Final Prjct

A major project on

A study on performance of mutual fund of Indian Amc.

(Submitted in Fulfilment of the Requirements of Bachelor of

Business Administration)

Of

Guru Gobind Singh Indraprastha University Batch

of 2013-2016

Submitted To: Submitted By:

Ms. Himani Gupta Vivek Singh

04921401713

Jagannath International Management School

OCF, Pocket 9, Sector-B, Vasant Kunj, New Delhi, Delhi 110070

Student Undertaking

I hereby declare that the project entitled” A study on performance of mutual funds of

Indian Amc” which is being submitted in fulfilment of the requirement of the course

and carried out by me under the supervision and guidance of Ms. Himani Gupta.

I further declare that I or any other person has not previously submitted this project

report to any other institution/university for any other degree/ diploma or any other

person.

Submitted To: Submitted By:

Ms. Himani Gupta Vivek Singh

Certificate

This is to certify that the project tittle is the original work of the student of Jagannath

International Management School Affiliated to Guru Gobind Singh Indraprasth

university, who has completed this project under my guidance. This project has not been

submitted as a part of any other degree or course to this or any other university.

Project Guide

Ms Himani Gupta

Assistant Professor

ACKNOWLEDGEMENT

I would like to express my sincerest thanks to Ms Himani Gupta, without whose support and guidance

this project could not have been completed. She has been an unrelenting source of inspiration and

guidance throughout the course of this project.

Last but not the least, I am highly grateful to all who have in some way or the other contributed towards

my project, without which this project would not have been such learning and enriching experience.

INDEX

Executive Summary

Introduction 6

• History of Mutual funds

• Different mutual funds used in project 9

• Different ratios used in project 10

Research Design 15

• Title 15

• Objective 16

• Data collection 16

Methodology 18

• Formula used 18

• Procedure 21

• Results and analysis 22

Conclusion 55

Limitations 57

Bibliography 58

EXECUTIVE SUMMARY

INTRODUCTION

Mutual fund in India serve as collective investment vehicles i.e. they show an indirect way in which

investors can invest in capital markets. The objective is to collect the funds from the investors and

then invest these funds from the investors and then invest these funds in securities permitted under

the regulation, Such kind of investment is ideal for small investors who want to invest in stock

markets but cannot invest in most of the scrip’s because of limited amount of capital at their

disposal. Mutual funds are also suitable for those investors who do not have sufficient knowledge

of capital markets and by investing through a mutual fund, they can make use of knowledge of

specialised people, which the mutual funds usually employ. Mutual Fund is one of the financial

instruments in capital market, here the study based on the empirical investigation on the

performance of Mutual Fund schemes, main purpose of the study is to identify which of the month

and year schemes provided highest return and minimize the risk.

Every mutual fund has a sponsor which establishes the fund and hence a sponsor can be considered

as similar to the promoter of the company. The sponsor forms a trust in accordance with SEBI

guidelines. The trust has a governing body which is also appointed by the sponsor. The governing

body of the trust gives direction, controls, and also manages the overall affairs of the mutual fund.

The trustee has to be a person of high reputation and integrity. One of the members of governing

body becomes a full time executive of the trust and heads a company known as Asset Management

Company (AMC). Assets Management Company design fund for particular investors and sectors

like information technology, fast moving consumer goods, international financial instruments….

So mutual fund industry is high competitive and fund manager investment style and research team

also affecting risk and return of the funds. An important practical motivation for mutual fund

performance evaluation is to help an investor decide in which funds to invest.

A lot of benchmarks have been developed to measure the performance of mutual funds. However,

almost every model which evaluates the performance of the fund uses the return on the fund in the

form of change in the Net Asset Value and compares it with the return on the market. Net Asset

Value (NAV) refers to the intrinsic worth of an investor’s investment in a scheme of mutual fund.

The formula for calculating NAV is given below:

HISTORY OF MUTUAL FUNDS

The mutual fund industry in India began with setting up of the Unit Trust of India (UTI) in 1964

by the Government of India. During last 36 years, UTI has grown to be a dominant player in the

industry with assets of over Rs.52000 crores (Rs.520 billion) as of December 2001. In 1987

public sector banks and two Insurance companies (Life Insurance Company and General

insurance company) were allowed to launch mutual funds. Securities and exchange Board of India

(SEBI), regulatory body for Indian capital market, formulated Comprehensive regulatory

framework for Mutual Funds in 1993 and allowed private corporate bodies to launch mutual fund

schemes. Since then several mutual funds have been set up by the private and joint sectors. As on

March 2002, there were 35 mutual funds companies with 433 schemes and assets under

management were Rs.100594 (Rs.1005 Billion). It has been about a decade of competition for

Indian mutual fund industry. Indian mutual funds contribute 0.18% to net assets kitty, 0.55% to

the number of schemes at global level and we have a long way to catch up with the developed

world. The Product Life Cycle of Indian Mutual fund is in growth stage. The performance of

mutual funds receives a great deal of attention from both practitioners and academics. With an

aggregate investment of over $11 trillion worldwide and over $20 billion in India, the investing

public’s interest in identifying successful fund managers is understandable. From an academic

perspective, the goal of identifying superior fund managers is interesting as it encourages

development and application of new models and theories. 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. It is also our aim to

identify the outperformers.

