Mutual Fund

Nitin Page 1 9/10/2008
Contents
Preface 2
Acknowledgement 3
Objectives of the Study 4
Executive Summary 5
1. Introduction to Mutual Fund 10
1.1 Mutual Fund – Concept 11
1.2 Types of Mutual Fund Schemes 12
1.3 Advantages – Disadvantages of Mutual Fund 16
1.4 Risk Involved in Mutual Fund 19
1.5 Structure of Mutual Fund 21
2. Mutual Fund Industry in India 23
2.1 History of Mutual Fund 24
2.2 Mutual Fund Players 26
3. SBI Mutual Fund 31
3.1 Introduction of the Organization 32
3.2 Company Profile 33
3.3 Vision & Mission 34
3.4 Investment Philosophy 35
3.5 Details of Chairman, Trustee, AMC & Sponsors 36
3.6 Product Profile 39
4. Marketing of Mutual Funds 42
4.1 Mutual Fund – Marketing Perspective 43
4.2 Distribution Channel 46
4.3 Trends in Marketing of Mutual Funds in India 49
4.4 Marketing of UTI Mutual Fund – Our Learning 52

1.1 Mutual Fund – Concept
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:
A mutual fund is a pool of money , which is collected from many investors and is
invested by any management company to achieve some common objective of the
investors.
Thus, a mutual fund is a collective investment process. An Asset Management

Company
Mutual Fund Operation Flow Chart

Source: www.indiamart.com

1.2 Types of Mutual Fund Schemes
Wide varieties of Mutual Fund Schemes exist to cater to the needs such as financial
position, risk tolerance and return expectations etc. There are following types of schemes
available for various types of investors.
BY STRUCTURE
A. Open – Ended Schemes
B. Close – Ended Schemes
C. Interval Schemes
BY INVESTMENT OBJECTIVE
A. Growth/Equity Oriented Schemes
B. Income/Debt Oriented Schemes
C. Balanced Schemes
D. Money Market/Liquid Schemes
E. Gilt Schemes
F. Index Schemes
OTHER SCHEMES
A. Sector Specific Schemes
B. Tax Saving/ELSS Schemes

BY STRUCTURE
H. Open – Ended Schemes

As the name implies the size of the scheme (fund) is open – i.e. not specified or pre-
determined. Entry to the fund is always open, the investor who can subscribe at anytime.
Such fund stands ready to buy or sell its securities at anytime. The key feature of Open-
ended schemes is Liquidity. It implies that the capitalization of the fund is constantly
changing as investors sell or buy their shares. Further, the shares or units are normally
not traded on the stock exchange but are repurchased by the funds at announced rates.
Open-ended schemes have comparatively better liquidity despite the fact that these are
not listed. The reason is that investors can any time approach mutual fund for sale of such
units. No intermediaries are required. Moreover, the realizable amount is certain since
repurchase is at a price based on declared net asset value (NAV). The portfolio mix of
such schemes has to be investments, which are actively traded in the market. Otherwise it
will not be possible to calculate NAV. This is the reason that generally open-ended
schemes are equity based. In Open-ended schemes, the option of dividend reinvestment
is available.
I. Close-Ended Schemes
A Close – ended schemes have a definite period after which their shares/units are
redeemed. The scheme is open for subscription only during a specified period at the time
of launch of a scheme. Investors can invest in the scheme at the time of the initial public
issue and thereafter they can buy or sell the units of the scheme on the stock exchanges
where the units are listed. In order to provide an exit route to the investors, some close-
ended funds give an option of selling back the units to the mutual fund through periodic
repurchase at NAV related prices. In these types of schemes, the size of the fund kept to
be constant. SEBI regulations stipulate that at least one of the two exit routes is provided
to the investor i.e. either repurchase facility or through listing on stock exchanges. These
mutual funds schemes disclose NAV generally on weekly basis.
J. Interval schemes
Interval Schemes combine the features of both open-ended and close-ended schemes.
They are open for sale or redemption during pre-determined intervals at NAV based
prices.

BY INVESTMENT OBJECTIVE
A. Growth/Equity Oriented Schemes

The aim of growth funds is to provide capital appreciation over the medium to long term.
Such schemes normally invest a major part of their corpus in equities. Such funds have
comparatively high risks. These schemes provide different options to the investors like
dividend option; capital appreciation etc. and the investors may choose an option
depending on their preference. The investor must indicate the option in the application
form. The mutual funds also allow the investors to change the options at a later date.
Growth schemes are good for investors having a long-term outlook seeking appreciation
over a period of time.
B. Income/Debt oriented Schemes
The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate debentures,
government securities and money market instruments. Such funds are less risky
compared to equity schemes. These funds are not affected because of fluctuations in
equity market. However, opportunities of capital appreciation are also limited in such
funds. The NAVs of such funds are affected because of change in interest rates in the
country. If the interest rates fall, NAVs of such funds are likely to increase in the short
run and vice versa. However, long-term investors may not bother about these
fluctuations.
C. Balanced Fund
The aim of balanced funds is to provide both growth and regular income as such schemes
invest both in equities and fixed income securities in the proportion indicated in their
offer documents. These are appropriate for investors looking for moderate growth. They
generally invest 40-60% in equities and debt instruments. These funds are also affected
because of fluctuations in share prices in the stock markets. However, NAVs of such
funds are likely to be less volatile compared to pure equity funds.
D. Money market / Liquid fund
These funds are also income funds and their aim is to provide easy liquidity, preservation
of capital and moderate income. These schemes invest exclusively in safer short-term
instruments such as treasury bills, certificates of deposit, commercial paper and inter-
bank call money, government securities etc. Returns in these schemes fluctuate much less
compared to other funds. These funds are appropriate for corporate and individual
investors as a means to park their surplus funds for short periods.

E. Gilt Funds
These funds invest exclusively in government securities. Government securities have no
default risk. NAVs of these schemes also fluctuate due to change in interest rates and
other economic factors as are the case with income or debt oriented schemes.
F. Index Schemes
Index funds replicate the portfolio of a particular index such as the BSE Sensex, S&P
NSE 50 index (Nifty) etc. These schemes invest in the securities in the same weight age
comprising of an index. NAVs of such schemes would rise or fall in accordance with the
rise or fall in the Index, though not exactly by the same percentage due to some factors
known as “tracking error” in technical terms. Necessary disclosures in this regard are
made in the offer document of the mutual fund scheme.
These are also exchange traded index funds launched by the mutual funds, which are
traded in the stock exchanges.
OTHER SCHEMES
A. Tax Saving (ELSS) Schemes

All the mutual funds floated by public sector banks and insurance companies have
launched tax saving schemes. These schemes are designed on the basis of tax policy with
special tax incentives to tax taxpaying investors. These schemes offer tax rebates to the
investors under specific provisions of the Income Tax Act, 1961 as the government offers
tax incentives for investment in specified avenues. E.g., Equity Linked Savings Schemes
(ELSS). Pension Schemes launched by the mutual funds also offer tax benefits. These
schemes are growth oriented and invest predominantly in equities. Their growth
opportunities and risks associated are like any equity-oriented scheme.
B. Sector Specific Schemes

These are the schemes, which invest in the securities of only those sectors or industries as
specified in the offer documents. E.g. Pharmaceuticals, Software, Fast Moving Consumer
Goods (FMCG), Power or Infrastructure etc. The return sin these funds are dependent in
the performance of the respective sector/ industries. While these funds may give higher
returns, they are more risky compared to diversified funds. Investors need to keep a
watch in the performance of those sectors/industries and must exit at an appropriate time.
They may also seek advice of an expert.

1.3 Advantages and Disadvantages of Mutual Fund
Advantages of Mutual Fund

Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.
Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries
and sectors. This diversification reduces the risk because seldom do all stocks decline at
the same time and in the same proportion. You achieve this diversification through a
Mutual Fund with far less money than you can do on your own.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such
as bad deliveries, delayed payments and follow up with brokers and companies. Mutual
Funds save your time and make investing easy and convenient.
Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return
as they invest in a diversified basket of selected securities.
Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing
in the capital markets because the benefits of scale in brokerage, custodial and other fees
translate into lower costs for investors.
Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value
related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a
stock exchange at the prevailing market price or the investor can avail of the facility of
direct repurchase at NAV related prices by the Mutual Fund.
Transparency
Investors get regular information on the value of their investment in addition to
disclosure on the specific investments made by their scheme, the proportion invested in
each class of assets and the fund manager's investment strategy and outlook.
Flexibility
Through features such as regular investment plans, regular withdrawal plans and
dividend reinvestment plans, you can systematically invest or withdraw funds according
to your needs and convenience.
Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual
fund because of its large corpus allows even a small investor to take the benefit of its
investment strategy.
Choice of Schemes
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of
strict regulations designed to protect the interests of investors. The operations of Mutual
Funds are regularly monitored by SEBI.

