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Project Synopsis

On

MUTUAL FUNDS IS THE BETTER
INVESTMENTS PLAN (WITH SPECIAL REFERENCE
TO SBI AND OTHER BANKS) IN DEHRADUN

Submitted as a part of Course Curriculum for

Master of Business Administration

In

Finance







Under the guidance
Supervisor Name Dr. V. S. Rawat
Designation Lecturer

Submitted by
Name of the Student Abdul Rehman
Enrollment Number 11007880


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CONTENTS


Brief And Representation Review Of Literature 3
Company Profile 5
Significance of Study 8
Objective of Study 9
Limitations of Study 10
Research Methodology 11
Bibliography 13


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BRIEF AND REPRESENTATION REVIEW OF LITERATURE


REVIEW OF LITERATURE


A few research studies that have influenced the preparation of this paper substantially are
discussed in this section. Sharpe, William F. (1966) suggested a measure for the evaluation of
portfolio performance. Drawing on results obtained in the field of portfolio analysis, economist
Jack L. Treynor has suggested a new predictor of mutual fund performance, one that differs from
virtually all those used previously by incorporating the volatility of a fund's return in a simple yet
meaning fulmanner. Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio
performance (Jensensalpha) that estimates how much a managers forecasting ability contributes
to funds returns. As indicated by Statman (2000), the e SDAR of a fund portfolio is the excess
return of the portfolio over the return of the benchmark index, where the portfolio is leveraged to
have the benchmark indexs standard deviation. S.Narayan Rao , et. al., evaluated performance
of Indian mutual funds in a bear market through relative performance index, risk
return analysis, Treynors ratio, Sharpes ratio, Sharpes measure , Jensens measure, and
Famas measure. The study used 269 open-ended schemes (out of total schemes of 433) for
computing relative performance index. Then after excluding funds whose returns are less than
risk-free returns, 58 schemes are finally used for further analysis. The results of performance
measures suggest that most of mutual fund schemes in the sample of 58were able to satisfy
investors expectations by giving excess returns over expected returns based on both premium
for systematic risk and total risk. Bijan Roy, et. al., conducted an empirical study on conditional
performance of Indian mutual funds. This paper uses a technique called conditional performance
evaluation on a sample of eighty-nine Indian mutual fund schemes .This paper measures the
performance of various mutual funds with both unconditional and conditional
form of CAPM, Treynor Mazuy model and Henriksson Merton model.



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The effect of incorporating lagged information variables into the evaluation of mutual fund
managers performance is examined in the Indian context. The results suggest that the use of
condition inglagged information variables improves the performance of mutual fund schemes,
causing alphas to shift towards right and reducing the number of negative timing coefficients.
Mishra, et al.,(2002) measured mutual fund performance using lower partial moment. In this
paper, measures of evaluating portfolio performance based on lower partial moment are
developed. Risk from the lower partial moment is measured by taking into account only those
states in which return is below a pre-specified target rate like risk-free rate. Kshama Fernandes
(2003) evaluated index fund implementation in India. In this paper, tracking error of index funds
in India is measured. The consistency and level of tracking errors obtained by some well-run
index fund suggests that it is possible to attain low levels of tracking error under Indian
conditions. At the same time, there do seem to be periods where certain index funds appear to
depart from the discipline of indexation. K. Pendaraki et al. studied construction of mutual fund
portfolios, developed a
multicriteria methodology and applied it to the Greek market of equity mutual funds. The
methodology is based on the combination of discrete and continuous multi-criteria decision aid
methods for mutual fund selection and composition. UTADIS multi-criteria decision aid
methodis employed in order to develop mutual funds performance models. Goal programming
model is employed to determine proportion of selected mutual funds in the final portfolios

Before we understand what is mutual fund, its very important to know the area in which mutual
funds works, the basic understanding of stocks and bonds.
Stocks: Stocks represent shares of ownership in a public company. Examples of public
companies include Reliance, ONGC and Infosys. Stocks are considered to be the most common
owned investment traded on the market.
Bonds: Bonds are basically the money which you lend to the government or a company, and in
return you can receive interest on your invested amount, which is back over predetermined
amounts of time. Bonds are considered to be the most common lending investment traded on the
market. There are many other types of investments other than stocks and bonds (including
annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks
and/or bonds.


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COMPANY PROFILE

SBI MUTUAL FUND


SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the country with an
investor base of over 4.6 million and over 20 years of rich experience in fund management
consistently delivering value to its investors.

SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Banks of India' one of
India's largest banking enterprises, and Society Generally Asset Management (France), one of
the world's leading fund management companies that manages over US$ 500 Billion worldwide.