FOUR DIFFERENT PHASES OF MUTUAL FUND INDUSTRY IN INDIA

Phase I

The first phase was prior to 1987 when UTI was the only player in this field. UTI

was established in 1963mby an act of parliament under RBI’s control. In 1978, UTI

was delinked from RBI and the control of the trust went in hands of IDBI. In the first

phase assets under mutual fund industry were of Rs. 6700 crores.

Phase II

The second phase was between 1987 to 1993, when a lot of public sector banks, LIC

etc. made an entry into this industry. Thus by the end of 1993, the AUM under this

industry was Rs. 47004 crores.

Phase III

The third phase was from 1993 to 2003. This phase saw twin developments, first the

entry of private players into the field and second the regulation of mutual funds by

SEBI. The AUM had jumped to Rs. 121805 crores by the end of 1st January 2003.

Phase IV

The fourth phase 2003 onwards saw the UTI act being repealed and UTI was

bifurcated into two separate entities, one which is a specified undertaking of UTI

catering to US 64 schemes (assured schemes). The second entity was called UTI

mutual fund scheme that followed SEBI norms.

RESTRICTIONS ON INVESTMENT TO BE MADE BY THE MUTUAL FUND

• No individual scheme of a fund should invest more than 5% of its total resources in

any one company.

• No mutual fund under its entire scheme together should invest more than 15% of its

total resources in any one industry.

• All investments in the debt segment must be rated as investment grade.

• The funds cannot engage in forward transactions.

• Investment in unlisted companies should be limited to 10% for closed end schemes

and 5% for open end schemes

DIFFERENT TYPES OF FUND USED IN THE PROJECT:

Debt fund:

An investment pool, such as a mutual fund or exchange-traded fund, in which core holdings are

fixed income investments. A debt fund may invest in short-term or long-term bonds, securitized

products, money market instruments or floating rate debt. The fee ratios on debt funds are lower, on

average, than equity funds because the overall management costs are lower.

The main investing objectives of a debt fund will usually be preservation of capital and generation

of income. Performance against a benchmark is considered to be a secondary consideration to

absolute return when investing in a debt fund.

Balanced fund:

A fund that combines a stock component, a bond component and, sometimes, a money market

component, in a single portfolio. Generally, these hybrid funds stick to a relatively fixed mix of

stocks and bonds that reflects either a moderate (higher equity component) or conservative (higher

fixed-income component) orientation. A balanced fund is geared toward investors who are

looking for a mixture of safety, income and modest capital appreciation. The amounts that such a

mutual fund invests into each asset class usually must remain within a set minimum and

maximum. Although they are in the "asset allocation" family, balanced fund portfolios do not

materially change their asset mix.

Equity funds:

A mutual fund that invests principally in stocks. It can be actively or passively (index fund)

managed. Also known as a "stock fund”. Stock mutual funds are principally categorized

according to company size, the investment style of the holdings in the portfolio and geography:

Size is determined by a company's market capitalization, while the investment style, reflected in

the fund's stock holdings, and is also used to categorize equity mutual funds. Stock funds are also

categorized by whether they are domestic (U.S.) or international. These can be broad market,

regional or single-country funds. There are so-called "specialty" stock funds that target business

sectors such as healthcare, commodities and real estate.

Equity Large Cap Funds:

Large cap funds are those mutual funds, which seek capital appreciation by investing primarily in

stocks of large blue chip companies with above-average prospects for earnings growth. Large cap

funds invest in those companies that have more potential of earning growth and higher profit. One

of the major advantages of large cap funds is that they are less volatile than mid cap and small cap

funds and the near term prospects of large cap funds can be more accurately predicted. On the flip

side, the large cap funds offer lower returns than mid cap or small cap funds. But when compared

in totality, large cap funds outperform all other funds. These funds come under low risk low

return category. In volatile times it is advisable to invest in large cap funds.

Liquid funds:

Liquid funds are used primarily as an alternative to short-term fix deposits. Liquid funds invest with minimal risk (like money market funds). Most funds have a lock-in period of a maximum of three days to protect against procedural (primarily banking) glitches, and offer redemption proceeds within 24 hours. The minimum investment size in a liquid fund varies from Rs. 25,000 to RS 1 lakh. Liquid funds invest in short-term debt instruments with maturities of less than one year. Therefore, they invest in money market instruments, short-term corporate deposits and treasury. The maturity of instruments held is between three and six months. A liquid fund provides good liquidity, low interest rate risk and the prevailing yield in the market. Liquid funds have the restriction that they can only have 10 per cent or less mark-to-market component, indicating a lower interest rate risk.

DIFFERENT RATIOS USED IN THE PROJECT

Sharpe’s ratio:

The Sharpe ratio characterizes how well the return of an asset compensates the investor for

the risk taken

The Sharpe ratio formula is:

The numerator is the risk premium which is the difference between the return on the portfolio &

the risk free return while the denominator is the standard deviation of the fund which is the common measure of risk.

The formula in terms of market is given by:

The fund with higher Sharpe’s ratio is considered to be better.

