chepter two mutual fund final

Upload: bhavesh-keshari

Post on 07-Apr-2018

230 views

Category:

Documents


0 download

TRANSCRIPT

  • 8/4/2019 Chepter Two Mutual Fund Final

    1/38

    (CHAPTER TWO) INTRODUCTION TO MUTUAL FUND

    2.1 MUTUAL FUND

    2.2 DEFINATION OF MUTUAL FUND

    2.3 HISTORY OF MUTUAL FUND

    2.4 TYPES OF MUTUAL FUND

    2.5 SEBIS REGULATIONS FOR MUTUAL FUND INDUSTRY

    2.6 ADVANTAGES OF MUTUAL FUND

    2.7 DROWBACK OF MUTUAL FUND

    2.1 MUTUAL FUND

    Mutual funds are dynamic financial institutions which play a crucial role in

    an economy. It mobilizes the savings and invests them in the capital market.

    Thus, it acts as a vehicle between savings and capital market. It is an

    institution that invests the pooled funds of public to create a diversified

    portfolio of securities. Pooling is the key to mutual fund investing.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 investible surplus of as

    little as a few thousand rupees can invest in Mutual Funds. Each Mutual

    Fund scheme has a defined investment objective and strategy.

    1

  • 8/4/2019 Chepter Two Mutual Fund Final

    2/38

    Operating Cycle of Mutual Fund

    Trans- Investor

    Invest Money

    ferred To OPERATING

    CYCLE

    OF

    MUTUAL Portfolio

    Returns FUND Management

    Company

    Give Various

    Reinvest with

    Investment

    Avenues

    Here, is a chart which depicts the circular flow of mutual fund. It begins

    with investors and ends with investor. Here, an investor invests the money

    with portfolio Management Company, which divert or re invest money in

    various avenues available in the market. Over a period of time, these

    investments give the returns to the investors. That returns are again diverted

    in investment by the investor, which continues forever. So, to conclude

    mutual fund is cyclical in nature.

    The Asset Management Companies (AMCs) manage different types of

    mutual fund schemes. Mutual funds have become a hot favourite of millionsof people all over the world. People prefer mutual fund to bank deposits, life

    insurance and even bonds because with a little money, they can get into the

    investments game.

    2

  • 8/4/2019 Chepter Two Mutual Fund Final

    3/38

    2.2 DEFINITIONS

    1. Frank Reilly defines mutual fund as, intermediaries that bring a wide

    variety of securities within the reach of the most modest investors.

    2. The Security Exchange Board of India (SEBI) defines mutual fund as,

    a fund established in the form of a trust by a sponsor, to raise monies

    by the trustees through the sale of units to public, under one or more

    schemes, for investing in securities in accordance with these

    regulations.

    2.3 HISTORY OF MUTUAL FUNDThe history of mutual fund dates back to 1830 when William I established

    first such fund in Belgium. Almost 40 years later, foreign and colonial

    government trust was established in England in 1868 followed by

    Massachusetts Investors Trust in Boston, USA in 1924. Mutual funds

    origined in Belgium, where, in 1882, a company was started to finance

    investments in national industries associated with high risks under the name

    of Societe Generale de Belgiue. In the 1860s, this movement spread to

    England.

    In 1868, the Foreign and Colonial Government Trust was formed to spread

    risks for investors over a large number of securities. The history of mutual

    fund started in the USA from the beginning of the 20th century.In recent

    years, mutual fund in Japan and Far East have been showing good

    performance, probably as a result of growth and performance of the

    economies of these countries and their capital markets. Mauritius and the

    Netherlands are emerging as tax havens for offshore mutual fund. Mutual

    funds are thus a global financial culture now.

    3

  • 8/4/2019 Chepter Two Mutual Fund Final

    4/38

    In India, Mutual Fund business was established by Unit Trust of India in

    1964.Mutual fund Industry in India received a boost when it was thrown

    open to private sector in 1994. A mutual fund is a collective investment

    vehicle that pools money from various investors and invests it in debt, equity

    and money market instruments, based on a stated set of objectives. These

    objectives define the mutual fund and are stated in the offer document.

    The origin of the mutual funds industry goes back to the time when mutual

    fund was introduced by UTI in the year 1963. Though the growth has been

    relatively slow, it accelerated since 1987 when there were players outside

    the UTI, who entered the industry. In the past decade, Indian mutual find

    industry had seen a remarkable improvement both quality wise and quantity

    wise. Before the end of the monopoly in market, the Assets Under

    Management (AUM) was Rs.67 bn.

