A

Project Study Report

On

“Systematic Investment Plan

(The Better Way to Invest In Mutual Funds)”

AT
SBI MUTUAL FUND

Submitted in Partial Fulfillment for The

Award of Degree of
Master of Business Administration

2011-2013

Submitted by: Submitted to:

Chanchal Salvi Dr.Sunita Agarwal
MBA Semester III Professor

Advent Institute of Management Studies

Udaipur
 PREFACE

There are four steps to Accomplishment & Success – Plan, Purposefully, Prepare
thoroughly, Proceed Positively & Pursue Persistently.

In this development and changing world, I feel proud for being a student of M.B.A
programmed at Advent Institute of Management Studies UDAIPUR. The summer
training in the MBA course is the major event that gives you an insight into the
expectations that a company has from the MBAs. It provides a „pre working‟
experience for a student and gives enough exposure so that one can give his/her best
in the organization which he/she joins in the future. Due to ever increasing
competitiveness in the market today the specific skills of management are always
called for.

For this project my training place was State Bank of India. Udaipur. During my study I
got enough information. This report is purely based on what I worked and analyzed
during my training.

In preparing this report I have drawn a vast amount of literature Naturally, I owe an
intellectual debt to numerous lectures that enrich the stream of my study.

This project is a summary of the information gathered during the study. I Confident that
my sincere effort and special attention will justify the subjects in the report.
 ACKNOWLEDGEMENT

I express my sincere thanks to Dr. R.K. Balyan, Director, Advent Institute of

Management Studies and my project guide Dr. Sunita Agrawal, Professor, Deptt
AIMS, for guiding me right from the inception till the successful completion of the
project. I sincerely acknowledge her for extending their valuable guidance, support for
literature, critical reviews of project and the report and above all the moral support she
had provided to me with all stages of this project.

I would also like to thank the supporting staff of Advent Institute of Management
Studies for their help and cooperation throughout our project.

Chanchal salvi
 Executive Summary

Mutual funds have emerged as a strong financial intermediary and are the fastest
growing segment of the financial services sector in India. Mutual funds play a very
significant role in channelizing the savings of millions of individuals. A mutual fund is
the most suitable investment for the common person as it offers an opportunity to
invest in a diversified, professionally managed portfolio at a relatively low cost. There
are wide varieties of mutual fund schemes that cater to investor needs. Whether as the
foundation of one‟s investment programme or as a supplement, mutual fund schemes
can help the investors to meet their financial goals.
A host of factors has contributed to this explosive growth of the industry. The industry
has made significant strides in terms of its variety, sophistication and regulation. Due
to the economic boom, entry of foreign asset management companies, favorable stock
markets and aggressive marketing by mutual funds, the asset management industry in
India is witnessing dramatic growth in terms of new fund openings, the number of
mutual fund families, and in the total assets under management in recent years.
Despite various attractions offered, the total net assets of mutual funds are very less
as compared to other developed countries. In the product offering too, the Indian fund
industry is not close to the developed countries. India‟s 32 member fund industry has
to scale new heights to narrow the gap with the other developed countries.
To achieve this, the Indian mutual fund industry needs to widen its range of products
with affordable and competitive schemes that combine various elements of liquidity,
return and security in making mutual fund products the best possible alternative for the
small investors in the Indian market. Besides, mutual funds can survive only if they
perform well and satisfy the expectations of the investors.
In this context a sincere attempt has been made by the researcher to examine the
steady growth of the industry, the innovations and the development that has taken
place in India. This research on Mutual Fund industry will specifically focus on the SBI
Mutual Funds.
 Table of Contents

Sr. Chapter Name of content Page

No:- no
1. Introduction 1.1 An overview 1-15

2. Profile of company 16-

3. Research 2.1 Title of the study 30

methodology
2.2 Duration of the project 32

2.3 Objective of the study 34

2.4 Simple size &method 36

2.5 Scope of the study 37

2.6 Limitation of the study 41

4. Findings & Facts 3.1 Findings 45

5. Data Analysis 60

6. SWOT analysis of the 62

company
7. Conclusion 63

8. Suggestions 64
Recommendations
9. Appendix 65

10. Bibliography 67
 Chapter 1
Introduction to the
Industry
Introduction

The financial system is a set of institutional arrangements through which financial

