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Summer Training Project

Report On

Submitted by:-
Ashutosh Suthar
BBA 2nd year
Sekhawati College Of Management and IT

Executive summary

A mutual fund is a fund in which an investor's money is combined with the money of
many other investors. The total amount of money is invested by a professional
manager according to the specific mutual fund's investment objective. Each investor
holds a share of the total fund, and is entitled to a portion of the profits of the fund
(and, of course, would share in any investment losses).

Life is full of surprises, some pleasant and some not so pleasant. Our families and we
have to live with these uncertainties. Preparing for the uncertainties of life is what
Insurance is all about. Why waste precious moments contemplating tomorrow, when
we have to live today? Insurance is a tool, a solution for delegating the worries
concerning tomorrow onto a trustworthy institution so that you can start living today.

My project aims to the understanding Market Study Of SBI Mutual Fund as compare
to Unit Linked Plan of Life Insurance and how are Mutual Fund’s products different
from Unit Linked Life Insurance.


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 heartful thanks 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 IT for giving me an opportunity.

Ashutosh Suthar

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.

After the analysis of collected data, the main findings of this study and suggestion are
presented in the report.



”Mutual Fund are a pool of savings collected from a number of small investors, sharing a
common financial goal. The money thus collected is invested by experienced
professionals called fund managers, according to the pre-decided objectives in diverse
types of securities like Government sponsored Debentures and Bonds, shares of public
and private sector companies, bank guaranteed instruments.
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.
A Mutual Fund is the ideal investment vehicle for today’s
complex and modern financial scenario. Markets for equity shares, bonds and other fixed
income instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events occurring in
faraway places. A typical individual is unlikely to have the knowledge, skills, inclination
and time to keep track of events, understand their implication and speedily. An individual
also finds it difficult to keep track of ownership of his assets, investment, brokerage dues
and bank transaction etc.
A mutual fund is the answer to all these situations.It appoints
professionally qualified experience staff that manages each of these functions on a full
time basis. The large pool of money collected in the fund allows it to hire such staff at a
very low cost to each investor.
What are the different types of Mutual Funds?

On the basis of the objective, mutual funds can be divided into Growth, Income and
Balanced Funds.
Growth or Equity Schemes aim at capital appreciation over the medium to long term
period. Typically these funds would invest a majority of their corpus in shares or equity
of companies.
Income or Debt Schemes aim at providing a steady and regular income and hence would
invest in fixed interest securities issued by the Government, corporate bonds and
debentures and money market instruments.
Balanced or Hybrid Funds, invest in a combination of Equity and Debt Instruments in
varying proportions. These are mostly funds with about 60% invested in Equity and
remaining 40% in Debt.





• Open ended fund: An open ended fund is one that is available for subscription all
through the year. These don’t have a fixed maturity. Investors can conveniently
buy and sell units at Net Asset Value (NAV) related prices. The key feature of
open ended schemes is liquidity.
• Close ended fund: A close end 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 public issue and thereafter they can buy or
sell the units of the scheme on the stock exchanges where they 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 Funds through periodic repurchase at NAV
related prices. SEBI regulations stipulate that at least one of the two exit routes is
provided to the investors.

What is the difference between an open ended and close ended scheme?
Open ended funds can issue and redeem units any time during the life of the
scheme while close ended funds can not issue new units except in case of
bonus or rights issue. Hence, unit capital of open ended funds can fluctuate on
daily basis while that is not the case for close ended schemes. Other way of
explaining the difference is that new investors can join the scheme by directly
applying to the mutual fund at applicable net asset value related prices in case
of open ended schemes while that is not the case in case of close ended
schemes. New investors can buy the units from secondary market only.

• Interval funds: interval Funds combine the features of open-ended & close-ended
schemes. They are open for sale or redemption during predetermined interval at
NAV related prices.


• GROWTH FUNDS (Equity Funds or Stock):- The aim of growth funds is to

provide capital appreciation over the medium to long term. Such scheme
normally invests a majority of corpus in equities. It has been proven that returns
from stocks have outperformed most other kind of investment held over the long
term. Growth scheme are ideal for investors having a long–term outlook seeking
growth over a period of time.

Money is invested in the stocks of corporations.Long-term investment returns

range from moderate to high, depending on the types of stocks held in the fund.
Investment returns result from stock dividends as well as the growth in value of
the stock itself. For example, emerging growth companies may issue no dividends
but may show a large increase in the value of the stock itself.