    There are 4 phases in the Indian Mutual Funds industry:

    First Phase - 1964-87

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

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

    Fourth Phase - since February 2003

    4

  • 8/4/2019 Chepter Two Mutual Fund Final

    5/38

    MILESTONES OF MUTUAL FUND INDUSTRY IN INDIA

    1964: A concept arrives in the market with first mutual fund product US64.

    1987: End of UTIs monopoly as SBI and Canara Bank entered the market.

    1989: Launch of LIC Mutual Fund.

    1993: Industry opens to private sector with Kotharis regulations on Mutual

    Fund.

    1994: Morgan Mania, Foreign Mutual Fund arrives.

    1998: Funds started underperforming with US 64 flop shows.

    2000: Shake out imminent.

    2001: US-64 redeemed as per pre-determined rate scheme.

    Performance Appraisal by SEBI and AMFI for debt schemes.

    2002: SEBI to control UTI also.

    2003: Fund of Funds floated

    2004: Mutual Funds allowed investing in overseas securities.

    2.4 TYPES OF MUTUAL FUND

    1. Open ended scheme

    When a fund is accepted and liquidated on a continuous basis by a

    mutual fund manager, it is called open ended scheme.

    In an open ended mutual fund, one can buy and sell units at any

    time, so they are more convenient at net asset value.

    Main objective is income generation.

    5

  • 8/4/2019 Chepter Two Mutual Fund Final

    6/38

    They are not listed on stock market.

    2. Close ended scheme

    In these funds, one can buy units from the fund house only during the

    New Fund Offering period.

    Most of these funds have restricted exit option for investors, usually at

    a pre determined interval.

    These funds have fixed tenure.

    Main objective is capital appreciation.

    3.Income fund

    The investors who need regular returns can go for this scheme.

    The scheme offers the maximum current income, whereby the income

    earned by units is distributed periodically.

    Main objective is to declare regular dividend.

    It is for short run.

    It is best suited to old and retired people.

    4. Growth fund

    The aim of growth funds is to provide capital appreciation over the

    medium to long- term.

    6

  • 8/4/2019 Chepter Two Mutual Fund Final

    7/38

    Such schemes normally invest a major part of their corpus in equities.

    Such funds have comparatively high risks.

    It is also known as nest eggs or long haul investments.

    This type of fund is best suited to salaried and business people.

    5. Balance fund

    The aim of balanced funds is to provide both growth and regular

    income.

    Such invest both in equities and fixed income securities in the

    proportion indicated in their offer documents.

    These are appropriate for investors looking for moderate growth.

    They generally invest 40-60% in equity and debt instruments.

    6. Specialized fund

    Basically this mutual funds units are for meeting the specific needs of

    specific categories of people such as pensioner, children, widow etc.

    these funds open the door for foreign investors.

    7. Money Market Mutual Fund

    They are open ended funds but they invest in highly liquid and safesecurities. They pay money market rate of interest. MMMF can invest

    only in short term instruments such as CPs, CD, Treasury bills etc.

    7

  • 8/4/2019 Chepter Two Mutual Fund Final

    8/38

    The repurchase could be subject to minimum lock in period of 3

    months.

    RBI has fixed minimum amount of Rs. 100000 as a investment for

    investing in MMMF.

    8. Taxation fund

    Certain mutual fund schemes offer tax rebate on investments made in

    equity shares, under Section 88 of the Income Tax Act 1961.

    Suitable to salaried people who want to enjoy tax rebates in the month

    of February and March.

    9. Index fund

    They are linked to a specific index of share prices.

    It means that the funds mobilized under such scheme are invested

    principally in the securities of companies whose securities are

    included in the index concerned and in the same weight age.

    10. Gilt funds

    These funds invest exclusively in government securities.

    Government securities have no default risk.

    NAVs of these schemes also fluctuate due to change in interest rates

    and other economic factors as is the case with income or debt oriented

    schemes.

    8

  • 8/4/2019 Chepter Two Mutual Fund Final

    9/38

    11. Leverage fund

    These funds are also called as borrowed fund since they are used

    primarily to increase the size of the value of portfolio of the mutual

    fund.

    The value increases the earning capacity of the fund increases.

    The gains are distributed to the unit holders.

    Options mainly call option are used by these funds.

    12. Fund to Fund

    Here funds of one mutual fund are invested in the units of the other

    mutual funds.

    There are number of funds that direct investment into a specified

    sector of the economy.

    These makes diversified and yet intensive investments of funds

    possible.

    13. Sectoral fund

    9

  • 8/4/2019 Chepter Two Mutual Fund Final

    10/38

    When the manager of mutual funds invest the amount collected from a

    wide variety of small investors directly in various specific sectors of

    the economy, such funds are called as sectoral mutual fund.

