ACKNOWLEDGEMENT

Project Report is the most vital part of an PGDM course, I therefore, consider
myself fortunate to receive this Research report yet the opportunity could not
have been utilized without the guidance and support of many individuals who
although held varied positions, but were equally instrumental for successful
completion of my research report.
I would like to express gratitude to the respected Miss Ruchika
Mehrotra Faculty Guide for their valuable inputs and direction that
rendered success to the project.
I owe a deep intellectual debt to all of them who through their rich &varied
contribution have greatly improved my understanding of various concepts of my
report.
















Preface

The Indian capital market has been increasing tremendously during last few
years. With the reforms of economy, reforms of industrial policy, reforms of
public sector and reforms of financial sector, the economy has been opened
up and many developments have been taking place in the Indian money
market and capital market. The Sensex first crossed 6,000 on February 11,
2000, fuelled by the IT boom, but closed below that mark. On November 23,
2004, it closed above 6,000 for the first time. In order to help the small
investors, SBI SBI Mutual Fund industry has come to occupy an important
place. The spread of the banking system has been a major factor in promoting
financial intermediation in the economy and in the growth of financial
savings. With progressive liberalization of economic policies, there has been a
rapid growth of capital market, money market and financial services
industry including merchant banking, leasing and venture capital. Consistent
with this evolution of the financial sector, the SBI SBI Mutual Fund industry
has also come to occupy an important place.
In the FY2006 capital market has been riding on a roller coaster. In the month
of April this year the bullish run in the stock market has pushed the Sensex up
above the 12000 mark. On the 10
th
day of next month the Sensex touched its
best ever closing level of 12612. However, the slide started soon after it and
the Sensex fall from peak to trough in May with 2214 points.
This project, titled, Risk And Return Analysis of SBI Mutual Fund
Schemes examines the effect these changes in stock markets are having on
the SBI Mutual Funds, and to evaluate the performance of some SBI Mutual
Fund schemes and to suggest what should be done to avoid any negative
effects the market is having on the SBI Mutual Funds and the investors. In
this project we will also examine the role of distributors in influencing
investors decisions.


























INTRODUCTION

Industry & company profile of SBI

State Bank of India is Indias largest commercial bank. State Bank of India has
a vast domestic network of over 9000 branches (approximately 14% of all bank
branches) and commands one fifth of deposits and loans of all scheduled
commercial bank of India. The State Bank Group includes a network of eight
banking subsidiaries and several non banking subsidiaries offering merchant
banking services, fund management, factoring services, primary dealership in
government securities, credit cards and insurance.

Roots
State bank of India traces its roots to the first decade of 19
th
century. When the
Bank of Calcutta, later renamed the Bank of Bengal, was established on 2J une
1806.The government amalgamated namely the Bank of Bombay lei corporate
on 15 April 1848 and the Bank of Madras 27 J an 1921 and named the
recognized banking entity the Imperial Bank of I ndia.
Time line
June, 2 1806 the Bank of Calcutta established.








TRANSFORMATION JOURNEY IN STATE BANK OF INDIA


The State Bank of India, the countrys oldest Bank and a premier in terms of
balance sheet size, number of branches, market capitalization and profits is
today going through a momentous phase of Change and Transformation the
two hundred year old Public sector behemoth is today stirring out of its Public
Sector legacy and moving with an agility to give the Private and Foreign Banks
a run for their money.

The bank is entering into many new businesses with strategic tie ups Pension
Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking,
Point of Sale Merchant Acquisition, Advisory Services, structured products etc
each one of these initiatives having a huge potential for growth.
The Bank is forging ahead with cutting edge technology and innovative new
banking models, to expand its Rural Banking base, looking at the vast untapped
potential in the hinterland and proposes to cover 100,000 villages in the next
two years.
It is also focusing at the top end of the market, on whole sale banking
capabilities to provide Indias growing mid / large Corporate with a complete
array of products and services. It is consolidating its global treasury operations
and entering into structured products and derivative instruments. Today, the
Bank is the largest provider of infrastructure debt and the largest arranger of
external commercial borrowings in the country. It is the only Indian bank to
feature in the Fortune 500 list.

The Bank is changing outdated front and back end processes to modern
customer friendly processes to help improve the total customer experience. With
about 8500 of its own 10000 branches and another 5100 branches of its
Associate Banks already networked, today it offers the largest banking network
to the Indian customer. The Bank is also in the process of providing complete
payment solution to its clientele with its over 21000 ATMs, and other electronic
channels such as Internet banking, debit cards, mobile banking, etc.

With four national level Apex Training Colleges and 54 learning Centers spread
all over the country the Bank is continuously engaged in skill enhancement of
its employees. Some of the training programs are attended by bankers from
banks in other countries.

The bank is also looking at opportunities to grow in size in India as well as
internationally. It presently has 82 foreign offices in 32 countries across the
globe. It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP
Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a
formidable group in the Indian Banking scenario. It is in the process of raising
capital for its growth and also consolidating its various holdings.

Throughout all this change, the Bank is also attempting to change old mindsets,
attitudes and take all employees together on this exciting road to
Transformation. In a recently concluded mass internal communication
programmed termed Parivartan the Bank rolled out over 3300 two day
workshops across the country and covered over 130,000 employees in a period
of 100 days using about 400 Trainers, to drive home the message of Change and
inclusiveness. The workshops fired the imagination of the employees with some
other banks in India as well as other Public Sector Organizations seeking to
emulate the programmed.

The CNN IBN, Network 18 recognized this momentous transformation journey,
the State Bank of India is undertaking, and has awarded the prestigious Indian
of the Year Business, to its Chairman, Mr. O. P. Bhatt in January 2008.

The elephant has indeed started to dance.

EVOLUTION OF SBI


The origin of the State Bank of I ndia goes back to the first decade of the
nineteenth century with the establishment of the Bank of Calcutta in Calcutta on
2 June 1806. Three years later the bank received its charter and was re-designed
as the Bank of Bengal (2 January 1809). A unique institution, it was the first
joint-stock bank of British India sponsored by the Government of Bengal. The
Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843)
followed the Bank of Bengal. These three banks remained at the apex of modern
banking in India till their amalgamation as the Imperial Bank of India on 27
January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into
existence either as a result of the compulsions of imperial finance or by the felt
needs of local European commerce and were not imposed from outside in an
arbitrary manner to modernize India's economy. Their evolution was, however,
shaped by ideas culled from similar developments in Europe and England, and
was influenced by changes occurring in the structure of both the local trading
environment and those in the relations of the Indian economy to the economy of
Europe and the global economic framework.


Bank of Bengal H.O.


Establishment of SBI
The establishment of the Bank of Bengal marked the advent of limited liability,
joint-stock banking in India. So was the associated innovation in banking, viz.
the decision to allow the Bank of Bengal to issue notes, which would be
accepted for payment of public revenues within a restricted geographical area.
This right of note issue was very valuable not only for the Bank of Bengal but
also its two siblings, the Banks of Bombay and Madras. It meant an accretion to
the capital of the banks, a capital on which the proprietors did not have to pay
any interest. The concept of deposit banking was also an innovation because the
practice of accepting money for safekeeping (and in some cases, even
investment on behalf of the clients) by the indigenous bankers had not spread as
a general habit in most parts of India. But, for a long time, and especially upto
the time that the three presidency banks had a right of note issue, bank notes and
government balances made up the bulk of the investible resources of the banks.
The three banks were governed by royal charters, which were revised from time
to time. Each charter provided for a share capital, four-fifth of which were
privately subscribed and the rest owned by the provincial government. The
members of the board of directors, which managed the affairs of each bank,
were mostly proprietary directors representing the large European managing
agency houses in India. The rest were government nominees, invariably civil
servants, one of whom was elected as the president of the board.


Group Photograph of Central Board (1921)


Business

The business of the banks was initially confined to discounting of bills of
exchange or other negotiable private securities, keeping cash accounts and
receiving deposits and issuing and circulating cash notes. Loans were restricted
to Rs. one lakh and the period of accommodation confined to three months only.
The security for such loans was public securities, commonly called Company's
Paper, bullion, treasure, plate, jewels, or goods 'not of a perishable nature' and
no interest could be charged beyond a rate of twelve per cent. Loans against
goods like opium, indigo, salt woolens, cotton, cotton piece goods, mule twist
and silk goods were also granted but such finance by way of cash credits gained
momentum only from the third decade of the nineteenth century. All
commodities, including tea, sugar and jute, which began to be financed later,
were either pledged or hypothecated to the bank. Demand promissory notes
were signed by the borrower in favour of the guarantor, which was in turn
endorsed to the bank. Lending against shares of the banks or on the mortgage of
houses, land or other real property was, however, forbidden.
Indians were the principal borrowers against deposit of Company's paper, while
the business of discounts on private as well as salary bills was almost the
exclusive monopoly of individuals Europeans and their partnership firms. But
the main function of the three banks, as far as the government was concerned,
was to help the latter raise loans from time to time and also provide a degree of
stability to the prices of government securities.


Old Bank of Bengal




Major change in the conditions

A major change in the conditions of operation of the Banks of Bengal, Bombay
and Madras occurred after 1860. With the passing of the Paper Currency Act of
1861, the right of note issue of the presidency banks was abolished and the
Government of India assumed from 1 March 1862 the sole power of issuing
paper currency within British India. The task of management and circulation of
the new currency notes was conferred on the presidency banks and the
Government undertook to transfer the Treasury balances to the banks at places
where the banks would open branches. None of the three banks had till then any
branches (except the sole attempt and that too a short-lived one by the Bank of
Bengal at Mirzapore in 1839) although the charters had given them such
authority. But as soon as the three presidency bands were assured of the free use
of government Treasury balances at places where they would open branches,
they embarked on branch expansion at a rapid pace. By 1876, the branches,
agencies and sub agencies of the three presidency banks covered most of the
major parts and many of the inland trade centers in India. While the Bank of
Bengal had eighteen branches including its head office, seasonal branches and
sub agencies, the Banks of Bombay and Madras had fifteen each.


Bank of Madras Note Dated 1861 for Rs.10
Presidency Banks Act
The presidency Banks Act, which came into operation on 1 May 1876, brought
the three presidency banks under a common statute with similar restrictions on
business. The proprietary connection of the Government was, however,
terminated, though the banks continued to hold charge of the public debt offices
in the three presidency towns, and the custody of a part of the government
balances. The Act also stipulated the creation of Reserve Treasuries at Calcutta,
Bombay and Madras into which sums above the specified minimum balances
promised to the presidency banks at only their head offices were to be lodged.
The Government could lend to the presidency banks from such Reserve
Treasuries but the latter could look upon them more as a favour than as a right.