• INCOME FUNDS :- The aim of income fund is to provide regular and steady
income to investors. Such schemes generally invest in fixed income securities
such as bonds, corporate debenture and government securities. Income Funds are
ideal for capital stability and regular income.

Can I get fixed monthly income by investing in mutual fund units?

Yes, there are a number of mutual fund schemes which give you fixed
monthly income. Further, you can also get monthly income by making a
single investment in an open ended scheme and redeeming fix value of units
at regular intervals.

• BALANCED FUNDS(Mix of stocks & Bonds):-

Money is invested in a combination of stocks and bonds. Balanced investment

funds differ in the proportion and types of stocks and bonds they hold. Balanced
investment funds are considered to have moderate risk due primarily to short-term
changes in stock and bond values. Since bonds are generally less volatile then
stocks, they help to moderate the changes in stock values.

Investment returns result from dividend and interest income, as

well as change in the market value of the stocks and bonds. This type of
investment is generally considered to have moderate to high potential long-term
investment returns.
• 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
deposits, commercial paper and inter-bank call money. Returns on these schemes
may fluctuate depending upon the interest rates prevailing in the markets. These
are ideals for corporate and individual investors as a means to park their surplus
for short periods.

• Load funds: - A load fund is one that charges a commission for entry or exit. That
is, each time you buy or sell units in the fund, a commission will be payable.
Typically entry and exit loads range from 1% to 2.25%. It could be worth paying
the load, if the fund has a good performance history.

• No load fund: - A no load fund is one that dose not charge a commission is
payable on purchase or sale of units in the fund. The advantage of a no load fund
is that the entire corpus is put to work.



What are the tax benefits for investing in mutual fund units?

These schemes offer tax rebates to the investors under specific provisions of the
Indian Income Tax laws as the government as the government offers tax
incentives for investment made in equity linked savings schemes (ELSS) and
pension schemes are allowed as deduction U/S 88 of the income tax Act, 1961.
The act also provides opportunities to investors to save capital gains U/S 54 EA
and 54 EB by investing in mutual funds, provided the capital asset has been sold
prior to April 1, 2006 and the amount is invested before September 30, 2006.



Industry specific scheme 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.

Sectorial funds are those, which invest exclusively in a specified industry or a
group of industries or various segments such as ‘A’ group shares or initial public

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

What is BSE & NSE?

BSE is an abbreviation of the Bombay Stock Exchange. Of the 22 stock
exchanges in India, Bombay Stock Exchange is the largest with over 6,000
stocks listed. The BSE accounts for over two thirds of the total trading
volume in the country. Established in 1875, the exchange is also the oldest in
Asia. It was the first one to be recognised by the Government of India under
the Securities Contracts (Regulation) Act, 1956 and it is the only one that had
the privilege of getting permanent recognition ab-initio. The market
capitalization of the BSE is Rs.5 trillion. The BSE `Sensex' is a widely used
market index for the BSE.
The Exchange provides an efficient and transparent market for trading in
equity, debt instruments and derivatives. It aims to promote, develop and
maintain a well-regulated market for dealing in securities and to safeguard the
interest of members and the investing public having dealings on the


The origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated
from the year 1987 when non-UTI player entered the industry. In the past decade, Indian
mutual fund industry had seen dramatic improvements, both quality wise as well as
quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets
under Management (AUM) were Rs. 67bn.

The private sector entry to the fund family raised AUM to Rs. 470 bn in March 1993 and
till April 2004; it reached the height of 1,540 bn.Putting the AUM of the Indian Mutual
Funds Industry into comparison, the total of it is less than the deposits of SBI alone,
constitute less than 11% of the total deposits held by the Indian banking industry.
The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the concept.
Hence, it is the prime responsibility of all mutual fund companies, to market the product .
Each phase is briefly described as under.

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

Second Phase1987-1993(Entry of Public Sector Funds):-

Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Can bank
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 in 1989 and GIC in 1990. The end of 1993 marked Rs.47, 004 as assets under

Third Phase1993-2003(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 (February2003):- This phase had bitter experience for UTI. It was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with AUM of Rs.29, 835 crores (as on January 2003).

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

With the bifurcation of the erstwhile UTI which had in March 2000
more than Rs.76,000 crores of AUM 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 September, 2004, there were 29
funds, which manage assets of Rs.153108 crores under 421 schemes.