    14. Bond fund

    It is a type of mutual fund whose strength is derived from bond based

    investments. Advantage of the fund is secure and steady income.

    It carries risk and has little or no capital appreciation.

    15. Other funds

    In addition to the above schemes, following are some other

    schemes mentioned below:

    a) Load funds: Where mutual fund managers charge a fee over

    and above the NAV from purchaser.

    b) No load funds: Where no load fee is charged because very

    little effort is made to promote the sale of the funds unit, except

    through direct advertising.

    c) Offshore mutual fund: Where the funds are mobilized from

    abroad for deployment in the Indian market.

    d) Other funds: Such as property funds, art funds, commodity

    funds, energy funds, etc.

    2.5 SEBIS Regulations for Mutual Fund Industry

    10

  • 8/4/2019 Chepter Two Mutual Fund Final

    11/38

    There was no uniform regulation of the mutual funds industry till a few

    years ago. The UTI was regulated by a special Act of Parliament while funds

    promoted by public sector banks were subject to RBI Guidelines of July

    1989. The Securities & Exchange Board of India (SEBI) was formed in 1993

    as a capital market regulator. One of its responsibilities was to regulate the

    mutual fund industry and it came up with comprehensive regulations for the

    industry in 1993. The rules for the formation, administration and

    management of mutual funds in India were clearly laid down. Regulations

    also prescribed disclosure requirements.

    The regulations were thoroughly reviewed and re-notified in December

    1996. The revised guidelines tighten the accounting and disclosure

    requirements in line with recommendations of The Expert Committee on

    Accounting Policies, Net Asset Values and Pricing of Mutual Funds. The

    SEBI (Mutual Funds) Regulations, 1996 have been further amended in 1997,1998 and 1999. Today, all mutual funds are regulated by SEBI. Efforts have

    been made to bring UTI schemes under SEBI's ambit with the result that all

    schemes, with the exception of Unit 64, are now regulated by the capital

    market regulator.

    Regulatory Aspects

    Schemes of a Mutual Fund The asset management company shall launch no scheme unless the

    trustees approve such scheme and a copy of the offer document has

    been filed with the Board.

    Every mutual fund shall along with the offer document of each

    scheme pay filing fees.

    The offer document shall contain disclosures which are adequate in

    order to enable the investors to make informed investment decision

    including the disclosure on maximum investments proposed to be

    made by the scheme in the listed securities of the group companies of

    the sponsor A close-ended scheme shall be fully redeemed at the endof the maturity period. "Unless a majority of the unit holders

    otherwise decide for its rollover by passing a resolution".

    The mutual fund and asset management company shall be liable to

    refund the application money to the applicants,-

    (i) If the mutual fund fails to receive the minimum subscription

    amount referred to in clause (a) of sub-regulation (1);

    11

  • 8/4/2019 Chepter Two Mutual Fund Final

    12/38

    (ii) If the moneys received from the applicants for units are in

    excess of subscription as referred to in clause (b) of sub-

    regulation(1).

    Rules Regarding Advertisement

    The offer document and advertisement materials shall not be

    misleading or contain any statement or opinion, which are incorrect or

    false.

    Investment Objectives and Valuation Policies The price at which the units may be subscribed or sold and the price at

    which such units may at any time be repurchased by the mutual fundshall be made available to the investors.

    General Obligations Every asset management company for each scheme shall keep and

    maintain proper books of accounts, records and documents, for each

    scheme so as to explain its transactions and to disclose at any point of

    time the financial position of each scheme and in particular give a true

    and fair view of the state of affairs of the fund and intimate to the

    Board the place where such books of accounts, records and documentsare maintained.

    The financial year for all the schemes shall end as of March 31 of

    each year. Every mutual fund or the asset management company shall

    prepare in respect of each financial year an annual report and annual

    statement of accounts of the schemes and the fund as specified in

    Eleventh Schedule.

    Every mutual fund shall have the annual statement of accounts audited

    by an auditor who is not in any way associated with the auditor of the

    asset management company.

    Procedure for Action In Case Of Default: On and from the date of the suspension of the certificate or the

    approval, as the case may be, the mutual fund, trustees or asset

    12

  • 8/4/2019 Chepter Two Mutual Fund Final

    13/38

    management company, shall cease to carry on any activity as a mutual

    fund, trustee or asset management company, during the period of

    suspension, and shall be subject to the directions of the Board with

    regard to any records, documents, or securities that may be in its

    custody or control, relating to its activities as mutual fund, trustees or

    asset management company.

