WINTER PROJECT REPORT (MBA) “RISK MANAGEMENT IN DEBT FUNDS OF STATE BANK OF INDIA”

7/28/2019 WINTER PROJECT REPORT (MBA) RISK MANAGEMENT IN DEBT FUNDS OF STATE BANK OF INDIA

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WINTER PROJECT REPORT (MBA)

RISK MANAGEMENT IN DEBT FUNDS OFSTATE BANK OF INDIA

INVERTIS INSTITUTE OF MANAGEMENT STUDIES, BAREILLY

2009-2011

Submitted in partial fulfillment of the requirement for MBA Degree

Programme of Uttar Pradesh Technical University, Lucknow

Project Guide:

Mr.Nitin Pathak

Invertis university

Bareilly Presented By: Rahul Kumar Srivastava

MBA IVth sem.

0901570089

IIMS, Bareilly


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ACKNOWLEDGEMENT

There is always a sense of gratitude which one express to other for the helpful so needy

services they render during all phases of life. I would like to express my gratitude

towards all those who have been helpful to me in preparing my winter project.

First of all, I consider it a pleasant duty to express my heartfelt appreciation, gratitude

and indebtedness to Mr.Nitin Pathak, project guide for his keen interest, invaluable pain

taking & excellent guidance, patience, endurance, encouragement & thoughtful advice

throughout the project work duration.

I am also thankful to all my friends and family who gave me constant & continuous

inspiration to complete this project.

(RAHUL KUMAR SRIVASTAVA)


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PREFACE

he post liberalization era has seen significant changes in product offerings by the

mutual fund industry. Today, they have a wide variety of products and services offered

by a large number of players. Investors are wooed by fund houses and distribution

companies which have their focus on investor servicing. While the Indian customer is

thrilled by the variety, he finds it difficult to make the right choice due to similar returns

offered by the schemes.

Before investing, one should take into consideration various factor such as risk taking

ability, shortand long term financial goal and liabilities. For instance, if the goal is to

save for retirement, one should pick up high risk, high reward equity schemes.Investors should identify their needs and goals instead of following the herd.

Following global trends, most fund houses are gearing up to launch schemes specifically

for commodities, derivatives and real estate, thus increasing opportunities for the

investors. Besides investing in mutual funds, investors are advised to have a mix of

previous metal like gold and property in their investment portfolio.

Let us consider some investment options for different age groups. If you are young and

have a risktaking ability, buy aggressive equity schemes. But invest prudently in equity

funds at current sensex levels. If you buy equity scheme at high levels, ensure that some

money is invested when sensex returns to lower levels. Regular investing will take care

of market volatility and give decent returns.

Young investors can also opt for high risk and high reward sectoral schemes. Also,

investing in derivative dedicated scheme is associated with more risk; the returns from

this scheme in a

Volatile market will be relatively high. For middle Aged investor, a combination of

equity and debt instruments is advised. Middleaged investors should invest in balanced

schemes instead of buying vanilla equity schemes.

T


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Most funds have launched balanced funds and equity linked savings schemes where

investors, as per the income tax act, qualify for income tax deduction. For an investor

looking for regular income, several monthly income schemes have been launched. These

schemes have been trailing the market in the past few months, but a look at their long

term record reveals that these schemes are good investment vehicles. Before investing in

any fund, investors should priorities goals and their financial needs so that short term

swings of the market do not affect their overall returns.


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EXECUTIVE SUMMARY

At the present time of cut throat competition in every industry every

company want to top the chart and want to show as big as possible figure

of profits in its balance sheet. It is quite clear today that at present time

the growth of any organization is possible only with the help of hard

working and well focused staffs that are the backbone of any

organizations.

It was my great pleasure that I completed my summer training from

State Bank of India Mutual Fund where I got to know that in Mutual Fund

Industry the skills of the man power matters most and increasing number

of mutual fund Consultants help the organization to increase its mutual

fund of policies which in turn result in growth for the organization. So it

is quite clear that mutual fund Consultants matter most for State bank of

India Mutual Fund.

My job was to create the database for the organization so that the

number if mutual fund Consultants could be increased. My job was to

approach the individuals and aware them about mutual funds and the way

of investment. By this, I am able to understand the needs of the investor

at the time of investment. By approaching the individuals, I could

understand about the different level of risk bearing capacity. I visited

various areas of Lucknow in order to meet different types of people. I was

allotted to the branch of SBI.


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TABLE OF CONTENT

Sr. No Page No.

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55.. RRiisskkMMaannaaggeemmeenntt 3333


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Chapter-1

INTRODUCTION

INTRODUCTION

1.1 ABOUT THE PROJECT:

The postliberalization era has seen significant changes in product offerings by the

mutual fund industry. Today, they have a wide variety of products and services offered

by a large number of players. Investors are wooed by fund houses and distribution

companies which have their focus on investor servicing. While the Indian customer is

thrilled by the variety, he finds it difficult to make the right choice due to similar returns

offered by the schemes.

Before investing, one should take into consideration various factor such as risk talking

ability, shortand long term financial goal and liabilities. For instance, if the goal is to

save for retirement, one should pick up highrisk, highreward equity schemes.

Investors should identify their needs and goals instead of following the herd.

Following global trends, most fund houses are gearing up to launch schemes specifically

for commodities, derivatives and real estate, thus increasing opportunities for the

investors. Besides investing in mutual funds, investors are advised to have a mix of

previous metal like gold and property in their investment portfolio.

Let us consider some investment options for different age groups. If you are young and

have a risktaking ability, buy aggressive equity schemes. But invest prudently in equity

funds at current sensex levels. If you buy equity scheme at high levels, ensure that some

money is invested when sensex returns to lower levels. Regular investing will take care

of market volatility and give decent returns.

Young investors can also opt for highrisk and high reward sectoral schemes. Also,

investing in derivative dedicated scheme is associated with more risk; the returns from


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this scheme in a volatile market will be relatively high. For middleaged investor, a

combination of equity and debt instruments is advised. Middleaged investors should

invest in balanced schemes instead of buying vanilla equity schemes.

Most funds have launched balanced funds and equity linked savings schemes where

investors, as per the income tax act, qualify for income tax deduction. For an investor

looking for regular income, several monthly income schemes have been launched. These

schemes have been trailing the market in the past few months, but a look at their long

term record reveals that these schemes are good investment vehicles. Before investing in

any fund, investors should priorities goals and their financial needs so that short term

swings of the market do not affect their overall returns.

1.2OBJECTIVE OF THE STUDY:

The objectives of the study are as follows:

1. To find the number of schemes of mutual funds offered by the SBI-MF.2. To find the participation of the investors in the decision making process and the

degree of involvement exhibited by them while investing in mutual funds.

3. To analysis the risk level of the funds.4. To know about the investors risk bearing power at every stages of life.5. To know about the management of risk and to determine the optimum scheme for

differentdifferent age groups.

6. To ascertain the brand image of SBI mutual fund schemes among available othermutual funds.


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1.3SCOPE OF STUDY:

At the present time of cut thro competition in every industry every company want to top

the chart and want to show as big as possible figure of profits in its balance sheet. It is

quite clear today that at present time the growth of any organization is possible only with

the help of hard working and well focused staffs that are the backbone of any

organizations.

It was my great pleasure that I completed my summer training from State Bank of India

Mutual Fund where I got to know that in Mutual Fund Industry the skills of the man

power matters most and increasing number of mutual fund Consultants help the

organization to increase its mutual fund of policies which in turn result in growth for the

organization. So it is quite clear that mutual fund Consultants matter most for State bank

of India Mutual Fund.

1.4-LIMITATIONS:

This study is based on investors expectations on the bases of risk for different

different schemes. These expectations are majored on the interaction bases.

Interaction was with differentdifferent age group people. Risk level is different

and the way of managing the risk is also different because different schemes are

managed by different managers.


