Professional Documents
Culture Documents
With
Submitted to the
University of Hyderabad
In Partial Fulfillment of the
University of Hyderabad
By
Ankit Singh
08MBMA12
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For Getting A Copy Feel Free to Contact
ankitvns2007@gmail.com
MBA 2008-2010
School of Management Studies,
University of Hyderabad,
Gachibowli, Hyderabad,
Andhra Pradesh.
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CERTIFICATE
This is to certify that the project work entitled “Factors Affecting Investors’
Faculty Member
University Of Hyderabad
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DECLARATION
This to declare that the project title “Factors Affecting Investors Preference for
Mutual Funds in India and Performance Evaluation of Mutual Funds in India” is an
authentic record of my original work carried out under the guidance of Dr. Chetan
Srivastava, Lecturer in Marketing, School of Management Studies, University of
Hyderabad.
The project work has been carried out solely for the purpose of submission in
partial fulfillment of Master of Business Administration at School of Management
Studies, University of Hyderabad.
I further declare that I have not submitted this document to any other School,
University, or Institution in whatever manner.
08MBMA12
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ACKNOWLEDGEMENTS
First of all I express my gratitude to my project guide Dr. Chetan Srivastava, Lecturer, School
of Management Studies, University of Hyderabad. His able guidance at each step of the project
helped me to broaden my outlook on the project and in successful completion of the project.
I shall always remember his polite way of correction and constant encouragement by asking
various questions.
I would like to express my gratitude to my Project Supervisor, Ms. Nandita Banerjee,
Centre Manager at Reliance Money Lucknow who had spared her valuable time in assisting me
during my project work. It has been a great privilege to work under the supervision of Mr.
Gaurav Nagar, Manager at Reliance Mutual Fund, Lucknow. Their sympathetic, accommodating
and constructive nature remained a constant source of inspiration for me throughout the duration
of this project work.
I convey my regards and special thanks to Dr. V. Venkata Ramana, Professor and Dean,
School of Management Studies, University of Hyderabad for giving me this opportunity for
doing summer internship at Reliance Money.
I would also thank Dr. Mary Jessica and Dr. G.V.R.K. Acharyulu, Faculty, School of
Management Studies, University of Hyderabad, for their guidance and support for the
completion of project work.
I specially thank all the faculty members of the School of Management Studies for
having equipped me with the skills and the ability through their inputs, which assisted me in the
completion of the project.
I am thankful to all the personnel at Reliance Money for their utmost co-operation also I
wish to thank all those people who have directly or indirectly been instrumental in successful
completion of this project work.
Finally, I would like to thank my Parents, Family, Friends, Colleagues and God Almighty
for their unending inspiration and encouragement.
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(1) Executive Summary
The report contains the brief description of the Mutual Fund Industry in India. It contains
the findings and analysis of the survey conducted to gather primary data to judge the factors that
influence the investors most before taking decision to make any investment in mutual funds.
Further an attempt has been made to know as to how important the various qualities of a mutual
fund scheme, various qualities of an Asset Management Company (AMC) and importance of
various services provided by the AMCs are to the investor while making investment in a
particular scheme. The attempt has also been made to categorize investors based on various
demographic factors such as age, income, etc. and to present a comparative analysis of the
various demographic factors. The size of the sample is limited to 200 only. More than 33 % of
the investors prefer fixed deposits for making investment. The investors first look for safety of
capital in mutual funds. More than 67 % of the investors first prefer open ended funds. About
half of the total mutual fund investors have invested in equity schemes. The study also reveals
that the investors prefer to take decision regarding the investments on their own. The investors
consider the reputation of the portfolio managers as the least important factor in the selection of
the funds/schemes. The investors consider the reputation of the company as the most important
quality while making selection of a particular fund or scheme. They have given highest
importance to daily disclosure of NAV in case of investor services.
The report also deals with the performance evaluation of Mutual Funds in India vis-a-vis
the Benchmark Index of the funds with the help of Beta (a measure of systematic risk), Standard
Deviation (a measure of total risk), Sharpe Ratio, Treynor‟s Ratio, Jensen Measure (a measure of
fund manager performance), and Fama Measure. For this purpose, 10 similar equity schemes of
10 fund houses have been taken as sample, out of which 9 schemes are open ended and 1 scheme
is closed ended. The top 10 fund houses are selected on the basis of their Assets under
Management (AUM) as on 30th June 2009. More than 75% of corpus of each scheme is invested
in equity stocks. The study covers the period of 36 months from 31st July 2006 to 30th June
2009. The data used is monthly closing NAVs. The source of data is the respective website of a
particular scheme and also the mutualfundsindia.com and amfi.com.
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It is evident from the analysis that fund managers were not successful in satisfying the
investors with their performance. Under quarterly analysis only 7 funds out of the 10 funds
selected were able to earn more than market returns and only 6 funds were able to earn more than
the risk free rate.
Under half yearly analysis only 4 funds out of the 10 funds selected were able to earn
more than market returns and only 9 funds were able to earn more than the risk free rate.
Under yearly analysis only 6 funds out of the 10 funds selected were able to earn more
than market returns and only 9 funds were able to earn more than the risk free rate.
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(2) Table of Contents
Certificate (i)
Declaration (ii)
Acknowledgements (iii)
1. Executive Summary 1-2
2. Table of Contents 3
3. Company Profile 4-7
4. History of Indian Mutual Funds Industry 8-9
5. Background and Need for Study 10
6. Statement of Problem 10-11
7. Objective of Study 12
8. Testable Hypothesis 13
9. Limitations of Study 13
10. Theoretical Framework 14
11. Literature Review 15-22
12. Research Methodology
(a) Designing of Questionnaire 23-24
(b) Duration of Study 24
(c) Sample Selection 24
13. Data Collection and Analysis 24-35
14. Performance analysis of Mutual Funds 36-56
15. Comparison of Funds on the basis of Index 57-59
16. Overall ranking of Mutual Funds
(a) On the basis of Jensen alpha 60
(b) On the basis of Jensen Alpha 61
(c) On the basis of Total Risk 62
(d) On the basis of Portfolio Diversification 63
17. Findings of the Study 64-65
18. Suggestions 66-67
19. Bibliography and References 68
20. Annexure I-II 69-72
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(3) COMPANY PROFILE-
Reliance Capital Ltd is a part of the Reliance - Anil Dhirubhai Ambani (ADA) Group, and is
ranked among the 25 most valuable private companies in India. Reliance Capital is one of India's
leading and fastest growing private sector financial services companies, and ranks among the top
3 private sector financial services and banking groups, in terms of net worth. Reliance Capital
has interests in asset management and mutual funds, life and general insurance, private equity
products, consumer finance and other activities in financial services. The Reliance ADA Group
is one of India's top 2 business houses, and has a market capitalization of over Rs.2,90,000 crore
(US$ 75 billion), net worth in excess of Rs.55,000 crore (US$ 14 billion), cash flows of Rs.
11,000 crore (US$ 2.8 billion) and net profit of Rs. 7,700 crore (US$ 1.9 billion).
Reliance Money-
Reliance Money is a group company of Reliance Capital; one of India's leading and fastest
growing private sector financial services companies, ranking among the top 3 private sector
financial services and banking companies, in terms of net worth. Reliance Capital is a part of the
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About Reliance Money in brief
Reliance Money is a part of the Reliance Anil Dhirubhai Ambani Group and is promoted by
Reliance capital. The fastest growing private sector financial services company in India ranked
amongst the 3 private sector financial companies in terms of net worth. Reliance Money is a
comprehensive financial solution provider that enables one to carry out trading and investment
activities in a secure, cost-effective and convenient manner. Through Reliance Money, one can
invest in a wide range of asset classes from Equity, Equity and Commodity Derivatives, Mutual
Funds, Insurance products, IPO‟s to availing services of Money transfer and Money changing.
Reliance Money offers the convenience of on-line and off-line transactions through a variety of
means, including its, portal, call & Transact, Transaction Kiosks and at its network of affiliates.
“Success is a journey, not destination” if we look for examples to prove this quote then
we can find many but there is none like that of Reliance Money. This company is today known
The success story of the company is driven by 9 success sutras adopted by in namely Trust,
Integrity, Dedication, commitment, Enterprise, Hard work, Home work, Team work play ,
Learning and Innovation, Empathy and Humility and last but not least is it’s Network.
Mission statement:
Mission of the company is to be a leading and preferred service provider to the customers, and
aims to achieve this leadership position by building an innovative, enterprising and technology
driven organization which will set the highest standards of service and business ethics.
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Vision of Reliance Money:
To achieve and in market leadership Reliance Money aimed for complete customer satisfaction,
by combining its human and technological resources, to provide world class quality services. In
the process Reliance Money strived to meet and exceed customer‟s satisfaction and set industry
standards.
ORGANIZATION HIERARCHY
RELIANCE MONEY
(
BRANCH OFFICE
Cluster Head
Business Development
Executives
Centre Manager
Executives
Sales Promoters
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PRODUCTS AND SERVICES-
Equity- Reliance Money offers its clients competitively priced Equity broking, PMS and
Mutual Funds- Reliance Money offers dedicated research & expert advice on Mutual Funds.
Life-Insurance- Clients can choose from different plans of almost all Insurance Companies
where they can invest their money. A team of experts will suggest the best Insurance scheme
General Insurance- Reliance Money assists in areas of Health insurance, Travel insurance,
Commodities- Reliance Money is a single platform to trade on both the major commodity
exchanges i.e. NCDEX and MCX. In addition in-house research desk shall provide research
reports on all major commodities which shall enable in getting views for trading and diversify
Structured Products, Art Investments- Structured Products is a new class of financial products
for investors apprehensive of increased volatility in stock markets. Specially designed products
could include Equity, Index-linked in nature, Real Estate Funds, Art Funds, Overseas
Tax Planning- Reliance Money‟s wealth management offerings include tax related services like:
Tax Planning & advisory services and filling Tax returns for individuals.
