EXECUTIVE SUMMARY

The Banking Sector is one of the fastest growing sectors in India today. The upcoming sectors
which are really showing the graph towards upwards are - Telecom, Banking Insurance. These
sectors really have a lot of responsibility towards the economy

Mutual fund industry has seen a lot of changes in past few years with multinational companies
coming into the country, bringing in their professional expertise in managing funds worldwide.
In the past few months there has been a consolidation phase going on in the mutual fund industry
in India. Now investors have a wide range of Schemes to choose from depending on their
individual profiles.

This is an internship report regarding the diverse services provided by SBI IN Mutual fund. It
starts with an introduction about the industry followed by the history and profile of SBI.It gives a
briefing about all the services rendered by the company.

The report shows an internal architecture of the Mutual fund. It gives a detail about the mutual
fund and what is the risk involved in that and how much returns they are providing to investors.
Also it discusses the vision, mission and policies of the organization along with their competitors
at national level. There are also some suggestions/recommendations for the business. what I
learnt and imbibed in my day-to-day affairs by doing the research in mutual fund .
INDUSTRY PROFILE
The mutual fund industry is a lot like the film star of the finance business.Though it is perhaps
the smallest segment of the industry, it is also the most glamorous – in that it is a young industry
where there are changes in the rules of the game everyday, and there are constant shifts and
upheavals.The mutual fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is achieved by the pooling
of a number of small investments into a large bucket.Yet it has been the subject of perhaps the
most elaborate and prolonged regulatory effort in the history of the country.

A little history:

The mutual fund industry started in India in a small way with the UTI Act creating what was
effectively a small savings division within the RBI. Over a period of 25 years this grew fairly
successfully and gave investors a good return, and therefore in 1989, as the next logical step,
public sector banks and financial institutions were allowed to float mutual funds and their
success emboldened the government to allow the private sector to foray into this area.The initial
years of the industry also saw the emerging years of the Indian equity market, when a number of
mistakes were made and hence the mutual fund schemes, which invested in lesser-known stocks
and at very high levels,became loss leaders for retail investors. From those days to today the
retail investor, for whom the mutual fund is actually intended, has not yet returned to the industry
in a big way. But to be fair, the industry too has focused on brining in the large investor, so that it
can create a significant base corpus,which can make the retail investor feel more secure.

The Indian MF industry has Rs 5.67 lakh crore of assets under management. As per data
released by Association of Mutual Funds in India,the asset base of all mutual fund combined has
risen by 7.32% in April, the first month of the current fiscal. As of now, there are 33 fund houses
in the country including 16 joint ventures and 3 whollyowned foreign asset managers.
According to a recent McKinsey report, the total AUM of the Indian mutual fund industry could
grow to $350-440 billion by 2012, expanding 33% annually. While the revenue and profit (PAT)
pools of Indian AMCs are pegged at $542 million and $220 million respectively, it is at par with
fund houses in developed economies. Operating profits for AMCs in India, as a percentage of
average assets under management, were at 32 basis points in 2006-07,while the number was 12
bps in UK, 17 bps in Germany and 18 bps in the US, in the same time frame.
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank the. The history of mutual funds in India
can be broadly divided into four distinct phases

First Phase – 1964-87

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

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

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and
Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47,004
crores

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting
up funds in India and also the industry has witnessed several mergers and acquisitions. As at the
end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The
Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other
mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of
Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations.The
second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile
UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund industry
has entered its current phase of consolidation and growth. As at the end of October 31, 2003,
there were 31 funds, which manage assets of Rs.126726 crores under 386 schemes
STRUCTURE OF MUTUAL FUND
Growth of Mutual fund in India

The Indian Mutual Fund has passed through three phases. The first phase was between 1964 and
1987 and the only player was the Unit Trust of India, which had a total asset of Rs. 6,700 crores
at the end of 1988. The second phase is between 1987 and 1993 during which period 8 Funds
were established (6 by banks and one each by LIC and GIC). The total assets under management
had grown to 61,028 crores at the end of 1994 and the number of schemes was 167.
The third phase began with the entry of private and foreign sectors in the Mutual Fund industry
in 1993. Kothari Pioneer Mutual Fund was the first Fund to be established by the private sector
in association with a foreign Fund.
As at the end of financial year 2000(31st march) 32 Funds were functioning with Rs. 1, 13,005
crores as total assets under management. As on august end 2000, there were 33 Funds with 391
schemes and assets under management with Rs 1, 02,849 crores.
The securities and Exchange Board of India (SEBI) came out with comprehensive regulation in
1993 which defined the structure of Mutual Fund and Asset Management Companies for the first
time. Several private sectors Mutual Funds were launched in 1993 and 1994. The share of the
private players has risen rapidly since then.Currently there are 34 Mutual Fund
organizations in India managing 1,02,000 crores.

