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Achal Gupta
Managing Director & Chief Executive Officer

The Indian Stock Markets traded in a range with a mix of investors’

sentiments and varying cues from the international markets. Looking at
the key indices, BSE Sensex closed 0.95% higher to close at 17868
points, while the S&P Nifty closed for the month at 5367.6 points, up
marginally by 1.04%. Among the sectors, there was an overall positive
trend, except for few sectors like Oil and Gas, and Healthcare which
showed a decline. BSE Oil and Gas and BSE Healthcare showed a
decline of 6.5% and 2.64% respectively during the month. Metals and
Realty were among the top gainers with BSE Metal and Realty clocking
5.51% and 4.73% growth respectively during the month.

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The Reserve Bank of India announced its First Quarter review of its
Monetary Policy 2010-11 indicating action against rising inflation. The
repo and reverse repo rates were increased by 25 and 50 basis points to
5.75% and 4.50% respectively. The CRR, however, was maintained
unchanged at 6%. The markets did not show any sharp reactions to the
announcement, since it had already pre-empted and factored in the rate
changes by the Central Bank.

During July 2010, the average assets under management (AAUM)

showed a marginal decline of 1.5% to close at Rs. 6.66 Lakh Crore. The
tightness in liquidity due to outflows of 3G auction and advance tax
payments continued to loom during the month. However, during the
month, the AAUM of SBI Mutual Fund grew by 14.5% to close at
Rs.38,513 crore. We would like to thank the trust and participation of
our investors that has been aiding our growth.

Equity as an asset class brings in a great potential for wealth creation

that can help an investor build a corpus over a long term. Launched in
1993, Magnum Multiplier Plus is one of our key schemes that has a
proven track record. The scheme invests in equities of high growth
companies with an endeavor to provide investors with long term capital
appreciation. We will be glad to help you further to understand the risk-
return profile of Magnum Multiplier Plus, and of our other equity
schemes which are designed to help you with a variety of investment
objectives. Feel free to approach your nearest SBI Mutual Fund Investor
Service Center for more details.

We are absolutely committed to provide unparalleled service to our

investors’ and cater to your information, investment and servicing
needs. Please feel free to call at our dedicated customer care numbers 1-
800-425-5425 (MTNL/BSNL users only) and 080-26599420 from
Monday to Saturday (8am – 10pm) or write to us at
customer.delight@sbimf.com with your queries. Alternatively you can also visit
your nearest Investor Service Centre / Investor Service Desk for any assistance.

Navneet Munot
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Chief Investment Officer
SBI Funds Management Pvt. Ltd

Globally, the economic data point towards tapering of growth momentum and
as the US Fed chairman said, the environment remained “unusually uncertain”.
Our assessment is that given the powerful forces of deleveraging in household
and financial sector balance sheets and limited flexibility on the fiscal side,
deflation remains the bigger near term risk for developed world. In this
backdrop, we expect monetary policy to remain extremely accommodative
leading to excess liquidity supporting asset markets despite worsening
economic fundamentals. Despite record fiscal deficits, treasury yields are at
multi month low as bond prices are pricing in possibility of deflationary
environment to continue. One of the silver linings is healthy corporate balance
sheets which supports the downside in equity and credit markets.

Prices of several soft commodities like Wheat, Sugar, Cocoa etc shot up
sharply on production disruptions in some key regions. Sharp swings in supply
situation due to climatic conditions and demand side accentuated by financial
investment are leading to unpredictable and violent moves in some of these
commodities. Energy, food and water are some of the long term structural
issues due to ‘climate change’ and changing population and growth dynamics
in the world. There would be distinct impact (opportunities as well as
challenges) on several businesses which investors should keep an eye on.

Corporate results for First quarter of FY 2010-11 announced so far have shown
a mixed trend. While the top line growth has been ahead of expectations, there
was pressure on margins in some of the sectors. Banks results were better than
expected and the sector outperformed the market last month. IT companies

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showed a strong top line growth reflecting robust demand environment across
verticals, however, there was divergence within the sector in terms of growth
in margins and bottom line. The sectors which reported negative growth in
earnings were Cement, Telecom and Power. In case of companies in
engineering sector, sales growth was below expectations. However, given the
record ‘Bill to book ratio’, there is strong visibility of growth over the next
several quarters. Within the economy, investment would be a bigger driver of
growth for next few years and several companies in the infrastructure sector
would be beneficiary of this trend.

Foreign Institutional Investors (FIIs) continue to pour money into our equity
market with their year to date investment crossing $ 10 billion mark. The long
term structural story of India based on favorable demographics, domestic
consumption, high savings, infrastructure build up and opportunities in off
shoring is quite compelling. Recently announced reforms on fuel prices, new
draft Direct Taxes code and government’s efforts to push GST have aided to
positive sentiments. Having said that, market is trading at fair valuation and
near term gains could be capped. We recommend that in view of a structural
growth story and opportunities in stock picking, investors should remain
invested in equities instead of trying to time the market. In the near term,
market would watch developments in the global markets and trends in
Monsoon. Progress of monsoon has to be keenly watched which is relatively
more critical this year due to pressure on food prices and its impact on rural
economy, inflation and Govt. finances.

It its first quarter review of monetary policy, RBI increased repo rate by 25 bps
to 5.75% and reverse repo rate by 50 bps to 4.50% which will shrink the
corridor between these two rates to 125 bps. In the backdrop of strong growth
momentum, widening current account deficit, higher credit-deposit ratio and
elevated inflation and inflationary expectations, RBI had to increase the pace
towards normalization of monetary policy. Indeed, the global environment is
quite hazy and that might be weighing on RBI’s mind, however, price situation
in both goods and asset markets were clearly indicating towards early signs of
overheating.