Bank of Madras
The decision of the Government to keep the surplus balances in Reserve
Treasuries outside the normal control of the presidency banks and the connected
decision not to guarantee minimum government balances at new places where
branches were to be opened effectively checked the growth of new branches
after 1876. The pace of expansion witnessed in the previous decade fell sharply
although, in the case of the Bank of Madras, it continued on a modest scale as
the profits of that bank were mainly derived from trade dispersed among a
number of port towns and inland centers of the presidency.
India witnessed rapid commercialization in the last quarter of the nineteenth
century as its railway network expanded to cover all the major regions of the
country. New irrigation networks in Madras, Punjab and Sind accelerated the
process of conversion of subsistence crops into cash crops, a portion of which
found its way into the foreign markets. Tea and coffee plantations transformed
large areas of the eastern Terais, the hills of Assam and the Nilgiris into regions
of estate agriculture par excellence. All these resulted in the expansion of India's
international trade more than six-fold. The three presidency banks were both
beneficiaries and promoters of this commercialization process as they became
involved in the financing of practically every trading, manufacturing and
mining activity in the sub-continent. While the Banks of Bengal and Bombay
were engaged in the financing of large modern manufacturing industries, the
Bank of Madras went into the financing of large modern manufacturing
industries; the Bank of Madras went into the financing of small-scale industries
in a way which had no parallel elsewhere. But the three banks were rigorously
excluded from any business involving foreign exchange. Not only was such
business considered risky for these banks, which held government deposits, it
was also feared that these banks enjoying government patronage would offer
unfair competition to the exchange banks which had by then arrived in India.
This exclusion continued till the creation of the Reserve Bank of India in 1935.


Bank of Bombay


Presidency Banks of Bengal
The presidency Banks of Bengal, Bombay and Madras with their 70 branches
were merged in 1921 to form the Imperial Bank of India. The triad had been
transformed into a monolith and a giant among Indian commercial banks had
emerged. The new bank took on the triple role of a commercial bank, a banker's
bank and a banker to the government. But this creation was preceded by years
of deliberations on the need for a 'State Bank of India'. What eventually
emerged was a 'half-way house' combining the functions of a commercial bank
and a quasi-central bank.
The establishment of the Reserve Bank of India as the central bank of the
country in 1935 ended the quasi-central banking role of the Imperial Bank. The
latter ceased to be bankers to the Government of India and instead became agent
of the Reserve Bank for the transaction of government business at centers at
which the central bank was not established. But it continued to maintain
currency chests and small coin depots and operate the remittance facilities
scheme for other banks and the public on terms stipulated by the Reserve Bank.
It also acted as a bankers' bank by holding their surplus cash and granting them
advances against authorized securities. The management of the bank clearing
houses also continued with it at many places where the Reserve Bank did not
have offices. The bank was also the biggest tendered at the Treasury bill
auctions conducted by the Reserve Bank on behalf of the Government.

The establishment of the Reserve Bank simultaneously saw important
amendments being made to the constitution of the Imperial Bank converting it
into a purely commercial bank. The earlier restrictions on its business were
removed and the bank was permitted to undertake foreign exchange business
and executor and trustee business for the first time.



Imperial Bank
The Imperial Bank during the three and a half decades of its existence recorded
an impressive growth in terms of offices, reserves, deposits, investments and
advances, the increases in some cases amounting to more than six-fold. The
financial status and security inherited from its forerunners no doubt provided a
firm and durable platform. But the lofty traditions of banking which the
Imperial Bank consistently maintained and the high standard of integrity it
observed in its operations inspired confidence in its depositors that no other
bank in India could perhaps then equal. All these enabled the Imperial Bank to
acquire a pre-eminent position in the Indian banking industry and also secure a
vital place in the country's economic life.


Stamp of Imperial Bank of India
When India attained freedom, the Imperial Bank had a capital base (including
reserves) of Rs.11.85 crores, deposits and advances of Rs.275.14 crores and
Rs.72.94 crores respectively and a network of 172 branches and more than 200
sub offices extending all over the country.


First Five Year Plan
In 1951, when the First Five Year Plan was launched, the development of rural
India was given the highest priority. The commercial banks of the country
including the Imperial Bank of India had till then confined their operations to
the urban sector and were not equipped to respond to the emergent needs of
economic regeneration of the rural areas. In order, therefore, to serve the
economy in general and the rural sector in particular, the All India Rural Credit
Survey Committee recommended the creation of a state-partnered and state-
sponsored bank by taking over the Imperial Bank of India, and integrating with
it, the former state-owned or state-associate banks. An act was accordingly
passed in Parliament in May 1955 and the State Bank of India was constituted
on 1 July 1955. More than a quarter of the resources of the Indian banking
system thus passed under the direct control of the State. Later, the State Bank of
India (Subsidiary Banks) Act was passed in 1959, enabling the State Bank of
India to take over eight former State-associated banks as its subsidiaries (later
named Associates).

The State Bank of India was thus born with a new sense of social purpose aided
by the 480 offices comprising branches, sub offices and three Local Head
Offices inherited from the Imperial Bank. The concept of banking as mere
repositories of the community's savings and lenders to creditworthy parties was
soon to give way to the concept of purposeful banking sub serving the growing
and diversified financial needs of planned economic development. The State
Bank of India was destined to act as the pacesetter in this respect and lead the
Indian banking system into the exciting field of national development.

INTRODUCTION TO SBI SBI MUTUAL FUNDS:-

A SBI SBI Mutual Fund is a trust that pools the savings of a number of
investors who share a common financial goal. The money thus collected is
then invested in capital market instruments such as shares, debentures and
other securities. The income earned through these investments and the capital
appreciations realized are shared by its unit holders in proportion to the
number of units owned by them. Thus a SBI SBI Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in
a diversified, professionally managed basket of securities at a relatively low
cost.
The flow chart below describes broadly the working of a SBI SBI Mutual
Fund.










A SBI SBI Mutual Fund is a body corporate registered with the Securities and
Exchange Board of India (SEBI) that pools up the money from
individual/corporate investors and invests the same on behalf of the
investors/unit holders, in Equity shares, Government securities, Bonds, Call
Money Markets etc, and distributes the profits. In the other words, a SBI SBI
Mutual Fund allows investors to indirectly take a position in a basket of assets.
SBI SBI Mutual Fund is a mechanism for pooling the resources by issuing
units to the investors and investing funds in securities in accordance with
objectives as disclosed in offer document. Investments in securities are spread
among a wide cross-section of industries and sectors thus the risk is reduced.
Diversification reduces the risk because all stocks may not move in the same
direction in the same proportion at same time. Investors of SBI SBI Mutual
Funds are known as unit holders.

The investors in proportion to their investments share the profits or losses. The
SBI SBI Mutual Funds normally come out with a number of schemes with
different investment objectives which are launched from time to time. A SBI
SBI Mutual Fund is required to be registered with Securities Exchange Board
of India (SEBI) which regulates securities markets before it can collect funds
from the public.

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI
was bifurcated into two separate entities. One is the Specified Undertaking of
the Unit Trust of India with assets under management of Rs.29,835 crores as at
the end of January 2003, representing broadly, the assets of US 64 scheme,
assured return and certain other schemes. The Specified Undertaking of Unit
Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the SBI SBI
Mutual Fund Regulations.

ORGANIZATION OF A SBI SBI MUTUAL FUND:
There are many
entities involved
and the diagram
below illustrates
the
organizational set up of a SBI SBI Mutual Fund:








(For detailed definitions in the above chart refer to annexure 1)

SBI SBI Mutual Funds diversify their risk by holding a portfolio of instead of
only one asset. This is because by holding all your money in just one asset, the
entire fortunes of your portfolio depend on this one asset. By creating a
portfolio of a variety of assets, this risk is substantially reduced.

SBI SBI Mutual Fund investments are not totally risk free. In fact, investing in
SBI SBI Mutual Funds contains the same risk as investing in the markets, the
only difference being that due to professional management of funds the
controllable risks are substantially reduced. A very important risk involved in
SBI SBI Mutual Fund investments is the market risk. However, the company
specific risks are largely eliminated due to professional fund management.





IMPORTANT CHARACTERISTICS OF A SBI SBI MUTUAL
FUND
A SBI SBI Mutual Fund actually belongs to the investors who have
pooled their

Funds. The ownership of the SBI SBI Mutual Fund is in the hands of the
Investors.

A SBI SBI Mutual Fund is managed by investment professional and
other

Service providers, who earns a fee for their services, from the funds.

The pool of Funds is invested in a portfolio of marketable investments.

The value of the portfolio is updated every day.

The investors share in the fund is denominated by units. The value

of the units changes with change in the portfolio value, every day. The

value of one unit of investment is called net asset value (NAV).

The investment portfolio of the SBI SBI Mutual Fund is created
according to The stated

Investment objectives of the Fund.


ADVANTAGES OF SBI SBI MUTUAL FUNDS:
Diversification: An investor undertakes risk if he invests all his funds in
a single scrip. SBI SBI Mutual Funds invest in a number of companies
across various industries and sectors. This diversification reduces the risk
of the investment.
Professional Management: An investor lacks the knowledge of the
capital market operations and does not have large resources to reap the
benefits of investment. Hence, he requires the help of an expert. SBI SBI
Mutual Funds are managed by professional managers who have the
requisite skills and experiences to analyse the performance and
prospectus of companies.
Regulatory oversight: SBI SBI Mutual Funds are subject to many
government regulations that protect investors from fraud.
Liquidity: It's easy to get your money out of a SBI SBI Mutual Fund.
Write a check, make a call, and you've got the cash.
Convenience: You can usually buy SBI SBI Mutual Fund shares by mail,
phone, or over the Internet. It reduces paperwork, saves time and makes
investment easy.
Low cost: SBI SBI Mutual Fund expenses are often no more than 1.5
percent of your investment. Expenses for Index Funds are less than that,
because index funds are not actively managed. Instead, they
automatically buy stock in companies that are listed on a specific index
Transparency: SBI SBI Mutual Funds transparently declare their
portfolio every month. Thus, an investor knows where his/her money is
being deployed and in case they are not happy with the portfolio they can
withdraw at a short notice.
Flexibility: SBI SBI Mutual Funds offer a family of schemes, and
investors have the option of transferring their holdings from one scheme
to other.
Tax benefits: SBI SBI Mutual Fund investors now enjoy income tax
benefits. Dividends received from SBI SBI Mutual Funds debt schemes
are tax exempt to the overall limit of Rs 9000 allowed under section SOL
of the Income Tax Act.

