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A

TRAINING REPROT ON

SBI MUTUAL FUND


MUMBAI

`
MBA (INDUSTRY INTEGRATED)
SEMESER - IV

SUBMITTED BY

MR. DEEPAK KATKE

INTERNATIONAL INSTITUTE FOR LEARNING MANAGEMENT BUSINESS SCHOOL

IILM - BS MUMBAI
KNOWLEDGE TOWER, SECTOR 11/20,
CBD BELAPUR, NAVIMUMBAI 400614

EASTERN INSTITUTE FOR INTEGRATED LEARNING IN MANAGEMENT


UNIVERSITY
EIILM UNIVERSITY

2009

A training report on SBI Mutual Fund. 1


CERTIFICATE

This is to certify that Mr / Miss / Mrs. DEEPAK KATKE (Enrollment No:


EIILMU/08/S0346 ) has successfully completed a training entitled,
“ SBI MUTUAL FUND.” in partial fulfillment for the requirement of MBA
(Industry Integrated) program.

Signature with Date

Project / Training Guide Dean

Examiner Stamp of IILM BS

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ACKNOWLEDGEMENT

Success is not a destination, but a journey – it is often said. I realized it


even better during my training Program at SBI funds Management
Private Limited. When I completed this journey, I may not have come
this far in my learning without help, guidance and support of certain
people who acted as guides, friends and torch bearers along the way.
We wish to express our gratitude to our faculty ., IILM BUSINESS
SCHOOL MUMBAI, for having given us an opportunity to go through
this project and extend our learning beyond the ambit of academic
curriculum and to my company guide Mr Hiralal Tulsiani and bhushan
relationship Manager of SBI FUNDS MANAGEMENT who has been
a source of constant inspiration for me. I shall be indebted to
him for his guidance, co-operation and confidence .I would
also like to thank Mrs. Swati ghaisas Chief Manager of sbi
mutual fund, Investor Service Centre, MUMBAI who has been
singularly responsible for all the knowledge that I have
assimilated during the past sixteen months. Her confidence
boosting talks helped me go a long a way during the course of
the project.
This pleasure would not have been ours without the firm support
extended to us by our friends. We thank them for their valuable
suggestions towards the preparation of this report.

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INDEX

CHAPTER TITLE PAGE


NO.

1 INTRODUCTION 5

1.1 Background 7

1.2 Significance of Work 10

17
2 METHODOLOGY

32
3 ANALYSIS & DISCUSSION

4 CONCLUSION 33

35
5 FUTURE PROSPECTS

36
6 REFERENCES

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INTRODUCTION

Why Invest in a Mutual Fund ?

Mutual funds make saving and investing simple, accessible, and affordable.
The advantages of mutual funds include professional management,
diversification, variety, liquidity, affordability, convenience, and ease of
recordkeeping—as well as strict government regulation and full disclosure.

During the past decade interest in and information about investing has
increased dramatically. Technological advances have ushered in a vast
supply of new services that allow you to invest with ease. Mutual fund share
holders have benefited from these technological advances, as funds have
continually offered improved services to meet changing investors need. Still,
the most important advantages mutual funds offer over other types of
investments remain unchanged since the first fund was offered in 1924:
professional management— the security of knowing your money is managed
by a team of professionals devoted to reaching your investment objectives—
and diversification —the ability to invest affordably in a wide range of
securities and reap market rewards while diminishing accompanying risks.

Establishing realistic financial goals is an essential first step toward


successful investing. Understanding the investments best suited to helping
you achieve your goals is equally important. Most Americans invest to meet
long-term goals, such as ensuring a secure retirement or paying for a child’s
college education, but many also have more immediate goals, like making a

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down payment on a home or automobile. Mutual funds can fit well into
either your long- or short-term investment strategy, but the success of your
plan depends on the type of fund you choose. Because all funds invest in
securities markets, it is crucial to maintain realistic expectations about the
performance of those markets and choose funds best suited to your needs. [1]

Keeping Recent Investment Returns in Perspective

Successful investors base their performance expectations on historic average


returns, and keep short-term market movements in perspective. Although
many investors have enjoyed strong returns on their investments in recent
years—as because of the bull in the Indian stock market sensex went from
14000 index to 25000 indexes in just one year thus has returned an average
of
Nearly 70 from year percent annually over the past 5 years. Experts remind
us that the unprecedented returns of the 1990s are not likely to continue.