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Banking system has moved to a balanced to tight liquidity scenario from the
high surplus scenario of the past two years. This has been a result of RBI’s
shift from a balance sheet expansion mode to a tightening stance as India’s
growth and inflation pick up. This trend of liquidity withdrawal has been
further accentuated by significant currency leakages from the banking system
and the highly uncertain global environment that has not only impacted our
current account but has also not yet yielded the anticipated capital flows. In
this backdrop, short term rates have shot up sizably to the extent of 1-2% over
the last few months. With pick up in credit, seasonal factors and impact of
systemic changes like Base Rate and RBI rate increases, it is expected that
short term rates may remain elevated notwithstanding intermittent bouts of
easy liquidity.

While Government’s fiscal position received a big boost in the form of telecom
license auction receipts and decontrol of some of the petroleum products, the
borrowing programme would still be large for the Banking system to absorb,
especially in a stubbornly inflationary scenario. However, continued global
uncertainty and bleak prospects of growth in the developed economies has kept
a check on rising bond yields. On balance, it is expected that interest rates
would see an upward bias but at the same time, upsides would remain capped
with further improvements in government balance sheet, drop in inflationary
readings aided by base effect and expected pick up in Banks’ NDTL growth
due to good inflow of overseas liquidity in to our economy. With increasing
global linkages and foreign participation, debt markets here are expected to
witness increased volatility instead of secular trends.

Our fixed income funds have a very cautious positioning on duration and
liquidity. As far as liquid and ultra short term funds are concerned, we will
continue to maintain relatively lower maturity profile and higher liquidity.
While the core portfolios of fixed income funds are invested in highly liquid
short term assets, we would play duration on a tactical basis as we expect
higher volatility. We recommend investors with risk appetite to invest in our
short term fund and dynamic bond fund which are positioned to take advantage
of these opportunities. From a medium term perspective, there would be good
entry opportunities in long bonds in this quarter. We re-iterate that while

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domestic situation warrants higher rates, one must not ignore strong
deflationary forces in rest of the world.

News of the RMB REFORMS LED TO POSITIVE SENTIMENTS on all

Asian currencies including the rupee, but concerns about the rising trade
deficit & volatility in the equity market keep the upside checked for the rupee.
The rupee closed unchanged at 46.50 against the dollar. India’s current account
deficit of US $ 13 billion in Q1 of 2010, driven by a record trade deficit of $ 31.5
billion.
The govt. announced bold measures to tackle the oil subsidy issue, including
the shift to a market determined petrol price and a hike in diesel, LPG and
kerosene prices.

WINING AWARD OF SBI MUTUAL FUND

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 HISTORY OF MUTUAL FUNDS:

World:

When three Boston securities executives pooled their money together in

1924 to create the first mutual fund, they had no idea how popular mutual
funds would become.
The idea of pooling money together for investing purposes started in
Europe in the mid-1800s. The first pooled fund in the U.S. was created in
1893 for the faculty and staff of Harvard University. On March 21st,
1924 the first official mutual fund was born. It was called the
Massachusetts Investors Trust. After one year, the Massachusetts
Investors Trust grew from $50,000 in assets in 1924 to $392,000 in assets
(with around 200 shareholders).
In contrast, there are over 10,000 mutual funds in the U.S. today totaling
around $7 trillion (with approximately 83 million individual investors)
according to the Investment Company Institute.
The stock market crash of 1929 slowed the growth of mutual funds. In
response to the stock market crash, Congress passed the Securities Act of
1933 and the Securities Exchange Act of 1934. The SEC (U.S. Securities
and Exchange Commission) helped create the Investment Company Act
of 1940 which provides the guidelines that all funds must comply with
today.
With renewed confidence in the stock market, mutual funds began to
blossom. By the end of the 1960s there were around 270 funds with $48
billion in assets.
In 1976, John C. Bogle opened the first retail index fund called the First
Index Investment Trust. It is now called the Vanguard 500 Index fund
and in November of 2000 it became the largest mutual fund ever with
$100 billion in assets.

INDIA:
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 the. The history of mutual funds in India can be broadly
divided into four distinct phases

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First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. It was set up by the Reserve Bank of India and functioned
under the Regulatory and administrative control of the Reserve Bank of
India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI
was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of
assets under management.

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

1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non- UTI Mutual Fund established in June 1987 followed by
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 crore.

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

With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
fund families. Also, 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.
The number of mutual fund houses went on increasing, with many
foreign mutual funds setting up funds in India and also the industry has
witnessed several mergers and acquisitions. As at the end of January
2003, there were 33 mutual funds with total assets of Rs.1,21,805 crores.

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The Unit Trust of India with Rs.44,541 crore of assets under management
was way ahead of other mutual funds.

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. As at the end of September, 2004, there were 29 funds,
which manage assets of Rs.143108 crores under 421 schemes.
The graph indicates the growth of assets over the years

PNB, BOB and LIC. It is registered with SEBI and functions under the
Mutual Fund Regulations. As at the end of September, 2004, there were
29 funds, which manage assets of Rs.143108 crores under 421 schemes.
The graph indicates the growth of assets over the years

Finance Department

Finance management is that managerial activity which is concerned with

the planning and controlling of the firm’s financial resources.
The subject of financial arrangement is interest both to academicians and
practicing managers. It is great interest to the academicians because the
subject is still developing and there are still certain areas in financial
management where controversies exits for which no unanimous solutions
have been reached as yet the practicing managers are interested in the
subject to course among the most crucial decision of the firm are those
which relate to financial and an undertaking of the theory of financial
management provides them which conceptual and analytical in sights to
make these decisions skill fully. The raising of capital fund and using
them for generating returns and paying returns to the supplies of fund are
called the financial function of the firm. There are two types of funds that
a firm raise equity fund and borrowed funds.

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SSSTPL is financially very sound. The company is spending heavily on
Quality of the product and giving satisfaction to the customer & also
fulfill the needs and requirements of the employees in the organization.

The main and important function of Finance & Account department

are :-
Sales Accounting.
Bills Payable.
General Accounting.
Cost Accounting.
Prepare Balance Sheet.