Disadvantages of Mutual Fund
Entry and Exit load
Mutual funds are a victim of their own success. When a large body like a fund invests in
shares, the concentrated buying or selling in adverse price movements lay at the time of
buying, the fund ends up paying a higher price and while selling it realize a lower price.
This problem is especially severe in emerging markets like India, where, excluding a few
stocks, even the stocks in the Sensex are not liquid. Let alone stocks in the NSE 50 or the
CRISIL 500. So there is simply no way that a fund can beat the Sensex or any other
index, if it is blindly invests in the same stocks as those in the Sensex and in the same
proportion.
No control over costs
The costs of the fund management process are deducted from the fund. This includes
marketing and initial costs deducted at the time of entry itself, called, ‘Load’. Then there
is the annual asset management fee and expenses, together called the expense ratio.
Usually, the former is not counted while measuring performance, while the latter is. A
Standard 2 percent expense ratio means that, everything else being equal, the fund
manager under performs the benchmark index by an equal amount.
No tailor-made portfolio
The portfolio of a fund does not remain constant. The extent to which the portfolio
changes is a function of the style of the individual fund manager i.e. whether he is a buy
and hold type of manager or one who aggressively churns the fund. It is also depends on
the volatility of the fund size i.e. whether the fund constantly receives fresh subscriptions
and redemptions. Such portfolios changes have associated costs of brokerage, custody
fees, registration fees etc. that lowers the portfolio return commensurately.
No Guarantee of return
No investment is risk free. If the entire stock market declines in value, the value of
mutual fund shares will go down as well, no matter how balanced the portfolio. Investors
encounter fewer risks when they invest in mutual funds than when they buy and sell
stocks on their own. However, anyone who invests through a mutual fund runs the risk of
losing money.
Taxes
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you
will pay taxes on the income you receive, even if you reinvest the money you made.
Management risk
When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as you

had hoped, you might not make as much money on your investment as you expected. Of
course, if you invest in Index Funds, you forego management risk, because these funds
do not employ managers.
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1.4 Risk Involved in Mutual Fund
THE RISK-RETURN TRADE-OFF

The most important relationship to understand is the risk-return trade-off. Higher the risk
greater the returns/loss and lower the risk lesser the returns/loss.
Hence it is up to you, the investor to decide how much risk you are willing to take. In
order to do this you must first be aware of the different types of risks involved with your
investment decision.
MARKET RISK:
Sometimes prices and yields of all securities rise and fall. Broad outside influences
affecting the market in general lead to this. This is true, may it be big corporations or
smaller mid-sized companies. This is known as Market Risk. A Systematic Investment
Plan (“SIP”) that works on the concept of Rupee Cost Averaging (“RCA”) might help
mitigate this risk.
CREDIT RISK:
The debt servicing ability (may it be interest payments or repayment of principal) of a
company through its cash flows determines the Credit Risk faced by you. This credit risk
is measured by independent rating agencies like CRISIL who rate companies and their
paper. An ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poor
credit quality. A well-diversified portfolio might help mitigate this risk.
INFLATION RISK:
Things you hear people talk about: “Rs. 100 today is worth more than Rs. 100
tomorrow.” “Remember the time when a bus ride costed 50 paisa?”
“Mehangai Ka Jamana Hai.”
The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of
times people make conservative investment decisions to protect their capital but end up
with a sum of money that can buy less than what the principal could at the time of the
investment. This happens when inflation grows faster than the return on your investment.
A well-diversified portfolio with some investment in equities might help mitigate this
risk.
INTEREST RATE RISK:
In a free market economy interest rates are difficult if not impossible to predict. Changes
in interest rates affect the prices of bonds as well as equities. If interest rates raise the
prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising
interest rate environment. A well-diversified portfolio might help mitigate this risk.
POLITICAL/GOVERNMENT POLICY RISK:
Changes in government policy and political decision can change the investment
environment. They can create a favorable environment for investment or vice versa.
LIQUIDITY RISK:
Liquidity risk arises when it becomes difficult to sell the securities that one has
purchased. Liquidity Risk can be partly mitigated by diversification, staggering of
maturities as well as internal risk controls that lean towards purchase of liquid securities.
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1.5 Structure of Mutual Fund
All mutual fund comprise mainly three constitutions –
Sponsors
Trustees
Asset Management Company (AMC)
Sponsors
The Sponsors initiate the idea to set up a mutual fund. It could be a registered company,
scheduled bank or financial institution. A Sponsor is the Promoter of the Mutual Fund
which cerates AMC and appoints trustees. There are some criterions, which every
sponsor have to fulfill:
Financial Services Business
5- years Track record
3 years profit making record
At least 40% contribution to AMC capital
Trustees
Trustees hold a fiduciary responsibility towards unit holders by protecting their interests.
Trustees float and market schemes and secure necessary approvals. Trustees are
appointed by sponsor with SEBI approval. A trust has registered ownership of
investments and appoints all other
constituents. They check if the AMC’s investments are within well defined limits,
whether the fund’s assets are protected and also ensure that unit hold get their due
returns. There are at least 4 trustees and 2/3 of them should be independent. Trustees of
one mutual fund cannot be trustee of another mutual fund. All major decisions need
trustee approval.
Asset Management Company (AMC)
AMC’s are managing the money of investors. An AMC takes decisions, compensates
investors through dividends, maintain proper accounting and information for pricing of
units, calculated the NAV and provides information on listed schemes.
An AMC is responsible for operational aspects of the mutual fund. Basically, they are
manufacturers of mutual fund schemes. They have an investment management agreement
with trustees, which are registered with SEBI. Its net worth should be maintained Rs. 10
crore at all times. An AMC cannot have any other Business interest and they have a
mandatory duty of quarterly reporting to appointed trustees.
Other Constituents
Custodian
It takes custody of securities and other assets of mutual fund. Its responsibilities include
receipt and delivery of securities, collecting income-distributing dividends, safekeeping
of the units and segregating assets and settlements between schemes. Custodians can
service more than one fund.
Registrar and Transfer Agents
They make transactions and maintain the investor records.
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MUTUAL FUND
INDUSTRY
IN
INDIA
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2.1 History of Mutual Fund
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank. The history of
mutual funds in India can be broadly divided into four distinct phases
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6, 700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June
1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set
up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47,004
crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund registered
in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996. The industry now functions under the
SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of
January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The
Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of
other mutual funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with assets under management of Rs.29, 835 crores as at the end of January
2003, representing broadly, the assets of US 64 scheme, assured return and certain other
schemes. The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations.
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The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of
assets under management and with the setting up of a UTI Mutual Fund, conforming to
the SEBI Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421 schemes.
The graph indicates the growth of assets over the years.
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2.2 Mutual Fund Players
The Indian mutual fund industry is mainly divided into three kinds of categories. These
categories include public sector players, nationalized banks and private sector and foreign
players.
UTI Mutual Fund was one of the leading Mutual Fund companies in India till May 2006
with a corpus of more than Rs.31, 000 Crore and it is the public sector mutual fund.
Bank of Baroda, Punjab National Bank, Can Bank and SBI are the major nationalized
banks mutual fund.
At present mutual fund industry is mainly dominated by private and foreign sector
players which include major players like Prudential ICICI Mutual Fund, HDFC Mutual
Fund, Reliance Mutual Fund etc. are private sector mutual funds players while Franklin
Templeton etc. are major foreign mutual fund players. At present there are more than 33
players operating in Indian. The brief introduction of major players is given as follows.
ABN AMRO Mutual Fund
ABN 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.
Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life
Financial. Sun Life Financial is a global organization evolved in 1871 and is being
represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from
India. Birla Sun Life Mutual Fund follows a conservative long-term approach to
investment. Recently it crossed AUM of Rs. 10,000 Crore.
Bank of Baroda Mutual Fund

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under
the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the
AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank
AG is the custodian.
HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing
Development Finance Corporation Limited and Standard Life Investments Limited.
HSBC Mutual Fund

HSBC 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.
ING Vyasya Mutual Fund