surpluses available in the economy are mobilized. A financial system, which is
inherently strong, functionally diverse and displays efficiency and flexibility, is critical in
creating a market-driven, productive and competitive economy. A mature financial
system has to gear up and undergo varied and comprehensive changes in order to
achieve rapid economic development.
The financial sector reforms in India in the early nineties has resulted in explosive
growth of the economy, opening up of the Indian financial market to foreign and private
Indian players, large inflow of Foreign Ninth AIMS International Conference on
Management Institutional Investors, increased competition and better product
offerings to consumers. One of the major developments of this decade has been the
take-off of mutual funds. Mutual funds have emerged as a strong financial intermediary
and are the fastest growing segment of the financial services sector in India. It aims at
promoting a diversified, efficient and competitive financial sector increasing the return
on investment and promoting and accelerating the growth of the economy. It is a
medium of investment suitable to the small investors, who are not able to invest in
stock market directly.
Mutual funds now play a very significant role in channelizing the savings of millions of
individuals. The mutual fund industry in India over the years has seen dramatic
improvements in terms of quantity as well as quality of product and service offerings in
recent years. The tremendous growth of Indian Mutual Funds industry is an indicator of
India‟s efficient financial market and the trust which investors have on the regulatory
Environment. Millions of investors rely on mutual funds as their primary investments
because they offer a convenient, cost-effective and easy way to invest in the financial
markets. The Securities Exchange Board of India (SEBI) regulates this fast growing
industry and it is the representative body of all mutual funds in the
country. Every mutual fund has a goal - either growing its assets (capital gains) and/or
generating income (dividends) for its investors. Distribution in the form of capital gains
(short-term and long-term) and dividends may be passed on (paid) to the shareholders
as income or reinvested to purchase more shares. A mutual fund is valued daily and
reports a price known as a Net Asset Value (NAV) per share. In its simplest
Form, a NAV is the total value of all the securities held in a fund divided by the total
number of shares owned by its shareholders. As the price of the NAV increases or
decreases, the shareholder's value will increase or decrease.

Current Scenario of Mutual Funds

The global economic environment was conducive and this led to the explosive growth
of mutual funds in most countries particularly since 1980‟s. This growth can be
attributed to the strong emergence of the market economy which depends more on the
growth led by the stock market. Mutual funds found increasing acceptance in the
developed countries when compared to the developing countries in the early and mid
90‟s but gradually it found its place even in the developing countries because of its
advantages. Gradually the number of mutual funds increased significantly worldwide
and many developed countries started designing country specific funds to match the
trend prevailing in other developed countries.

Evolution of Mutual Fund Industry in India

The mutual fund revolution that was sweeping the other countries bypassed India also.
The formation of Unit Trust of India marked the evolution of the Indian mutual fund
industry in the year 1963. The primary objective at that time was to attract the small
investors and it was made possible through the collective efforts of the Government of
India and the Reserve Bank of India.
UTI commenced its operations from July 1964 and different provisions of the UTI Act
laid down the structure of management, scope of business, powers and functions of
the trust as well as accounting, disclosures and regulatory requirements for the trust.
Even though the growth of the mutual fund industry was very slow in the beginning, it
accelerated when the public sector and private sector mutual funds entered the market
after the year 1987. The mobilization of funds and the number of players operating in
the industry reached new heights as investors started showing more interest in mutual
funds. Investors' interests were safeguarded by SEBI and the Government offers tax
benefits to the investors in order to encourage them. SEBI also introduced SEBI
(Mutual Funds) Regulations, 1996 and set uniform standards for all mutual funds in
India.

History of the Indian Mutual Fund Industry

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. Though the
Growth was slow, but it accelerated from the year 1987 when non-UTI players entered
the Industry.
In the past decade, Indian mutual fund industry had seen a dramatic improvement,
both qualities wise as well as quantity wise. Before, the monopoly of the market had
seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The
private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993
and till April 2004; it reached the height if Rs. 1540 billion.
The Mutual Fund Industry is obviously growing at a tremendous space with the mutual
fund industry can be broadly put into four phases according to the development of the
sector. 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 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 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 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)
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. As at the end of January 2003, there were 33
Mutual funds with total assets of Rs. 1,21,805 crores.

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 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. Consolidation
And growth. As at the end of September, 2004, there were 29 funds, which manage
Assets of Rs.153108 crores under 421 schemes.
Mutual Fund

A mutual fund is a company that brings together money from many people and invests
it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other
assets the fund owns are known as its portfolio. Each investor in the fund owns shares,
which represent a part of these holdings A mutual fund is a professionally managed
investment product that sells shares to investors and pools the capital it raises to
purchase investments A fund typically buys a diversified portfolio of stock, bonds, and
money market securities, or a combination of stock and bonds, depending on the
investment objectives of the fund. Mutual funds may also hold other investments, such
as derivatives. A fund that makes a continuous offering of its shares to the public and
will buy any shares an investor wishes to redeem, or sell back, is known as an open-
end fund. An open-end fund trades at net asset value (NAV).
An investment vehicle that is made up of a pool of funds collected from many investors
for the purpose of investing in securities such as stocks, bonds, money
market instruments and similar assets. Mutual funds are operated by money
managers, who invest the fund's capital and attempt to produce capital gains and
income for the fund's investors. A mutual fund's portfolio is structured and maintained
to match the investment objectives stated in its prospectus.
Advantages of Mutual Funds