Real Estate Advisory Services- It provides Broking Model for lease/rent and buy/sell of
financial markets through the online platform which includes different product ranges.
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(4) HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY
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. 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. These were set up by public
sector banks, 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 Canbank 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.
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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 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.
Current status of Mutual Funds Industry in India-
At present there are 36 AMCs functioning in India. The total Assets under Management of all
these AMCs as on 31st August, 2009 are Rs. 749,915.52 crores with Reliance Mutual Fund on
the top with Rs. 117,313.78 crores under its management and Quantum Mutual Fund on the
lowest with Rs. 70.33 crores under its management. The total number of schemes under
operation is 3756 with ICICI Prudential Mutual Fund at the top with 323 Schemes and Quantum
Mutual Fund at the lowest with 11 schemes.
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(5) BACKGROUND AND NEED FOR THE STUDY- MF is a retail product designed to
target small investors, salaried people and others who are intimidated by the stock market but,
nevertheless, like to reap the benefits of stock market investing. At the retail level, investors are
unique and are a highly heterogeneous group. Hence, designing a general product and expecting
a good response will be futile except the case of UTI monopoly during 1964-1987. But with the
entry of public sector banks and financial institutions in the field and the globalization and
liberalization measures announced by the government led to a paradigm shift in the mind set of
investors and the capital market environment became more unfriendly to retail investors. They
had no other choice but to turn to MFs to reap the benefits of stock market investing. Hence, the
need to be innovative in designing the product was not felt and investors had to choose from
among the limited schemes offered. After the entry of private sector companies into the industry
the competition started growing in the industry.
Currently (as on 31/8/2009) there are 3756 schemes running with 36 AMCs (Source:
Mutualfundsindia.com) with varied objectives and AMCs compete against one another by
launching new products or repositioning old ones. The investors are having a lot of options to
choose from so he is confused in his selection of the product. The choice of investors is affected
by the different features of the scheme, the reputation of the AMCs, various services provided by
the companies to the investors. Unless the MF schemes are tailored to his changing needs, and
unless the AMCs understand the fund selection/switching behavior of the investors, survival of
funds will be difficult in future. With this background an attempt is made in this paper to study
the factors influencing the fund/scheme selection behaviour of Retail Investors.
Over the last few years mutual funds are giving impressive returns, especially Equity
Funds. There is a need to know the returns provided by the individual schemes and the risk levels
at which they are delivered in comparison with the market and the risk free rates. The aim is also
to identify the out-performers. There is a need to evaluate the performance of Indian Mutual
Fund Schemes.
(6) STATEMENT OF PROBLEM- The “expectations” of investors influence the price of the
securities, the volume traded and various other financial operations in actual practice. These
„expectations‟ of investors are influenced by their “perception” and humans generally relate
perception to action. The evidence of prevalence of such a psychological state is seen among MF
investors in India.
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For instance, UTI, which is synonymous to mutual funds in India, had a glorious past
and perceived as a safe, high yield investment vehicle with the added tax benefit. Many UTI
account holders have justified their beliefs by staying invested in UTI schemes even after the
1999 bail out and the July 2001 episode of repurchase freeze on US 64 for 6 months. People also
believe that something they own is better than something they do not own. For instance, the
existence of many poor performing funds with investors staying invested with them? In general,
rules for investment, the analysis of investment and discussion of financial behaviour tend to
assume behaviour, which is logical and internally consistent in various ways. Investor behaviour
does not; however, always appear to conform to such expectational norms.
Much of economic and financial theory is based on the notion that individuals act
rationally and consider all available information in the decision making process. However, in the
financial literature, there are no clear models, which explain the influence of “perception” and
“beliefs” on “expectations” and “decision making”. No doubt, reality is so complex that trying to
fit individual investor‟s behaviour into a model is impossible. Investor‟s behaviour may change
from period to period even if the other variables influencing the behaviour are held constant.
However, to a certain extent, the concepts can be borrowed from social psychology where
behavioural patterns, rational and irrational are observed and empirically tested. On the same
lines certain models can be developed to identify the financial behaviour, to the extent of the
availability of the explanatory variables. Such models can help to understand the “why” and
“how?” aspect of investor behaviour, which can have managerial implications for policy makers.
The fund managers manage the portfolio of the mutual funds by undertaking the risk so
they are expected to perform better than the market. The investment strategy and management
style are qualitative but the fund return is the only quantitative indicator to judge the
performance of mutual funds. 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.
There must be some performance indicator that will reveal the quality of stock selection of
various AMCs.
Hence, with this background, this study attempts to evaluate the behavioural aspects of
fund selection techniques of individual investors during the period, May 2009 to August 2009
and also attempts to judge the performance of mutual funds using traditional measures.
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(7) OBJECTIVES OF STUDY
The investors do not evaluate all possible product attributes while making a choice, but the
marketer‟s search is for identification of “The key buying criteria” or “The key choice criteria”
or “determinant attributes‟ which are defined as certain features of a product offering that are
closely associated with preferences.
The study has the following general objectives-
1. To identify preferred saving avenue among investors and to identify the saving pattern of
investors.
2. To categorize investors as being inclined towards investment products based on certain
parameters such as sex, age, qualifications, occupation, annual income etc.
1. To judge the importance of factors that influences the investors to invest in mutual funds
and to identify the scheme preference of investors.
2. To perceive the preferred communication mode of investors.
3. To identify the information sources influencing the scheme selection decision of
investors.
4. To evaluate fund qualities that would affect the selection of Mutual Funds.
5. To understand the fund sponsor qualities influencing the selection of MFs/Schemes.
6. To evaluate investor related services that would affect the selection of Mutual funds.
7. To compare the performance of the selected funds of different companies with the help
of Sharpe Measure, Treynor Measure and Beta, measures of performance.
8. To examine the degree of correlation that exists between fund and market return.
9. To evaluate the diversification of the Portfolio of the selected funds.
10. To assess the Performance and selectivity skills of fund managers.
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(8) TESTABLE HYPOTHESIS- The following hypothesis is made in the study-
1. The investors consider all the qualities of the fund as important in the selection of the
fund/scheme.
2. The investors consider all the qualities of AMC important in the selection of the scheme.
3. The investors consider all the investor services important in the selection of the scheme.
4. The portfolios are well diversified and fund managers are able to generate returns more
than that of the market because of their knowledge and stock selection skills.
1. Sample size was limited to 200 only out of which only 60 respondents had invested in
Mutual Funds. The sample size may not represent whole market.
2. The study has not been conducted over an extended period of time considering both
market ups and downs. The market state has a significant influence on the buying
patterns and preferences of investors. The study cannot capture such situations.
3. This study is limited to the investors of Lucknow, Varanasi and Kanpur only. Therefore
the inferences cannot be generalized.
4. A few respondents were not able to understand some of the terms of the questionnaire
which may affect the study to a little extent.
5. Only 10 selected equity schemes of top 10 AMCs based on their Assets under
Management as on June 30, 2009 are evaluated for their performance.
6. The performance evaluation of mutual funds is restricted to a period of three years
starting from June 30, 2006 to June 30, 2009 to evaluate the performance of selected
Mutual Funds but not from their inception.
7. The NAVs used in the study are obtained from amfi.com and also from
Mutualfundsindia.com, which in turn is supplied by the members. Members in turn
have not followed any uniform role in the computation of NAV due to the flexibilities
offered under SEBI Regulations.
8. This study excludes the effect of entry and exit loads of the Mutual funds.
9. The dividends if any are assumed to be paid in the end of the study period i.e. either at
the end of the last quarter, or at the end of the last half year, or at the end of the previous
year, as the case may be.
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(10) THEORETICAL FRAMEWORK
Mutual Fund industry today is one of the most preferred investment avenues in India. However,
with a large number 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 cannot 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. There must be some performance indicator that will reveal the quality of stock selection
of various AMCs. The idea behind performance evaluation is to find the returns provided by the
individual schemes and the risk levels at which they are delivered in comparison with the market
and the risk free rates. The aim is also to identify the out-performers. The objective of the study
is to evaluate the performance of Indian Mutual Fund Schemes.
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-a-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 cannot. 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. These measures are Sharpe Measure, Treynor Measure, Jensen Alpha and
Fama Measure.
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(11) LITERATURE REVIEW-
Ippolito (1992) and Bogle (1992) says that fund/scheme selection by investors is based on past
performance of the funds and money flows into winning funds more rapidly than they flow out
of losing funds. Goetzman (1997) states that there is a evidence that investor psychology affects
the fund/scheme selection and switching. Lu Zheng (1998) examined the fund selection ability
of MF investors and found that the investor‟s decisions are based on short-term future
performance and investors use fund specific information in their selection decision.
Madhusudhan V. Jambodekar (1996) conducted a study to assess the awareness of MFs among
investors, to identify the information sources influencing the buyer decision and the factors
influencing the choice of a particular fund. The study revealed that income schemes and open-
ended schemes are preferred over growth schemes and close-ended schemes during the prevalent
market conditions. Investors look for Safety of Principal, Liquidity and Capital Appreciation in
order of importance; Newspapers and Magazines are the first source of information through
which investors get to know about MFs / Schemes and the investor service is the major
differentiating factor in the selection of MFs. Shanmugham (2000) conducted a survey of 201
individual investors to study the information sourcing by investors, their perceptions of various
investment strategy dimensions and the factors motivating share investment decisions, and
reports that among the various factors, psychological and sociological factors dominated the
economic factors in share investment decisions. Sujit Sikidar and Amrit Pal Singh (1996)
carried out a survey with an objective to understand the behavioural aspects of the investors of
the North Eastern region towards equity and mutual funds investment portfolio. The survey
revealed that the salaried and self employed formed the major investors in mutural fund
primarily due to tax concessions. Syama Sunder (1998) conducted a survey to get an insight
into the mutual fund operations of private institutions with special reference to Kothari Pioneer.