Major players in Indian mutual fund industry and their AUM

SBI Mutual Fund
ABN AMRO M F
Birla Mutual Fund
Deutsche Mutual Fund
Fidelity Mutual Fund
HDFC Mutual Fund
HSBC Mutual Fund
LIC Mutual Fund
COMPANYPROFILE

The State Bank of India, popularly known as SBI, is one of the leading banks in India.
The bank traces its origin to the first decade of the 19th century. Later on, it was merged
with the Imperial Bank. In the year 1955, the Government of India nationalized the
Imperial Bank along with the Reserve Bank of India. Ever since that time, the bank
acquired its present name that is SBI.

The State Bank of India is India's largest commercial bank. The bank has been striving
sincerely to adhere to the efforts of providing utmost customer satisfaction to the best
possible extent.
The State Bank of India (SBI) is India’s largest bank and SBI Mutual Fund is
sponsored by the bank. SBI Mutual Fund has an excellent track record in creating wealth
for its members. Interestingly SBI Mutual Fund is a joint venture between the State Bank
of India and Société Générale Asset Management, one of the world’s leading fund
management companies that manages over US$ 500 Billion internationally. During the
20 years since inception, SBI Mutual Fund has launched 38 schemes and successfully
redeemed fifteen of them. Today, SBI Mutual Fund manages over Rs. 40000 crores of
assets and has a diverse profile of members with investments across 38 active schemes.

SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country with
an investor base of over 5.8 million. With over 20 years of rich experience in fund
management, SBI MF brings forward its expertise in consistently delivering value
to its investors.

SBI MF draws its strength from India's Largest Bank State Bank of India and
Société Générale Asset Management, France.
SBI Mutual Fund operates under State Bank of India and Société Générale Asset
Management of France and has asset management experience of more than 25 years. SBI
Mutual Fund offers different kinds of products like growth based products, income based
products and balanced funds. 

The SBI Mutual Fund operates under State Bank of India and Société Générale Asset
Management of France. With over twenty years of experience in asset management, the
company has grown immensely since its establishment. SBI Mutual Funds offer
innovative mutual fund products to its wide pool of customers and its products are
available across India. It has a wide portfolio of products that meet the requirements of
different types of investors. The SBI Mutual Fund is headed by Mr Syed Shahabuddin,
Managing Director of the company.
SBI Mutual Fund is India's largest bank sponsored mutual fund with an investor base of
over 3 million. SBI Mutual Fund is a joint venture between the State Bank of India,
India's largest banking enterprise and Societe Generale Asset Management of France, one
of the world's leading fund management companies. 

Since its inception SBI Mutual Fund has launched thirty-two schemes and successfully
redeemed fifteen of them. SBI Mutual Fund schemes have consistently outperformed
benchmark indices. SBI Mutual is the first bank-sponsored fund to launch an offshore
fund - Resurgent India Opportunities Fund.

Presently, SBI Mutual Fund manages over Rs. 17000 crores of assets. The fund has a
network of 100 collection branches, 26 investor service centres, 28 investor service desks
and 40 district organisers.
Activities:

State Bank of India Mutual Funds offers investment opportunities in both, Equity and Debt
funds. With 18 years of operational experience the achievements of State Bank of India Mutual
Funds are -

The fund has launched 32 schemes and successfully redeemed them with handsome
returns.
The fund has investor base of over 3.5 million.
SBI Mutual Fund have consistently met investor's expectations and have emerged as the
preferred investment for millions of investors and HNI’s.
SBI Mutual Fund manages over Rs.16500 crores of assets and has a diverse portfolio of
30 active schemes.
State Bank of India Mutual Funds has a network of 100 collection branches, 26 investor
service centers , 28 investor service desks and 52 district organizers.
SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent India
Opportunities Fund. .