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BACKGROUND

STATE BANK OF INDIA - MUTUAL FUND

SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the
country with an investor base of over 4.6 million. With over 20 years of
rich experience in fund management, SBI MF brings forward its
expertise in consistently delivering value to its investors
Established in 1987, SBI Funds Management is amongst India’s
oldest Asset Management Companies. Managing assets over Rs.34,000
crores through 30 Domestic Mutual Funds Schemes and Rs 4,800 crores
through PMS. Investor base of over 58 lakhs* predominantly retail clients.
Significant experience in managing Offshore Funds. Portfolio Management
Services being provided to major global institutional clients.
• A joint venture between SBI and Societal General Asset Management

SBI Funds management has been expert in managing assets since


1987 & tied-up with Societal General in 2004. Today:
– Assets under Management as on December 31, 2008 were , Rs

25003.67 Cr. (source amfi)


– SBIFM has won the trust of 54 lack investors

– SBIFM promotes among the best performing equity funds over


the past 1, 3 & 5 years.
– SBIFM has an 22 members experienced investment team
– SBIFM has more than 350 professionals (corporate office in
Mumbai & 61 investors centers)

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SBI Mutual Fund is India’s largest bank sponsored mutual fund and has
an enviable track record in judicious investments and consistent wealth
creation.

The fund traces its lineage to SBI - India’s largest banking enterprise.
The institution has grown immensely since its inception and today it is
India's largest bank, patronized by over 80% of the top corporate houses
of the country.

SBI Mutual Fund is a joint venture between the State Bank of India and
Société General Asset Management, one of the world’s leading fund
management companies that manages over US$ 500 Billion worldwide.

Exploiting expertise, compounding growth:

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


successfully redeemed fifteen of them. In the process it has rewarded
it’s investors handsomely with consistently high returns. A total of over
5.8 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund. Schemes of the Mutual fund have
consistently outperformed benchmark indices and have emerged as the
preferred investment for millions of investors and HNI’s. Today, the
fund manages over Rs. 51,461 crores of assets and has a diverse profile
of investors actively parking their investments across 36 active
schemes.The fund serves this vast family of investors by reaching out to
them through network of over 130 points of acceptance, 28 investor
service centers, 46 investor service desks and 56 district organizers.

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SBI Mutual is the first bank-sponsored fund to launch an offshore fund
– Resurgent India Opportunities Fund. Growth through innovation and
stable investment policies is the SBI MF credo.

1.2 Significance of work

This diagram signifies the importance of Mutual Fund.

A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is invested by the
fund manager in different types of securities depending upon the objective of
the scheme. These could range from shares to debentures to money market
instruments. The income earned through these investments and the capital

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appreciations realized by the schemes are shared by its unit holders in
proportion to the number of units owned by them.
Thus a mutual fund is the most suitable investment for the common person
as it offers an opportunity to invest in a diversified, professionally managed
basket of securities at a relatively low cost.
Since small investors generally do not have adequate time, knowledge,
experience & resources for directly accessing the capital market, they have
to rely on an intermediary, which undertakes informed investment decisions
& provides consequential benefits of professional expertise.
The advantage of Mutual Funds to the investors is professional managed,
low transaction cost, liquidity, transparency, well regulated, diversified
portfolios & tax benefits. By pooling their assets through mutual funds,
investors achieve economies of scale.

A collected corpus can be used to procure a diversified portfolio


indicating greater returns has also create economies of scale through cost
reduction. This principle has been effective worldwide as more & more
investors are going the mutual fund way. This portfolio diversification
ensures risk minimization. The criticality such a measure comes in when you
factor in the fluctuations that characterize stock markets. The interest of the
investors is protected by the SEBI, which acts as a watchdog. Mutual funds
are governed by SEBI (Mutual Funds) regulations, 1996.

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ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:

Mutual funds have a unique structure not shared with other entities such as
companies of firms. It is important for employees & agents to be aware of
the special nature of this structure, because it determines the rights &
responsibilities of the fund’s constituents viz., sponsors, trustees, custodians,
transfer agents & of course, the fund & the Asset Management
Company(AMC) the legal structure also drives the inter-relationships
between these constituents.
The structure of the mutual fund India is governed by the SEBI (Mutual
Funds) regulations, 1996. These regulations make it mandatory for mutual
funds to have a structure of sponsor, trustee, AMC, custodian. The sponsor
is the promoter of the mutual fund,& appoints the trustees. The trustees are
responsible to the investors in the mutual fund, & appoint the AMC for
managing the investment portfolio. The AMC is the business face of the

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mutual fund, as it manages all affairs of the mutual fund. The mutual fund &
the AMC have to be registered with SEBI. Custodian, who is also registered
with SEBI, holds the securities of various schemes of the fund in its custody.

• Sponsor:
The sponsor is the promoter of the mutual fund. The sponsor establishes
the Mutual fund & registers the same with SEBI. He appoints the trustees,
Custodians & the AMC with prior approval of SEBI, & in accordance with
SEBI regulations. He must have at least five year track record of business
interest in the financial markets. Sponsor must have been profit making in at
least three of the above five years. He must contribute at least 40% of the
capital of the AMC.