The survey revealed that Agents play a vital role in spreading the Mutual Fund culture; open-end
schemes were much preferred then; age and income are the two important determinants in the
selection of the fund/scheme; brand image and return are the prime considerations while
investing in any Mutual Fund. Anjan Chakarabarti and Harsh Rungta (2000) stressed the
importance of brand effect in determining the competitive position of the AMCs. Their study
reveals that brand image factor, though cannot be easily captured by computable performance
measures, influences the investor‟s perception and hence his fund/scheme slection.
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SEBI – NCAER Survey (2000) was carried out to estimate the number of households and the
population of individual investors, their economic and demographic profile, portfolio size,
investment preference for equity as well as other savings instruments. This is a unique and
comprehensive study of Indian Investors, for, data was collected from 3,00,0000 geographically
dispersed rural and urban households. Some of the relevant findings of the study are :
Households preference for instruments match their risk perception; Bank Deposit has an appeal
across all income class; 43% of the non-investor households equivalent to around 60 million
households (estimated) apparently lack awareness about stock markets; and, compared with low
income groups, the higher income groups have higher share of investments in Mutual Funds
(MFs) signifying that MFs have still not become truly the investment vehicle for small investors.
Nevertheless, the study predicts that in the next two years (i.e., 2000 hence) the investment of
households in MFs is likely to increase. Sharad Panwar and Dr. R. Madhumathi found that
public-sector sponsored, private-sector Indian sponsored and private-sector foreign sponsored
mutual funds do not differ statistically in terms of portfolio characteristics such as net assets,
common stock%, market capitalization, holdings, Top Ten %. However, there is a statistical
difference between three classes of public-sector sponsored, private-sector Indian sponsored and
private-sector foreign sponsored mutual funds in terms of average standard deviation, average
variance and average coefficient of variation. Portfolio risk characteristics measured through
private-sector Indian sponsored mutual funds seems to have outperformed both Public- sector
sponsored and Private-sector foreign sponsored mutual funds. Residual variance is not linearly
related to investment performance in terms of Jensen‟s alpha and portfolio beta, regardless of the
benchmark index used. The general linear model of analysis of covariance establishes
differences in performance among the three classes of mutual funds in terms of portfolio
diversification. S.Narayan Rao , evaluated performance of Indian mutual funds in a bear market
through relative performance index, risk-return analysis, Treynor‟s ratio, Sharpe‟s ratio, Sharpe‟s
measure , Jensen‟s measure, and Fama‟s measure. The study used 269 open-ended schemes (out
of total schemes of 433) for computing relative performance index. Then after excluding funds
whose returns are less than risk-free returns, 58 schemes are finally used for further analysis. The
results of performance measures suggest that most of mutual fund schemes in the sample of 58
were able to satisfy investor‟s expectations by giving excess returns over expected returns based
on both premium for systematic risk and total risk
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Jayadev (1996) evaluated the performance of 62 mutual funds schemes using NAV data for
varying period between 1987 and 1995. He reported superior performance for bulk (30 out of 44)
of the sample schemes when total risk was considered. However, in terms of systematic risk only
24 out of 44 schemes outperformed the benchmark portfolio. He also found that Indian mutual
funds were not properly diversified. Further, in terms of Fama‟s measure, he did not find
selectivity ability of the fund manager.
Amitab Gupta (2001) in his study, the selected schemes were evaluated with respect to the
broad based BSE National Index to find out whether the schemes were able to beat the market.
a (Beta) Co-efficient - The beta is a measure of systematic risk or Non-diversifiable risk.
The beta of a stock measures the sensitivity or volatility of the stock with reference to a broad
based market index, e.g. SENSEX in India. In the case of Mutual Funds it represents fluctuations
in NAV of a Mutual Fund vis-à-vis base market. The more responsive the NAV of a Mutual
Fund is to the changes in the market the higher will be its beta and vice-versa. It is calculated by
relating the returns on a Mutual Fund with the returns in the Market. A beta of 1 indicates that
the security's price will move with the market, and the stock is called unity stock. A beta of less
than 1 means that the security will be less volatile than the market and the stock is called low
beta stock. A beta of greater than 1 indicates that the security's price will be more volatile than
the market and the stock is called high beta stock. In the study it is assumed that the Beta is
consistent during the period of study.
Page | 22
E.g. A beta of 1.2 for a stock would indicate that this stock is 20 per cent riskier than the
Index. Similarly, a beta of 0.9 would indicate that this stock is 10 per cent (100-90) less risky
than the Index. And, of course, a beta of one would mean that the stock is as risky as the stock
market indexBeta is calculated using the following formula-
𝑵 𝑿𝒀 − 𝐗 ( 𝐘)
=
𝐍 𝐗 𝟐 − ( 𝐗)𝟐
𝒓𝒕 − 𝒓∗
𝑺𝒕 =
𝒕
Page | 23
Where, St = Sharpe Index
𝒓𝒏 − 𝒓∗
𝑻𝒏 =
𝜷𝒏
Page | 24
dJensen’s Measure of Performance - This measure was developed by Michael Jensen in
1968. This measures the Portfolio Manager‟s predictive ability i.e. his ability to earn returns
through successful prediction of security prices which are higher than those which an ordinary
investor would expect given the level of riskiness of his portfolio and average market return i.e.
the expected (CAPM) returns. It is a measure of absolute performance on a risk adjusted basis.
A positive value for Jensen's alpha means that the fund manager has "beat the market"
with his or her stock picking skills and vice-versa. If it is equal to zero then it indicates neutral
performance by portfolio manager. A positive value of this would indicate that the scheme has
provided a higher return over the CAPM return and lies above Security Market Line (SML) and
a negative value would indicate it has provided a lower than expected returns and lies below
SML. The Jensen model assumes that the portfolio is fully invested and is subjected to the
limitations of CAPM.
Limitation of this model is that it considers only systematic risk not the entire risk
associated with the fund and an ordinary investor cannot mitigate unsystematic risk, as his
knowledge of market is primitive.
It is calculated using the following formula-
Page | 25
eFama’s Measure of Performance - This measure was developed by Eugene Fama in 1972.
This model is an extension of Jenson model. This model compares the performance, measured in
terms of returns, of a fund with the required return 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 returns over and above the return required to compensate for the total
risk taken by the fund manager.
A positive value for Fama indicates that the fund earned returns higher than expected
returns and lies above Capital Market Line (CML) and a negative value indicates that the fund
earned returns lower than expected returns and will lie below the Capital Market Line (CML).
It is calculated using the following formula-
𝐏 𝐫𝐦 − 𝐫𝐟
𝑭𝑷 = 𝐫𝐏 − 𝐫𝐟
𝐦
(𝐱 − 𝐱)𝟐
=
𝐍
Page | 26
Where, = Standard Deviation,
X = Values of the series,
𝐱 = Mean of the series,
N = Number of items in a series.
(g) Co-efficient of Correlation – The correlation measures the degree of relationship between
two variables. The co-efficient of correlation varies between -1 to +1. The higher the correlation
the greater is the degree of relationship between the variables. The correlation is used in this
study to measure the relationship between the fund returns and market returns. It‟s formula is
similar to that of the Beta. It is as follows-
𝑵 𝑿𝒀 − 𝐗 ( 𝐘)
𝒓= 𝟐 𝟐
𝐍 𝐗 − ( 𝐗)
(i) Returns on Fund - Returns on fund is calculated using the following formula-
𝑵𝑨𝑽𝒕+𝟏 + 𝑫𝒕+𝟏 − 𝑵𝑨𝑽𝒕
𝑹𝒇 =
𝑵𝑨𝑽𝒕
Where, 𝑅𝑓 = Returns on Mutual Fund.
𝑁𝐴𝑉𝑡 = Net Asset Value at the end of the previous Period,
𝑁𝐴𝑉𝑡+1 = Net Asset Value at the end of the current Period,
𝐷𝑡+1 = Dividend received during the current Period.
jReturns on Market Index - Returns on Market Index is calculated using the following
formula-
𝑴𝒕+𝟏 − 𝑴𝒕
𝑹𝒎 =
𝑴𝒕
Where, 𝑅𝑚 = Return on Market Index,
𝑀𝑡+1 = Market Index at the end of Current Period,
𝑀𝑡 = Market Index at the end of Previous Period,
Page | 27
(12) RESEARCH METHODOLOGY
Page | 28
(C) Investor Services-
1. Disclosure of investment objectives, method and Periodicity of valuation in
advertisement.
2. Disclosure of method periodicity of scheme‟s sales and repurchase in offer document.
3. Announcement of NAV on every trading day
4. Disclosure of deviation of the investments from the expected pattern.
5. Disclosure of investments at regular intervals.
6. Mutual Fund Investors‟ grievance redressal machinery.
(b) Duration of Study- The survey is conducted for a period of two months starting from May
10, 2009 to July 10, 2009. The performance of the Mutual Funds is calculated for a period of
three years starting from July 2006 to June 2009.
(c) Sample Selection- The survey is conducted on 120 investors out of which 60 investors
invested in Mutual Funds. The sample for study includes 29 Government Employees, 26 Private
Sector Employees, 21 Self-Professionals, 27 Businessmen, and 13 Retired Government
Employees so as to get effective results. Out of total 120 respondents, 55 investors invested
through Reliance Money. The survey was conducted in certain areas of Lucknow, Kanpur and
Varanasi only.
For the second part of the study the sample includes 10 similar equity schemes of Top 10
fund houses selected on the basis of their Assets under Management (AUM) as on 30th June
2009. This includes 9 open ended schemes and 1 closed ended scheme. More than 75% of corpus
of each scheme is invested in equity stocks.
(13) Data Collection and Analysis- The report is based on primary as well as secondary data.
For the first part of the study Primary data was collected through the above designed
Questionnaire using telephone calls, e-mails and also personal interviewing the respondents. The
data is analyzed using the correlation analysis, chi-square test and analysis of variance.