An attempt was made for first time in SEBI GUIDELINES, 1992 to spell out for
managing the affairs of mutual funds ensuring arm’s length distance between the sponsor
and the fund. The four constituents are the sponsoring company, the fund, the custodians
and the asset management company. Moreover in reality, pooled funds of small investors
were being put to use for the advantage of the sponsors. Four constituents for the
management of mutual funds are shown in below chart:

investment of fund)
investment of fund)

Trustees Mutual
(Holding property
(Holding of of
property Trust) (Promoters)

(Safe custody
(Safe custodyof of
securities etc.)
securities etc.)
Sponsors: It refers to anybody corporate which initiates the launching of a mutual fund. It
is this agency which of its own or in collaboration with other body corporate comply the
formalities of establishing a mutual fund. The sponsor should have a sound track record
and expertise in the relevant field of financial services for a minimum period of say five
years. SEBI ensure that sponsors should have professional competence, financial
soundness and general; reputation of fairness and integrity in the business transactions.
Sponsors is normally not responsible for any loss or shortfall resulting from the
operations of any scheme of the fund beyond it’s initial contribution towards the
constitution of the trust fund.

TRUSTEES: A trustee is a person who holds the property of the mutual fund in trust for
the benefits of the units holders. A company is appointed as a trustee to manage the
mutual. To ensure fair dealings, mutual fund regulation require that one cannot be a
trustee or a director of a trustee company in more than one mutual fund.
Further at least fifty percent of the trustees are to be independent of the sponsors. Asset
management company or its directors or employee shall not act as trustee if any mutual
fund. It is the duty of the trustee to provide information to units holders as well as to
SEBI about the MF schemes. Trustees are to appoint AMC to investment management
agreement to be entered into with AMC. It is trustee’s duty to observe and ensure that
AMC is managing schemes in accordance with the trust deed. Trustee can dismiss the
appointed AMC. It is the responsibility of the trustees to supervise the collection of any
income due to be paid to the scheme. Trustees for their services are paid trusteeship fee,
which is to be specified in the trust deed.

CUSTODIANS: In a mutual fund depending on its size there is substantial work

involved for managing the scrip bought from the market.

Their safe study custody and ready availability is to be ensured. SEBI requires that each
MF shall have a custodian who is not in any way associated with the AMC. Such
custodian cannot act as sponsor or trustee of any mutual fund. Further custodian is not
permitted to act as a custodian of more than one mutual fund without the prior approval
of SEBI.
Custodian’s main assignment is safekeeping of the securities or participation in any
clearing system on behalf of the client to effect deliveries of the securities. Custodian,
depending on the terms of the agreement, also collects income/ dividends on the
securities. Some of other associated assignments of custodians are:
• Ensuring delivery of scrip’s only on receipt of payment and payment only upon
receipt of scrip’s.
• Regular reconciliation of assets to accounting records.
• Timely resolution on discrepancies and failures.
• Securities are properly registered or recorded.

Depending on the volume there can be co- custodian for a mutual fund. These custodians
are entitled to receive custodianship fee based on the average weekly value of net assets
or sale and purchase of securities along with per certificate custody charges.
Assets Management Company as the name implies is to be a body corporate whose
memorandum and article of association are to be approved by SEBI. The sponsors of the
trustees appoint AMC to manage the affairs of the mutual fund. It is the AMC, which
operates all the schemes of the fund. Any Assets Management Company
Cannot act as a trustee of any other mutual fund. Assets Management Company can act
as AMC of only one mutual fund.

To ensure efficient management SEBI desires that existing Assets Management

Company should have a sound track record ( good net worth, dividend paying capacity
and profitability etc.), general reputation and fairness and in transaction. The directors of
the AMC should be expert in relevant fields like portfolio management, investment
analysis and financial administration because any AMC is basically involved in these
three activities. An AMC is expected to operate independently. Regulation requires that
at least fifty percent of the direction should be such who do not have any association with
the sponsors or the trustees.
Working Of An Asset Management Company: It is not required that AMC performs all
its functions of its own. It can hire services of outside agencies as per its requirement or
perform all function of its own. The main agencies, services of which an AMC may
require are depicted in the chart.
Registrar and Transfer agents are assigned the jobs of receiving processing
the application forms of investors, issuing units certificates, sending refund orders,
according all transfers of units, redemption of units, issuing dividend or income warrants.