DISADVANTAGES OF SBI SBI MUTUAL FUNDS
Hidden costs: The SBI SBI Mutual Fund industry tactfully buries
costs under layers of jargon. These costs come despite of negative
returns. Examples of such costs include sales charges, annual fees, and
other expenses; and depending on the timing of their investment,
investors may also have to pay taxes on any capital gains distribution they
receive even if the fund went on to perform poorly after they bought
shares.
Lack of control: Investors typically cannot ascertain the exact make-
up of a fund's portfolio at any given time, nor can they directly influence
which securities the fund manager buys and sells or the timing of those
trades.
Dilution: Because funds have small holdings in so many different
companies, high returns from a few investments often don't make much
difference on the overall return. Dilution is also the result of a successful
fund getting too big. When money pours into funds that have had strong
success, the manager often has trouble finding a good investment for all
the new money.
Price Uncertainty: With an individual stock, one can obtain real-time
(or close to real-time) pricing information with relative ease by checking
financial websites or through a broker, as can one observe stock price
changes by the hour or minute. By contrast, with a SBI SBI Mutual Fund,
the price at which one purchases or redeems shares will typically depend
on the fund's NAV, which the fund might not calculate until many hours
after the order has been placed. In general, SBI SBI Mutual Funds must
calculate their NAV at least once every business day, typically after the
major U.S. exchanges close.


















STRUCTURE OF A SBI SBI MUTUAL FUND



RISK FACTORS
1. Standard Risk Factors:
Investment in Mutual Fund Units involves investment risks such as trading volumes,
settlement risk, liquidity risk, default risk including the possible loss of principal.
As the price / value / interest rates of the securities in which the scheme invests
fluctuate, the value of your investment in the scheme may go up or down.
conditions, factors and forces affecting capital markets in particular, level of interest
rates, various market related factors and trading volumes.
Sponsor
SBI SBI
Mutual
Fund
Trustees
ASSET
MANAGEMENT
COMPANY
Custodian Registrar
performance of the scheme.
in any manner indicate either the quality of the
scheme or its future prospects and returns.
the scheme beyond the initial contribution of Rs. 5 Lakhs made by it towards setting
up the Fund.


2. Common Scheme Specific Risk Factors
a. The Trustees, AMC, Fund, their directors or their employees shall not be liable for
any tax consequences that may arise in the event that the scheme is wound up for
the reasons and in the manner provided under the Scheme Information Document &
Statement of Additional Information.
b. Redemption by the unit holder due to change in the fundamental attributes of the
Scheme or due to any other reasons may entail tax consequences. The Trustees,
AMC, Fund their directors or their employees shall not be liable for any tax
consequences that may arise.
c. The tax benefits described in the SAI & SID are as available under the present
taxation laws and are available subject to relevant condition. The information given is
included only for general purpose and is based on advice received by the AMC
regarding the law and practice currently in force in India and the Investors and Unit
Holders should be aware that the relevant fiscal rules or their interpretation may
change. As in the case with any investment, there can be no guarantee that the tax
position or the proposed tax position prevailing at the time of the investment in the
Scheme will endure indefinitely. In view of the individual nature of tax consequences,
each Investor / Unit holder is advised to consult his/her/its own professional tax
advisor.
d. The Mutual Fund is not assuring any dividend nor is it assuring that it will make
any dividend distributions. All dividend distributions are subject to the availability of
distributable surplus and would depend on the performance of the scheme.
e. Investments under the scheme may also be subject to the following risks:
I. Investment in equity:
Equity and equity related risk: Equity instruments carry both company specific and
market risks and hence no assurance of returns can be made for these investments.
II. Investment in debt:
(a) Credit risk: Credit risk is risk resulting from uncertainty in counterparty's ability or
willingness to meet its contractual obligations. This risk pertains to the risk of default
of payment of principal and interest. Government Securities have zero credit risk
while other debt instruments are rated according to the issuer's ability to meet the
obligations.
(b) Liquidity Risk pertains to how saleable a security is in the market. If a particular
security does not have a market at the time of sale, then the scheme may have to
bear an impact depending on its exposure to that particular security.
(c) Interest Rate risk is associated with movements in interest rate, which depend on
various factors such as government borrowing, inflation, economic performance etc.
The values of investments will appreciate/depreciate if the interest rates fall/rise.
(d) Reinvestment risk: This risk arises from uncertainty in the rate at which cash
flows from an investment may be reinvested. This is because the bond will pay
coupons, which will have to be reinvested. The rate at which the coupons will be
reinvested will depend upon prevailing market rates at the time the coupons are
received.
f. Risks associated with Investing in Foreign Securities
Subject to necessary approvals, the some of the schemes may invest in securities in
overseas markets, which could be exposed to currency risk, sovereign risk,
economic and political risks. Prices of ADR/GDR may not move in consonance with
the domestic underlying stock due to currency movements and the prices could also
be trading at a discount/premium to the underlying stocks
g. Risks associated with Investing in Derivatives
The Scheme would primarily use various derivative products in an attempt to protect
the
value of portfolio and enhance the unit holder interest. As and when the scheme
trades in derivative market, there are risk factors and issues concerning the use of
derivatives that the investors should understand. Derivative products are specialized
instrument that require investment technique and risk analysis different from those
associated with stocks. The use of derivative requires an understanding not only of
the underlying instrument but also of the derivative itself. Derivative requires the
maintenance of adequate controls to monitor the transactions entered into, the ability
to assess the risk that a derivative adds to the portfolio and the ability to forecast
price. There is a possibility that loss may be sustained by the portfolio as a result of
the failure of another party (usually referred as the Counter party) to comply with
the terms of the derivative contract. Other risks in using derivative include the risk of
mispricing or improper valuation of derivative and the inability of derivative to
correlate perfectly with underlying assets, rates and indices. Thus, derivatives are
highly leveraged instruments. The risk of loss associated with futures contracts is
potentially unlimited due to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small price
movement in a futures contract may result in an immediate and substantial loss or
gain. There may be a cost attached to selling or buying futures or other derivative
instrument. Further there could be an element of settlement risk, which could be
different from the risk in settling physical shares. The possible lack of a liquid
secondary market for a futures contract or listed option may result in inability to close
futures or listed option positions prior to their maturity date. Derivative products are
leveraged instruments and can provide disproportionate gains as well as
disproportionate losses to the investor. Execution of such strategies depends upon
the ability of the fund manager to identify such opportunities. Identification and
execution of the strategies to be pursued by the Fund Manager involve uncertainty
and decision of the Fund Manager may not always be profitable. No assurance can
be given that the fund manager will be able to identify or execute such strategies.
The risk associated with the use of derivatives are different from or possibility greater
than the risks associated with investing directly in securities and other traditional
investments.
h. Risks associated with Investing in Securitized Debt
Liquidity risk: There is no assurance that a deep secondary market will develop
for the instrument. This could limit the ability of the investor to resell them.
Limited Recourse: The instruments represent an undivided beneficial interest in
the underlying receivables and do not represent an obligation of either the Issuer or
the Seller or the originator, or the parent or any affiliate of the Seller, Issuer and
Originator. No financial recourse is available to the buyer of the security against the
Investors Representative.
Delinquency and Credit Risk: Delinquencies and credit losses may cause
depletion of the amount available under the Credit Enhancement and thereby the
Monthly Investor Payouts to the Holders may get affected if the amount available in
the Credit Enhancement facility is not enough to cover the shortfall. On persistent
default of an Obligor to repay his obligation, the Servicer may repossess and sell the
Vehicle/ Asset. However many factors may affect, delay or prevent the repossession
of such Vehicle/Asset or the length of time required to realize the sale proceeds on
such sales. In addition, the price at which such Vehicle/Asset may be sold may be
lower than the
amount due from that Obligor.
Risks due to possible prepayments: Full prepayment of a contract may lead to
an
event in which investors may be exposed to changes in tenor and yield.
Bankruptcy of the Originator or Seller: If the service provider becomes subject
to
bankruptcy proceedings and the court in the bankruptcy proceedings concludes that
either the sale from each Originator was not a sale then an Investor could
experience
losses or delays in the payments due under the instrument.
Scheme-specific Risk Factors
EQUITY FUNDS:
Magnum Sector Funds Umbrella
Generally, sector funds are more aggressive, holding a relatively smaller number of
stocks, all of which tend to be affected by the same factors. Magnum Sector Funds
Umbrella (MSFU) will be investing in primarily in equity & equity related instruments,
derivatives, Government Securities and money market instruments (such as money
market instrument, term/notice money market, repos, reverse repos and any
alternative to the call money market as may be directed by the RBI). The liquidity of
the schemes investments is inherently restricted by trading volumes and settlement
periods. The liquidity of the schemes investments is inherently restricted by trading
volumes and settlement periods. In the event of a large number of redemption
requests, or of a restructuring of the schemes investment portfolio, these periods
may become significant. In view of the same, the Trustees have the right in their sole
discretion to limit redemption (including suspending redemption) under certain
circumstances as described in the Section on Investors' Rights and Services.
The Emerging Businesses Fund would be exposed to the following Scheme-specific
Risk Factors
i. Since investments are proposed to be made in the stocks of companies engaged
in
potentially emerging businesses, a failure of such businesses to take off could pose
a risk.
ii. Since a large part of the Emerging Businesses Fund portfolio would be invested in
companies which are export dependant, a slowdown in the global economy could be
a risk.
iii. A sharp appreciation of the rupee in the short term may affect the export
profitability of the companies adversely.
iv. MSFU - Emerging Businesses Fund would be investing in equity & equity related
instruments and money market instruments (such as money market instrument,
term/notice money market, repos, reverse repos and any alternative to the call
money market as may be directed by the RBI) as also. The liquidity of the schemes
investments is inherently restricted by trading volumes and settlement periods. In the
event of an inordinately large number of redemption requests, or of a restructuring of
the schemes investment portfolio, these periods may become significant. In view of
the same, the Trustees have the right in their sole discretion to limit redemptions
(including suspending redemptions) under certain circumstances.
Magnum Children's Benefit Plan
(a) Redemption by the Magnum holder / Unit holder due to change in the
fundamental attributes of the Scheme or due to any other reasons may entail tax
consequences. The
Trustees, AMC, Fund their directors or their employees shall not be liable for any tax
consequences that may arise.
(b) The Scheme has two options for premature repurchases. Premature repurchase
in cases
of donor investing through parents where the lock-in facility has been exercised, will
be
permitted only on a joint request from both the donor & the parent/legal guardian.
Repurchase without the lock - in will be permitted on a request from parent/legal
guardian.
The other terms and conditions for repurchases are same under both options as
detailed in
the section on redemption and repurchases.
(c) Magnum Childrens Benefit Plan will be investing in debt instruments (including
securitized
debt), Government Securities and money market instruments (such term/notice
money
market, repos, reverse repos and any alternative to the call money market as may be
directed by the RBI) as also equity & equity related instruments. The liquidity of the
schemes investments is inherently restricted by trading volumes and settlement
periods. In
the event of an inordinately large number of redemption requests, or of a
restructuring of
the schemes investment portfolio, these periods may become significant. In view of
the
same, the Trustees have the right in their sole discretion to limit redemptions
(including
suspending redemptions) under certain circumstances.
Magnum Income Fund-1998
(a) Magnum Income Fund-1998 (Magnum Income Fund) will be investing in debt
instruments
(including securitized debt), Government Securities and money market instruments
(such
as term/notice money market, repos, reverse repos and any alternative to the call
money
market as may be directed by the RBI). The liquidity of the schemes investments is
inherently restricted by trading volumes and settlement periods. In the event of an
inordinately large number of redemption requests, or of a restructuring of the
schemes
investment portfolio, these periods may become significant.
(b) The Mutual Fund is not assuring that it will make dividend distributions on a semi
annual
basis. All dividend distributions are subject to the availability of distributable surplus.
Magnum Taxgain Scheme-1993
Magnum Taxgain Scheme 1993 (Magnum Taxgain Scheme) will be investing in
equity &
equity related instruments, derivatives as also debt instruments, and money market
instruments (such as call money market, term/notice money market, repos, reverse
repos
and any alternative to the call money market as may be directed by the RBI). The
liquidity of
the schemes investments is inherently restricted by trading volumes and settlement
periods.
In the event of an inordinately large number of redemption requests, or of a
restructuring of
the schemes investment portfolio, these periods may become significant.
Magnum Income Plus Fund
(a) The Trustees, AMC, Fund, their directors or their employees shall not be liable for
any tax
consequences that may arise in the event that the scheme is wound up for the
reasons and
in the manner provided under the Scheme Information Document & Statement of
Additional
Information.
(b) Redemption by the Magnum holder due to change in the fundamental attributes
of the
Scheme or due to any other reasons may entail tax consequences. The Trustees,
AMC,
Fund their directors or their employees shall not be liable for any tax consequences
that may
arise
(c) Magnum Income Plus Fund will be investing in debt instruments (including
Securitized debt),
Government Securities and money market instruments (such as term/notice money
market,
repos, reverse repos and any alternative to the call money market as may be
directed by the
RBI) as also equity & equity related instruments. The liquidity of the schemes
investments is
inherently restricted by trading volumes and settlement In view of the same; the
Trustees
have the right in their sole discretion to limit redemptions (including suspending
redemptions)
under certain circumstances periods. In the event of an inordinately large number of
redemption requests, or of a restructuring of the schemes investment portfolio, these
periods
may become significant.
Magnum Gilt Fund
a. Magnum Gilt Fund is prone to interest rate risks like any other debt instruments.
Changes in
interest rates will affect the schemes Net Asset Value as the prices of securities
generally
increase as interest rates decline and generally decrease as interest rates rise.
b. Magnum Gilt Fund will be investing in Government Securities only with the
exception of
investments in call money market, term/notice money market, repos, reverse repos
and any
alternative to the call money market as may be directed by the RBI.
c. The Mutual Fund is not assuring any monthly or quarterly dividend nor is it
assuring that it will
make monthly or quarterly dividend distributions. All dividend distributions are
subject to the
investment performance of the scheme.
Magnum Index Fund
A. An investor in an index fund is taking a view on the movement of the stock market
in general,
and particularly of the stocks that constitute the index. Performance of the S&P CNX
Nifty
Index will have a direct bearing on the performance of the scheme. The scheme
does not
seek to protect the value of investment from a fall in the S&P CNX Nifty Index or its
constituent stocks. Hence the investor is automatically assuming the risk that if the
index
falls, his investment is likely to depreciate to that extent. The view taken by the
investors on
the movements of the stock market and the Nifty is entirely their own and the AMC is
not
responsible for any loss arising out of the investors decision to invest or repurchase
based
on their view of the market.
B. The portfolio of the fund may underperform to the extent of the impact cost of any
transaction
by the fund in individual stocks. Other transaction costs and operating costs may
also cause
the fund to underperform.
C. Any delay in the receipt of sale proceeds due to the settlement cycles of the stock
exchanges, or delay in receipt of dividends from corporates can result in delay in
reinvestment of these funds, causing some amount of underperformance. Any delay
in
receipt of information by the fund manager regarding the change in the composition
of the
index or corporate actions (dividends, fresh issues of capital, mergers, buyback, etc)
related
to individual securities in the index may also result in underperformance.
D. The performance of the scheme may also be impacted by the Tracking Error of
the scheme
vis--vis the S&P CNX Nifty Index. The Tracking Error may arise due to the
expenses that
the scheme will incur on an ongoing basis, transaction costs involved in buying and
selling of
index shares, impact cost that may arise due to selling of stocks of the scheme at a
loss to
meet redemption requirements or on account of holding cash. The Tracking Error
that may
arise in this scheme is estimated to be in the range of 0.5% to 1.00% on an
annualised basis.
Magnum Monthly Income Plan (Monthly Income is not assured and is subject to
availability of
distributable surplus)
A. Magnum Monthly Income Plan will be investing in debt instruments (including
securitized
debt), Government Securities and money market instruments (such as term/notice
money
market, repos, reverse repos and any alternative to the call money market as may be
directed by the RBI) as also equity & equity related instruments. The liquidity of the
schemes
investments is inherently restricted by trading volumes and settlement periods. In the
event of
an inordinately large number of redemption requests, or of a restructuring of the
schemes
investment portfolio, these periods may become significant.
B. The Mutual Fund is not assuring that it will make monthly or quarterly or annual
dividend
distributions. All dividend distributions are subject to the availability of distributable
surplus.
Fund for redemption may become significant. Please see para Right to Limit
Redemptions
in the Scheme Information Document.
D. AMCs perception: Such situations may be extremely rare and temporary in
nature. Although
the debt market in India is not very liquid, there is always demand for debt
instruments having
a high rating & issued by good companies, at appropriate yields. At times, the fund
may
choose to hold such instruments till maturity and meet redemption needs through
temporary
borrowing within permissible limits. The fund will keep a sufficient amount of the
funds in
cash, call money and liquid money market instruments to take care of the normal
redemption
needs.
Magnum NRI Investment Fund
Magnum NRI Investment Fund will be investing in debt instruments (including
Securitized debt
and International securities), Government Securities and money market instruments
(such as
repos, reverse repos and any alternative to the call money market as may be
directed by the RBI)
as also equity & equity related instruments.
Magnum Multiplier Plus Scheme '93
Magnum Multiplier Plus Scheme '93 will be investing in equity & equity related
instruments,
derivatives as also debt instruments (including securitized debt), Government
Securities and
money market instruments (such as repos, reverse repos and any alternative to the
call money
market as may be directed by the RBI).
Magnum Balanced Fund
Magnum Balanced Fund will be investing in equity & equity related instruments as
also debt
instruments (including securitized debt), Government Securities and money market
instruments
(such as alternate to call money market, term/notice money market, repos, reverse
repos and any
alternative to the call money market as may be directed by the RBI).
Magnum Equity Fund
Magnum Equity Fund will be investing in primarily in equity & equity related
instruments
derivatives as also debt instruments (including securitized debt), Government
Securities and
money market instruments (such repos, reverse repos and any alternative to the call
money
market as may be directed by the RBI) and derivative instruments.
Magnum Global Fund
Magnum Global Fund will be investing in equity & equity related instruments,
derivatives as also
debt instruments (including securitized debt), money market instruments (such as
call repos,
reverse repos and any alternative to the call money market as may be directed by
the RBI)
liquidity of the schemes investments is inherently restricted by trading volumes and
settlement
periods. In the event of an inordinately large number of redemption requests, or of a
restructuring
of the schemes investment portfolio, these periods may become significant. In view
of the same,
the Trustees have the right in their sole discretion to limit redemptions (including
suspending
redemptions) under certain circumstances.