For the second part Secondary data is collected from the offer document of the funds, the
websites of respective AMCs, amfiindia.com and MutualFundsindia.com. The data is analyzed
using the Sharpe Measure, Treynor‟s Measure, Jensen Measure, Fama Measure, Standard
Deviation and Correlation Analysis. The profile of the investors is given below-
Page | 29
RESPONSES DURING THE SURVEY
SEX
Male 136
Female 64
AGE
Below 30 42
30-40 70
40-50 54
50 and above 34
OCCUPATION
Salaried 75
Businessman 47
Professional 41
Retired 37
ANNUAL INCOME
Below 2,00,000 51
2,00,000-3,00,000 77
3,00,000-4,00,000 38
Above 4,00,000 34
ANNUAL SAVINGS
Below 50,000 67
50,000 – 100,000 52
100,000 – 150,000 43
Above 150,000 38
INVESTMENTS
Fixed Deposits 75
Mutual Funds 60
Life Insurance 28
Stock Market 22
Postal Savings 6
Others 9
OBJECTIVE
Liquidity / Safety 21
Growth 16
Returns 12
Tax Benefits 11
TYPE OF FUNDS
Open-Ended Funds 41
Close-Ended Funds 13
Interval-Funds 6
Page | 30
SCHEME PREFERENCE
Equity (Growth) 19
Equity (Dividend) 8
Debt 17
Balanced 10
Sector Specific 6
ROUTE NO OF RESPONDENTS
Self – Evaluation 21
Advisors 17
Commercials 13
Friends/Family 9
MODE NO OF RESPONDENTS
Personal Communication 21
Internet / e-mail 16
Telephone 14
No Preference 9
Page | 31
Analysis of the Findings- The relationship between important factors has been analyzed with
the help of Chi-Square Test. The following pairs have been analyzed-
1. Income and Savings- The relationship between the savings and investment can be
presented with the help of following table and diagram,
50
40
30
20 Below 2,00,000
10
2,00,000-3,00,000
0
3,00,000-4,00,000
Above 4,00,000
Page | 32
2. Savings and Investments-
Investments /
Below 50,000 50,000-100,000 100,000-150,000 Above 150,000
Savings
Fixed Deposits 42 16 9 8
Mutual Funds 13 16 15 16
Life Insurance 5 11 7 5
Stock Market 3 6 7 6
Postal Savings 3 1 2 0
Others 1 2 3 3
45
40
35
30
25
20 Below 50,000
15
10 50,000-100,000
5
0 100,000-150,000
Above 150,000
Page | 33
3. Age and Time Horizon-
Age / Time Below 1 year 1-3 years 3-5 years Above 5 years
Below 30 7 10 13 12
30-40 15 16 25 14
40-50 8 19 12 15
50 and above 6 17 9 2
30
25
20
Below 30
15
30-40
10
40-50
5
0 50 and above
Below 1 1-3 years 3-5 years Above 5
year years
Page | 34
4. Age and Investment-
30
25
20
15
Below 30
10
5 30-40
0 40-50
50 and above
Page | 35
5. Age and Scheme-
12
10
8
6
4 Below 30
2 30-40
0 40-50
50 and above
Page | 36
A. RANKING OF AMC QUALITIES-
NO OF
RANK
AMC QUALITIES RESPONDENTS
(Based on Weighted Average)
1 2 3 4 5
Private Sector / Public Reputation of the
21 16 12 7 4 One
Sector ownership company
Reputation of the Range of schemes with
25 17 11 6 1 Two
company different qualities
Range of schemes with Company‟s expertise in
24 20 9 3 4 Three
different qualities managing money
Efficiency of research Private Sector / Public
13 16 10 12 9 Four
wing Sector ownership
Company‟s expertise in Efficiency of research
19 20 16 4 1 Five
managing money wing
ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 0.64 4 0.16 0.0025 0.99999 2.86608
Within Groups 1279.2 20 63.96
Total 1279.84 24
The F Value is much less than the critical or table value which means that people
consider all the qualities of AMC as important while investing in a fund. Therefore the
hypothesis that investors consider all the qualities of the AMC as important factor while making
investment in mutual funds stands accepted. The difference in the sample is due to random
sampling error.
Page | 37
B. RANKING OF SCHEME QUALITIES
NO OF
RANK
SCHEME QUALITIES RESPONDENTS
(Based on Weighted Average)
1 2 3 4 5
Fund‟s/Scheme‟s
32 21 5 2 0 One Safety of Capital
performance record
Fund‟s/Scheme‟s brand Fund‟s/Scheme‟s
29 15 10 5 1 Two
name performance record
Scheme‟s portfolio
15 12 21 9 3 Three Products with tax benefits
constituents
Fund‟s/Scheme‟s brand
29 14 7 8 2 Four
Entry and Exit load name
Investment/Withdrawal
21 19 11 5 5 Five Entry and Exit load
facilities
Investment/Withdrawal
12 14 9 14 11 Six
Rating by a rating agency facilities
New Features of the Scheme‟s portfolio
13 21 10 6 10 Seven
Scheme constituents
New Features of the
Products with tax benefits 26 24 6 3 1 Eight
Scheme
Reputation of scheme(s),
13 5 11 17 14 Nine Rating by a rating agency
portfolio manager(s)
Reputation of scheme(s),
Safety of Capital 32 18 7 2 1 Ten
portfolio manager(s)
The F Value is much less than the critical value or table value which shows that investors
consider all the qualities of the a scheme as important factor while selecting a particular scheme.
Therefore the hypothesis that, investors consider all the qualities of the scheme important while
selecting a particular scheme stands accepted. The differences in the sample are due to the
random sampling error.
Page | 38
Anova: Single Factor (Scheme Qualities)
SUMMARY
Groups Count Sum Average Variance
Column 1 5 60 12 193.5
Column 2 5 60 12 118
Column 3 5 60 12 45
Column 4 5 60 12 108.5
Column 5 5 61 12.2 57.2
Column 6 5 60 12 4.5
Column 7 5 60 12 31.5
Column 8 5 60 12 144.5
Column 9 5 60 12 20
Column 10 5 60 12 170.5
ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 2036.68 4 509.17 14.9142 7.8E-08 2.57874
Within Groups 1536.3 45 34.14
Total 3572.98 49
NO OF
RANK
SCHEME QUALITIES RESPONDENTS
(Based on Weighted Average)
1 2 3 4 5
Disclosure of investment
objectives, method and Announcement of NAV
31 23 4 2 0 One
Periodicity of valuation in on every trading day
advertisement
Disclosure of method, Disclosure of investment
periodicity of scheme‟s objectives, method and
27 18 10 4 1 Two
sales and repurchase Periodicity of valuation in
in offer document advertisement
Disclosure of method,
Announcement of NAV periodicity of scheme‟s
32 21 7 0 0 Three
on every trading day sales and repurchase
in offer document
Disclosure of deviation of Mutual Fund Investors‟
the investments from the 19 24 11 2 4 Four grievance redressal
expected pattern machinery
Disclosure of investments Disclosure of investments
18 24 13 3 2 Five
at regular intervals at regular intervals
Mutual Fund Investors‟ Disclosure of deviation of
grievance redressal 20 26 10 1 4 Six the investments from the
machinery expected pattern
Page | 39
Anova: Single Factor (Scheme Qualities)
SUMMARY
Groups Count Sum Average Variance
Column 1 5 60 12 197.5
Column 2 5 60 12 112.5
Column 3 5 60 12 198.5
Column 4 5 60 12 89.5
Column 5 5 60 12 90.5
Column 6 5 61 12.2 112.2
ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 0.166667 5 0.03333 0.00025 1 2.62065
Within Groups 3202.8 24 133.45
Total 3202.967 29
The F value is less than the table value which means that the investor consider all the
investor services as important while selecting a particular scheme. Hence the hypothesis that
investor considers all the investor services as important in their fund scheme selection stands
true. The difference in the sample is due to the random sampling error.
Page | 40
(14) PERFORMANCE ANALYSIS OF MUTUAL FUNDS
The performance of Mutual Funds has been measured for a period of three years starting from
July 2006 to June 2009. The funds‟ performance is analyzed and a comparison is made between
the performance of various funds with their respective benchmark index with the help of above
discussed methods on Quarterly, Half-yearly, and Yearly basis in order to present a more
comparative analysis. It is done keeping in mind the different investment periods of the
investors. The funds chosen belong to the top 10 AMCs in India as on 30th June 2009. The
rankings of the AMCs are based on the total AUM under them as on the date. The funds are
selected based on their corpus. More than 75% of the total corpus of each fund is invested in the
equity. The following 10 Equity funds are included in the study –
Page | 41
(1) Birla Sunlife Equity Fund - It is a open-ended equity fund. The date of inception is
August 27, 1998 with a NAV of Rs. 10. The Benchmark Index is BSE 200. The primary
investment objective is to provide long term capital appreciation through a portfolio with a target
allocation of 90% in Equity. Its Asset Allocation is 93.70% in Equity, 3.30% in Debt and 3.00%
in Cash and Cash Equivalent at the end of July 2009. The fund size is Rs. 1112.67 crores as on
July 31, 2009. Its results are as follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
6.16 5.12 4.58 1.04 1.58 0.54 22.40 0.02 0.54
Half-Yearly Results
12.65 11.91 4.64 0.74 8.01 7.27 35.33 0.21 7.27
Yearly Results
18.52 13.52 4.51 5.00 14.01 9.01 21.21 0.42 9.01
r2 = Co-efficient of Determination
Page | 42
(a) Quarterly Analysis- The Beta of fund and the standard deviation of the fund returns is
more than that of the market in relation to risk free rate. This shows that the fund is more
volatile and risky as compared to the market both in terms of Systematic Risk and Total
Risk but it is compensating for that risk by earning 1.04% more than market and also
earning 1.58% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta of fund and the standard deviation of the fund returns is
less than that of the market in relation to risk free rate. This shows that the fund is less
risky and volatile as compared to the market both in terms of Systematic Risk and Total
Risk and it is also compensating for the risk by earning 0.74% more than market and
8.01 % more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(c) Yearly Analysis- The Beta of fund and the standard deviation of the fund returns is more
than that of the market in relation to risk free rate. This shows that the fund is more risky
and volatile as compared to the market both in terms of Systematic Risk and Total Risk
but it is compensating for that risk by earning 5.00% more than market and also earning
14.01% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
Page | 43
(2) Templeton India Equity Fund- It is a diversified open ended equity fund. The date of
inception is May 18, 2006 with a NAV of Rs. 10 per unit. The Benchmark Index is BSE 200.