Investment Avenues

The possible avenues for investment can be divided into following

categories:

Fixed income instruments:

This product class includes options such as Fixed Deposits, Debentures,
Bonds, Preference shares etc. These investments are relatively safer but
limited upside on returns.
Mutual Funds:
Mutual funds are surrogate direct investment in debt or equity. A detailed
analysis of mutual funds as an investment avenue is done in later pages.
Insurance:
From security, insurance is fast moving towards investment source.

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 MUTUAL FUNDS AND YOU

A mutual fund is a pool of money, collected from investors and is

invested according to certain investment objectives. The money thus
collected is then invested in capital market instruments such as shares,
debentures and other securities. The income earned through these
investments and the capital appreciation realized is shared by its unit
holders in proportion to the number of units owned by them.

Important characteristics of mutual funds:

1. A mutual fund actually belongs to the investors who have

pooled their fund. The ownership of the mutual fund is in the
hands of the investor.
2. A mutual fund is managed by investment professionals and
other services providers, who earn a fee for their services, from
the fund.
3. The pool of funds is invested in a portfolio of marketable
investments. The value of the portfolio is updated everyday. A
mutual fund scheme issues units that are normally priced at
Rs.10 during the initial offer.
The flow chart below describes broadly the working of a mutual fund:

Benefits of investing in mutual fund:

As opposed to investing directly in the three asset classes, accessing them
through a mutual fund has several advantages:
1. Relatively less expensive:
When compared to direct investments in the capital market, mutual
funds cost less. This is due to saving in brokerage costs, demat costs,
depository costs etc.
2. Transparency:
You will always have access to up-to-date information on the value of
your investment in addition to the complete portfolio of investment,
the proportion allocated to different assets and the fund manager’s
investment strategy.
3. Flexibility:

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 Through features such as regular investment plans, regular withdrawal
plan and dividend investment plans, you can systematically invest or
withdraw funds according to your needs and convenience.
4. Sebi regulated :
All mutual funds are registered with Securities Exchange Board of
India (SEBI) and function within the provisions and regulations that
protect the interests of investors.
5. Professional Management:
Your money is managed by professional who have the experience and
resources to thoroughly the economy and financial markets, and spot
good opportunities.
6. Diversification
With smaller amount, you can achieve a higher degree of
diversification and reduce your risk.
7. Liquidity and convenience:
Investing and getting back your money is easy. Also, there is very
little paper work, and it is very easy to track and monitor your
investments.
8. Tax Benefits:
Some mutual fund schemes offer you tax rebates under section 88. In
addition, your returns from mutual funds (dividends and capital
appreciation) are also eligible for favorable tax treatment.

DISADVANTAGES OF MUTUAL FUNDS

The following are the disadvantages of investing through mutual fund:

1. No control over cost

Since investors do not directly monitor the fund’s operations, they
cannot control the costs effectively. Regulations therefore usually
limit the expenses of mutual funds.
2. No tailor-made portfolio
Mutual fund portfolios are created and marketed by AMCs, into which
investors invest. They can not made tailor made portfolio.
3. Managing a portfolio of funds

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 As the number of funds increase, in order to tailor a portfolio for
himself, an investor may be holding a portfolio fund, with the costs of
monitoring them and using him, being incurred by him.

Net asset of mutual fund

The investors’ fund is deployed in a portfolio of securities by the fund
manager. The value of these investments keeps changing as the market
price of the securities change. Since investors are free to enter and exit
the fund at any time, it is essential that the market value of their
investment is used to determine the price at which such entry and exit
will takes place. The net assets represent the market value of assets which
belongs to the investors, on a given date. Net assets are calculated as:
Market value of investments
Plus current assets and other assets
Plus accrued income
Less current liabilities and other liabilities
Less accrued expenses

NAV
Net asset value or NAV of a mutual fund is the value of one unit of
investment in the fund, in net asset terms. It is computing by dividing the
net assets of the fund by the no. of units that are outstanding in the books
of the fund. Appreciation or reduction in value of investments is reflected
in net asset value (NAV) of the concerned scheme, which is declared by
the fund from time to time.
Net asset value on a particular date reflects the realisable value that the
investor will get for each unit that he his holding if the scheme is
liquidated on that date.
Factors that effect the NAV of a fund:
The major factors affecting the NAV of a fund are:
 Sale and purchase of securities
 Sale and repurchase of units
 Valuation of assets
 Accrual of income and expenses

The NAV of a fund is primarily affected by the market value of the

investment portfolio. The number of units outstanding, the accrual of

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expenses and income, are other factors that impact the NAV of a fund.

These followings are the SEBI regulations regarding NAV computation

and disclosure:
1. All mutual funds have to disclose their NAV everyday, by posting
it on the AMFI website.
2. Open-ended funds have to compute and disclose NAV everyday,
closed end funds can compute NAV every week, but disclosure
has to be made everyday.
3. Closed end schemes not mandatory listed on stock exchange can
publish NAV according to the periodicity of 1 month or 3 months,
as permitted by SEBI.

Sale and Repurchase price

The sale price is the price at which a mutual fund is willing to sell to
investor additional units. An investor, who buys or invests in a mutual
fund, pays the sales price. The repurchase price represents the price at
which the mutual fund is willing to buy the units back from the investor.
This is the price at which the investor can sell his holdings to the mutual
funds.

Systematic Investment Plan (SIP):

An SIP is a vehicle offered by mutual funds to help an individual save

regularly. It is just like a recurring deposit with the post office or bank
where you put in a small amount every month. The difference here is that
the amount is invested in a mutual fund. The minimum amount to be
invested can be as small as Rs 500 and the frequency of investment is
usually monthly or quarterly.

How an SIP works

An SIP allows you to take part in the stock market without trying to
second guess its movements. An SIP means you commit yourself to
investing a fixed amount every month. Let's say it is Rs1,000. When the
NAV is high, you will get fewer units. When it drops, you will get more
units.

