yatheesha.doc

A STUDY ON PERFORMANCE ANALYSIS OF SBI MAGNUM TAX GAIN SCHEME

1.1 INTRODUCTION

A Mutual fund is a pool of money that is managed on behalf of the investors,

by a Professional fund manager. The manager uses the money to buy stocks, bonds

and other securities according to specific investment objective that have been

established for the fund. In return of the investment, the investors are given units for

that fund. The investments range from shares to debentures to money market

instruments. Each mutual fund with different type of schemes is managed by

respective Asset Management Company (AMC). An investor can invest his money in

one or more schemes depending upon his choice. The income earned by the investor

and the capital appreciation realized by the scheme is shared by the unit holders in

proportion to the number of units held by him. Thus mutual fund is a best investment

option for a common investor as it offers an opportunity to invest in a diversified,

professionally managed portfolio at a relatively lower cost.

Mutual Funds in India are governed by the SEBI (Mutual Fund) Regulations

1996 as amended from time to time.

DEFINITION OF MUTUAL FUNDS:

“Mutual fund is non depository, non-blocking financial intermediary that acts

as an improvement vehicle for bringing wealth holders and deficit units together

directly”.

PIERCE AND JAIMES.L

“Mutual fund is a corporation which accepts money from investors and uses

the same to buy stocks, long-term and short-term debt instruments used by issuers”.

WESTON.J.FRED AND BRINGHAM

“Mutual fund is a common pool of money in which investor place their

contribution that are be invested in accordance with the stated objective. The fund

belongs to all the investors depending on the proportion of his contribution to the

fund.”

1S.V COLLEGE OF ENGINEERING, TIRUPATI


MUTUAL FUND OPERATION FLOW CHART

From the above graph it is understood that Mutual fund is:

1. Pooled Vehicle

A mutual fund (MF) is a vehicle to pool money from investors, with a promise

that the money would be invested in a particular manner, by professional managers

who are expected to honor the promise.

2. Professional Management

The idea of mutual fund is that individual investors generally lack the time, the

inclination of the skills to manage their own investments. Thus, mutual funds hire

professional managers to manage the investments for the benefit of their investors in

return for a management fee.

3. Schemes

Investors have their individual preference on how they would lay their money

invested and how much risk they are willing to take.



Individual investors could choose to hire a professional manager to manage

money as per his investment and risk preferences. Such personal treatment often

referred to as portfolio management scheme. PMS is economically feasible only for

the investment portfolio above a particular value, rarely below Rs 1000000.

It is possible to balance the time and cost required to manage investment by

grouping investors together based on their preferences. In this manner, the focus of

the investment activity can be shifted from single investor to a group of investor

having similar expectation.

For ease of management and reporting such a group of investor is identified

with a “mutual fund scheme” In commercial terminology, the investor invests in a

scheme and professional manager manage the scheme. A Mutual fund can, and

typically does, have several schemes to cater to different investor preferences.

4. Money in Trust

The mutual fund manages the investment of scheme for the benefit of its

investors. Every scheme has an:

Investment portfolio Account of income and expenditure & Account of asset

and liability.

In order to ensure fairness to investor, SEBI regulate the expenditure that can

be charged to scheme, Heather as management fee of other expenses. The gain of any

scheme belongs to its investor. Similarly losses, if any, would need to be born by its

investors, up to the amount invested. Thus, the mutual fund manages the scheme’s

money in trust for the benefit of investor.

5. Legal Framework

Across the world, mutual fund sector is viewed as a critical mechanism to

channel investor fund in to the capital market. Since these in investor are often not so

well qualified to invest, the mutual fund business is highly regulated. Regulation

varies from country to country. But, broadly, they provided for Checks and balances

in legal structure, Pre-qualification to start a mutual fund, Permissible schemes and

investment, Control over marketing process, level of operational flexibility to

professional investor and valuation of security.



CLASSIFICATION OF MUTUAL FUNDS

Wide variety of Mutual Fund Schemes exists to cater to the needs such as

financial position, risk tolerance and return expectations etc. The table below gives an

overview into the existing types of schemes in the Industry.

By Structure

o Open - Ended Schemes

o Close - Ended Schemes

o Interval schemes

By Investment Objective

o Growth Schemes

o Income Schemes

o Balanced Schemes

o Money Market Schemes

Other Schemes

o Tax Saving Schemes

o Special Schemes

Index Schemes

Sector Specific Schemes

By Structure

Open Ended Schemes

Open- End Funds in India is such that the investors can sell as well as buy all

throughout the year. The investors sell and buy units of Open- End Funds in India at

the related prices of Net Asset Value (NAV) each day. An investor can buy Open-

End Funds in India either from a brokerage house or through the mutual fund

company. Open- End Funds in India have no fixed date of maturity. The main

advantage of Open- End Funds in India is that it offers liquidity to the investors for

they can sell the units whenever they need the money



Major Open- End Funds in India are:

UTI Gold Exchange Traded Fund

Standard Chartered Premier Equity Fund

Sahara Mid- Cap Fund

Lotus India Tax Plan

Reliance Tax Saver (ELSS) Fund

Canara Robeco Equity Tax Saver- 93

DSP Merrill Lynch Tax Saver Fund

Tata Life Sciences and Technology Fund

JM Arbitrage Advantage Fund

Kotak Gold ETF

Close Ended Schemes

Closed- End Funds in India have a fixed period of maturity which can vary

between three to fifteen years. Closed- End Funds in India can be subscribed to only

during the period of time that has been specified. Investors can make investments in

Closed- End Funds in India either during the period of public offer or buy the funds

from the stock exchanges.

In Closed- End Funds in India, the number of shares that are sold in the public

offer is fixed and after this the selling and buying of the units are possible only in the

stock exchanges. Certain Closed- End Funds in India repurchase the units periodically

at related prices of Net Asset Value (NAV) in order to provide the investors an exit

route

Major Closed- End Funds in India are:

UTI Wealth Builder

HDFC Long-Term Equity

Standard Chartered Enterprise Equity

Franklin India Smaller Companies

Birla Long-Term Advantage

Tata Capital Builder

ING Vysya C.U.B.

Prudential ICICI Fusion

Tata Equity Management



Interval Funds

Interval Funds in India combine the characteristics of both the close ended

funds and open ended funds. This means that Interval Funds in India can be

repurchased and sold at the time that has been predetermined. Interval Funds in India

are usually repurchased every six or twelve months or as has been unveiled in the

annual report and prospectus of the fund. Interval Funds in India are sold and

repurchased at the prices that are related to the Net Asset Value (NAV).

Advantages of Interval Funds in India

The advantage of Interval Funds in India is that it allows the investor more

flexibility than the close ended funds for he can sell it at the predetermined time.

Further the advantage of Interval Funds in India is that it ensures that the investor has

liquidity of capital at regular intervals of time.