TREYNOR’S MODEL:

Jack Treynor (1965) conceived an index of portfolio performance measure called as reward to

volatility ratio, based on systematic risk. He assumes that the investor can eliminate unsystematic

risk by holding a diversified portfolio. Hence his performance measure denoted as TP is the

excess return over the risk free rate per unit of systematic risk, in other words it indicates risk

premium per unit of systematic risk.

The formula in terms of market is:

Here the numerator is Higher the ratio, better is the performance of the fund.

JENSON’S MODEL:

Michael C.Jensen (1968) has given different dimension and confined his attention to

the problem of evaluating a fund manager’s ability of providing higher returns to the

investors. He measures the performance as the excess return provided by the

portfolio over the expected (CAPM) returns.

Where,

If the ratio is positive then we should invest in the fund or otherwise reject.

Anova test (one way classification)

The F- test was developed by R.A. Fisher. The object of the test is to find out whether the two

independent estimates of population variance differ significantly or whether the two samples be

regards as drawn from the normal populations. F- Test is based on ratio of variance. That variance

represents rows and columns and degree of freedom, it’s also represents how rows affect and

column affect. The ANOVA single factor imply ratio of variance, the average variation with the

average of the average.

CO-EFFICIENT OF DETERMINATION:

Measure of diversification Coefficient of Determination is also called “goodness of fit”. the overall

goodness of fit is measured by the coefficient of determination. It tells what proportion of variation

in the dependent variable is explained by the independent variable. The potential advantage of

mutual fund investment is the diversification of portfolio. Diversification reduces the unique or

unsystematic or diversifiable risk and thus improves the performance. The diversification extent

can be measured by the value of coefficient of determination (r2). A low r2 value indicates the fund

has large scope for diversification. A comparison of diversification degree and unique risk is made

for clarity.

RESEARCH DESIGN

The research design is the conceptual framework within which researcher study is conducted and

it construct the blue print for collection of data, measurement of data, statistical tools for analysis

and analysis of variance. Research design included an outline of what the researcher will do from

writing the hypothesis and its operational implication to the final analysis of data. Decisions

regarding what, when, how much, by what means concerning an inquiry or a research study

constitute a research design, further more researcher design means arrangement of conditions for

collection and analysis of data in a manner that aims to combine relevance to the research purpose

with economy in procedure. Good researcher design is often features like flexible, appropriate,

efficient, and economical. Here hypothesis testing research is those where the researcher tests the

hypothesis of casual relationship between variables. Researcher ensures the minimization of bias

and maximization reliability of the evidence collected. Coding should be done carefully to avoid

error in coding and for this purpose the reliability of researcher to be believed.

Fund managers of the assets management company also do the researcher to identify the market

and would find period to buy, to hold and to sell the scrip. Fund managers having good researcher

team who continuous analysis of economic market, fundamental analysis, efficient market and

technical analysis of the particular index. Today researcher team should identify the international

financial market and how international financial instruments value could identified. Financial

crisis affect market total risk and total return, its indicate how to diversified the portfolio, how to

totally remove the unsystematic risk.

Researcher decided proper plan to action and define variable. Variable also identified dependent and

independent. Researcher specified research processing and analysing of the data.

DATA COLLECTION

Universe:

The universe of the study consists of the all the assets management companies (AMC), included

selected five start mutual funds under the different objective of the study.

Sampling Unit:

The sample unit included Equity funds, balanced funds, liquid funds, money market, and debt

funds. All the schemes having different ratings.

Sample Period:

Sample study should take from period April 2010 to April 2012.

Sample size:

• Liquid Funds

• Escorts Liquid Fund

• Sahara Liquid Fixed Pricing

• Templeton India Cash Asset Management

Equity Fund

• Birla Sun Life Equity Fund (Plan-B)

• DSP Black Rock Equity Fund

• HDFC Equity Fund

• Reliance Equity Fund

Debt Fund

• Religare Short Term Debt Fund

• JP Morgan Debt Fund

Large-Cap Fund

• Axis Equity Fund

• SBI Blue-chip Fund

• Birla Sun Life Top 100 Fund

Balanced Funds

• Canara Robecco Balanced Fund

• Kotak Balanced Fund

• HDFC Balanced Fund

METHODOLOGY

A. Formula used

Relative Performance Index (RPI)

Relative Performance Index is defined as the ratio of the unadjusted percentage NAV

growth and the percentage change in BSE Sensex.

Return

For each mutual fund scheme under study, the monthly returns are computed as

The market returns are computed on similar lines with BSE Sensex (The Bombay

Stock Exchange Sensitive Index) as benchmark.

The return on the market portfolio is computed as:

The logarithmic mean is computed to obtain mean monthly market return. The returns thus obtained are absolute

returns and are retained throughout the study.

Risk

Standard deviation: Measure of total risk

Financial analysts and statisticians prefer to use a quantitative risk surrogate called the

variance of returns

Where,

The square root of the variance is called the standard deviation σ = Var (r). The standard deviation

and the variance are equally acceptable and equivalent quantitative measures of an asset’s total risk.

The variance and standard deviation are computed from logarithmic monthly returns.

Beta: Measure of Systematic Risk

To obtain the measure of systematic risk (Beta) of the mutual fund scheme, Market Model is

applied.