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 Date NAV Approx number of units
you will get at Rs 1,000
Jan 1 10 100
Feb 1 10.5 95.23
Mar 1 11 90.90
Apr 1 9.5 105.26
May 1 9 111.11
Jun 1 10 100

Within six months, you would have 602.5 units by investing just Rs.1,000
every month.

How an SIP scores:

1. Becomes a disciplined investor

2. Reduces the average cost

3. Does not strain day-to-day finances

Fees and expenses:

Mutual funds are in business first and foremost to make money for
themselves; their second priority is to make money for their shareholders.
For this reason, all mutual funds charge fees, and these fees come in
several different varieties. Some of them are common to all mutual funds;
others are charged by some but not others.
When investing in mutual funds, investors tend to only look at the
returns. However, it also pays to be aware of what the fund is charging
you. The cost structure is set by the mutual fund regulator, the Securities
and Exchange Board of India.

One-time expenses:

Entry load
It is the fee you pay when you buy the units of a fund. It is a percentage
of the amount you are investing. Let's say the entry load is 2.25%. That
means if you invest Rs 5,000, Rs 112.5 will be the fee you pay.
The balance will be invested and you will be given units accordingly.

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Exit load
It is the fee you pay when you sell the units of a fund. It is a percentage
of the total amount you will get when you sell the units of a fund.
Contingent Deferred Sales Charge
It is an exit load charged in particular circumstances. For example,
Fidelity Equity Fund charges a load of 1% if you sell your units within
180 days of buying them. If you sell it after that, you pay no load. In
technical terms, the 1% is referred to as a CDSC. This is the charge from
which the mutual fund meets its selling and distribution expenses on an
ongoing basis. The maximum load that can be charged is 7%. Today, the
highest load is 2.25%, which is charged for equity funds.
Generally, if a fund charges an entry load, it will not charge an exit loan.
They tend to charge just one load.

Recurring expenses:

These are the expenses incurred of running a fund. These involve a broad
array of expenses like fund management fee, expenses for running and
maintaining a mutual fund, selling and promotion expenses. All these fall
under a single basket called 'expense ratio or annual recurring expenses'
that is disclosed every March and September. So if you want to see how
'expensive' a fund is, you can check the expense ratio. The maximum
recurring expenses that an equity fund can charge is 2.5% of the average
daily net assets.
The fund can charge 2.50% for the first Rs100 crore of assets under
management, 2.25% for next Rs 300 crore and 2% for the next Rs 300
crore; all funds handling more than Rs 700 crore can charge 1.75%.
This expense is calculated on a daily basis and the Net Asset Value that
you see is what is declared after the expenses are deducted. Since this is
charged regularly, a high expense ratio over the long-term may eat
substantially into the returns.
Initial issue expenses
Also known as new fund offer expenses, this is an expense which fund
houses charge at the time of launching a fund. This is subject to a
maximum of 6% of the amount raised during the new fund offer period.
This expense is amortised over a period not exceeding five years. That
means this expense amount is distributed over the five years and not

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charged in the first year itself. However, as per a recent SEBI guideline,
open-ended equity funds can no longer do this (close-ended funds can).
They will have to meet the expenses from the load itself.

TYPES OF MUTUAL FUND SCHEMES:

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 BY STRUCTURE
 Open-Ended Schemes
 Close-Ended Schemes

BY INVESTEMENT OBJECTIVE
 Growth Schemes
 Income Schemes
 Balanced Schemes
 Money market Schemes

OTHER SCHEMES
 Tax Saving Schemes
 Special Schemes
Index Schemes
Sector Specific Schemes

By Structure:

Open-Ended Funds
An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy
and sell units at Net Asset Value related prices. The key feature of open-
end schemes is liquidity.
Closed-Ended Funds
A closed-end fund has a stipulated maturity period which generally
ranging from 3 to 15 years. The fund is open for subscription only during
a specified period. Investors can invest in the scheme at the time of the
initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide
an exit route to the investors, some close-ended funds give an option of
selling back the units to the Mutual Fund through periodic repurchase at
NAV related prices. SEBI Regulations stipulate that at least one of the
two exit routes is provided to the investor.

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By Investment Objective:

Growth Funds
The aim of growth funds is to provide capital appreciation over the
medium to long term. Such schemes normally invest a majority of their
corpus in equities. It has been proved that returns from stocks, have
outperformed most other kind of investments held over the long term.
Growth schemes are ideal for investors having a long term outlook
seeking growth over a period of time.

Income Funds
The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such
as bonds, corporate debentures and Government securities. Income Funds
are ideal for capital stability and regular income.

Balanced Funds
The aim of balanced funds is to provide both growth and regular income.
Such schemes periodically distribute a part of their earning and invest
both in equities and fixed income securities in the proportion indicated in
their offer documents. In a rising stock market, the NAV of these
schemes may not normally keep pace, or fall equally when the market
falls. These are ideal for investors looking for a combination of income
and moderate growth.

Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation
of capital and moderate income. These schemes generally invest in safer
short-term instruments such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money. Returns on these schemes
may fluctuate depending upon the interest rates prevailing in the market.
These are ideal for Corporate and individual investors as a means to park
their surplus funds for short periods.
Other Schemes:
Tax Saving Schemes

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These schemes offer tax rebates to the investors under specific provisions
of the Indian Income Tax laws as the Government offers tax incentives
for investment in specified avenues. Investments made in Equity Linked
Savings Schemes (ELSS) and Pension Schemes are allowed as deduction
u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities
to investors to save capital gains u/s 54EA and 54EB by investing in
Mutual Funds.

Special Schemes:

Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the
offer document. The investment of these funds is limited to specific
industries like InfoTech, FMCG, and Pharmaceuticals etc.

Index Schemes
Index Funds attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50

Sectoral Schemes
Sectoral Funds are those which invest exclusively in a specified sector.
This could be an industry or a group of industries or various segments
such as 'A' Group shares or initial public offerings.