By Investment objective

Growth Schemes

Growth schemes invest in those stocks of those companies whose profits are

expected to grow at a higher than average rate. For example, telecom sector is a

growth sector because many people in India still do not own a phone – so as they buy

more and more cell phones, the profits of telecom companies will increase. Similarly,

infrastructure; we do not have well connected roads all over the country; neither do

we have best of ports or airports. For our country to move forward, this infrastructure

has to be of world class. Hence companies in these sectors may potentially grow at a

relatively faster pace. Growth schemes will invest in stocks of such companies.

Income Schemes

Income schemes in India usually invest their principal in companies that give

high payouts of dividends and also in securities of fixed income such as corporate

debentures, government securities, and bonds. The advantage of Income Funds in

India is that it provides regular income to the investor either on a monthly or quarterly

basis. Further the advantage of Income Funds in India is that it also provides stability

of capital to the investor. Income Funds share prices are not fixed for they have a

tendency to grow with the fall in interest rates and fall with the rise of the interest



rates. The bonds that are there in Income Funds are usually of the investment grade.

The other bonds are of such credit quality that they assure the protection of the

capital.

Balanced Schemes

The Balanced fund aims to provide both growth and income. These funds

invest in both shares and fixed income securities in the proportion indicated in their

offer documents. Ideal for investors who are looking for a combination of income

and moderate growth.

Balanced mutual funds have a portfolio mix of bonds, preferred stocks and

common stocks. Balanced mutual funds aim to conserve investors’ initial investment,

to pay an income and to aid in the long-term growth of both the principle and the

income.

Money-Market Funds

These are generally the safest and most secure of mutual fund investments.

They invest in the largest, most stable securities, including Treasury bills. The

chances of your capital being eroded are very minimal. Money-market funds are risk-

free. If you invest a thousand rupees, you will get that money back. It is simply a

matter of when you get it back. When investing in a money-market fund, you should

pay attention to the interest rate that is being offered, along with the rules regarding

check-writing. Money-markets have allowed investors to reap high yields on their

deposits, and have made the entire investment process more accessible to people.

The interest rates on money-market funds are changing nearly day to day. In

times of inflation, these funds have had high yields.

Other Schemes

Tax Saving Schemes

Investors in India opt for the tax-saving mutual fund schemes for the simple

reason that it helps them to save money. The tax-saving mutual funds or the equity-

linked savings schemes (ELSS) receive certain tax exemptions under Section 88 of

the Income Tax Act. That is one of the reasons why the investors in India add the tax-



saving mutual fund schemes to their portfolio. The tax-saving mutual fund schemes

are one of the important types of mutual funds in India that investors can opt for.

SPECIAL SCHEMES

1. Index schemes

Equity Schemes come in many variants and thus can be segregated according

to their risk levels. At the lowest end of the equity funds risk – return matrix come the

index funds while at the highest end come the sectoral schemes or specialty schemes.

These schemes are the riskiest amongst all type schemes as well. However, since

equities as an asset class are risky, there is no guaranteeing return for any type of

fund. Index Funds invest in stocks comprising indices, such as the Nifty 50, which is a

broad based index comprising 50 stocks. There can be funds on other indices which

have a large number of stocks such as the CNX Midcap 100 or S&P CNX 500. Here

the investment is spread across a large number of stocks. In India today we find many

index funds based on the Nifty 50 index, which comprises large, liquid and blue chip

50 stocks.

2. Sector Specific Schemes

Sector- Specific Funds in India are those funds that make investments only in

those industries or sectors that have been specified in the prospectus of the funds.

Sector- Specific Funds in India usually make investments in sectors such as power,

pharmaceuticals, petroleum, and technology. The amount of returns that Sector-

Specific Funds in India give depends totally on the performance of the industries or

sectors in which investments have been made. Sector- Specific Funds in India give

very high returns but at the same time they are also very risky in comparison to the

funds that are diversified. This is the reason that the investors that have invested in

Sector- Specific Funds in India need to carefully watch the operation of those

industries or sectors and then at the correct time make an exit.

NATURE OF INCOME DISTRIBUTION

Investors often get confused between the above mentioned (Dividend Payout,

Dividend Reinvestment and Growth Options) three options which he has to choose

while investing in mutual fund’s units. These options have to be selected by the

investor at the time of purchasing the units and many a times investors feel that the



dividend reinvestment option is better than growth as they get more number of units.

Let’s understand the three options:

Growth Option

Growth option is for those investors who are looking for capital appreciation.

Say an investor aged 25 invests Rs 1 lakh in an equity scheme. He would not be

requiring a regular income from his investment as his salary can be used for meeting

his monthly expenses. He would instead want his money to grow and this can happen

only if he remains invested for a long period of time. Such an investor should go for

Growth option. The NAV will fluctuate as the market moves. So if the scheme

delivers a return of 12% after 1 year, his money would have grown by Rs. 12,000.

Assuming that he had invested at a NAV of Rs. 100, then after 1 year the NAV would

have grown to Rs 112. Notice here that neither is any money coming out of the

scheme, nor is the investor getting more units. His units will remain at 1,000 (1, 00,

000/ 100) which he bought when he invested Rs. 1 lakh @ Rs. 100/ unit.

Dividend Payout Option

In case an investor chooses a Dividend Payout option, then after 1 year he

would Receive Rs. 12 as dividend. This results in a cash outflow from the scheme.

The impact of this would be that the NAV would fall by Rs. 12 (to Rs. 100 after a

year. In the growth option the NAV became Rs. 112). Here he will not get any more

number of units (they remain at 1,000), but will receive Rs 12,000 as dividend (Rs. 12

per unit * 1,000 units). Dividend Payout will not give him the benefit of compounding

as Rs. 12,000 would be taken out of the scheme and will not continue to grow like

money which is still invested in the scheme.

Dividend Reinvestment Option

This option provides the investor an opportunity to re-invest the dividends

Declared by mutual fund back in to the fund itself at NAV that is prevalent at the time

of re-investment. The value of the units will be similar to that under the cumulative

option.



THE STRUCTURE OF MUTUAL FUND

The following figure illustrates the structure of mutual fund industry.

Figure1.1: Structure of Mutual Fund

Sponsors The sponsor is the company which sets up the mutual fund. It means anybody

corporate acting alone or in combination with another body corporate established a

mutual fund after initiating and completing the formalities.

Trustees The management of the mutual fund is subject to the control of the board of

trustees of the fund. They guide the operations of the fund and carry the crucial

responsibility to see that AMC always act in the best interest of the investors.

Asset Management Company

The mutual fund is operated by a separately established asset management

company (AMC).It manages the funds of the various schemes. It is entrusted with the

specific task of mobilizing funds under the scheme.

Custodian A custodian is a person carrying on the activities of the safekeeping of the

securities or participating in any clearing system on behalf of the clients to effect

deliveries of the securities.