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Chapter-2

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY:

Since the objective of the study requires an understanding of the nature of information

collected and its usage at the time of the investment in mutual funds. For the information

on different attributes of the different schemes of SBI-MF, interact with the investors or

the potential investors from Lucknow. In the initial stage, we interacted with the present

investor in mutual funds. These lists of investors were provided by the banks. After this,

we were interacted with the potential customers of bank. Mutual funds are based on bank

transactions. So it is necessary that potential customers have bank account. Thats why

we were basically concentrating on the bank customers. For getting the information about

the requirement of the investors, I visit the differentdifferent areas of Lucknow and

interact with them.

I found that the awareness of the mutual fund is very low. My main motive was to

aware the people about the mutual fund its risk level and to learn the risk management

with the help of mutual fund staff.

The main objective of the study was management of risk. In this study, I was able to

know how much risk in differentdifferent schemes and on the point of you of fund

manager, how he or she is able to manage the risk.

DATA

Data are simply facts, or recorded measures of certain phenomena. Data are in raw

form for all. But to use the data for any organization or work, we need it make it in the

suitable format. This form at is known as information.


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Data can be in forms, one is primary data and other can be secondary data. Primary data

is that which is gathered and assembled specifically for the research project at hand.

This data is not published till now.

Secondary data or historical data are data previously collected and assembled for some

project other than the one in hand. This data can often be found inside the company, in

the library, and on the internet.

For this project, I used the secondary data, which is taken by the SBIMF. This data is

from the SBIMF fact sheet and some internet sites. For the justification of the data, I

directly meet with the investor of SBI- MF & the potential investors (Lucknow city).

METHODOLOGY:

Research is an organized inquiry designed and carried out to provide information to solve

the problem. Research is the process of systematically obtaining accurate answers to

significant pertinent questions by the use of gathering data, interpretation and work.

DATA COLLECTION:

Data is collected through the company STATE BANK OF INDIA and the internet

websites. Data collection is the most important part of any research and mainly it should

be trustable. For this purpose, I interact with the general people from the lower class and

middle class as well as the high class. By this, I am able to surely and confidently say that

collected data are trustable.

MODE OF COLLECTION:

Data collection is the collecting work of our team including four trainees from various

institutes with the help of SBI-MF staff members.


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INTERPRETATION:

Interpretation is based on the financial concepts. Interpretations are very

important part of any research and it should base on the concepts. I tried to be this

project very particular as on concept.

HYPOTHESS OF THE STUDY:

The following hypotheses are formulated for the present study:

Age is an influencing factor for the investment in the schemes of mutualfunds.

There is no relationship between the occupation of the user and categoryof investors.

The income of the investor influences the risk level and schemes of themutual fund.

Advertisement and sources of the awareness effects the decision of theinvestors.

Risk level and investors age are not fully interdependent. Investors decisions are very much effected by the investors needs.


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CHAPTER-3

ORGANIZATION PROFILE

ORGANIZATION PROFILE

ORGANIZATIONSTATE BANK OF INDIA

2.1 ABOUT SBI:

State Bank of India (SBI) is that country's largest commercial bank. The government-controlled bank--the Indian government maintains a stake of nearly 60 percent in SBI

through the central Reserve Bank of India--also operates the world's largest branch

network, with more than 13,500 branch offices throughout India, staffed by nearly

220,000 employees. SBI is also present worldwide, with seven international subsidiaries

in the United States, Canada, Nepal, Bhutan, Nigeria, Mauritius, and the United

Kingdom, and more than 50 branch offices in 30 countries. Long an arm of the Indian

government's infrastructure, agricultural, and industrial development policies, SBI has

been forced to revamp its operations since competition was introduced into the country's

commercial banking system. As part of that effort, SBI has been rolling out its own

network of automated teller machines, as well as developing anytime-anywhere banking

services through Internet and other technologies. SBI also has taken advantage of the

deregulation of the Indian banking sector to enter the banc assurance, assets management,

and securities brokering sectors. In addition, SBI has been working on reigning in its

branch network, reducing its payroll, and strengthening its loan portfolio. In 2003, SBI

reported revenue of $10.36 billion and total assets of $104.81 billion.


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2.2HISTORY OF SBI:

The State Bank of India traces its roots to the first decade of 19th century when the Bank

Of Calcutta, later renamed the Bank Of Bengal, was established on 2 June 1806. Thegovernment amalgamated Bank of Bengal and two other Presidency banks, namely, the

Bank of Bombay (incorporated on 15 April 1840 and the Bank Of Madras on 27 January

1921, and named the reorganized banking entity the Imperial Bank Of India. All ,these

Presidency banks had been incorporated as joint stock companies and were the result of

the royal charters The Imperial Bank of India continued as a joint stock company. Until

the establishment of a central bank in India the Imperial Bank and its early predecessors

served as India's central bank, at least in terms of issuing the currency. The State Bank of

India Act 1955, enacted by the Parliament Of India, authorized the Reserve Bank Of

India, which is the central banking organization of India, to acquire a controlling interest

in the Imperial Bank of India, which was renamed the State Bank of India on 30 April

1955.

2.3 ASSOCIATE BANKS:

There are seven other associate banks that fall under SBI. They all use the "State Bank

of" name followed by the regional headquarters' name. These were originally banks

belonging to princely states before the government nationalized them in1959. In tune

with the first Five Year Plan, emphasizing the development of rural India, the

government integrated these banks with the State Bank of India to expand its rural

outreach. The State Bank group refers to the seven associates and the parent bank. All the

banks use the same logo of a blue keyhole. Currently, the group is merging all the

associate banks into SBI, which will create a "mega bank", and one hopes, streamline

operations and unlock value.

State Bank Of Bikaner & Jaipur State Bank OF Hyderabad


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State bank Of Indore State Bank Of Mysore State Bank Of Patiala State Bank Of saurashtra State Bank Of Travancore

2.4 FOREIGN OFFICES:

State Bank of India is present in 32 countries, where it has 84 offices serving the

international needs of the bank's foreign customers, and in some cases conducts retail

operations. The focus of these offices is India-related business.

SBI has branches in these countries:

Australia Bahrain Germany Hong Kong Israel U.S.A. Republic Of Maldives

Bangladesh Belgium Japan Sri Lanka The Bahamas Peoples Republic OfChina

Canada Dubai France U.K. South Africa Singapore Sultanate Of Oman


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2.5 GROWTH OF SBI:

State Bank of India has often acted as guarantor to the Indian Government, most notably

during Chandra Shekhars tenure as Prime Minister of India. With more than 9400

branches and a further 4000+ associate bank branches, the SBI has extensive coverage.

Following its arch-rival ICICI Bank, State Bank of India has electronically networked

most of its metropolitan, urban and semi-urban branches under its Core Banking System

(CBS), with over 4500 branches being incorporated so far. The bank has the largest ATM

network in the country having more than 5600 ATMs The State Bank of India has had

steady growth over its history, though the Harshad Mehta scam in 1992 marred its

image. In recent years, the bank has sought to expand its overseas operations by buyingforeign banks. It is the only Indian bank to feature in the top 100 world banks in the

Fortune Global 500 rating and various other rankings. According to the Forbes 2000

listing it tops all Indian companies.

2.6 GROUP COMPANIES:

SBI Mutual funds ( A Trust )SBI Capital Market Ltd

SBI Factors And Commercial Services Ltd SBI DFHI Ltd SBI Cards And Payment Services Ltd SBI Life Insurance Co. Ltd ( Life Insurance ) SBI Funds Management Pvt. Ltd SBI Canada


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2.7 Socit Gnrale Asset Management :

SGAM has a strong global research wing and strong products in the capital guaranteed

and real estate categories.

SGAM stands for SocitGnrale Asset Management. SGAM is a French company and have its business in France. SGAM is one of the world leading fund management company managing assets of

US$ 330bn world wide.

SGAM has global markets expertise and significant strengths in Risk managementand compliance.