The mathematical form of the model is:

Where, rp is the return on the mutual fund scheme, rm is the return on the market, α is the intercept,

β is the slope or the beta coefficient, ep is the error term. Higher values of β indicate a high

sensitivity of fund returns against market returns; the lower value indicates low sensitivity.

Higher β values are desired for the mutual funds during bull phase of the market and lower β

values are desired during the bear phase to outperform the market. The error term ep is an

approximation for unique risk. There are unequal sample observations and non-identical time

periods for the selected mutual fund schemes. It is assumed that beta is stationary during the

period. The constants α and β are computed through regression analysis by regressing the

monthly market return with the monthly mutual fund return. The regression also provides the

value of r2 (coefficient of determination) that gives the strength of co-relation between the

market and the fund returns and indicates the extent of diversification.

Sharpe’s Model

We use of the following ratio for computing Sharpe‘s ratio:

Treynor’s Model

We use of the following ratio for computing Treynor‘s ratio:

.

Jensen’s Model

We use the following formula to compute Jensen‘s ratio:

A mutual fund scheme with large Treynor ratio and low Sharpe ratio can be concluded to have

relatively larger unique risk. Thus the two indices rank the schemes differently. The major

limitation of the Sharpe ratio is that it is based on the Capital Market Line (CML). The major

character of the capital market line is only the efficient portfolios can be plotted on the CML but

not inefficient. Hence we assume that a managed portfolio (mutual fund scheme) is an efficient

portfolio. Procedure

The “higher values of NAV” of mutual fund schemes was downloaded from

www.amfiindia.com and “higher of market values” was downloaded from

www.yahoofinance.com in an excel sheet. This downloaded data was sorted using “conditional

formatting” in the toolbar. After the data was sorted , the RPI(Relative Performance Index) for

the funds and markets was computed respectively. The data so obtained was transported to SPSS.

In SPSS, the returns of the listed schemes was calculated using the following formula:

ri ={ ln(scheme) – lag[ln(scheme)]}*100

Then the adjusted return and the standard deviation was computed using the descriptive. Beta

measure of risk of systematic risk was calculated. Finally the regression formation was done,

where the dependent variable was the mutual fund scheme and the independent variable was

the market. And the correlation was also calculated. Then, this data was exported to excel and

the following ratios were computed to analyse it:

Sharpe’s Ratio

Treynor’s Ratio

Jensen’s Ratio

The results so obtained were analysed and conclusions were drawn.

http://www.amfiindia.com/



http://www.yahoofinance.com/



SCHEMES ( GROWTH) ADJUSTED RETURN

( Apr’10 to Apr’12)

ESCORTS ( LIQUID )

93.09

SAHARA FIXED PRICING ( LIQUID) 100

TEMPLTON INDIA CASH

MANAGEMENT (LIQUID)

180

BIRLA SUN LIFE EQUITY FUND PLAN B

( EQUITY)

32.14

DSP BLACK ROCK EQUITY FUND REG.

( EQUITY)

145.83

HDFC EQUITY FUND ( EQUITY) 163.15

RELAINCE EQUITY FUND ( EQUITY ) 4.87

RELIGARE SHORT TERM DEBT FUNT

( DEBT )

70.58

JP MORGAN ACTIVE BOND DEBT

FUND ( DEBT )

-70.51

AXIS EQUITY FUND ( LARGE CAP) 27.86

SBI BLUE CHIP FUND ( LARGE CAP) -80.41

BIRLA SUN LIFE TOP 100 FUND

(LARGE CAP)

4

CANARA ROBECO BALANCED FUND

( BALANCED)

-83.33

KOTAK BALANCED FUND

( BALANCED)

-5

HDFC BALANCED FUND ( BALANCED) -533.33

MARKETS

SENSEX -8.69

S&P NIFTY 3.92

ADJUSTED RETURN FOR THE COMPLETE PERIOD OF TWO YEARS

(SCHEME WISE)

Graph 1

MONTHLY RETURNS FOR EVERY SCHEME

SCHEMES ( GROWTH) PEARSON

COEFFICIENT(SENSEX

)

PEARSON

CEFFICIENT(NIFTY)

RESULT

ESCORTS ( LIQUID ) 0.204 0.173 ACCEPTED

SAHARA FIXED PRICING

( LIQUID)

-0.170 -0.157 REJECTED

TEMPLTON INDIA CASH

MANAGEMENT (LIQUID)

-0.118 -0.107 REJECTED

BIRLA SUN LIFE EQUITY

FUND PLAN B ( EQUITY)

0.908 0.919 ACCEPTED

DSP BLACK ROCK EQUITY

FUND REG. ( EQUITY)


HDFC EQUITY FUND

( EQUITY)


RELAINCE EQUITY FUND

( EQUITY )


RELIGARE SHORT TERM

DEBT FUNT ( DEBT )

-0.056 -0.026 REJECTED

JP MORGAN ACTIVE

BOND

DEBT FUND ( DEBT )

-0.113 -0.082 REJECTED

AXIS EQUITY FUND

( LARGE CAP)


SBI BLUE CHIP FUND

( LARGE CAP)


BIRLA SUN LIFE TOP 100

FUND (LARGE CAP)