ING Vyasya Mutual Fund was setup on February 11, 1999 with the same named Trustee
Company. It is a joint venture of Vysya and ING. The AMC, ING Investment
Management (India) Pvt. Ltd. was incorporated on April 6, 1998.
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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.
Sahara Mutual Fund
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation
Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on
August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the
AMC stands at Rs 25.8 crore.
State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch
offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today
it is the largest Bank sponsored Mutual Fund in India. They have already launched 35
Schemes out of which 15 have already yielded handsome returns to investors. State Bank
of India Mutual Fund has more than Rs. 5,500 Crore as AUM. Now it has an investor
base of over 8 Lakhs spread over 18 schemes.
Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsor for
Tata Mutual Fund is Tata Sons Ltd., and Tata Investment Corporation Ltd. The
investment manager is Tata Asset Management Limited and its Tata Trustee Company
Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country with
mo
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.
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.
Standard Chartered Mutual Fund
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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.
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.
Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and it’s 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-
profit organizations. Its services are also extended to high net
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.
Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as its
sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was
incorporated on December 1, 1995 with the name Escorts Asset Management Limited.
Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital
Management Corp. of Delaware (USA) as sponsor. The Trustee is ACAM Trust Company
Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. with the
corporate office in Mumbai.
Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt.
Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company.
Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset
Management Company Pvt. Ltd. is the AMC.
Can bank Mutual Fund
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Can bank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the
sponsor. Can bank Investment Management Services Ltd. incorporated on March 2, 1993
is the AMC. The Corporate Office of the AMC is in Mumbai.
Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance
Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the
Trustee Company and AMC is Cholamandalam AMC Limited.
LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It
contributed Rs. 2 Crore 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.
GIC Mutual Fund

GIC Mutual Fund , sponsored by General Insurance Corporation of India (GIC), a
Government of India undertaking and the four Public Sector General Insurance
Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd.
(NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII)
and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act,
1882.
Introduction
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A mutual fund is a financial intermediary that pools the savings of investors for collective
investment in a diversified portfolio of securities. A Fund is the Fund’s investors share
“Mutual fund” as all of its returns, minus its expenses.
The securities and Exchange Board of India (Mutual Fund) Regulation , 1969 defines a
Mutual Fund as a’ a Fund established in the form of a trust to raise money though the sale
of units to the public or a section of the public under one or more schemes for investing
in securities , including money market instrument.
A Mutual Fund in India can raise resource through sale of units to the public. It can be set
up in the form of a Trust under the Indian Trust act.
Portfolio management services
Management of offshore funds
Providing advice to pension or provident funds
Management of venture capital funds
Management of money market funds
Management of real estate funds
A mutual fun serves as a link between the investor and the securities market by
mobilizing savings from the investors and investing them in the securities market to
generate returns. Thus, a mutual fund is akin to portfolio management services (PMS).
Benefits of Mutual Funds
Professional Management: An average investor lacks the Knowledge of capital market

operations and does not have resources to reap the benefits of investment. Hence, he
requires the help of an expert. It, is not only expensive to ‘hire the services’ of an expert
but it is more difficult to identify a real expert. Mutual funds are managed by professional
manages who have the requisite skills and expensive to analyze the performance and
prospects of companies. They make possible an organized investment strategy, which is
hardly possible for an individual investor.
Portfolio Diversification: an investor undertake risk if he invests all his funds in a single
scrip. Mutual funds invest in a number of companies across various industries and
sectors. This diversification reduces the riskiness of the investment.
Reduction in transaction costs: Compared to direct investing in the capital

market, investing through the funds is relatively less expensive as the benefit
of scale is passed on to the investors.
Liquidity: Investors cannot sell the securities held easily , while in case of mutual funds
,they can easily encash their investment by selling their units to the Fund if it is an open
ended scheme or selling them on a stock exchange if it is a close ended.
Nitin Page 20 9/10/2008

Convenience: Investing in mutual fund reduces paperwork, saves time and makes
investment easy.
Flexibility: Mutual Funds investors now enjoy income tax benefits. Dividens received
from mutual funds’ debt schemes are tax
How to Measure a Mutual Fund's Performance

The world of mutual fund performance is complex and daunting. Advertisements in
newspapers talk about "five-star funds." Banner ads talk about "the NUMBER ONE
FUND in America" and histories of past performance refer to "returns of 38.8% over the
Nitin Page 21 9/10/2008

last six months." If one were to pay attention to all of the talking heads on television, all
the magazines that promise a list of "great funds for the upcoming year," and worst of all,
the advertisements in the print and television media, one would be convinced that there
are hundreds of funds out there that can tout great performance.
This simply isn't the case.
Although past performance is certainly not an indication of future results, there are some
clues to be found about the quality of a fund by correctly measuring its past performance.
Usually, what will be discerned through a careful study of past performance is that not
many mutual funds actually deliver anything close to what their advertisements claim.
When looking at a mutual fund's past performance, a good and necessary step is to
identify its Morningstar style box. Morningstar has broken down the world of domestic
mutual funds into small-, medium-, and large-cap funds and by objective -- growth,
value, or blend. (Click the link above for more details on any of these terms.)
The Morningstar style box looks like a tic-tac-toe board, as such:
Once you know which "style box" a fund is in, you can compare it with the other mutual
funds that are similarly classified, and in many cases to a relevant index fund.
Going through this exercise and comparing a fund's returns over three years, five years,
and ten years with the appropriate market index and other similarly styled funds will be
much more useful than simply comparing a fund's returns to the S&P 500 or
seeing how many stars it has. While the S&P 500 is a very useful benchmark
for the market as a whole, you will get a much better idea about a specific
fund's relative merits by comparing it with its style box competition than you
will by comparing it with the market as a whole or the S&P 500 in particular.
In 1998 for example, approximately 90% of all mutual funds lost to the returns of the
S&P 500. S&P 500 index funds are categorized by Morningstar as "large-cap blend"
funds, meaning that the S&P 500 is dominated by neither growth stocks nor value stocks.
While 90% of all mutual funds trailed the S&P, the majority of funds that were
categorized as "large-cap growth" funds beat the S&P in 1998. Does this mean that large-
cap growth fund managers were particularly good at their jobs? No. While actively
managed large-cap growth funds averaged a return of 36% for 1998, beating the S&P by
Nitin Page 22 9/10/2008

about 8%, the Vanguard Large-Cap Growth Index Fund was up over 42% for the year. So
if you see any advertisements for mutual funds showing that the fund beat the S&P over
the course of 1998, find out whether it's categorized as a large-cap growth fund. If it is,
don't be too impressed -- it should have soundly beaten the returns of the S&P 500 Index.
Vanguard now provides index funds that match seven of the nine style boxes (Vanguard
does not have specific indices for mid-cap growth or mid-cap value), and these funds are
very good measuring sticks for the rest of the actively managed fund world.
There are many fine places on the Internet where you can quickly ascertain the relative
performance of any mutual fund for which you are interested in measuring the
performance. Go to Morningstar.com and look up the fund by either entering the name of
the fund or its ticker symbol if you know it. Morningstar will then show you a healthy
selection of useful data on your fund, including its style box categorization, its
performance year-by-year compared to the S&P 500, and also to a more appropriate
index, such as the Wilshire 4500 if it is not a large-cap fund.
You can also measure your fund, once you know its style box categorization, at
SmartMoney: Mutual Fund Snapshots. SmartMoney's site has lots of pretty colors and an
interesting function that allows you to compare funds with other funds for one-, three-,
and five-year periods. To get a good glimpse of how the funds in your 401(k) plan are
doing compared to the appropriate index fund, here are the places to compare your funds
to Vanguard's style-box-specific index funds:
Small-cap funds: NAESX (Russell 2000 Stock Index)
Mid-cap funds: SPMIX (S&P Midcap 400 Index)
Large-cap value: VIVAX (BARRA/S&P Value Index)
Large-cap blend: VFINX (S&P 500 Stock Index)
Large-cap growth: VIGRX (BARRA/S&P Growth Index)
Vanguard has recently started a mid-cap index fund (VIMSX), a small-cap value fund
(VISVX), and a small-cap growth fund (VISGX). However, none of these funds is old
enough to provide meaningful information. If you are looking to assess mid-cap funds, it
is probably best to compare them to the California Investment Trust S&P Midcap Fund
(SPMIX). If you are looking to assess the quality of small-cap value funds or small-cap
growth funds, at the present it is probably best to compare your fund with the small-cap
blend index funds, such as Vanguard's Small Cap Index Fund (NAESX).
Going through the process of comparing mutual funds' returns to an appropriate index or
index fund should reveal to you that the track record of most managed mutual funds is
terribly unimpressive. Some, of course, will beat their appropriate indices or index funds,
but it is a very, very rare fund indeed that consistently outperforms the market.
Nitin Page 23 9/10/2008