2.8 MUTUAL FUND INDUSTRY IN INDIA:

2.8.1 HISTORY:

The origin of mutual fund industry in India is with the introduction of the concept of

mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated

from the year 1987 when non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen dramatic improvements, both

quality wise as well as quantity wise. Before, the monopoly of the market had seen an

ending phase; the Assets under Management (AUM) was Rs.67bn. The private sector

entry to the fund family rose the AUM to Rs.470 bn in March 1993 and till April 2004, it

reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is

less than the deposits of SBI alone, constitute less than 11% of the total deposits held by

the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the

country. Large sections of Indian investors are yet to be intellectuated with the concept.

Hence, it is the prime responsibility of all mutual fund companies, to market the product

correctly abreast of selling.


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2.8.2 MUTUAL FUND IN INDIA:

Mutual Funds have been around for a long time, dating back to the early 19 th century.

The first modern American Mutual fund opened in 1924, yet was only in the 1990s that

mutual funds became mainstream investments, as the number of households owning them

nearly tripled during that decade. With recent surveys showing that over 88% of all

investors participate in mutual funds, you are probably already familiar with these

investments, or perhaps ever own same. In any case, its important that you know exactly

how these investments work and how you can use them to your advantage.

A Mutual fund represents a vehicle for collective investment. When you participate in the

scheme of a mutual fund, you become part owner of the investments held under that

scheme. Mutual funds mobilize savings from a large number of investors and invest these

funds in shares and other securities. The return obtained from the mutual funds

investments is shared among the investors, called shareholders or unit holders, in

proportion to their investment. Mutual funds employ a professional team to carry out the

investment activities on behalf of unit holders. The main feature of a mutual fund is that

it makes diversification of portfolio a possibility for the small investors who otherwise

may not be able to do so with their limited resources. These investors are also able to get

professional investment management services and are relieved in investing in securities

like book keeping and transaction.

The mutual fund is constituted as a trust under the Indian Trust Act, 1881, and registered

with SEBI. In India the following entities are involved in a mutual fund operation:

The sponsor The mutual fund The trustees The asset management company The custodian The registrars and transfer agents


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2.9 SBI-MUTUAL FUNDS

SBI Mutual Fund, one of the countrys premier fund houses, with over 20 years of richexperience in the fund management, was founded with a visionTo reach out to the

small investor and provide them with alternate investment options to help achieve their

financial goals. It is Indias largest bank sponsored mutual fund and has an enviable track

record in judicious investments and consistent wealth creation.

SBI Mutual Fund is a joint venture between The State bank Of India and Socit

Gnrale Asset Management, one of the worlds leading fund management companies.

Today, SBI Mutual Fund is among the largest AMC in the country managing assets of

over Rs.25,878 crores as on July 31st 2007 across 40 active schemes. The trust reposed by

3.8 million investors is a testimony to our fund management expertise.


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Joint agreement with SocGen unit signed - SBI MF seeks to be second biggest:

A joint venture between State Bank of India and Socit Gnrale AssetManagement.

SGAM has global markets expertise and significant strengths in Risk managementand compliance.

JV strengths include cultural similarity and clear demarcation of activities based onmutual strengths.

SBI Mutual is the first bank-sponsored fund to launch an offshore fundResurgentIndia Opportunities Fund.

Net worth of Rs.63 Crores and assets over Rs.7000 crores under management. Choice of 28 open ended schemes. Investor base of over 9 lakhs investors. 17 years of Fund Management expertise. Schemes of the Mutual fund have consistently outperformed benchmark indices and

have emerged as the preferred investment for millions of investors and HNIs.

2.10COMPOUNDING GROWTH OF SBI-MUTUAL FUND:

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

redeemed fifteen ofthem. In the process it has rewarded its investors handsomely with

consistently high returns.

A total of over 5.4 million investors have reposed their faith in the wealth generation

expertise of the Mutual Fund.

Schemes of the Mutual fund have consistently outperformed benchmark indices and have

emerged as the preferred investment for millions of investors and HNIs.

Today, the fund manages over Rs.31,794 crores of assets and has a diverse profile of

investors actively parking their investments across 36 active schemes.


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The fund serves this vast family of investors by reaching out to them through network of

over 130 points of acceptance, 28 investor service centers, 46 investor service desks and

56 district organizers.

SBI Mutual is the first bank-sponsored fund to launch an offshore fundResurgent India

Opportunities Fund. Growth through innovation and stable investment policies is the SBI

MF credo.


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[Fig. 2.1: CAPITAL STUCTURE]

State Bank of IndiaSocit Gnrale Asset Management

SBI Mutual Fund Trustee Company Pvt. Ltd

100%

SBI Funds Management Pvt. Ltd

37%63%

SBI Mutual Fund

State Bank of India


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2.11 COMPETITORS OF SBIMUTUAL FUND

SBI was allowed to dominate the Indian banking sector for more than two decades. In the

early 1990s, the Indian government kicked off a series of reforms aimed at deregulating

the banking and financial industries. SBI was now forced to brace itself for the arrival of

a new wave of competitors eager to enter the fast-growing Indian economy's commercial

banking sector. Yet years as a government-run institution had left SBI bloated--the civil-

servant status of its employees had encouraged its payroll to swell to more than 230,000.

The bureaucratic nature of the bank's management left little room for personal initiative,

nor incentive for controlling costs.

By the beginning of 2004, SBI appeared to be well on its way to meeting the challenges

offered by the deregulated Indian banking sector. In a twist, the bank had become an

aggressor into new territories, launching its own line of banc assurance products, and also

initiating securities brokering services. In the meantime, SBI continued its technology

rollout, boosting the number of networked branches to more than 4,000 at the end of

2003. SBI promised to remain a central figure in the Indian banking sector as it entered

its third century. Major competitors regarding mutual funds are given below:

COMPETITORS:

1-ABN AMRO Mutual FundABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee

(India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management

(India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian

of ABN AMRO Mutual Fund.

2- HDFC Mutual FundHDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing

Development Finance Corporation Limited and Standard Life Investments Limited.
http://finance.indiamart.com/india_business_information/abn_amro.htmlhttp://finance.indiamart.com/india_business_information/abn_amro.htmlhttp://finance.indiamart.com/india_business_information/abn_amro.htmlhttp://finance.indiamart.com/india_business_information/hdfc.htmlhttp://finance.indiamart.com/india_business_information/hdfc.htmlhttp://finance.indiamart.com/india_business_information/hdfc.htmlhttp://finance.indiamart.com/india_business_information/abn_amro.html


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3-HSBC Mutual FundHSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital

Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund

acts as the Trustee Company of HSBC Mutual Fund.

4-Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the

largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup

on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee

Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset

Management Company Limited incorporated on 22nd of June, 1993.

5-Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is

presently having more than 1,99,818 investors in its various schemes. KMAMC started

its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering

to investors with varying risk - return profiles. It was the first company to launch

dedicated gilt scheme investing only in government securities.

6-Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages

the UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTI

Asset Management Company presently manages a corpus of over Rs.20000 Crore. The

sponsors of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank , State

Bank of India, and Life Insurance Corporation of India (LIC). The schemes of UTIMutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds,

Equity Funds and Balance Funds.
http://finance.indiamart.com/india_business_information/hsbc.htmlhttp://finance.indiamart.com/india_business_information/hsbc.htmlhttp://finance.indiamart.com/india_business_information/hsbc.htmlhttp://finance.indiamart.com/india_business_information/prudential_icici.htmlhttp://finance.indiamart.com/india_business_information/prudential_icici.htmlhttp://finance.indiamart.com/india_business_information/prudential_icici.htmlhttp://finance.indiamart.com/india_business_information/hsbc.html


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7-Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The

sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is

the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which

was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of

various schemes under which units are issued to the Public with a view to contribute to

the capital market and to provide investors the opportunities to make investments in

diversified securities.

