INTRODUCTION TOMUTUAL FUND

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

contribution that is to be invested in accordance with the stated objective.
The fund belongs to all the investors depending on the proportion of his
contribution to the fund.
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market instruments
such as shares, debentures and other securities.
The income earned through these investments and the capital appreciations realized are
shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual
Fund is the most suitable investment for the common man as it offers an opportunity to invest in
a diversified, professionally managed basket of securities at a relatively low cost. The flow chart
below describes broadly the working of a Mutual Fund.

RESEARCH
METHODOLOGY
A) NEED FOR THE STUDY
In present market trend, Mutual Fund is one of the revolutionary
investment alternatives. In present economic liberalization scenario
investors with their huge surplus funds, needs highly diversifiable
instrument alternative for moderate returns with low risks, with this the
mutual funds got significance in Indian capital market.
And Due to the following Advantages

ADVANTAGES OF MUTUAL FUNDS:

1)
2)
3)
4)
5)
6)
7)
8)

Reduced Risk.
Diversified investment.
Botheration free investment.
Revolving type of investment (Reinvestment).
Selection and timings of investment.
Wide investment opportunities.
Investments care.
Tax benefits.

B) OBJECTIVES OF THE STUDY

1. To analyze and evaluate the performance of TAXGAIN funds of various
Mutual Fund companies based on past data.
2. To know which Tax gain fund is performing well.
3. Comparison is to be done based on Risk & Return & giving Ranks
4. To provide the information to the Investor as a financial adviser

C) Sampling & Data Collection

SAMPLING TECHNIQUE:
Convenience sampling technique (which comes under non-probability sampling
method)is taken to select the five balanced funds.
DATA COLLECTION:
1. Primary Data: Collected from the fund manager about the funds they are providing
and the investment methods they are following through personal interview.
2. Secondary Data: Collected from the websites related to mutual funds, books, and
brochures.

SAMPLE
1) INDIA INFOLINETax Gain Scheme (G)
2) HDFC Tax Saver (G)
3) Taurus Tax Shield (G)
4) Canara Robeco Equity Tax Saver (G)
5) UTI Equity Tax Saving Plan (G)
6) LIC MF Tax Plan (G)
7) ICICI Pru Tax Plan (G)

D) Statistical Tools & Techniques

Statistical Tools
1. Mean
2. Standard deviation
3. Beta
4. Sharpe Measure
5. Trey nor Measure

Mean
It is the average of all the 3 year returns. It used to calculate Treynor Measure and
Sharpe measure.

Standard Deviation ()
Standard Deviation is a statistical tool, which measures the variability of returns from the
expected value, or volatility. It is denoted by sigma (). It is calculated using the formula
mentioned below:
Where, is the sample mean, xis are the observations (returns), and N is the total
number of observations or the sample size.

Beta
Risk is an important consideration in holding any portfolio. The risk in holding
securities is generally associated with the possibility that realized returns will be less than the
returns expected.
Risks can be classified as Systematic risks and Unsystematic risks.

Unsystematic risks:
These are risks that are unique to a firm or industry. Factors such as management
capability, consumer preferences, labor, etc. contribute to unsystematic risks.
Unsystematic risks are controllable by nature and can be considerably reduced by
sufficiently diversifying one's portfolio.

Systematic risks:
These are risks associated with the economic, political, sociological and other macrolevel changes. They affect the entire market as a whole and cannot be controlled or
eliminated merely by diversifying one's portfolio

What is Beta?
The degree, to which different portfolios are affected by these systematic risks as
compared to the effect on the market as a whole, is different and is measured by Beta. To put it
differently, the systematic risks of various securities differ due to their relationships with the
market. The Beta factor describes the movement in a stock's or a portfolio's returns in relation to
that of the market return. For all practical purposes, the market returns are measured by the
returns on the index (Nifty, Mid-cap etc.), since the index is a good reflector of the market.

Methodology
Formula:
Beta is calculated as:
Covariance ( Kj, Km)
= -----------------------------------Variance (Km)

Where,
Kj is the returns on the portfolio or stock - DEPENDENT VARIABLE
Km is the market returns or index - INDEPENDENT VARIABLE
Variance is the square of standard deviation.
Covariance is a statistic that measures how two variables co-vary, and is given by:

Where, N denotes the total number of observations, and and respectively represent the
arithmetic averages of x and y.
In order to calculate the beta of a portfolio, multiply the weightage of each stock in the portfolio
with its beta value to arrive at the weighted average beta of the portfolio

Sharpe Measure
Sharpe measure reflects the excess return earned on a portfolio per unit of its total risk. It
is similar to Trey nor measure except that it employees standard deviation as a measure of risk.
Thus,

Average rate of return Risk free rate

Sharpe measure = ----------------------------------------------Standard deviation of return

Trey-nor Measure
According to Jack Trey-nor, systematic risk or beta is the appropriate measure of risk.
Trey-nor measure of portfolio also related to the portfolio of beta.
Thus,
Average rate of return-Risk free rate
Trey-nor measure

= --------------------------------------------Beta

Note:
1.

The Sharpe measure, the Trey-nor measure as well as the

Sharpe measure, postulate a linear relationship between risk and return though they employ
different measures of risk.

2.

For a perfectly diversified portfolio both the measures give

identical rankings because in such cases the total risk and systematic risk are the same

E) Limitations of the Study

1) Study is confined to the data available from the fact sheets
And Websites
2) Tax Gain Schemes of Seven AMCs are only taken in to account due
Time and Finance constraints.
3) Historical data is not a perfect measure of future performance.

To