Registrar and Transfer Agents

Registrars and Transfer Agents (RTAs) perform the important role of

maintaining investor records. All the New Fund Offer (NFO) forms, redemption

forms (i.e. when an investor wants to exit from a scheme, it requests for redemption)

go to the RTA’s office where the information is converted from physical to electronic

form. How many units will the investor get, at what price, what is the applicable

NAV, what is the entry load, how much money will he get in case of redemption, exit

loads, folio number, etc. is all taken care of by the RTA.

ADVANTAGES AND DIS-ADVANTAGES OF MUTUAL FUNDS

The Advantages Of Investing In A Mutual Fund Are:

1. Professional Management

Qualified professionals manage your money and they have research team that

continuously analyses the performance and prospects of companies. They also select

suitable investment to achieve the objectives of the schemes and expertise which will

add value to your investment. These fund managers are in a better position to manage

your investment and get higher returns.

2. Diversification

The cliché, “don’t put all your eggs in one basket” really applies to the

concept of intelligent investing. Diversification lowers your risk of loss by spreading

your money across various industries. It is a rare occasion when all the stocks decline

at the same time and in the same proportion. Sector funds will spread your investment

across only one industry and it would not be wise for your portfolio to be skewed

towards these types of funds for obvious reasons.

3. Choice of Schemes

Mutual Funds offer a variety of schemes that will suit your needs over a life

time. When you enter a new stage in your life, all you need to do is sit down with

your investment advisor who will help you to rearrange your portfolio to suit your

altered lifestyle.



4. Affordability

As small investors, many find that it is so not possible to buy shares of large

corporations. Mutual funds generally buy and sell securities in large volumes which

allow investors to benefit from lower trading costs. The smallest investor can get

started on mutual funds because of the minimal investment requirements. You can

invest with a minimum of Rs. 500 in a on a regular basis.

5. Tax Benefits

Investments held by investors for a period of 12 months or more qualify for

Capital gains and will be taxed accordingly (10%of the amount by which the

investment appreciated, or 20%after factoring in the benefits of cost indexation,

whichever is lower). These investments also get the benefits of indexation.

6. Liquidity

With open-ended funds, you can redeem all or part of your investment any

time you wish and receive the current value of the shares or the NAV related price.

Funds are more liquid than most investment in shares, deposits and bonds and the

process is standardized, making it quick and efficient so that you can get your cash in

hand as soon as possible.

7. Transparency

The performance of a mutual fund is reviewed by various publications and

rating agencies, making it easy for investors to compare one to the other. Once you

are part of a mutual fund scheme, you are provided with regular updates, for examples

daily NAVs, as well as information on the specific investment made and the fund

manager’s strategy and outlook of the scheme.

8. Well Regulated

All Mutual Funds are registered by SEBI and they function within the

provision of strict regulations designed to protect the interests of investors. The

operations of Mutual Funds are regularly monitored by SEBI.



9. Flexibility

Through features such as regular investment plans, regular withdrawal plans

and dividend reinvestment plans, you can systematical invest or withdraw funds

accordingly to your needs and convenience.

10. 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.

The Disadvantages of Investing in a Mutual Fund are:

Professional Management:

Did you notice how we qualified the advantage of professional management

with the word "theoretically"? Many investors debate over whether or not the so-

called professionals are any better than you or I at picking stocks. Management is by

no means infallible, and, even if the fund loses money, the manager still takes his/her

cut. We'll talk about this in detail in a later section.

Costs:

Mutual funds don't exist solely to make your life easier--all funds are in it for

a profit. The mutual fund industry is masterful at burying costs under layers of jargon.

These costs are so complicated that in this tutorial we have devoted an entire section

to the subject.

Dilution:

It's possible to have too much diversification (this is explained in our article

entitled "Are You Over-Diversified?"). Because funds have small holdings in so many

different companies, high returns from a few investments often don't make much

difference on the overall return. Dilution is also the result of a successful fund getting

too big. When money pours into funds that have had strong success, the manager

often has trouble finding a good investment for all the new money.



Taxes:

When making decisions about your money, fund managers don't consider your

personal tax situation. For example, when a fund manager sells a security, a capital-

gain tax is triggered, which affects how profitable the individual is from the sale. It

might have been more advantageous for the individual to defer the capital gains

liability.

Key Concepts

Net asset value (NAV)

Net asset value (NAV) is a term used to describe the value of an entity's

assets less the value of its liabilities. The term is most commonly used in relation to

open-ended or mutual funds due to the fact that shares of such funds are redeemed at

their net asset value. However, the term may also be used as a synonym for book

value or the equity value of a business. Net asset value may represent the value of the

total equity, or it may be divided by the number of shares outstanding and, thereby,

represent the per share net asset value. There is no universal method of valuing assets

and liabilities for the purposes of calculating net asset value, and the criteria used for

the valuation will depend upon the circumstances, the purposes of the valuation and

any regulations that may apply.

NAV = (Market Value of All Securities Held by Fund + Cash and Equivalent

Holdings - Fund Liabilities) / Total Fund Shares Outstanding

Entry Load

Investors have to bear expenses for availing of the services (professional

management) of the mutual fund. The first expense that an investor has to incur is by

way of Entry Load. This is charged to meet the selling and distribution expenses of

the scheme. A major portion of the Entry Load is used for paying commissions to the

distributor. The distributor (also called a mutual fund advisor) could be an

Independent Financial Advisor, a bank or a large national distributor or a regional

distributor etc. They are the intermediaries who help an investor with choosing the

right scheme, financial planning and investing in scheme s from time to time to meet

one’s requirements. Investors must ensure that his Advisor has passed the AMFI –

Mutual Fund (Advisors) module certification.


http://en.wikipedia.org/wiki/Asset

http://en.wikipedia.org/wiki/Valuation_(finance)

http://en.wikipedia.org/wiki/Valuation_(finance)

http://en.wikipedia.org/wiki/Shares_outstanding

http://en.wikipedia.org/wiki/Shareholders'_equity

http://en.wikipedia.org/wiki/Book_value

http://en.wikipedia.org/wiki/Book_value

http://en.wikipedia.org/wiki/Mutual_fund

http://en.wikipedia.org/wiki/Open-ended_fund

http://en.wikipedia.org/wiki/Liability

http://en.wiktionary.org/wiki/less#Preposition


Exit Loads

As there are Entry Loads, there exist Exit Loads as well. As Entry Loads

increase the cost of buying, similarly Exit Loads reduce the amount received by the

investor. Not all schemes have an Exit Load, and not all schemes have similar exit

loads as well. Some schemes have Contingent Deferred Sales Charge (CDSC). This is

nothing but a modified form of Exit Load, wherein the investor has to pay different

Exit Loads depending upon his investment period. If the investor exits early, he will

have to bear more Exit Load and if he remains invested for a longer period of time,

his Exit Load will reduce. Thus the longer the investor remains invested, lesser is the

Exit Load. After some time the Exit Load reduces to nil; i.e. if the investor exits after

a specified time period, he will not have to bear any Exit Load.