Superior Ballistics Inc Mission Statement
Briefly, our goal is to advance the state of the art in cartridge design by creating
chamberings having the greatest performance potential. This is achieved through
application of modern solid fuel rocket motor internal ballistics technology. This is
unique to SMc™ designs.
The associated articles should give interested readers a good understanding of our
design theory. For any given usable case capacity and working chamber pressure, SMc
designs generate significantly more velocity and do so while creating far less barrel
heating! As a bonus, for any given performance level, compared to conventional
chamberings, SMc designs generate less felt recoil and sight picture disturbance. As is
explained in the associated articles, these results conform to Newton's laws.
Incorporated 29/6/1987
Ownership Public
Ownership Pattern Foreign - 37%,

Domestic-63%
Sponsor State Bank of India,

Societe Generale Asset
Management
26,977.36 as on
Total Assets (Rs Cr)
5/31/2008
Nitin Page 24 9/10/2008

Equity Funds (Open End) 14
Debt Funds (Open End) 12
Short-term Debt (Open End) 12
Hybrid Funds (Open End) 3
Closed-end Funds 22
Chief Executive Syed Shahabuddin
Chief Investment Officer Sanjay Sinha
Investor Relations Officer G Kandasubramanian
Address 191, Maker Tower 'E'

19th Floor,Cuffe Parade
Mumbai - 400005
Telephone (022) 22180221/ 27
Fax (022) 22189663
Performance Measures Of Mutual Funds

Mutual Fund industry today, with about 34 players and more than five hundred schemes,
is one of the most preferred investment avenues in India. However, with a plethora of
schemes to choose from, the retail investor faces problems in selecting funds. Factors
such as investment strategy and management style are qualitative, but the funds record is
an important indicator too. Though past performance alone can not be indicative of future
performance, it is, frankly, the only quantitative way to judge how good a fund is at
present. Therefore, there is a need to correctly assess the past performance of different
mutual funds.
Worldwide, good mutual fund companies over are known by their AMCs and this fame is
directly linked to their superior stock selection skills. For mutual funds to grow, AMCs
must be held accountable for their selection of stocks. In other words, there must be some
performance indicator that will reveal the quality of stock selection of various AMCs.
Nitin Page 25 9/10/2008

Return alone should not be considered as the basis of measurement of the performance of
a mutual fund scheme, it should also include the risk taken by the fund manager because
different funds will have different levels of risk attached to them. Risk associated with a
fund, in a general, can be defined as variability or fluctuations in the returns generated by
it. The higher the fluctuations in the returns of a fund during a given period, higher will
be the risk associated with it. These fluctuations in the returns generated by a fund are
resultant of two guiding forces. First, general market fluctuations, which affect all the
securities present in the market, called market risk or systematic risk and second,
fluctuations due to specific securities present in the portfolio of the fund, called
unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in
terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is
measured in terms of Beta, which represents fluctuations in the NAV of the fund vis-à-vis
market. The more responsive the NAV of a mutual fund is to the changes in the market;
higher will be its beta. Beta is calculated by relating the returns on a mutual fund with the
returns in the market. While unsystematic risk can be diversified through investments in a
number of instruments, systematic risk can not. By using the risk return relationship, we
try to assess the competitive strength of the mutual funds vis-à-vis one another in a better
way.
In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class. The most
important and widely used measures of performance are:
Ø The Treynor Measure
Ø The Sharpe Measure
Ø Jenson Model
Ø Fama Model
The Treynor Measure

Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above risk
free rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and systematic
risk associated with it (beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the
fund.
All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative
Treynor's Index is an indication of unfavorable performance.
The Sharpe Measure
In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a
ratio of returns generated by the fund over and above risk free rate of return and the total
risk associated with it. According to Sharpe, it is the total risk of the fund that the
investors are concerned about. So, the model evaluates funds on the basis of reward per
unit of total risk. Symbolically, it can be written as:
Sharpe Index (Si) = (Ri - Rf)/Si
Nitin Page 26 9/10/2008

Where, Si is standard deviation of the fund.
While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a
fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.
Comparison of Sharpe and Treynor

Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well-diversified portfolios. On the other hand,
the systematic risk is the relevant measure of risk when we are evaluating less than fully
diversified portfolios or individual stocks. For a well-diversified portfolio the total risk is
equal to systematic risk. Rankings based on total risk (Sharpe measure) and systematic
risk (Treynor measure) should be identical for a well-diversified portfolio, as the total
risk is reduced to systematic risk. Therefore, a poorly diversified fund that ranks higher
on Treynor measure, compared with another fund that is highly diversified, will rank
lower on Sharpe Measure.
Jenson Model
Jenson's model proposes another risk adjusted performance measure. This measure was
developed by Michael Jenson and is sometimes referred to as the Differential Return
Method. This measure involves evaluation of the returns that the fund has generated vs.
the returns actually expected out of the fund given the level of its systematic risk. The
surplus between the two returns is called Alpha, which measures the performance of a
fund compared with the actual returns over the period. Required return of a fund at a
given level of risk (Bi) can be calculated as:
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it, alpha
can be obtained by subtracting required return from the actual return of the fund.
Higher alpha represents superior performance of the fund and vice versa. Limitation of
this model is that it considers only systematic risk not the entire risk associated with the
fund and an ordinary investor can not mitigate unsystematic risk, as his knowledge of
market is primitive.
Fama Model
The Eugene Fama model is an extension of Jenson model. This model compares the
performance, measured in terms of returns, of a fund with the required return
Nitin Page 27 9/10/2008

commensurate with the total risk associated with it. The difference between these two is
taken as a measure of the performance of the fund and is called net selectivity.
The net selectivity represents the stock selection skill of the fund manager, as it is the
excess return over and above the return required to compensate for the total risk taken by
the fund manager. Higher value of which indicates that fund manager has earned returns
well above the return commensurate with the level of risk taken by him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)
Where, Sm is standard deviation of market returns. The net selectivity is then calculated
by subtracting this required return from the actual return of the fund.
Among the above performance measures, two models namely, Treynor measure and
Jenson model use systematic risk based on the premise that the unsystematic risk is
diversifiable. These models are suitable for large investors like institutional investors
with high risk taking capacities as they do not face paucity of funds and can invest in a
number of options to dilute some risks. For them, a portfolio can be spread across a
number of stocks and sectors. However, Sharpe measure and Fama model that consider
the entire risk associated with fund are suitable for small investors, as the ordinary
investor lacks the necessary skill and resources to diversified. Moreover, the selection of
the fund on the basis of superior stock selection ability of the fund manager will also help
in safeguarding the money invested to a great extent. The investment in funds that have
generated big returns at higher levels of risks leaves the money all the more prone to risks
of all kinds that may exceed the individual investors' risk appetite.
As students of MBA, we had been given the chance to do a grand study on any industry and any field
of our choice. This was a platform for us to perform our best and explore our potentials in the areas of
our interest
State Bank of India BUY
CMP: Rs 737.65
Investment Argument
State Bank of India (SBI), India's premier commercial bank with a sizeable market share of around
18%, is almost considered to be proxy for the Indian Banking System and for the Indian Economy too.
SBI Group's core strength lies in the vast geographical reach of over 13,800 branches covering the
remotest corner of the country. The group has an asset base of around Rs 6,300bn as on FY2005.
The SBI Group with its 71 subsidiaries, joint ventures, associates and RRBs has positioned itself as
the largest 'Universal Bank' in the country catering to every segment of financial services ranging
from traditional banking products to factoring services, credit cards, mutual fund, life insurance,
investment banking, asset reconstruction, etc.
Nitin Page 28 9/10/2008

The SBI Group has fast narrowed its technology gap with the private sector by aggressively rolling
out its technology upgradation plans. SBI has fully computerized its network of over 13,800 branches
with its core banking solution also implemented at over 7,000 branches. The Bank also has the largest
ATM network (over 5,500 ATMs).
The Bank has considerably leveraged its strengths of a vast geographical reach and customer base to
tap its potential in Retail Assets. SBI has built up a whopping Retail Assets Portfolio of over Rs 550bn
in a span of around 3-4 years.
SBI has embarked on the Business Process Re-engineering exercise aimed at re-designing the business
processes, setting up of centralized processing unit and management performance re-design to
improve its operational efficiency and enhance customer satisfaction.
Valuation
At the CMP Rs 857, the stock trades at 7.8x FY2007E EPS of Rs 110.4, 1.4x FY2007E BV of Rs
629.4 and 1.6x FY2007E Adj. BV of Rs 548.6.
We recommend a Buy.
Risk – Return Trade off
Market Cap (Rs cr) 45112
Market Cap (US$ mn) 10206
52 Week High / Low 962 / 577
Avg Daily Volume 1279085
Face Value (Rs) 10
BSE Sensex 9743
Nifty 2941
BSE Code 500112
NSE Code SBIN
Reuters Code SBI.BO
Bloomberg Code SBIN@IN
Shareholding Pattern (%)
Government 59.7
MF / Banks / Indian FI's 12.0
FII / NRIS's / OCB's 19.8
Nitin Page 29 9/10/2008