The primary investment objective is to provide a combination of regular income and long term
capital appreciation by investing primarily in stocks that have a current or potentially attractive
dividend yield. Its Asset Allocation is 93.81% in Equity and 6.19% in Cash and Cash Equivalent
at the end of July 2009. The fund size is Rs. 1175.62 crores as on July 31, 2009. Its results are as
follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
16.70 5.12 4.58 11.58 12.12 0.54 22.40 0.02 0.54
Half-Yearly Results
34.52 11.91 4.64 22.61 29.88 7.27 35.33 0.21 7.27
Yearly Results
69.37 13.52 4.51 55.85 64.86 9.01 21.21 0.42 9.01
r2 = Co-efficient of Determination
Page | 44
(a) Quarterly Analysis- The Beta of fund is less than that of the market and the standard
deviation of the fund returns is more than that of the market. This shows that the fund is
less risky as compared to the market in terms of Systematic Risk but it is more volatile
and risky as compared to the market in terms of Total Risk and it is compensating for the
risk by earning 11.58% more than market and also earning 12.12% more than the Risk-
Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta of fund and the standard deviation of the fund returns is
more than that of the market. This shows that the fund is more risky and volatile as
compared to the market both in terms of Systematic Risk and Total Risk but it is
compensating for the risk by earning 22.61% more than market and 29.88 % more than
the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(c) Yearly Analysis- The Beta of fund is less than that of the market and the standard
deviation of the fund returns is more than that of the market. This shows that the fund is
less risky as compared to the market in terms of Systematic Risk but it more volatile and
risky as compared to the market in terms of Total Risk and it is compensating for the risk
by earning 55.85% more than market and also earning 64.86% more than the Risk-Free
rate. Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a low degree of positive correlation
between the fund returns and market returns and portfolio is not well diversified.
Page | 45
(3) UTI Equity Fund- It is an open ended equity fund. The date of inception is April 20, 1992
with a NAV of Rs. 10 per unit. The Benchmark Index is BSE 100. The principal investment
objective is to provide long term capital appreciation through investing at least 80% of its funds
in equity and equity related instrument with medium to high risk profile and upto 20% in debt
and money market instruments with low to medium risk profile. Its Asset Allocation is 90.68%
in Equity, 2.25% in Debt and 7.07% in Cash and Cash Equivalent at the end of July 2009. The
fund size is Rs. 1629.68 crores as on July 31, 2009. Its results are as follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
3.32 5.10 4.58 (-1.78) (-1.26) 0.52 21.78 0.02 0.52
Half-Yearly Results
6.55 11.84 4.64 (-5.29) 1.91 7.20 34.62 0.21 7.20
Yearly Results
10.37 13.81 4.51 (-3.44) 5.86 9.30 20.42 0.46 9.30
r2 = Co-efficient of Determination
Page | 46
(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is less than
that of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk. It is earning 1.78% less than
market and also earning 1.26% less than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is negative and less than that of the
market which shows that the fund‟s performance is not up to the mark when compared to
the market. The Jensen‟s Alpha and Fama calculated for the fund is negative which
shows that the fund manager has not been able to beat the market with his stock selection
skills. There is a high degree of positive correlation between the fund returns and market
returns and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is less
than that of the market. This shows that the fund is less risky and volatile as compared to
the market both in terms of Systematic Risk and Total Risk. It is earning 5.29% less than
market but is earning 1.91% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is less than that of the market which
shows that the fund‟s performance is not up to the mark when compared to the market.
The Jensen‟s Alpha and Fama calculated for the fund is negative which shows that the
fund manager has not been able to beat the market with his stock selection skills. There is
a high degree of positive correlation between the fund returns and market returns and
portfolio is well diversified.
(c) Yearly Analysis- The Beta and the standard deviation of the fund returns is less than that
of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk. It is earning 3.44% less than
market but is earning 5.86% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is less than that of the market which
shows that the fund‟s performance is not up to the mark when compared to the market.
The Jensen‟s Alpha and Fama calculated for the fund is negative which shows that the
fund manager has not been able to beat the market with his stock selection skills. There is
a high degree of positive correlation between the fund returns and market returns and
portfolio is well diversified.
Page | 47
(4) SBI Equity Fund- It is a diversified open ended equity fund. The date of inception is January
1, 1991 with a NAV of Rs. 10 per unit. The Benchmark Index is BSE 100. The primary
investment objective is to provide the investor Long-term capital appreciation by investing in
high growth companies along with the liquidity of an open-ended scheme through investments
primarily in equities and the balance in debt and money market instruments. Its Asset Allocation
is 92.51% in Equity, 1.35% in Debt and 6.14% Cash and Cash Equivalent at the end of July
2009. The fund size is Rs. 370.56 crores as on July 31, 2009. Its results are as follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
5.80 5.10 4.58 0.70 1.22 0.52 21.78 0.02 0.52
Half-Yearly Results
12.54 11.84 4.64 0.70 7.90 7.20 34.62 0.21 7.20
Yearly Results
16.10 13.81 4.51 2.29 11.59 9.30 20.42 0.46 9.30
r2 = Co-efficient of Determination.
Page | 48
(a) Quarterly Analysis- The Beta of fund is less than that of the market and the standard
deviation of the fund returns is more than that of the market. This shows that the fund is
less risky as compared to the market in terms of Systematic Risk but it is more volatile
and risky as compared to the market in terms of Total Risk and it is compensating for the
risk by earning 0.70% more than market and also earning 1.22% more than the Risk-Free
rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is more
than that of the market. This shows that the fund is more risky and volatile as compared
to the market both in terms of Systematic Risk and Total Risk. It is compensating for the
risk by earning 0.70% more than market but is earning 7.90% more than the Risk-Free
rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(c) Yearly Analysis- The Beta and the standard deviation of the fund returns is less than that
of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk. But still it is earning 2.29%
more than market and 11.59% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
Page | 49
(5) Kotak Emerging Equity Scheme- It is a diversified close-ended equity fund. The date of
inception is March 30, 2007 with a NAV of Rs. 10. The Benchmark Index is BSE Midcap. The
primary investment objective is to generate long-term capital appreciation from a portfolio of
equity and equity related securities, by investing predominantly in mid and small cap companies.
Its Asset Allocation is 81.77% in Equity and 3.35% in Debt and 14.88% in Cash and Cash
Equivalent at the end of July 2009. The fund size is Rs. 134.09 crores as on July 31, 2009. Its
results are as follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 – 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
0.14 3.98 4.58 (-3.84) (-4.44) (-0.60) 33.23 -0.02 (-0.60)
Half-Yearly Results
-1.33 5.49 4.64 (-6.82) (-5.97) 0.85 48.05 0.02 0.85
Yearly Results
-18.62 -11.61 4.51 (-7.01) (-23.13) (-16.12) 5.86 -2.75 (-16.12)
r2 = Co-efficient of Determination.
Page | 50
(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is less than
that of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk but it is earning 4.44% less than
market and 0.60% less than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is negative and less than that of the
market which shows that the fund‟s performance is not up to the mark with that of the
market. The Jensen‟s Alpha and Fama calculated for the fund is negative which shows
that the fund manager has not been able to beat the market with his stock selection skills.
There is a high degree of positive correlation between the fund returns and market returns
and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is less
than that of the market. This shows that the fund is less risky and volatile as compared to
the market both in terms of Systematic Risk and Total Risk. It is earning 6.82% less than
market and 5.97% less than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is negative and less than that of the
market which shows that the fund‟s performance is not up to the mark with that of the
market. The Jensen‟s Alpha and Fama calculated for the fund is negative which shows
that the fund manager has not been able to beat the market with his stock selection skills.
There is a high degree of positive correlation between the fund returns and market returns
and portfolio is well diversified.
(c) Yearly Analysis- The Beta of fund is less than that of the market and the standard
deviation of the fund returns is more than that of the market. This shows that the fund is
less risky as compared to the market in terms of Systematic Risk but it is more volatile
and risky as compared to the market in terms of Total Risk. It is earning 7.01% less than
market and 23.13% less than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is negative and less than that of the
market which shows that the fund‟s performance is not up to the mark with that of the
market. The Jensen‟s Alpha and Fama calculated for the fund is negative which shows
that the fund manager has not been able to beat the market with his stock selection skills.
There is a positive perfect correlation between the fund returns and market returns and
portfolio is highly diversified.
Page | 51
(6) HDFC Equity Fund - It is a open-ended equity fund. The date of inception is January 1,
1995 with a NAV of Rs. 10. The Benchmark Index is S & P CNX 500. The primary investment
objective is to provide capital appreciation through investments predominantly in equity oriented
securities. Its Asset Allocation is 94.74% in Equity and 5.26% in Cash and Cash Equivalent at
the end of July 2009. The fund size is Rs. 4337.71 crores as on July 31, 2009. Its results are as
follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
5.60 4.82 4.58 0.78 1.02 0.24 21.82 0.01 0.24
Half-Yearly Results
10.66 11.48 4.64 (-0.82) 6.02 6.84 35.19 0.19 6.84
Yearly Results
15.12 12.71 4.51 2.41 10.61 8.20 21.91 0.37 8.20
r2 = Co-efficient of Determination.