Sale price

It is the pay when you invest in a scheme, also called as “offer price”.

Re purchase price

It is the price at which a close ended scheme re-purchases its units and it may

include a back end load. This is also called bid price.

Redemption price

It is the price at which an open ended scheme repurchases their units and close

ended schemes redeem their units on maturity. Such prices are NAV related.

Systematic investment plan:

A specific amount should be invested for a continuous period at regular

intervals under this plan.

SIP is similar to a regular saving scheme like a recurring deposit. It is a

method of investing a fixed sum regularly in a mutual fund.

SIP allows the investor to buy units on a given date every month. The investor

decides the amount and also the mutual fund scheme.

While the investor's investment remains the same, more number of units can

be bought in a declining market and less number of units in a rising market.

The investor automatically participates in the market swings once the option

for SIP is made.



Categories of Mutual Funds

Large Cap Funds Large Cap Funds in India are a kind of mutual fund that looks for

appreciation of capital by investing mainly in the shares of companies that are big

blue chip. The big blue chip companies in which Large Cap Funds in India make their

investments have above- average potential for growth in earnings. The large cap

companies in which Large Cap Funds in India makes investments are usually

companies that have a market capitalization that is more than Rs. 1000 crores. The

main advantage of Large Cap Funds in India is that they are considered to be of low

return and low risk category. This ensures that the investments of the investors are

relatively safe.

Mid - Cap funds

Mid-cap funds are a special type of mutual fund wherein, the corpus

accumulated is invested in small or medium sized companies. In the absence of any

standardized definition or definite classification of small or medium sized company,

each mutual fund classifies small and medium sized companies according to its own

policies. In general, companies with a market capitalization up to Rs 500 crores are

regarded as small and companies with a market capitalization over Rs 500 crores but

below Rs 1,000 crores are defined as medium sized by the mutual fund industry. Mid-

cap funds bear high risk factors and thus offer high returns in case of positive

movements of the indexes.

Small - Cap Funds

A small-cap fund, like Turner Small Cap Equity, will focus on companies with

a market value below $1 billion. The volatility of the fund often depends on the

aggressiveness of the manager. Aggressive small-cap managers will buy hot growth

and technology companies, taking high risks in hopes of high rewards. More

conservative "value" managers will look for companies that have been beaten down

temporarily by the stock market. Value funds aren't as risky as the hot growth funds,

but they can still be volatile. Because of their volatility, small-cap funds require that

you have enough time to make up for short-term losses. And as we saw during 1997

and 1998, there are times when the market turns away from small-cap companies

altogether for extended periods.



1.2 INDUSTRY PROFILE

A Mutual Fund is defined as “a financial service organization that it receives

money from shareholders, invests it, earns return on it, attempts to make it grow and

agrees to pay the shareholder cash on demand for the current value of his investment”

The primary objective of all mutual funds is to provide better returns to

investors by minimizing risk associated with capital market investment. Naturally the

degree of risk associated with expected returns and the associated benefits differs.

The concept of mutual funds in India dates back to the year 1963. The era

between 1963 and 1987 marked the existence of only one mutual fund company in

India with Rs. 67bn assets under management (AUM), by the end of its monopoly era,

the Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund

companies in India took their position in mutual fund market. The new entries of

mutual fund companies in India were SBI Mutual Fund, Can bank Mutual Fund,

Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual

Fund.

The succeeding decade showed a new horizon in Indian mutual fund industry.

By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private

sector funds started penetrating the fund families. In the same year the first Mutual

Fund Regulations came into existence with re-registering all mutual funds except

UTI. The regulations were further given a revised shape in 1996. Kothari Pioneer was

the first private sector mutual fund company in India which has now merged with

Franklin Templeton. Just after ten years with private sector player’s penetration, the

total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in

India.

HISTORY OF MUTUAL FUNDS

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 of India.

The history of mutual funds in India can be broadly divided into four distinct phases.



First Phase – 1964-87Unit 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.

The second is the UTI Mutual Fund, 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.

1. 33 assets management companies manage the financial assets over 2000

billion contributed by the 20 million investors.

2. Majority of the funds approximately 96% of the funds are open ended

remaining are close ended type

3. 48% growth in four decades 1965 – 2005.

Figure 1.1: Growth in Assets under Management



The Sponsors of Association of Mutual Funds in India

Bank Sponsored Institutions

SBI Fund Management Ltd.

Bank of Baroda Asset Management Co. Ltd.

Canara Investment Management Services Ltd.

UTI Asset Management Pvt.Ltd.

GIC Asset Management Co. Ltd.

Jeevan Bhima Sahayog Asset Management Co. Ltd.

Predominantly Indian Joint Ventures

Birla Sun Life Asset Management Co .Ltd

DSP Merrill Lynch Fund Managers Limited

HDFC Asset Management Co. Ltd

Predominantly Foreign Joint Ventures

ABN Amro Asset Management (I) Ltd.

Alliance Capital Asset Management (India)Pvt. Ltd

Deutsche Asset Management (India) Pvt.Ltd

Fidelity Fund Management Pvt. Ltd

Franklin Templeton Asset Management (India) Pvt. Ltd

HSBC Asset Management (India) pvt.ltd

ING Investment Management (India) pvt.ltd

Morgan Stanley Investment Management pvt.ltd

Principal Asset Management Co.pvt. ltd

Prudential ICICI Asset Management Co.ltd

Standard Chartered Asset Management Co. pvt. ltd



1.3COMPANY PROFILE

INTRODUCTION:

SBI Funds Management is a joint venture between State Bank of India, the

country’s largest bank and Societe Generale Asset Management (France). A

subsidiary of state bank of India, the largest public sector bank in India & a joint

venture with societe Generale asset management with a shareholding ratio of 63:37.

One of the world’s leading fund management companies. With over 20 years of rich

experience in fund management, SBI Funds Management Pvt. Ltd. Is one of the

largest investment management firms in India managing investment mandates of over

46 lakh investors with a network of over 130 points of acceptance spread across India

our vast family of investors is expanding faster and further.

SBI MUTUAL FUND –BACK GROUND:

SBI Mutual Fund, the first bank sponsored mutual fund in India, was

incorporated on 29 June, 1987 by SBI. The first scheme launched by the fund was

‘Magnum Regular Income Scheme-1987’. The Fund has 26 schemes, out of which

21 are open-ended, with an AUM of Rs. 27,431 Core as on 30 th November, 2007.

Until May 1993, SBI Capital Markets Limited (SBICAP), the investment banking

subsidiary of SBI, was the investment Manager as well as the Trustee of the Fund. In

December 2004, SBI entered into a joint venture agreement with societe Generale

asset management and transferred 37% equity shares to them.