63
Exhibit 2: Earnings & Margins
Source: Company
Q3FY2006 Performance
SBI’s Q3FY2006 performance was slightly disappointing. Net Profit registered a mere 1.4% rise to Rs
1,115cr much below our expectations of Rs 1,312cr. Lower Earnings was largely on account of higher
jump in Staff Costs and Lower Non-Interest Income.
The Bank reported a Net Interest Income (NII) growth of 15.3% to Rs 4,220cr beating our
expectations of Rs 4,086cr. Growth in NII was partly attributable to Interest on Income Tax refund to
the tune of Rs 954cr. However, the Bank reported a decent growth in Core Income as Interest on
Advances increased by 35.6% on higher business volumes. Interest Expenses too were on the higher
side as Interest on Deposits grew by 18.2% and Interest on Borrowings went up by over 100% during
the quarter. The higher Interest outgo could be on account of higher borrowings to meet the IMD
redemption of December'05.
The Bank's performance on the Non-Interest Income front too was disappointing as aggregate Non-
Interest Income declined by 17.8% to Rs 1,840cr. Profit on Sale of Investments too declined sharply
by 86.3% to Rs 130cr (Rs 948cr). However, excluding Treasury gains, the Non-Interest Income
moved up by 32.6% due to exchange gains on IMD Redemption to the tune of Rs 532cr, in the
absence of which other Non-Interest Income fell by 8.6%.
A substantial spike of 49.4% in Staff Costs pushed up the operating overheads during the quarter.
Other operating overheads were higher by 14.5% to Rs 937cr. Subsequently, Aggregate Operating
Overheads of the Bank ended 38% to Rs 3,461cr higher. As a result, Cost/Income ratio of SBI rose to
57.1% (42.5%).
Provision for Tax during Q3FY2006 increased substantially by 74.9% to Rs 1,015cr. However,
Aggregate Provisions declined by 35.2% on account of a 24.2% fall in Investment Depreciation,
59.2% decline in Other Provisions and a write back of Rs 103cr towards NPAs.
MF going global: The way forward

While many have been heard extolling the benefits of investing abroad, most investors
and advisors who subscribe to this 'go global' theory are unable to find an answer to the
fundamental question: Where to invest and why?
Nitin Page 30 9/10/2008

During the ING Global Investment Marathon, while the investment managers at ING
stressed on the need for global investment, they also ensured that these questions were
well addressed.
A series of workshops, each focussing on a different economy and a different investment

avenue, were organised to assist investors. Starting with opportunities in Asia in terms of
equity, debt instruments, private equity and real estate, the workshops covered an entire
gamut of emerging markets in Europe, United States and Latin America.
The Asian economies, especially those of India and China, have, over a period of time,
emerged as two of the strongest emerging economies of the world. But there do exist
opportunities even beyond the great wall.
If India has been highly rated for its strong domestic consumption and China for its rapid
strides in infrastructure development, Brazil and Russia stand out for their power play in
the commodities segment. With commodity prices, especially those of oil at an all time
high, these two economies have more to gain than lose.
According to Maarten-Jan Bakkum, senior product specialist, ING, apart from high
commodity prices, the Latin American countries, especially Mexico, have gained on
account of low vulnerability to the US recession. Also, these economies have now begun
to see a surge in the infrastructure investments as well as in private consumption.
Russia, on the other hand, boasts of strong balance sheet with over $400 billion in forex
reserves, over $150 billion in the oil stabilisation fund and almost no outstanding debt.
Michel Wetser, senior portfolio specialist, ING, stated that the country was also expected
to see heavy investment in the infrastructure space and surge of domestic demand in the
under-penetrated consumer sector. Like Latin America, Russia is also sheltered from
global economic weakness given its low correlation with the US economy.
The workshops also emphasised the importance of tactical asset allocation, not just in
various economies, but also in variety of asset classes like property, fixed interest
instruments and cash. Investment tactics lie in the ability to invest across economies and
asset classes that have a low correlation.
According to Mugunthan Siva, investment strategist and portfolio manager, ING,

investment allocations are ought to be based on price momentum, valuations relative to
other asset classes and risk embedded within the asset class.
While the knowledge has been imparted, it would be a futile endeavour if the same is not
spread across. Vineet Vohra thus emphasised the need of carrying the enlightened torch
of knowledge beyond the four walls.
Superior Ballistics Inc Mission Statement
Nitin Page 31 9/10/2008

Briefly, our goal is to advance the state of the art in cartridge design by creating
chamberings having the greatest performance potential. This is achieved through
application of modern solid fuel rocket motor internal ballistics technology. This is
unique to SMc™ designs.
The associated articles should give interested readers a good understanding of our
design theory. For any given usable case capacity and working chamber pressure, SMc
designs generate significantly more velocity and do so while creating far less barrel
heating! As a bonus, for any given performance level, compared to conventional
chamberings, SMc designs generate less felt recoil and sight picture disturbance. As is
explained in the associated articles, these results conform to Newton's laws.
Historical Background
(To date, obtaining factory-made, properly headstamped cases for SMc™ designs has
been a problem. By January 2006, we are promised properly formed and headstamped
cases for the 5mm/35 SMc. We are working toward obtaining cases for the 22/40 SMc,
sometime in 2006. Availability of other sizes will depend upon how quickly this concept
achieves success. With Savage now offering the 5/35 through its Custom Shop, our goal
it to eventually offer target, varminting and big game hunting chamberings with properly
headstamped cases, factory loaded ammunition, and quality commercial rifles.)
Historically, cartridge design has generally been secondary to gun design. Chosen case
configuration – cylindrical, tapered or bottlenecked – has been in direct response to
desired energy level, (usually) availability of existing cases from which to create a new
design, and (most importantly) fitment of any new design into a particular gun (whether a
new or an existing design). Rarely has a gun been designed that requires creation of an
entirely new cartridge. Typically, a new gun or gun chambering was designed and then a
new cartridge was created – through modifications of an existing case type – to fit that
gun.
Hence, most current and obsolete cartridge designs have resulted from alteration of an
existing case – e.g., necking 308 Winchester (simply a shortened 30-06) down to 24-
caliber to make the 243 Winchester. Such conversions are relatively easy. Making a new
bunter (the tool that creates the headstamp) and the final forming tools required for such
a conversion costs about $1000, circa 2000. Conversely, creating new tooling (as
required to create an entirely new case design) now costs more than $20,000.
Hence, usually, when a "new" chambering is introduced, it is merely a necked (up or
down) version of an existing case; more rarely, body taper or case body length are
altered; very rarely a new design has a unique case head diameter (the 10m Auto is a
recent example). Adopting a new case to an existing gun often requires significant
alterations and sometimes an entirely new design.
Therefore, lacking a compelling reason to create a case with a different head diameter –
such as fitting a specific gun design, or achieving improved ballistics – this approach to
new case designs is simply too expensive. For these reasons, historically, other than as a
result of pure coincidence, case configuration has been completely unrelated to internal
ballistic efficiency. Enter the SMc era.
Conversely, through trial and error, independent experimenters have routinely been
improving cartridge designs since almost the beginning of the self-contained cartridge
era. These experimenters often improved factory designs to significant ballistic
advantage but they did so without any internal ballistics understanding. In some cases,
Nitin Page 32 9/10/2008