    Restrictions on Investments A mutual fund scheme shall not invest more than 15% of its NAV in

    debt instruments issued by a single issuer, which are rated not below

    investment grade by a credit rating agency authorized to carry out

    such activity under the Act. Such investment limit may be extended to

    20% of the NAV of the scheme with the prior approval of the Board

    of Trustees and the Board of asset Management Company.

    A mutual fund scheme shall not invest more than 10% of its NAV in

    unrated debt instruments issued by a single issuer and the total

    investment in such instruments shall not exceed 25% of the NAV of

    the scheme. All such investments shall be made with the prior

    approval of the Board of Trustees and the Board of asset Management

    Company.

    No mutual fund under all its schemes should own more than ten per

    cent of any company's paid up capital carrying voting rights.

    Such transfers are done at the prevailing market price for quoted

    instruments on spot basis. The securities so transferred shall be inconformity with the investment objective of the scheme to which such

    transfer has been made.

    A scheme may invest in another scheme under the same asset

    management company or any other mutual fund without charging any

    fees, provided that aggregate inter scheme investment made by all

    schemes under the same management or in schemes under the

    management of any other asset management company shall not

    exceed 5% of the net asset value of the mutual fund.

    The initial issue expenses in respect of any scheme may not exceed

    six per cent of the funds raised under that scheme.

    Every mutual fund shall buy and sell securities on the basis of

    deliveries and shall in all cases of purchases, take delivery of relative

    securities and in all cases of sale, deliver the securities and shall in no

    case put itself in a position whereby it

    13

  • 8/4/2019 Chepter Two Mutual Fund Final

    14/38

    has to make short sale or carry forward transaction or engage in badla

    finance.

    Every mutual fund shall, get the securities purchased or transferred in

    the name of the mutual fund on account of the concerned scheme,

    wherever investments are intended to be of long-term nature. Pending deployment of funds of a scheme in securities in terms of

    investment objectives of the scheme a mutual fund can invest the

    funds of the scheme in short term deposits of scheduled commercial

    banks.

    No mutual fund scheme shall make any investment in;

    i. Any unlisted security of an associate or group company of the

    sponsor; or Any security issued by way of private placement by

    an associate or group company of the sponsor; or The listed

    securities of group companies of the sponsor which is inexcess of 30% of the net assets [of all the schemes of a mutual

    fund]

    No mutual fund scheme shall invest more than 10 per cent of its NAV

    in the equity shares or equity related instruments of any company.

    Provided that, the limit of 10 per cent shall not be applicable for

    investments in index fund or sector or industry specific scheme.

    A mutual fund scheme shall not invest more than 5% of its NAV in

    the equity shares or equity related investments in case of open-ended

    scheme and 10% of its NAV in case of close-ended scheme.

    2.6 ADAVNTAGE OF INVESTING IN MUTUAL FUND

    Diversification: The best mutual funds design their portfolios so

    individual investments will react differently to the same economic

    conditions. For example, economic conditions like a rise in interest

    rates may cause certain securities in a diversified portfolio to decrease

    in value. Other securities in the portfolio will respond to the same

    economic conditions by increasing in value. When a portfolio is

    balanced in this way, the value of the overall portfolio should

    gradually increase over time, even if some securities lose value.

    14

  • 8/4/2019 Chepter Two Mutual Fund Final

    15/38

    Professional Management: Most mutual funds pay topflight

    professionals to manage their investments. These managers decide

    what securities the fund will buy and sell.

    Regulatory oversight: Mutual funds are subject to many government

    regulations that protect investors from fraud.

    Liquidity: It's easy to get your money out of a mutual fund. Write a

    check, make a call, and you've got the cash.

    Convenience: You can usually buy mutual fund shares by mail,

    phone, or over the Internet.

    Low cost: Mutual fund expenses are often no more than 1.5 percent of

    your investment. Expenses for Index Funds are less than that, because

    index funds are not actively managed. Instead, they automatically buystock in companies that are listed on a specific index

    Transparency

    Flexibility

    Choice of schemes

    15

  • 8/4/2019 Chepter Two Mutual Fund Final

    16/38

    2.7 DRAWBACKS OF MUTUAL FUND

    No control over

    cost

    Lack of

    transparency at

    initial stage

    Too much

    dependent on

    out agencies

    Absence of

    sales force staff

    No proper

    formula for

    NAV

    calculation

    Disparities

    between NAV

    and listed price

    Poor investor

    servicing

    Investors

    psychology

    DRAWBACKSOF MUTUAL

    FUND

    16

  • 8/4/2019 Chepter Two Mutual Fund Final

    17/38

    Disparity between NAV and listed prices

    Small investors are having lack of knowledge about pricing for their units.

    NAV is used to rate the performance of mutual fund. Due to disparity

    investors are not able to dispose off their units in the market.

