AMITY SCHOOL OF BUSINESS

AMITY UNIVERSITY UTTAR PRADESH NOIDA

COMPARATIVE STUDY OF MUTUAL FUNDS

Name of the Student: Gautam Tandon

Enrollment Number: A3923016015

Class Roll Number: 22

Program:Bachelors of Business Administration + Masters Of Business Administration

(B.B.A+M.B.A Dual Degree)

Batch: 2016-2020

Semester: 8

Course: NTCC term paper

Faculty Supervisor: Mrs Manika Sharma

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Reasons for choosing the project:

Direct investment in shares conveys a generally higher risk component. One need to pick stocks
by examining the firm and sector. It's a very difficult task to pick few company from a larger
number of listed stocks which are traded on the stock exchange. Once done task is not still over,
you have to monitor and keep track of your portfolio too.

In Mutual Funds, the selection of stock is finished by expert fund managers. You just have to
monitor performance of the fund only and not individual stocks inside the funds. They
additionally allow investment flexibility unlike stocks, with growth/dividend options, top-ups,
systematic withdrawals/transfer, etc. other than riding over unpredictability by contributing
smaller amounts consistently through SIPs.
Direct plans in shared assets are useful for financial specialists who wish to put resources into
mutual fund schemes by straightforwardly managing AMC without intermediary or any mutual
fund brokers. These are useful for investors who need to increases their profits by reducing the
expenses.

This report helps in choosing the best schemes out of Direct Growth

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Chapter 1 : INTRODUCTION

This report is on the study of comparative analysis of mutual funds schemes (direct growth) on
the basis of risk and return. It highlights the performance of various MFs schemes by analyzing
or comparing on basis of various ratios like beta, Treynors, Sharpes and Standard deviation, and
to ascertain which MFs are better and gives more return in lesser risk.

MUTUAL FUNDS IN INDIA

Any type of mutual fund that exists in the U.S. is mirrored in some way in the Indian market.
There are mutual funds that invest in equity or stocks, and are managed to achieve a range of
goals. Some equity mutual funds are designed to generate long-term capital gains through
growth or value investing strategies, like the Birla SL Frontline Equity Fund, while others are
focused on generating dividend income for shareholders. Some combine the two, such as the
popular ICICI Prudential Equity & Debt Fund.

Indian mutual funds may also invest in bonds and other debt securities with the goal of
generating regular interest income. Indian debt funds invest in government or corporate debt
instruments and money market securities just like American funds.

There are also Indian balanced funds that invest in both equity and debt instruments to
create portfolios that offer a degree of stability without completely ignoring the potential for big
gains in the stock market. A good example is the DSP Equity Opportunities Fund. Just like in the
American market, the Indian market offers mutual funds that specialize in certain sectors, only
invest in government or inflation-protected debt, track a given index or are designed to maximize
tax-efficiency.

Regulation

Mutual funds in India are regulated by the securities and exchange board of India (SEBI).
Indian mutual funds are subject to stringent requirements about who is eligible to start a fund,
how the fund is managed and administrated and how much capital a fund must have on hand. To
start a mutual fund, for example, the fund sponsor must have been in the financial industry for at
least five years and have maintained positive net worth for the five years immediately preceding
registry.

The SEBI regulations include a minimum start up capital requirement of Rs. 500 million for
open-ended debt funds and Rs. 200 million for closed-ended funds. In addition, Indian mutual
funds are only allowed to borrow up to 20% of their value for a term not to exceed six months to
meet short-term liquidity requirements.

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Mutual Fund Management Structure

The mutual fund sponsor, either an individual, group of individuals or corporate body, is
responsible for applying for registry with SEBI. Once approved, the sponsor must form

A trust to hold the assets of the fund appoint a board of trustees or trust company and choose an
asset management company.

The board of trustees or trust company is responsible for overseeing the mutual fund and
ensuring it operates with the best interests of its shareholders in mind. The asset management
company is the entity in charge of managing the fund's portfolio and communicating with
shareholders.

If the asset manager wishes to expand the product line, introduce a new scheme or change an
existing one, it must first obtain approval from the board of trustees or trust company. In
addition, the trustees must appoint a custodian and depository participant who is responsible for
keeping track of asset trading activity and safeguarding both the tangible and intangible assets of
the fund.

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CHAPTER 2 : LITERATURE REVIEW

Literature on mutual fund performance evaluation is enormous. A few research studies have
influenced the preparation of this report substantially are discussed in section.