CANARA ROBECO

BALANCED FUND

( BALANCED)


KOTAK BALANCED FUND

( BALANCED)


HDFC BALANCED FUND

( BALANCED)


SCHEMES STANDARD

DEVIATION

(

MEASUREM

ENT OF

RISK)

VARIANCE BETA

SENSEX

R2 SENSEX

( COEFFI CIEN

T OF

DETERM INA

TION

DIVERSI FICA

TION

MEASUR

E)

BETA

NIFTY

R2 NIFTY

(COEFFICIENT OF

DETERMINATION

DIVERSIFICATION

MEASURE)

ESCORTS

( LIQUID )

0.6314 0.399 0.24 0.041 0.173 0.030

SAHARA

FIXED

PRICING

( LIQUID)

0.0563 0.003 -0.17 0.029 -0.157 0.025

TEMPLTON

INDIA CASH

MANAGEM

ENT

(LIQUID)

0.0485 0.002 -0.118 0.014 -0.107 0.011

BIRLA SUN

LIFE

EQUITY

FUND PLAN

B

( EQUITY)

1.188 3.555 0.908 0.824 0.919 0.844

DSP BLACK

ROCK

1.811 3.283 0.874 0.763 0.882 0.777

EQUITY

FUND REG.

( EQUITY)

HDFC

EQUITY

FUND

( EQUITY)

1.944 3.782 0.905 0.820 0.908 0.825

RELAINCE

EQUITY

FUND

( EQUITY )

1.777 3.158 0.867 0.751 0.883 0.780

RELIGARE

SHORT

TERM DEBT

FUNT

( DEBT )

0.169 0.029 -0.056 0.003 -0.026 0.001

JP MORGAN

ACTIVE

BOND DEBT

FUND

( DEBT )

0.194 0.038 -0.113 0.013 -0.082 0.007

AXIS

EQUITY

FUND

(LARGE

CAP)

1.633 2.669 0.934 0.873 0.933 0.871

SBI BLUE

CHIP FUND

(LARGE

CAP)

1.756 3.084 0.95 0.902 0.952 0.907

BIRLA SUN

LIFE TOP 100

FUND

1.705 2.910 0.963 0.927 0.966 0.934

(LARGE

CAP)

CANARA

ROBECO

BALANCED

FUND (

BALANCED

)

1.108 1.229 0.865 0.749 0.873 0.762

KOTAK

BALANCED

FUND

(BALANCE

D)

1.209 1.487 0.837 0.700 0.834 0.695

HDFC

BALANCED

FUND (

BALANCED

)

1.345 1.810 0.864 0.747 0.868 0.753

ANALYSIS USING REGRESSION:

ESCORTS LIQUID FUND:

From the results, it can be observed that the curve is steep so the variance is low.

Hence standard deviation which gives us the risk measure is low.

NIFTY: R2 being 0.030 shows that the scheme is almost uncorrelated to the market. SENSEX:

R2 being 0.041 shows that the scheme is almost uncorrelated to the market. This model is

insignificant

The returns of Escorts starts off with movement somewhat moving with the market. In the later half

it is somewhat constant

. TEMPLETON INDIA CASH MANAGEMENT FUND:

Graph 5

From the results, it can be observed that the curve is very steep so the variance is low, hence standard

deviation which gives us the risk measure is low.

NIFTY: R2 being 0.011 shows that the scheme is highly uncorrelated to the market this model is insignificant.

SENSEX : R2 being 0.014 shows that the scheme is highly uncorrelated to the market. This model

is insignificant .

The returns Templeton is constant at .00xx value throughout, not responding to the change in markets

return.

BIRLA SUN LIFE EQUITY FUND (PLAN B) :

Graph 6

From the result it can be observed that the curve is moderately distributed so the variance is moderate, hence

standard deviation which gives us the risk measure is moderate.

NIFTY : R2 being 0.844 shows that the scheme is highly correlated to the market.This model is significant.

SENSEX : R2 being 0.824 shows that the scheme is highly correlated to the market. This model is significant.

The returns of Birla Sunlife Equity has high dependence on the market. It moves with the markets all

over the period.

DSP BLACK ROCK EQUITY FUND REG:

From the results, it can be observed that the curve is moderately steep so the variance is low,

hence standard deviation which gives us the risk measure is low.

NIFTY : R2 being 0.777 shows that the scheme is correlated to the market This model is significant.

SENSEX : R2 being 0.763 shows that the scheme is uncorrelated to the market. This model is significant.

The returns of DSP rock is highly dependent on the markets. It moves with the markets throughout.

HDFC EQUITY FUND:

From the results, it can be observed that the curve is very steep so the variance is very low,

hence standard deviation which gives us the risk measure is too low.

NIFTY : R2 being 0.825 shows that the scheme is highly correlated to the market. This model is significant.

SENSEX : R2 being 0.820 shows that the scheme is highly correlated to the market. This model is significant.

The returns of HDFC equity is somewhat linked with the market returns. It moves up and down with

the market.

RELIANCE EQUITY FUND:

Graph 9

From the results, it can be observed that the curve is moderate so the variance is moderate, hence standard

deviation which gives us the risk measure is neither too low nor too high.

