Professional Documents
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Report On
Submitted by:-
Aashima
Executive summary
A mutual fund is a fund in which an investor's money is
combined with the money of many other investors. The total
amount of money is invested by a professional manager
according to the specific mutual fund's investment objective.
Each investor holds a share of the total fund, and is entitled to a
portion of the profits of the fund (and, of course, would share in
any investment losses).
Life is full of surprises, some pleasant and some not so pleasant.
Our families and we have to live with these uncertainties.
Preparing for the uncertainties of life is what Insurance is all
about. Why waste precious moments contemplating tomorrow,
when we have to live today? Insurance is a tool, a solution for
delegating the worries concerning tomorrow onto a trustworthy
institution so that you can start living today.
My project aims to the understanding Market Study Of SBI
Mutual Fund as compare to Unit Linked Plan of Life Insurance
and how are Mutual Funds products different from Unit Linked
Life Insurance.
ACKNOWLEDGEMENT
Achieving a milestone for any person is extremely difficult.
However, there are motivations, which come across the
curvaceous path like twinkling stars in the sky and make our
task much easier. It becomes my humble and foremost duty to
acknowledge all of them.
I am deeply indebted to and express my sincere appreciation
and gratitude to Mr. TEACHER NAME, Mr. Praveen Saini
of SBI mutual fund private limited and Mr. Sunil Arora of
State Bank Of India for providing their valuable guidance and
encouragement through out the summer training for keeping my
morale up and making it possible to complete and submit this
project of mine in time. In addition to allow me to study the
mutual fund sector. They provided me in depth details and
enlightened me in the preparation of the study report.
It would be unfair on my part if do not thank my heartful
thanks to my parents and colleagues for their unstinting help
without which this work could never have been accomplished
they made me realized the importance of a team, teamwork and
also the leadership skills. I am grateful to all of them for
standing with me and supporting me in this project.
Words can not be adequately expressed my sense of gratitude
and indebtedness to IMS UNISON UNIVERSITY DEHRADUN.
Ashima
Ims unison university
PREFACE
DEDICATED
MUTUAL FUND
INTRODUCTION
Mutual Fund are a pool of savings collected from a number
of small investors, sharing a common financial goal. The
money thus collected is invested by experienced
professionals called fund managers, according to the predecided objectives in diverse types of securities like
Government sponsored Debentures and Bonds, shares of
public and private sector companies, bank guaranteed
instruments.
Thus a Mutual Fund is the most
suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed
portfolio at a relatively low cost. Anybody with an investible
surplus of as little as a few thousand rupees can invest in
Mutual Funds. Each Mutual Fund scheme has a defined
investment objective and strategy.
A Mutual Fund is the ideal investment
vehicle for todays complex and modern financial scenario.
Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have
become mature and information driven. Price changes in
these assets are driven by global events occurring in
faraway places. A typical individual is unlikely to have the
knowledge, skills, inclination and time to keep track of events,
understand their implication and speedily. An individual also
finds it difficult to keep track of ownership of his assets,
investment, brokerage dues and bank transaction etc.
A mutual fund is the answer to all
these situations.It appoints professionally qualified
experience staff that manages each of these functions on a
full time basis. The large pool of money collected in the fund
allows it to hire such staff at a very low cost to each investor.
STRUCTURE
INVESTMENT
OTHER SCHEMES
*OPEN-ENDED
*CLOSE-ENDED
*INTERVAL
*GROWTH
*INCOME
*BALANCED
*MONEY MARKET
*TAX SAVING
*SPECIAL SCHEME
*INDEX
BY STRUCTURE CLASSIFICATION: Open ended fund: An open ended fund is one that is
available for subscription all through the year. These
dont have a fixed maturity. Investors can conveniently
buy and sell units at Net Asset Value (NAV) related
prices. The key feature of open ended schemes is
liquidity.
Money is invested in the stocks of corporations.Longterm investment returns range from moderate to high,
Second Phase1987-1993(Entry of Public Sector Funds):Entry of non-UTI mutual funds. SBI Mutual Fund was the first
followed by Can bank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual
Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end
of 1993 marked Rs.47, 004 as assets under management.
Third Phase1993-2003(Entry of Private Sector Funds):With the entry of private sector funds in 1993, a new era
started in the Indian mutual fund industry, giving the Indian
investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Fund Regulations came into
being, under which all mutual funds, except UTI were to be
registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993.The 1993 SEBI (Mutual
Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in
1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.
The number of mutual fund houses
went on increasing, with many foreign mutual funds setting
up funds in India and also the industry has witnessed several
mergers and acquisitions. As at the end of January 2003,
there were 33 mutual funds with total assets of Rs. 1, 21,805
crores. The Unit Trust of India with Rs.44, 541 crores of
assets under management was way ahead of other mutual
funds.