Page | 52
(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is less than
that of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk but still it is earning 0.78% more
than market and 1.02% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is less
than that of the market. This shows that the fund is less risky and volatile as compared to
the market both in terms of Systematic Risk and Total Risk. It is earning 0.82% less than
market and 6.02% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(c) Yearly Analysis- The Beta and the standard deviation of the fund returns is less than that
of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk. But still it is earning 2.41%
more than market and 10.61% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a positive perfect correlation between the
fund returns and market returns and portfolio is highly diversified.
Page | 53
(7) LIC Equity Fund- It is a open ended equity fund. The date of inception is February 15, 1999
with a NAV of Rs. 10. The Benchmark Index is S & P CNX Nifty. The primary investment
objective is to obtain maximum possible capital growth consistent with reasonable levels of
safety and security by investing the funds mainly in equities and also in debts and other
permitted instruments of capital and money market. Its Asset Allocation is 96.22% in Equity and
3.68% in Cash and Cash Equivalent at the end of July 2009. The fund size is Rs. 103.49 crores as
on July 31, 2009. Its results are as follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
12.21 4.35 4.58 7.86 7.63 (-0.23) 18.63 -0.01 (-0.23)
Half-Yearly Results
29.70 10.31 4.64 19.39 25.06 5.67 31.21 0.18 5.67
Yearly Results
46.84 12.60 4.51 34.24 42.33 8.09 18.71 0.43 8.09
r2 = Co-efficient of Determination.
Page | 54
(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is more than
that of the market. This shows that the fund is more risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk and it is compensating for the
risk by earning 7.86% more than market and 7.63% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is more
than that of the market. This shows that the fund is more risky and volatile as compared
to the market both in terms of Systematic Risk and Total Risk and it is compensating for
the risk by earning 19.39% more than market and 25.06% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(c) Yearly Analysis- The Beta and the standard deviation of the fund returns is more than
that of the market. This shows that the fund is more risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk and it is compensating for the
risk by earning 34.24% more than market and 42.33% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a positive perfect correlation between the
fund returns and market returns and portfolio is well diversified.
Page | 55
(8) ICICI Discovery Fund - It is a open-ended equity fund. The date of inception is August 14,
2004 with a NAV of Rs. 10. The Benchmark Index is S & P CNX Nifty. The primary investment
objective is to generate returns through a combination of dividend income and capital
appreciation by investing primarily in a well diversified portfolio of value stocks. Its Asset
Allocation is 79.54% in Equity and 20.46% in Cash and Cash Equivalent at the end of July 2009.
The fund size is Rs. 300.74 crores as on July 31, 2009. Its results are as follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
4.40 4.35 4.58 0.05 (-0.18) (-0.23) 18.63 -0.01 (-0.23)
Half-Yearly Results
9.07 10.31 4.64 (-1.24) 4.43 5.67 31.21 0.18 5.67
Yearly Results
10.06 12.60 4.51 (-2.54) 5.55 8.09 18.71 0.43 8.09
r2 = Co-efficient of Determination
Page | 56
(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is more than
that of the market. This shows that the fund is more risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk and it is earning 0.05% more
than market and 0.18% less than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is negative but more than that of the
market which shows that the fund has performed better than the market. The Jensen‟s
Alpha and Fama calculated for the fund is positive which shows that the fund manager
has beaten the market with his stock selection skills. There is a high degree of positive
correlation between the fund returns and market returns and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is more
than that of the market. This shows that the fund is more risky and volatile as compared
to the market both in terms of Systematic Risk and Total Risk and it is earning 1.24% less
than market and 4.43% more than the Risk-Free rate.
Sharpe ratio for the fund is less and Treynor Ratio for the fund is more than that
of the market which shows that the fund has performed better than the market in terms of
systematic risk but not in terms of total risk. The Jensen‟s Alpha and Fama calculated for
the fund is negative which shows that the fund manager has not able to beat the market
with his stock selection skills. There is a high degree of positive correlation between the
fund returns and market returns and portfolio is well diversified.
(c) Yearly Analysis- The Beta and the standard deviation of the fund returns is less than that
of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk and it is earning 2.54% less than
market and 5.55% more than the Risk-Free rate.
Sharpe ratio for the fund is less and Treynor Ratio for the fund is more than that
of the market which shows that the fund has performed better than the market in terms of
systematic risk but not in terms of total risk. The Jensen‟s Alpha for the fund is positive
but Fama for the fund is negative which again shows that the fund manager has beaten
the market with his stock selection skills in terms of systematic risk not in terms of total
risk. There is a positive perfect correlation between the fund returns and market returns
and portfolio is well diversified.
Page | 57
(9) IDFC Imperial Equity Fund - It is a open-ended equity fund. The date of inception is
March 16, 2006 with a NAV of Rs. 10. The Benchmark Index is S & P CNX Nifty. The primary
investment objective is to seek to generate capital appreciation and/or provide income
distribution from a portfolio of predominantly equity and equity related instruments. Its Asset
Allocation is 83.81% in Equity and 16.19% in Cash and Cash Equivalent at the end of July 2009.
The fund size is Rs. 353.59 crores as on July 31, 2009. Its results are as follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
5.20 4.35 4.58 0.85 0.62 (-0.23) 18.63 0.01 (-0.23)
Half-Yearly Results
6.52 10.31 4.64 (-3.79) 1.88 5.67 31.21 0.18 5.67
Yearly Results
17.52 12.60 4.51 4.92 13.01 8.09 18.71 0.43 8.09
r2 = Co-efficient of Determination
Page | 58
(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is less than
that of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk but still it is earning 0.85% more
than market and 0.62% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
calculated for the fund is positive which shows that the fund manager has beaten the
market with his stock selection skills. There is a high degree of positive correlation
between the fund returns and market returns and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is less
than that of the market. This shows that the fund is less risky and volatile as compared to
the market both in terms of Systematic Risk and Total Risk and it is earning 3.79% less
than market and 1.88% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is less than that of the market which
shows that the fund‟s performance is not up to the mark with market. The Jensen‟s Alpha
and Fama calculated for the fund is negative which shows that the fund manager has not
able to beat the market with his stock selection skills. There is a high degree of positive
correlation between the fund returns and market returns and portfolio is well diversified.
(c) Yearly Analysis- The Beta and the standard deviation of the fund returns is less than that
of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk but still it is earning 4.92% more
than market and 13.01% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
for the fund is positive which again shows that the fund manager has beaten the market
with his stock selection skills. There is a positive perfect correlation between the fund
returns and market returns and portfolio is well diversified.
Page | 59
(10) Reliance Equity Fund- It is a diversified open ended equity fund. The date of inception is
March 28, 2006 with a NAV of Rs. 10. The Benchmark Index is S & P CNX Nifty. The primary
investment objective is to seek to generate capital appreciation and provide long-term growth
opportunities by investing in a portfolio constituted of equity and equity related securities of top
100 companies by market capitalization and the secondary objective is to generate consistent
returns by investing in debt and money market securities. Its Asset Allocation is 92.51% in
Equity, 1.35% in Debt and 6.14% Cash and Cash Equivalent at the end of July 2009. The fund
size is Rs. 370.56 crores as on July 31, 2009. Its results are as follows-
Sharpe Treynor
𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m)
(𝑺𝒕 )m (𝑻𝒏 )m
Quarterly Results
4.14 4.35 4.58 (-0.21) (-0.44) (-0.23) 18.63 0.01 (-0.23)
Half-Yearly Results
9.01 10.31 4.64 (-1.3) 4.37 5.67 31.21 0.18 5.67
Yearly Results
12.49 12.60 4.51 (-0.11) 7.98 8.09 18.71 0.43 8.09
Where, 𝑹𝒑 = Average Returns for Fund for particular period,
r2 = Co-efficient of Determination.
Page | 60
(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is less than
that of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk and it is earning 0.21% less than
market and 0.44% less than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is less than that of the market which
shows that the fund has not performed better than the market. The Jensen‟s Alpha and
Fama calculated for the fund is negative which shows that the fund manager has not been
able to beat the market with his stock selection skills. There is a high degree of positive
correlation between the fund returns and market returns and portfolio is well diversified.
(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is less
than that of the market. This shows that the fund is less risky and volatile as compared to
the market both in terms of Systematic Risk and Total Risk and it is earning 1.3% less
than market and 4.37% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is less than that of the market which
shows that the fund‟s performance is not up to the mark with market. The Jensen‟s Alpha
and Fama calculated for the fund is negative which shows that the fund manager has not
able to beat the market with his stock selection skills. There is a high degree of positive
correlation between the fund returns and market returns and portfolio is well diversified.
(c) Yearly Analysis- The Beta and the standard deviation of the fund returns is less than that
of the market. This shows that the fund is less risky and volatile as compared to the
market both in terms of Systematic Risk and Total Risk and it is earning 0.11% less than
market and 7.98% more than the Risk-Free rate.
Sharpe ratio and Treynor Ratio for the fund is more than that of the market which
shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama
for the fund is positive which again shows that the fund manager has beaten the market
with his stock selection skills. There is a positive perfect correlation between the fund
returns and market returns and portfolio is well diversified.
Page | 61
(15) COMPARISON OF FUNDS ON BASIS OF INDEX
(1) Base Index- BSE 200- There are two open-ended equity funds having benchmark index
of BSE 200, Birla Sunlife Equity Fund and Templeton India Equity Fund.
The second fund is better than the first one both in terms of systematic risk and
unsystematic risk under quarterly and yearly analysis and first fund is better than the
second one under half yearly analysis.
The first fund has underperformed as compared to the second one both on the Sharpe and
Treynor Measure of Performance under quarterly, half yearly and annual analysis.
The returns of the first fund are highly correlated to the market as compared to the second
fund under quarterly, half yearly and annual analysis.
The portfolio of the first fund is highly diversified as compared to second fund under
quarterly, half yearly and annual analysis.