Sharpe, William F. (1966) proposed a measure for the evaluation of portfolio

performance which Drawing on the results obtained in the field of the portfolio
analysis,

Economist Jack L. Treynor (1966) proposed a new predictor of mutual fund performance
that differs from virtually all those used earlier by incorporating the volatility of a fund's
return in a simple yet meaningful manner.

Michael C. Jensen (1967) inferred a risk-adjusted measure of performance (Jensen’s

alpha) that gauges how much a manager’s forecasting ability adds to fund’s return.

Statman (2000), the e SDAR of a reserve portfolio is abundance return of the portfolio over the
arrival of the benchmark record where the portfolio is utilized to have the benchmark list's
standard deviation.

S.Narayan Rao, et. al. (1998), assessed performance of Indian mutual funds in a bear market
through Jensen’s measure, and Fama’s measure. The study used 269 open-ended MFs schemes
(out of total MFs schemes of 433) for processing relative performance index.

Bijan Roy, et. al.(1999-2003), conducted an empirical study on conditional

performance of Indian mutual funds

ZakriY.Bello (2005) coordinated a sample of socially responsible stock mutual funds

matched to randomly selected conventional funds of similar net asset to investigate differences in
characteristics of assets held of portfolio diversification and variable effects of diversification on
investment performance.

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CHAPTER 3: Research Methodology

Research Methodology is the way toward gathering information and data for basic leadership in
the business.

3.1 Research design

Type of Research
The research available is descriptive. Descriptive research is a study designed to depict the
participants in an accurate way.
Three ways of descriptive research:
 Observational, defined as a method of viewing and recording the participants
 Quantitative research refers to the systematic empirical investigation of any phenomena
via statistical, mathematical or CORRELATIONAL RESEARCH computational
techniques.

3.2 Type of data:

Secondary data: Secondary data is the data that have been already collected by and readily
available from other sources. Such data are cheaper and more quickly obtainable than the
primary data.
All the data related to risk and return are collected from internet

3.3 tools and techniques :

 Beta factor,sd,treynor ratio,sharpe ratio

 Bar graphs to analyse the data after use of data collection tools
 spreadsheets

3.4 Objectives

1. To analyze the overall performance of MFS Schemes.

2. Comparing different mutual funds schemes on basis of various risk ratios like Standard
deviation, Beta, Treynors.
3. Comparing MFs schemes on basis of average return analysis.
4. Finding the best MFs scheme and gives ranking on the basis of risk and return.

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CHAPTER 4 : DATA COLLECTION

For collecting data the historical returns on some of the best performing mutual funds was used
for the period of past 5 years

Sources: moneycontrol.com

4.1 STANDARD DEVIATION

Standard Deviation value gives thought regarding how unstable fund returns has been in the past
3 years. Lower value shows more predictable performances.

Standard Deviation
25
21
20
16.07
14.77 14.07 14.89 14.53 15.26
15 13.6 13.49 13.12 13.79 14.01 13.39 13.96 13.84
13.17 13.29
14.02 13.92

10.27
10

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

As shown in the above table JM Core 11 mutual fund scheme has the highest standard deviation
with 21 which shows more unstable returns from this scheme where as JM Large cap mutual
fund on the other hand shows lowest standard deviation with 10.27 which shows more stable
returns as compared to its other competitors.
The category average of SD of large cap Mutual fund is 12.92 and from which JM Large cap
MFs is 20.51% lesser showing most stability of returns among its peers.

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4.2 BETA

A beta coefficient is a proportion of the instability, or systematic risk, of an individual stock in

contrast to the unsystematic risk of the whole market. Beta is utilized in the capital asset pricing
model (CAPM), which computes the expected return of an asset . Beta value gives thought
regarding how unpredictable fund performance has been contrasted with similar funds in the
market. Lower beta suggests the fund gives increasingly unsurprising performance contrasted to
the similar funds in market.

BETA
1.4 1.28
1.2 1.1
1.03 1.02 1.06
1 0.98 0.95 0.99 0.93 0.95
1 0.91 0.96 0.91 0.94 0.97 0.94 0.94 0.98

0.8 0.7
0.6
0.4
0.2
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

As visible from the graph the highest beta is that of jm core of 1.4 this denotes a highly
unpredictable performance while that of jm large direct fund is 0.7 which is much more
predictable and helpful for an investor looking for long term options with lower systematic risks
involved in contrast to the external market conditions and risks involved with them

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4.3 Sharpes Ratio

The Sharpe ratio was created by Nobel laureate William F. Sharpe and is used to comprehend
investors understand the return of an investment compared to its risk. The ratio is the average
return earned in excess of the risk-free rate per unit of instability or total risk.
Sharpe ratio shows how much risk is taken to generate the return. Higher the value shows funds
has been able to give better return for the amt. of risks taken.