Fund accounting again depending on the size of the fund, its age and number of expected
transactions may be assigned to specialized agencies. All accounting transaction are
recorded and maintained by such agencies.
Lead managers select and co-ordinate activities of intermediaries such as advertising
agency, printers, collection centers and marketing the services. They get collection
centers and marketing the services. They get fees on the basis of funds mobilized they are
normally engaged by AMC for extensive campaign about the scheme to attract the
investors. They are also called marketing associates. They assist AMC in approach
potential investors through personal promotion (meeting, exhibition, contacts) as well as
through impersonal promotion (adverting, publicity, sales promotion).
Investment advertising may be appointed by AMC if it cannot afford
to cope up with the workload of its own. Investment advisors analysis the market and
strategies on a continuous basis. Majority of Indian mutual funds have their own market
analyses who design their own investment strategies.
Legal advisors are also sometimes appointed to get legal guidance about planning and
execution of different schemes. A group of advocates and solicitors may be appointed as
legal advisors. Assets Management Company is also required to have an auditor who is
not auditor of the mutual fund, to undertake independent inspection and verification of its
accounting of its accounting activities.
Assets management companies may also appoint a separate fund manager for each
scheme. His basic function is to produce investment securities from the market and also
to dispose them off at appropriate time. Such assets manager adheres to the guidelines
evolved by AMC of its own or designed through investment advisors.

The major strength of any AMC lies in its investment function. Investment function is
specialized function which, depending on operational strategies of AMCs, can further be
divided into specialized categories. The investment department may be classified in four
segments. These can be
1. Fund manager
2. Research and Planning cell
3. Dealer
4. Underwriter

Asset Management Company manages the investment of fund through a fund manager.
AMC may evolve its own criterion for number off fund managers. His basic function is
to decide about which, when, how much and at what rate securities are to be sold or
bought. To a great extent the success of any scheme depends on the caliber of the fund
Many mutual funds especially in bank sponsored funds; the entire investment exercise is
not left to one individual. They have created committees to handle their investments. One
such mutual fund has created two committees. First is ‘investment committee’ which is
broad based committee having even nominees of the sponsor? It collectively decides
about the primary market investment. This committee in times to come has a prominent
role to play in the success of mutual funds especially in light of institutionalization of
public issues. Another line which mutual funds are curiously looking to is fund
participation in a venture even before it goes public. Another line participation in a
venture even before it goes public. The intense competition in securing bid for good new
issue, has also led mutual funds to finance the companies at embryonic stage. The second
is ‘MARKET OPERATION COMMITTEE’ having the assignment of disinvestment and
interacting with secondary market.

It is normally an in-house committee. These committees also make their judgment on the
basis of data provided by the research wing.
This department plays a crucial role. It performs a very sensitive and technical
assignment. Depending again on the operational policies, such unit can be borrowed. The
research can be with respect of securities as well as perspective investors. The fund
manager can co0ntribute to the bottom line of mutual fund by spotting significant
changes insecurities ahead of the crowd. Mutual funds may not appreciate the
presumptions made by outside research agency while analysis data, selecting securities to
be bought or sold, this section also assists planning new schemes and designing
innovations in schemes.

To execute the sale and purchase transaction in capital or money market, a separate
section may be created under the charge of a person called dealer having deep
understanding of stock market operations. Sometimes, this division is under the charge
of marketing division of AMC. Dealer is to comply with all formalities of sale and
purchase through brokers. Such brokers are to be approved by board of directors of

Recently mutual funds have been permitted by SEBI to go in for understanding of public
issues to generate additional income for their schemes. Activity will be subject to the
following understanding restrictions:

• For the purpose of the SEBI underwriter’s regulations, the capital adequacy of the
mutual fund shall be the original corpus of any of the schemes and the
undistributed gains lying to the credit of the schemes.
• The total underwriting obligations of the scheme shall not exceed the total value
of the corpus of any scheme together with undistributed profits lying to the credit
of the scheme.
• No understanding commitment may be undertaken in respect of the scheme
during the period of six months prior to the date of redemption of any scheme.

Underwriter studies the potentials of the issue vis-à-vis preference of public.

Decreased limit of minimum offer to public at large to 25 percent of the issue has
made underwriting a comparatively comfortable assignment. But on the other hand to
get underwriting business is going tough since almost every public issue is being
oversubscribed these days.



What is ULIP?

Unit linked life insurance plan provides you the opportunity to participate in market
linked returns while enjoying the valuable benefits of life insurance.This plan enables
you to protect your loved ones, while making your money grow. Your premiums are
invested in units of the investment fund (equity, debt, money market, security bonds
etc.)of your choice, based on the prevailing unit price.On maturity you receive the value
of your units.On death you receive the greater of the value of your units and your
selected basic sum assured.A policy,which provides for life insurance where the policy
value at any time varies according to the
value of the underlying assets at the time.