they or others theorized (generally incorrectly), upon the performance of these
"improved" designs. A good understanding of what happened inside a cartridge case
after the striker fell simply did not exist. We, as Superior Ballistic Inc., used first
principles theory combined with well developed solid fuel rocket motor internal ballistics
analysis techniques to further the state of the art in gun cartridge design.
We concluded that in the ideal design, internal case diameter and bullet diameter would
be linked; the correct relationship is near 2.1 to 1. Hence, other than by pure serendipity,
ideal case designs cannot be based upon existing cases! Specifically, existing case
diameters correctly match only a few standard bullet diameters for optimum efficiency.
Nearly ideal SMc designs in calibers 20, 22, 24, 25 and 26, and 28 can be achieved using
existing cases – respectively, 6mm Norma BR, 284 Win or 45-70, 7mm SAUM or 300
WSM, 416 Rigby, and 505 Gibbs. The SMc 20-caliber conversion is a direct
modification of the 6mm Norma BR case through resizing only. Forming the 22-caliber
SMc from Winchester 45-70 cases is feasible through many necking steps with annealing
and neck turning (to make it work in any standard bolt-action rifle, the case head must be
re-cut to rimless configuration) – while the 284 case is of the correct diameter to make a
22-caliber SMc case, 284 case walls are far too thick. Forming the 24-caliber SMc
requires case shortening and driving the 7mm SAUM case shoulder back significantly,
which is feasible (this requires annealing) – we believe the WSM case might also be
practical for this application. SMc designs in 26- and 28-caliber are impracticably
difficult because it is necessary to redraw the case body to thin it sufficiently so that
necking is possible.
Conventional receivers will handle SMc designs only up to 26-caliber. Several custom
manufacturers make receivers that will handle SMc designs up to 30-caliber but these are
relatively expensive (an SMc for 0.375" bullets could be adapted to 50 BMG receivers
but, again, case conversion would be monumentally difficult). We are working toward
correcting these limitations and at least one mainstream manufacturer has shown interest
in introducing a larger action that would work with a 30-caliber SMc.
As discussed in the associated articles, we also recognized that shoulder design is
important, as is neck length. We have designed all SMc cartridges accordingly with a
specifically shaped elliptical shoulder and an unusually long case neck. The former
contributes to ballistic efficiency; the latter contributes to long barrel life.
Handloaders should also be aware that in SMc cartridges the relative speed of propellants
is not as might be expected. Generally, all propellants tend to burn faster than when used
in conventional cartridges, the slower the propellant the greater the bias. Moreover,
extruded (tubular) propellants seem to show a greater bias than do ball-type propellants.
Since we believed (and have since proven) that ideal case designs would provide
sufficient ballistic advantages to warrant the effort we set out to create and test such
designs. Parallel to this testing was our decision to patent this new art. Comparatively, the
latter was a far more difficult decision. We certainly do not want to hamper state-of-the-
art advancement but we recognized that our investment would be significant.
We now hold patents covering all aspects of SMc cartridge, chamber and tooling designs.
Since these are parametric patents it is impossible to circumvent the concept by making
minor dimensional changes.
Nitin Page 33 9/10/2008

"Corporate mission" is another way of describing a company's management philosophy:
a company's long-term values and raison d'etre that do not change easily because of top
management shifts or market changes. Corporate mission establishes a clear long-term
goal for a company for all employees to aspire.
In contrast, a "corporate vision" concretely describes how a company sees itself in the
future. In the current age of rapid change, a corporate vision is of a more medium-term
nature.
Corporate Vision
Nitin Page 34 9/10/2008

We shall undertake judgments on actions based not on whehter they
violate the law or profit the company, but on whether or not they are
socially justifiable. In the book entitled "Zen of Vegetable Roots
(Caigentan)," which is a collection of social teachings that was written
by Hong Ying Ming during the era of the Ming Dynasty it is written,
"Virtue is the foundation of a business."
Bringing financial innovations to the forefront of the financial industry,

capitalizing on new opportunities emerging via the Internet and
developing financial services that further profit customers
Becoming the leader in creating and growing pivotal 21st-century

industry
Continuing to be a company that evolves of its own volition through

formation of an organization that flexibly adapts to changes in the
operating environment and a corporate DNA composed of "Ingenuity"
and "Self-transformation"
Ensuring each company in the SBI Group carries out its social and
economic responsibilities to all stakeholders and society.
An overview of Mutual Funds in India

Introduction:
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial
goal. The money collected & invested by the fund manager in different types of securities depending upon
the objective of the scheme. These could range from shares to debentures to money market instruments.
The income earned through these investments and its unit holders in proportion to the number of units
owned by them (pro rata) shares the capital appreciation realized by the scheme. Thus, a Mutual Fund is
the most suitable investment for the common person as it offers an opportunity to invest in a diversified,
professionally managed portfolio at a relatively low cost. 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 answer to all these situations. It appoints professionally qualified and experienced
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. In effect, the mutual fund vehicle
Nitin Page 35 9/10/2008

exploits economies of scale in all three areas - research, investments and transaction processing. While the
concept of individuals coming together to invest money collectively is not new, the mutual fund in its
present form is a 20th century phenomenon. In fact, mutual funds gained popularity only after the Second
World War. Globally, there are thousands of firms offering tens of thousands of mutual funds with different
investment objectives. Today, mutual funds collectively manage almost as much as or more money as
compared to banks.
CONCEPT
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 appreciation realized is
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 person 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:
THE SECURITY AND EXCHANGE BOARD OF INDIA (Mutual Funds) REGULATIONS,1996 defines
a mutual fund as a " a fund establishment in the form of a trust to raise money through the sale of units to
the public or a section of the public under one or more schemes for investing in securities, including money
market instruments."
Mutual Funds have been a significant source of investment in both government and corporate securities. It
has been for the decades the monopoly of the state with UTI being the key player with invested funds
exceeding Rs. 300 bn. (US $ 10 bn.). The state owned insurance companies also hold a portfolio of stocks.
Presently, numerous mutual funds exist, including private and foreign companies. Banks - mainly state
owned too have established Mutual Funds (MFs). Foreign participation in mutual funds and asset
management companies permitted on a case-by-case basis.
Structure of the Indian mutual fund industry
The Indian mutual fund industry is dominated by the Unit Trust of India, which has a total corpus of
Rs700bn collected from more than 20 million investors. The UTI has many funds/schemes in all categories
i.e. equity, balanced, income etc with some being open-ended and some being closed-ended. The Unit
Scheme 1964 commonly referred to as US 64, which is a balanced fund, is the biggest scheme with a
corpus of about Rs200bn. Most of its investors believe that the UTI is government owned and controlled,
which, while legally incorrect, is true for all practical purposes.
The second largest category of mutual funds is the ones floated by nationalized banks. Can bank Asset
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 Jeevan Bima Sahayog AMC
floated by the LIC are some of the other prominent ones.
Some of the AMCs operating currently are:
Name of the AMC Nature of ownership
Alliance Capital Asset Management (I) Private Limited Private foreign
Birla Sun Life Asset Management Company Limited Private Indian
Bank of Baroda Asset Management Company Limited Banks
Bank of India Asset Management Company Limited Banks
Can bank Investment Management Services Limited Banks
Cholamandalam Cazenove Asset Management Company Limited Private foreign
Dundee Asset Management Company Limited Private foreign
DSP Merrill Lynch Asset Management Company Limited Private foreign
Escorts Asset Management Limited Private Indian
First India Asset Management Limited Private Indian
GIC Asset Management Company Limited Institutions
IDBI Investment Management Company Limited Institutions
Indfund Management Limited Banks
ING Investment Asset Management Company Private Limited Private foreign
J M Capital Management Limited Private Indian
Jardine Fleming (I) Asset Management Limited Private foreign
Kotak Mahindra Asset Management Company Limited Private Indian
Kothari Pioneer Asset Management Company Limited Private Indian
Jeevan Bima Sahayog Asset Management Company Limited Institutions
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Morgan Stanley Asset Management Company Private Limited Private foreign
Punjab National Bank Asset Management Company Limited Banks
Reliance Capital Asset Management Company Limited Private Indian
State Bank of India Funds Management Limited Banks
Shriram Asset Management Company Limited Private Indian
Sun F and C Asset Management (I) Private Limited Private foreign
Sundaram Newton Asset Management Company Limited Private foreign
Tata Asset Management Company Limited Private Indian
Credit Capital Asset Management Company Limited Private Indian
Templeton Asset Management (India) Private Limited Private foreign
Unit Trust of India Institutions
Zurich Asset Management Company (I) Limited Private foreign
Recent trends in mutual fund industry