• Trustees:
The Mutual Fund may be managed by a Board of trustees a of individuals,
or a trust company – a corporate body. Most of the funds in India are
managed by board of trustees. While the board of trustees is governed by the
provisions of the Indian trust act, where the trustee is the corporate body, it
would also be required to comply with the provisions of the companies act,
1956. the board of trustee company, as an independent body, act as protector
of the unit-holders interest. The trustees don’t directly manage the portfolio
of securities. For this specialist function, they appoint an AMC. They ensure
that the fund is managed by AMC as per the defined objectives & in
accordance with the trust deed & SEBI regulations.

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The trust is created through a document called the trust deed i.e., executed
by the fund sponsor in favor of the trustees. The trust deed is required to be
stamped as registered under the provision of the Indian registration act &
registered with SEBI. The trustees begin the primary guardians of the unit-
holders funds & assets, a trustee has to be a person of high repute &
integrity.

• Asset Management Company(AMC):

The role of an Asset management companies is to act as the investment


manager of the trust. They are the ones who manage money of investors. An
AMC takes decisions, compensates investors through dividends, maintains
proper accounting & information for pricing of units, calculates the NAV, &
provides information on listed schemes. It also exercises due diligence on
investments & submits quarterly reports to the trustees. AMCs have been set
up in various countries internationally as an answer to the global problem of
bad loans.

Bad loans are essentially of two types: bad loans generated out of the usual
banking operations or bad lending, and bad loans which emanate out of a
systematic banking crisis.

It is in the latter case that banking regulators or governments try to bail out
the banking system of a systematic accumulation of bad loans which acts as
a drag on their liquidity, balance sheets and generally the health of banking.
So, the idea of AMCs or ARCs is not to bail out banks, but to bail out the
banking system itself.

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Types of AMCs in Indian Context:

The following are the various types of AMCs we have in India:

AMCs owned by banks.

AMCs owned by financial institutions.

AMCs owned by Indian private sector companies.

AMCs owned by foreign institutional investors.

AMCs owned by Indian & foreign sponsors.

• Custodian:

Often an independent organization, it takes custody all securities & other


assets of mutual fund. Its responsibilities include receipt & delivery of
securities collecting income-distributing dividends, safekeeping of the unit
& segregating assets & settlements between schemes.

Mutual fund is managed either trust company board of trustees. Board of


trustees & trust are governed by provisions of Indian trust act. If trustee is a
company, it is also subject Indian Company Act. Trustees appoint AMC in
consultation with the sponsors & according to SEBI regulation. All mutual
fund schemes floated by AMC have to be approved by trustees. Trustees
review & ensure that net worth of the company is according to stipulated
norms, every quarter.

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Though the trust is the mutual fund, the AMC is its operational face. The
AMC is the first functionary to be appointed, & is involved in appointment
of all other functionaries. The AMC structures the mutual fund products,
markets them & mobilizes fund, manages the funds & services to the
investors.

A draft offer document is to be prepared at the time of launching the fund.


Typically, it pre-specifies investment objectives of the fund, the risk
associated, the cost involved in the process & the broad rules to enter & to
exit from the fund & other areas of operation. In India as in most countries,
these sponsors need approval from a regulator, SEBI in our case. SEBI looks
at track records of the sponsor & its financial strength granting approval to
the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds


according to the investment objective. It also hires another entity to be the
custodian of the assets of the fund & perhaps the third one to handle registry
work for the unit holder of the fund.

• Registrars & Transfer Agent(R & T Agent):

The Registrars & Transfer Agents(R & T Agents) are responsible for the
investor servicing function, as they maintain the records of investors in
mutual funds. They process investor applications; record details provide by

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the investors on application forms; send out to investors details regarding
their investment in the mutual fund; send out periodical information on the
performance of the mutual fund; process dividend payout to investor;
incorporate changes in information as communicated by investors; & keep
the investor record up-to-date, by recording new investors & removing
investors who have withdrawn their funds.

2. METHODOLOGY

Research - the backbone of our Performance

Our expert team of experienced and market savvy researchers prepare


comprehensive analytical and informative reports on diverse sectors and
identify stocks that promise high performance in the future.
This team works in tandem with a compliance and risk-monitoring
department, which ensures minimization of operational risks while
protecting the interests of the investors.
Quite naturally many of our equity funds have delivered consistent
returns to investors and have repeatedly out performed benchmark
indices by wide margins.

RISK RETURN ANALYSIS OF THE SCHEMES

A rational investor before investing his or her money in any stock


analyses the risk associated with the particular stock. The actual return
he receives from a stock may vary from the expected one and thus a

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investor is always cautious about the rate of risk associated with the
particular stock. Hence it becomes very essential on the part of investors
to know the risk as the hard earned money is being invested with the
view to earn good return on the investment.