Mutual funds offer a variety of options to investors, in the manner in

which the returns from their investments are structured.
At a broad level, the investors have two options:

Dividend option and growth option

Investors, who choose a dividend option on their investment, will receive
dividends from the mutual funds, as and when such dividend are declared
Investors who do not require periodic income distributions can choose the
growth option, where the income earned are retained in the investment
portfolio and allow to grow rather than being distributed to the investors.
Mutual funds also provide another option to investors in the form of re-
investment. Investors re-invest the dividends that are declared by the

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mutual fund, back into the fund itself, at NAV that is prevalent at the time
of re-investment.

ORGANIZATION OF MUTUAL FUNDS :

Regulatory structure of mutual funds

The structure of mutual fund in India is governed by the SEBI (mutual

fund) regulations, 1996. These regulations make it mandatory for mutual
funds to have a three tier structure of sponsor-trustee-asset Management
Company. The sponsor is the promoter of the mutual fund and appoints
the trustees. The trustees are responsible to the investors in the mutual
fund and appoint the AMC for managing the investment portfolio. SEBI
regulations also provide for who can be a sponsor, trustee and AMC and
specify the format of agreements between these entities.

1. Sponsor appoints the trustees, custodians and the AMC with prior
approval of SEBI and in accordance with SEBI regulations.
2. Sponsor must have at least 5-year track record of business interest in
the financial market.

24
3. Sponsor must have been profit making in at least 3 of the above 5
years.

Mutual fund can be structured in following way:-

1. Company form, in which investors hold shares of the mutual fund. In
this management of the fund is in the hands of an elected board, which in
turn appoints investment managers to manage the fund.
2. Trust form, in which the funds of the investors are held by a trust on
behalf of the investors. The trust appoints investment managers and
monitors their functioning in the interest of investors.
The sponsors, acting through the trustees, appoint all the functionaries
required for managing the investor’s money. These functionaries are the
following:
1. Brokers
2. Investment managers
3. Selling agents
4. Custodians
5. Depository participants
6. Bankers
7. Legal advisors
8. Auditors

Sponsor
Sponsor is the person who acting alone or in combination with another
body corporate establishes a mutual fund. Sponsor must contribute at
least 40% of the net worth of the Investment Manged and meet the
eligibility criteria prescribed under the Securities and Exchange Board of
India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible
or liable for any loss or shortfall resulting from the operation of the
Schemes beyond the initial contribution made by it towards setting up of
the Mutual Fund.

Trust

25
The Mutual Fund is constituted as a trust in accordance with the
provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed
is registered under the Indian Registration Act, 1908.
Trustee
Trustee is usually a company (corporate body) or a Board of Trustees
(body of individuals). The main responsibility of the Trustee is to
safeguard the interest of the unit holders and inter alia ensure that the
AMC functions in the interest of investors and in accordance with the
Securities and Exchange Board of India (Mutual Funds) Regulations,
1996, the provisions of the Trust Deed and the Offer Documents of the
respective Schemes. At least 2/3rd directors of the Trustee are
independent directors who are not associated with the Sponsor in any
manner.
Asset Management Company (AMC)
The AMC is appointed by the Trustee as the Investment Manager of the
Mutual Fund. The AMC is required to be approved by the Securities and
Exchange Board of India (SEBI) to act as an asset management company
of the Mutual Fund. At least 50% of the directors of the AMC are
independent directors who are not associated with the Sponsor in any
manner. The AMC must have a net worth of at least 10 crore at all times.
Types of AMC in Indian context:-
1. AMC owned by banks
2. AMC owned by financial institutions.
3. AMC owned by foreign institutional investors.
4. AMC owned jointly by Indian and foreign sponsors
Registrar and Transfer Agent
The AMC if so authorised by the Trust Deed appoints the Registrar and
Transfer Agent to the Mutual Fund. The Registrar processes the
application form, redemption requests and dispatches account statements
to the unit holders. The Registrar and Transfer agent also handles
communications with investors and updates investor records

GOVERNMENT POLICIES
26
SEBI GUIDELINES TO INVESTORS:
1. Bank Details
In order to protect the interest of investors from fraudulent encashment
of cheques, the current SEBI Regulations, has made it mandatory for
investors to mention in their applicant/ redemption request, the bank
name and account number. The normal processing time may not be
applicable in situations where such details not provided by investors. The
AMC will not be responsible for any loss arising out of fraudulent
encashment of cheques and/or any delay/loss in transit.
2. Permanent Account Number
Wherever an application is for a total value of Rs. 50,000 or more, the
applicant or in the case of application in joint names, each of the
applicants, should mention his/her permanent account number(PAN)
allotted under the Income Tax Act, 1961 or where the same has not been
allotted, the GIR number and the income-tax circle/ward/District should
be mentioned. In case where neither the Pan nor the GIR number has
been allotted, the fact of non-allotment should be mentioned in the
application form.
3. Pledge of Units
The Units under the respective Scheme may be offered as security by way
of a pledge/change in favor scheduled banks, financial institutions, non-
banking finance companies or any other body. The AMC and/or the ISC
will note and record such pledged Units. A standard form for this
purpose is available on request from any of the ISCs. The AMC shall
mark a lien only upon receiving the duly completed form and documents
as it may require.
4. Transfer Facility
The mutual fund will be repurchasing and issuing units on an ongoing
basis and hence the transfer facility is found redundant. However, if a
transferee becomes a holder of the units buy operation of law or upon
enforcement of a pledge, then the AMC shall, subject to production of
such evidence and submission of such documents, which in their opinion
is sufficient, proceed to effect the transfer, if the intended transferee is
otherwise eligible to hold the units.