    No uniformity in calculation of NAV

    Their is no standard formula for calculation of NAV. Different company

    used different formulas. Hence comparison of fund is not possible.

    Lack of transparency

    Mutual fund in India are not providing adequate information and materials

    to the investors. It was expected that they would provide detail pattern of

    their various schemes.

    Too much dependents on outside agencies

    In India most of the funds depends upon outside agencies to collect data and

    to do research. One should not rely on borrowed return. In practice company

    have to pay more on borrowed research still they cannot fully rely upon

    unless they setup their own research department they wont succeed.

    Absence of qualified sales forces staff

    Efficient management of fund requires expertise knowledge in portfoliomanagement and skill in execution of idea. Unfortunately such professionals

    are very rare and the industry has to suffer.

    17

  • 8/4/2019 Chepter Two Mutual Fund Final

    18/38

    Poor services to investors

    Mutual fund failed to build up investors confidence by rendering poor

    services, transfer problems, non receipt of dividends and mutual fund

    statements on time are various problems faced by the industry.

    Investors psychology

    Investors often compare units with shares and they respect high listing

    prices. They do not realize that units are the parts of shares. Hence units are

    not popular among the public.

    18

  • 8/4/2019 Chepter Two Mutual Fund Final

    19/38

    1. State Bank of India Mutual Fund

    A fully owned subsidiary of the State Bank of India, the State

    Bank of India Mutual Fund offers its services to partnership

    firms, trusts and societies, individuals and corporates in India.

    The State Bank of India Mutual Fund follows effective credit

    management policies to minimise the investor's risks.

    Awards

    The State Bank of India Mutual Fund has received several

    prestigious awards. Some of the important awards received by the

    mutual fund company has been listed below.

    ICRA Mutual Fund Awards- 2007

    Lipper Award- 2007

    CNBC TV 18 and CRISIL Mutual Fund of the Year Award-

    2007

    State Bank of India Mutual Fund Schemes

    The State Bank of India Mutual Fund offers several products to its

    customers. Some of the major mutual fund schemes offered

    through SBI Mutual Fund has been listed below.

    SBI Arbitrage Opportunities Fund

    SBI Magnum Balanced Fund

    19

  • 8/4/2019 Chepter Two Mutual Fund Final

    20/38

    SBI Magnum Income Fund

    SBI Magnum Global Fund

    SBI Magnum Index Fund

    SBI Premier Liquid Fund

    SBI One India Fund

    2.2 PROCESS OF INVESTING IN MUTUAL FUNDS

    Mutual funds are not magic institutions which can bring treasure to

    the millions of their investors within short span of time. All funds

    are equal to start with. But, in due course of time, some are getting

    importance. Now days investors are very careful about the

    selection of Investment Avenue and scheme of mutual fund.

    Generally, following steps are followed to invest the funds in

    mutual fund and its various schemes:1. Checking the aim of fund: As an investor, one must find out the

    aim or objectives of the scheme of mutual fund. The objectives are

    generally, capital appreciation, income at routine intervals or

    growth or pension fund at retirement. So, as per the need the

    investor should go ahead.

    2. Checking the performance of fund as routine matter: Mutual

    fund is always associated with stock market performance.

    Generally, it tends to give good returns after long years. Stability

    and consistency in the performance are very crucial for the

    20

  • 8/4/2019 Chepter Two Mutual Fund Final

    21/38

    investor. The investor will prefer only those funds with steady

    growth. So, all the time checking the performance is very helpful

    for the investor.

    3. To see the background of the company: Currently there are

    number of public and private sector companies prevailing in the

    market. The success of any company depends upon proper

    portfolio management. A good background, history and experience

    will definitely perform good and better results. That has to be

    carefully watched by the investors before investing.

    4. Find out the cost of operation: Cost of operation includes

    Servicing charges, administrative charges charged by mutual fund

    companies. The lesser the charges, more the investment and

    returns in the hands of investor. So, to earn best returns the

    investor must check the cost of operation of mutual fund.

    5. To see the other facilities provided to investors by the fund:

    Mutual fund companies and their field force staff are providing

    new and innovative techniques to grab the investors. So, an

    investor must check the schemes and accordingly can invest in the

    best one.

    6. To check out the transparency of company: The success of thefund depends upon transparency of the fund management. The

    companies need to publish the records regarding the operation and

    21

  • 8/4/2019 Chepter Two Mutual Fund Final

    22/38

    working of the funds. So, here investor must see the publications

    before investing.

    7. Select the best one among alternatives: As there are wide range

    of mutual fund companies, products and schemes investor should

    be conscious. He has to check the performance, service quality,

    operation cost of the scheme, and must opt for the best suited

    amongst available.