Performance:

State Bank of India Mutual Funds had Total Income of ` 12602.88 crore for the financial year
2006 -07. State Bank of India Mutual Funds has posted Net Profit of Rs 1081.38 crore for the
financial year 2006 -07.

Organization:

State Bank of India Mutual Funds is headed by Mr. Syed Shahabuddin, Managing Director. State
Bank of India Mutual Funds Corporate Office is located at: 

NEW SCHEMES BY RBI

RBI has introduced a method of payment which promises you an option to collect your periodic
interest/ dividend/ repurchase directly through your bank account. In this system, payment
instructions would be issued electronically through our banker to the clearing authority and the
clearing authority would supply credit reports to the bank with which you maintain the specified
amount. The branch will credit your account directly and an ECS entry will appear in your
passbook. A payment advice will also be sent to you. This facility will help you in avoiding
cases of pilferage, fraudulent encashments etc.

The facility would be available for indivudual transactions upto Rs. 3,00,000/- (Interest
Dividend). This facility would only be an additional mode of payment and would be optional.
You can withdraw from the service with a six weeks notice to the Registrars.

Centres where ECS (Credit Clearing) is being offered by

State Bank of India
 Agra  Ludhiana
 Allahabad  Madurai
 Amritsar  Mangalore
 Baroda  Nashik
 Bhopal  Panaji
 Cochin  Rajkot
 Coimbatore  Shimla
 Dehradun  Surat
 Durgapur  Trichy
 Faridabad  Trichur
 Ghaziabad  Vijayawada
 Hubli  Visakhapatnam
 Jamshedpur  Varanasi
 Lucknow
General Introduction

TITLE OF THE STUDY

Mutual fund risk and return
A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India
(SEBI), that pools up the money from individual / corporate investors and invests the same on
behalf of the investors /unit holders, in equity shares, Government securities, Bonds, Call money
markets etc., and distributes the profits. In other words, a mutual fund allows an investor to
indirectly take a position in a basket of assets
TYPES OF MUTUAL FUND SCHEME:

Mutual fund schemes may be classified on the basis of its structure and its investment objective.

 By structure:

 Open ended.
 Close ended.
 Interval schemes.

 By investment objectives:

 Growth schemes.
 Income schemes.
 Balanced schemes.
 Money market schemes.

 Other schemes:

 Tax saving schemes.

 Special schemes
 Index schemes.
 Sector specific schemes.
By Structure

1) Open-end Funds
2) An open-end fund is one that is available for subscription all through the year. These do
not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
2) Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years.
The fund is open for subscription only during a specified period. Investors can invest in the
scheme at the time of the initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one
of the two exit routes is provided to the investor.

3) Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are open for
sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective

1) Growth Funds

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

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

3) Balanced Funds

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

4) Money Market Funds

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

OTHER SCHEMES

1) Tax Saving Schemes

2) These schemes offer tax rebates to the investors under specific provisions of the Indian
Income Tax laws as the Government offers tax incentives for investment in specified
avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension
Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961.

2) Special Schemes

a) Industry Specific Schemes

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

b) Index Schemes

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

c) Sectoral Schemes

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

DRAWBACKS OF MUTUAL FUND:

Mutual funds have their drawbacks and may not be for everyone           

1) No Guarantees:
No investment is risk free. If the entire stock market declines in value, the value of mutual fund
shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer
risks when they invest in mutual funds than when they buy and sell stocks on their own.
However, anyone who invests through a mutual fund runs the risk of losing money.

2) Fees and commissions:

All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge
sales commissions or "loads" to compensate brokers, financial consultants, or financial planners.
Even if you don't use a broker or other financial adviser, you will pay a sales commission if you
buy shares in a Load Fund.

3) Taxes:

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent
of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on
the income you receive, even if you reinvest the money you made.