NIFTY : R2 being 0.780 shows that the scheme is moderately correlated to the market. This model

is significant.

SENSEX : R2 being 0.751 shows that the scheme is moderately correlated to the market.This model is

significant.

The return of Reliance equity is a bit constant in the initial periods, while it’s highly linked with

the market returns in the later stages.

JP MORGAN DEBT FUND:

Graph 10

From the above graph it can be observed that the curve is highly steep so the variance is low,

hence standard deviation which gives us the risk measure is low.

NIFTY : R2 being 0.007 shows that the scheme is not at all uncorrelated to the market. This model insignificant.

SENSEX : R2 being 0.0013 shows that the scheme is not at all uncorrelated to the market. This model is

insignificant.

The returns of JPMORGAN are not linked with the markets. Its return is somewhat constant throughout.

RELIGARE SHORT TERM DEBT FUND:

Graph 11

From the above graph it can be observed that the curve is steep so the variance is low, hence standard

deviation which gives us the risk measure is low.

NIFTY: R2 being 0.001 shows that the scheme is not at all uncorrelated to the market. This model is

insignificant.

SENSEX: R2 being 0.003 shows that the scheme is not at all uncorrelated to the market. This model is

insignificant.

The returns of Religare are not linked with markets. Return is constant throughout.

AXIS EQUITY FUND:

Graph 12

From the above graph it can be observed that the curve is very very steep so the variance is significantly low,

hence standard deviation which gives us the risk measure is also very low.

NIFTY: R2 being 0.871 shows that the scheme is highly correlated to the market. This model is significant.

SENSEX: R2 being 0.873 shows that the scheme is highly correlated to the market. This model is significant.

The return of Axis equity is totally linked with the markets, it moves with the market throughout.

SBI BLUECHIP FUND:

From the above graph it can be observed that the curve is moderately steep so the

variance is between the lower and upper limits, hence standard deviation which gives

us the risk measure is also moderate.

NIFTY : R2 being 0.907 shows that the scheme is very highly correlated This model is significant.

SENSEX: R2 being 0.902 shows that the scheme is very highly correlated to the market. This model is

significant.

The returns of SBI blue chip is exactly linked with markets, the show high dependence and moves with

the markets throughout.

BIRLA SUN LIFE TOP 100 FUND:

Graph 14

From the above graph it can be observed that the curve is very very steep so the variance is significantly low,

hence standard deviation which gives us the risk measure is also very low.

NIFTY: R2 being 0.934 shows that the scheme is very highly correlated to the market. This model

is significant.

SENSEX: R2 being 0.927 shows that the scheme is very highly correlated to the market. This model is

significant.

The returns of Birla sun life top 100 is linked with the markets. It moves up and down with the markets.

CANARA ROBECCO (BALANCED) FUND:

From the above graph it can be observed that the curve is highly steep so the variance is

low, hence standard deviation which gives us the risk measure is also low.

NIFTY : R2 being 0.762 shows that the scheme is correlated to the market. This model is significant.

SENSEX : R2 being 0.749 shows that the scheme is correlated to the market. This model is significant.

KOTAK BALANCED FUND:

Graph 16

From the above graph it can be observed that the curve is little flatterer so the variance is high, hence

standard deviation which gives us the risk measure is also on a higher side.

NIFTY : R2 being 0.695 shows that the scheme is correlated to the market. This model is significant.

SENSEX : R2 being 0.700 shows that the scheme is correlated to the market. This model is significant.

The returns of Kotak is moderately linked with the markets, it moves up and down with the market,

but not in exact ratios.

HDFC BALANCED FUND:

Graph 17

From the above graph it can be observed that the curve is highly steep so the variance is low, hence

standard deviation which gives us the risk measure is also low.

NIFTY: R2 being 0.753 shows that the scheme is correlated to the market. This model is significant.

SENSEX: R2 being 0.747 shows that the scheme is correlated to the market. This model is significant.

The returns of HDFC Balanced is also moderately linked with the markets, it moves up and

down but not in complete ratios.

MEASURE OF TOTAL RISK:

Since the variance and standard deviation give us the measure of returns, we observe HDFC equity

has highest standard deviation and variance so investment in HDFC equity fund would be the

riskiest option for an investor in our study. Similarly Templeton India liquid fund is the least risky

option.

Measurement of systematic risk

It depends upon the beta value in each market, hence the following was observed:

Highly sensitive

• Bsl top 100

• Hdfc equity

• Sbi blue chip

• Bsl equity

Moderately sensitive

• Canara robeco

• Kotak

• Hdfc balanced

• Dsp black rock equity

• Reliance equity

Least sensitive

• Escorts liquid fund

• Sahara liquid fund

• Templeton India liquid fund

• Religare debt fund

• Jp Morgan debt fund

RELATIVE PRICE INDEX:

Table 4

SCHEMES RPI w.r.t

SENSEX

RPI w.r.t NIFTY

ESCORTS (

LIQUID )

-466.63 10.04

SAHARA

FIEXED

PRICING (

LIQUID)

-410.88 8.84

TEMPLTON

INDIA CASH

MANAGEMEN

T (LIQUID)