8-Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard

Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard

Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated

with SEBI on December 20,1999.

9-Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company with a

global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial

services groups in the world. Investors can buy or sell the Mutual Fund through their

financial advisor or through mail or through their website. They have Open end

Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid

schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed

end Income schemes and Open end Fund of Funds schemes to offer.

10-Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the market

in securities, investment management and credit services. Morgan Stanley Investment

Management (MISM) was established in the year 1975. It provides customized asset

management services and products to governments, corporations, pension funds and non-


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profit organizations. Its services are also extended to high net worth individuals and retail

investors. In India it is known as Morgan Stanley Investment Management Private

Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the

first close end diversified equity scheme serving the needs of Indian retail investors

focusing on a long-term capital appreciation.

11-LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It

contributed Rs.2 Crores towards the corpus of the Fund. LIC Mutual Fund was

constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882.

The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund

have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the

Investment Managers for LIC Mutual Fund.

CONCLUTION

Mutual fund is really a booming industry now a day. SBI is a major player in this field.

Concept of mutual fund is very old as it is since 1980s but till now this industry is

suffering a lot. So this needs the extra focus on this particular industry. SBI is one of the

well recognized banks in this sector. There is enough opportunity for this industry as well

as SBI bank. SBI is also having good efforts and result for the investor and from the

investment.


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CHAPTER4

MUTUAL FUND THEORICAL CONCEPT

MUTUAL FUND THEORICAL CONCEPT

HISTORY OF MUTUAL FUND:

Mutual funds are investment companies that pool money from investors at large and offer

to sell and buy back its shares on a continuous basis and use the capital thus raised toinvest in securities of different companies.

At the beginning of this millennium, mutual funds out numbered all the listed securities

in New York Stock Exchange. Mutual funds have an upper hand in terms of diversity and

liquidity at lower cost in comparison to bonds and stocks. The popularity of mutual funds

may be relatively new but not their origin which dates back to 18th century. Holland saw

the origination of mutual funds in 1774 as investment trusts before spreading to Anglo-

Saxon countries in its current form by 1868.

CONCEPT OF MUTUAL FUND:

Mutual funds can be either or both of open ended and closed ended investment

companies depending on their fund management pattern. An open-end fund offers to sell

its shares (units) continuously to investors either in retail or in bulk without a limit on the

number as opposed to a closed-end fund. Closed end funds have limited number of

shares.

Mutual funds have diversified investments spread in calculated proportions amongst

securities of various economic sectors. Mutual funds get their earnings in two ways. First

is the most organic way, which is the dividend they get on the securities they hold.

Second is by the redemption of their shares by investors will be at a discount to the

current NAVs (net asset values).


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A Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is 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 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 mutual fund: -

[Fig. 3.1: CYCLE OF MUTUAL FUND]


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ADVANTAGES:

It may not be obvious at first why we would want to purchase shares in differentsecurities though a mutual fund middle man instead of simply purchasing the securities

own. Mutual funds can offer the following benefits:-

Diversification can reduce your overall investment risk by spreading your risk acrossmany different assets. With a mutual fund you can diversify your holdings both

across companies (e.g. by buying a mutual fund that owns stock in 100 different

companies) and across asset classes (e.g. by buying a mutual fund that owns stocks,

bonds, and other securities). When some assets are falling in price, others are likely to

be rising, so diversification results in less risk than if you purchased just one or two

investments.

Choice: Mutual funds come in a wide variety of types. Some mutual funds investexclusively in a particular sector, while others might target growth opportunities in

general. There are thousands of funds, and each has its own objectives and focus. The

key is for you to find the mutual funds that most closely match your own particular

investment objectives. Liquidity is the ease with which you can convert your assets--with relatively low

depreciation in value--into cash. In the case of mutual funds, it's as easy to sell a share

of a mutual fund as it is to sell a share of stock.

Low Investment Minimums: Most mutual funds will allow you to buy into the fundwith as little $1,000 or $2,000, and some funds even allow a "no minimum" initial

investment, if you agree to make regular monthly contributions of $50 or $100.

Whatever the case may be, you do not need to be exceptionally wealthy in order to

invest in a mutual fund.

Convenience: When you own a mutual fund, you don't need to worry about trackingthe dozens of different securities in which the fund invests; rather, all you need to do

is to keep track of the fund's performance. It's also quite easy to make monthly

contributions to mutual funds and to buy and sell shares in them.


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Low Transaction Costs: Mutual funds are able to keep transaction costs -- that is,the costs associated with buying and selling securities -- at a minimum because they

benefit from reduced brokerage commissions for buying and selling large quantities

of investments at a single time. Of course, this benefit is reduced somewhat by the

fact that they are buying and selling a large number of different stocks. Annual fees of

1.0% to 1.5% of the investment amount are typical.

Regulation: Mutual funds are regulated by the government under the InvestmentCompany Act of 1940. This act requires that mutual funds register their securities

with the Securities and Exchange Commission. The act also regulates the way that

mutual funds approach new investors and the way that they conduct their internal

operations. This provides some level of safety to you, although you should be aware

that the investments are not guaranteed by anyone and that they can (and often do)

decline in value.

Risk-free:Mutual funds are relatively risk free in the way they invest and manage thefunds. The investment from the pool is well diversified across securities and shares

from various sectors. The fundamental understanding behind this is not all

corporations and sectors fail to perform at a time. And in the event of a security of a

corporation or a whole sector doing badly then the possible losses from that would bebalanced by the returns from other shares.

DIFFERENT TYPES OF MUTUAL FUNDS:

A mutual fund has several schemes in which we can invest. There are structure based

schemes distinguished by their maturity periods.

OPEN ENDED SCHEMES CLOSE ENDED SCHEMES INTERVAL SCHEMES


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OPEN ENDED SCHEMES:

These schemes have no fixed maturity period. Openended schemes are available for

subscription and redemption (purchase and sale) on an ongoing basis. The units are

bought and sold at NAV related prices. In this type of scheme, we are free to exit. There

is not locking time for the money.

CLOSE ENDED SCHEMES:

These schemes have a stipulated maturity period. Typically, we can invest in them for

between 3 to 10 years. These schemes are open for subscription only during a specified

period at the time of their launch. In case of listed schemes, we can invest at the time of

the initial issue and thereafter units of the scheme can be bought or sold on the stock

exchanges where the scheme is listed.

INTERVAL SCHEMES:

Interval schemes are a combination of openended and closeended schemes. These

schemes remain open for sale and repurchase only during a specified period.

BROAD TYPES OF MUTUAL FUNDS:

Equity Funds

Equity funds are considered to be the more risky funds as compared to other fund types,

but they also provide higher returns than other funds. It is advisable that an investor

looking to invest in an equity fund should invest for long term i.e. for 3 years or more.

There are different types of equity funds each falling into different risk bracket.

Debt / Income Funds

Funds that invest in medium to long-term debt instruments issued by private companies,

banks, financial institutions, governments and other entities belonging to various sectors

(like infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are


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low risk profile funds that seek to generate fixed current income (and not capital

appreciation) to investors. In order to ensure regular income to investors, debt (or

income) funds distribute large fraction of their surplus to investors. Although debt

securities are generally less risky than equities, they are subject to credit risk (risk of

default) by the issuer at the time of interest or principal payment. To minimize the risk of

default, debt funds usually invest in securities from issuers who are rated by credit rating

agencies and are considered to be of "Investment Grade". Debt funds that target high

returns are more risky.

Gilt Funds

Also known as Government Securities in India, Gilt Funds invest in government papers

(named dated securities) having medium to long term maturity period. Issued by the

Government of India, these investments have little credit risk (risk of default) and provide

safety of principal to the investors. However, like all debt funds, gilt funds too are

exposed to interest rate risk. Interest rates and prices of debt securities are inversely

related and any change in the interest rates results in a change in the NAV of debt/gilt

funds in an opposite direction.