SBI Mutual Fund has won the prestigious CNBC TV 18 Crisil Mutual Fund

of the year award 2007, apart from winning five awards for scheme performance. SBI

Mutual Fund has also won the most preferred brand of mutual fund at the CNBC

Awaaz Consumer Awards in 2006 and 2007. But above all, it is the trust of over 46

lakh investors that eggs us on to deliver innovative and stable investment services,

day after day. It is the driving force for our team of investment experts to develop and

deliver products that help investors like you achieve their financial objectives.

SBI Mutual Fund is one of the fastest growing mutual fund houses in India

having launched 40 schemes with over Rs.20000 Cores as Assets under Management.

We are currently experiencing growth in many areas with our investor base of over 35

lacks across India, a large network of over 100 points of acceptance, 26 Investor

Service Centers, 28 Investor Service Desks and 42 District Organizers."



SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country

with an investor base of over 5.4 million. With over 20 years of rich experience in

fund management, SBI MF brings forward its expertise in consistently delivering

value to its investors.

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an

enviable track record in judicious investments and consistent wealth creation. The

fund traces its lineage to SBI - India’s largest banking enterprise. The institution has

grown immensely since its inception and today it is India's largest bank, patronized by

over 80% of the top corporate houses of the country.

SBI Mutual Fund is a joint venture between the State Bank of India and

Society General Asset Management, one of the world’s leading fund

management companies that manages over US$ 500 Billion worldwide.

Exploiting expertise, compounding growth:

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

successfully redeemed fifteen of them. In the process it has rewarded its investors

handsomely with consistently high returns. A total of over 5.4 million investors have

reposed their faith in the wealth generation expertise of the Mutual Fund. Schemes of

the Mutual fund have consistently outperformed benchmark indices and have emerged

as the preferred investment for millions of investors and HNI’s.

Today, the fund manages over Rs31, 794 cores of assets and has a diverse

profile of investors actively parking their investments across 36 active schemes. The

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

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

and 56 district organizers.

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

Resurgent India Opportunities Fund. Growth through innovation and stable

investment policies is the SBI MF credo.

Investment Philosophy:

The Company seeks to provide investors with opportunities for long

term growth in capital through superior stock selection and active portfolio

management.



BOARD OF TRUSTEES

Shri T.L. Palani Kumar

Independent

Shri C.M. Dixit

Independent

Ms. Sandra Martyres

Associate

Ms. Bharati Rao

Associate

Mr. Krishnamurthy Vijayan

Independent

Mr. Shriniwas Joshi

Independent

Board of Directors

Mr. Pratip Chaudhuri

Chairman & Associate Director

Mr. Jayesh Gandhi

Independent Director

Mr. Deepak Kumar Chatterjee

Managing Director

Dr. H. Sadhak


Mrs. Madhu Dubhashi


Dr. H. K. Pradhan


Mr. Shyamal Acharya

Associate Director

Mr. Shishir Joshipura


Mr. Thierry Raymond Mequillet

Associate Director

Mr. Fathi Jerfel

Associate Director

Mr. Philippe Batchevitch

Alternate Director to Mr. Jerfel


http://www.sbimf.com/AboutUs/Board_of_Directors.aspx











http://www.sbimf.com/AboutUs/Trustees.aspx







INVESTOR SERVICE CENTERS



SBIMF INVESTORS SERVICE CENTERS

AHMEDABAD KOLKATTA

BANGALORE LUCKNOW

BHILAI LUDHIANA

BHOPAL MUMBAI

BHUBANESHWAR NAGPUR

CHANDIGARH NEW DELHI

CHENNAI PATNA

COIMBATORE PUNE

ERNAKULAM RANCHI

GOA SILIGURI

GUWAHATI SURAT

HYDERABAD VADODARA

INDORE VARANASI

JAIPUR VIJAYAWADA

KANPUR VIZAG

CAMS INVESTOR SERVICE CENTRES / TRANSACTION POINTS:

M/s Computer Age Management Services Pvt. Ltd. (CAMS) is the Registrar

and Transfer Agent for SBI MF schemes. At CAMS Investor Service Centers, you

may submit transactions, service requests and make enquiries about your balance,

valuation or ask for a statement. At CAMS Transaction Points, you may submit

transactions and service requests for execution by the nearest Investor Service Centre.

SBIMF INVESTORS SERVICE DESK:



AGRA JODHPUR

ALLAHABAD KOLHAPUR

AJMER KOTA

AMRITSAR MADURAI

AURANGABAD MANGALORE

BHAVNAGAR MORADABAD

CALICUT MYSORE

DEHRADUN NASHIK

DURGAPUR NOIDA

FARIDABAD PANIPAT

GHAZIABAD RAIPUR

GORAKHPUR RAJAHMUNDRY

GURGAON RAJKOT

GWALIOR ROURKELA

HISSAR SHIMLA

HOWRA SRINAGAR

HUBLI TIRUPATHI

JABALPUR THIRUVANANTHAPURAM

JALANDHAR TIRUNVELI

JAMMU VARANASI

JAMNAGAR VISHAKHAPATNAM

JAMSHEDPUR WARANGAL

1.4 PRODUCT PROFILESBI MAGNUM TAX GAIN SCHEME



SBI Magnum Tax gain scheme is an open-ended Equity Linked Savings

Scheme helps the investors to save tax under 80C of Income Tax Act.It has a lock-in

period of 3 years. This fund helps investors to address two critical issues:

Tax planning

Wealth creation

KEY FEATURES OF SBI Magnum Tax Gain – 93

Fund category : Equity – ELSS

Scheme plan : Growth

Scheme type : Open Ended from 1999

Launch date : March, 1993

Latest NAV : 108.439 (26/05/16)

52-Week High : 60.4 (13/07/10)

52-Week Low : 45.39 (16/07/09)

Fund manager : Jayesh Shroff

AMC : SBI Funds Management Ltd

Fund Objective : The fund plans to provide tax benefits along

With capital appreciation

Risk Grade : Moderately High

Return Grade : High

Net Assets (Cr) : 4604.80 (30/12/115)

Benchmark : S&P BSE 100

2.1 REVIEW OF LITERATURE



There is an extensive collection of literature which mainly focuses on US

funds and investors but very limited work has been done on mutual funds that exist in

emerging markets .This could be due to the difficulties in portfolio evaluation of these

markets (Hwang and Satchell, 1998) Moreover , the literature available on

behavioural finance is also limited both for developed and emerging markets and not

much information is available about investor perception, preference, attitudes, and

behaviour. Whatever is able to select a mutual fund which is able to offer high returns

with acceptable risk is a complex task.