The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned
mutual fund companies and the decline of the companies floated by nationalized banks and smaller private
sector players.
Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start
due to the stock market boom prevailing then. These banks did not really understand the mutual fund
business and they just viewed it as another kind of banking activity. Few hired specialized staff and
generally chose to transfer staff from the parent organizations. The performance of most of the schemes
floated by these funds was not good. Some schemes had offered guaranteed returns and their parent
organizations had to bail out these AMCs by paying large amounts of money as the difference between the
guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been
able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have
serious plans of continuing the activity in a major way.
The experience of some of the AMCs floated by private sector Indian companies was also very similar.
They quickly realized that the AMC business is a business, which makes money in the long term and
requires deep-pocketed support in the intermediate years. Some have sold out to foreign owned companies,
some have merged with others and there is general restructuring going on.
They can be credited with introducing many new practices such as new product innovation, sharp
improvement in service standards and disclosure, usage of technology, broker education and support etc. In
fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have
improved dramatically in the last few years in response to the competition provided by these.
Performance of Mutual Funds in India
Let us start the discussion of the performance of mutual funds in India from the day the concept of mutual
fund took birth in India. The year was 1963. Unit Trust of India invited investors or rather to those who
believed in savings, to park their money in UTI Mutual Fund. The performance of mutual funds in India in
the initial phase was not even closer to satisfactory level. People rarely understood, and of course investing
was out of question. But yes, some 24 million shareholders were accustomed with guaranteed high returns
by the beginning of liberalization of the industry in 1992. This good record of UTI became marketing tool
for new entrants. The expectations of investors touched the sky in profitability factor. However, people
were miles away from the preparedness of risks factor after the liberalization.
The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the
performance of mutual funds in India through figures. From Rs. 67bn. the Assets Under Management rose
to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as
high as Rs. 1,540bn. The net asset value (NAV) of mutual funds in India declined when stock prices started
falling in the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative
investments. There was rather no choice apart from holding the cash or to further continue investing in
shares. One more thing to be noted, since only closed-end funds were floated in the market, the investors
disinvested by selling at a loss in the secondary market.
The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal, the losses
Nitin Page 37 9/10/2008

by disinvestments and of course the lack of transparent rules in the whereabouts rocked confidence among
the investors. Partly owing to a relatively weak stock market performance, mutual funds have not yet
recovered, with funds trading at an average discount of 1020 percent of their net asset value. The measure
was taken to make mutual funds the key instrument for long-term saving. The more the variety offered, the
quantitative will be investors. At last to mention, as long as mutual fund companies are performing with
lower risks and higher profitability within a short span of time, more and more people will be inclined to
invest until and unless they are fully educated with the dos and don'ts of mutual funds.
Market Trends
COMPARISION OF MUTUAL FUNDS WITH OTHER INSTRUMENT
A lone UTI with just one scheme in 1964 now competes with as many as 400 odd products and 34 players
in the market. In spite of the stiff competition and losing market share, Last six years have been the most
turbulent as well as exiting ones for the industry. New players have come in, while others have decided to
close shop by either selling off or merging with others. Product innovation is now passé with the game
shifting to performance delivery in fund management as well as service. Those directly associated with the
fund management industry like distributors, registrars and transfer agents, and even the regulators have
become more mature and responsible.
The industry is also having a profound impact on financial markets. While UTI has always been a
dominant player on the bourses as well as the debt markets, the new generations of private funds, which
have gained substantial mass, are now flexing their muscles. Fund managers, by their selection criteria for
stocks have forced corporate governance on the industry. Rewarding honest and transparent management
with higher valuations has created a system of risk-reward created where the corporate sector is more
transparent then before.
Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and technology
sector. Funds performances are improving. Funds collection, which averaged at less than Rs100bn per
annum over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. In the current year
mobilization till now have exceeded Rs300bn. Total collection for the current financial year ending March
2000 is expected to reach Rs450bn.
What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds
rather than public sector mutual funds. Indeed private MFs saw a net inflow of Rs. 7819.34 Crore during
the first nine months of the year as against a net inflow of Rs.604.40 Crore in the case of public sector
funds.
MUTUAL FUNDS ADVANTAGES:
The benefits on offer are many with good post-tax returns and reasonable safety being the hallmark that we
normally associate with them. Some of the other major benefits of investing in them are:
Number of available options

Mutual funds invest according to the underlying investment objective as specified at the time of launching
a scheme. So, we have equity funds, debt funds, gilt funds and many others that cater to the different needs
of the investor. The availability of these options makes them a good option. While equity funds can be as
risky as the stock markets themselves, debt funds offer the kind of security that aimed at the time of
making investments. Money market funds offer the liquidity that desired by big investors who wish to park
surplus funds for very short-term periods. The only pertinent factor here is that the fund has to selected
keeping the risk profile of the investor in mind because the products listed above have different risks
associated with them. So, while equity funds are a good bet for a long term, they may not find favor with
corporate or High Net worth Individuals (HNIs) who have short-term needs.
Diversification
Investments spread across a wide cross-section of industries and sectors and so the risk is reduced.
Diversification reduces the risk because not all stocks move in the same direction at the same time. One
can achieve this diversification through a Mutual Fund with far less money than one can on his own.
Professional Management
Mutual Funds employ the services of skilled professionals who have years of experience to back them up.
They use intensive research techniques to analyze each investment option for the potential of returns along
with their risk levels to come up with the figures for performance that determine the suitability of any
potential investment.
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Potential of Returns
Returns in the mutual funds are generally better than any other option in any other avenue over a
reasonable period. People can pick their investment horizon and stay put in the chosen fund for the
duration. Equity funds can outperform most other investments over long periods by placing long-term calls
on fundamentally good stocks. The debt funds too will outperform other options such as banks. Though
they are affected by the interest rate risk in general, the returns generated are more as they pick securities
with different duration that have different yields and so are able to increase the overall returns from the
Get Focused
I will admit that investing in individual stocks can be fun because each company has a unique story.
However, it is important for people to focus on making money. Investing is not a game. Your financial
future depends on where you put you hard-earned dollars and it should not take lightly.
Efficiency
By pooling investors' monies together, mutual fund companies can take advantage of economies of scale.
With large sums of money to invest, they often trade commission-free and have personal contacts at the
brokerage firms.
Ease of Use
Can you imagine keeping track of a portfolio consisting of hundreds of stocks? The bookkeeping duties
involved with stocks are much more complicated than owning a mutual fund. If you are doing your own
taxes, or are short on time, this can be a big deal.
Wealthy stock investors get special treatment from brokers and wealthy bank account holders get special
treatment from the banks, but mutual funds are non-discriminatory. It doesn't matter whether you have $50
or $500,000, you are getting the exact same manager, the same account access and the same investment.
Risk
In general, mutual funds carry much lower risk than stocks. This is primarily due to diversification (as
mentioned above). Certain mutual funds can be riskier than individual stocks, but you have to go out of
your way to find them.
With stocks, one worry is that the company you are investing in goes bankrupt. With mutual funds, that
chance is next to nil. Since mutual funds, typically hold anywhere from 25-5000 companies, all of the
companies that it holds would have to go bankrupt.
I will not argue that you should not ever invest in individual stocks, but I do hope you see the advantages of
using mutual funds and make the right choice for the money that you really care about.
Drawbacks of Mutual Funds
Mutual funds have their drawbacks and may not be for everyone:
No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of
mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer
risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone
who invests through a mutual fund runs the risk of losing money.
Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some
funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial
planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you
buy shares in a Load Fund.
Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of
the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income
you receive, even if you reinvest the money you made.
Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you
might not make as much money on your investment as you expected. Of course, if you invest in Index
Funds, you forego management risk, because these funds do not employ managers
Regulatory Aspects
Schemes of a Mutual Fund
The asset management company shall launch no scheme unless the trustees approve such scheme and a
copy of the offer document has filed with the Board.
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Every mutual fund shall along with the offer document of each scheme pay filing fees.
The offer document shall contain disclosures, which are adequate in order to enable the investors to make
informed investment decision including the disclosure on maximum investments proposed to make by the
scheme in the listed securities of the group companies of the sponsor a close-ended scheme shall fully
redeemed at the end of the maturity period. "Unless a majority of the unit holders otherwise decide for its
rollover by passing a resolution".
The mutual fund and asset management company shall be liable to refund the application money to the
applicants,-
(i) If the mutual fund fails to receive the minimum subscription amount referred to in clause (a) of sub-
regulation (1);
(ii) If the moneys received from the applicants for units are in excess of subscription as referred to in clause
(b) of sub-regulation (1).
Rules Regarding Advertisement:
The offer document and advertisement materials shall not be misleading or contain any statement or
opinion, which are incorrect or false.
General Obligations:
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.
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.
Conclusion:
Mutual funds are funds that pool the money of several investors to invest in equity or debt markets. Mutual
Funds could be Equity funds, Debt funds or balanced funds.
Fund are selected on quantitative parameters like volatility, FAMA Model, risk adjusted returns, and rolling
return coupled with a qualitative analysis of fund performance and investment styles through regular
interactions / due diligence processes with fund managers.
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Market Trends
A lone UTI with just one scheme in 1964, now competes with as many as 400 odd
products and 34 players in the market. In spite of the stiff competition and losing market
share, UTI still remains a formidable force to reckon with.
Last six years have been the most turbulent as well as exiting ones for the industry. New
players have come in, while others have decided to close shop by either selling off or
merging with others. Product innovation is now passé with the game shifting to
performance delivery in fund management as well as service. Those directly associated
with the fund management industry like distributors, registrars and transfer agents, and
even the regulators have become more mature and responsible.
The industry is also having a profound impact on financial markets. While UTI has
always been a dominant player on the bourses as well as the debt markets, the new
generation of private funds which have gained substantial mass are now seen flexing
their muscles. Fund managers, by their selection criteria for stocks have forced corporate
governance on the industry. By rewarding honest and transparent management with
higher valuations, a system of risk-reward has been created where the corporate sector is
more transparent then before.
Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG
and technology sector. Funds performances are improving. Funds collection, which
averaged at less than Rs.100bn per annum over five-year period spanning 1993-98
doubled to Rs.210bn in 1998-99. In the current year mobilization till now have exceeded
Rs.300bn. Total collection for the current financial year ending March 2000 is expected
to reach Rs.450bn.
What is particularly noteworthy is that bulk of the mobilization has been by the private
sector mutual funds rather than public sector mutual funds. Indeed private MFs saw a net
inflow of Rs.7819.34 crore during the first nine months of the year as against a net
inflow of Rs.604.40 crore in the case of public sector funds.
Mutual funds are now also competing with commercial banks in the race for retail
investor’s savings and corporate float money. The power shift towards mutual funds has
become obvious. The coming few years will show that the traditional saving avenues are
losing out in the current scenario. Many investors are realizing that investments in
savings accounts are as good as locking up their deposits in a closet. The fund
mobilization trend by mutual funds in the current year indicates that money is going to
mutual funds in a big way. The collection in the first half of the financial year 1999-2000
matches the whole of 1998-99.
India is at the first stage of a revolution that has already peaked in the U.S. The U.S.
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boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund
assets are not even 10% of the bank deposits, but this trend is beginning to change.
Recent figures indicate that in the first quarter of the current fiscal year mutual fund
assets went up by 115% whereas bank deposits rose by only 17%. (Source: Thinktank,
The Financial Express September, 99) This is forcing a large number of banks to adopt
the concept of narrow banking wherein the deposits are kept in Gilts and some other
assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be
ignored and they will not close down completely. Their role as intermediaries cannot be
ignored. It is just that Mutual Funds are going to change the way banks do business in the
future.
BANKS V/S MUTUAL FUNDS
BANKS MUTUAL FUNDS
Returns Low Better
Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Interest calculation Minimum balance between Everyday
10th.
& 30th. Of every month
Guarantee Maximum Rs.1 lakh on None
deposits
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Trends In Mutual Fund Investing
March 2006
Washington, DC, April 27, 2006 - The combined assets of the nation's mutual funds increased
by $138.4 billion, or 1.5 percent, to $9.359 trillion in March, according to the Investment Company
Institute's official survey of the mutual fund industry. In the survey, mutual fund companies report
actual assets, sales, and redemptions to ICI.
Total Net Assets of Mutual Funds