- Diversification

- Professional Management

- Regulatory oversight

- Liquidity

- Convenience

- Low cost

- Transparency

- Flexibility

- Choice of schemes

- Tax benefits

- Well regulated

Working of Mutual Funds:

The following figure explains the working of Mutual funds

The important terms of the figure are explained as
follows:

Fund Sponsor:
The sponsor is the company which sets up the mutual fund. It means anybody
corporate acting alone or in combination with another body corporate established a
mutual fund after initiating and completing the formalities

Trust:
MF or trust can either be managed by the Board of Trustees, which is a
body of individuals, or by a Trust Company, which is a corporate body. Most of the
funds in India are managed by Board of Trustees. The trustee being the primary
guardian of the unit holders‟ funds and assets has to be a person of high repute and
integrity. The trustees, however, do not directly manage the portfolio securities. The
portfolio is managed by the AMC as per the defined objectives, accordance with Trust
Deed and SEBI (Mutual Funds) Regulations.

Asset Management Company

(AMC):
The AMC, which is appointed by the sponsor or the trustees and approved by SEBI,
acts like the investment manager of the trust. The AMC functions under the
supervision of its own Board of Directors, and also under the direction of the trustees
and SEBI. AMC, in the name of the trust, floats and manages the different investment
‟schemes‟ as per the SEBI Regulations and as per the Investment Management
Agreement signed with the Trustees.
Other
Apart from these, the MF has some other fund constituents, such as
custodians and depositories, banks, transfer agents and distributors.
The custodian is appointed for safe keeping of securities and participating in the
clearing system through approved depository. The bankers handle the financial
dealings of the fund. Transfer agents are responsible for issue and
redemption of units of MF.

RiskReturnMatrix:
The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vice versa if he pertains to
lower risk instruments, which would be satisfied by lower returns. For example, if an
investor opts for bank FD, which provide moderate return with minimal risk. But as he
moves ahead to invest in capital protected funds and the profit-bonds that give out
more return which is slightly higher as compared to the bank deposits but the risk
involved also increases.
Thus investors choose mutual funds as their primary means of investing, as Mutual
funds provide professional management, diversification, convenience and liquidity.
That doesn‟t mean mutual fund investments are risk free. This is because the money
that is pooled in are not invested only in debts funds which are less riskier but are
also invested in the stock markets which involves a higher risk but can expect higher
returns.

Mutual funds can be classified as follow:

 Based on their structure:
Open-ended funds: Investors can buy and sell the units from the fund, at any
point of time.
Close-ended funds: These funds raise money from investors only once.
Therefore, after the offer period, fresh investments cannot be made into the
fund. If the fund is listed on a stocks exchange the units can be traded like
stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund
Offers of close-ended funds provided liquidity window on a periodic basis such
as monthly or weekly. Redemption of units can be made during specified
intervals. Therefore, such funds have relatively low liquidity.

 Based on their investment objective:

 Equity funds: These funds invest in equities and equity related instruments.
With fluctuating share prices, such funds show volatile performance, even
losses. However, short term fluctuations in the market, generally smoothens out
in the long term, thereby offering higher returns at relatively lower volatility. At
the same time, such funds can yield great capital appreciation as, historically,
equities have outperformed all asset classes in the long term. Hence,
investment in equity funds should be considered for a period of at least 3-5
years. It can be further classified as:
i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their portfolio mirrors the benchmark index both in terms of composition
and individual stock weight ages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading
across different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except that
they
invest in companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related through
some theme.
e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking
sector
fund will invest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund: Their investment portfolio includes both debt and equity. As
a result, on the risk-return ladder, they fall between equity and debt funds.
Balanced funds are the ideal mutual funds vehicle for investors who prefer
spreading their risk across various instruments. Following are balanced funds
classes.
 i.)Debt-oriented funds -Investment below 65% in equities.

ii.)Equity-oriented funds -Invest at least 65% in equities, remaining in

debt.

Debt fund: They invest only in debt instruments, and are a good option for
investors averse to idea of taking risk associated with equities. Therefore, they
invest exclusively in fixed-income instruments like bonds, debentures,
Government of India securities; and money market instruments such as
certificates of deposit (CD), commercial paper (CP) and call money. Put your
money into any of these debt funds depending on your investment horizon and
needs.
i)Liquid funds- These funds invest 100% in money market instruments, a large
portion being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government securities of
and
T-bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.

IV)Arbitrage fund- They generate income through arbitrage opportunities due to

mispricing between cash market and derivatives market. Funds are allocated to
equities, derivatives and money markets. Higher proportion (around 75%) is put in
money markets, in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government
Securities.

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in
long-term debt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with
that of the fund.