Risk mainly consists of two components

• Systematic risk
• Unsystematic risk

Systematic risk

The systematic risk affects the entire market. The


economic conditional, political situations, sociological changes affect
the entire market in turn affecting the company and even the stock
market. These situations are uncontrollable by the corporate and
investor.

Unsystematic risk

The unsystematic risk is unique to industries. It differs


from industry to industry. Unsystematic risk stems from managerial
inefficiency, technological change in the production process,
availability of raw materials, changes in the consumer preference, and
labour problems. The nature and magnitude of above mentioned factors
differ from industry to industry and company to company.

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In a general view, the risk for any investor would be the probable
loss for investing money in any mutual fund. But when we look at the
technical side of it , we can’t just say that these schemes/fund carry risk
without any proof. They are certain set of formulas to say the
percentage of risk associated with it.

There are certain tools or formulas used to calculate the risk


associated with the schemes. These tools help us to understand the risk
associated with the schemes. These schemes are compared with the
benchmark BSE 100.

THE TOOLS USED FOR CALCULATION

• Standard Deviation
• Beta
• Alpha
• Sharp ratio
• Treynor ratio

• Arithmetic mean

∑ Y/N

Where Y- return of Nav values

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N- Number of observation

average return that can be expected from investment. The


arithmetic average return is appropriate as a measure of the central
tendency of a number of returns calculated for a particular time i.e. for
five years. It shows the

Standard deviation

S.D= √(y-Y)²

The standard deviation is a measure of the variables around its mean or


it is the square root of the sum of the squared deviations from the mean
divided by the number of observations.

S.D is used to measure the variability of return i.e.


the variation between the actual and expected return.

BETA

Beta describes the relationship between the stock’s return and index
returns. There can be direct or indirect relation between stock’s return
and index return. Indirect relations are vary rare.

1) Beta =+1.0

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It indicates that one percent change in market index
return causes exactly one percent change in the stock return. It indicates
that stock moves along with the market.

2) Beta= + 0.5

One percent changes in the market index return causes


0.5 percent change in the stock return. It indicates that it is less
volatile compared to market.

3) Beta=2.0

One percent change in the market index return causes 2


percent change in the stock return. The stock return is more volatile.
The stocks with more than 1 beta value are considered to be very
risky.

4) Negative beta value indicates that the stocks return move in


opposite direction to the market return.

Beta= N*∑XY- (∑X) (∑Y/ N(X*X) * (∑x)

Where, N- No of observation

X- Total of market index value

Y- Total of return to Nav

ALPHA

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Alpha = Y- beta(X)

Where

Y- avrage return to nav return

X- average return to market index .

Alpha indicates that the stock return is independent of the market


return. A positive value of alpha is a healthy sign. Positive alpha values
would yield profitable return.

SHARPE RATIO

St= Rp --Rf

S.D

WHERE

Rp – Avereage return to portfolio

Rf—Risk free rate of interest

S.D- Standard Deviation

Sharpe’s performce index gives a single value to be used for the


performance ranking of various funds or portfolios. Sharpe index
measures the risk premium of the portfolio relative to the total amount
of risk in the portfolio. The risk premium is the difference between the
portfolio’s average rate of return and the risk less rate of return. The
standard deviation of the portfolio indicates the risk.

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Higher the value of sharpe ratio better the fund has performed.
Sharpe ratio can be used to rank the desirability of funds or portfolios.
The fund that has performed well comapred to other will be ranked first
then the others.

TREYNOR RATIO

Ty= Rp—Rf

WHERE

Rp- Average return to portfolio

Rf- Risk less rate of interest.

B- Beta coeffecient

Treynor ratio is based on the concept of characteristic line.


Characteristic line gives the relation between a given market return and
fund’s return. The fund’s performance is measured in relation to market
performance. The ideal fund’s return rises at a faster rate than the
market performance when the market is moving upwards and its rate of
return declines slowly than the market return, in the decline.

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Treynor’s risk premium of the portfolio is the difference between the
aveage return and the risk less rate of return. The risk premium depends
on the systematic risk assumed in a portfoilo.

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MAGNUM MULTIPLIER PLUS SCHEME-93 (SBI)