-299.96 6.45

BIRLA SUN

LIFE EQUITY

FUND PLAN B

( EQUITY)

188.20

-4.05

DSP BLACK

ROCK EQUITY

FUND REG. (

EQUITY)

-178.37

3.84

HDFC EQUITY

FUND (

EQUITY)

-253.91 5.46

RELAINCE

EQUITY FUND

( EQUITY )

305.57 -6.57

RELIGARE

SHORT TERM

DEBT FUNT (

DEBT )

-391.78 8.43

JP MORGAN

ACTIVE BOND

DEBT FUND (

DEBT )

-332.93

7.16

AXIS EQUITY

FUND (

LARGE CAP)

35.39 -0.76

SBI BLUE

CHIP FUND (

LARGE CAP)

78.28 -1.68

BIRLA SUN

LIFE TOP 100

FUND

(LARGE CAP)

-184.84 3.98

CANARA

ROBECO

BALANCED

FUND (

BALANCED)

-254.67 5.48

KOTAK

BALANCED

FUND (

BALANCED)

29.88 -0.64

HDFC

BALANCED

FUND (

BALANCED)

-553.93 11.91

According to Sharpe’s Ratio, benchmark value for

Sensex is -5.29255

Good performers (Sensex):

Templeton India cash management fund (best performer)

Sahara liquid fixed pricing fund

Religare short term debt fund

Escorts liquid fund

Hdfc equity fund

Moderate performers (Sensex):

Dsp Blackrock equity fund

Reliance equity fund

Birla sun life top 100 fund

Axis equity fund

Birla sun life equity fund (plan-b) Kotak balanced

fund(just above underperformer)

Underperformer (Sensex):

JPMorgan debt fund

Canara robecco balanced fund

Sbi blue chip fund

Hdfc balanced fund (lowest performer)

Benchmark value for nifty is 1.393194

Good performers (nifty):

Templeton India cash management (best performer

Sahara liquid fixed pricing


Hdfc equity fund

Dsp Blackrock equity fund

Moderate performer


Birla sun life 100 fund

Axis equity fund

Birla sun life equity

Kotak balanced fund (just above underperformer)

Underperformer

JPMorgan debt fund


Sbi blue-chip fund

Hdfc balanced fund (lowest performer)

According to treynor’s ratio,

Benchmark for Sensex = -9.95

Good performers:

JPMorgan debt fund

Escorts liquid fund

Moderate performers:

Hdfc equity fund

Dsp black rock equity fund

Birla sun life equity fund


Axis equity fund

Birla sun life top 100 fund

Kotak balanced fund (just above underperformer)

Underperformers:


Hdfc balanced fund


Templeton India cash management fund

Canara robecco balanced fund Sbi

blue-chip fund

Benchmark for nifty = 2.66

Good performers:

JPMorgan debt fund

Escorts liquid fund

Hdfc equity fund

Dsp black rock equity fun

Moderate performers:

Birla sun life equity fund

Axis equity fund


Bsl top 100 fund

Underperformers:


Templton India cash management fund


Hdfc balanced fund

Sbi blue chip fund


According to Jensen ratio, negative return (Sensex):

JPMorgan debt fund

Sbi blue-chip fund


Hdfc balanced fund

Positive return (Sensex):

Templton India cash management

Dsp Blackrock debt fund

Hdfc equity fund


Escorts liquid fund


Negative return (nifty):

JPMorgan debt fund

Sbi blue chip fund


Kotak balanced fund

Hdfc balanced fund

Positive return (nifty):

Templton India cash management fund

Dsp Blackrock debt fund

Hdfc equity fund


Escorts liquid fund


CONCLUSION: As per our study including various schemes and the two markets. It can be concluded that the

scheme with the highest return over the span of two years from April 2010 to April 2012 is

Templeton India Cash Management (liquid) with an adjusted return of 180. Whereas the scheme

with the lowest return (negative) is HDFC Balanced with a return of -533.33.

If we compare on monthly basis from April 2010, we can conclude that the returns of Templeton

India Cash Management (liquid) is the most consistent. They show the most constant returns

followed closely by Sahara Fixed Pricing (liquid). When we talk about the least constant scheme

we can observe that schemes like HDFC Equity Fund, AXIS Equity Fund, SBI BLUE CHIP Fund

and DSP Black Rock Equity Fund move with the markets.

TEMPLTON INDIA CASH MANAGEMENT is the best performer in both the markets when we

consider the Sharpe’s Ratio whereas it is among the underperformers when we consider Treynor’s

ratio.

JP MORGAN is among the best scheme if we consider the Treynor’s ratio whereas it is among the

underperformers as per Sharpe’s Ratio. It also gives a negative return as per Jensen ratio Schemes

like Axis Equity Fund and Reliance are moderate performers as per both the ratios.

SBI Blue Chip also gives a negative return as per Jensen ratio in both the markets.

Since the 3 Ratios have different limitations and advantages, the results from all the three ratios for

the best performing fund are slightly deviated. Hence a proper measure for the best performance

fund could not be found. Thus, by keeping in mind and preferences of Asset Management Company

and investor the best performance fund according to the required ratio should be calculated.