Funds of ULIP

• Equity based funds

• Money Market based funds
• Debt Funds
• Balanced Fund

What are unit-linked life insurance products?

Unit-linked life insurance products are those where the benefits are expressed in terms of
number of units and unit price. They can be viewed as a combination of insurance
customer and mutual funds. The number of units, which the would get would depend on
the unit price when he pays his premium. The daily unit price is based on the market
value of the underlying assets (equities, bonds, government securities etc.) and computed
from the net asset value.

How do unit-linked products work?

The unit-linked plans work as under:

The premium paid by the client, less any charges to be deducted, is used to buy units in
the fund selected by the client at that day's unit price. So more units are added to the
client's account each time he pays a premium. If the unit price on that day is relatively
high the client gets less number of units and if the unit price is relatively low then he
gets more number of units.
In order to pay the regular monthly costs an equivalent numbers of units are cancelled
and are computed as cost to be deducted divided by unit price on that day.
The value of the fund depends on the unit price, which in turn is determined from the
market value of the underlying assets as seen earlier. Thus, Fund Value = Unit Price x
Number of Units


Mutual funds are essentially short to medium term products. The liquidity that these
products offer is valuable for investors. ULIPs, in contrast, are now positioned as long-
term products and going ahead, there will be separate playing fields for ULIPS and MFs,
with the product differentiation between them becoming more pronounced. ULIPs do
not seek to replace mutual funds, they offer protection against the risk of dying too early,
and also help people save for retirement. Insurance has to be an integral part of one's
wealth management portfolio. Further, exposure of Indian households to capital markets
is limited. ULIPs and mutual funds are, therefore, not likely to cannibalise each other in
the long run. While ULIPs as an investment avenue is closest to mutual funds in terms of
their functioning and structure, the first and foremost purpose of insurance is and will
always be 'protection'. The value that it provides cannot be downplayed or
As per IRDA's new guidelines, which came into effect on July 1,
there has to be a minimum lock-in period of three years for ULIPs, a minimum term of
atleast five years and the death benefit payable or sum assured under the single-premium
product has to be at least 125 per cent of the single premium paid, among other major
policy changes. The new guidelines will stop ULIPs being positioned as short term
investments products, and they will look less like mutual funds and more like insurance
New ULIPs now come with a minimum term value of five years, whereas in mutual
fund’s ELSS there is a lock-in period of just three years. If an investor decides to
withdraw money from ULIP after three years, the amount depends on the surrender value
given by the company.

Are ULIPs similar to MUTUAL FUND?

In structure, yes; in objective, no. Because of the high first-year charges, mutual funds
are a better option if you have a five-year horizon.
Main differences between ULIP and ordinary mutual funds is variation in expenses —
administrative charges, mortality charges and, of course, fund management fees. We are
going to compare the two products to suggest that, over a longish period, ULIP's
expenses work out to be lower than that of an equity mutual fund, and so you end up
getting more of your money to work for you.
For instance:- ULIP and a mutual fund, giving the same return of 20% per annum. The
insurance company charges 40% of the first year's premium as selling expenses and 5%
of premium every year as administrative charges.
A person buys a unit-linked policy for 20 years, with a life coverage of Rs 20 lakh, and
pays a premium of Rs 1 lakh per annum.
In first year, Rs 40,000 will be deducted from his premium as commission, and Rs
5,000 as administrative charge. If the person's age is 30, the mortality charge of Rs
2,763 will also be deducted.
But when his investment in Mutual Fund then he pays
only 2.25% as entry load.

When to choose investing in MF?

• If you don't need insurance, ULIP is not the best bet.

• ULIPs are hybrid products. that means, they have insurance and investment

• You have to invest for atleast 3 years in ULIP, but MFs are not like that

• ULIPs have lock-in period of 3 years where as MFs are not (except tax saving

• ULIPs may or may not disclose the holding portfolio but mutual funds have to
disclose where they are investing.

• MFs generally have low expense ratio than ULIPs.

• ULIPs have additional charges called "Allocation charges". And other charges
like Administrative charges, Mortality charges, Fund Management Charge.

Why Mutual Funds?

Mutual funds are a smart, convenient avenue for investing your capital. Review the

Professional financial management. Your investment in mutual funds is monitored by

portfolio managers who study the market for a living. By specializing in specific areas,
these individuals can take the time to really get to know companies and assess their
investment potential before investing--something that's often harder for the individual
investor to do.