TOOLS FOR CALCULATION

Magnum Multiplier Plus Scheme - 93 -

BSE-100 Dividend Growth


Date close X X2 NAV Y X*Y NAV Y X*Y
30- Jan-06 5224.37 36.05 39.54
28- Feb-06 5422.67 3.796 14.407 37.6 4.300 16.320 41.24 4.299 16.319
30-Mar-06 5904.17 8.879 78.844 42.25 12.367 109.812 46.34 12.367 109.808
30-Apr-06 6251.39 5.881 34.585 44 4.142 24.359 48.27 4.165 24.493
- -
30-May-06 5385.21 13.856 191.983 38.9 11.591 160.601 42.64 -11.664 161.608
30-Jun-06 5387.11 0.035 0.001 36.21 -6.915 -0.244 39.72 -6.848 -0.242
31-Jul-06 5422.39 0.655 0.429 36.81 1.657 1.085 40.37 1.636 1.072
31-Aug-06 5933.77 9.431 88.942 40.16 9.101 85.829 44.04 9.091 85.735
30-Sep-06 6328.33 6.649 44.214 42.18 5.030 33.446 46.26 5.041 33.519
31-Oct-06 6603.6 4.350 18.921 44.18 4.742 20.625 48.45 4.734 20.592
30-Nov-06 6931.05 4.959 24.588 47.41 7.311 36.253 52 7.327 36.333
31-Dec-06 6982.5 0.742 0.551 49.27 3.923 2.912 54.03 3.904 2.898
30-Jan-07 7145.91 2.340 5.477 50.34 2.172 5.082 55.19 2.147 5.024
28-Feb-07 6527.12 -8.659 74.984 46.16 -8.304 71.903 50.61 -8.299 71.861
30-Mar-07 6587.21 0.921 0.848 46.23 0.152 0.140 50.68 0.138 0.127
30-Apr-07 7032.93 6.766 45.785 49.38 6.814 46.105 54.14 6.827 46.196
30-May-07 7468.7 6.196 38.392 51.43 4.151 25.723 56.39 4.156 25.750
30-Jun-07 7605.37 1.830 3.349 54.46 5.892 10.781 59.71 5.888 10.774
31-Jul-07 8004.05 5.242 27.479 57.8 6.133 32.149 63.38 6.146 32.220
-
31-Aug-07 7857.61 -1.830 3.347 51.3 11.246 20.575 63.28 -0.158 0.289
30-Sep-07 8967.41 14.124 199.484 57.65 12.378 174.828 71.11 12.374 174.763
31-Oct-07 10391.2 15.877 252.088 65.04 12.819 203.527 80.22 12.811 203.406
30-Nov-07 10384.4 -0.065 0.004 67.93 4.443 -0.290 83.78 4.438 -0.290
31-Dec-07 11154.3 7.414 54.965 72.24 6.345 47.039 89.09 6.338 46.989
- -
30-Jan-08 9440.94 15.360 235.941 60.11 16.791 257.920 74.13 -16.792 257.932
28-Feb-08 9404.98 -0.381 0.145 58.21 -3.161 1.204 71.79 -3.157 1.202
- -
30-Mar-08 8232.82 12.463 155.331 50.53 13.194 164.434 62.31 -13.205 164.579

19798 53.47 1595.08 1333.8 42.66 1552.11


TOTAL 1 3 5 3 9 7 1529 53.705 1532.957

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ARITHMETIC MEAN:

ARITHMETIC DIVIDEND OPTION GROWTH OPTION


MEAN
X= ∑Y 42.669 = 1.580 53.705 = 1.998
27
N 27

CALCULATION FOR STANDARD DEVIATION:

Magnum Multiplier Plus Scheme – 93 -

Dividend Growth

Date NAV Y z (z)2 NAV Y Z (Z)2


30-Jan-06 36.05 0 0 0 39.54 0 0 0
28-Feb-06 37.6 4.300 2.719 7.394 41.24 4.299 2.310 5.338
30-Mar-06 42.25 12.367 10.787 116.352 46.34 12.367 10.378 107.694
30-Apr-06 44 4.142 2.562 6.562 48.27 4.165 2.176 4.734
30-May-06 38.9 -11.591 -13.171 173.482 42.64 -11.664 -13.653 186.395
30-Jun-06 36.21 -6.915 -8.496 72.174 39.72 -6.848 -8.837 78.095
31-Jul-06 36.81 1.657 0.077 0.006 40.37 1.636 -0.353 0.124
31-Aug-06 40.16 9.101 7.520 56.557 44.04 9.091 7.102 50.436
30-Sep-06 42.18 5.030 3.450 11.899 46.26 5.041 3.052 9.313
31-Oct-06 44.18 4.742 3.161 9.993 48.45 4.734 2.745 7.535
30-Nov-06 47.41 7.311 5.731 32.840 52 7.327 5.338 28.495
31-Dec-06 49.27 3.923 2.343 5.489 54.03 3.904 1.915 3.666
30-Jan-07 50.34 2.172 0.591 0.350 55.19 2.147 0.158 0.025
28-Feb-07 46.16 -8.304 -9.884 97.691 50.61 -8.299 -10.288 105.836
30-Mar-07 46.23 0.152 -1.429 2.041 50.68 0.138 -1.851 3.425
30-Apr-07 49.38 6.814 5.233 27.389 54.14 6.827 4.838 23.407
30-May-07 51.43 4.151 2.571 6.611 56.39 4.156 2.167 4.695
30-Jun-07 54.46 5.892 4.311 18.586 59.71 5.888 3.898 15.198
31-Jul-07 57.8 6.133 4.553 20.726 63.38 6.146 4.157 17.283
31-Aug-07 51.3 -11.246 -12.826 164.507 63.28 -0.158 -2.147 4.609
30-Sep-07 57.65 12.378 10.798 116.593 71.11 12.374 10.384 107.838
31-Oct-07 65.04 12.819 11.238 126.301 80.22 12.811 10.822 117.117
30-Nov-07 67.93 4.443 2.863 8.197 83.78 4.438 2.449 5.996
31-Dec-07 72.24 6.345 4.764 22.700 89.09 6.338 4.349 18.913
30-Jan-08 60.11 -16.791 -18.372 337.515 74.13 -16.792 -18.781 352.729
28-Feb-08 58.21 -3.161 -4.741 22.479 71.79 -3.157 -5.146 26.478
30-Mar-08 50.53 -13.194 -14.774 218.270 62.31 -13.205 -15.194 230.866