    2.3 RIGHTS OR POWERS OF MUTUAL FUND

    INVESTORS

    Unit holders of the Scheme have a proportionate right in the

    beneficial ownership of the assets of the Scheme.

    When the Mutual Fund declares a dividend under the

    Scheme/ Plan, the dividend warrants shall be dispatched

    within 30 days of the declaration of the dividend. Provided if a unit holder so desires the Mutual Fund shall

    issue a unit certificate (non- transferable) within 30 days of

    the receipt of request for the certificate.

    An investor is entitled to get the unit certificate transferred

    within a period of 30 days from the date of lodgement of the

    certificates along with the relevant transfer form.

    The First Unit holder shall receive the account statements, all

    notices and correspondence with respect to the account, as

    22

  • 8/4/2019 Chepter Two Mutual Fund Final

    23/38

    well as the proceeds of any redemption requests or dividends

    or other distributions.

    As per SEBI (MF) Regulations, the Mutual Fund shall

    dispatch redemption proceeds within 10 business days of

    receiving the redemption request.

    A penal interest of 15% or such other rate as may be

    prescribed by SEBI from time to time will be paid in case the

    Redemption proceeds are not made within 10 Business Days

    of the date of redemption request.

    The Trustee is bound to make such disclosures to the unit

    holders in order to keep them informed which may have

    adverse effect on their investment.

    The appointment of the AMC for the Mutual Fund can be

    terminated by majority of the directors of the Trustee or by

    75% of the unit holders of the scheme.

    75% of the Unit holders of a scheme can pass a resolution to

    wind-up a scheme.

    In specific circumstances, where the approval of unit holders

    is sought on any matter, the same shall be obtained by way of

    a postal ballot or such other means as may be approved bySEBI.

    The Trustee shall ensure that no change in the fundamental

    attributes of any Scheme or the trust or fees and expenses

    23

    http://www.sebi.gov.in/http://www.sebi.gov.in/
  • 8/4/2019 Chepter Two Mutual Fund Final

    24/38

    payable or any other change which would modify the Scheme

    and affects the interest of Unit holders, shall be carried out

    unless :

    o a written communication about the proposed change is

    sent to each Unit holder and an advertisement is given

    in one English newspaper having nationwide circulation

    as well as in a newspaper published in the language of

    the region where the head office of the Mutual Fund is

    situated

    o the Unit holders are given an option to exit at the

    prevailing Net Asset Value without any Exit Load

    The Trustee shall obtain the consent of the Unit holders:

    o whenever required to do so by SEBI, in the interest of

    the unit holders

    o whenever required to do so on the requisition made by

    three-fourths of the unit holders of the Scheme.

    o when the Trustee decides to wind up the Scheme or

    prematurely redeem the units.

    2.4 LIMITATION TO THE MUTUAL FUND INVESTORS

    1. Unit holders can not sue the trust but they can initiate

    proceedings against the trustees, if they feel that they are being

    cheated.

    24

  • 8/4/2019 Chepter Two Mutual Fund Final

    25/38

    2. Except in certain circumstances AMC can not assure a specified

    level of return to the investors. AMC can not be sued to make good

    any shortfall in such scheme.

    2.5OBLIGATIONS OF THE MUTUAL FUND INVESTORS

    1. An investor should carefully study the risk factors and other

    information provided in the offer documents .Failure to study will

    not entitled him for any rights thereafter.

    2. It is the responsibility of the investor to monitor his scheme by

    studying the reports and other financial statement of the fund.

    So before investing everybody should take necessary action to

    familiar with the scheme.

    .

    2.7 ROLE OF INTERMEDIARIES IN MUTUAL FUND

    Intermediaries play a pivotal role in promoting sale of mutual fund

    schemes. AMFI has therefore taken the initiative of developing a

    cadre of trained professional intermediaries. As the first step AMFI

    launched the certification programme in association with NSE's

    Certification in Financial Markets (NCFM) in July 2000 and SEBI

    has made AMFI Certification compulsory in a phased manner.

    25

  • 8/4/2019 Chepter Two Mutual Fund Final

    26/38

    Intermediaries consisting of individual agents, brokers, distribution

    houses and banks engaged in selling of mutual fund products as of

    now do not have any guidelines or regulatory framework relating

    to the business of selling Mutual Funds. It is important and

    necessary that these intermediaries follow professional and healthy

    practices. AMFI has therefore taken the initiative of framing a

    broad set of guidelines along with a code of conduct.

    1. The mutual fund industry in India started in 1964 with the

    formation of the Unit Trust of India (UTI). In 1987, other

    public sector institutions entered this business, and it was in

    1993 that the first of the private sector participants

    commenced its operations.