INVESTORS PROFILE:
An investor normally prioritizes his investment needs before undertaking an
investment. So different goals will be allocated to different proportions of the
total disposable amount. Investments for specific goals normally find their
way into the debt market as risk reduction is of prime importance, this is the
area for the risk-averse investors and here, SBI SBI Mutual Funds are
generally the best option. One can avail of the benefits of better returns with
added benefits of anytime liquidity by investing in open-ended debt funds at
lower risk, this risk of default by any company that one has chosen to invest
in, can be minimized by investing in SBI SBI Mutual Funds as the fund
managers analyze the companies financials more minutely than an individual
can do as they have the expertise to do so.

Moving up the risk spectrum, there are people who would like to take some
risk and invest in equity funds/capital market. However, since their appetite
for risk is also limited, they would rather have some exposure to debt as well.
For these investors, balanced funds provide an easy route of investment, armed
with expertise of investment techniques, they can invest in equity as well as
good quality debt thereby reducing risks and providing the investor with better
returns than he could otherwise manage. Since they can reshuffle their
portfolio as per market conditions, they are likely to generate moderate returns
even in pessimistic market conditions.

Next comes the risk takers, risk takers by their nature, would not be averse to
investing in high-risk avenues. Capital markets find their fancy more often
than not, because they have historically generated better returns than any other
avenue, provided, the money was judiciously invested. Though the risk
associated is generally on the higher side of the spectrum, the return-potential
compensates for the risk attached.