Your choice of investment strategies. Because mutual funds are managed along a range
of investment strategies, you can select a fund that matches your investment goals. Leave
it to the portfolio manager to select the blend of securities that is most likely to meet
those goals.

Easy tracking. You'll find current prices and historical total return figures for major
mutual funds listed in the business section of most newspapers.

Easy to do business with. You can complete most transactions by phone or mail and
receive clear, easy-to-read confirmation statements a few days later.

Diversification for balanced investing. Most funds own anywhere from 20 to 50

different securities, which cushions your investment from sudden swings in a single
security's value. You can further diversify by buying shares in several mutual funds that
own different types of securities. Diversification is designed to reduce market risk and
does not assure against market loss.

Structure of the Indian mutual fund industry:-




The Indian mutual fund industry is dominated by the UNIT TRUSTOF INDIA which has
a total corpus of is 700 bn collected from more than 20 million investors. The UTI has
many funds/ scheme in all categories i.e. equity, balanced, income etc. with some being
open-ended and some being close-ended. UTI was floated by financial institutions and is
governed by a special act of parliament. Most of its investors believe that the UTI is
government owned and controlled, which, while legally incorrect, is true for all practical


The second categories of mutual funds are the ones floated by nationalized banks. Can
bank assets management floated by Canara bank and SBI funds management floated by
the state bank of India are the largest of these. GIC AMC floated by general insurance
corporation and Jeeven Bima Sahayog AMC floated by the LIC are some of the other
prominent ones. The aggregate corpus of funds managed by this category of AMC’s is
about Rs 150 bn.


The third largest categories of mutual funds are the ones floated by the private sector and
by foreign asset management companies. The largest of these are Prudential ICICI
AMC’s, UTI AMC’s etc. The aggregate corpus of assets managed by this category of
AMC’s is in excess of Rs.250 bn.

Future Scenario of Mutual Fund Industry:-

The asset base will continue to grow at an annual rate of about 30 to 35 % over the next
few years as investor’s shift their assets from banks and other traditional avenues. Some
of the older public and private sector players will either close shop or be taken over.

Out of ten public sector players five will sell out, close down or merge with stronger
players in three to four years. In the private sector this trend has already started with two
mergers and one takeover. Here too some of them will down their shutters in the near
future to come.

But this does not mean there is no room for other players. The market will witness a
flurry of new players entering the arena. There will be a large number of offers from
various asset management companies in the time to come. Some big names like Fidelity,
Principal, and Old Mutual etc. are looking at Indian market seriously. One important
reason for it is that most major players already have presence here and hence these big
names would hardly like to get left behind.

The mutual fund industry is awaiting the introduction of derivatives in India as this
would enable it to hedge its risk and this in turn would be reflected in it’s Net Asset
Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes to trade in
derivatives. Importantly, many market players have called on the Regulator to initiate the
process immediately, so that the mutual funds can implement the changes that are
required to trade in Derivatives.
Global Scenario

Some basic facts-

• The money market mutual fund segment has a total corpus of $ 1.48 trillion in the
U.S. against a corpus of $ 100 million in India.
• Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only
Fidelity and Capital are non-bank mutual funds in this group.
• In the U.S. the total number of schemes is higher than that of the listed companies
while in India we have just 277 schemes
• Internationally, mutual funds are allowed to go short. In India fund managers do
not have such leeway.

• In the U.S. about 9.7 million households will manage their assets on-line by the
year 2003, such a facility is not yet of avail in India.
• On- line trading is a great idea to reduce management expenses from the current 2
% of total assets to about 0.75 % of the total assets.
• 72% of the core customer base of mutual funds in the top 50-broking firms in the
U.S. is expected to trade on-line by 2003.

Internationally, on- line investing continues its meteoric rise. Many have debated about
the success of e- commerce and its breakthroughs, but it is true that this aspect of
technology could and will change the way financial sectors function. However, mutual
funds cannot be left far behind. They have realized the potential of the Internet and are
equipping themselves to perform better.

In fact in advanced countries like the U.S.A, mutual funds buy- sell transactions have
already begun on the net, while in India the Net is used as a source of Information.

Such changes could facilitate easy access, lower intermediation costs and better services
for all. A research agency that specializes in internet technology estimates that over the
next four years Mutual Fund Assets traded on- line will grow ten folds from $ 128 billion
to $ 1,227 billion; whereas equity assets traded on-line will increase during the period
from $ 246 billion to $ 1,561 billion. This will increase the share of mutual funds from
34% to 40% during the period. Such increases in volumes are expected to bring about
large changes in the way Mutual Funds conduct their business.
Here are some of the basic changes that have taken place since the advent of the Net.