Investment Strategies:

1. Systematic Investment Plan: under this a fixed sum is invested each month
on a fixed date of a month. Payment is made through post dated cheques or direct
debit facilities. The investor gets fewer units when the NAV is high and more units
when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund
and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of
the same mutual fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual

fund then he can withdraw a fixed amount each month.

Options Available To Investors:

Each plan of every mutual fund has three options – Growth, Dividend and dividend
reinvestment. Separate NAV are calculated for each scheme.

- Dividend Option

Under the dividend plan dividend are usually declared on quarterly or annual basis.
Mutual fund reserves the right to change the frequency of dividend declared.

- Dividend reinvestment option

Instead of remittances of units through payouts, Units holder may choose to invest the
entire dividend in additional units of the scheme at NAV related prices of the next
working day after the record date. No sales or entry load is levied on dividend reinvest.

- Growth Option

Under this, plan returns accrue to the investor in the form of capital appreciation as
reflected in the NAV. The scheme will not declare the dividend under the Growth plan
and investors who opt for this plan will not receive any income from the scheme.
Instead of income earned on their units will remain invested within the scheme and will
be reflected in the NAV.

Risk Return Hierarchy of Different Funds

BANKS V/S MUTUAL FUNDS:

Mutual Funds are now also competing with commercial banks in the race for retail
investor‟s savings and corporate float money. The power shift towards mutual funds
has become obvious. The coming few years will show that the traditional saving
avenues are losing out in the current scenario. Many investors are realizing that
investments in savings accounts are as good as locking up their deposits in a closet.
The fund mobilization trend by mutual funds indicates that money is going to mutual
fund in a big way.

CATEGORY BANKS MUTUAL FUNDS

Returns Low High

Administrative exp. High Low

Risk Low Moderate

Investment options Less More

Network High penetration Low but improving

Liquidity At a cost Better

Quality of assets Not transparent Transparent

Minimum balance between

Interest calculation Everyday
10th & 30th of every month

Maximum Rs.1 lakh on

Guarantee None
deposits
 Chapter 2

Profile of Company
Company profile

SBI Mutual Fund is India‟s largest bank sponsored mutual fund and has an enviable
track record in judicious investments and consistent wealth creation SBI Mutual Fund
Set up on 29 June 1987, SBI Mutual Fund is a joint venture between the State Bank of
India, India's largest bank and Societe Generale Asset Management of France, one of
the world's leading fund houses in the country with an investor base of over 4.6 million
and over 20 years of rich experience in fund management consistently delivering value
to its investors.
SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank of India'
one of India's largest banking enterprises, and Societe Generale Asset Management
(France), one of the world's leading fund management companies that manages over
US$ 500 Billion worldwide. Today the fund house manages over Rs 28500 crores of
assets and has a diverse profile of investors actively parking their investments across
36 active schemes. In 20 years of operation, the fund has launched 38 schemes and
successfully redeemed 15 of them, and in the process, has rewarded our investors
with consistent returns. Schemes of the Mutual Fund have time after time
outperformed benchmark indices, honored us with 15 awards of performance and have
emerged as the preferred investment for millions of investors. The trust reposed on us
by over 4.6 million investors is a genuine tribute to our expertise in fund management.
SBI Funds Management Pvt. Ltd. serves its vast family of investors through a network
of over 130 points of acceptance, 28 Investor Service Centers, 46 Investor Service
Desks and 56 District Organizers.SBI Mutual is the first bank sponsored fund to launch
an offshore fund – Resurgent India Opportunities Fund. Growth through innovation and
stable investment policies is the SBI MF credo.
 MUTUAL F U N D S STRUCTURE

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund
established in the form of a trust by a sponsor to raise monies by the Trustees
through the sale of units to the public under one or more schemes for investing in
securities in accordance with these regulations. These regulations have since been
replaced by the SEBI (Mutual Funds) Regulations, 1996. The structure indicated by
the new regulations is indicated as under. A mutual fund comprises four
separate entities, namely sponsor, mutual fund trust, AMC and custodian. The
sponsor establishes the mutual fund and gets it registered with SEBI.
The mutual fund needs to be constituted in the form of a trust and the instrument of
the trust should be in the form of a deed registered under the provisions of the Indian
Registration Act,1908.
The Custodian maintains the custody of the securities in which the scheme invests. It
also keeps a tab on corporate actions such as rights, bonus and dividends declared
by the companies in which the fund has invested. The Custodian is appointed by the
Board of Trustees. The Custodian also participates in a clearing and settlement
system through approved depository companies on behalf of mutual funds, in
case of dematerialized securities.
The sponsor is required to contribute at least 40% of the minimum net worth (Rs.
10 crore) of the asset management company. The board of trustees manages the
MF and the sponsor executes the trust deeds in favor of the trustees. It is the job of
the MF trustees to see that schemes floated and managed by the AMC appointed by
the trustees are in accordance with the trust deed and SEBI guidelines
Taxation of Mutual Funds and Investor