(billions of dollars)
March 06 Feb 06 % chg Dec 05

Stock Funds 5,339.9 5,198.1R 2.7 4,940.0
Hybrid Funds 588.1 582.5R 1.0 567.3
Taxable Bond Funds 1,039.5 1,043.2R -0.3 1,018.6
Municipal Bond Funds 345.0 346.1 -0.3 338.8
Taxable Money Market Funds 1,702.4 1,701.5R 0.1 1,706.5
Tax-Free Money Market Funds 344.2 349.5 -1.5 334.0
Total 9,359.2 9,220.8R 1.5 8,905.2
R=Revised data
Highlights: Long-term funds - stock, bond, and hybrid funds -had a net inflow of $39.88 billion in
March, vs. a net inflow of $36.84 billion in February.
Stock funds posted an inflow of $34.04 billion in March, compared with an inflow of $27.35 billion
in February. Among stock funds, world equity funds (US funds that invest primarily overseas)
posted an inflow of $18.48 billion in March, vs. an inflow of $19.06 billion in February. Funds that
invest primarily in the US had an inflow of $15.56 billion in March, vs. an inflow of $8.29 billion in
February. For the first three months of the year, world equity funds had inflows of $61.08 billion
and domestic funds had inflows of $31.88 billion.
Hybrid funds posted an inflow of $634 million in March, compared with an inflow of $760 million in
February.
Bond funds had an inflow of $5.21 billion in March, compared with an inflow of $8.73 billion in
February. Taxable bond funds had an inflow of $3.98 billion in March, vs. an inflow of $5.87 billion
in February. Municipal bond funds had an inflow of $1.22 billion in March, compared with an
inflow of $2.86 billion in February.
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Money market funds had an outflow of $9.42 billion in March, compared with an inflow of $5.45
billion in February. Funds offered primarily to institutions had an outflow of $10.13 billion. Funds
offered primarily to individuals had an inflow of $710 million.
Net New Cash Flow of Long-Term Funds

(millions of dollars)
Stock Mutual Funds

March 2006 Feb 2006 YTD 2006 YTD 2005
New Sales 124,368 102,815R 351,964 271,192R

Redemptions -90,273 -75,788R -261,233 -219,613R
Exchanges In 19,659 17,181R 61,617 47,698R
Exchanges Out -19,715 -16,860 -59,383 -51,726R
Net New Cash Flow 34,040 27,348R 92,964 47,552R
Hybrid Mutual Funds
New Sales 9,516 8,238R 27,369 32,417R

Redemptions -8,198 -7,100 -24,353 -20,098R
Exchanges In 1,388 1,205 4,199 4,521
Exchanges Out -2,072 -1,582 -5,936 -3,647
Net New Cash Flow 634 760R 1,280 13,193R
Taxable Bond Mutual Funds
New Sales 28,088 25,115R 81,669 78,106R

Redemptions -23,093 -18,702R -63,777 -71,945R
Exchanges In 3,566 3,091R 11,136 10,561R
Exchanges Out -4,577 -3,637 -12,945 -12,024R
Net New Cash Flow 3,984 5,867R 16,083 4,697R
Municipal Bond Mutual Funds
New Sales 6,349 6,847 19,801 14,625R

Redemptions -5,183 -4,086 -13,886 -13,069R
Exchanges In 900 845 2,843 2,403
Exchanges Out -841 -746 -2,625 -2,671
Net New Cash Flow 1,224 2,860 6,133 1,288
Net New Cash Flow of Money Market Funds

(millions of dollars)
March 06 Feb 06 YTD 2006 YTD 2005
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-9,420 5,452R -8,404 -49,059
Liquid Assets of Stock Mutual Funds

(percent of total net assets)
March 06 Feb 06 March 05

4.0% 4.2% 4.2%
Annual Redemptions from Stock Funds

(percent of average net assets*)

19.1% 19.0% 19.1%R
*Redemptions over the most recent twelve-month period as a percent of average of total net assets at beginning and
ending of period.
Annual Redemptions and Redemption Exchanges from Stock Funds

(percent of average net assets*)

23.2% 23.1% 23.3%
*Redemptions and Redemption Exchanges over the most recent twelve-month period as a percent of average of total net
assets at beginning and ending of period.
Number of Mutual Funds in this Report

Stock Funds 4,611 4,599R 4,541
Hybrid Funds 512 510 503R
Taxable Bond Funds 1,277 1,281 1,280R
Municipal Bond Funds 737 740 762
Taxable Money Market Funds 590 591R 632R
Tax-free Money Market Funds 275 275 303
Total 8,002 7,996R 8,021R
R=Revised data
Nitin Page 45 9/10/2008

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Nitin Page 1 9/10/2008

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Thus, a mutual fund is a collective investment process. An Asset Management

Mutual Fund Operation Flow Chart

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H. Open – Ended Schemes

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A. Growth/Equity Oriented Schemes

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A. Tax Saving (ELSS) Schemes

B. Sector Specific Schemes

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Advantages of Mutual Fund

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THE RISK-RETURN TRADE-OFF

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Birla Sun Life Mutual Fund

Bank of Baroda Mutual Fund

HDFC Mutual Fund

HSBC Mutual Fund

ING Vyasya Mutual Fund

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State Bank of India Mutual Fund

Tata Mutual Fund

Kotak Mahindra Mutual Fund

Reliance Mutual Fund

Standard Chartered Mutual Fund

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Franklin Templeton India Mutual Fund

Morgan Stanley Mutual Fund India

Escorts Mutual Fund

Alliance Capital Mutual Fund

Benchmark Mutual Fund

Can bank Mutual Fund

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Chola Mutual Fund

LIC Mutual Fund

GIC Mutual Fund

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Benefits of Mutual Funds

Professional Management: An average investor lacks the Knowledge of capital market

Reduction in transaction costs: Compared to direct investing in the capital

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How to Measure a Mutual Fund's Performance

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Ownership Pattern Foreign - 37%,

Sponsor State Bank of India,

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Debt Funds (Open End) 12

Short-term Debt (Open End) 12

Hybrid Funds (Open End) 3

Chief Executive Syed Shahabuddin

Chief Investment Officer Sanjay Sinha

Investor Relations Officer G Kandasubramanian