    2. From the beginning, UTI and other mutual funds have relied

    extensively on intermediaries to market their schemes to

    investors. It would be accurate to say that without

    intermediaries, the mutual fund industry would not have

    achieved the depth and breadth of coverage amongst

    investors that it enjoys today.

    3. Intermediaries have played a pivotal and valuable role in

    popularizing the concept of mutual funds across India. They

    26

  • 8/4/2019 Chepter Two Mutual Fund Final

    27/38

    make the forms available to clients, explain the schemes and

    provide administrative and paperwork support to investors,

    making it easy and convenient for the clients to invest.

    4. Intermediation itself has undergone a change over the past

    few decades. While individual agents provided the

    foundation for growth in the early years, institutional agents,

    distribution companies and national brokers soon started to

    play an active role in promoting mutual funds. Recently,

    banks, finance companies, secondary market brokers and

    even post offices have also begun to market mutual funds to

    their existing and potential client bases.

    5. It is, thus clear that all types of intermediaries are required

    for the growth of the industry, and their wellbeing, quality

    orientation and ways of doing business will have a significant

    impact on how the mutual fund industry in India evolves in

    the future.

    27

  • 8/4/2019 Chepter Two Mutual Fund Final

    28/38

    ACKNOWLEDGEMENT

    Achieving a milestone for any person is extremely difficult.

    However, there are motivations, which come across the

    curvaceous path like twinkling stars in the sky and make our

    task much easier. It becomes my humble and foremost duty to

    acknowledge all of them.

    I am deeply indebted to and express my sincere appreciation

    and gratitude to Mr. Sameer Saxena, Mr. Praveen Saini of

    SBI mutual fund private limited and Mr. Sunil Arora of State

    Bank Of India for providing their valuable guidance and

    encouragement through out the summer training for keeping my

    morale up and making it possible to complete and submit this

    project of mine in time. In addition to allow me to study the

    mutual fund sector. They provided me in depth details and

    enlightened me in the preparation of the study report.

    It would be unfair on my part if do not thank my heartfulthanks to my parents and colleagues for their unstinting help

    without which this work could never have been accomplished

    they made me realized the importance of a team, teamwork and

    also the leadership skills. I am grateful to all of them for

    standing with me and supporting me in this project.

    Words can not be adequately expressed my sense of gratitude

    and indebtedness to Sekhawati College of Management and ITfor giving me an opportunity.

    28

  • 8/4/2019 Chepter Two Mutual Fund Final

    29/38

    PREFACE

    Only Theoretical knowledge stands nowhere and cannot give

    positive and meaningful result unless supplemented with the

    real practice of Business Environment. Summer training is the

    implementation of the theory in practice that makes real

    meaning to what exactly is management

    The researcher was assigned to SBI mutual fund, Jaipur for

    summer training, which constitute an integral part of three years

    BBA program. The training period consists of 45-60 days. It

    was really a great opportunity of getting practical insight into

    the corporate world. The researcher contacted directly to the

    customers in their Home in Jaipur city to obtain relevant

    information.

    The company was interested to know to assess the customer

    acquisition and market position of the SBI Mutual fund schemes

    in the jaipur.

    29

  • 8/4/2019 Chepter Two Mutual Fund Final

    30/38

    After the analysis of collected data, the main findings of this

    study and suggestion are presented in the report.

    INTRODUCTION OF SBI MUTUAL FUND

    SBI mutual fund is a well known mutual fund management

    company in government sector. It is formed by joint venture

    between SBI and Societe Generale Asset Management Company

    of France.

    Investment Managers:

    SBI FUNDS MANAGEMENT PRIVATE LIMITED

    Name of Trustees Company:

    SBI MUTUAL FUND TRUSTE COMPANY PVT. LTD.

    Name and Address of registrar:

    COMPUTER AGE MANAGEMENNT SERVICES PVT.

    LTD.

    (SEBI REGISTRATION NO. INR000002813)

    178/10, KODAMBAKKAM HIGH ROAD,OPP. HOTEL

    PALMGROVE,CHENNAI-600034.