SHARPES
0.7
0.6
0.6
0.54 0.54 0.53
0.51
0.5 0.45
0.42 0.42 0.43
0.4
0.4 0.35
0.31 0.31 0.3
0.3 0.28 0.28 0.26 0.28
0.23 0.25

0.2

0.1

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

As shown in the above graph JM Core 11 mutual funds scheme has the highest value of Sharpes
ratio with 0.6 which shows that it has higher risk adjusted return as compared to the others
schemes following with Axis and HDFC MFs Schemes with sharpes ratio of 0.54 both, whereas
jm large on the other hand shows lowest ratio score with 0.23 which shows lesser risk adjusted
returns as compared to its other competitors. The category average of Sharpes ratio value of large
cap Mutual fund is 0.31 and from which JM core 11 MFs is much higher showing more risk
adjusted returns compared among its peers.

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4.4 Treynor’s Ratio

The Treynor ratio, also known as the reward-to-volatility ratio, is a performance metric for
deciding how much abundance return was produced for every unit of risk taken by a portfolio.

Abundance return in the sense indicates to the return earned over the return that could have been
earned in a risk-free investment. Although there's no true risk free investment, treasury bills are
regularly used to show the risk-free return in the Treynor ratio. Risk in the Treynor ratio
indicates to systematic risk as estimated by a portfolio's beta. Treynor’s ratio shows how much
abundance return was produced for every unit of risk taken. Higher the value implies fund has
had the capacity to give better returns for the amount of risk taken. It is determined by
subtracting the risk-free return from the fund’s returns, and then dividing by the beta of returns.

treynors
0.12
0.1
0.1
0.08 0.08 0.08 0.08
0.08
0.06 0.06 0.06 0.06 0.06
0.06 0.05 0.05
0.04 0.04 0.04 0.04 0.04 0.04 0.04
0.04 0.03
0.02

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

As shown in the above graph JM Core 11 mutual funds scheme has the highest value of Treynors
ratio with 0.1, which shows that it has higher risk adjusted return as compared to the others
schemes following with Axis, HDFC, Reliance and ICICI MFs Schemes with treynors ratio of
0.08, whereas jm large mutual fund on the other hand shows lowest ratio score with 0.03 which
shows lesser risk adjusted returns as compared to its other competitors. The category average of
Treynors ratio value of large cap Mutual fund is 0.05 and from which JM core 11 MFs is much
higher showing more risk adjusted returns compared among its peers.

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4.5 Average return

SIP, or systematic investment plan, is a method of investing in schemes. SIP investors invest a
certain fixed amount in a particular scheme at fixed intervals (week, month, quarter, etc.) for a
definite amount of time (5, 10, 15 years).

A mutual fund’s return is calculated in terms of it’s net asset value (NAV)
A fund's NAV is derived by dividing the value of its portfolio securities (the fund's assets), less
any accrued fees and expenses (the fund's liabilities), by the number of fund shares outstanding.

Here we shall compare the returns on the basis of there 3 years,5 years from the day of them
being issued in the markets in comparison to the corresponding benchmark which in this case is
NIFTY 50

Note : Returns have been calculated based on NAV's as on Mar 29 2019 & Index values as
on Mar 29 2019

avg return for 3 years

30.00%

25.00% 24.00%

19.20%
20.00% 17.70% 18.70%
17.30%
17.00%
16.30% 15.40% 15.60% 15.50%
15.00% 14.30%
13.90% 13.40%
13.30% 13.10%
12.40% 13.30%
11.50% 11.90%
10.70%
10.00%

5.00%

0.00%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Benchmark average return = 15%

As quiet aptly described in the graph shown above in this case average return on NIFTY 50 till 3
years has been 15% and in this case JM core with its JM core 11 direct growth fund has recorded
the highest NAV returns in the course of 3 years of its issue which is 24% while JM LARGE
with its JM LARGE direct growth funds have recorded the lowest NAV returns of 10.7%