• Lower Costs: Distribution of funds will fall in the online trading regime by 2003.
Mutual funds could ts to 0.75% if trading is done on- line. As per SEBI regulations,
bond funds can charge a maximum of 2.25% and equity funds can charge 2.5% as
administrative fees. Therefore if the administrative costs are low, the benefits are
passed down and hence Mutual Funds are able to attract mire investors and increase
their asset base.

• Better advice: Mutual funds could provide better advice to their investors through
the Net rather than through the traditional investment routes where there is an
additional channel to deal with the Brokers. Direct dealing with the fund could help the
investor with their financial planning.

• In India, brokers could get more Net savvy than investors and could help the
investors with the knowledge through get from the Net.
• New investors would prefer online: Mutual funds can target investors who are
young individuals and who are Net savvy, since servicing them would be easier on the

• India has around 1.6 million net users who are prime target for these funds and
this could just be the beginning. The Internet users are going to increase dramatically
and mutual funds are going to be the best beneficiary. With smaller administrative costs
more funds would be mobilized .A fund manager must be ready to tackle the volatility
and will have to maintain sufficient amount of investments which are high liquidity and
low yielding investments to honor redemption.

• Net based advertisements: There will be more sites involved in ads and
promotion of mutual funds. In the U.S. sites like AOL offer detailed research and
financial details about the functioning of different funds and their performance
statistics is witnessing a genesis in this area .There are many sites such as and that are doing something similar and providing
advice to investors regarding their investments.

• In the U.S. most mutual funds concentrate only on financial funds like equity and
debt. Some like real estate funds and commodity funds also take an exposure to physical
assets. The latter type of funds are preferred by corporate who want to hedge their
exposure to the commodities they deal with.

• For instance, a cable manufacturer who needs 100 tons of Copper in the month of
January could buy an equivalent amount of copper by investing in a copper fund. For
Example, Permanent Portfolio Fund, a conservative U.S. based fund invests a fixed
percentage of it’s corpus in Gold, Silver, Swiss francs, specific stocks on various bourses
around the world, short –term and long-term U.S. treasuries etc.
In developed countries like the U.S.A there are funds to satisfy everybody’s requirement,
but in India only the tip of the iceberg has been explored. In the near future India too will
concentrate on financial as well as physical funds.


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:

Name of Trustees Company:


Name and Address of registrar:

State Bank of India

SBI Mutual Fund Trustee Company Pvt. Ltd

State Bank of India Société Générale Asset Management

63% 37%

SBI Funds Management Pvt. Ltd

(Asset Management Company)

SBI Mutual Fund

As like others mutual fund companies SBI mutual fund company also has different types
of schemes and these are as shown below:


1. Magnum Multicap fund
2. Magnum Equity Fund
3. 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 Fund
11. Arbitrage fund


1. One India
2. Infrastructure


1. Contra Fund
2. Emerging Business Fund
3. FMCG Fund
4. IT Fund
5. Pharma Fund


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


1. Magnum Institutional Income Fund
2. Magnum InstaCash Fund
3. Magnum InstaCash Fund (Liquid floater)








1.) Brand Name:
• The biggest strength is the tag of SBI is going to be the largest banking group of
finance industries.

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.

1. Prone to Market Risk:
Mutual Funds depend on overall macro economic condition and market scenario.

2. Tough Competitions:
There is a very tough competition because of large number of Asset Management Companies.
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:

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 are traping the countries
having almost same type of socio-economic condition & even same culture etc.


1. Tough Competition:-As there are so many mutual fund companies having almost same kind
of schemes, so it’s tough to compete with.

2. Unawareness: Major % of population is not aware of mutual funds, so it’s hard to convince

3. Changing Scenario: Our market scenario is changing day by day i.e. our market is fluctuating,
so this makes investor hard to invest
Various Locations in India
SEBI’S Regulations for Mutual Fund Industry

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

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

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

• Every mutual fund shall along with the offer document of each scheme pay filing
• 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 end of 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);

(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 fund shall 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 documents are 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 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

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
• 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 in conformity 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
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 in excess 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.

Who can invest?

The following persons (subject, wherever relevant, to purchase of units being permitted
under their respective constitutions and relevant State Regulations) are eligible to
subscribe to the units:

• Adult Resident Indian Individuals, either single or jointly (not exceeding three).