MUTUAL EXPECTATIONS AND BENEFITS
Everyone expects the New year to usher an era of joy and prosperity and
certainly looks forward to a windfall in terms of good things to come. Investor
is no exception to this. But before one rushes to celebrate with new investments,
it would be appropriate to take a look at how Y2K treated SBI SBI Mutual
Funds (MFs) - the investment vehicle of the small investor.
A happy-go-lucky-man turned investor would have nothing to write home
about, had he invested in the Year 2000 and stayed invested throughout the
year. Positive returns seemed like a state of utopia in Y2K. What a
transformation in an Industry that had witnessed almost triple digit returns in
1999 when BSE Sensex had generated returns of about 65 percent.
What was common to MFs in Y2K was the presence of technology, media &
telecom sector scrips in portfolios of most funds, especially equity growth
funds. Birla Advantage Fund with and exposure of 67%, Alliance to the tune of
71% are just to name a few. While the bull phases did not raise any questions
about the portfolio compositions, the bear phases certainly did. NAVs of most
of these funds plummeted raising questions on the extent of portfolio
diversification.
When the bull phase came to an end and when most of the funds stood stripped
with the downslide of most of the TMT stocks, most fund managers moved to
quality portfolio levels and reduced their IT exposure to reasonable levels. Most
equity diversified funds, today, maintain IT exposure at 20% to 37% while
simultaneously picking up both old and new economy stocks. But fund
managers still are willing to bet on TMT stocks despite the tumultuous
experience they have had in Y2K. While accepting the possibility of a
downward revision of their growth rate, they foresee no indications of a
significant slowdown from at least India based companies. They concur that the
fundamentals of IT sector are strong with future growth, however, being at a
modest pace. They are now of the view that a mixture of old and new economy
scrips would form an ideal portfolio.
While the crash in IT share prices has resulted in a re-balancing of portfolios,
action on the old economy front would further narrow the gap between the so
called click and mortar and brick and mortar companies-bring with it a
greater diversification in MF portfolios.
MF Industry in India, like any other Industry, has had its nascent stage and is
still trying to grapple with several inconsistencies. The Industry is now
approaching a stage where a cross section of investing community has begun to
comprehend that MFs provide and ideal investment vehicle to meet their varied
investment objectives in the long run with adequate emphasis on portfolio
diversification. All in all, MFs have had their share of lessons in Y2K and are
waiting for newer horizons in Y2K+1 with abated breath.











TYPES OF SBI SBI MUTUAL FUNDS:
1. OPEN-ENDED SBI SBI MUTUAL FUNDS:-
The holders of the shares in the Fund can resell them to the issuing SBI SBI
Mutual Fund Company at the time. They receive in turn the net assets value
(NAV) of the shares at the time of re-sale. Such SBI SBI Mutual Fund
Companies place their funds in the secondary securities market. They do not
participate in new issue market as do pension funds or life insurance
companies. Thus they influence market price of corporate securities. Open-end
investment companies can sell an unlimited number of Shares and thus keep
going larger. The open-end SBI SBI Mutual Fund Company Buys or sells their
shares. These companies sell new shares NAV plus a Loading or management
fees and redeem shares at NAV. In other words, the target amount and the
period both are indefinite in such funds

2. CLOSED-ENDED SBI MUTUAL FUNDS:-
A closedend Fund is open for sale to investors for a specific period, after
which further sales are closed. Any further transaction for buying the units or
repurchasing them, Happen in the secondary markets, where closed end Funds
are listed. Therefore new investors buy from the existing investors, and
existing investors can liquidate their units by selling them to other willing
buyers. In a closed end Funds, thus the pool of Funds can technically be kept
constant. The asset management company (AMC) however, can buy out the
units from the investors, in the secondary markets, thus reducing the amount of
funds held by outside investors. The price at which units can be sold or
redeemed Depends on the market prices, which are fundamentally linked to
the NAV. Investors in closed end Funds receive either certificates or
Depository receipts, for their holdings in a closed end SBI SBI Mutual Fund.

ORGANISATION AND MANAGEMENT OF SBI MUTUAL FUNDS:-
In India SBI SBI Mutual Fund usually formed as trusts, three parties are
generally involved viz.
Settler of the trust or the sponsoring organization.
The trust formed under the Indian trust act, 1982 or the trust company
registered under the Indian companies act, 1956
Fund managers or The merchant-banking unit
Custodians.


SBI MUTUAL FUNDS TRUST:-
SBI Mutual Fund trust is created by the sponsors under the Indian trust act,
1982
Which is the main body in the creation of SBI SBI Mutual Fund Trust?
The main functions of SBI SBI Mutual Fund trust are as follows:
Planning and formulating SBI SBI Mutual Funds schemes.
Seeking SEBIs approval and authorization to these schemes.
Marketing the schemes for public subscription.
Seeking RBI approval in case NRIs subscription to SBI SBI Mutual
Fund is Invited
Attending to trusteeship function. This function as per guidelines can be
assigned to separately established trust companies too. Trustees are
required to submit a consolidated report six monthly to SEBI to ensure
that the guidelines are fully being complied with trusted are also
required to submit an annual report to the investors in the fund.
FUND MANAGERS (OR) THE ASSES MANAGEMENT COMPANY
(AMC)
AMC has to discharge mainly three functions as under:
I. Taking investment decisions and making investments of the funds
through market dealer/brokers in the secondary market securities or
directly in the primary capital market or money market instruments

II. Realize fund position by taking account of all receivables and
realizations, moving corporate actions involving declaration of
dividends,etc to compensate investors for their investments in units; and

III. Maintaining proper accounting and information for pricing the units and
arriving at net asset value (NAV), the information about the listed
schemes and the transactions of units in the secondary market. AMC has
to feed back the trustees about its fund management operations and has
to maintain a perfect information system.
CUSTODIANS OF SBI MUTUAL FUNDS:-
SBI Mutual Funds run by the subsidiaries of the nationalized banks had
their respective sponsor banks as custodians like canara bank, SBI, PNB,
etc. Foreign banks with higher degree of automation in handling the
securities have assumed the role of custodians for SBI SBI Mutual Funds.
With the establishment of stock Holding Corporation of India the work of
custodian for SBI SBI Mutual Funds is now being handled by it for
various SBI SBI Mutual Funds. Besides, industrial investment trust
company acts as sub-custodian for stock Holding Corporation of India for
domestic schemes of UTI, BOI MF, LIC MF, etc

Fee structure:-
Custodian charges range between 0.15% to 0.20% on the net value of the
customers holding for custodian services space is one important factor
which has fixed cost element.



RESPONSIBILITY OF CUSTODIANS:-
Receipt and delivery of securities
Holding of securities.
Collecting income
Holding and processing cost
Corporate actions etc

FUNCTIONS OF CUSTOMERS
Safe custody
Trade settlement
Corporate action
Transfer agents

RATE OF RETURN ON SBI SBI MUTUAL FUNDS:-
An investor in SBI SBI Mutual Fund earns return from two sources:
Income from dividend paid by the SBI SBI Mutual Fund.
Capital gains arising out of selling the units at a price higher than the
acquisition price

Formation and regulations:
1. SBI Mutual Funds are to be established in the form of trusts under the
Indian trusts act and are to be operated by separate asset management
companies (AMC s)
2. AMCs shall have a minimum Net worth of Rs. 5 crores;
3. AMCs and Trustees of SBI SBI Mutual Funds are to be two separate
legal entities and that an AMC or its affiliate cannot act as a manager in
any other fund;
4. SBI Mutual Funds dealing exclusively with money market instruments
are to be regulated by the Reserve Bank Of India
5. SBI Mutual Fund dealing primarily in the capital market and also partly
money market instruments are to be regulated by the Securities
Exchange Board Of India (SEBI)
6. All schemes floated by SBI Mutual Funds are to be registered with SEBI

Schemes:-
1. SBI SBI Mutual Funds are allowed to start and operate both closed-end
and open-end schemes;
2. Each closed-end schemes must have a Minimum corpus (pooling up)
of Rs 20 crore;
3. Each open-end scheme must have a Minimum corpus of Rs 50 crore
4. In the case of a Closed End scheme if the Minimum amount of Rs
20 crore or 60% of the target amount, which ever is higher is not
raised then the entire subscription has to be refunded to the investors;
5. In the case of an Open-Ended schemes, if the Minimum amount of Rs
50 crore or 60 percent of the targeted amount, which ever is higher, is
no raised then the entire subscription has to be refunded to the
investors.

Investment norms:-
1. No SBI Mutual Fund, under all its schemes can own more than five
percent of any companys paid up capital carrying voting rights;
2. No SBI Mutual Fund, under all its schemes taken together can invest
more than 10 percent of its funds in shares or debentures or other
instruments of any single company;
3. No SBI Mutual Fund, under all its schemes taken together can invest
more than 15 percent of its fund in the shares and debentures of any
specific industry, except those schemes which are specifically floated
for investment in one or more specified industries in respect to which a
declaration has been made in the offer letter.
4. No individual scheme of SBI Mutual Funds can invest more than five
percent of its corpus in any one companys share;
5. SBI Mutual Funds can invest only in transferable securities either in the
money or in the capital market. Privately placed debentures, securitized
debt, and other unquoted debt, and other unquoted debt instruments
holding cannot exceed 10 percent in the case of growth funds and 40
percent in the case of income funds.


Distribution:
SBI Mutual Funds are required to distribute at least 90 percent of their profits
annually in any given year. Besides these, there are guidelines governing the
operations of SBI Mutual Funds in dealing with shares and also seeking to
ensure greater investor protection through detailed disclosure and reporting by
the SBI Mutual Funds. SEBI has also been granted with powers to over see the
constitution as well as the operations of SBI Mutual Funds, including a
common advertising code. Besides, SEBI can impose penalties on SBI Mutual
Funds after due investigation for their failure to comply with the guidelines.

SBI MUTUAL FUND SCHEME TYPES:

Equity Diversified Schemes
These schemes mainly invest in equity. They seek to achieve long-term capital
appreciation by responding to the dynamically changing Indian economy by
moving across sectors such as Lifestyle, Pharma, Cyclical, Technology, etc.



Sector Schemes
These schemes focus on particular sector as IT, Banking, etc. They seek to
generate long-term capital appreciation by investing in equity and related
securities of companies in that particular sector.

Index Schemes
These schemes aim to provide returns that closely correspond to the return of a
particular stock market index such as BSE Sensex, NSE Nifty, etc. Such
schemes invest in all the stocks comprising the index in approximately the
same weightage as they are given in that index.



Exchange Traded Funds (ETFs)
ETFs invest in stocks underlying a particular stock index like NSE Nifty or
BSE Sensex. They are similar to an index fund with one crucial difference.
ETFs are listed and traded on a stock exchange. In contrast, an index fund is
bought and sold by the fund and its distributors.

Equity Tax Saving Schemes
These work on similar lines as diversified equity funds and seek to achieve
long-term capital appreciation by investing in the entire universe of stocks.
The only difference between these funds and equity-diversified funds is that
they demand a lock-in of 3 years to gain tax benefits.

Dynamic Funds
These schemes alter their exposure to different asset classes based on the
market scenario. Such funds typically try to book profits when the markets are
overvalued and remain fully invested in equities when the markets are
undervalued. This is suitable for investors who find it difficult to decide when
to quit from equity.

Balanced Schemes
These schemes seek to achieve long-term capital appreciation with stability of
investment and current income from a balanced portfolio of high quality
equity and fixed-income securities.

Medium-Term Debt Schemes
These schemes have a portfolio of debt and money market instruments where
the average maturity of the underlying portfolio is in the range of five to seven
years.

