currencies
7- Underwrite issues
8- Form subsidiary
9- Housing schemes
10- Acts and agent

RESEARCH DESIGN

27

The present study is an attempt to examine the impact of electronic banking on operational performance
and service quality of banking sector in India. This chapter discusses the research methodology of the
dissertation. It explains the scope, objectives, period and sample of the study. The statistical techniques
used to analyze the data and limitations of the study have also been discussed.

Primary Sources:
To achieve the objectives of the study mainly primary data has been used. To study the extent of
electronic banking services in India, a survey was conducted during the month of June, 2008. The search
was conducted through a worldwide web with using a various websites viz. www.banknetindia.com and
websites of banks found at www.rbi.org.in and www.google.com to discover the main pages and home
pages of 50 public and private sector banks. These websites were monitored to have a close look at the
services delivered to customers. A check list containing various e-banking services offered by the banks
was prepared to check the extent of disclosure of banking services and products by the banks offering
electronic banking services. All the data for the said purpose was collected through internet.

Measurement of Extent of Electronic Banking Services:For the purpose of extent of e-banking services, 48 services have been taken into account. These
have been divided into four categories, viz. internet banking services, phone banking services,
mobile banking services and ATM services.
Building of Index:In order to measure the extent of electronic banking services provided by the banks, it was
considered necessary to convert the services into a numerical form. For this purpose, an Index
was prepared. The e-banking services, 48 in all, have been divided into four categories, viz.
internet banking services, phone banking services, mobile banking services and ATM services.
One point has been assigned to each

Secondary Sources:-

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The secondary data has been collected from various IBA Bulletins published by Indian banks,
statistical tables relating to banks of India, Trends and Progress Reports of RBI, and annual
reports of the banks. The growth of ATMs has been studied by dividing the banks into five
categories, i.e., nationalized banks, SBI group, old private sector banks, new private sector
banks, and foreign banks. These have been further classified into onsite ATMs and offsite ATMs.
The compiled data relates to the period from 2004-05 to 2007-08. To study the growth of ATMs,
growth to previous year and to total has been calculated. Third objective is based upon both the
primary and secondary data. The data regarding Electronic clearing services (debit and credit),
Electronic fund transfer, Debit cards, Credit cards, Real time gross settlement system and
Magnetic Ink Character Recognition (MICR) has been collected through published sources. Both
volume and value based transactions are calculated. The data was collected for the period 200304 to 2008-09. No sector- wise division has been made for this objective. In order to know the
trend of epayment, growth to previous year has been calculated. The fourth section of
questionnaire filled by the customers provides the data which helps to achieve this objective of
the study. Following sources are used for the collection of data:
1. IBA Bulletins published by Indian Banks Association (various issues).
2. Statistical tables relating to banks in India available at the website of Reserve Bank of India
(www.rbi.org.in)
3. Various journals and magazines issued by the banks from time to time.
4. Trends and Progress Reports of Reserve Bank of India, RBI Bulletin (various issues).
5. Reports on Currency and Finance, annual publication of RBI (various issues).

LIMITATIONS OF S B I MUTUAL FUND

29

mutual funds offer advantages and disadvantages, which are important for you to consider
and understand before you decide to buy. Here we explore some of the drawbacks of mutual
funds.

Fluctuating Returns

Diversification

Cash and More Cash

Costs

Misleading Advertisements

Evaluating Funds

ANALYSIS AND FINDING

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The State Bank of lndia is the first public sector bank to start mutual fund buslness follow~ng the
permission of the Government of lndia to do mutual fund bus mess The permission was granted in 1987
The SBI Mutual Fund launched ~ts f~rst scheme ir 1387 w~th a long-term point of view to help small
investors spread throughout the country and mobilized Rs. 131 cores from 90,000 Investors. In ZOCIC'
ill? :und with an Investor base of over 2-8 million spread over 23 schemes rnoo~l~zed Rs 2,079 crores.
Investment in Mutual Funds put everything into one package, diversification,
professionalisrn and ease of purchase. in lndia ovei !tie last few years Mutual Funds have remerged as
major players in savings mobilization, Institutional investors such as mutual fund constitute a very
important component of the capital market in developing countries. lnvestors have been showing keen
interest by subscribing to various mutual fund schemes anticipating higher returns and capital gains.
In Kerala. SBI Mutual Fund Schemes are attractive to small investors because
of the brand image of State Bank of lndia. More and more, investors are investing in mutual funds
expecting high return and low risk coverage. But the political instability stale of capital market and
adverse international developments has lead to the poor performance of the mutual funds. It is in this
background that a study 'Performance Appraisal of SBI Mutual Fund - with special reference to Kerala
State' assumes relevance.

