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A

PROJECT REPORT

ON

“A STUDY OF SBI MUTUAL FUNDS”

A detailed study done in

SBI

Submitted in partial fulfillment of the requirement for the award of degree of Bachelor in Business Administration (BBA) under Bharati Vidyapeeth University-

Pune1

Submitted bySNEHALCHAVAN

ROLL NO: 10BATCH: 2007-2010

Under the guidance ofDR. GOVIND P. SHINDE

Bharati Vidyapeeth’s Institute of Management & Entrepreneurship Development, Sector 8, CBD-Belapur, Navi Mumbai –400614

ACKNOWLEDGEMENT

The opportunity to get practical training in a reputed organization fulfills the felt gap

between the theory and practical. In the case of a student of finance & control, this

aspect assumes an additional dimension.

I hereby acknowledge SBI mutual funds providing the constant guidance for

encouragement which helped me a lot to be successful in my efforts. This formal

acknowledgement will hardly be sufficient to express my deep sense of gratitude to

all of them. It was a memorable experience while doing my winter training project on

a study of SBI Mutual Funds.

2

I would also like to thanks Dr. D.Y.PATIL director of BVIMED,NAVI MUMBAI

and PROF.G.SHINDE my faculty guide without whom this project report could not

be successfully completed.

Above all, I would like to thank almighty God, who helped me in successfully

completing my winter training project.

SNEHAL CHAVAN

DECLARATION

This is to certify that Winter Training Report entitled “A Study of SBI Mutual Fund”.

Which is submitted by me in partial fulfillment of the requirement for the award of

degree Bachelor of Business Administration (BBA), at BHARTI VIDYAPEETH

INSTITUTION OF ENTERPRENURSHIP DEVELOPMENT, NAVI MUMBAI

comprises only my original work and due acknowledgement has been made in the

text to all other material used.

Snehal chavan

3

EXECUTIVE SUMMARY

In few years Mutual Fund has emerged as a tool for ensuring one’s 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.

4

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.

The second part of the Project consists of data and its analysis collected through

survey done on 200 people. For the collection of Primary data I made a questionnaire

and surveyed of 200 people. I also taken interview of many People those who were

coming at the SBI Branch where I done my Project. I visited other AMCs in Mumbai

to get some knowledge related to my topic. I studied about the products and

strategies of other AMCs in mumbai to know why people prefer to invest in those

AMCs. This Project covers the topic “A STUDY OF PREFERENCES OF THE

INVESTERS FOR THE INVESTMENT IN MUTUAL FUND.” The data collected

has been well organized and presented. I hope the research findings and conclusion

will be of use.

5

CONTENTS

Acknowledgement

Declaration

Executive Summary

Chapter - 1 INTRODUCTION

Chapter - 2 COMPANY PROFILE

Chapter - 3 OBJECTIVES AND SCOPE

Chapter - 4 RESEARCH METHODOLOGY

Chapter - 5 DATA ANALYSIS AND INTERPRETATION6

Chapter - 6 FINDINGS AND CONCLUSIONS

Chapter - 7 SUGGESTIONS & RECOMMENDATIONS

ANNEXURE BIBLIOGRAPHY

QUESTIONNAIRE

CHAPTER- 1

INTRODUCTION

7

INTRODUCTION TO MUTUAL FUND

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.

8

A mutual fund is the ideal investment vehicle for today’s 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, 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

9

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

10

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.

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.

11

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.

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

12

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

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

pool their money with the funds managers. Taking into consideration the market

strategy the funds managers invest this pool of money into reliable securities. With ups

and downs in market returns are generated and they are passed on to the investors. The

above cycle should be very clear and also effective.

The fund manager while investing on behalf of investors takes into

consideration various factors like time, risk, return, etc. so that he can make proper

investment decision.