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TOTAL 1333.83 42.669 1.580 1682.706 1528.7 53.705 1.989 1516.241

STANDARD DEVIATION
S.D DIVIDEND GROWTH
S.D= √(Z)² = √(1682.706) = 7.89 √(1516.241) =7.493

√(N) √27 √27

BETA

BETA DIVIDEND GROWTH

= N*∑XY- (∑X) (∑Y) = 27(1552.116)-(53.473)(42.669) 27(1532.957)-(53.47)(53.70)

N* ∑(X)² -(∑X)² 27(1595.085) - (53.473)2 27(1595.085) - (53.473)2

= 0.985 = 0.9579

ALPHA
ALPHA DIVIDEND GROWTH
= Y-B(X) = 1.580-0.985(1.980) = 1.989-0.957(1.980)

- 0.3696 0.092

SHARPE RATIO

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Sharpe ratio Dividend Growth
Rp-Rf = 1.580 – 0.08 = 0.190 = 1.989 – 0.08 = 0.254

S.D 7.89 7.493

TREYNOR RATIO

TREYNOR DIVIDEND GROWTH


RATIO
Rp-Rf = 1.580 – 0.08 = 1.522 1.989 – 0.08 = 1.992

B 0.9855 0.9579

POWER PLAN (ICICI PRUDENTIAL):

A training report on SBI Mutual Fund. 27


POWER PLAN

S&P CNX NIFTY Dividend Growth


Date Close X X2 NAV Y X*Y NAV Y X*Y
30-Jan-06 3001.1 18.02 59.74
28-Feb-06 3074.7 2.452 6.014 18.78 4.218 10.343 62.26 4.218 10.345
30-Mar-06 3402.55 10.663 113.696 20.86 11.076 118.097 69.16 11.083 118.171
30-Apr-06 3557.6 4.557 20.765 22.34 7.095 32.331 74.05 7.071 32.220
-
30-May-06 3071.05 13.676 187.043 19.57 -12.399 169.577 64.87 -12.397 169.546
30-Jun-06 3128.2 1.861 3.463 18.62 -4.854 -9.034 61.74 -4.825 -8.979
31-Jul-06 3143.2 0.480 0.230 18.89 1.450 0.695 62.63 1.442 0.691
31-Aug-06 3413.9 8.612 74.171 18.62 -1.429 -12.310 68.71 9.708 83.606
30-Sep-06 3588.4 5.111 26.127 19.71 5.854 29.922 72.76 5.894 30.129
31-Oct-06 3744.1 4.339 18.827 20.65 4.769 20.693 76.22 4.755 20.633
30-Nov-06 3954.5 5.620 31.579 21.55 4.358 24.492 79.55 4.369 24.551
31-Dec-06 3966.4 0.301 0.091 22.12 2.645 0.796 81.67 2.665 0.802
30-Jan-07 4082.7 2.932 8.597 22.57 2.034 5.965 83.32 2.020 5.924
28-Feb-07 3745.3 -8.264 68.296 21.04 -6.779 56.022 77.66 -6.793 56.139
30-Mar-07 3821.55 2.036 4.145 18.91 -10.124 -20.610 77.49 -0.219 -0.446
30-Apr-07 4087.9 6.970 48.577 20.38 7.774 54.180 83.5 7.756 54.056
30-May-07 4295.8 5.086 25.865 21.77 6.820 34.687 89.2 6.826 34.717
30-Jun-07 4318.3 0.524 0.274 21.9 0.597 0.313 89.72 0.583 0.305
31-Jul-07 4528.85 4.876 23.773 22.63 3.333 16.253 92.75 3.377 16.466
31-Aug-07 4464 -1.432 2.050 22.27 -1.591 2.278 91.26 -1.606 2.300
30-Sep-07 5021.35 12.485 155.886 21.95 -1.437 -17.940 98.65 8.098 101.104
31-Oct-07 5868.75 16.876 284.797 24.7 12.528 211.430 111.01 12.529 211.441
30-Nov-07 5762.75 -1.806 3.262 24.76 0.243 -0.439 111.25 0.216 -0.390
31-Dec-07 6138.6 6.522 42.537 27.24 10.016 65.326 122.41 10.031 65.426
-
30-Jan-08 5137.45 16.309 265.987 22.85 -16.116 262.837 102.66 -16.134 263.136
28-Feb-08 5223.5 1.675 2.805 22.32 -2.319 -3.885 100.32 -2.279 -3.818
30-Mar-08 4734.5 -9.362 87.638 17.48 -21.685 203.001 87.93 -12.350 115.619