Today the fund house manages over Rs 28500 crores of assets and has a diverse profile of
investors actively parking their investments across 36 active schemes. In 20 years of operation,
the fund has launched 38 schemes and successfully redeemed 15 of them, and in the process, has
rewarded our investors with consistent returns. Schemes of the Mutual Fund have time after time
outperformed benchmark indices, honored us with 15 awards of performance

and have emerged as the preferred investment for millions of investors. The trust reposed on us
by over 4.6 million investors is a genuine tribute to our expertise in fund management. SBI
Funds Management Pvt. Ltd. serves its vast family of investors through a network of over 130
points of acceptance, 28 Investor Service Centres, 46 Investor Service Desks and 56 District
Organizers.SBI Mutual is the first bank sponsored fund to launch an offshore fund Resurgent
India Opportunities Fund. Growth through innovation and stable investment policies is the SBI
MF credo.


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Mutual Fund

A mutual fund is just the connecting bridge or a financial intermediary that allows a group of
investors to pool their money together with a predetermined investment objective. The mutual
fund will have a fund manager who is responsible for investing the gathered money into specific
securities.(Stocks or bonds). When you invest in a mutual fund, you are buying units or portions
of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to others they
are very cost efficient and also easy to invest in, thus by pooling money together in a mutual
fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to
do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing
risk & maximizing returns.

Thus a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a relatively
low cost. The flow chart below describes broadly the working of a mutual fund.

COMPARISON OF ULIPS VS MUTUAL FUNDS

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in
terms of their structure and functioning. As is the cases with mutual funds, investors in ULIPs
are allotted units by the insurance company and a net asset value (NAV) is declared for the same
on a daily basis.

Similarly ULIP investors have the option of investing across various schemes similar to the ones
found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to
name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance
component.



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However it should not be construed that barring the insurance element there is nothing
differentiating mutual funds from ULIPs.

How ULIPs can make one RICH!
Despite the seemingly comparable structures there are various factors wherein the two differ.

1. Mode of investment/ investment amounts

2. Expenses

3. Portfolio disclosure


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SIGNIFICANCE OF STUDY




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OBJECTIVE OF THE STUDY


To give a brief idea about the benefits available from mutual Fund investment.
To give an idea of the types of schemes available.
To know the preferences for the portfolios.
To know why one has invested or not invested in SBI mutual fund.
Explore the recent developments in the mutual funds in India
To give an idea about the regulations of mutual funds.
To analyze SBI mutual fund strategy against its competitor.


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LIMITATIONS OF PROPOSED STUDY

Some of the persons were not so responsive.

Possibility of error in data collection because many of investors may have not given
actual answers of my questionnaire.


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RESEARCH METHODOLOGY

Research as a care full investigation or enquiry specially through search for a new facts in any
branch of knowledge Research is an academic activity and such as the term should be used in
technical sense. The manipulation of things , concepts or symbols for the purpose of
generalizing to extend ,correct or verify knowledge ,whether that knowledge through objective.

RESEARCH OBJECTIVE

Data sources:

Research is totally based on primary data. Secondary data can be used only for the reference.
Research has been done by primary data collection, and primary data has been collected by
interacting with various people. The secondary data has been collected through various journals
and websites and some special publications of SBI .


Sampling:
Sampling procedure:

The sample is selected in a random way, irrespective of them being investor or not or availing
the services or not. It was collected through mails and personal visits to the known persons, by
formal and informal talks and through filling up the questionnaire prepared. The data has been
analyzed by using the measures of central tendencies like mean, median, mode. The group has
been selected and the analysis has been done on the basis statistical tools available.
Sample size:
The sample size of my project is limited to 200 only. Out of which only 135 people attempted all
the questions. Other 65 not investing in MFs attempted only 2 questions.




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Sample design:
Data has been presented with the help of bar graph, pie charts, line graphs etc.

TYPES OF RESEARCH

ANALYTICAL RESERCH
In this project work, analytical research is used. In this project has to use facts or information
.Already used available ,and analyze these to make a critical evolution of the material.

METHODS OF DATA COLLECTION
In this project work primary and secondary data sources of data has been used.
Primary data: Primary data collect through observation, or through direct communication or
doing experiments.

Secondary data: Secondary data means already available through books, journals, magazines,
newspaper.




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BIBLIOGRAPHY

BOOKS
Khan, M.Y. & Jain, P.K. (2007) Financial Management, Tata McGraw-Hill Publishing
Company Limited (fifth edition).
P.V. Kuldarni, and B.G. Sathyaprasad, financial management, Ninth edition, Himalaya
publishing House, NEW Delhi, 2001.

S. N. Maheshwari, principles of management accounting, Thirteenth edition, Sultan
Chand & sons New Delhi,2002

Dr. S. N. Maheshwari, financial management, sixth edition, Sultan Chand & Sons New
Delhi,2000

M. Pandey, Financial management, eighth edition, Vikas publishing House pvt. Ltd. New
Delhi, 2003.

Prasanna Chandra, Financial management, fourth edition, Tata McGraw- Hill publishing
Company Limited, New Delhi,1999.

Mutual Fund Hand Book

WEBSITES

www.sbimf.com

www.moneycontrol.com

www.amfiindia.com

www. mutualfundsindia.com