The Jensen alpha and Fama which are the measures of fund manager‟s performance for
the second fund are more than the first fund under quarterly, half yearly and annual
analysis which shows that the second‟s fund manager has performed better than the first
fund‟s manager in terms of stock picking skills.
(2) Base Index- BSE 100- There are two open-ended equity funds having benchmark index
of BSE 100, UTI Equity Fund and SBI Equity Fund.
The first fund is better than the second one both in terms of systematic risk and
unsystematic risk under quarterly, half-yearly and yearly analysis.
The first fund has underperformed as compared to the second one both on the Sharpe and
Treynor Measure of Performance under quarterly, half yearly and annual analysis.
The returns of the first fund are highly correlated to the market as compared to the second
fund under quarterly and yearly analysis and are less correlated to the market as
compared to the first one under half yearly analysis.
The portfolio of the first fund is highly diversified as compared to second fund under
quarterly and yearly analysis and less diversified under the half-yearly analysis.
Page | 62
The Jensen alpha and Fama which are the measures of fund manager‟s performance for the
second fund are more than the first fund under quarterly, half yearly and annual analysis
which shows that the second‟s fund manager has performed better than the first fund‟s
manager in terms of stock picking skills.
(3) Base Index- S & P CNX Nifty- There are four open-ended equity funds having
benchmark index of S & P CNX Nifty, LIC Equity Fund, ICICI Discovery Fund, IDFC
Imperial Equity Fund and Reliance Equity Fund.
The third fund is best both in terms of systematic risk and total risk followed by the
fourth fund, second fund and first find under quarterly, half yearly and yearly analysis.
The first fund has performed best on the Sharpe Measure under quarterly analysis
followed by third second and fourth fund. It is also best on the Sharpe measure under
half-yearly analysis followed by fourth, second and third fund. The third fund is best on
Sharpe measure under the yearly analysis followed by first, fourth and second fund.
The first fund has performed best on the Treynor measure under quarterly analysis
followed by third, second and fourth fund. It is also best on the Treynor measure under
half-yearly analysis followed by fourth, second and third fund. The second fund is best on
Treynor measure under the yearly analysis followed by third, first and fourth fund.
The returns of the third fund are highly correlated to the market followed by fourth,
second and first fund under quarterly analysis. The returns of the fourth fund are highly
correlated to the market followed by second, third and first fund under half yearly
analysis. The returns of the third fund are highly correlated to the market followed by
fourth, first and second fund under yearly analysis.
The portfolio of the third fund is highly diversified followed by fourth, second and first
fund under quarterly analysis. The portfolio of the fourth fund is highly diversified
followed by second, third and first fund under half yearly analysis. The portfolio of the
third fund is highly diversified followed by fourth, first and second fund under yearly
analysis.
Page | 63
The Jensen alpha and Fama for the first fund is the highest positive followed by third and
second fund under quarterly analysis which shows that fund manager for the first fund has
done the best in terms of stock picking skills. The Jensen alpha for the fourth fund is negative
under quarterly analysis which shows that the fund manager has not been able to beat the
market with the stock selectivity skills. The Jensen alpha and Fama for the first fund is
positive under half yearly analysis which shows that the fund manager has beaten the market
with his stock picking skills. The Jensen alpha and Fama for the second, third and fourth fund
is negative under half-yearly analysis which shows that the fund manager has not been able
to beat the market with his stock selection skills. The Jensen alpha for the first fund is highest
positive under yearly analysis followed by the third, second and fourth fund which shows
that the fund manager for the first fund has performed the best in terms of stock selection
skills. The Fama for the first fund is highest positive under yearly followed by third and
fourth fund which shows that the fund manager for the first fund has performed the best in
terms of stock selection skills whereas the Fama for the second fund is negative which shows
that the fund manager has not been able to beat the market with the stock selectivity skills.
Page | 64
(16) OVERALL RANKING OF TEN MUTUAL FUNDS
(a) ON THE BASIS OF JENSEN ALPHA- The Jensen Alpha measures the performance of the
Fund Manager in terms of his predictive ability and stock selection skills, considering the
systematic risk associated with the fund. On the basis of this measure all the fund can be ranked
as follows-
FUND
RANK
QUARTERLY HALF-YEARLY YEARLY
Templeton India Equity Templeton India Equity Templeton India Equity
1.
Fund Fund Fund
2. LIC Equity Fund LIC Equity Fund LIC Equity Fund
IDFC Imperial Equity
3. Birla Sunlife Equity Fund Birla Sunlife Equity Fund
Fund
IDFC Imperial Equity
4. SBI Equity Fund ICICI Equity Fund
Fund
5. HDFC Equity Fund HDFC Equity Fund SBI Equity Fund
6. SBI Equity Fund Reliance Equity Fund HDFC Equity Fund
7. ICICI Equity Fund UTI Equity Fund Birla Sunlife Equity Fund
8. Reliance Equity Fund ICICI Equity Fund Reliance Equity Fund
IDFC Imperial Equity
9. UTI Equity Fund UTI Equity Fund
Fund
Kotak Emerging Equity Kotak Emerging Equity Kotak Emerging Equity
10.
Scheme Scheme Scheme
It can be seen from the above table in terms of the performance of fund manager in terms
of his predictive ability and stock selection skills, considering the systematic risk associated
with the fund, top performer is Templeton India Equity Fund in quarterly, half yearly and
yearly analysis. The Kotak Emerging Equity Scheme is at the lowest.
Page | 65
(b) ON THE BASIS OF FAMA- The Fama Measures the performance of fund manager in
terms of his predictive ability and stock selection skills considering the total risk associated with
the fund. On the basis of this measure the funds can be ranked as follows-
FUND
RANK
QUARTERLY HALF-YEARLY YEARLY
Templeton India Equity Templeton India Equity Templeton India Equity
1.
Fund Fund Fund
2. LIC Equity Fund LIC Equity Fund LIC Equity Fund
IDFC Imperial Equity
3. Birla Sunlife Equity Fund Birla Sunlife Equity Fund
Fund
IDFC Imperial Equity
4. SBI Equity Fund SBI Equity Fund
Fund
5. HDFC Equity Fund HDFC Equity Fund HDFC Equity fund
6. ICICI Equity Fund Reliance Equity Fund Birla Sunlife Equity Fund
7. Reliance Equity Fund ICICI Equity Fund Reliance Equity fund
8. SBI Equity Fund UTI Equity Fund UTI Equity Fund
IDFC Imperial Equity
9. UTI Equity Fund ICICI Equity fund
Fund
Kotak Emerging Equity Kotak Emerging Equity Kotak Emerging Equity
10.
Scheme Scheme Scheme
It can be seen from the above table in terms of the performance of fund manager in terms
of his predictive ability and stock selection skills, considering the total risk associated with the
fund, top performer is Templeton India Equity Fund in quarterly, half yearly and yearly analysis.
The Kotak Emerging Equity Scheme is at the lowest.
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(c) ON THE BASIS OF TOTAL RISK- The Total Risk is measured with the help of Standard
Deviation. On this basis funds can be ranked as follows-
FUND
RANK
QUARTERLY HALF-YEARLY YEARLY
Templeton India Equity
1. LIC Equity Fund LIC Equity Fund
Fund
Templeton India Equity Templeton India Equity
2. LIC Equity Fund
Fund Fund
Kotak Emerging Equity
3. SBI Equity Fund Birla Sunlife Equity Fund
Scheme
Kotak Emerging Equity
4. SBI Equity Fund HDFC Equity fund
Scheme
5. Birla Sunlife Equity Fund Birla Sunlife Equity Fund ICICI Equity Fund
6. ICICI Equity Fund ICICI Equity Fund SBI Equity Fund
7. HDFC Equity Fund HDFC Equity Fund Reliance Equity fund
8. Reliance Equity Fund Reliance Equity Fund UTI Equity Fund
IDFC Imperial Equity IDFC Imperial Equity IDFC Imperial Equity
9.
Fund Fund Fund
Kotak Emerging Equity
10. UTI Equity Fund UTI Equity Fund
Scheme
It can be seen from the above table in terms of the performance of fund manager in terms
of his predictive ability and stock selection skills, considering the total risk associated with the
fund, top performer is Templeton India Equity Fund in quarterly, half yearly and yearly analysis.
The Kotak Emerging Equity Scheme is at the lowest.
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(d) ON THE BASIS OF PORTFOLIO DIVERSIFICATTION- This is measured with the
help of Coefficient of Determination. On this basis the funds can be ranked as follows-
FUND
RANK
QUARTERLY HALF-YEARLY YEARLY
IDFC Imperial Equity Kotak Emerging Equity
1. SBI Equity Fund
Fund Scheme
2. Birla Sunlife Equity Fund HDFC Equity Fund Birla Sunlife Equity Fund
3. UTI Equity Fund Birla Sunlife Equity Fund UTI Equity Fund
4. HDFC Equity Fund Reliance Equity Fund SBI Equity fund
5. Reliance Equity Fund ICICI Equity Fund HDFC Equity Fund
Kotak Emerging Equity Kotak Emerging Equity IDFC Imperial Equity
6.
Scheme Scheme Fund
7. ICICI Equity Fund IDFC Equity Fund Reliance Equity fund
8. SBI Equity Fund LIC Equity Fund LIC Equity Fund
Templeton India Equity
9. LIC Equity Fund ICICI Equity Fund
Fund
Templeton India Equity Templeton India Equity
10. UTI Equity Fund
Fund Fund
It can be seen from the above table in terms of the diversification of the portfolio of the
fund top performer is IDFC Imperial Equity Fund in quarterly ranking; SBI Equity Fund is the
top performer in half yearly ranking, and Kotak Emerging Equity Scheme in yearly ranking. The
Templeton India Equity Fund is the lowest performer in quarterly and annual analysis; UTI
Equity Fund is the lowest performer in half yearly analysis.