Asset
Management
company
(Managing the
investment of fund)
Trustees
Mutual Fund
(Holding property of
fund)
(A Trust)
Custodians
(Safe custody of fund
securities etc.)
Sponsors
(Promoters)
that AMC performs all its functions of its own. It can hire
services of outside agencies as per its requirement or
perform all function of its own. The main agencies, services
of which an AMC may require are depicted in the chart.
Registrar and Transfer agents are assigned the
jobs of receiving processing the application forms of
investors, issuing units certificates, sending refund orders,
according all transfers of units, redemption of units, issuing
dividend or income warrants.
ASSEST MANAGEMENT
COMPANY
REGISTRAR
AND TRANSFER
AGENT
INVESTMENT
ADVISORS
FUND
ACCOUNTING
LEGAL
ADVISORS
LEND
MANAGERS
FUND
MANAGER
AUDITORS
FUNCTIONS OF AMC:The major strength of any AMC lies in its investment function.
Investment function is specialized function which, depending on
operational strategies of AMCs, can further be divided into
specialized categories. The investment department may be classified
in four segments. These can be
1. Fund manager
2. Research and Planning cell
3. Dealer
4. Underwriter
FUND MANAGER:-
MF Vs ULIP
Mutual funds are essentially short to medium term products.
The liquidity that these products offer is valuable for
investors. ULIPs, in contrast, are now positioned as longterm products and going ahead, there will be separate
playing fields for ULIPS and MFs, with the product
differentiation between them becoming more pronounced.
ULIPs do not seek to replace mutual funds, they offer
protection against the risk of dying too early, and also help
people save for retirement. Insurance has to be an integral
part of one's wealth management portfolio. Further,
exposure of Indian households to capital markets is limited.
ULIPs and mutual funds are, therefore, not likely to
cannibalise each other in the long run. While ULIPs as an
investment avenue is closest to mutual funds in terms of
their functioning and structure, the first and foremost
purpose of insurance is and will always be 'protection'. The
value that it provides cannot be downplayed or
underestimated
As per IRDA's new guidelines, which
came into effect on July 1, there has to be a minimum lock-in
period of three years for ULIPs, a minimum term of atleast
five years and the death benefit payable or sum assured
under the single-premium product has to be at least 125 per
cent of the single premium paid, among other major policy
changes. The new guidelines will stop ULIPs being
positioned as short term investments products, and they will
look less like mutual funds and more like insurance policies.
New ULIPs now come with a minimum term value of five
years, whereas in mutual funds ELSS there is a lock-in
period of just three years. If an investor decides to withdraw
money from ULIP after three years, the amount depends on
the surrender value given by the company.
STRUCTURE OF
MUTUAL FUND
FIRST
CATEGORY
SECOND
CATEGORY
THIRD CATEGORY
FIRST CATEGORY
The Indian mutual fund industry is dominated by the UNIT
TRUSTOF INDIA which has a total corpus of is 700 bn
collected from more than 20 million investors. The UTI has
many funds/ scheme in all categories i.e. equity, balanced,
income etc. with some being open-ended and some being
close-ended. UTI was floated by financial institutions and is
governed by a special act of parliament. Most of its investors
believe that the UTI is government owned and controlled,
which, while legally incorrect, is true for all practical
purposes.
SECOND CATEGORY
The second categories of mutual funds are the ones floated
by nationalized banks. Can bank assets management
floated by Canara bank and SBI funds management floated
by the state bank of India are the largest of these. GIC AMC
floated by general insurance corporation and Jeeven Bima
Sahayog AMC floated by the LIC are some of the other
prominent ones. The aggregate corpus of funds managed by
this category of AMCs is about Rs 150 bn.
THIRD CATEGORY
The third largest categories of mutual funds are the ones
floated by the private sector and by foreign asset
management companies. The largest of these are Prudential
ICICI AMCs, UTI AMCs etc. The aggregate corpus of
assets managed by this category of AMCs is in excess of
Rs.250 bn.
Future Scenario of Mutual Fund Industry:The asset base will continue to grow at an annual rate of
about 30 to 35 % over the next few years as investors shift
their assets from banks and other traditional avenues. Some
of the older public and private sector players will either close
shop or be taken over.
Out of ten public sector players five will sell out, close down
or merge with stronger players in three to four years. In the
private sector this trend has already started with two
mergers and one takeover. Here too some of them will down
their shutters in the near future to come.
But this does not mean there is no room for other players.
The market will witness a flurry of new players entering the
arena. There will be a large number of offers from various
asset management companies in the time to come. Some
big names like Fidelity, Principal, and Old Mutual etc. are
looking at Indian market seriously. One important reason for
it is that most major players already have presence here and
hence these big names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of
derivatives in India as this would enable it to hedge its risk
and this in turn would be reflected in its Net Asset Value
(NAV).