Finance Act 1999 radically changed taxation of Dividends received by

investors in Mutual Funds.
Mutual Fund as an entity is not taxed since it is a Pass through entity. Section
10(23d) of the IT Act.
Finance Act 1999 made income (dividend) from UNITS totally exempt from
tax u/s 10(33) in the hands of investors.
Income (dividends) distributed by a debt fund was made liable to Dividend
Distribution Tax at applicable rate.
Open ended funds with more than 50% invested in equity do not pay any
DDT (since changed to 65% in FY 06-07.
Individuals 14.02% , Companies 22.44%.
Security Transaction Tax (STT) is charged as applicable.
80 C benefits under ELSS up to Rs 1 lack.
Types of Investment in Mutual Fund
Lump Sum
Systematic Investment Plan

Lump Sum Payment

A lump sum is a single payment of money, as opposed to a series of payments made

over time (such as an annuity) This means investing the entire sum of money at one
go. For instance, if you have Rs 1 lakh which you are willing to fully invest in stocks or
MFs, it is a lump-sum investment.

Systematic Investment Plan

SBI Mutual Fund on Wednesday, April 15th started its equity based micro systematic
investment plan (Micro SIP) at Alibaug, near Mumbai.

Micro SIP has been launched to offer long-term investment benefits in equity to low
income households residing in the rural and semi-urban areas. "This plan is aimed at
getting in low income households in rural and semi-urban areas to benefit from
long-term investment in equity as an asset class," said Achal Gupta, Managing
Director, SBI Mutual Fund.
The first 100 investors from the low income group in Alibaug were basically the daily
wage earners who enrolled with the SIP in the presence of Mr. O. P. Bhatt, Chairman,
State Bank of India. This was a part of the initiative taken by the bank.

The bank plans to market the product through intermediaries like Self-Help Groups
(SHGs), NGOs and Micro Credit/ Finance Institutions. "We plan to take this product to
the masses partly through marketing by SBI Mutual Fund, and partly by setting targets
for SBI branches for the sale of this product," said Bhatt. The plan is called as SBI
Chota SIP and requires a minimum investment of only Rs 100 per month with
minimum tenure of 5 years.

The bank has also requested the government to remove the permanent account
number (PAN) requirement, which is a must for all mutual fund investments, for this
plan. Presently the investors who want to opt for this plan have the option of investing
in SBI Mutual Fund's Magnum Balanced Fund, MMPS 93, MSFU Contra Fund, and
SBI Blue Chip Fund and later on this plan would be extended to other schemes as
well.SIP is actually a Systematic Investment Plan of investing in Mutual Fund. It is
specially designed for those who aim to build wealth over a long period and want a
better future for him and their dependants. The investment in a Mutual fund can be
done in two ways. First way is onetime payment i.e. making payment to a fund at once
and gets the units of the fund as per the Net Asset Value (NAV) of the fund on that
day. A person wishes to invest in a fund Rs. 24,000/- . On the day of Investment, the
NAV of the fund was Rs. 10/-. He gets 2400 units @ Rs. 10/- per unit. The other way of
investment is making payment to the fund periodically, which is termed as Mutual Fund
SIP. When you commit to invest a fixed amount monthly in a fund, it is called as
Systematic Investment. It is actually beneficial for those investors who wish to invest a
large amount in a fund and wishes to create a large chunk of wealth for long term but
due to financial constraints are able to do so.

Systematic Investment Plan in Mutual Fund is commonly named SIP – is really getting
popular in India. Systematic Investment Plan is such a beautiful tool, which if used
properly can help you to achieve all your financial goals. Some time back we wrote “Do
you really understand Systematic Investment Plan” which is one of the most popular
articles of TFL, but readers requested that they want to read more about basics of
Mutual Fund SIP.
What is Systematic Investment Plan?

Systematic Investment Plan (SIP) is a smart financial planning tool that helps you to
create wealth, by investing small sums of money every month, over a period of time.
Systematic Investment Plan (SIP) is a planned approach to investments and an
investment technique that allows you to provide for the future by investing small
amounts of money in Mutual Fund schemes of your choice.

State Bank of India is one of the largest banking institutions in India. It is not only
reliable but investing money is also safe with a guarantee that great returns can be
obtained from here. Currently, investment in the mutual funds and in the SIP schemes
of the mutual funds has become quite common. There are many companies that offer
the opportunity of investment in the SIP. SBI is also one of them.