13

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

No tailor-made Portfolios

Managing a Portfolio Funds

Difficulty in selecting a Suitable Fund Scheme

14

1.5 HISTORY OF THE INDIAN MUTUAL FUND

INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of

India, at the initiative of the Government of India and Reserve Bank. Though the growth

was slow, but it accelerated from the year 1987 when non-UTI players entered the

Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both

qualities wise as well as quantity wise. Before, the monopoly of the market had seen an

ending phase; the Assets Under Management (AUM) was Rs67 billion. The private

sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till

April 2004; it reached the height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutual

fund industry can be broadly put into four phases according to the development of the

sector. Each phase is briefly described as under.

  First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve

Bank of India and functioned under the Regulatory and administrative control of the

Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial

Development Bank of India (IDBI) took over the regulatory and administrative control in

15

place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of

1988 UTI had Rs.6,700 crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector

banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation

of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June

1987 followed by 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 crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

1993 was the year in which the first Mutual Fund Regulations came into being, under

which all mutual funds, except UTI were to be registered and governed. The erstwhile

Kothari Pioneer (now merged with Franklin Templeton) was the first private sector

mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive

and revised Mutual Fund Regulations in 1996. The industry now functions under the

SEBI (Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33

mutual funds with total assets of Rs. 1,21,805 crores.

Fourth Phase – since February 200316

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.

17

1.6 CATEGORIES OF MUTUAL FUND:

Mutual funds can be classified as follow:

Based on their structure:

Open-ended funds: Investors can buy and sell the units from the fund, at any point of

time.

18

Close-ended funds: These funds raise money from investors only once. Therefore,

after the offer period, fresh investments can not be made into the fund. If the fund is

listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley

Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided

liquidity window on a periodic basis such as monthly or weekly. Redemption of units

can be made during specified intervals. Therefore, such funds have relatively low

liquidity.

Based on their investment objective:

A) 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.

19

iii|) Dividend yield funds- it is similar to the equity diversified funds except

that they invest in companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related

through some theme.

e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A

banking sector fund will invest in banking stocks.

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

B) 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.

C) 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.

20

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 mis-pricing between cash market and derivatives market. Funds are

allocated to equities, derivatives and money markets. Higher proportion

(around 75%) is put in money markets, in the absence of arbitrage

opportunities.

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

government securities.

vi) Income funds LT- Typically, such funds invest a major portion of the

portfolio in long-term debt papers.

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

an exposure of 10%-30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line

with that of the fund.

21

1.7 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.

1.8 WHY INVESTOR NEEDS MUTUAL FUND :-

Mutual funds offer benefits, which are too significant to miss out. Any investment

has to be judged on the yardstick of return, liquidity and safety. Convenience and tax

efficiency are the other benchmarks relevant in mutual fund investment. In the wonderful

game of financial safety and returns are the tows opposite goals and investors cannot be

nearer to both at the same time. The crux of mutual fund investing is averaging the risk.

Many investors possibly don’t know that considering returns alone, many mutual

funds have outperformed a host of other investment products. Mutual funds have

historically delivered yields averaging between 9% to 25% over a medium to long time

frame. The duration is important because like wise, mutual funds return taste bitter

with the passage of time. Investors should be prepared to lock in their investments 22

preferably for 3 years in an income fund and 5 years in an equity funds. Liquid funds

of course, generate returns even in a short term.

MUTUAL FUND RISK:-

Mutual funds face risks based on the investments they hold. For example, a bond

fund faces interest rate risk and income risk. Bond values are inversely related to

interest rates. If interest rates go up, bond values will go down and vice versa. Bond

income is also affected by the changes in interest rates. Bond yields are directly related

to interest rates falling as interest rates fall and rising as interest rates.

Similarly, a sector stock fund is at risk that its price will decline due to

developments in its industry. A stock fund that invests across many industries is more

sheltered from this risk defined as industry risk.

Followings are glossary of some risks to consider when investing in mutual

funds:-

COUNTRY RISK :-

The possibility that political events (a war, national election), financial problems

(rising inflation, government default), or natural disasters will weaken a country’s

economy and cause investments in that country to decline.