1506.49
TOTAL 112277 53.128 6 572.5 6.078 1255.020 2252.49 46.037 1403.695

POWER PLAN:

TOOLS FOR CALCULATION

A training report on SBI Mutual Fund. 28


ARITHMETIC MEAN DIVIDEND OPTION GROWTH OPTION
X= ∑Y 6.078 = 0.225 46.037 = 1.7050
27
N 27
CALCULATION FOR STANDARD DEVIATION:

POWER PLAN

Dividend Growth

Date NAV Y z (z)2 NAV Y Z (z)2


30-Jan-06 18.02 0.000 59.74 0
28-Feb-06 18.78 4.218 3.993 15.940 62.26 4.218 2.513 6.317
30-Mar-06 20.86 11.076 10.851 117.736 69.16 11.083 9.378 87.939
30-Apr-06 22.34 7.095 6.870 47.196 74.05 7.071 5.366 28.789
30-May-06 19.57 -12.399 -12.624 159.373 64.87 -12.397 -14.102 198.867
30-Jun-06 18.62 -4.854 -5.079 25.800 61.74 -4.825 -6.530 42.641
31-Jul-06 18.89 1.450 1.225 1.501 62.63 1.442 -0.263 0.069
31-Aug-06 18.62 -1.429 -1.654 2.737 68.71 9.708 8.003 64.045
30-Sep-06 19.71 5.854 5.629 31.685 72.76 5.894 4.189 17.551
31-Oct-06 20.65 4.769 4.544 20.649 76.22 4.755 3.050 9.305
30-Nov-06 21.55 4.358 4.133 17.085 79.55 4.369 2.664 7.097
31-Dec-06 22.12 2.645 2.420 5.856 81.67 2.665 0.960 0.922
30-Jan-07 22.57 2.034 1.809 3.274 83.32 2.020 0.315 0.099
28-Feb-07 21.04 -6.779 -7.004 49.055 77.66 -6.793 -8.498 72.217
30-Mar-07 18.91 -10.124 -10.349 107.093 77.49 -0.219 -1.924 3.701
30-Apr-07 20.38 7.774 7.549 56.982 83.5 7.756 6.051 36.613
30-May-07 21.77 6.820 6.595 43.499 89.2 6.826 5.121 26.228
30-Jun-07 21.9 0.597 0.372 0.138 89.72 0.583 -1.122 1.259
31-Jul-07 22.63 3.333 3.108 9.662 92.75 3.377 1.672 2.796
31-Aug-07 22.27 -1.591 -1.816 3.297 91.26 -1.606 -3.311 10.966
30-Sep-07 21.95 -1.437 -1.662 2.762 98.65 8.098 6.393 40.867
31-Oct-07 24.7 12.528 12.303 151.375 111.01 12.529 10.824 117.162
30-Nov-07 24.76 0.243 0.018 0.000 111.25 0.216 -1.489 2.217
31-Dec-07 27.24 10.016 9.791 95.867 122.41 10.031 8.326 69.330
30-Jan-08 22.85 -16.116 -16.341 267.028 102.66 -16.134 -17.839 318.241
28-Feb-08 22.32 -2.319 -2.544 6.474 100.32 -2.279 -3.984 15.875
30-Mar-08 17.48 -21.685 -21.910 480.030 87.93 -12.350 -14.055 197.556

46.03
TOTAL 572.5 6.078 0.228 1722.095 2252.49 7 1.707 1378.669

STANDARD DEVIATION

S.D DIVIDEND GROWTH

A training report on SBI Mutual Fund. 29


S.D= √(Z)² = √(1722.095) = 7.986 √(1378.669) =7.145

√(N) √27 √27

BETA

BETA DIVIDEND GROWTH

= N*∑XY- (∑X) (∑Y) = 27(1255.020)-(53.128)(6.078) 27(1403.695)-(53.128)(46.03)

N* ∑(X)² -(∑X)² 27(1506.496) - (53.128)2 27(1506.496) - (53.128)2

=0.886 = 0.936

ALPHA
ALPHA DIVIDEND GROWTH
= Y-B(X) = 0.225-0.8866(1.967)= = 1.7050-0.9366(1.967)