Money Market / Liquid FundsMoney market / liquid funds invest in short-term (maturing within one year) interest

bearing debt instruments. These securities are highly liquid and provide safety of

investment, thus making money market / liquid funds the safest investment option when

compared with other mutual fund types. However, even money market / liquid funds are

exposed to the interest rate risk. The typical investment options for liquid funds include

Treasury Bills (issued by governments), Commercial papers (issued by companies) and

Certificates of Deposit (issued by banks).

Hybrid Funds

As the name suggests, hybrid funds are those funds whose portfolio includes a blend of

equities, debts and money market securities. Hybrid funds have an equal proportion of

debt and equity in their portfolio.


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Commodity Funds

These funds that focus on investing in different commodities (like metals, food grains,

crude oil etc.) or commodity companies or commodity futures contracts are termed as

Commodity Funds. A commodity fund that invests in a single commodity or a group of

commodities is a specialized commodity fund and a commodity fund that invests in all

available commodities is a diversified commodity fund and bears less risk than a

specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in

gold, gold futures or shares of gold mines) are common examples of commodity funds.

Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest inshares/securitized assets of housing finance companies, are known as Specialized Real

Estate Funds. The objective of these funds may be to generate regular income for

investors or capital appreciation.

Exchange Traded Funds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end and an

open-end mutual fund. Exchange Traded Funds follow stock market indices and are

traded on stock exchanges like a single stock at index linked prices. The biggest

advantage offered by these funds is that they offer diversification, flexibility of holding a

single share (tradable at index linked prices) at the same time. Recently introduced in

India, these funds are quite popular abroad.

Fund of Funds

Mutual funds that do not invest in financial or physical assets, but do invest in other

mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund ofFunds maintain a portfolio comprising of units of other mutual fund schemes, just like

conventional mutual funds maintain a portfolio comprising of equity/debt/money market

instruments or non financial assets. Fund of Funds provide investors with an added

advantage of diversifying into different mutual fund schemes with even a small amount

of investment, which further helps in diversification of risks. However, the expenses of


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Fund of Funds are quite high on account of compounding expenses of investments into

different mutual fund schemes.

[FIG. 3.2: GRAPHICAL REPRESENTATION PF RISK &TYPES OF MUTUAL FUNDS]


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RATING OF MUTUAL FUND SCHEMES:

Mutual Fund Schemes are periodically evaluated by the Independent Institutions.

CRISIL, Value Research India, and Economic Times are three such institutions whoseranking or evaluations are currently very popular.

A)-CRISIL:

Composite Performance Ranking that cover all open ended schemes that disclose their

entire portfolio composition and have NAV information for at least two years. It currently

ranks schemes in five categories viz. Equity Schemes, Debt Schemes, Gilt Schemes,

Balanced Schemes and Liquid Schemes. Its ranking is based on four criteria, viz. risk

adjusted return of the schemes NAV, diversification of the portfolio, liquidity, and asset

size. The weights assigned to these criteria vary from category to category. Within each

category, the top 10 percent are considered very good, the next 20 percent good, the next

40 percent average, the next 20 percentage below average, and the last 10 percentage

poor.

B)- VALUE RESEARCH INDIA:

Like CRISIL, Value Research India rates schemes in different categories. Each scheme

is a risk grade and a return grade and a composite measure of performance is calculated

by subtracting the risk grade from the return grade. Within each category, the top 10

percentage are considered five star, the next 22.5 percentage four star, the next 35

percentage three star, the next 22.5 percentage two star, and the last 10 percentage one

star.

C)-ECONOMIC TIMES LIPPER:

The Economic Times, powered by Lipper, evaluates mutual fund schemes using a return

risk ratio which is defined as average return dividend by standard deviation of return.

The Economic Times periodically reports the returnrisk ratio for top performing

mutual fund schemes along with a few other parameters.


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CHAPTER5

SBIDEBT MUTUAL FUNDS

SBIDEBT MUTUAL FUNDS

INTERODUCTION:

The company may raise debt in a variety of ways. It may borrow funds from financial

instruments or public either in the form of public either in the form of public deposit or

debentures for a specified period of time at a certain rate of interest. A debenture may be

issued at par at a discount or premium as compared to its face value.

Debt Funds invest only in debt instruments such as Corporate Bonds, Government

Securities and Money Market instruments either completely avoiding any investments in

the stock markets as in Income Funds or Gilt Funds or having a small exposure to

equities as in Monthly Income Plans or Children's Plan. Hence they are safer than equity

funds. At the same time the expected returns from debt funds would be lower. Such

investments are advisable for the risk-averse investor and as a part of the investment

portfolio for other investors.

Companies, like the governments, borrow money by issuing bonds called corporatebonds.

The Government of India periodically issues bonds which are called Governmentbonds. A part from the central and State Governments, a number of Government

agencies issue bonds that are guaranteed by the central government or some stateGovernment. Interest payments on these bonds are typically semiannual.


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ORGANISATION STRUCTURE OF DEBT FUNDS:

Headed by K. Ram Kumar, with over 14 years experience in Mutual Funds, with last 2

years with SBIMF manages liquid funds and floaters. Ganti Murthy with over 10 years

experience in Mutual Funds, handles Long Term Funds.Bekxy Kuriakose, with 5 years

experience all with SBIMF manages the hybrid funds. The funds management is

supported by a Research Analyst and Dealer.The fund management process is driven by

the objectives of the scheme.Decisions driven by Fund Managers view with close

monitoring by Investment Committee.

[FIG. 4.1: ORGANISATION STRUCTURE OF DEBT FUNDS]

CIO

Fund

Manager

Head of Fixed

Income

Research AnalystDealer

Fund

Manager


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INVESTMENT METHODS:

Investment can be possible in two ways:

One time investment Systematic Investment Plan

a) ONE TIME INVESTMENTOne time investment plan is also known as lum-sum deposit. In it investor has to invest

full money at the time of investment.

MINIMUM INVESTMENT LIMIT- Rs. 50,000

MAXIMUM INVESTMENT LIMIT - No limit

b) SYSTEMATIC INVESTMENT PLAN(SIP)This is for the systematic plan of saving. In this plan investor has to invest minimum

Rs. 6000 in a year. This plan is mainly for the fixed income people.

MINIMUM AMOUNT & TIME FOR S.I.P.

AMOUNT TIME

Rs. 500 For 12 months

Rs. 1000 For 6 months

Rs. 1500 For per quarter


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SIP BENEFITS: -

Rupee Cost AveragingCapitalize on periodic dips in the stock market andget more units at lower NAV thus lowering your average unit cost resulting in

higher returns.

Disciplined Investing ApproachPlan you investment, select a fund andinvest small amounts regularly to build a sizable amount. For as little as Rs 1000/-

pm a sizable amount can be build.

Compounding benefits - The amounts invested early and regularly, help notonly in creating a substantial amount of wealth but also returns compounded over

the years.

Simple and ConvenientYou do not have to take time from your scheduleto make your investments. With a completed application form, one can submit

post dated cheques or avail the Magnum Easy Pay (auto-debit) facility.

REQUIREMENTS FOR SIP: -

For starting S.I.P., we need only three things

Bank account Mutual fund scheme which offers SIP facility Rs 500 per month minimum

AND every month amount will be debited from investors bank account and units will

allocate to investor.

EXAMPLE: If invest 1,000 Rs. Per month and get Rs. 70,00,000 in 30 years with 15%

return-


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[FIG. 4.2: GRAPHICAL REPRESENTATION OF YEAR &VALUES]

Systematic Transaction Plan:

Minimum amount- Rs.1000/- month - 6 months

Rs.3000/ Quarter - 6 months

In respect of STP transactions, an investor would now be permitted to transfer any

amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or

Rs.3000 per quarter, without any restriction on maintaining the minimum balance

requirement as stipulated for the switch out scheme. The minimum period for STP will be

at least 6 months.