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 avg return in 5 years
20.00% 18.80% 19.00%
18.00%
15.70%
15.40% 16.00%
16.00% 15.30% 15.30%
14.70% 14.80%
14.40% 14.10% 14.00%
13.40%
13.30% 13.70%
14.00% 12.80% 12.50%
12.40% 12.90%
12.00% 10.60%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
is C l ra ore sco ci ls ss EL MA LIN MA BC
Ax HDF Re na ici ul ei LIC T A FC E
ID ARG ES S BN
P
L&
T
a c ve a b el w TA R K R HS
C JM In di L HA RAN PHA
In Ed J M P F
FL FL
DH DH

5 yrs 5 yrs

Benchmark average return = 12%

As quiet aptly described in the graph shown above in this case average return on NIFTY 50 till 5
years has been 12% and in this case JM core with its JM core 11 direct growth fund has recorded
the highest NAV returns in the course of 3 years of its issue which is 19% while IDFC direct
growth funds have recorded the lowest NAV returns of 10.6%

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Here we shall compare each of the 20 shares with each other in the period of 3 years and 5 years
from date of issue

30.00%

25.00% 24.00%

19.20%
20.00%17.70% 18.80%
18.70% 19.00%
17.00%17.30%
15.70%15.40% 16.30% 16.00%
15.40% 15.30% 15.60%
14.70%15.30% 14.80% 15.50%
15.00% 14.40% 14.30%
14.10%
13.90% 14.00%13.70%
13.30%
12.80% 13.40%
12.50% 13.10% 13.40%
13.30%12.90% 13.30%
12.40% 12.40% 11.50% 11.90%
10.70%
10.60%
10.00%

5.00%

0.00%
is C l ra ore sco ci ls ss EL MA
Ax HDF Re na i ci ul ei LIC T A FC E
ID AR G ES S KL
IN MA
SB
C
BN
P
L&
T
a c ve i a b el w TA L A R N A R H
C JM In d H A H
In Ed JM LP FR F L P
F
DH DH

3years 5 yrs

As visible from the graph above jm core direct 11 mutual fund has shown to have the highest
average NAV return in the span of 5 years that is 19% followed by a close second in reliance
direct mutual fund scheme with 18.8% returns while IDFC direct growth scheme offers the least
in terms of NAV returns which is 10.6%

When we come to NAV returns over the span of 3 years Jm core direct 11 mutual fund is in
unassailable lead of 24% followed by a distant HDFC direct growth fund with 19.20% NAV
return while JM large direct growth fund shows the least NAV return of 10.7%

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CHAPTER 5 : Conclusion and recommendations

Conclusion:

In terms of standard deviation : JM Large cap direct growth fund shows the lowest SD among
the other 20 shares of the same type and category of 10.27 which depicts better risk free returns
in comparison to its competitors

In terms of BETA : that of JM Large cap direct fund is 0.7 which is much more predictable and
helpful for an investor looking for long term options with lower systematic risks involved in
contrast to the external market conditions and risks involved with them

In terms of SHARPES ratio : JM Core direct growth 11 mutual funds scheme has the highest
value of Sharpes ratio with 0.6 which shows that it has higher risk adjusted return as compared to
the others schemes

In terms of SHARPES ratio : jm large mutual fund on the other hand shows lowest ratio score
with 0.03 which shows lesser risk adjusted returns as compared to its other competitors.

In terms of AVERAGE RETURNS : jm core direct growth 11 mutual fund has shown to have
the highest average NAV return in the span of 5 years that is 19%
When we come to NAV returns over the span of 3 years Jm core direct 11 mutual fund is in
unassailable lead of 24%

Recommendations :

if the investor is prepared to sacrifice his returns for a more risk free approach the definite
recommend in such case would be to opt for :
JM Core 11 Fund - (Direct) - Growth

If the investors is purely return oriented regardless of the high risks involved with the mutual
fund schemes involved this would be the recommendation :
JM Large Cap Fund - (Direct) - Growth

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CHAPTER 6 : REFERENCES

1. Loth, R. (2007, June 13). Understanding Mutual Fund Returns. Retrieved from
www.investopedia
a.com/university/quality-mutual-fund/chp4-fund-risk-return/mf-returns.aspp-fund.html

2. Moneycontrol.com. (n.d.). Large Cap Fund. Retrieved from

www.moneycontrol.com/mutual-funds/performance-tracker/returns/large-cap-fund.html

3. SIP Calculator | Calculate Returns On Mutual Fund Investment 2019. (n.d.). Retrieved from
www.fundsindia.com/sip-calculator.html

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