Elton and gruber, grindblatt and titman (1989) were Consistent with these

findings that there is some empirical evidence that mutual fund investors make

purchase decision on the basis of past performance at all 1990 Paterl at all

1992 .However other evidence suggests that consumers are influenced by factors

other than return and risk. A consumer report (1990) server of, mutual fund in

investors found that although past performance and level of risk were relevant like

amount of sale charge management fees fund manager reputation clarity of funds

accounting statements recommendation from a financial magazine or newsletter.

Some studies reveal that there is only a slight positive relationship or no

relationship at all between previous performance and current returns (Blake et al 1993

Bogle 1992 Brown and Goetz man 1995:beown at 1992) raised the question of why

poorly performing funds still survive Harless and Peterson (1998 ) they explain that

investors tend to choose funds based on previous performance but stick to these funds

despite their poor return in a recent study of consumers rationally and the mutual fund

purchase decision.

Capon et al 1992 explored the extent to which investors make purchase

decision inconsistent with modern finance theory .The theory suggested that purchase

decisions for financial assets should be made on the basis of investors beliefs

regarding the future return and risk of those assets. Markowitz 1959 study results

offered support the mutual fund investment decision is better considered in a multi

attribute framework where return and risk are merely two aspects of a set of attributes

whose importance varies across consumers however one might hypothesize intuitively

that as mutual fund purchase value increases investors would behave in a more

rational manner simply because of the magnitude of potential gains and losses.

3.1 NEED FOR THE STUDY



Generally most of the investors investing in mutual funds in order to avail tax

benefits and also to earn returns, in this connection they would park their

funds in the tax saving schemes.

A study required to analyze the performance of SBI Tax Saving Scheme to

fulfill the objectives of the investors. Hence the study has been undertaken

The study can helpful to the investor to predict the performance of the SBI

Magnum Tax Gain Scheme.

3.2 SCOPE OF THE STUDY

My study is confined to only Tax saving scheme in SBI Mutual funds.



The study will also helpful to predict the performance of the SBI Tax Saving

Schemes in future.

Considers performance evaluation of tax saving scheme based on measures-

Mean, Standard Deviation, beta, Sharpe and Treynor.

3.3 OBJECTIVES OF THE STUDY

To evaluate the Historical performance of Tax gain scheme by using different statistical models.



To find out the Performance of Tax gain scheme with relation to Bench mark (BSE-100).

To project the future trends of SBI Tax Gain Scheme in terms of risk and return.

To know the benefits of investing in Tax gain scheme.

3.4 RESEARCH METHODOLOGY

SOURCES OF DATA:



The data has been collected based on purely secondary data.

Secondary data sources

Secondary data has been collected through internet, books, magazines, journal,

manual & records of SBI Funds Management Pvt. Ltd.

Type of study: Descriptive

Tools used

The tools used for the performance analysis of selected funds are Treynor

Ratio and Sharpe Ratio

The tools used to compare the fund performance with benchmark are Mean,

Standard deviation and Beta.



FINANCIAL TOOLS

Variance and standard deviation

The following steps are involved in calculating variance or standard deviation

of returns of assets or securities using historical returns:

Calculate the average rate of return using equation

Calculate the deviation of individual rates of return from the average rate of

return and square it. i.e.,

Calculate the sum of the squares of the deviations as determined in the

preceding step and divide it by the number of periods ( or observations) less

one to obtain variance

Calculate the square root of the variance to determine the standard deviation

Calculation of Beta

A measure of risk commonly advocated is beta. The beta of a portfolio is

computed the way the beta of an individual security is computed, to calculate the beta

of a portfolio, regress the rate or return of the portfolio on the rate of return of a

market index. The slope of this regression line is the portfolio beta. Remember that is

reflects the systematic risk of the portfolio.



PERFORMANCE MEASURE

For evaluating the performance of a portfolio it is necessary to consider both

risk and return. The two popularly employed portfolio performance measure are

Treynor measure and the Sharpe measure

Treynor Measure

According to Jack Treynor, systematic risk or beta is the appropriate measure

of risk, as suggested by the capital asset pricing model. The treynor measure of

portfolio relates the excess return on a portfolio to the portfolio beta.

The numerator of the treynor measure is the risk premium earned by the

portfolio; the denominator, the systematic risk (beta). Hence, the treynor measure

reflects the excess return earned per unit of risk. As systematic risk is the measure of

risk, the treynor measure implicitly assumes that the portfolio is well diversified.

Sharpe Ratio

The Sharpe measure is the similar to the treynor measure except that it

employs standard deviation, not beta, as the measure of risk. Thus,

Hence the Sharpe ratio measure reflects the excess return earned on a portfolio

per unit of total risk (standard deviation).



3.5 LIMITATIONS

The study has been confined to limited time period i.e., May month only.

My study purely based on secondary data.

The study is confined to data available from fact sheets and websites.

There is less period of time to analyze the future performance of Tax saving

scheme.

Micro level data have been considered for analyzing the facts.



4.1 DATA ANALYSIS & INTERPRETATION

PERFORMANCE OF SBI MAGNUM TAX GAIN SCHEME BY USING

STANDARD DEVIATION

Calculation of Standard Deviation of Selected Scheme for the Period 2011

Table: 4.1

SBI MAGNUM TAX GAIN

2011 Open Close R R-R̅ (R-R̅)2Jan 65.56 58.69 -11.7056 -8.959147 80.26632Feb 57.74 55.51 -4.01729 -1.27087 1.615109Mar 57.25 60.07 4.694523 7.4409477 55.3677Apr 61.3 60.75 -0.90535 1.8410748 3.389557May 60.23 58.83 -2.37974 0.3666864 0.134459Jun 59.08 59.26 0.303746 3.0501708 9.303542July 59.77 59.04 -1.23645 1.5099748 2.280024Aug 59.17 54.53 -8.50908 -5.762653 33.20817Sep 54.8 54.3 -0.92081 1.8256143 3.332868Oct 53.64 56.57 5.179424 7.9258484 62.81907Nov 56.15 52.53 -6.8913 -4.144876 17.17999Dec 53.21 49.93 -6.5692 -3.822772 14.61359 SUM -32.9571 283.5104

=-32.9571/12

=-2.74642

=283.5104

=283.5104/ (12-1)

=25.77367

=5.076778



CALCULATION OF STANDARD DEVIATION OF SELECTED SCHEME

FOR THE PERIOD 2012

Table: 4.2

2012 Open Close R R-R̅ (R-R̅)2Jan 49.9 55.29 9.748598 7.525379 56.63133Feb 55.61 58.11 4.302186 2.078966 4.322102Mar 57.81 58.35 0.92545 -1.29777 1.684205Apr 59.22 58.15 -1.84007 -4.06329 16.51031May 58.23 55.4 -5.1083 -7.33152 53.75122Jun 54.64 58.58 6.725845 4.502626 20.27364July 58.89 59.14 0.422726 -1.80049 3.241776Aug 59.35 60.06 1.182151 -1.04107 1.083822Sep 59.84 64.06 6.587574 4.364355 19.0476Oct 64.34 63.44 -1.41866 -3.64188 13.26331Nov 63.66 66.49 4.256279 2.03306 4.133333Dec 66.45 67.05 0.894855 -1.32836 1.764552 SUM 26.67863 195.7072