Short-Term Debt Schemes
These schemes have a portfolio of debt and money market instruments where
the average maturity of the underlying portfolio is in the range of one to two
years.

Money Market Debt Schemes
These schemes invest in debt securities of a short-term nature, which generally
means securities of less than one-year maturity. The typical short-term
interest-bearing instruments these funds invest in Treasury Bills, Certificates
of Deposit, Commercial Paper and Inter-Bank Call Money Market.

Medium-Term Gilt Schemes
These schemes invest in government securities. The average maturity of the
securities in the scheme is over three years.

Short-Term Gilt Schemes
These schemes invest in government securities. The securities invested in are
of short to medium term maturities.

Floating Rate Funds
They invest in debt securities with floating interest rates, which are generally
linked to some benchmark rate like MIBOR. Floating rate funds have a high
relevance when interest rates are on the rise helping investors to ride the
interest rate rise.

Monthly Income Plans (MIPS)
These are basically debt schemes, which make marginal investments in the
range of 10-25% in equity to boost the schemes returns. MIP schemes are
ideal for investors who seek slightly higher return that pure long-term debt
schemes at marginally higher risk.


DIFFERENT MODES OF RECEIVING THE INCOME EARNED
FROM SBI MUTUAL FUND INVESTMENTS
SBI SBI Mutual Funds offer three methods of receiving income:


Growth Plan
In this plan, dividend is neither declared nor paid out to the investor but is
built into the value of the NAV. In other words, the NAV increases over time
due to such incomes and the investor realizes only the capital appreciation on
redemption of his investment.

Income Plan
In this plan, dividends are paid-out to the investor. In other words, the NAV
only reflects the capital appreciation or depreciation in market price of the
underlying portfolio.

Dividend Re-investment Plan
In this case, dividend is declared but not paid out to the investor, instead, it is
reinvested back into the scheme at the then prevailing NAV. In other words,
the investor is given additional units and not cash as dividend.
SBI MUTUAL FUND INVESTING STRATEGIES:
1. Systematic Investment Plans (SIPs)
These are best suited for young people who have started their careers and need
to build their wealth. SIPs entail an investor to invest a fixed sum of money at
regular intervals in the SBI SBI Mutual Fund scheme the investor has chosen,
an investor opting for SIP in xyz SBI SBI Mutual Fund scheme will need to
invest a certain sum on money every month/quarter/half-year in the scheme.

2. Systematic Withdrawal Plans (SWPs)
These plans are best suited for people nearing retirement. In these plans, an
investor invests in a SBI SBI Mutual Fund scheme and is allowed to withdraw
a fixed sum of money at regular intervals to take care of his expenses

3. Systematic Transfer Plans (STPs)
They allow the investor to transfer on a periodic basis a specified amount from
one scheme to another within the same fund family meaning two schemes
belonging to the same SBI SBI Mutual Fund. A transfer will be treated as
redemption of units from the scheme from which the transfer is made. Such
redemption or investment will be at the applicable NAV. This service allows
the investor to manage his investments actively to achieve his objectives.
Many funds do not even charge any transaction fees for his service an added
advantage for the active investor.












ADVANTAGES OF INVESTING TRHOURGH SBI MUTUAL FUNDS:
There are several reasons that can be attributed to the growing popularity and
suitability of SBI SBI Mutual Funds as an investment vehicle especially for
retail investors:
ASSET ALLOCATION
SBI SBI Mutual Funds offer the investors a valuable tool Asset
Allocation. This is explained by an example.
An investor investing Rs.1 lakh in a SBI SBI Mutual Fund scheme, which has
collected Rs.100 crores and invested the money in various investment options,
will have Rs.1 lakh spread over a number of investment options as
demonstrated below:
Investment Type Percentage of
Allocation (% of
total portfolio)
Total portfolio
of the SBI SBI
Mutual Fund
scheme (Rs. In
crores)
Investors portfolio
allocation (Rs.)
EQUITY: 57% 57 57,000
State Bank of India 15% 15 15,000
Infosys Technologies 12% 12 12,000
ABB 10% 10 10,000
Reliance Industries 9% 9 9,000
MICO 7% 7 7,000
Tata Power 4% 4 4,000
DEBT: 43% 43 43,000
Govt. Securities 20% 20 20,000
Company
Debentures
10% 10 10,000
Institution Bonds 9% 9 9,000
Money Market 4% 4 4,000
Total 100% 100 1,00,000

Thus Asset Allocation is allocating your investments in to different
investment options depending on your risk profile and return expectations.

DIVERSIFICATION
Diversification is spreading your investment amount over a larger number
of investments in order to reduce risk. For instance, if you have Rs.10,000
to invest in Information Technology (IT) stocks, this amount will only buy
you a handful of stocks of perhaps one or two companies. A fall in the
market price of any of these company stocks will significantly erode your
investment amount instead it makes sense to invest in an IT sector SBI SBI
Mutual Fund scheme so that your Rs.10,000 is spread across a larger
number of stocks thereby reducing your risk.

PROFESSIONALS AT WORK
Few investors have the time or expertise to manage their personal
investments every day, to efficiently reinvest interest or dividend income,
or to investigate the thousands of securities available in the financial
markets. Fund managers are professionals and experienced in tracking the
finance markets, having access to extensive research and market
information, which enables them to decide which securities to buy and sell
for the fund. For an individual investor like you, this professionalism is
built in when you invest in the SBI SBI Mutual Fund.

REDUCTION OF TRANSACTION COSTS
While investing directly in securities, all the costs of investing such as
brokerage, custodial services etc. Borne by you are at the highest rates due
to small transaction sizes. However, when going through a fund, you have
the benefit of economies of scale; the fund pays lesser costs because of
larger volumes, a benefit passed on to its investors like you.

EASY ACCESS TO YOUR MONEY
This is one of the most important benefits of a SBI SBI Mutual Fund. Often
you hold shares or bonds that you cannot directly, easily and quickly sell.
In such situations, it could take several days or even longer before you are
able to liquidate his SBI SBI Mutual Fund investment by selling the units
to the fund itself and receive his money within 3 working days.

TRANSPARENCY
The investor gets regular information on the value of his investment in
addition to disclosure on the specific investments made by the fund, the
proportion invested in each class of assets and the fund managers
investment strategy and outlook.

SAVING TAXES
Tax saving schemes of SBI SBI Mutual Funds offer investor a tax rebate
under section 88 of the Income Tax Act. Under this section, an investor can
invest up to Rs.10,000 per Financial year in a tax saving scheme. The rate
of rebate under this section depends on the investors total income.


INVESTING IN STOCK MARKET INDEX
Index schemes of SBI SBI Mutual Funds give you the opportunity of
investing in scrips that make up a particular index in the same proportion of
weightage that these scrips have in the index. Thus, the return on your
investment mirrors the movement of the index.

INVESTING IN GOVERNMENT SECURITIES
Gilt and Money Market Schemes of SBI SBI Mutual Funds also give you
the opportunity to invest in Government Securities and Money Markets
(including the inter banking call money market)

WELL-REGULATED INDUSTRY
All SBI SBI Mutual Funds are registered with SEBI and they function
within the provisions of strict regulations designed to protect the interests
of investors. The operations of SBI SBI Mutual Funds are regularly
monitored by SEBI.


CONVENIENCE AND FLEXIBILITY
SBI SBI Mutual Funds offer their investors a number of facilities such as
inter-fund transfers, online checking of holding status etc, which direct
investments dont offer.

RISKS ASSOCIATED WITH SBI SBI MUTUAL FUNDS:-
Investing in SBI SBI Mutual Funds, as with any security, does not come
without risk. One of the most basic economic principles is that risk and reward
are directly correlated. In other words, the greater the potential risk the greater
the potential return. The types of risk commonly associated with SBI SBI
Mutual Funds are:

1) MARKET RISK
Market risk relates to the market value of a security in the future. Market
prices fluctuate and are susceptible to economic and financial trends, supply
and demand, and many other factors that cannot be precisely predicted or
controlled.

2) POLITICAL RISK
Changes in the tax laws, trade regulations, administered prices, etc are some of
the many political factors that create market risk. Although collectively, as
citizens, we have indirect control through the power of our vote individually,
as investors, we have virtually no control.

3) INFLATION RISK
Interest rate risk relates to future changes in interest rates. For instance, if an
investor invests in a long-term debt SBI SBI Mutual Fund scheme and interest
rates increase, the NAV of the scheme will fall because the scheme will be end
up holding debt offering lower interest rates.

4) BUSINESS RISK
Business risk is the uncertainty concerning the future existence, stability, and
profitability of the issuer of the security. Business risk is inherent in all
business ventures. The future financial stability of a company cannot be
predicted or guaranteed, nor can the price of its securities. Adverse changes in
business circumstances will reduce the market price of the companys equity
resulting in proportionate fall in the NAV of the SBI SBI Mutual Fund
scheme, which has invested in the equity of such a company.

5) ECONOMIC RISK
Economic risk involves uncertainty in the economy, which, in turn, can have
an adverse effect on a companys business. For instance, if monsoons fail in a
year, equity stocks of agriculture-based companies will fall and NAVs of SBI
SBI Mutual Funds, which have invested in such stocks, will fall
proportionately.


PERFORMANCE MEASURES OF SBI MUTUAL FUNDS:
SBI SBI Mutual Fund industry today, with about 30 players and more than six
hundred schemes, is one of the most preferred investment avenues in India.
However, with a plethora of schemes to choose from, the retail investor faces
problems in selecting funds. Factors such as investment strategy and
management style are qualitative, but the funds record is an important
indicator too.
Though past performance alone cannot be indicative of future performance, it
is, frankly, the only quantitative way to judge how good a fund is at present.
Therefore, there is a need to correctly assess the past performance of different
SBI SBI Mutual Funds. Worldwide, good SBI SBI Mutual Fund companies
over are known by their AMCs and this fame is directly linked to their
superior stock selection skills.

For SBI Mutual Funds to grow, AMCs must be held accountable for their
selection of stocks. In other words, there must be some performance indicator
that will reveal the quality of stock selection of various AMCs.

Return alone should not be considered as the basis of measurement of the
performance of a SBI Mutual Fund scheme, it should also include the risk
taken by the fund manager because different funds will have different levels of
risk attached to them. Risk associated with a fund, in a general, can be defined
as Variability or fluctuations in the returns generated by it. The higher the
fluctuations in the returns of a fund during a given period, higher will be the
risk associated with it. These fluctuations in the returns generated by a fund
are resultant of two guiding forces. First, general market fluctuations, which
affect all the securities, present in the market, called Market risk or Systematic
risk and second, fluctuations due to specific securities present in the portfolio
of the fund, called Unsystematic risk. The Total Risk of a given fund is sum of
these two and is measured in terms of standard deviation of returns of the
fund.