- 1.518 - 0.1372

SHARPE RATIO

Sharpe ratio Dividend Growth


Rp-Rf = 0.225– 0.08 = 0.018 = 1.7050 – 0.08 = 0.227

S.D 7.986 7.145

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TREYNOR RATIO
TREYNOR DIVIDEND GROWTH
RATIO

Rp-Rf = 0.225– 0.08 = 0.018 1.7050 – 0.08 = 1.734

B 0.8866 0.9366

MAGNUM MULTIPLIER POWER PLAN (ICICI


1993 PLUS (SBI) PRUDENTIAL)
Dividend Growth Dividend Growth
Average 1.5803 1.9890 0.225 1.7050
return
Beta 0.9855 0.9579 0.8866 0.9366

SD 7.89 7.493 7.986 7.145


Alpha 0.3696 0.092 -1.518 -0.1372

Sharpe ratio 0.190 0.254 0.018 0.227


Treynor 1.522 1.992 0.163 1.7349
ratio

ANALYSIS & DISCUSSION:

• The SBI Magnum Multiplier plus1993 Dividend option & Growth


option has given high returns compared to ICICI prudential Power
Plan.

A training report on SBI Mutual Fund. 31


• The larger the Sharpe ratio, better the fund is performing. So, the SBI
Magnum Multiplier plus 1993 fund has a greater Sharpe ratio
compared to ICICI PRUDENTIAL Power Plan, all options show the
positive value, this means funds are performing well.
• Since the market has risen up, this has resulted in funds positive
return.
• Since the funds objective is to invest in Diversified portfolios the
benchmarks index has performed very good, which has resulted in
good performance of the fund.
• As per the Treynor index, the SBI Magnum Multiplier 1993 has
given higher returns compared to ICICI PRUDENTIAL Power Plan
due to which the risk is also high. But incase of ICICI PRUDENTIAL
Power Plan the returns are low and the risk is high compared to SBI
Magnum Multiplier 1993.
• As per Beta for dividend option and growth option of SBI Magnum
Multiplier 1993 has got the highest risk. When market is 1 it moves
at 0.9855 in dividend &
0.9579 in growth compared to ICICI PRUDENTIAL Power Plan.

• Overall, all the options are performing well.

CONCLUSION:

A training report on SBI Mutual Fund. 32


The Global market is fast growing in investment business. Countries like
US, whole of Europe spread their investment in different investment
alternatives with the help of advisory services to recommend investor.

In Indian scenario the investments are spread over Bank Deposits, Savings
Certificate, Post Office, Equity Markets and the latest Mutual Fund. Since
Mutual Funds are subject to market risk the investor take help of advisory
services for financial planning which helps the investor to take calculated
risk.

It was in 1995, the scenario got changed when depository act was
passed and PAN card details and D mat account was made compulsory
for all those investor who are investing a heavy amount. So as to protect
the interest of the investors. From july 2 of 2007 it has been made
mandatory to have PAN card details, this will enhance the faith of
investors in stock market and many investor would come forward to
invest in mutual fund .

No doubt, watching the value of investments go down day after day can be
pretty tough. However, the pain becomes more bearable if one follows a
proper investment plan and invests for the long term. Having a well
diversified portfolio as well as a plan to rebalance it from time to time also
helps a great deal. No wonder, Mutual fund are considered to be the best
way to invest in the stock market.

The mutual fund industry has gained a higher growth in the recent years.
There are around 34 Asset Management Companies which are currently
operating and the numbers of Mutual funds are around 630 funds, so it is

A training report on SBI Mutual Fund. 33


difficult to analyze each and every fund in order to known their riskiness and
return. Some tools are used to find risk and return of the fund, which helps
an investor to find out their risk.

The schemes taken for study proved to be a good investment avenue for
all the investors as the risk associated with these schemes are low and
they are yielding a very good return.

The volatility in the market might have affected the ratios but
definitely not the performance of the schemes. The schemes have been
the one of the best schemes of SBI MF & ICICI PRUDENTIAL.

FUTURE PROSPECTS

A training report on SBI Mutual Fund. 34


The investment environment is becoming increasingly complex.
Innumerable parameters need to be factored in to generate a clear
understanding of market movement and performance in the near and
longtermfuture.

At SBIMF, we devote considerable resources to gain, maintain and


sustain our profitable insights into market movements. We consistently
push the envelope to ensure our investors get the maximum benefits
year after year.

A training report on SBI Mutual Fund. 35


REFRECNCES

• www.sbimf.com
• www.amfiindia.com
• www.bseindia.com
• www.nseindia.com
• www.investopedia.com
• www.researchonline.com

BOOK
• Business Statistics
- G.C. Beri
- S P Gupta.

A training report on SBI Mutual Fund. 36