COMPARISON OF MUTUAL FUNDS SCHEMES:

27
Comparison of funds according to their returns (in %age) in one
year:

Name HDFC SBI Birla Tata Reliance Kotak Prudential

of ICICI
the
Fund
Midcap 56.5 57 68.8
Fund 5
FMCG 56.4 43.26
Fund 7
Equity 39.79 45.7 59
Fund 7
NRI 2.25 13.05
Fund
Multipl 16.4 16.64
ier 5
Fund
Power 42.29 48.24
sector
Fund
Growth 45.9 58.45 49.98
Fund 8
Tax 73.72 115. 63.4 15.6 84.98
Gain 49 9
Fund
Pharm 32.1 21.46
a sector 7
Fund
Index 37 31.8 46.8 36.06
fund 9
Infrastr 11.4 11.53
ucture 9
Fund
Floatin 5.19 5.1 5.4
g rate
Fund

28
Gilt 4.56 3.7 2.5 4.98
Fund
Income 5.68 3.5 9.7 10.46
Plus
Fund

29
 OBJECTIVES OF THE STUDY

 To enquire in detail about the SBI mutual fund

company Ltd.

 To enquire the detail of different scheme of

capital investment.

 To review the difference mutual fund company in

india.

 To know the basic funda of investment.

 To enquire the risk return of investment.

OBJECTIVES OF THE SURVEY:

The main objective of the survey was to asses the potential of various
investment avenues in Gurgaon:

1. To know about the objectives behind investment decisions

2. To quantify the income invested annually by respondents in
different avenues

3. To know the preference for various investment avenues

4. To know the risk coverage of people

5. To find future investment preferences and interests with regard to

investment decisions

QUESTIONNAIRE FORMATION:

One of the important aspects of training was survey which was conducted
in Gurgaon. The purpose of the survey was to asses the customer
30
investment needs and potential for various investment avenues in
Gurgaon.

For any survey Questionnaire plays a vital role. A Questionnaire decides

the success of the survey. There should be following characteristics of a
questionnaire:

1. There should be continuity in the Questions.

2. All questions should be linked with the required information of the
study.

3. The language used in questionnaire should be easy to understand

and no ambiguity should exist.

After considering all these areas for an effective questionnaire, we made a

questionnaire and conducted the survey.

31
 METHODOLOGY

The methodology is an integral primary part of the project work. Every

project has been undertaken in and definite manner, which forms the
validity of the report. The project undertaken by me is also based on a
definite method, which is usually found in most of the research projects.
The methodology in my project is based on the following manner in a
sequential order: -

1. DATA COLLECTION
The collection of data is a core part of every activities relating to
marketing decisions. The information derived from such data is closely
analyzed, Interpreted and a conclusion has been arrived on which other
decisions are totally depends.
There are various sources from where data can be collected any there also
most appropriate methods in the application of which we can collect the
data. In the application of sources and methods the reliability and
accuracy must be well judged prior to collection. The whole study has
been worked out depending on the data availed from.

2. SOURCES OF DATA COLLECTION

There are two sources on which data can be collected via primary source
and secondary source. The data which are prepared from the main
proposed and researcher or owner it is called primary source and the data
collected from this source is called primary data. The data which is
collected from the persons, private bodies, private research agencies etc
are called secondary source and the data collected is from both primary
and secondary type. The following are the data which have been
collected from both the sources:-
Primary data
In the course of carrying out the project I have collected the survey data
conducted in Gurgaon form primary source only.
Secondary data: -

32
Most of the data in my project has been collected from the secondary
source as the data is only available to them and other parties I have find
the most convenient source and collected from them. The data collected
from this source are the past records and it is used to analyses.

3. METHODS OF DATA COLLECTION

The method of data collection is as essential as the source of collection of
data. The methods of data collection establish a pattern, the application
on which provides a well fledged out data. A most appropriate method
will produce data which are more accurate, reliable and cheap and also
will require less time and efforts in the collection. In the carrying of my
project I have used the following methods in collecting the data:-

Personal Survey
The information regarding the Investors being kept have been collected
through personal survey. In fact, in some cases it has been beneficial on
the part of the project to meet the big investors. The most important part
of the project under the data collection has been the collecting the
information from the individual investors for survey conducted in
Gurgaon.

33
 LIMITATIONS:
1. There is no surety that the respondents disclosed the right
information
2. It was conducted on 200 people in Gurgaon and thus is hard to
generalize for all

34
 STUDY ANALYSIS
Graph No. 1

Comparison of Funds

80
68.8
56.55 57
60

40 Midcap Fund
e
Rturns

20

0
SBI Kotak Birla
Midcap Fund 56.55 57 68.8

Data Analysis
The returns for all the three funds are good. But for the Birla, it is very
high i.e. 68.8%. After Birla, there is Kotak with 57% returns for a year
and in the last there is SBI with 56.55% annual return.

35
Graph No. 2

Comparison of fund

60
50
40
Returns 30 56.47
43.26 FMCG Fund
20
10
0
SBI Prudential
ICICI

Data Analysis
This graph shows the annual returns for FMCG fund for SBI and
Prudential ICICI. SBI gives higher returns than Prudential ICICI. For
SBI, annual returns are 56.47% and on the other hand, returns are 43.26%
for Prudential ICICI.

36
Graph No. 3

Comparison of Fund

70
60
50
40
s

Prudential
rn

30
etu

ICICI, 59
R

SBI,
20 45.77 HDFC, 39.79
10
0 ,
SBI Prudential ICICI HDFC

Equity Fund

Data Analysis
This graph shows the annual returns for Equity fund. Prudential ICICI is
the highest return giver with 59% return and on the top. After that, SBI is
on the second position with 45.77% and in the last; there is HDFC with
39.79% returns.

37
Graph No. 4

Comparison of fund

2.25
SBI

13.05
Reliance NRI Equity fund

0 5 10 15
Reliance SBI
NRI Equity fund 13.05 2.25

Data Analysis
This graph shows the annual returns for NRI Equity fund. In this fund
SBI is very much far away from Reliance. Reliance gives annual returns
of 13.05%, on the other hand, SBI gives annual returns of 2.25%.