=26.67863/12

=2.223219

=195.7072

=195.7072/ (12-1)

=17.79156

=4.218005




FOR THE PERIOD 2013

Table: 4.3

2013 Open Close R R-R̅ (R-R̅)2Jan 67.56 66.93 -0.94128 -1.02281 1.046139Feb 66.66 62.93 -5.92722 -6.00875 36.10505Mar 63.13 62.6 -0.84665 -0.92817 0.861504Apr 62.82 65.1 3.502304 3.420777 11.70171May 65.83 65.99 0.242461 0.160934 0.0259Jun 65.63 64.13 -2.339 -2.42053 5.858947July 64.52 62.38 -3.43059 -3.51211 12.33494Aug 62.18 59.35 -4.76832 -4.84985 23.52105Sep 60.04 63.05 4.773989 4.692462 22.0192Oct 63.45 68.93 7.950094 7.868567 61.91435Nov 69.19 68.79 -0.58148 -0.66301 0.439578Dec 69.37 71.77 3.344016 3.262488 10.64383 Sum 0.978327 186.4722

=0.978327/12

=0.081527

=186.4722

=186.4722/ (12-1)

=16.95202

=4.117283




FOR THE PERIOD 2014

Table: 4.4.

2014 Open Close R R-R̅ (R-R̅)2Jan 71.76 69.91 -2.64626 -5.8257 33.93882Feb 69.32 73.37 5.519967 2.340523 5.478049Mar 72.74 77.35 5.959922 2.780478 7.73106Apr 77.53 78.48 1.210499 -1.96894 3.876743May 78.66 86.67 9.241952 6.062508 36.754Jun 88.38 93.69 5.667627 2.488183 6.191055July 94.01 95.19 1.239626 -1.93982 3.762894Aug 94.04 99.59 5.572849 2.393405 5.728385Sep 100.53 101.46 0.916617 -2.26283 5.120385Oct 101.31 104.39 2.950474 -0.22897 0.052427Nov 104.42 108.83 4.052191 0.872747 0.761688Dec 108.68 107.04 -1.53214 -4.71158 22.199 Sum 38.15333 131.5945

=38.15333/12

=3.179444

=131.5945

=131.5945/ (12-1)

=11.96314

=3.458777




FOR THE PERIOD 2015

Table: 4.5

2015 Open Close R R-R̅ (R-R̅)2Jan 107.2 115.23 6.968671 7.107062 50.51033Feb 115.48 115.72 0.207397 0.345788 0.119569Mar 118.25 114.33 -3.42867 -3.29028 10.82595Apr 115.67 109.86 -5.28855 -5.15016 26.52413May 111.5 114.9 2.959095 3.097486 9.594418Jun 114.68 114.85 0.148019 0.28641 0.082031July 115.93 117.46 1.302571 1.440962 2.076372Aug 117.49 110.93 -5.91364 -5.77525 33.35349Sep 109.14 111.14 1.799532 1.937923 3.755546Oct 111.15 111.95 0.714605 0.852996 0.727602Nov 111.51 110.78 -0.65896 -0.52057 0.270996Dec 110.98 110.46 -0.47076 -0.33237 0.110468 Sum -1.66069 137.9509

=-1.66069/12

=-0.13839

=137.9509

=137.9509/ (12-1)

=12.54099

=3.541326



COMPARISION OF MEAN AND STANDARD DEVIATION OF SBI

MAGNUM TAX GAIN SCHEME FOR THE PERIOD 2011 TO 2015

Chart 4.6

INFERENCE: From the above table, we came to know that SBI Magnum Tax Gain fund is

performing low in 2015 compared to 2012 and 2014.

The risk % for SBI Magnum Tax Gain Scheme is gradually decreasing from 2011 to 2014 and again it starts increasing in 2015.



COMPARISION BETWEEN RETURNS OF FUND AND BENCHMARK FOR THE PERIOD 2011SBI MAGNUM TAX GAIN:Table: 4.7

2011 R(X) R(Y) (X)2 XYJan -12.0635 -11.7056 145.529 141.211Feb -3.8002 -4.01729 14.44156 15.26652Mar 7.633809 4.694523 58.27505 35.83709Apr -1.08743 -0.90535 1.182514 0.984509May -3.17763 -2.37974 10.09735 7.561939Jun 0.73915 0.303746 0.546343 0.224514July -3.35466 -1.23645 11.25378 4.147875Aug -9.99591 -8.50908 99.91823 85.05601Sep -2.73837 -0.92081 7.498678 2.52152Oct 7.199099 5.179424 51.82702 37.28718Nov -9.58849 -6.8913 91.93916 66.07717Dec -7.4094 -6.5692 54.89928 48.67386Sum -37.6436 -32.9571 547.4079 444.8492

Beta calculation for SBI MAGNUM Tax Gain

= ((12*444.85)-(-37.64*-32.96))/((12*547.41)-(-37.64)^2)

=0.795357

Chart 4.7.1



COMPARISION BETWEEN RETURNS OF FUND AND BENCHMARK FOR THE PERIOD 2012

Table: 4.8

2012 R(X) R(Y) (X)2 XYJan 11.26791 9.748598 126.9658 109.8463Feb 3.84318 4.302186 14.77003 16.53408Mar -1.46543 0.92545 2.147496 -1.35619Apr -0.99176 -1.84007 0.983589 1.824908May -7.17423 -5.1083 51.46964 36.64814Jun 6.593019 6.725845 43.46791 44.34363July -1.16501 0.422726 1.357238 -0.49248Aug 0.488662 1.182151 0.238791 0.577673Sep 7.740569 6.587574 59.9164 50.99157Oct -1.51646 -1.41866 2.299647 2.15134Nov 4.891885 4.256279 23.93054 20.82123Dec 1.094927 0.894855 1.198865 0.979801SUM 23.60726 26.67863 328.746 282.87

= ((12*282.87)-(23.60*26.68))/((12*328.75)-(23.607)^2)

=0.816091

Chart 4.8.1




Table: 4.9

2013 R(X) R(Y) (X)2 XYJan 1.526063 -0.94128 2.32887 -1.43645Feb -6.54744 -5.92722 42.86894 38.80811Mar -0.79085 -0.84665 0.625444 0.669573Apr 4.16269 3.502304 17.32799 14.57901May 0.988298 0.242461 0.976732 0.239624Jun -3.66596 -2.339 13.43926 8.574681July -1.61867 -3.43059 2.620088 5.552988Aug -5.33931 -4.76832 28.50819 25.45952Sep 4.424119 4.773989 19.57282 21.12069Oct 8.477495 7.950094 71.86793 67.39689Nov -1.50929 -0.58148 2.277948 0.87762Dec 2.357778 3.344016 5.559116 7.884447SUM 2.464933 0.978324 207.9733 189.7267