4) Management risk:

When you invest in a mutual fund, you depend on the fund's manager to make the right decisions
regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you
might not make as much money on your investment as you expected. Of course, if you invest in
Index Funds, you forego management risk, because these funds do not employ managers

ADVANTAGE OF MUTUAL FUNDS

There are numerous benefits of investing in mutual funds and one of the key reasons for
its phenomenal success in the developed markets like US and UK is the range of benefits
they offer, which are unmatched by most other investment avenues. We have explained
the key benefits in this section. The benefits have been broadly split into universal
benefits, applicable to all schemes, and benefits applicable specifically to open-ended
schemes. Universal Benefits

Affordability: A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc.
depending upon the investment objective of the scheme. An investor can buy in to a
portfolio of equities, which would otherwise be extremely expensive. Each unit holder
thus gets an exposure to such portfolios with an investment as modest as Rs.500/-. This
amount today would get you less than quarter of an Infosys share! Thus it would be
affordable for an investor to build a portfolio of investments through a mutual fund rather
than investing directly in the stock market. Diversification The nuclear weapon in your
arsenal for your fight against Risk. It simply means that you must spread your investment
across different securities (stocks, bonds, money market instruments, real estate, fixed
deposits etc.) and different sectors (auto, textile, information technology etc.). This kind
of a diversification may add to the stability of your returns, for example during one
period of time equities might under perform but bonds and money market instruments
might do well enough to offset the effect of a slump in the equity markets. Similarly the
information technology sector might be faring poorly but the auto and textile sectors
might do well and may protect your principal investment as well as help you meet your
return objectives. Variety Mutual funds offer a tremendous variety of schemes. This
variety is beneficial in two ways: first, it offers different types of schemes to investors
with different needs and risk appetites; secondly, it offers an opportunity to an investor to
invest sums across a variety of schemes, both debt and equity. For example, an investor
can invest his money in a Growth Fund (equity scheme) and Income Fund (debt scheme)
depending on his risk appetite and thus create a balanced portfolio easily or simply just
buy a Balanced Scheme.
Professional Management: Qualified investment professionals who seek to maximize
returns and minimize risk monitor investor's money. When you buy in to a mutual fund,
you are handing your money to an investment professional who has experience in making
investment decisions. It is the Fund Manager's job to (a) find the best securities for the
fund, given the fund's stated investment objectives; and (b) keep track of investments and
 changes in market conditions and adjust the mix of the portfolio, as and when required.
Tax Benefits: Any income distributed after March 31, 2002 will be subject to tax in the
assessment of all Unit holders. However, as a measure of concession to Unit holders of
open-ended equity-oriented funds, income distributions for the year ending March 31,
2003, will be taxed at a concessional rate of 10.5%.
In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from the
Total Income will be admissible in respect of income from investments specified in
Section 80L, including income from Units of the Mutual Fund. Units of the schemes are
not subject to Wealth-Tax and Gift-Tax.
Regulations: Securities Exchange Board of India (“SEBI”), the mutual funds regulator
has clearly defined rules, which govern mutual funds. These rules relate to the formation,
administration and management of mutual funds and also prescribe disclosure and
accounting requirements. Such a high level of regulation seeks to protect the interest of
investors

CHARACTERISTICS OF MUTUAL FUNDS

The ownership is in the hands of the investors who have pooled in their funds.
It is managed by a team of investment professionals and other service providers.
The pool of funds is invested in a portfolio of marketable investments
The investors share is denominated by ‘units’ whose value is called as Net Asset
Value (NAV) which changes everyday
The investment portfolio is created according to the stated investment objectives
of the fund

OBJECTIVES OF THE STUDY

To find the risk and return relationship

To analyze the risk and return of SBI
To calculate the return of SBI Mutual fund
 To give a brief idea about the benefits available from Mutual Fund investment
Explore the recent developments in the mutual funds in India

SCOPE OF THE STUDY

In my project the scope is limited to some prominent mutual funds in the mutual fund
industry analyzed the funds by calculating the different ratios from SBI mutual balance
sheet.

NEED FOR THE STUDY

The main purpose of doing this project was to know about mutual fund and its functioning. This
helps to know in details about mutual fund industry right from its inception stage, growth and
future prospects.
It also helps in understanding different schemes of mutual funds. Because my study depends
upon prominent funds in India and their schemes like equity, income, balance as well as the
returns associated with those schemes.
The project study was done to ascertain the asset allocation, entry load, exit load, associated with
the mutual funds. Ultimately this would help in understanding the benefits of mutual funds to
investors.

RESEARCH METHODOLOGY

To achieve the objective of studying the stock market data has been collected.
Research methodology carried for this study can be one types
1. Secondary

SECONDARY:

The data, which has being collected for the first time and it is the original data.
The secondary information is mostly taken from websites, books, journals, etc.