• Non - resident Indians, Overseas Corporate Bodies, and persons of Indian origin
residing abroad, on a full repatriation basis

• Parents / Lawful guardians on behalf of Minors

• Hindu Undivided Families (HUFs) in the name of HUF or Karta

• Companies (including Public Sector Undertakings), Bodies Corporate, Trusts

(through Trustees ) and Co-operative Societies

• Banks (including Regional Rural Banks) and Financial Institutions

• Religious and Charitable Trusts

• Foreign Institutional Investors registered with SEBI / Special Purpose Vehicles

(SPVs) approved by appropriate authority ( subject to RBI approval )
• International Multilateral Agencies approved by the Government of India

• Army/Navy/Air Force / Para Military Units and other eligible institutions

• Unincorporated body of persons as may be accepted by RCTC

• Partnership Firms Provident Fund, Pension Funds, Superannuating Funds and

Gratuity Funds can invest only in Reliance Gilt Securities Fund.

How to Invest In Mutual Funds?

• STEP ONE- Identify your investment needs.
o Your financial goals will vary, based on your age, lifestyle, financial
independence, family commitments, level of income and expenses among many
other factors. Therefore, the first step is to assess your needs. Here you need to be
very categorical in the investment objectives and needs. E.g. one may require
income to finance a wedding or education of children. You need to analyze risk
and the cash flow requirements. By going through such an exercise, you will
know what you want out of your investment and can set the foundation for second
mutual Fund investment strategy.

STEP TWO- Choose the right Mutual Fund

o Once you have a clear strategy in mind, you now have to choose which Mutual
Fund and scheme you want to invest in. The offer document of the scheme tells you its
objectives and provides supplementary details like the track record of other schemes
managed by the same Fund Manager.

STEP THREE-Select the ideal mix of schemes

o Investing in just one mutual fund scheme may not meet all your investment
needs. You may consider investing in a combination of scheme to achieve your specific
STEP FOUR-Invest regularly

o For must of us, the approach that works best is to invest a fixed amount at
intervals, say every month. By investing a fixed sum each month, you buy fewer units
when the price is higher and more units when the price is low, thus bringing down you
average cost per unit.

o This is called rupee cost averaging and is a disciplined investment strategy

followed by investors all over the world.

• STEP FIVE- Keep your taxes in mind.

 If you are in a high tax bracket and have utilized fully the exemptions
under section 80L of the Income Tax Act, investing in growth funds that do not pay
dividends might be more tax efficient and improve your post tax return.

STEP SIX- Start early

 It is desirable to start investing early and stick to a regular investment plan. If you start
now, you will make more than if you wait and invest later. The power of compounding
lets you earn income on income and your money multiplies at a compounded rate of

• STEP SEVEN- The final step

 All you need to do now is to get in touch with a Mutual Fund or you
agent/broker or a Bank Distributor (like IDBI Bank) and start investing.

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 units and 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.

• Uncertainty of market:- Mutual Funds are securities investments are subject to

market risks and there is no assurance or guarantee that the objectives of the
Scheme will be achieved. As with any investment in securities, the NAV of the
units issued under the Scheme can go up or down depending on the factors and
forces affecting the capital markets.

• Lack of awareness:- In Jaipur Mutual Fund Industry is in infantry stage so people

are unaware of it. So people are afraid to invest & they only trust of some
Government funds like UTI, SBI. They preferably like to invest in Insurance
specially in LIC. They generally ask that Who will give them assured returns?

• High competition: Due to the existence of large number of AMC’s the

competition is high. Investors are confused that where they have to invest and
where not. Other AMC’s offered the same type of products/schemes which
diversified the investors.

• Rigid and traditional structure:- People believe investing in Bank FD’s and Post
Office saving and are reluctant to invest in Mutual Fund. People like to secure
money in terms of lending to the people on high interest they meant their amount
is safe.

• Socio-economic factor:- The standard of living is low and people have low saving
so investment in Mutual Fund is low. The most of the people of this country are
agriculture dependent so they have less to invest.

• Political factors:- Due to volatile government & their policies regarding investor
& investment, the stock market is not integrated which in turn affects the mutual
fund industry.

• Due to time constraint the survey was conducted only in jaipur.

• Indifference and lack of interest disposed by a few respondents leading to

unauthentic response

• Sometimes biasness was shown by the respondents.



1. N. K. Sinha: Money Banking & Finance; BSC Publishing Co. Pvt. Ltd.
2. C.R Kothari: Research Methodology; Wishva Publication, New Delhi.


1 Business world.
2 Money Outlook
3 Business Today
4 Offer Documents of Different Schemes.


1. Economic Times.