38
Graph No. 5

Comparison of fund

16.64
16.7

16.6
16.45
16.5
Multiplier fund
16.4

16.3
Prudenci
SBI
al ICICI
Multiplier fund 16.64 16.45

Data Analysis
This graph shows the annual returns for the Multiplier fund. Both the
funds, Prudential ICICI and SBI give almost equal returns. Prudential
ICICI gives annual returns of 16.64% and on the other hand, SBI gives
returns of 16.45% annually.

39
Graph No. 6

Comparison of Fund

Prudencial 48.24
ICICI POWER Sector
Fund

Reliance 42.29

0% 50% 100%
Returns

Data Analysis
This graph shows the comparison between the annual returns of Reliance
and Prudential ICICI for the POWER sector fund. Prudential ICICI gives
annual returns of 48.24% and Reliance gives annual returns of 42.29%.

40
Graph No. 7

Comparison of funds

Growth fund,
Growth fund, Prudencial
Reliance, ICICI, 49.98
58.45

Growth fund, ,
Growth fund,
Tata, 45.98

Data Analysis
This graph shows the annual returns for Growth fund. There is not much
difference between the returns of Prudential ICICI and Tata. Reliance
gives highest annual returns of 58.45%. Prudential ICICI gives returns of
49.98% and Tata gives a return of 45.98% return.

41
Graph No. 8

Comparison of Fund

Prudencial ICICI 84.98

Kotak 15.6
Tax Gain Fund
Tata 63.49

SBI 115.49

HDFC 73.72

0 50 100 150
Returns

Data analysis
This graph shows the annual returns for Tax Gain fund. SBI gives the
highest returns of 115.49%. Prudential ICICI gives returns of 84.98%,
HDFC gives a return of 73.72%. Tata gives returns of 63.49% and Kotak
gives 15.6%.

42
Graph No. 9

Comparison of funds
35
30
25
20
Pharma Fund
s

32.17
rn

15
e
Rtu

10 21.46
5
0
SBI Reliance
Pharma Fund 32.17 21.46

Data Analysis
This graph shows the annual returns of SBI and Reliance for Pharmacy
fund. SBI is far much ahead of Reliance. SBI gives the annual returns of
32.17%, on the other hand Reliance gives returns of 21.46%.

43
Graph No. 10

Comparison of funds

Index fund,
Prudencial
Index fund,
ICICI, 36.06
Birla, 46.8
Index fund, ,

Index fund,
Index fund,
HDFC , 37
SBI, 31.89

Data Analysis
This graph shows the returns for Index fund. Birla give highest annual
returns of 46.8%. HDFC gives a return of 37%, Prudential ICICI give
36.06% and on the last position there is SBI, gives a return of 31.89%,
which is very much less than Birla.

44
Graph No. 11

Comparison of funds
11.94

12
11.53
11.8
Returns 11.6
11.4
11.2
Prudencial Birla
ICICI

Infrastructure Fund

Data Analysis
This graph shows the annual returns of Prudential ICICI and Birla for
Infrastructure fund. There is not much difference between the returns of
two companies. Prudential ICICI gives a return of 11.53 and on the other
hand, Birla gives a return of 11.94% annually.

45
Graph No. 12

Comparison of fund

Floating Rate
Floating Rate
fund, Kotak,
fund, SBI, 5.19 SBI
5.4
Birla
Kotak
Floating Rate
fund, Birla, 5.1

Data analysis
This graph shows the annual returns of Birla, Kotak and SBI for Floating
Rate fund. The returns for all are almost same. SBI gives annual return
at 5.19%. Kotak gives annual returns 5.4% and Birla gives at a rate of
5.1% annual return.

46
Graph No. 13

Comparison of fund

Gilt fund, Gilt fund,

Kotak, 2.5 Prudencial
ICICI, 4.98
Gilt fund,
Birla, 3.7 Gilt fund, ,
Gilt fund,
SBI, 4.56

Data Analysis
This graph shows the annual returns of Kotak, SBI, ICICI and Birla.
Prudential ICICI gives the highest return of 4.98%. SBI gives a return of
4.56%. Birla gives annual return of 3.7% and Kotak gives annual returns
of 2.5%.

47
Graph No. 14

Comparison of fund
12 10.46
9.7
10
8
5.68
6
eturns

3.5
4
R

2
0
Prudential SBI Birla Kotak
ICICI

Income Plus Fund

Data Analysis
This graph shows the annual returns of Prudential ICICI, SBI, Birla and
Kotak for Income plus fund. Prudential ICICI gives returns of 10.46%
annually. Then Kotak gives at a rate of 9.7%. After that, there is SBI,
which gives returns of 5.68% and Birla with 3.5% annual returns.

48
 Data Analysis:
The number of respondents with insurance cover:

Non Insured
14%

Insured
86%

Respondents with investment in mutual funds:

Yes
22%

No
78%
Respondents with vehicle insurance and the respective companies
share:

Non Insured
4%

49 Insured
96%
 others
16%
New India
28%

United
13%

National
18% Oriental
25%

Investment in shares availed by respondents:

Yes
25%

No
75%

Respondents having Demat account

50
 Yes
27%

No
73%

Purpose of Investment:

security
8%

Savings & Return

47%
Tax Saving
45%

51
 ELSS:

These schemes are for tax benefits and have a compulsory lock in period
of 3 years. Diversify the equity risk by investing in a wider array of
stocks across sectors. Typical returns between 15-20% p.a. According to
the new Income tax act Sec80C investments in ELSS are subject to 100%
tax rebate on investments up to maximum Rs.100000/- from a financial
year.

Scheme AMC Launch NAV Corpus 3Yr. Inception

Name Return
Franklin Templeto April, 99 109.25 260.75 48.40 38.44
Tax n
Shield

Magnum SBI March,93 44.64 746.24 68.66 24.72

Tax Gain Crore
Tata Tax Tata March,96 37.13 101.65 46.78 26.5
saving Mutual
HDFC HDFC Dec,00 79.04 413.32 57.33 44.44
Long
Term
Advantage
Birla Tax Birla Dec, 98 171.28 20.79 53.4 39.27
plan 98

The above table shows the top 5 equity linked saving scheme on the basis
of 3 year return as on 15 August, 2006. Returns are annualized.