0

1000000

2000000

3000000

4000000

5000000

6000000

70000008000000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

No. of years

Value

ofinvestment(Rs.)

6% p.a.

10% p.a.

15% p.a.

70 00 000

100000


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SCHEMES IN DEBT FUNDS:

Some mutual fund schemes are given below:

Magnum NRI Investment Fund Magnum Income Plus Fund Magnum Income Fund Magnum Childrens Benefit Plan Magnum Monthly Income Plan Magnum Gilt Fund Magnum Monthly Income Plan Float


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CHAPTER6

RISK MANAGEMENT IN DEBT SCHEME

RISK MANAGEMENT IN DEBT SCHEMES

INVESTMENT DECISION

Investor should take the decision by seeing the two sides of the investment:

Return Risk

RETURN:

Return is the primary motivating force that drives investment. It represents the reward of

undertaking investment.

The game of investing is all about returns.

The return of an investment consists of two components:

CURRENT RETURN:Current return is measured as the periodic income in relation to the beginning price of the

investment. As: - dividend or interest, generated by the investment.

FOR EXAMPLE: -

It gives 7.0 to 10.0% due to the holding of non convertible debentures which gives

maximum interest in all debentures.

If fund give 7% average for 3 years, current return for 1 unit-

Current return = (10* 7/100) *3

= 2.10 Rs.


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CAPITAL RETURN:Capital return is reflected in the price change. As: - change in assets like equity stocks,

debt stocks etc.

CALCULATION: -

Capital return = sale of fund (NAV)-purchase of fund (NAV)

FOR EXAMPLE: -

For 3 years, NAV of 31-April- 2005 is 9.75 Rs. And on 31- April- 2008 is 10.29 Rs.

Capital return = 10.299.75

= 0.54Rs. / Unit

RISK:

Now question arises what is risk? How an investor can measure it?

Risk is called as BETA. Beta is risk factor which present in all type of investment.Risk refers to the possibility that the actual outcome of an investment will differ from its

expected outcome. Means Risk is always present but only quantity of risk matters.

CALCULATION: -

BETA is directly related to the market returns and the fund return. Market is always

unexpected and fund is always changeable.


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NOTE: Risk can be measured due to three type of risk:

A)-BUSINESS RISK: -

As an Investor of corporate securities (Equity shares or Debentures), investor is exposed

to the risk of poor business performance. This may be caused by a variety of factors like

heightened competition, emergence of new technology, inadequate supply of essential

inputs, change in government policies, and so on. It can affect the interest of debenture

holders if the ability of the firm to meet its interest and principal payment obligation is

impaired.

B)-INTEREST RISK: -

The changes in interest rate have a bearing on the welfare of investors. As the interest

rate goes up, the market price of existing fixed income security falls, and vice versa.

Fixed income securities price effect the return.

C)-MARKET RISK: -

There can be several reasons for the fluctuation; a major cause appears to be the changing

psychology of the investors.

TOTAL RISK:

All type of risks is included in measure the total risk.

Total risk = Business risk + Interest risk + Market risk

After understanding only the meaning of risk and return, an investor can not takeinvestment decision. For this, investor should understand the standards of risk and

relationship between return and risk.


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RISK AND RETURN:

Before taking any decision about investment investor should do the joint study on return

and risk.

Now investor has some question in his mind:

Q.1- What is relationship between the return and risk?

Q.2On which ratio we should do the investment?

Q.3Are risk and return only factors to effect the investment decision?

And so on .

There is no any hard and fast rule for any thing. Every decision or investment opportunity

have different look to see.

AN EXAMPLE FOR RISK RETURN:

If there is 1.00 risk and return is also 10%.

QUS. -Do you think it is good??????????

No it is not. In this condition what is the benefit? In it you may lose your 1 Rs. Or can

get 0.10 Rs.So return should as according to the level of risk.

RISK ANALYSIS:

Return and risk has relationship for decision only. For a good decision maker there

should be inverse proportion.

As: - Risk should be minimum and Return should be maximum.


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Analysis for the risk (Beta):

RISK DECISION

Less than 0.5Risk is too less. Enough opportunity toinvest.

0.5 to 0.9There is risk but not much. Investor caninvest on this level.

Equal to 1.00It is the maximum level of risk onwhich investor can invest.

More than 1.00Not good for investment.On this level investor should not invest.

OPTIONS:

These options are related to the current or periodic return. Investor has two opportunity or

option about to receive the current return. Investor has to choose one of them:

GROWTH:In growth option, investor doesnt get the return in money form. Fund managers

invest the current return directly in the same fund and allot the units for this

current return.

DIVIDEND:In dividend option, investor can get return in money form. Here investor has two

options again.

As: - Payout - Investor withdraw the current return.

Reinvestment- Investor got the return and than reinvest it.


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QUANTITAVE DATA:

1)- STANDARD DEVIATION:

Standard deviation is often by the investors to measure the risk of a stock. The basic idea

is that the standard deviation is a measure of volatility.

In finance, S.D. is applied to the annual rate of return of an investment to measure the

investments volatility. S.D. is known as historical volatility and is used by investors as a

gauge for the amount of expected volatility.

S.D. ANALYSIS:-

The more a stocks return varies from the stocks average return, the more volatile of

stock.

Lesser the Standard Deviation means lesser the Volatility.

And it is good condition for the investor.

2)- BETA ():

It is the risk factor which is always available in all type of investment. Risk is the factor

which impacts the investors decision.

ANALYSIS: -

Minimum the risk, maximum the security for the investor.


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3)- R-SQUARE:

R-SQUARE is known as variance. Variance shows how much it is affected by the market

fluctuation. The relation between the market and investment return are basically known

as variance.

R-SQUARE ANALYSIS: -

Lesser the variation lesser the risk. Variation should be less for the good investment.

4)- SHARPE RATIO:

This ratio shows the ratio between the return and risk.

Sharpe Ratio = Return / Risk

SHARPE RATIO ANALYSIS: -

If Sharpe Ratio is higher than it is good for the investors.

ABOUT THE DEBT FUNDS

(BY VALUE RESEARCH)

Magnum NRI Investment Fund:

FUND MANAGER:

Mr. Ganti N. Murthy

He has a great experience of 16 years in managing funds. In this fund he has only 1

month experience.


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OBJECTIVE:

To provide attractive returns to the magnum holders either through periodic dividends or

through capital appreciation through an actively managed portfolio of debt, equity, and

money market instruments.

INCOME GENRATE:

Income may be generated through the receipt of coupon payments, the amortization of

the discount on the debt instruments, receipt of dividends or purchase and sale of

securities.

BENCHMARK:

Crisil Composite Bond Fund Index.

NAV OF THE FUND:

NAV of April is 10.31 (D)

NAV of May is 10.29 (D)

SECTORAL BREAKDOWN:

Net Current Asset Non-convertible Debenture

Non-convertible Debenture are from Housing Development Finance Corporation

Limited.

Net Current Asset64.08%

Non-convertible debenture35.92%


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INFORMATION ABOUT NRI INVESTMENT FUND

HEADING DETAILS

Entry Load Nil

Exit Load Short Term - NilLong TermWith in 6 month- 0.5%After 6 month- Nil

Options GrowthDividend

PayoutReinvestment

Investment way One Time InvestmentS.I.P.S.T.P.

Net

cuurent

asset,

64.08,

64%

Non

convertibledeb.,

35.92,

36%

Net cuurentasset

Non convertibledeb.


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FUND PERFORMANCE: -

YTD 1m 3m 6m 1y 3y 5y S.Inc

Fund -.25 -.23 -.51 0.19 1.89 2.38 N.A. 2.29

Benchmark 1.44 0.39 0.38 2.89 7.96 5.26 N.A. 3.97

QUANTITATIVE DATA:

Standarddeviation

Beta R-Squared Sharpe Ratio

Ratio 1.20% 0.45 0.50 -4.04

ANALYSIS OF QUANTITATIVE DATA:

S.D.: -

Standard Deviation of the Fund is 1.20%

It is very less. So it is good condition.