SEBI is working out the norms for enabling the existing
mutual fund schemes to trade in derivatives. Importantly,
many market players have called on the Regulator to initiate
the process immediately, so that the mutual funds can
implement the changes that are required to trade in
Derivatives.
Global Scenario
Some basic facts The money market mutual fund segment has a total
corpus of $ 1.48 trillion in the U.S. against a corpus of
$ 100 million in India.
Out of the top 10 mutual funds worldwide, eight are
bank- sponsored. Only Fidelity and Capital are nonbank mutual funds in this group.
In the U.S. the total number of schemes is higher than
that of the listed companies while in India we have just
277 schemes
Internationally, mutual funds are allowed to go short. In
India fund managers do not have such leeway.
ORGANISATIONAL STRUCTURE OF
SBI MUTUAL FUND
CEO
NATIONAL
SALES HEAD
BRANCH
MANAGERS
SOUTH
DELHI
PUNJAB
EAST
U.P.
RAJASTHAN
JAIPUR
CIO
FUND
MANAGERS
WEST
NORTH
VICE
PRESIDENT
EQUITY
DEBT
SWOT ANALYSIS
OPPORTUNITIES:1. Hoarding:
Most of the Indians have black money that too in huge
amount i.e. the do not have money in banks, so approaching
them is beneficial.
2. Indian Capital Market is Growing:
So more & more new investors are interested in investments.
3. Tailor Made Products:
We have tailor made products like sector specified schemes
& even diversified schemes.
4. Branch Expansion:
Large no. of branches are opening day by day and even we
are traping the countries having almost same type of socioeconomic condition & even same culture etc.
General Obligations:
Every asset management company for each scheme
shall keep and maintain proper books of accounts,
records and documents, for each scheme so as to
explain its transactions and to disclose at any point of
time the financial position of each scheme and in
particular give a true and fair view of the state of affairs
of the fund and intimate to the Board the place where
such books of accounts, records and documents are
maintained.
The financial year for all the schemes shall end as of
March 31 of each year. Every mutual fund or the asset
management company shall prepare in respect of each
financial year an annual report and annual statement of
accounts of the schemes and the fund as specified in
Eleventh Schedule.
Every mutual fund shall have the annual statement of
accounts audited by an auditor who is not in any way
associated with the auditor of the asset management
company.
Procedure for Action In Case Of Default:
On and from the date of the suspension of the
certificate or the approval, as the case may be, the
mutual fund, trustees or asset management company,
shall cease to carry on any activity as a mutual fund,
trustee or asset management company, during the
period of suspension, and shall be subject to the
directions of the Board with regard to any records,
documents, or securities that may be in its custody or
control, relating to its activities as mutual fund, trustees
or asset management company.
Restrictions on Investments:
A mutual fund scheme shall not invest more than 15%
of its NAV in debt instruments issued by a single issuer,
which are rated not below investment grade by a credit
rating agency authorized to carry out such activity
under the Act. Such investment limit may be extended
to 20% of the NAV of the scheme with the prior
approval of the Board of Trustees and the Board of
asset Management Company.
A mutual fund scheme shall not invest more than 10%
of its NAV in unrated debt instruments issued by a
single issuer and the total investment in such
instruments shall not exceed 25% of the NAV of the
scheme. All such investments shall be made with the
prior approval of the Board of Trustees and the Board
of asset Management Company.
No mutual fund under all its schemes should own more
than ten per cent of any company's paid up capital
carrying voting rights.
Such transfers are done at the prevailing market price
for quoted instruments on spot basis. The securities so
transferred shall be in conformity with the investment
objective of the scheme to which such transfer has
been made.
A scheme may invest in another scheme under the
same asset management company or any other mutual
fund without charging any fees, provided that aggregate
inter scheme investment made by all schemes under
the same management or in schemes under the
management of any other asset management company
shall not exceed 5% of the net asset value of the
mutual fund.
If you are in a high tax bracket and have utilized fully the
exemptions under section 80L of the Income Tax Act,
investing in growth funds that do not pay dividends might
be more tax efficient and improve your post tax return.
STEP SIX- Start early
It is desirable to start investing early and stick to a regular
investment plan. If you start now, you will make more than
if you wait and invest later. The power of compounding lets
you earn income on income and your money multiplies at a
compounded rate of return
STEP SEVEN- The final step
CONCLUSION:
LIMITATIONS:
BIBLIOGRAPHY
BOOKS:
1. N. K. Sinha: Money Banking & Finance; BSC
Publishing Co. Pvt. Ltd.
2. C.R Kothari: Research Methodology; Wishva
Publication, New Delhi.
MAGAZINES:1
2
3
4
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