A SIP is a method of investing in mutual funds, by investing a fixed sum at a regular

frequency, to buy units of a mutual fund schemes. It is quite similar to a recurring
deposit of a bank or post office. For the convenience, an investor could start a SIP with
as low as Rs 500; however this amount may differ from one fund house to other. The
SIP provides them a way to invest in the fund of their choice in installments.
Here is an illustration using hypothetical figures indicating how the
SIP can work for investors:
Suppose an investor would like to invest Rs.4,000 under the Systematic Investment
Plan on quarterly basis.
Period Invested Premium NAV of Maxi Units allocated
miser Fund (Rs
(Rs) per unit)

7th April‟10 4000 11.34 352.73

7th May‟10 4000 11.01 363.31

7th June‟10 4000 12.05 331.95

7th July‟10 4000 13.13 304.65

7th 4000 13.67 292.61

August‟10

7th Sept‟10 4000 15.81 253.00

7th Oct‟10 4000 16.78 238.38

7th Nov‟10 4000 18.28 218.82

7th Dec‟10 4000 18.71 213.79

7th Jan‟11 4000 21.48 186.22

7th Feb‟11 4000 21.49 186.13

7th 4000 21.98 181.98

March‟11

Total 48000

Actual average NAV=

(11.34+11.01+12.05+13.13+13.67+15.81+16.78+18.28+18.71+21.48+21.49+21.
98) / 12 = 16.29
NAV for Mr. X (4,000 * 12) / (352.73+ 363.31 + 331.95 + 304.65 + 292.61 +
253.00+ 238.38 + 218.82 + 213.79 + 186.22 + 186.13+ 183.74) = Rs.15.36
Based on the historical analysis for BSE Sensex for last 10 to 12 years (i.e.1-Jan-1998
to 1-Jan- have 2010) we find that if an individual had invested Rs. 1000 ever year (SIP)
he would by earned a return of 9% vis-à-vis 5% earned an individual who had invested
Rs. 1000 at the beginning of 10 year period. Similarly over a five-year period (1-Jan-
1994 to 1-Jan-1999) SIP investment return would have been 16.52% compared to
14.09% for a one-time investment at the beginning of the period.

Using the SIP strategy the investor can reduce his average cost per unit. The investor
gets the advantage of getting more units when the market is turned down.

Benefits of SIP

1. SIP can be started with a minimum investment of Rs. 500/- per month or Rs.
1000/- per month.
2. It is good and effective way of creating wealth for long term.
3. ECS facility is available in case of Investment through SIP.
4. A small withdrawal from the account doesn‟t affect the bank balance of an
individual as compared to a hefty withdrawal.
5. It can be for a year, two years, three years etc. if a person at any point of time
couldn‟t be able to continue its SIP, he may give instructions at least 25 days
before to the fund house. His SIP be discontinued.
6. All type of funds except Liquid funds, cash funds and other funds who invest in
very short fixed return investments offers the facility of SIP.
7. Capital gains, if applicable, are taxed on a first-in first-out basis.
8. As the investment made through SIP are not at one time. Some units bought at
high price and some at low price, so chances of making gain through SIP is higher
than the one time investment.

In short, SIP is a simple and effective way to create wealth but to create such
wealth, one should think about the investment in SIP for a period of at least for time
frame of three years because it pays to invest in a longer run..
SBI and SIP:

The relationship between SBI and SIP is quite long and strong. SBI has introduced
several SIPs because it is definitely one of the greatest and the smartest way of
investment in the present scenario. Not only is it less risky but at the same time it also
generates less return. Right from Rs 50 to Rs1500, different amounts can be invested
in the SIP monthly scheme of SBI
 Chapter 3

Research Methodology
Research Methodology

 Title of the study

„Systematic Investment Plan

(The Better Way to Invest In Mutual Funds)‟

 Duration of the Project

The duration of the project is 45 days

 Objective of the study

The purpose of choosing the project is to know:
Investor‟s option for entry into mutual fund

Lump sum

SIP

Comparative analysis between Lump Sum and SIP

Investors Delight when investment is through SIP
Procedure for investment in SIP

 Research Type

Conclusive and explorative approach has been adopted in the study. As here the
topic of research problem has been explored so that hidden facts can come into the
light and then the maximum allocation criteria in SIP are Rs. 1000-3000 i.e. the final
conclusion is given 45%

 SAMPLE SIZE
A sample size of 50 investors was chosen to meet the earlier mentioned objectives. The
selection of sample was based on the following criteria: -

People belonging to different state of society.

 Servicemen working in government organization & private organization.
Professionals who includes doctors, lawyers, teachers etc

 Research Design

This research is Explorative and conclusive in nature because it aims to collect the
data about the behavior of investors in which way they invest in Mutual Funds. The
research approach used is survey based and the analysis is largely based on the
primary data.

 Research Instrument

Structured questionnaire: open- ended and close- ended.