As per our model, the Karl Pearson coefficient of correlation is the highest for Birla Sun Life top

100 fund with 0.963. This shows that this scheme is highly correlated with both the markets.

Whereas the coefficient of correlation is the lowest for Sahara fixed pricing with -0.170 which

shows that it is the elastically correlated with the markets.

We also observed that HDFC equity fund is riskiest option while Templton India Fund is least risky

option. If we consider the systematic risk by observing the beta value for all schemes in the 2

markets BSL Top 100 fund is highly sensitive with the market whereas JP Morgan Active Bond

Debt fund is least sensitive. As per the performance the liquid funds have the overall highest return

whereas if we consider the balanced fund, they give the least return. Also the large cap funds show

the highest level, while the least level of correlation is shown by the liquid funds.

Throughout the study we observe that both the markets are highly correlated to each other. So the regression

result of any particular scheme to a market is almost similar to the other market.

LIMITATIONS

The present study has the following limitations:

1. The NAVs used in the study are obtained from AMFI’s website, which in turn is supplied by the

members. Members in turn have not followed any uniform rule in its computation due to the

flexibilities offered under SEBI regulations.

2. Initially all mutual fund schemes were directly linked to stock market. In the recent 2 years

numerous schemes which are independent of stock market (debt & money market funds) are

introduced and such schemes’ returns need not have correlation with BSE sensex, and the sensex

is not adjusted for dividends.

3. Banks are free to accept deposits at any interest within the ceilings fixed by Reserve Bank of

India and interest rates can vary from client to client. Hence there can be an inaccuracy in the

risk-free rates.

4. The analysis is not free from the limitations of non-identical time periods and unequal sample

observations.

5. The study excludes the effect of entry and exit loads of the mutual funds.

BIBLIOGRAPHY

• WWW.AMFIINDIA.COM

• WWW.YAHOOFINANCE.COM

• WWW.MONEYCONTROL.COM

• WWW.INVESTOPEDIA.COM

• WWW.MUTUALFUNDSINDIA.COM

• WWW.WIKIPEDIA.COM

• WWW.RBI.ORG.IN





http://www.moneycontrol.com/

http://www.moneycontrol.com/

http://www.investopedia.com/

http://www.investopedia.com/

http://www.mutualfundsindia.com/

http://www.mutualfundsindia.com/

http://www.wikipedia.com/

http://www.wikipedia.com/

http://www.rbi.org.in/

http://www.rbi.org.in/

QUESTIONNAIRE

What kind of investments you prefer most? Pl tick (√). All applicable

a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund

e. Post Office-NSC, etc. f. Shares/Debentures g. Gold/ Silver h. Real Estate

I. PPF j. PF

While investing your money, which factor you prefer most? Any one

Liquidity Low Risk High Return Company reputation

Have you ever invested your money in mutual fund?

Yes No

If yes,

a) Where do you find yourself as a mutual fund investor?

Totally ignorant [ ]

Partial knowledge of mutual funds [ ]

Aware only of any specific scheme in which you invested [ ]

Fully aware [ ]

b) In which kind of mutual you would like to invest?

Public [ ] Private [ ]

How do you come to know about Mutual Fund?

a. Advertisement b. Peer Group c. Banks d. Financial Advisors

Which mutual fund scheme have you used?

Open-ended Close-ended

Liquid fund Mid- Cap

Growth fund Regular Income fund

Long-Cap Sector fund

If no,

a) If not invested in Mutual Fund then why?

Not aware of MF Higher risk Not any specific reason

Which feature of the mutual funds allure you most?

Diversification [ ]

Better return and safety [ ]

Reduction in risk and transaction cost [ ]

Regular Income [ ]

Tax benefit [ ]

In which Mutual Fund you have invested? Please tick (√). All applicable.

a. SBIMF

b. UTI

c. HDFC

d. Reliance

e. ICICI prudential funds

f. JM mutual fund

g. Other. Specify

When you invest in Mutual Funds which mode of investment will you prefer?

a. One Time Investment b. Systematic Investment Plan (SIP)

Where from you purchase mutual funds?

Directly from the AMCs [ ]

Brokers only [ ]

Brokers/ sub-brokers [ ]

Other sources [ ]

Which AMC will you prefer to invest?

Assets Management Co.

a. SBIMF

b. UTI

c. Reliance

d. HDFC

e. Kotak

f. ICICI

g. JM finance

Which sector are you investing in mutual fund sector?

i. General 1st

ii. Oil and petroleum

iii. Gold fund

iv. Diversified equity fund

v. Power sector

vi. Debt fund

vii. Banking fund

viii. Real estate fund

ix. General 1st

How would you like to receive the returns every year?

a. Dividend pay-out b. Dividend re-investment c. Growth in NAV

Personal Details:

(a). Name:-

(b). Add: - Contact No:-

(c). Age:-

(d). Qualification:-

Graduation/PG Under Graduate Others

(e). Occupation. Pl tick (√)

Govt. Sec Pvt. Sec Business Agriculture Others

(g). What is your monthly family income approximately? Pl tick

(√).

Up to

Rs.10,000

Rs. 10,001 to

15000

Rs. 15,001 to

20,000

Rs. 20,001 to

30,000

Rs. 30,001

and above

Final Prjct

Documents