INCOME RISK :-

The possibility that political events (a war, national election), financial problems

(rising inflation, government default), or natural disasters will weaken a country’s

economy and cause investments in that country to decline.

MARKET RISK :-

The possibility that stock fund or bond fund prices overall will decline over short or

even extended periods. Stock and bond markets tend to move in cycles, with periods

when prices rise and other periods when prices fall.

23

GRAPH 1.3:- RISK RETURN REWRAD IN MUTUAL FUND

Liquid Fund

Short Term Fund

Income Fund

MIP

Balance Fund

Equity Fund

This graph shows risk and return impact on various mutual funds. There is a direct

relationship between risks and return, i.e. schemes with higher risk also have potential to

provide higher returns.

24

INTRODUCTION

TO

COMPANY PROFILE

25

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 4.6 million and over 20 years of rich

experience in fund management consistently delivering value to its investors.

SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank of

India' one of India's largest banking enterprises, and Société Générale Asset

Management (France), one of the world's leading fund management companies

that manages over US$ 500 Billion worldwide.

Today the fund house manages over Rs 28500 crores of assets and has a diverse

profile of investors actively parking their investments across 36 active schemes.

In 20 years of operation, the fund has launched 38 schemes and successfully

redeemed 15 of them, and in the process, has rewarded our investors with

consistent returns. Schemes of the Mutual Fund have time after time

outperformed benchmark indices, honored us with 15 awards of performance and

have emerged as the preferred investment for millions of investors. The trust

reposed on us by over 4.6 million investors is a genuine tribute to our expertise

in fund management.

SBI Funds Management Pvt. Ltd. serves its vast family of investors through a

network of over 130 points of acceptance, 28 Investor Service Centres, 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.

26

Growth through innovation and stable investment policies is the SBI MF credo.

1.2 PRODUCTS OF SBI MUTUAL FUND:

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, Sectoral Funds

and Index Funds. Diversified Equity Funds invest in various stocks across

different sectors while sectoral funds which are specialized Equity Funds

restrict their investments only to shares of a particular sector and hence, are

riskier than Diversified Equity Funds. Index Funds invest passively only in the

stocks of a particular index and the performance of such funds move with the

movements of the index.

Magnum COMMA Fund

Magnum Equity Fund

Magnum Global Fund

Magnum Index Fund

Magnum Midcap Fund

Magnum Multicap Fund

27

Magnum Multiplier plus 1993

Magnum Sectoral 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

Debt schemes

Debt Funds invest 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 Children’s benefit Plan

Magnum Gilt Fund

28

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

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

29

1.3 COMPETITORS OF SBI MUTUAL FUND

Some of the main competitors of SBI Mutual Fund in Patna 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

30

1.4 AWARDS AND ACHIEVEMENTS

SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award -

8 times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year

2005-2006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the Year

Award 2007 and 5 Awards for our schemes.

31

32

Chapter - 3

Objectives and scope

33

1.1 OBJECTIVES OF THE STUDY

a. To find out the Preference of the investors for Asset Management of company.

b. To know the preference of the portfolios.

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.

1.2 Scope of the study

A big boom has been witnessed in Mutual Fund Industry in resent times. A large number

of new players have entered the market and trying to gain market share in this rapidly

improving market.

The study will help to know the preferences of the customers, which company, portfolio,

mode of investment, option for getting return and so on they prefer. This project report

may help the company to make further planning and strategy.

34

Chapter – 4

Research Methodology

35

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY:-

Research methodology is a way to systematically show the research problem. It

may be understood as a science of studying how research is done scientifically. It is

necessary for the researcher to know not only the research methods but also the

methodology. This Section includes the methodology which includes. The research

design, objectives of study, scope of study along with research methodology and

limitations of study etc.

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 journals and websites.

Duration of Study:

The study was carried out for a period of two months, from 8 Dec to 8th Jan 2009.

