PERFORMANCE EVALUATION OF MUTUAL FUND SEGMENTS IN INDIA With Special Reference to Sectoral Funds THESIS SUMMARY SUBMITTED TO KUMAUN UNIVERSITY, NAINITAL In partial fulfillment of the requirements for the award of the degree of DOCTOR OF PHILOSOPHY BY TRIBHUVAN PRATAP SINGH Under the Supervision of Prof. N. S. BISHT HEAD DEPARTMENT OF COMMERCE KUMAUN UNIVERSITY NAINITAL – 263002 FACULTY OF COMMERCE AND MANAGEMENT STUDIES KUMAUN UNIVERSITY NAINITAL 2012 Estelar
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PERFORMANCE EVALUATION OF MUTUAL FUND
SEGMENTS IN INDIA
With Special Reference to Sectoral Funds
THESIS SUMMARY
SUBMITTED
TO
KUMAUN UNIVERSITY, NAINITAL
In partial fulfillment of the requirements for the award of the degree of
DOCTOR OF PHILOSOPHY
BY
TRIBHUVAN PRATAP SINGH
Under the Supervision
of
Prof. N. S. BISHT
HEAD
DEPARTMENT OF COMMERCE
KUMAUN UNIVERSITY
NAINITAL – 263002
FACULTY OF COMMERCE AND MANAGEMENT STUDIES
KUMAUN UNIVERSITY
NAINITAL
2012
Estelar
INTRODUCTION
A mutual fund is an ideal investment vehicle in today’s complex and modern financial
scenario. Markets for equity shares, bonds and other fixed income instruments, real estate,
derivatives and other assets have become mature and information driven. For a layman it is
difficult to have the knowledge, skills, inclination and time to keep track of the events and to
understand their implications in order to act speedily in such a complex financial scenario.
A mutual fund is the answer to all these situations which exploits economies of scale in
three areas i.e. research, investments and transaction processing. Although Mutual Funds
provide an effective and efficient avenue to non skilled and small investors but a normal
investor is not able to opt for an appropriate fund which can give him best returns in
different phases of economy and market developments. Thus this study primarily aims to
identify the opportunities offered by sectoral funds and evaluate the performance of such
funds in different stages of economic developments and also in comparison with other type
of funds i.e. equity diversified funds. This has helped to draw a conclusion as to which types
of funds are best suited for a developing kind of market based economy like India.
METHODOLOGY
The current study utilizes two methodological frameworks, First– Mean, Variance / Risk-
Return models for the purpose of identifying the return potentials and associated risks with
various sectoral and equity diversified funds. Second– Statistical measure namely Mann-
Whiney Rank Sum Test (U-test) and application of Data Envelopment Analysis (a specialized
form of linear programming for evaluating the efficiency of a decision making unit i.e. a
mutual fund scheme for the purpose of current study), for statistically evaluating the
performance of all active sectoral funds and also to test the hypotheses of the study to
measure the difference in the performance sectoral funds and equity diversified funds. The
study sources statistical data related to NAV, AUM etc. from reliable sources such as AMFI
India, SEBI, BSE, NSE and respective mutual fund houses for the span of last 10 years starting
from 2002 to 2011. This helped the researcher to draw the conclusion on the performance
of different types of funds (sectoral and diversified) in different time spans i.e. for last 3, 5, 7
and 10 years.
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FINDINGS AND CONCLUSION
The analysis of sector specific funds revealed that the performance of such funds against
their respective indicators and indices had been quite satisfactory. They have carried
moderate to higher level of risk because of their sectoral concentrations. Specific Funds
such as Banking, FMCG and Pharmaceuticals have fairly outperformed the market indices
and also against their close counterparts – diversified funds, in short and medium time
frames (i.e. 3, 5 and 7 years) but as far as long term scenario (10 years) is concerned,
diversified equity funds have beaten sectoral funds with sufficient margins.
With the help of various tools and techniques such as Mann-Whitney Rank Sum U Test and
Data Envelopment Analysis, it was statistically confirmed that in long term there is
significant difference between the performance of sectoral funds and diversified equity
funds and diversified funds have performed significantly better than sectoral funds. Also the
efficiency levels of funds differ in various time frames, in Short and medium term (3 and 5
years) sectoral funds have showcased higher operating efficiencies by maintaining higher
input-output ratios (as confirmed by higher average DEA values) whereas in longer terms (7
and 10 years) Equity Diversified Funds demonstrated higher operating efficiencies with
optimum input-output ratios as compared to sectoral funds. Therefore, with the help of
current study, it was concluded and confirmed that sectoral funds can be a good investment
avenue for a limited period of time or for the time in which the specific industry or sector
keeps on performing high but in long run, equity diversified funds are still better investment
avenue as compared to sectoral funds.
KEY WORKS
Indian Mutual Fund Industry, Development of Mutual Funds in India, Performance of Indian
Mutual Fund Industry, Performance of Sectoral Funds, Sectoral Funds Vs Equity Diversified
Funds and Data Envelopment Analysis for Mutual Funds.
Estelar
PERFORMANCE EVALUATION OF MUTUAL FUND SEGMENTS IN INDIA With Special Reference to Sectoral Funds
THESIS
SUBMITTED
TO
KUMAUN UNIVERSITY, NAINITAL
In partial fulfillment of the requirements for the award of the degree of
DOCTOR OF PHILOSOPHY
Author:
TRIBHUVAN PRATAP SINGH
Address : C-73, Hanuman Nagar, Line Par, Moradabad – 244001.