Systematic risk, on the other hand, is measured in terms of Beta, which
represents fluctuations in the NAV of the fund vis--vis market. The more
responsive the NAV of a SBI Mutual Fund is to the changes in the market;
higher will be its beta. Beta is calculated by relating the returns on a SBI
Mutual Fund with the returns in the market. While Unsystematic risk can be
diversified through investments in a number of instruments, systematic risk
cannot. By using the risk return relationship, we try to assess the competitive
strength of the SBI Mutual Funds one another in a better way. In order to
determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to
evaluate a portfolio by comparing alternative portfolios within a particular risk
class.

The most important and widely used measures of performance are:
The TreynorMeasure
The Sharpe Measure
Jenson Model
Fama Model

1) The Treynor Measure:-
Developed by Jack Treynor, this performance measure evaluates funds on the
basis of Treynor's Index.
This Index is a ratio of return generated by the fund over and above risk free
rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and
systematic risk associated with it (beta). Symbolically, it can be represented
as:

Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where,
Ri represents return on fund,
Rf is risk free rate of return, and
Bi is beta of the fund.

All risk-averse investors would like to maximize this value. While a high and
positive Treynor's Index shows a superior risk-adjusted performance of a fund,
a low and negative Treynor's Index is an indication of unfavorable
performance.
2) The Sharpe Measure :-
In this model, performance of a fund is evaluated on the basis of Sharpe Ratio,
which is a ratio of returns generated by the fund over and above risk free rate
of return and the total risk associated with it.
According to Sharpe, it is the total risk of the fund that the investors are
concerned about. So, the model evaluates funds on the basis of reward per unit
of total risk. Symbolically, it can be written as:
Sharpe Index (Si) = (Ri - Rf)/Si
Where,
Si is standard deviation of the fund,
Ri represents return on fund, and
Rf is risk free rate of return.

While a high and positive Sharpe Ratio shows a superior risk-adjusted
performance of a fund, a low and negative Sharpe Ratio is an indication of
unfavorable performance.

Comparison of Sharpe and Treynor
Sharpe and Treynor measures are similar in a way, since they both divide the
risk premium by a numerical risk measure. The total risk is appropriate when
we are evaluating the risk return relationship for well-diversified portfolios.
On the other hand, the systematic risk is the relevant measure of risk when we
are evaluating less than fully diversified portfolios or individual stocks. For a
well-diversified portfolio the total risk is equal to systematic risk. Rankings
based on total risk (Sharpe measure) and systematic risk (Treynor measure)
should be identical for a well-diversified portfolio, as the total risk is reduced
to systematic risk. Therefore, a poorly diversified fund that ranks higher on
Treynor measure, compared with another fund that is highly diversified, will
rank lower on Sharpe Measure.


3) Jenson Model:-
Jenson's model proposes another risk adjusted performance measure. This
measure was developed by Michael Jenson and is sometimes referred to as the
differential Return Method. This measure involves evaluation of the returns
that the fund has generated vs. the returns actually expected out of the fund1
given the level of its systematic risk. The surplus between the two returns is
called Alpha, which measures the performance of a fund compared with the
actual returns over the period. Required return of a fund at a given level of risk
(Bi) can be calculated as:

Ri = Rf + Bi (Rm - Rf)
Where,
Ri represents return on fund, and
Rm is average market return during the given period,
Rf is risk free rate of return, and
Bi is Beta deviation of the fund.

After calculating it, Alpha can be obtained by subtracting required
return from the actual return of the fund.

Higher alpha represents superior performance of the fund and vice versa.
Limitation of this model is that it considers only systematic risk not the entire
risk associated with the fund and an ordinary investor cannot mitigate
unsystematic risk, as his knowledge of market is primitive.

4) Fama Model:-
The Eugene Fama model is an extension of Jenson model. This model
compares the performance, measured in terms of returns, of a fund with the
required return commensurate with the total risk associated with it. The
difference between these two is taken as a measure of the performance of the
fund and is called Net Selectivity.

The Net Selectivity represents the stock selection skill of the fund manager, as
it is the excess returns over and above the return required to compensate for
the total risk taken by the fund manager. Higher value of which indicates that
fund manager has earned returns well above the return commensurate with the
level of risk taken by him.

Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)

Where,
Ri represents return on fund,
Sm is standard deviation of market returns,
Rm is average market return during the given period, and
Rf is risk free rate of return.

The Net Selectivity is then calculated by subtracting this required return
from the actual return of the fund.

Among the above performance measures, two models namely, Treynor
measure and Jenson model use Systematic risk is based on the premise that the
Unsystematic risk is diversifiable. These models are suitable for large
investors like institutional investors with high risk taking capacities as they do
not face paucity of funds and can invest in a number of options to dilute some
risks. For them, a portfolio can be spread across a number of stocks and
sectors. However, Sharpe measure and Fama model that consider the entire
risk associated with fund are suitable for small investors, as the ordinary
investor lacks the necessary skill and resources to diversify. Moreover, the
selection of the fund on the basis of superior stock selection ability of the fund
manager will also help in safeguarding the money invested to a great extent.
The investment in funds that have generated big returns at higher levels of
risks leaves the money all the more prone to risks of all kinds that may exceed
the individual investors' risk appetite.














HISTORY OF THE INDIAN SBI MUTUAL FUND INDUSTRY

The SBI SBI 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 of India. The history of SBI SBI Mutual Funds in India can be broadly
divided into four distinct phases
First Phase 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It
was set up by the Reserve Bank of India and functioned under the Regulatory
and administrative control of the Reserve Bank of India. In 1978 UTI was de-
linked from the RBI and the Industrial Development Bank of India (IDBI) took
over the regulatory and administrative control in place of RBI. The first scheme
launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700
crores of assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector SBI SBI Mutual Funds set up
by public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI SBI SBI Mutual Fund was
the first non- UTI SBI SBI Mutual Fund established in June 1987 followed by
Canbank SBI SBI Mutual Fund (Dec 87), Punjab National Bank SBI SBI
Mutual Fund (Aug 89), Indian Bank SBI SBI Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda SBI SBI Mutual Fund (Oct 92). LIC established
its SBI SBI Mutual Fund in June 1989 while GIC had set up its SBI SBI Mutual
Fund in December 1990.
At the end of 1993, the SBI SBI Mutual Fund industry had assets under
management of Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian
SBI SBI Mutual Fund industry, giving the Indian investors a wider choice of
fund families. Also, 1993 was the year in which the first SBI SBI Mutual Fund
Regulations came into being, under which all SBI SBI Mutual Funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector SBI SBI Mutual
Fund registered in July 1993.
The 1993 SEBI (SBI SBI Mutual Fund) Regulations were substituted by a more
comprehensive and revised SBI SBI Mutual Fund Regulations in 1996. The
industry now functions under the SEBI (SBI SBI Mutual Fund) Regulations
1996.
The number of SBI SBI Mutual Fund houses went on increasing, with many
foreign SBI SBI 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 SBI SBI 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 SBI SBI Mutual Funds.

Fourth Phase since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI
was bifurcated into two separate entities. One is the Specified Undertaking of
the Unit Trust of India with assets under management of Rs.29,835 crores as at
the end of January 2003, representing broadly, the assets of US 64 scheme,
assured return and certain other schemes. The Specified Undertaking of Unit
Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the SBI SBI
Mutual Fund Regulations.

OBJECTIVE


The present study has been undertaken with the object of examining, analyzing and inferring
the effect of capital market on mutual fund, which addresses the following issues:
To understand the effect of recent changes in stock market on the mutual funds.
To understand basic concepts of mutual funds
To analyze the NAVs of various mutual funds during the last few months.
To analyze the average returns of various mutual funds during the last few months.

The secondary objective of this study is to understand the role of distributors in influencing
investors decision.


SCOPE OF THE STUDY:
Subject matter is related to the investors approach towards mutual funds and ulips.
People of age between 20 to 60
People of income group between 10000 to 30000.
Area limited to Lucknow.
Demographics include names, age, qualification, occupation, marital status and
annual income.




LIMITATIONS OF STUDY

The edifice of the study entirely stands up on the pillar of information given by respondent
Limitations applicable to the questionnaire method may be applicable to this study, as
biased answers, memory access variation, in cooperative and doubtful approach.
The time for study was very short.
The secondary data available for comparative analysis is only for the period of 2008-2009
Due to various factors associated, the information provided by customer has its own bias.






















HYPOTHESIS TESTING

Null hypothesis (H
0
) =

Preference of investment of people in ULIP is
more than Mutual fund

Alternative Hypothesis (H
1
) = Preference of investment of people in
Mutual fund is more than ULIP

RESEARCH METHODOLOGY

The study of capital market and its effect on mutual funds and ULIP is an arduous task in
itself. The keyword in handling such kind of problems is research. Gathering information
from all the possible sources, whether by different articles, press releases, company circulars
or by direct interaction with the clients or face to face interviews with the head of the
department.

This project work is mainly based on Primary and Secondary data in which primary data was
collected and secondary data was available to us from the confidential office records of the
department, various magazines and newspapers published by concerned authorities. The data
was also collected from secondary sources; mainly from various internet sites related to
capital market and mutual funds and Key Information Memorandum of various fund houses.
However the information gathered was mainly from self analysis and from interaction with
the senior employees of the CMSD department as well as with the highly informed and
experienced clients.
The interpretation of data and constructions of graphs was done using Microsoft Word Graph
chart.


RESEARCH DESIGN:

Research was initiated by examining primary and secondary data to gain insight into the
problem. By analyzing primary and secondary data, the study aim is to explore the short
comings of the present system and primary data will help to validate the analysis of
secondary data besides on unrevealing the areas which calls for improvement.

SAMPLING PLAN:

Since it is not possible to study whole universe, it becomes necessary to take sample from the
universe to know about its characteristics.

SAMPLE TECHNIQUE: Convenience Sampling.

SAMPLE SIZE: 20

RESEARCH INSTRUMENT: Structured Questionnaire.







RESEARCH OBJECTIVE
i. To study increasing trend of technology related services in banking industry in India
ii. To identify and analyze the various components of the service rendered by SBI
iii. To analyze the benefit of various deposit schemesoffered by SBI and technology
related services offered by different banks on customers
Project Usefulness in Future
This project will help us to give information about various deposit schemes offered by
SBI,their benefits and also knowledge about various technology related services offered by
the bank. It helps to compare the past & present services provided by banks .


