Sampling:

Sampling procedure:

36

The sample was selected of them who are the customers/visitors of State Bank if India,

Boring Canal Road Branch, 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.

37

Limitation:

This study also includes some limitations which have been discussed as follows:

Though every one used to be very co-operative but every detail was unable to be

disclosed to me as the officials has to maintain secrets of the company.

It is difficult to cover all the function of the company.

Because of the limited time period, the survey work was conducted in the Mumbai

region and the sample size was taken as 200 respondents only.

Some of the persons were not so responsive.

Some respondents were reluctant to divulge personal information which can affect

the validity of all responses.

Possibility of error in data collection because many of investors may have not

given actual answers of my questionnaire.

38

Chapter – 5Data Analysis

& Interpretation

39

ANALYSIS & INTERPRETATION OF THE DATA

1. (a) Age distribution of the Investors of Mumbai

Age Group <= 30 31-35 36-40 41-45 46-50 >50

No. of

Investors

12 18 30 24 20 16

Interpretation:

According to this chart out of 120 Mutual Fund investors of Mumbai 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.

40

(b). Educational Qualification of investors of MUMBAI

Educational Qualification Number of Investors

Graduate/ Post Graduate 88

Under Graduate 25

Others 7

Total 120

Interpretation:

Out of 120 Mutual Fund investors 71% of the investors in Mumbai are

Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under HSC).

41

c). Occupation of the investors of Mumbai

.

Interpretation:

Occupation No. of InvestorsGovt. Service 30

Pvt. Service 45

Business 35

Agriculture 4

Others 6

42

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.

(d). Monthly Family Income of the Investors of Mumbai

Income Group No. of Investors<=10,000 5

10,001-15,000 12

15,001-20,000 28

20,001-30,000 43

>30,000 32

Interpretation:

43

In the Income Group of the investors of Mumbai 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

(2) Investors invested in different kind of investments.

Kind of Investments No. of RespondentsSaving A/C 195Fixed deposits 148Insurance 152Mutual Fund 120Post office (NSC) 75Shares/Debentures 50Gold/Silver 30

Real Estate 65

44

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.

3. Preference of factors while investing

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

No. of

Respondents

40 60 64 36

45

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

4. Awareness about Mutual Fund and its Operations

Response Yes No

No. of Respondents 135 65

46

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.

5. Source of information for customers about Mutual Fund

Source of information No. of Respondents

Advertisement 18

Peer Group 2547

Bank 30

Financial Advisors 62

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.

6. Investors invested in Mutual Fund

Response No. of Respondents

YES 120

NO 80

Total 200

48

Interpretation:

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

in Mutual Fund.

7. Reason for not invested in Mutual Fund

Reason No. of Respondents

Not Aware 65

Higher Risk 5

Not any Specific Reason 1049

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.

8. Investors invested in different Assets Management Co. (AMC)

Name of AMC No. of InvestorsSBIMF 55

UTI 75HDFC 30

Reliance 75ICICI Prudential 56

Kotak 4550

Others 70

Interpretation:

In Patna 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.

9. Reason for invested in SBIMF

Reason No. of Respondents

Associated with SBI 35

Better Return 5

51

Agents Advice 15

Interpretation:

Out of 55 investors of SBIMF 64% have invested because of its association with

Brand SBI, 27% invested on Agent’s Advice, 9% invested because of better return.

10. Reason for not invested in SBIMF

Reason No. of Respondents

Not Aware 25

52

Less Return 18

Agent’s Advice 22

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 Agent’s

Advice.

11. Preference of Investors for future investment in Mutual Fund

Name of AMC No. of InvestorsSBIMF 76

53

UTI 45HDFC 35

Reliance 82ICICI Prudential 80

Kotak 60Others 75

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.

