COMPARATIVES STUDY OF PERFORMANCE OF MUTUAL FUNDS COMPANIES IN INDIA

Prepared By:

Bhavin Patel Piyush Radadiya

INTRODUCTION

MUTUAL FUNDS

 

“…A mutual fund is a company that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings……..”

-The U.S. Securities and Exchange Commission

WORKING OF A MUTUAL FUND

CLASSIFICATION OF MUTUAL FUNDS

TYPES OF FUNDS

By Objective Equity Funds Balance FundsMoney market

Constitution Structure

Collection entry or exit charges from investors

Close – ended Load funds

Open – ended No-Load funds

REVIEW OF LITERATURE Zakri Y.Bello (2005):

He was matched a sample of socially responsible stock mutual funds matched to randomly selected conventional funds of similar net assets to investigate differences in characteristics of assets held, degree of portfolio diversification and variable effects of diversification on investment performance. The study found that socially responsible funds do not differ significantly from conventional funds in terms of any of these attributes. Moreover, the effect of diversification on investment performance is not different between the two groups. Both groups underperformed the Domini 400 Social Index and S & P 500 during the study period.

Vikram K. Nanda (1997):

This paper provides a model that explains the structure of mutual funds. Specifically, the paper explains why funds structure as open-or closed-end funds, and managers generate earn excess returns that on the margin are increasing in their ability and decreasing in the size of funds under management. Managers capture the rents from their ability by optimally setting the management fee and attracting funds from investors. Investors have stochastic liquidity needs that impose a cost on open-end funds available for investment to deviate from an optimal level.

  OBJECTIVE OF STUDY

To evaluate the performance of mutual funds in security market.

To evaluate investment performance of mutual funds in terms of risk.

To find the investment patterns of investors to invest in mutual funds.

To study about the different opportunities available in mutual fund.

To know the factors which are considered by the investors while investing in mutual fund.

RESEARCH METHODOLOGY HYPOTHESIS H0 : Investment in Mutual Funds is beneficial and profitable.

H1 : Investment in Mutual Funds is not beneficial and profitable.

H0 : There would be no significant difference in overall performance of selected

mutual fund Schemes during the study period.

H1: There would be significant difference in overall performance of selected mutual

fund Schemes during the study period. 

SAMPLING DESIGN The samples consist of 10 mutual funds companies Balance fund schemes selected, five

funds from public sector and five funds from private sector mutual funds which have a

history of more than five years.

TYPES OF RESEARCH For the present study, exploratory research was

adopted to discover the ideas. Through exploration, it developed the concepts more clearly, establish priorities, develop operational definitions, and improve the final research design. This research is both quantitative and qualitative.

 

SOURCES OF DATASecondary Data Secondary data is data taken from secondary sources,

internal or external. The sources of secondary data are published documents, periodicals, books, journals, reports, internet, magazines, newspapers, etc

List Of Companies1. Birla Sun Life 95 Fund (G)

2. HDFC Balanced Fund (G)

3. Reliance Regular Savings Balanced Option (G)

4. DSP Black Rock Balanced Fund (G)

5. Franklin Templeton India Balanced Fund (G)

6. UTI Balanced Fund (G)

7. SBI Magnum Balanced Fund (G)

8. Canara Robeco Balance fund (G)

9. LIC Nomura Balanced Fund (G)

10. ICICI Prudential Balanced funds (G)

DATA ANALYSIS & INTERPRETATION RETURN

-40

-35

-30

-25

-20

-15

-10

-5

0

-9.5 -9.8-10.8

-12.6-14.1

-17.3

-19.5 -19.6

-22.5

-35.6

Returns (in %)

1 ICICI Prudential Balanced funds (G)2 Canara Robeco Balance fund (G)3 HDFC Balanced Fund (G)4 Franklin Templeton India Balanced Fund (G)5 Birla Sun Life 95 Fund (G)6 DSP Black Rock Balanced Fund (G)7 Reliance Regular Savings Balanced Option (G)8 UTI Balanced Fund (G)9 SBI Magnum Balanced Fund (G)10 LIC Nomura Balanced Fund (G)

Calculation of T – TESTN Mean S.D D.f Tc Tt Result

10 -17.13 7.9123N - 1=

10 – 1 =9 1.147 2.262 H1

Tcal =

= -17.13 – (5) 7.9123/√10 Tcal= 8.84H0 : There is no significant difference in return of selected mutual fund during the study Period.H1 : There is significant difference in return of selected mutual fund during study period. Table of at 5% level of significant and degree of freedom = (n-1) = 2.262 Tc > Tt8.84 > 2.262From the above calculation we can says that the calculated value of T is greater than the table value of T so null hypothesis will be rejected and the result is there is significant difference in return of selected mutual fund during study period.