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(17) FINDINGS OF THE STUDY- The study conducted during May 2009 to July 2009 reveals
the following-
1. Savings Instrument Preference among Individual Investors- The study reveals that
the most preferred investment is Fixed Deposits as it is one of the few investments which
enable an average investor to get reasonable and regular returns along with safety of
capital. The Mutual Funds are on the second and Life Insurance is on the third among 6
choices.
2. Objective of Investment in Mutual Funds- The investors first look for safety in mutual
funds, followed by growth, returns and Tax Benefits.
3. Type of Mutual Fund- More than 67 % of the investors first prefer open ended funds,
less than 23 % of the investors favor close-ended equity funds and only 10 % of the
investors favor Interval funds.
4. Scheme Preference of investors- Out of the 60 respondents 27 have invested in Equity
Schemes (19 in growth schemes and 8 in dividend schemes), 17 in debt schemes, 10 in
balanced schemes and only 6 in sector specific schemes.
5. Preferable Route to Mutual Fund Investing Among Individual Investors- The study
reveals that the scheme decision is made by the respondents on their own and other
factors influencing their decisions are followed by advisors, commercials and the least by
suggestions of friends and family.
6. Preferred Mode of Communication for receiving Updates- The factors are ranked on
the basis of the weighted average. The survey shows that 21 persons used personal visit
to distribution centers to know about the updates, 16 wanted to use internet to know about
the same, 14 preferred to call directly to the office to know about the performance of
mutual funds and rest 9 preferred nothing to know about the updates.
7. Importance of Scheme Qualities- The weighted average is calculated by assigning
weights from 1 to 5 in the order of importance i.e. 5 to Rank 1, 4 to rank 2, 3 to rank 3, 2
to rank 4 and 1 to rank 5. The study reveals that the investors consider the safety of
capital as the most important factor in the selection of their scheme followed by scheme‟s
performance record and tax benefits and they consider the reputation of the portfolio
managers as the least important factor in the selection of fund.
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8. Importance of AMC Qualities- The investors consider the reputation of the AMC as the most
important factor affecting their choice of the mutual funds followed by range of different
schemes, company‟s expertise in managing money, ownership of the company and they give least
importance to the efficiency of research wing of the company.
9. Importance of Investor Services- The investors give more importance to daily
disclosure of NAV by the companies followed by disclosure of facts relating to mutual
fund investments and they give least importance to disclosure of deviation of the
investments from the expected pattern which shows that investors focus on the
performance of funds rather than the pattern of investments.
10. Performance Evaluation of Mutual Funds- It is evident from the above analysis that
fund managers were not successful in satisfying the investors with their performance.
Under quarterly analysis only 7 funds out of the 10 funds selected were able to earn more
than market returns and only 6 funds were able to earn more than the risk free rate.
Under half yearly analysis only 4 funds out of the 10 funds selected were able to
earn more than market returns and only 9 funds were able to earn more than the risk free
rate.
Under yearly analysis only 6 funds out of the 10 funds selected were able to earn
more than market returns and only 9 funds were able to earn more than the risk free rate.
Page | 70
(18) SUGGESTIONS- The following suggestions can be given based on the study-
1. Since the investors are highly focused towards liquidity in the schemes more and more
open-ended schemes should be brought into the market by the companies.
2. The investors are also having more interest in Equity schemes, so the companies should
pay more focus on marketing of Equity schemes.
3. The investors prefer Personal visit to know about the updates regarding their Mutual
Funds, so the companies should focus on opening up of service centers in the country to
provide the investors knowledge about the mutual funds.
4. The investors give priority to self evaluation in scheme selection in spite of their less
knowledge about the market so there is a need on the part of the middlemen to win the
confidence of the investors. This will help the middlemen in getting more number of
customers in long term.
5. Out of the total audience of 200 only 60 have invested in Mutual Funds. Thos shows that
there may be less knowledge of mutual funds among the investors regarding the mutual
funds or there may be negative perception regarding mutual funds in the minds of
investors. The AMCs and Sponsors etc. should pay focus on the education of the
investors and try to remove the negativity in the minds of the investors about the mutual
funds.
6. When it comes to the qualities of the fund/scheme the investors prefer safety of capital
invested in mutual funds followed by fund‟s performance record and tax benefits. So the
companies should focus on safety of capital i.e. the company should design balanced
schemes in order to protect the capital invested and the funds should offer tax benefits.
The fund managers should be able to perform well in order to build up the image of the
funds.
7. The qualities of an AMC also affect the scheme selection of investors. The reputation of
the AMCs is highly important factor for the investors affecting their selection of a
particular AMC followed by range of schemes and their expertise in managing money.
Therefore the companies should focus on building up of their brand in the market in order
to gain more customers. This can be done by improving the performance of the funds in
the market and also by offering wide range of schemes in the market to target different
group of investors.
Page | 71
8. The investor services are also important for the investors in their selection of a particular
fund/AMC. The daily NAV disclosure is the most important factor which affects the
choice of the investors followed by disclosure of objectives of investment, method and
periodicity of valuation and Disclosure of method of sale and repurchase in offer
document. So the AMCs should be as transparent as possible and follow the norms
stipulated by SEBI and AMFI in order to gain the confidence of investors and thereby
building up the image in tn the market.
Page | 72
Bibliography and References-
1. Customer Orientation in Designing Mutual Fund Products - An Analytical Approach
to Indian Market Preferences by Dr Tapan K Panda and Dr Nalini Prava Tripathy.
2. An Empirical Study on Factors Influencing the Mutual Fund/Scheme Selection by
Retail Investors by - Ms. T.R. Rajeswari and Prof. V.E. Rama Moorthy.
3. Performance Evaluation of Indian mutual Funds by – Dr. S. Narayan Rao.
4. Analysis of components of investment performance – an empirical study of mutual
funds in India by Dr. S. Anand & Dr. V Murugaiah.
5. What’s the right investment mix for you? Business India, August 2, 2004.
6. Investor Home – Psychology and Behavior finance.
7. Security Analysis and Portfolio Management, by Fisher and Jordan.
8. Mutualfundsindia.com
9. Amfiindia.com
10. Investopedia.com
11. Review of Marketing research Volume-5 by Naresh Malhotra.
Page | 73
Annexure - I
Questionnaire for Study
Page | 74
NAME ______________________________
E-MAIL ___________________________________________
Please tick mark-
I. AGE: Below 30 [ ] 30 – 40 [ ] 40 – 50 [ ] 50 and above [ ]
II. GENDER: Male [ ] Female [ ]
III. INCOME: < 200,000 [ ] 200,000-300,000 [ ] 300.000-400,000 [ ] 400,000 > [ ]
IV. OCCUPATION: Salaried [ ] Businessman [ ] Professional [ ] Retired [ ]
V. QUALIFICATION: Below graduate [ ] Graduate [ ] Above Graduate [ ]
VI. MARITAL STATUS: Married [ ] Unmarried [ ]
Please fill in-
SAVINGS = Rs ____________ / Year
What % of your savings are invested for 5 years and above __________________ (approx.)
What % of your savings are invested for 3-5 years__________________ (approx.)
What % of your savings are invested for 1-3 years___________________ (approx)
What % of your savings are invested for less than one year________________ (approx)
Please rank the choices according to your preferences as indicated in example-
Give Rank 1 to the most preferred option.
Give Rank 2 to the next best option and so on.
EXAMPLE: Which season do you like most?
Rainy [3] Winter [1] Summer [2]
1. Which of the following do you prefer for investment?
[ ] Mutual funds [ ] Fixed Deposits [ ] Life Insurance [ ] Postal Savings
[ ] Stock Market [ ] Others
2. What were the most important factors while selecting a mutual fund scheme?
[ ] Liquidity [ ] Risk factor [ ] Returns [ ] Growth [ ] Tax Benefits
3. Which funds do you prefer for investment?
[ ] Open-Ended Funds [ ] Closed-Ended Funds [ ] Interval Funds
4. Which schemes you are interested to invest in?
[ ] Equity [ ] Debt [ ] Balanced [ ] Sector Specific
5. Which environmental forces influenced you the most to invest in mutual fund?
[ ] Friends/family [ ] Commercials [ ] Advisors [ ] Self-evaluation
Page | 75
6. Which mode of communication do you prefer most for receiving updates and
performance of your scheme/portfolio of mutual fund investment?
[ ] Telephone [ ] Internet/E-mail [ ] Direct Mail [ ] Self-Visit
SCHEMES QUALITIES
5. Investment/Withdrawal facilities
Page | 76
AMC QUALITIES
INVESTOR SERVICES
Page | 77
Annexure – II
Name, NAV History, Fund Returns, Index History and Index Returns of
Selected Schemes
Page | 78
(1) BIRLA SUNLIFE EQUITY FUND
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV Div X^2 XY
Returns (Y) Index Returns (X)
Page | 79
(2) TEMPLETON INDIA EQUITY INCOME FUND
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV Div. X^2 XY
Returns (Y) Index Returns (X)
Page | 80
(3) UTI EQUITY FUND
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV Div X^2 XY
Returns (Y) Index Returns (X)
Page | 81
(4) SBI EQUITY FUND
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV Div X^2 XY
Returns (Y) Index Returns (X)
Page | 82
(5) KOTAK EMERGING EQUITY SCHEME
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV Div X^2 XY
Returns (Y) Index Returns (X)
Page | 83
(6) HDFC EQUITY FUND
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV Div X^2 XY
Returns (Y) Index Returns (X)
Page | 84
(7) LIC EQUITY FUND
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV Div X^2 XY
Returns (Y) Index Returns (X)
Page | 85
(8) ICICI DISCOVERY FUND
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV X^2 XY
Returns (Y) Index Returns (X)
Page | 86
(9) IDFC IMPERIAL EQUITY FUND
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV Div X^2 XY
Returns (Y) Index Returns (X)
Page | 87
(10) RELIANCE EQUITY FUND
QUARTERLY ANALYSIS
Fund Market Market
Year Month NAV Div X^2 XY
Returns (Y) Index Returns (X)
Page | 88
Thank You
Page | 89