12. Channel Preferred by the Investors for Mutual Fund Investment

Channel Financial Advisor Bank AMC

54

No. of Respondents 72 18 30

Interpretation:

Out of 120 Investors 60% preferred to invest through Financial Advisors, 25%

through AMC and 15% through Bank.

13. Mode of Investment Preferred by the Investors

Mode of Investment One time Investment Systematic Investment Plan (SIP)

55

No. of Respondents 78 42

Interpretation:

Out of 120 Investors 65% preferred One time Investment and 35 % Preferred

through Systematic Investment Plan.

14. Preferred Portfolios by the Investors

Portfolio No. of Investors

56

Equity 56

Debt 20

Balanced 44

Interpretation:

From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and

17% preferred Debt portfolio

15. Option for getting Return Preferred by the Investors

Option Dividend Payout Dividend Growth

57

Reinvestment

No. of Respondents 25 10 85

Interpretation:

From the above graph 71% preferred Growth Option, 21% preferred Dividend

Payout and 8% preferred Dividend Reinvestment Option.

16. Preference of Investors whether to invest in Sectoral Funds

Response No. of Respondents

58

Yes 25

No 95

Interpretation:

Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because

there is maximum risk and 21% prefer to invest in Sectoral Fund.

59

Chapter – 6

Findings and Conclusion

Findings

60

In Mumbai 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 Mumbai 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.61

Out of 55 investors of SBIMF 64% have invested due to its association with the

Brand SBI, 27% Invested because of Advisor’s 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 Agent’s 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 Sectoral Fund.

Conclusion

62

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, 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

Mumbai 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 etc. they are

well known Brand, 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.

Only those people invest directly who know well about mutual fund and its operations

and those have time.

63

64

Chapter – 7

Suggestions

And

Recommendations

Suggestions and Recommendations

65

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.

66

Younger people aged under 35 will be a key new customer group into

the future, so making greater efforts with younger customers who show

some interest in investing should pay off.

Customers with graduate level education are easier to sell to and there

is a large untapped market there. To succeed however, advisors must

provide sound advice and high quality.

Systematic Investment Plan (SIP) is one the innovative products

launched by Assets Management companies very recently in the industry.

SIP is easy for monthly salaried person as it provides the facility of do the

investment in EMI. Though most of the prospects and potential investors

are not aware about the SIP. There is a large scope for the companies to

tap the salaried persons.

67

QUESTIONNAIRE

Dear Sir/ madam

I am Snehal Chavan doing BBA from BHARTI VIDYAPEETH,IMED. I m preparing a project on A STUDY ON MUTUAL FUND. For this I have designed a Questionniare to know your views. please fill the given as per your thinking and experiences with this. I will be thankful to you for this.

1. Personal Details:

(a). Name:- (b). Add: - Phone:- (c). Age:- (d). Qualification:-

(e). Occupation. Pl tick (√)

Govt. Ser Pvt. Ser Business Agriculture Others

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

Up to Rs.10,000

Rs. 10,001 to 15000

Rs. 15,001 to 20,000

Rs. 20,001 to 30,000

Rs. 30,001 and above

2. What kind of investments you have made so far? Pl tick (√). All applicable.

a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund

e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver 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

Graduation/PG Under Graduate Others

68

7. If not invested in Mutual Fund then why?

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

8. If yes, in which Mutual Fund you have invested? Pl. tick (√). All applicable.

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? Pl. tick (√).

69

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

14. When you want to invest which type of funds would you choose?

a. Having only debt portfolio

b. Having debt & equity portfolio.

c. Only equity portfolio.

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

a. Dividend payout b. Dividend re-investment c. Growth in NAV

16. Instead of general Mutual Funds, would you like to invest in sectorial funds? Please tick (√). Yes No

Thank you very much for your co-operation!

Snehal chavan

70

BIBLIOGRAPHY

NEWS PAPERS

OUTLOOK MONEY

TELEVISION CHANNEL (CNBC AAWAJ)

MUTUAL FUND HAND BOOK

FACT SHEET AND STATEMENT

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