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A Study on Mutual Funds of SBI

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Introduction:
SBI Mutual Fund is currently amongst the Top 10 in terms of assets. However, its success in terms of garnering assets is simply because of the sensational run of a few schemes which helped tremendously in bringing in the moolah. The AMC was initially known for its closed-end funds. In 1994, it came up with its first open-ended scheme, Magnum Global. Later its open-ended offerings made their mark and aggressive fund management during bull runs under Sandip Sabharwal served it well. It was the performance of three equity funds — Magnum Taxgain, Magnum Contra and Magnum Global, that resulted in investors’ changing their perception of this fund house. Amongst the hybrid category, Magnum Balanced was a great performer. As these funds had a sensational run their assets grew multi-fold leading to a rise in the AUM.

Unfortunately, the good times did not last for long. After Sabharwal quit in November 2005, the funds continued to rally for a short while. In 2007 and 2008, they began to falter. They were not topping the charts in the 2007 rally and fell hard in the 2008 downturn. When Navneet Munot took over as CIO end-2008, not only did he have a faltering portfolio but even a global crisis that took its toll on the Indian market. To add to it, the size of the funds had increased considerably which made it difficult to reproduce the returns when the assets were less. This was all the more vital since the fund house was always known to tilt towards mid caps where a smaller asset base helps. Though Munot worked hard in putting process in place, the 2009 returns were not impressive enough.

Performance takes its toll
Why have the funds been faltering? On October 9, 2010, a meeting was apparently held at the head office of SBI Mutual Fund where fund managers were asked if they had been leaking information to the press on the going-ons inside the organization. The trigger was a report in an economic daily which implied that SBI Mutual Fund is going through a rough patch with its foreign partner. Though the fund house denied that there was any truth to the report and a consequent meeting, the rumours are not quenched. Even though the public sector bank promoted AMC has been in partnership with a French entity for years, there still appears to be a clash of working styles. The European player has apparently laid down a list of tough rules on how fund managers should deploy their funds, stock selecting parameters, limits on exposure and other filters, which restrict the fund managers to a large extent. Société Générale Asset Management has also expressed displeasure at the dismal performance of the schemes. To make matters worse is the so-called “lack of unity” in the investment team.

All these, if true, could be contributing factors on why the equity performance has been hindered. However, the senior management at the fund house rubbishes every single one of these claims, puts it down to baseless rumors and bad mouthing and claims that both partners are working in close co-ordination with each other. In other words, implying that there is a whole lot of smoke with no fire! But what the management cannot wish away is the poor performance. Numbers do not lie and in this case, they have disappointed.

Which begs an answer to the question: Is poor performance resulting in the lack of AUM growth? Difficult to say. Take for instance, inflows in the equity linked savings scheme (ELSS) category. “Net sales in ELSS last year were Rs 1,554 crore, out of which Rs 633 crore was garnered by SBI Mutual Fund, which is around 41 per cent of the new money coming into tax-saving schemes,” says Srinivas Jain, Chief Marketing Officer. “This seems like more than fair share in a segment which is fairly competitive and has a wide choice.”

Point noted. But even if bad performance did not have a disastrous effect on inflows, there’s no denying that inflows could have been even better had the funds continued on their winning streak. Currently, what is working in SBI Mutual Fund’s favour is the perception of performance and great branding. Thanks to earlier performance which has led to top-of-the-mind recall for a lot of their funds, it is perceived performance that continues to play a strong role.

Number of Pages of Project Report: 74
Package Includes: Project Report
Project Format: Document (.doc)

Table of Contents of Project Report:
EXECUTIVE SUMMARY
CHAPTER 1: INTRODUCTION
CHAPTER 2: LITERATURE REVIEW
CHAPTER 3: MUTUAL FUNDS IN INDIA
CHAPTER 4: SBI MUTUAL FUND
CHAPTER 5: COMPANY PROFILE
CHAPTER 6: RESEARCH METHODOLOGY
DATA SOURCE
METHOD OF DATA COLLECTION
LIMITATIONS
SECONDARY DATA ANALYSIS
HYPOTHESIS
CHAPTER 7: PRIMARY DATA ANALYSIS
FINDINGS
RECOMMENDATIONS
CONCLUSIONS
REFERENCES
APPENDIX: QUESTIONNAIRE


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