BETA: -

There is 0.45 beta which is very less. So in this fund there is more security. It is good

condition for the investor.

RSQUARE: -

R2 is 0.50 which is good for the investor.


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SHARPE RATIO: -

Sharpe Ratio of NRI Fund is -4.04

This is negative. It means one of them (risk and return) is negative. Risk can be negative.Return is negative. So it is not beneficial for the investor.

(BY VALUE RESEARCH)

Childrens Benefit Plan

FUND MANAGER:

Mr. Ganti N. Murthy

He has a great experience of 16 years in managing funds. In this fund he has only 1

month experience.

OBJECTIVE:

To provide attractive returns to the magnum holders / unit holders by means of capital

appreciation through an actively managed portfolio of debt, equity and money market

instruments. Income generated though the receipt of coupon payments, the amortization

of the discount on the debt instruments, receipt of dividends or purchase and sale of

securities in the underlying portfolio, will be reinvested.

RATIO OF EQUITY AND DEBT:

Under this scheme, your money is invested using what is called the 80:20

principles. This means that 80% of your savings is put into debt instruments, ensuring

stability and security in a volatile market. The balance 20% can ride the crest of the


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equity market to maximize returns. The ratio can be altered to 75:25 depending on market

conditions.

BENCHMARK:

Crisil MIP Blended Index

SECTORAL BREAKDOWN:

Preference Shares0.05

Net Current Asset27.91

Certificate of Deposits9.24

Commercial Paper20.85

Non-Commercial Paper26.17

Equity Shares15.78

Preferenc

e share,

0.05, 0%

Netcurreent

asset,

27.91,

28%

certificate

of

deposits,9.24, 9%

commerci

al paper,20.85,

21%

equity

share,

15.78,

16%

non -

commerci

al paper,

26.17,

26%

Preference

share

Net curreent

asset

certificate of

deposits

commercialpaper

non -

commercial

paper


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ABOUT THE MAGNUM CHILDRENS BENEFIT:

Minimum Investment of Rs. 1500 only

In multiples of Rs. 100 - no maximum limit.

Entry Load: 1.50%

SIP /STP - Nil

Exit Load:

Within 1 year: 3%

Within 2 years: 2%

Within 3 years: 1%

SIP /STP-

As applicable to the normal transaction in the respective Debt Schemes.

NAV:

NAV of the month APRIL18.1804

NAV of the month MAY18.6053

FUND PERFORMANCE: -


Fund -1.00 2.34 1.76 0.90 9.24 10.61 10.82 10.48

Benchmark -1.01 1.68 0.62 0.87 11.23 10.28 9.79 N.A.


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QUANTITATIVE DATA:

S.D. BETA R - SQUARE SHARPERATIO

RATIO 4.72% 0.97 0.83 0.72


S.D.:

Virility of the fund is very low. It is only 4.72%. It shows that market risk does not affect

much to the returns of the funds.

It is better for the investor.

BETA:

Beta of this fund is too high. It means risk level in this fund is too much. But till level of

1.00, beta is acceptable.

It has high market risk.

RSQUARE:

R2 shows the variance. The variance of this fund is 0.83 which is more than

enough.

It is better the lower for the investor. So it is not good on the investors point of you.

SHARPE RATIO:

It is the relation between the return and risk. Ratio in this fund is 0.72

which shows that returns are less in compare to risk.


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(BY VALUE RESEARCH)5.4.3 Magnum Income Fund

FUND MANAGER:

Mr. Ganti N. Murthy

Total experience is 16 years and experience with this fund is 3 years & 10 month.

OBJECTIVE:

To provide the investors an opportunity to earn, in accordance with their

requirements, through capital gains or through regular dividends, return that would be

higher than the returns offered by comparable investment avenues through investment in

debt & money market securities.

RATIO OF EQUITY & DEBT:

This 100% debt fund, offers benefits of investment in a high

quality bond portfolio, with liquidity and tax efficiency of returns.

BENCHMARK:

Crisil Composite Bond Fund Index

SECTORAL BREAKDOWN:

Zero Coupon Bond5.25%


Securitized Debt9.07%

Certificate of Deposit3.22%

Commercial Paper13.73%

Dated Govt. Securities0.70%

Non Convertible Debenture44.96%


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NAV:

NAV of April is 10.2101 (D)

NAV of May is 10.1989 (D)

ABOUT THE FUND:

A 100% debt fund, investing in high-quality debt instruments Open ended from December 1998 Minimum investment of Rs. 2000 Entry Load : Nil Exit Load: Up Rs. 50 lacs: 0.5%; upto 6 months. Above Rs. 50 lacs : Nil SIP/STP- As applicable to the normal transaction in the respective Debt Schemes.

23.07,

23%

3.22, 3%

13.73,

14%

5.25, 5%

9.07, 9%

0.07, 0%

44.96,

46%

Net curreent

assetcertificate ofdepositscommercialpaperZero CouponBondSecuritized Debt

Dated Govt.SecuritiesNon ConvertibleDebenture


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FUND PERFORMANCE:


Fund -1.04 -.11 -2.4 0.35 4.90 4.26 3.68 7.96

Benchmark 1.44 0.39 0.38 2.89 7.96 5.26 4.50 N.A.

QUANTITATIVE DATA:


RATIO 2.29% 0.98 0.64 -1.29


S.D.:

S.D. shows the fluctuation in the returns. There is 2.29% S.D. It shows that expected

returns are not more differ to the actual return. So, it is good for investor.

BETA:

is 0.98. Which is too high? But in respect of analysis, it is acceptable till 1.00.

R - SQUARE:

R

2

of the fund is 0.64. It shows returns are affected by market and market risk. For thisfund, R2 is high. So market conditions effects the returns.

SHARPE RATIO:

Ratio of the fund is -1.29. It shows the returns are in negative. This is not good for the

investors.


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(BY VALUE RESEARCH)

Intra Cash Fund

FUND MANAGER:

Mr. Ganti N. Murthy

Total experience is 16 years and experience with this fund is 2 years & 4 months.

OBJECTIVE:

To provide the investors an opportunity to earn returns through investment in debt &

money market securities, while having the benefit of a very high degree of liquidity to

meet unexpected needs of cash.

BENCHMARK:

Crisil Liquid Fund Index

NAV:

NAV of April is 10.7024(D)

NAV of May is 10.7126(D)

SECTORAL BREAKDOWN:



Certificate of Deposits25.61%


NonConvertible Debenture16.37%


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ABOUT THE FUND:

Entry Load - Nil

Exit LoadNil

OptionGrowth & Dividend

SIPNA

Min. Inv.Rs. 10,000

FUND PERFORMANCE:


Fund 2.74 0.64 2.04 4.06 7.60 6.84 6.00 6.91

Benchmark 2.48 0.75 1.96 3.59 7.17 6.37 5.49 N.A.

3.89, 4%4.15, 4%

25.61, 26%

49.98, 50%

16.37, 16%

Net curreent

asset

Securitized Debt

certificate of

deposits

commercial

paper

Non Convertible

Debenture


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QUANTITATIVE DATA:S.D

BETAR - SQUARE SHARPE

RATIO

RATIO 0.35% 0.43 0.53 -1.05


S.D.:

Standard Deviation shows the difference between expected return and actual return. Here

it is only 0.35%. It means there is not any difference. Its good for investor.

BETA:

is 0.43, which is lesser than 0.5. It shows that risk level is very low.

R-SQUARE:

R2is 0.53. Which is not much? It shows the effect of market risk on the funds return. It

is good for investor point of you.

SHARPE-RATIO:

This ratio shows the return on risk. This is -1.05. This is negative so it is not good.


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(BY VALUE RESEARCH)SBI Premium Liquid Fund

FUND MANAGER:

Mr. Parijat Agarwal

Total experience is 12 years and experience with this fund is 10 months.