 Contact Method

Personal interview

 Research Approach

Any methodology includes the overall research design, the sampling procedure and
data collection method. The methodology adopted by me for purpose of finding the
investment behavior of investors was DIRECT SURVEY METHOD

 POPULATION

Udaipur City

 Study scope of the

Udaipur only

This project will help existing/prospective investor to understand what the various mode
of investment in Mutual Fund are and why Systematic Investment Plan gives better
returns than Lump sum. So that investors can do better use of their hard earned money
to earn more profit.

 Types of data

1. Primary Data

2. Secondary Data

Primary Data is that data which is collected by the researcher as per his/her needs

Secondary Data is that data which is collected through references as websites,

journals, books, magazines , etc.

 LIMITATIONS TO THE SURVEY

Though research based decision-making is now considered but still there is a gap
between the understanding of researcher and users.

Research is there to help in decision-making, not a substitute of decision-making. Some

of the following limitations have restricts the scope of survey to some extent :

Some respondents gave vague information and were not serious while
responding.

Some respondents were hesitant to reveal information about their finances

because of income tax queries.

It was difficult to find whether respondents actually participate in their

financial planning.

Research can provide number of facts but it does not provide actionable
results.

It cannot provide answer to any problem but can only provide a set of
guidelines.

Management rely more on the intuitions and judgments rather than

research.

Area of research was restricted to some location of the city and state.
 Chapter 4

Facts and Finding

Finding

The analysis is done based on the structured questions and we got following points:

- 55% investor invests in SIP mode.

- 84% got more profit in SIP

- The maximum duration of investment in SIP is 3 years i.e. 34%.

- The maximum allocation criteria in SIP are 1000-3000 i.e. 45%

 Chapter 5

Analysis and Interpretation

Q 1: In which Financial Instrument do you invest into?

Ans:

Financial Instruments Investment in %

Mutual 76

Bond 15

Online Trading 07

Derivatives 02

Interpretation: From above pie chart, I have analyzed that 76% of investors invest in
the analysis is done on the basis of the response of respondents, which is collected
through the questions present in questionnaire.
Q 2: By structure in which type of schemes have you invested?

Ans :

Types of schemes on the basis of Investment in %

structure

Open ended funds 66

Close ended funds 22

Intervals funds 12

Interpretation: The above pie chart depicts that 66% investors invest in Open-ended
funds, 22% in Close-ended funds and 12% in Interval funds.
Q. 3: By investment objective In which type of schemes have you invested?

Ans:

Types of Investment on the basis of Investment in %

objective

Growth Schemes 55

Income Schemes 13

Balances Schemes 32

Interpretation: From the above pie chart, I conclude that there are 55 % investors
who invest in Growth Schemes, 13% investor invest in Income Schemes, and 32%
investors invest in Balanced Funds.
Q.4. In which type of fund you want to invest?

Ans :
TYPES OF FUNDS INVESTMENT IN
%

Index Fund 41

Tax Saver Fund 15

Sectoral fund 44

Interpretation: The above chart depicts that the maximum numbers of investor.i.e.41%
investors invest in Sectoral Funds , 44% in Index Funds and 15% in Tax Saver Funds.
Q.5 Do you repeat your investment after initial investment?

Ans :

Repetition of Investors in %
investment

Yes 68

No 32

Interpretation: The above pie chart depicts that 68% of investors invest again after the
initial investment
Q.6 What percentage of your earnings do you invest in Mutual Funds?

Ans :

% of earnings Investors in %

Upto 10% 43

Upto 25% 32

Upto 50% 15

Above 50% 10

Interpretation: The above chart depicts that 43% investor invest that up to 10% of their
earning in Mutual Fund.
Q.7 :How many investors invested in SIP , Lump sum or both?

Ans :

Type of investment Investment in %

SIP 55
Lump sum 10
Both 35

Interpretation: From above chart I have analyzed that 55% investors have invested
SIP, 10% in lump sum and 35% in both the category.
Q.8 what is an allocation criteria of an investor in SIP?

Ans :

Allocation criteria (in Rs) Investment in %

Less than 1000 9
1000-3000 45
3000-5000 36
More than 5000 10

50
Allocation criteria (in Rs)
45
40
35
30
25
20
investment in %
15
10
5
0
less than 1000 1000-3000 3000-5000 more than 5000

Interpretation: From above chart b I have analyzed that the allocation criteria of
investment is 45% in the range Rs1000 to Rs 3000.
Q.9 What is the time duration of investment?

Ans :

Time duration Investment in %

Less than or equal to 5 years 25
Less than or equal to 4 years 8
Less than or equal to 3 years 34
Less than or equal to 2 years 25
Less than or equal to 1 year 8

Interpretation: The above bar chart depicts that most of the investors (i.e. 33.33%)
invest in less than 3 years.
Q.10 which has given more profit to investors?