    30

  • 8/4/2019 Chepter Two Mutual Fund Final

    31/38

    As like others mutual fund companies SBI mutual fund company

    also has different types of schemes and these are as shown below:

    State Bank of India Socit Gnrale Asset Management

    State Bank of India

    SBI Mutual Fund Trustee Company Pvt. Ltd

    100%

    SBI Funds Management Pvt. Ltd(Asset Management Company)

    37%63%

    SBI Mutual Fund

    31

  • 8/4/2019 Chepter Two Mutual Fund Final

    32/38

    DIFFERENT SCHEME OF SBI MF:

    OPEN-ENDED EQUITY SCHEME:

    1. Magnum Multicap fund

    2. Magnum Equity Fund3. Magnum Index Fund

    4. Magnum Multiplier Plus

    5. Magnum SBI Blue-Chip Fund

    6. Magnum Tax gain scheme

    7. Magnum Comma Fund

    8. Magnum Global Fund

    9. Magnum MidCap Fund

    10. Magnum Balanced Fund11. Arbitrage fund

    CLOSE-ENDED EQUITY SCHEME:

    1. One India

    2. Infrastructure

    MAGNUM SECTOR FUNDS UMBRELLA

    1. Contra Fund2. Emerging Business Fund

    3. FMCG Fund

    4. IT Fund

    5. Pharma Fund

    OPEN-ENDED DEBT SCHEME:

    1. Magnum Children Benefit Plan

    2. Magnum Monthly Income Plan

    3. Magnum Income Plus Fund (Investment)4. Magnum Income Plus Fund (Saving)

    5. Magnum Income Fund

    6. Magnum NRI Investment Fund

    32

  • 8/4/2019 Chepter Two Mutual Fund Final

    33/38

    OPEN-ENDED LIQUID FUND

    1. Magnum Institutional Income Fund

    2. Magnum InstaCash Fund

    3. Magnum InstaCash Fund (Liquid floater)

    ORGANISATIONAL STRUCTURE OF

    SBI MUTUAL FUND

    SWOT ANALYSIS

    STRENGTHS:-

    1.) Brand Name:

    The biggest strength is the tag of SBI is going to be the largest

    banking group of finance industries.

    33

  • 8/4/2019 Chepter Two Mutual Fund Final

    34/38

    1. Compatible Price:

    Prices of different schemes of SBI Mutual Funds are much more

    compatible than others.

    2. Diversified Schemes:We have diversified schemes which are an exception case of SBI

    Mutual Fund.

    3. Less Risk:

    Our debt schemes are 100% free form market risk. Even as our

    portfolio is that diversified so equities are also less risky than others.

    4. Easy procedures of redemption & registration too:We have open ended schemes so Mutual funds are easily redeemable.

    WEAKNESS:-

    1. Prone to Market Risk:

    Mutual Funds depend on overall macro economic condition an

    market scenario.

    2. Tough Competitions:There is a very tough competition because of large number of Ass

    Management Companies.

    OPPORTUNITIES:-

    1. Hoarding:

    Most of the Indians have black money that too in huge amount i.e.

    the do not have money in banks, so approaching them is beneficial.

    2. Indian Capital Market is Growing:

    So more & more new investors are interested in investments.

    3. Tailor Made Products:

    34

  • 8/4/2019 Chepter Two Mutual Fund Final

    35/38

    We have tailor made products like sector specified schemes & even

    diversified schemes.

    4. Branch Expansion:

    Large no. of branches are opening day by day and even we aretraping the countries having almost same type of socio-economic

    condition & even same culture etc.

    THREATS:-

    1. Tough Competition:-As there are so many mutual fund companie

    having almost same kind of schemes, so its tough to compete with.

    2. Unawareness: Major % of population is not aware of mutual funds, s

    its hard to convince people.

    3. Changing Scenario: Our market scenario is changing day by day i.

    our market is fluctuating, so this makes investor hard to invest

    35

  • 8/4/2019 Chepter Two Mutual Fund Final

    36/38

    Various Locations in India

    36

  • 8/4/2019 Chepter Two Mutual Fund Final

    37/38

    CONCLUSION:

    From the analysis of the compare of Mutual Fund and Unit Linked

    Insurance Plan found thatUnit-linked life insurance products are

    those where the benefits are expressed in terms of number of unitsand unit price. They can be viewed as a combination of insurance

    customer and mutual funds. Main differences between ULIP and

    ordinary mutual funds is variation in expenses administrative

    charges, mortality charges and, of course, fund management fees.

    BIBLIOGRAPHY

    BOOKS:

    1. N. K. Sinha: Money Banking & Finance; BSC Publishing

    Co. Pvt. Ltd.

    2. C.R Kothari: Research Methodology; Wishva Publication,

    New Delhi.

    MAGAZINES:-

    1 Business world.

    2 Money Outlook

    3 Business Today

    4 Offer Documents of Different Schemes.

    NEWSPAPERS:-

    37

  • 8/4/2019 Chepter Two Mutual Fund Final

    38/38

    1. Economic Times.

    WEBSTIES:

    1) WWW.AMFIINDIA.COM

    2) WWW.SBIMF.COM

    http://www.amfiindia.com/http://www.amfiindia.com/