BETA

DSP Bla

ck R

ock

Balan

ced

Fund

(G)

Relia

nce

Regul

ar S

avin

gs B

alan

ced

(G)

Birla

Sun L

ife 9

5 Fun

d (G

)

HDFC Bal

ance

d Fun

d (G

)

LIC N

omur

a Bal

ance

d Fun

d (G

)

Frank

lin T

empl

eton

Indi

a Bal

ance

d Fun

d (G

)

ICIC

I Pru

dent

ial B

alan

ced

fund

s (G)

UTI Bal

ance

d Fun

d (G

)

Canar

a Rob

eco

Balan

ce fu

nd (G

)

SBI Mag

num

Bal

ance

d Fun

d (G

)0

0.2

0.4

0.6

0.8

1

1.2

0.8200000000000010.8600000000000010.8700000000000040.88 0.89 0.9 0.9

0.98 0.98

1.08

BETA

Calculation of T – TESTN Mean S.D D.f Tc Tt Result

10 0.916 0.07604N - 1=10 – 1=9

1.913 2.262 H0

Tcal =

= 0.916 - 0.87 0.07604/√10  Tcal = 1.913H0 : There is no significant difference in beta of selected mutual fund during the study Period.H1 : There is significant difference in beta of selected mutual fund during study period. Table of at 5% level of significant and degree of freedom = (n-1) = 2.262 Tc > Tt1.913 > 2.262From the above calculation we can says that the calculated value of T is less than the table value of T so null hypothesis will be accepted and the result is there is no significant difference in beta of selected mutual fund during study period.

STANDARD DEVIATION

DSP Bla

ck R

ock

Balan

ced

Fund

(G)

Frank

lin T

empl

eton

Indi

a Bal

ance

d Fun

d (G

)

HDFC Bal

ance

d Fun

d (G

)

ICIC

I Pru

dent

ial B

alan

ced

fund

s (G)

Birla

Sun L

ife 9

5 Fun

d (G

)

LIC N

omur

a Bal

ance

d Fun

d (G

)

UTI Bal

ance

d Fun

d (G

)

Canar

a Rob

eco

Balan

ce fu

nd (G

)

SBI Mag

num

Bal

ance

d Fun

d (G

)

Relia

nce

Regul

ar S

avin

gs B

alan

ced

(G)

0

0.5

1

1.5

2

2.5

3

3.5

4

2.4 2.46 2.52 2.56 2.58 2.6 2.72 2.772.97

3.73

Standard Deviation

Calculation of T – TESTN Mean S.D D.f Tc Tt Result

10 2.731 0.3878N - 1

=10 – 1=9

14.115 2.262 H1

Tcal =

= 2.731 - 1 0.3878/√10 Tcal =14.115H0 : There is no significant difference in S.D of selected mutual fund during the study Period.H1 : There is significant difference in S.D of selected mutual fund during study period. Table of at 5% level of significant and degree of freedom = (n-1) = 2.262 Tc > Tt14.115 > 2.262From the above calculation we can says that the calculated value of T is greater than the tablevalue of T so null hypothesis will be rejected and the result is there is significant difference inS.D of selected mutual fund during study period.

FINDINGS ICICI Prudential balanced fund has the better returns to compare the all other funds. As it has

yielded the return is (-9.5). This is due to the portfolio of its investments which have

performed very well. There for the fund manager should be credited for the success of the

fund.

DSP Black Rock balanced fund has delivered more consistent returns, as it has the lowest

Standard Deviation (2.4) among all the funds. This is due to the low risk profile of its port

folio of investments. Investors interested in stable returns & less volatility would like to

invest in this mutual fund. The returns of the fund can hence be trusted.

 

DSP Black Rock Balanced Fund has the lowest risk among all the selected funds, as it has

the lowest Beta (0.82) and thus is less volatile. This means if the market goes up by say 10%,

the fund’s returns would go up by 8.2% and vice-versa. It is to be noted here that SBI

magnum Balanced fund has a highest Beta of 1.8. Therefore investors who prefer lesser risk

would want to invest in this fund.

 

 

In terms of the size UTI Balanced fund is the largest fund, as it has Net Assets of Rs 898.40 crore, which is the largest among all the selected funds. This shows that a large number of investors have invested their fund in this fund and also are confident about the fund’s performance.

From the table it can be observed that Canara Robeco Balanced fund has the best performance according to the Sharp Ratio (-5.7) other than that. This means it has better performance of the mutual fund. The investors should select a mutual fund with a higher Sharpe ratio, as it yields higher return for the same risk level.

ICICI Prudential balanced fund also has the best performance according to the Treynor’s Measure (-17.22) as compared to the other funds. Higher the Treynor’s ratios better the returns of the mutual fund. The investor should again select a mutual fund with a higher Treynor’s ratio, as it yields higher returns for the same risk level.

Birla sun life 95 balanced fund has the highest ranking according to Jenson’s Measures (-11.57). As with the two measures, higher the Jonson’s measures value, better the performing. This again means it has yielded higher returns at a lower risk level and has risk adverse investor should go for this fund.

CONCLUSIONS

Investors who want the highest returns and are willing to take higher risk should invest their fund in ICICI Prudential balance fund, as yielded better returns (-9.5) among the selected mutual funds.

Investor here should understand the basic fact that all investors are associated with risk and therefore only by taking a higher return, can they obtain higher returns.

  Investors who are interested in consistent returns should invest in DSP Black

balance fund, as it has the lowest standard deviation (2.4) among all the selected mutual funds.

  Investors who have a lower risk appetite should invest in DSP Black Rock Balance

funds, as it has the lowest Beta (0.82) among all the selected mutual funds. Beta measures the volatility of the fund relative to a particular market benchmark. Therefore lower the beta lowers the risk and vice-versa.

Thank you…