Suggestions/Recommendations

31

Recommendations to SBI Fund Management Ltd.

1. Keep up the brand image in the minds of people through better performance both in the
case of returns as well as after sales services.
2. Give more financial information to the investors so that they can take decisions of
their own investment.
lmprove the quality of agents in their job through training and give them better
Incentives Make servlce available at every branch of SBI for better and easv accessibility
Increase the speed of grievances redressel facil~ties and make
i.1 accessible to the tnvestors.
Recommendations to the lnvestors of SBI Mutual Fund
1. An investor should carefully study various mutual fund schemes before investing in
them, keeping in mind, his own needs of growth, returns, capital appreciation or tax
savings
2. Investors must always remember that risk and returns go hand in hand. If one wants
more return, one will have to take more risks.
3. Investors shall clot drop on top ?r poor performed mutual fund units too quickly.
4. Investors don't put all investment in the same mutual fund. Diversify anc invest in
variety of funds 5, investors don't panic and sell mutual fund holdings during or after a
plunge.
Recommendations to SBI Mutual Fund Agents1 Intermediaries
Investors need to be educated about the various mutual fund schemes and their objects
through appropriate publicity measures, issuing brochures etc.
2. Improve the confidence among investors through appropriate communications
3. Performance based marketing strategies should be introduced.
4. SBI MF schemes adopt t~me-bound investment programmers. Real benefit can only
be realized at the time of redemption. Temporary fluctuations in NAV and re-purchase
price do not reflect the real benefits. Agents should convey this basic truth to investors in
clear terms.
5. Agents should be informed and advised the available exit options of SBI Miffs to the
investors

Conclusions
Based on the detailed analysis of Indian Telecom Industry, Bharti Airtel Limited and its
competitors we conclude the following regarding the financial health of Bharti Airtel Limited:
32

Growth:
The companys sales have grown over 70% CAGR in the last 2 years. It stands at Rs 17,794
Crores in 2007 up from Rs 7,944 Crores in 2005. Bharti Airtel Ltd is the market leader in mobile
phone services with over 22% market share in terms subscriber base. With about 6 million
mobile subscribers being added every month in India, the future growth of Bharti Airtel Ltd
looks very strong.
Profitability:
The PAT/Sales of the company stands at 22.67% in 2007 and has grown from 15.24% in 2005. In
2007, RONW stood at 35%, ROCE was 26% and ROTA was 16%. This indicated the return on
investment was extremely healthy. The EPS was Rs 21.27 in 2007 up from Rs 6.39 in 2005. All
these parameters suggest that the company is achieving increased levels of profitability in spite
of massive growth.
Solvency:
The Debt Ratio has decreased from 0.35 in 2005 to 0.21 in 2007. The DER has also decreased
from 0.97 in 2005 to 0.49 in 2007. The Interest coverage ratio has improved from 7.36 to 16.99
which is a positive sign. The Debt service coverage ratio however stands at 0.91 in 2007 and
needs improvement. The business expansion is being funded more by the Profits rather than
external borrowings.
Liquidity:
Liquidity is a cause of concern. Current Ratio and Liquid Ratio in 2007 stands at 0.45.
Absolute cash ratio is much less at 0.08. However the Debtor days are 29.10 which show the
debt collection practices of Bharti Airtel Ltd is much more effective as compared to its
competitors. The low liquidity could be attributed to the fact that the company invests heavily in
growth.
Efficiency:
Total Assets Turnover Ratio has increased from 0.54 in 2005 to 0.66 in 2007. Debt Turnover
Ratio, Fixed Assets Turnover Ratio and Current Assets Turnover Ratio have all improved and are
higher as compared to its competitors. This points that Bharti Airtel Limited is more efficient in
using its resources.

Bibliography and References

Web sites:
www.wikipedia.com
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http://managementhelp.org/customer/satisfy.htm
http://airtelbroadband.in/wps/wcm/connect/airtel.in/airtel.in/Home
http://www.customersatisfaction.com/
http://www.markosweb.com/www/airtel.in/
http://www.1000ventures.com/business_guide/crosscuttings/customer_satisfaction.html
Airtel site is the site where I come to know about the basic of the company and know more
about the company.

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