BALANCED SCHEMES:

52
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.

Scheme AMC Launch NAV Corpus( 3 yr. Inception*

Name Crore) Return*
Magnum SBI May,1996 30.43 209.91 48.6528 18.1
Balanced Crore
fund
Can Canbank Feb,1993 35.05 69.96 40.63 10.12
Balanced crore
II
HDFC HDFC Jan ,1994 96.017 1626.0283 40.42 19.83
Prudence
Fund
Kotak Kotak Nov.,1999 22.172 103.5666 40.15 18.67
Balance Mahindra
Tata Tata Oct,1995 42.2142 135.368 36.27 15.35
Balanced
Fund

The above table shows the top 5 balanced scheme on the basis of 3 year
return as on 15 August, 2006. Returns are annualized.

EQUITY SCHEMES:
53
These are the schemes with at least 65% of investment in equity shares.
They have a high risk profile and are suitable generally for long term
investment.

Scheme AMC Launch NAV Corpus(Crore) 3 yr. Inception

Name Return
Sundaram Sundaram July,2002 77.33 882.82 70.11 65.79
Select
madcap
Reliance Reliance Oct,1995 215.91 1962.87 63.93 32.62
Growth Capital

Birla Sun Birla Aug,1998 143.68 3707.15 57.89 39.85

Life SunLife
Tata Tata AMC Mar,1992 48.0983 354.6658 55.89 23.31
Equity Pvt. Ltd.
opportunity
fund
Franklin Templeton Nov,1993 172.81 1606.87 52.87 25.08
India asset
Prima management
Fumd

The above table shows the top 5 equity scheme on the basis of 3 year
return as on 15 August, 2006. Returns are annualized.

FINDINGS:

54
1. Insurance is most preferred investment avenue as well as risk cover
with 86% of respondents with insurance cover.
2. Vehicle Insurance have major presence at Gurgaon with all major
players closely competing for the market share.

3. Mutual funds are not widely preferred at present by respondents

but have a strong demand as a potential investment avenue in
future.

4. Short term time frame is least preferred and majority of people opt
for medium and long term respectively.

5. Tax saving and returns expectations are major objective of

investment

55
 SUGGESTIONS & RECOMMENDATION
Having agreed that mutual offer a more sensible way to invest in equity
and debt markets and may even provide superior returns, the question
arises that at which time to invest and in which type of fund one must
invest. We have already seen that it is extremely difficult for even an
expert investor to try and time the markets any case it is not a major
determinant of overall portfolio return. The following are the suggestion
one must keep in mind investment in mutual funds.

Mutual fund investments are subject to market risk and there is no

assurance that fund objective will be achieved so one must take the
advice of broker or experts in the field of mutual funds before investing.

1. The past performances of any scheme do not in any way indicate

about the future performance.
2. One must not time the market and think that every time is good for
investments.

3. One must also take care about the track record of performance over
the last few years in relation to the appropriate yardstick and how
similar funds in that category perform.

4. Considering the volatility in the market, the best way to invest and
earn attractive returns is make an Systematic Investment Plan(SIP)
rather than making an lump sum investment. The benefits of
making an SIP are as follows:

There is a disciplined investment because one can see the investment

transforming into a big one. SIP is a perfect tool for people who have a
specific future financial requirement. By investing the amount of one’s
choice, one plan for and, meet financial goals like funds for a child’s
education, a marriage in the family or a comfortable post retirement life.

 One should take the advantage of Rupee Cost Averaging

 One must also see whether the Mutual Fund is organized to provide
efficient, prompt and personalized service. The degree of

56
 transparency as reflected in frequency and quality of their
communications.

 Evaluation of portfolio i.e. analysis of risk and return, volatility,

expense ratio, fund manager’s style of investment, portfolio
diversification, fund manager’s experience is a must. Good equity
fund should provide consistent returns over a period of time.

 While if someone is making an investment he should not make the

entire investment in entirely in scheme of the mutual fund but in
different schemes of mutual fund so that he gets a balanced return
from all the schemes.

57
 ANNEXURE
CUSTOMER NEED ANALYZER

Personal Profile

Name  

Address  

Telephone Tel (R) Tel (O) Mob.

Date of birth  

Marital status Married  Single 

Educational Undergraduate  Graduate  P.G.  Professional 

qualification

Employment Details Business  Service  Professional  Retired 

Name of org. Private  Public 

Assets owned Two wheeler  Car

Financial Profile

Annual Income <1 lac  1-2 lac  2-4 lac  >4 lac

Current InvestmentStock Market  F.D.  Post Office  Real Estate

Portfolio  Bonds  Mutual Funds  Any
other 

Future Interest Stock Market  F.D.  Post Office  Real

Estate  Bonds  Mutual Funds 
Any other 

58
Objective of Investment Saving and return  Tax Saving  Security 

PAN No. Yes  No 

Risk Coverage

Type of Insurance Company

Life Insurance  LIC Other

Vehicle Insurance  

Other Details

Time Frame <1 yrs.  1-2 yrs.  2-5 yrs. 

>5yrs.

Returns Expected 3-6%  7-10%  11-15%  15-25%  Any

other 
Availed Future Interest
Depository A/c
Yes  No  Yes  No

References:

Name ____________Address____________ Ph. No. _______

Name ____________Address____________ Ph. No. _______

Customer’s
SignatureNotes:

59
 BIBLIOGRAPHY
BOOK

Author : Shashikant Uma

Title : Mutual Fund

INTERNET

Name of The Site : www.sbimf.com

Article : About the organization &

feature of the product

Name of the Site : www.mutualfund.com

Article : History of mutual fund

Government policy

SEBI Guidelines

60
Name of the Site : www.myiris.com

Article : Comparison of different mutual

fund

61