OBJECTIVE:

To provide attractive returns to the magnum holders either through periodic

dividends or through capital appreciation through an actively managed portfolio of debt

& money market instruments. Income may be generated through the receipt of coupon

payments, the amortization of the discount on the debt instruments, receipt of dividends

or purchase and sale of securities in the underlying portfolio.

BENCHMARK:

Crisil Liquid Fund Index

NAV:

NAV of April is 10.0325(D)

NAV of May is 10.0325(D)


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SECTORAL BREAKDOWN:

Zero coupon Bond1.18%


Short Term Deposit0.98


Certificate of Deposits28.98%


NonConvertible Debenture15.47%

17.37,

17%

4.68, 5%

28.98,

29%

31.33,

32%

15.47,

15%

1.18, 1%

0.98, 1%Net curreentasset

Securitized Debt

certificate ofdeposits

commercialpaper

Non ConvertibleDebenture

Zero CouponBond

Short term


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ABOUT THE FUND:

Entry LoadNil

Exit LoadNil

SIPNil

Min. Inv.Rs. For institutional planRs. 50 lacs and multiple of Rs. 1 lacs.

For super Institutional PlanRs. 5 crores and multiples of Rs. 1 lacs.

FUND PERFORMANCE:


Fund 2.80 0.67 2.09 4.18 7.78 6.88 N.A. 6.22

Benchmark 2.48 0.75 1.96 3.59 7.17 6.37 N.A. 5.65

QUANTITATIVE DATA:


RATIO 0.31% 0.34 0.44 -1.06


S.D.:

Standard Deviation is 0.31% which shows that there is inconsiderable change

between the expected return and actual return. It is very good condition for investor.


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BETA:

ofthe fund is 0.34. It shows that risk level in this particular fund is very low.

R-SQUARE:

R2 of the fund is 0.44, which is less and good for the investor because returns are not

highly effected by the market risk.

SHARPE RATIO:

Sharpe Ratio of the fund is1.06 which is not good for investor.

RISK MANAGEMENT

A)-OPTIONS:

Options are valuable since they provide protection against unwanted, uncertain

happenings. They provide alternatives to bail out from a difficult situation. Options can

be exercised on the happening of certain events. Options may be explicit or implicit.

Options have assumed considerable significance in finance. They can be written on any

asset, including shares, bonds, portfolios, stock indices, etc. They are quite useful in risk

management.

CALL OPTION:A call option is a special contract under which the option owner enjoys the right to buy

something without any obligation.

PUT OPTION:The option to sell an asset is called a put option. It is without any obligation.


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KEY WORDS:

The prices at which option can be exercised are called an exercise price or a strikeprice.

Buyer of the option is called option holder. Seller of the option is called option writer.

QUS.-What condition is beneficial for whose person?

There are three types of conditions:-

IN THE MONEY-A put or call option is said to in the money when it is advantageous for the investor to

exercise it. In the case of in the money call options, the exercise price is less than the

current value of the underlying asset, while in the money put options, the exercise price

is higher than the current value of the underlying asset.

OUT OF THE MONEY-A put or a call option is out of the money if it is not advantageous for the investor to

exercise it. In the case of the out of the money call options, exercise price is higher than

the current value of the asset, while in the case of the out of the money put options, the

exercise price is lower than the current value of the underlying asset.

AT THE MONEY-When the holder of a put or call option does not lose or gain whether or not he exercise

his option, the option is said to be at the money. In the case of at the money option

exercise price is equal to the current value of the underlying asset.


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NOTE: - Option does not come free. The option premium is the price that the holder of

an option has to pay be obtaining a call or a put option. The price will have to be paid,

generally in advance, whether or not the holder exercises his option.

EG. SHOWING THE PROFIT & LOSS IN CALL OPTION

Current price of the INFORCES is 75Rs. And it is expertise is 90Rs. In 3 months. But

due to the fear of fall in the price below to 75Rs. To reduce the risk, we can buy a 3

month call option at agreed price of Rs.70 ignoring the option premium, taxes, and cost

of Rs. 5. If the price is Rs.75, it is in the money. If it is Rs.70 you will not exercise the

option.

Share price at expiration exercise price

DONT EXERCISE CALL OPTION WHEN

Share price at expectation exercise price

OR Share price at expectation = exercise price

The value of the call option at expiration = maximum (share priceexercise price, 0)

CALL PREMIUM

The call premium is a cost to the option buyer and again to the call seller.

What is the net pay off of the buyer and the seller of a call option when the call premium

(that the buyer has to pay to the seller) is involved?

EXAMPLE:-

The share of Telco is selling for Rs.105. Radhey buys a 3 months call option at a

premium of Rs.5. The exercise price is Rs.105. what is Radheys pay off if the share price

is Rs.100 or Rs.110 or Rs. 115 at the option is exercised?


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The call optionHolders pay-off at expiration

Share price Rs. 100 Rs. 105 Rs. 110 Rs. 115

Buyers inflowSale of share - - 110 115

Buyers out flowExercise option - - 105 105

Call premium 5 5 5 5

Net pay-off -5 -5 0 5

The call option sellers pay-off at expiration

share price Rs.100 Rs.105 Rs.110 Rs.115 Rs.120

Sellers inflowExercise price - - 105 105 105

Call premium 5 5 5 5 5

Sellers outflowShare price - - 110 115 120

Net pay-off 5 5 0 -5 -10

PUT OPTION: -

A put option is a contract that gives the holder a right to sell a specified share (or any

other asset) at an agreed exercise price on or before a given maturity price.

ILLUSTRATION-

Suppose you expect price of HPCLs share to fall in the near future. So you buy a 3

month put option at an exercise price of Rs.50. current market price is Rs.48.If the price


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actually fall to Rs.35 after 3 months, you will exercise your option. You will purchase the

share for Rs. 35 and sell for Rs.50 and gain is Rs.15. But you will forget your put option

if price rise above the exercise price. A put buyer gains when the share price falls below

the exercise price; the put option is worthless for you and its value is 0.

Exercise price share price at expectation

DONT EXERCISE THE PUT OPTION

Exercise price = share price at expectation

OR Exercise price share price at expectation

Value of put option at expiration = max. {Exercise priceshare price at expiration, o}

PUT OPTION PREMIUM & PAYOFFS

An investor hopes IPO (INDIAN PATROLIUM OIL)s share will fall after 3 months.

Therefore, he purchases a put option on Wipros share with a maturity of 3 months at a

premium of Rs.5. The exercise price is Rs. 30. The current value of Wipros is Rs.28,

what could be his profit or loss of the put buyer and the put seller at the different

oppturnity. The buyers maximum loss is confirmed to Rs. 5 that is put premium. His

profit is equal to Exercise price less the sum of share price and premium. Since the share

price cannot fall below zero, he has limited profit potential. The put buyer will always

exercise his option if the exercise is more than the share price.


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The Put OptionHolders Pay-off at Expiration

Share Price Rs.18

Rs.25

Rs.28

Rs.30

Rs.40

Buyersbenefit:Exerciseoption

30 30 30 _ _

Buyers Cost:Put Premium 5 5 5 5 5

Buy Share18 25 28

_ _

Net Pay-off(profit) 7 0 -3 -5 -5

The Put Option Sellers Pay-off at Expiration

Share Price Rs.18

Rs.25

Rs.28

Rs.30

Rs.40

Sellers

benefit: PutPremium

5 5 5 5 5

Sale Share18 25 28

_ _

Sellers cost:Exerciseoption

30 30 30_ _

Net Pay-off-7 0 3 5 5

PROTECTIVE PUT & COVERED CALL

In a long position, it involves buying and holding shares to benefit from capital gains and

dividend. An investor may create a long position in shares of firm

WINTER PROJECT REPORT (MBA) “RISK MANAGEMENT IN DEBT FUNDS OF STATE BANK OF INDIA”

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