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 LIST OF CONTENTS CONTENT CHAPTER-I CHAPTER-II CHAPTER-III CHAPTER-IV CHAPTER-V CHAPTER-VI CHAPTER-VII CHAPTER-VIII COMPANY PROFILE INTRODUCTION OBJECTIVE & SCOPE REVIEW OF LITRATURE RESEARCH METHODOLOGY DATA ANALYSIS & INTERPRETATION FINDING OF STUDY SUGGESTIONS AND RECOMMANDATIONS CONCLUTION BIBLIOGRAPHY QUESTIONNAIRE

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NO. OF

LIST OF TABLES

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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

NO.OF NNNNN FIG

LIST OF FIGURES

PAGE NO.

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

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 Mr. C A Santosh Mr. Didier Turpin Ms.Aparna Nirgude Mr. K.T Ravindran Mr. Vinaya Datar Mr. Navneet Manout Mr. D. P Singh Mr. R. S. Srinivas Jain Managing Director Chief Manager - Customer Service. Dy. Chief Executive Officer Chief Risk Officer Chief Operating Officer Company Secretary & Compliance Officer Chief Investment Officer Head of Sales 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 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. theme.

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 open-ended 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 self-employed 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 T-

To 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 Equity Bonds Co. Debentures Co. FDs Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds High Moderate Moderate Moderate Low Moderate Low Moderate High High

Safety Low High Moderate Low High High High High Moderate High

Volatility High Moderate Moderate Low Low Low Low Moderate High Moderate

Liquidity High Moderate Low Low High Moderate Low Moderate Low High

Convenienc e Moderate High Low Moderate High High Moderate Gold Low High

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

No. of MFs betting on it automotive 255 banking & financial 196 services cement & 237 construction consumer durables 51 conglomerates 218 chemicals 259 consumer non 146 durables engineering & 317 capital goods food & beverages 175 information 284 technology media & 218 entertainment Manufacturing 259 metals& mining 275 Miscellaneous 250 oil & gas 290 Pharmaceuticals 250 Services 200 Telecom 264 Tobacco 150 Utility 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 1000 1000 1000 1000 1000

NAV 58.18 1 18.20 43 19.91 9 14.55 9 38.30 7

NAV Date 30/8/201 1 30/8/201 1 30/8/201 1 30/8/201 1 30/8/201 1

Total Amount 14524.07 13584.94 4 14247.72 8 13791.15 7 13769.15 2

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

Scheme Name

INSTALMENTS

Original inv 144000 114000 66000

Returns at BSE 200

FUND RETURNS

Birla SL tax relief 144 '96 Birla SL equity fund 114 Birla frontline equity 66 fund

553190 388701 156269

1684008 669219 181127

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 rerating 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 Table 6.15:- (a)Age Distribution of Investors of Barnala
Age Group No. Investors <= 30 of 12 31-35 18 36-40 30 41-45 24 46-50 20 >50 16

Investors invested in Mutual Fund

35 30 25 20 15 10 5 0 <=30 31-35 36-40 41-45 46-50 >50 Age group of the Investors 12 18 30 24 20 16

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 Graduate/ Post Graduate Under Graduate Others Total Number of Investors 88 25 7 120

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

Govt. Service Pvt. Service Business Agriculture Others .

No. of Investors
30 45 35 4 6

50 No. of Investors 40 30 20 10 0 Govt. Service Pvt. Service Business 35 45 30 4 Agriculture 6 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
<=10,000 10,001-15,000 15,001-20,000 20,001-30,000 >30,000

No. of Investors
5

12 28 43 32

50 No. of Investors 40 30 20 10 0 5 <=10 28 12 10-15 15-20 20-30 >30 43 32

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

K indsof Inves tment

Gold/S ilver Pos t Office(NS C ) Ins urance S aving A/c 0

30 50

65 75

120

152 148

195 200 250

50

100

150

No.of R espondents

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 (a) Liquidity (b) Low Risk (c) High Return (d) Trust

No. Respondents

of 40

60

64

36

18%

20%

32%

30%

Liquidity

Low R is k

H ig hR eturn

Trus t

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%

Y es

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

Financial Advisors

62

7 0 6 0 5 0 4 0 3 0 2 0 2 5 1 0 1 8 0 Advertisem ent Peer Group

No. of R espondents

6 2 3 0 B a nk F ina ncia l Advisors

S ource of Inform a tion

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 YES NO No. of Respondents 120 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

13%

6%

81%
Not Aware H ig her R is k 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 HDFC Name of AMC Kotak SBIMF ICICI Reliance UTI 0 20 40 No. of Investors 60 30 45 55 56

70

75 75 80

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

Associated with SBI Better Return Agents Advice

No. of Respondents
35 5 15

27%

9%

64%

As s ociated with S BI

Better R eturn

Ag entsAdvice

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

Not Aware Less Return Agents Advice

No. of Respondents
25 18 22

34%

38%

28%
Not A w are Less Return A g ent's A dvice

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

Others K otak
Na m e of AMC

75 60 80 82 35 45 76 20 40 60 80 100

IC IC I Prudential R eliance H D F C UTI S BIMF 0

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 No. of Respondents One time Investment 78 Systematic Investment Plan (SIP) 42

35%

65%

One tim e Inves tm ent

S IP

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 Reinvestment No. of Respondents 25 10 85 Growth

21%

8% 71%
D ividend Pa yout D ividend R einves tment G rowth

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%

Y es

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: (c). Age:Phone:-

(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 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001 and above

15000

20,000

30,000

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

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

Yes

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 ().

Yes

No

7. if not invested in Mutual Fund then why? (a) Not aware of MF (b) Higher risk (c) Not any specific reason

8. If yes, in which Mutual Fund you have invested? 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 debt b. Having debt & equity c. Only equity portfolio. 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