RESEARCH METHODOLOGY

Research Introduction
The activities of market research include defining marketing opportunities and problems,
generating and evaluating marketing ideas, monitoring performance, and understanding the
marketing process. The methodology of the study included selection of sample, study/survey
of library references, collation and compilation of the primary and secondary data and
information obtained through structured questionnaires, open ended interview.
Data Collection
We have collected two types of Data
a. Primary Data through Questionnaire and interaction.primary research is done for
studying customer preference towards various schemes offered by SBI
b. Secondary Data through internet, articles, magazines, bank visit,studying project
reports etc. our report contains mainly secondary data
Research Methodology :
Research Design:
The techniques used for research is Exploratory Research.
Research Tool :
Questionnaire and customer interaction( sample size 100)
Through internet, articles, magazines etc.










DATA ANALYSIS
Q1) Education Qualification
Undergraduate 5
Graduate 84
Post graduate 11



COMMENT
Half of the respondents are graduates and have their accounts in different banks.
Undergraduate also constitute 29% of the account holders.








Q2) Marital Status
S.No
Marital Status No of Respondents
1
Married 67
2
Single 33

29%
50%
21%
Education Qualification
Graduate
Post
graduate

COMMENT
67% respondents are married and this shows saving and investment habit increases after
marriage. Single persons are also increasingly saving their earnings in banks.





















Q3) Occupation
67%
33%
Gender
Married
Single
S.No
Occupation No of Respondents
1
Profession 18
2
Service 36
3
Business 26
4
Student 20







COMMENT
It shows that service or salaried class constitute 36% of the population and availing the
advantage of a wide product range offered by different banks followed by business class and
proffesionals.










18%
36%
26%
20%
occupation
Profession
Service
Business
Student






Q4) Your annual household income.

S.No Household income
No of
Respondents
1
Less than 2 lack 35
2
Between 2 to 5 lack 54
3
Between 5 to 8 lack 11
4
More than 8 lack 0







COMMENT
It shows that between 2-5 lakh income group constitute largest segment of banks with 54% of
respondents followed by customer who belong to less than 2 lakh income group.


35%
54%
11% 0%
annual household income
<than 2 lack
Between 2 to 5
lack
Between 5 to 8
lack












Q5) You are a customer of SBI?
S.No
Existing customer No of Respondents
1
Yes 83
2
No 17






COMMENT
From the total respondents 83% were already customers of SBI and availing the facilities of a
wide product range only 17% respondents are not current customers of SBI.
83%
17%
customer of SBI
yes
no



















Q6) What is your perception about different products and services offered by SBI?
S.No
Customer perception No of Respondents
1
Lucrative 53
2
Not lucrative 29
3
No idea 18


COMMENT
Most people consider SBIs product range and services lucrative because of its wide reach
ability and creditworthiness. 29% respondents found it not lucrative because of slow
technological up gradation and entry of private banks




















53%
29%
18%
products and services offered by SBI
Lucrative
Not lucrative
No idea
Q7) Do you have taken any of these taxes saving scheme provided by SBI?
S.No
Tax saving schemes No of Respondents
1
Public provident fund 48
2
Senior citizens savings scheme 24
3 SBI Tax Savings Scheme, 2006
28


COMMENT
48% respondents among all are benefitted by SBIs public provident fund, followed by those
customers who have invested in Senior citizens savings scheme, constitiute 24% and SBI
Tax Savings Scheme, 2006 holders constitute 28%









48%
24%
28%
taxes saving scheme provided by SBI
Public provident fund
Senior citizens savings
scheme
SBI Tax Savings Scheme,
2006


Q8) Do you want to open a Savings account or Current account with SBI? (If not an
existing customer)
S.No Want to open accounts No of Respondents
1 Yes 64
2 No 22
3 Will tell later 16





COMMENT
A large number of respondents are willing to open an account in SBI in near future because
of its far reach ability and easy accessibility.







63%
21%
16%
want to open a Savings account or Current
account
Yes
No
Will tell
later








Q9) What is your main purpose to deposit money in various investment plans offered by
SBI?
















21%
19%
12%
32%
16%
main purpose to deposit money in
various investment plans
Savings
safety
liquidity
tax exemption
on demand
payment
S.No Main purpose No of Respondents
1 Savings 21
2 Safety 19
3 Liquidity 12
4 tax exemption 32
5 on demand payment 16





COMMENT
The main purpose of depositing in various bank schemes is to avail tax exemptions on their
deposits, savings for future use and safety are two other main purpose followed by on
demand payment and liquidity.







Q10) Do you have your salary account in SBI?
S.No
Having salary accounts No of Respondents
1
Yes 72
2
No 28



COMMENT
72%
28%
salary account in SBI
yes
no
Mostly people who belongs to government and public sector maintains their salary account in
SBI which increases its deposits stock.











Q11) Are you availing any of these facilities offered by SBI?
S.No Other facilities No of Respondents
1 ATMs 47
2 credit/debit card 32
3 Demat account 5
4 online banking 2


COMMENT
SBI has a largest ATM network which offers computerized transactions where customers can
utilize the services whenever and wherever there is a need

65%
24%
8%
3%
other facilities
ATMs
credit/debit
card
Demat
account
online
banking


















Q12)Do you have your accounts in any other bank, if yes then in which bank?
S.NO Current customer of bank No of Respondents
1 PNB 14
2 Bank of Baroda 9
3 Union bank 5
4 HDFC 11
5 Allahabad Bank 14
6 ICICI Bank 22
7 Indian Overseas bank 3
8 Central Bank 0
9 Bank of India 21
10 Others 1

COMMENT
SBI holds 20% deposit market in INDIA. Private players like ICICI and HDFC had emerged
two leading banks following it, Bank Of India is also a leading public sector bank.






FINDINGS
1) In recent years increase in disposable income and increased number of working women
lead to bulk deposits in SBI.

2) The main purpose of deposits is to enjoy tax exemptions and safety of their deposits.
Salaried class constitutes its largest segment.

3) ICICI, HDFC and Bank of India are the main competitors of SBI and giving it tough
competition.

14%
9%
5%
11%
14%
22%
3%
0%
21%
1%
accounts in any other bank
PNB
Bank of Baroda
Union bank
HDFC
Allahabad Bank
ICICI Bank
Indian Overseas bank
Central Bank
Bank of India
Others
4) SBI is still largest bank in INDIA due to its wide reach ability in all parts of India with its
wide range of products and services.

5) Most of the customers found its products lucrative because of attractive rates of interest on
their deposits, convenient and economical method of payment and means of transfer of fund
from one place to another

6) Customer prefer SBI bank because of its government backing and its working style

7) Reasons for high use of SBI advance product
biggest bank of India
attractive rate of returns
transparency
simple & fast processing
quick processing















CONCLUSION

From the analysis part it can be conclude that customers have a good respond towards SBI
advance products. SBI is in 1st position having large number of customers & providing good
services to them. The bank has a wide customer base, so the bank should concentrate on this
to retain these customers.

In present scenario SBI is the largest advance product issuer in India. Within a very short
period of time the achievement made by SBI is excellent, what a normal bank cannot
expect,but it is being done by SBI. It happens due to employee dedication towards the
organization, fastest growing Indian economy, & brand image.

To be the largest advance product issuer, SBI should focus on-

Launch Innovative product
Customized advance products
Better customer services
Fastest customers problem solving techniques
Customer retention
Apart from all the above, SBI believe in providing good customer services to their customers
which is a key factor for success in future








SWOT ANALYSIS
Strengths:
Brand Name: SBI Bank has earned a reputation in the market over the period of
time(Being the oldest bank in India tracing history back to 1806)

Market Leader: SBI is ranked at 380 in 2008 Fortune Global 500 list, and ranked 219
in 2008 Forbes Global 2000. With an asset base of $126 billion and its reach, it is a
regional banking behemoth.

Wide Distribution Network: Excellent penetration in the country with more than
10000 core branches and more than 5100 branches of associate banks (subsidiaries).
Diversified Portfolio: SBI Bank has all the products under its belt, which help it to
extend the relationship with existing customer.SBI Bank has umbrella of products to
offer their customers, if once customer has relationship with the bank.

Government Owned: Government owns 60% stake in SBI. This gives SBI an edge
over private banks in terms of customer security.

Low Transition Costs-SBI offers very low transition costs which attracts small
customers.
Weaknesses:
The existing hierarchical management structure of the bank, although strength in
some respects, is a barrier to change.

Though SBI cards are the 2nd largest player in the credit card industry, it has the
highest non performing assets (NPAs) in the industry, which stand out to be at 16.28
% (Dec 2007).

Modernisation: SBI lags with respect to private players in terms of modernisation of
its processes, infrastructure, centralisation, etc

Opportunities:
Merger of associate banks with SBI: Merger of all the associate banks (like SBH,
SBM, etc) into SBI will create a mega bank which streamlines operations and
unlocks value.

Planning to add 2000 branches and 3000 ATMs in 2008-2009. This will further
increase its reach.

Increasing trade and business relations and a large number of expatriate populations
offers a great opportunity to expand on foreign soil.
Threats:
Advent of MNC banks: Large numbers of MNC banks are mushrooming in the
Indian market due to the friendly policies adopted by the government. This can
increase the level of competition and prove a potential threat for the market share of
SBI bank.

Consumer expectations have increased many folds in last few years and the bank has
not been responsive enough to meet them on time.
Private banks have started venturing into the rural and semi-urban sector, which used
to be the bastion of the State Bank and other PSU banks







SUGGESTION & RECOMMENDATION

1) Customer awareness programme is required so that more people should attract towards
advance product.

2) Bank should more concern about physical verification rather than phone verification so it
will avoid fraud or cheating.

3) Advance product selling agents must not give any type of wrong informationregarding
advance product.

4)For the better service new offers would be require.

5) SBI customer care should more concern about the fastest settlement of customerproblems.

6) Agents should be trained, well educated & proper trained to convince the people
7) About different advance product
8) It is the duty of the bank to disclose all the material facts regarding advance product, like
ROI, repayment period and any types of charges, etc.
9) Special scheme should be implemented to encourage both customer and agents.

10) SBI should more focus on Retaining existing customers
11) Bank must focus on Segmentation based on customer knowledge Productoffering based
on customer demand.
12) customer should concentrate and should very precautionary while using modern
technology such as ATM, mobile banking facilty, etc





ANNEXURE
www.sbi.com
www.sbideposits.com
www.rbi.org.in
www.e-investing.in Financial Services
www.differencebetween.net/.../difference-between-rtgs-and-neft
en.wikipedia.org/wiki/CFMS - Cached
www.ecs.com.tw
en.wikipedia.org/wiki/Electronic_funds_transfer
en.wikipedia.org/wiki/Mobile_banking