= ((12*189.73)-(2.465*0.98))/((12*207.97)-(2.465)^2)

=0.913522

Chart 4.9.1




Table: 4.10

2014 R(X) R(Y) (X)2 XYJan -4.49233 -2.64626 20.18099 11.88786Feb 2.756419 5.519967 7.597845 15.21534Mar 7.190545 5.959922 51.70394 42.85509Apr -0.19686 1.210499 0.038755 -0.2383May 8.258 9.241952 68.19456 76.32004Jun 4.611464 5.667627 21.2656 26.13606July 0.478222 1.239626 0.228697 0.592817Aug 3.286623 5.572849 10.80189 18.31585Sep -0.34882 0.916617 0.121672 -0.31973Oct 4.235852 2.950474 17.94244 12.49777Nov 2.693082 4.052191 7.252692 10.91288Dec -3.50843 -1.53214 12.30908 5.375406SUM 24.96377 38.15332 217.6382 219.5511

= ((12*219.55)-(24.96*38.15))/((12*217.64)-(24.96)^2)

=0.845959

Chart 4.10.1




Table: 4.11

2015 R(X) R(Y) (X)2 XYJan 2.742616 6.968671 7.521943 19.11239Feb 1.014847 0.207397 1.029914 0.210476Mar -5.09202 -3.42867 25.92869 17.45886Apr -3.41366 -5.28855 11.65309 18.05333May 2.015669 2.959095 4.062922 5.964557Jun -0.81036 0.148019 0.656691 -0.11995July 2.029397 1.302571 4.118452 2.643433Aug -6.51535 -5.91364 42.44985 38.52946Sep 0.043331 1.700532 0.001878 0.073685Oct 0.885418 0.714605 0.783965 0.632724Nov -1.39111 -0.65896 1.935194 0.916688Dec -0.01346 -0.47076 0.000181 0.006337SUM -8.5047 -1.75969 100.1428 103.482

= ((12*103.48)-(-8.505*-1.76))/ ((12*100.143)-(-8.50) ^2)

=1.086273

Chart 4.11.1



COMPARISION BETWEEN RETURNS OF FUND AND BENCHMARK FOR THE PERIOD 2011 to 2015

Table: 4.12

INFERENCE:

The fund beta value for the period 2011 to 2014 is less than 1 i.e., (0.80<1),

(0.82<1), (0.91<1), (0.85<1) and for the year 2015 it is more than 1 i.e.,

(1.09>1)

Since the fund beta values are < 1 for the period 2011-2014. So stock is

defensive. If the market goes up it will also move up but a little bit lower.



MEASURING THE PERFORMANCE OF THE SBI TAX GAIN SCHEME FOR THE PERIOD 2011

1. TREYNOR RATIO

= (-32.96-0.6)/0.80

=-42.19

INFERENCE: As per Treynor ratio SBI Tax Gain Scheme has not performed well.

2. SHARPE RATIO

= (-32.96-0.6)/5.08

=-6.61

INFERENCE: As per Sharpe ratio SBI Tax Gain Scheme has not performed well.




3. TREYNOR RATIO

= (26.68-0.6)/0.82

=31.96

INFERENCE: As per Treynor ratio SBI Tax Gain Scheme has performed well.

4. SHARPE RATIO

= (26.68-0.6)/4.22

=6.18

INFERENCE: As per sharpe ratio SBI Tax Gain Scheme has performed well.




5. TREYNOR RATIO

= (0.98-0.6)/0.91

=0.41


6. SHARPE RATIO

= (0.98-0.6)/4.12

=0.09





7. TREYNOR RATIO

= (38.15-0.6)/0.85

=44.40


8. SHARPE RATIO

= (38.15-0.6)/0.85

=10.86





9. TREYNOR RATIO

= (-1.76-0.6)/1.09

=-2.17

INFERENCE: As per Treynor ratio SBI Tax Gain Scheme has not performed well.

10.SHARPE RATIO

= (-1.76-0.6)/3.54

=-0.67

INFERENCE: As per sharpe ratio SBI Tax Gain Scheme has not performed well.



5.1 FINDINGS

Based on different tools such as:

Mean : SBI Tax Gain Scheme is yielding high returns in the year 2014(i.e.,

38%) and low returns in the year 2011(i.e., -32%).

Standard Deviation: SBI Tax Gain Scheme is having high risk in the year

2011 (i.e., 25.7%) and low risk in the year 2014 (i.e., 11.9%).

Beta values: SBI Tax Gain Scheme having high risk compared to market

returns in the year 2015 (i.e., 1.08%) and low risk in the year 2011 (i.e.,

0.79%).



5.2 SUGGESTIONS

SBI Tax Gain fund is having high risk, so investors are cautioned about investing in this to earn high returns.

SBI tax gain has to be revised the portfolio to increase fund returns.

Fund Manager should take more efforts on spreading awareness about options in ELSS as these investment instruments provides a higher return with tax saving.

I suggest preferring ELSS scheme with SIP plan. It provides more returns and less Tax burden to the investors.



5.3 CONCLUSION

Mutual funds are one of the best options to invest the hard core savings of the

investors.SBI Tax Saving Scheme is one of the best plans for Tax payers. It is

performing well but it yields low returns in 2015 compared to 2014 due to many

external factors and it is having moderately high risk. Even though, it is the best

scheme suggestible to the investors who are interesting to avail Tax benefits.



6.1 BIBLIOGRAPHY

BOOKS

Prasanna Chandra, 2002, “FINANCIAL MANAGEMENT”, 5th Edition, Tata-McGraw Hill, New Delhi.

I. M. Pandey, 2002, “FINANCIAL MANGEMENT”, 8TH Edition, Vikas Publishing House Private Limited, New Delhi.

Dr. V. A. Avadhani, 2006, “SECURITIES ANALYSIS AND PORTFOLIO MANAGEMENT”, 8TH Revised Edition, Himalaya Publishing House, Mumbai.

Preeti Singh, 2006, “INVESTMENT MANAGEMENT” 14th Revised Edition, Himalaya Publishing House, Mumbai.

FACT SHEETS

SBI Mutual funds

WEBSITES

www.mutualindia.com

www.nseindia.com

www.economictimes.com

www.moneycontrol.com

www.valueresearch.com

www.investopedia.com


http://www.investopedia.com/

http://www.valueresearch.com/

http://www.moneycontrol.com/

http://www.economictimes.com/

http://www.nseindia.com/

http://www.mutualindia.com/

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