Ans :

Investment in Profit in %
Lump sum 84
SIP 16

Interpretation: The above Pie chart depicts that 84% of investors have got more profit
in Systematic Investment Plan.
 Chapter 5

SWOT Analysis
SWOT ANALYSIS

STRENGTH WEAKNESS

No access to rural market.

No direct link between investors
A well known name in
and AMC.
financial companies.
Wide experience in this
field.
Dedicated employees.
Tie up with many financial
institutions.
Ever growing distribution
network.
Good infrastructure.
Experienced fund
manager.
Easy access to branch.

Opportunities THREATS

Positive outlook of People Highly volatile and uncertain

toward mutual funds. market.
Untapped market. Large number of financial giants
present in this market
Chapter 7

Conclusion
Conclusion:

Findings:

Our findings during the training with State Bank of India (MF), Udaipur was good on the
following grounds:-

State Bank is a top ranked company listed with NSDL and CDSL; provide trading
through both NSE and BSE.
Sis providing software to their prospective sub brokers and revisers.
Cheque updating in 15 minutes and the credit limit up to 10 times.

There are some more points :-

Mutual fund advisors give emphasis on mutual funds than other investment
options.

The awareness level of investor is low as advisors are interested in dealing in

mutual funds.

Very less advisors are knowing about services provided by State Bank of India
(Mutual Fund)

Mutual funds have given a new direction to the flow of personal saving and
enable small and medium investors in remote rural and semi urban areas to reap
the benefits of the stock market investments. Indian mutual funds are thus
playing a very important role in allocation of scarce resources in the emerging
economy.
 Chapter 8

Suggestion
RECOMMENDATION AND SUGGESTIONS

Though the State Bank of India have a very good ascribed plan with exclusive band of
opportunities but as nothing is free from the hurdles therefore there are few
shortcomings which I felt makes SBI fail to achieve its target :

There is high potential market for mutual fund advisors in Udaipur city but this
market needs to be explored as investors are still hesitated to invest their
money in mutual fund.
In Udaipur investors have inadequate knowledge about mutual fund, so proper
marketing of various schemes is required. Company should arrange more and
more seminars on mutual funds.
Awareness of mutual fund services among the investors are very low so Asset
Management Company needs proper marketing of their all services by
advertising , distribution of pamphlet , arranging seminars etc.
Most advisors are not interested in dealing of mutual funds because they get
very low commission.
Company should also provide knowledge about the growth rate and expected
growth rate of mutual fund industry in India.
Most people are aware of Life Insurance , NSC and PPF for tax saving so
company should market various tax saving scheme of mutual fund and their
benefits.
Chapter 9

Annexure
QUESTIONNAIRE

(Hello, I am Chanchal Salvi. I need your spare time to fill up the questionnaire, as this is
the part of my Summer Internship Training under MBA curriculum)

NAME: ______________________________________ __________________

AGE

0-18_____ 18-36_____ 36-54_____ 54-72______ 72 ABOVE______

GENDER: Male

Female

OCCUPATION: Businessman [ ] Pvt. Employee [ ]

Govt. Employee [ ] Professional [ ]

Student [ ] other (specify):________

CONTACT NO: __________________________________

Q1. In which of these Financial Instruments do you invest into?

Mutual Funds [ ] Bonds [ ]

Derivatives [ ] Online trading [ ]

Q2 .By structure in which type of schemes did you invested?

Open Ended Fund [ ]

Close Ended Fund [ ]

Interval Schemes [ ]

Q3.By investment objective in which type of schemes have you invested?

Growth Schemes [ ]

Income Schemes [ ]

Balanced Schemes [ ]
Q4.In which type of funds you want to invest?

Tax Saver Funds [ ]

Index Funds [ ]

Sactorial Funds [ ]

Q5. Did you repeat your investment after your initial investments?

Yes [ ] No [ ]

Q6. What percentage of your earnings do you invest in Mutual Funds?

Up to 10% Up to 25% Up to 50% Above 50%

Q7. In which you have invested?

SIP [ ] Lump Sum [ ] Both [ ]

Q8. What is your allocation criterion?

<1000b [ ] 1000-3000 [ ] 3000-5000 [ ] >5000b [ ]

Q9. For what time period you have invested?

<= 1 yr. [ ] <= 2 yr. [ ] <= 3 yr. [ ] <= 4 yr. [ ] <= 5 yr. [ ]

Q10. Which has given you more profit?

SIP [ ] Lump Sum [ ]

Chapter 10
Bibliography
Bibliography

1. Internet
2. Magazines and journal of the company
3. Book of financial Management
4. Website:-

www.sbimf.com

www.amfi.coms

www.moneycontrol.com

www.valueresearch.com

www.google.com

www.mutaulfundsindia.com

www.investopedia.com