Mutual Fund - A Study of investor’s Awareness and Performance of

equity diversified mutual fund schemes in INDIA.

Submitted to Lovely Professional University

SUBMITTED TO: SUBMITTED BY:

Mrs. Manu Kalia Deepti Tomer A-21

Sheikh Tallha B-25

Satpal Singh B-26

Zainul Islam B-27

DEPARTMENT OF MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITY

PHAGWARA
 MUTUAL FUND

 INTRODUCTION

Mutual funds are a vehicle to mobilize moneys from investors, to invest in different
markets and securities, in line with the investment objectives agreed upon, between the mutual
funds and the investors.
The primary Role of Mutual funds is to assist investors in earning an income or
building their wealth, by participating in the opportunities available in various securities
available in various securities and markets.
The money that is raised from investors, ultimately benefits governments, companies or
other entities, directly or indirectly, to raise moneys to invest in various projects or pay for
various expenses.
The investment that an investor makes in a scheme is translated into certain number of
‘Units’ in the scheme. Thus, an investor in a scheme is used units of the scheme.
Under law, every unit has a face value of Rs10. The face value is relevant from an
accounting perspective. The number of units multiplied by its face value (Rs 10) is the capital of
the scheme-its unit capital.

 TYPES OF MUTUAL FUNDS:

There are three types of funds category which are follows:
 Open-ended, close-ended and interval funds:
1. Open-ended funds- are open for investors to enter or exit at any time, even after the
NFO.
2. Close-ended funds- have a fixed maturity and investor can buy units only during its
NFO.
3. Interval funds- combine features of both open-ended and close ended schemes. They are
largely close ended, but become open-ended at pre-specified intervals. The interval in
consider is between January 1 to 15, and July 1 to 15, each year.
4. Actively managed funds- are funds where the fund manager has the flexibility to choose
the investment portfolio, within the broad parameters of the investment objective of the
scheme.
5. Passive funds- invest on the basis of specific index, whose performance it seeks to track.
 Equity funds:
A scheme might have an investment objective to invest largely in equity shares and
equity related instruments like convertible debentures. Such scheme are called equity scheme.
 Types of Equity funds:
1. Diversified equity funds- are category of funds that invest in a diverse mix of securities
that cut across sectors.
2. Sector funds- however invest in only a specific sector. For example, a banking sector
fund will invest in only shares of banking companies.
3. Thematic funds- invest in a line of investment theme.
4. Equity Linked Saving Scheme (ELSS) - offer tax benefits to investors.
5. Equity income/ Dividend Yield Scheme – invest in securities whose shares fluctuate
less, and therefore, dividend represents a large proportion of the returns on those shares.
6. Arbitrage funds- take contrary position in different markets and securities, such that the
risk is neutralized.
7. Monthly income plane – seeks to declare a dividend every month.
8. Capital protected scheme – are closed-ended schemes, which are structured to ensure
that investors get their principal back, irrespective of what happens in the market.
 Debt fund:
Schemes with an investment objective that limits to investment in debt securities like
Treasury Bills, Government Securities, Bonds and Debentures are called Debt funds.
Types of debt funds:
1. Gilt funds – invest in only in treasury bills and government securities, which do not
have a credit risk.
2. Diversified debt fund – on other hand, invest in a mix of government and non-
government debt funds.
3. Junk bond schemes or high yield bond – schemes invest in companies that are of poor
credit quality.
4. Fixed maturity funds- in which the investment portfolio is closely aligned to the
maturity of the scheme.
5. Floating rate funds – invest in floating rate debt securities. Ex- debt securities where
the interest rate payable by the issuer changes in line with the market.
6. Liquid scheme – or money market scheme – are a variant of debt scheme that invest
only in debt securities where the money will be repaid within 91-days.
LITERATURE REVIEW:-

K.Paul(1998) The author has researched that of mutual funds has grown dramatically in
recent years. The Financial Research Corporation data base, the source of data for this article,
lists 7,734 distinct mutual fund portfolios. Mutual funds are now the preferred way for individual
investors and many institutions to participate in the capital markets, and their popularity has
increased demand for evaluations of fund performance. Business Week, Barron’s, Forbes,
Money, and many other business publications rank mutual funds according to their performance.
Information services, such as Morningstar and Lipper Analytical Services, exist specifically for
this purpose. There is no general agreement, however, about how best to measure and compare
fund performance and on what information funds should disclose to investors.

P.Shekher(2002) The author feels that Information on the performance and flows into
institutional mutual funds provides a unique opportunity to examine the factors influencing the
investment decisions of institutional investors. For example, do institutional funds display
superior performance relative to retail funds after controlling for differences in expenses and
risk? Does fund performance vary with the degree of investor oversight? Is the institutional
mutual fund industry best thought of as somewhat monolithic where all funds compete for the
same types of mutual fund?

S.RATHI (2004) a small investor generally goes for bank deposits, which do not provide
hedge against inflation and often have negative real returns. He has limited access to price
sensitive information and if available, may not be able to comprehend publicly available
information couched in technical and legal jargons. He finds himself to be an odd man out in the
investment game. Mutual funds have come, as a much needed help to these investors. MFs are
looked upon by individual investors as financial intermediaries/ portfolio managers who process
information, identify investment opportunities, formulate investment strategies, invest funds and
monitor progress at a very low cost. Thus the success of MFs is essentially the result of the
combined efforts of competent fund managers and alert investors. A competent fund manager
should analyze investor behavior and understand their needs and expectations, to gear up the
performance to meet investor requirements.

RUSS WERMERS (2005) the author use a new database to perform a comprehensive
analysis of the mutual fund industry. The author finds that funds hold stocks that outperform the
market by 1.3 percent per year, but their net returns underperform by one percent. Of the 2.3
percent difference between these results, 0.7 percent is due to the underperformance of non stock
holdings, whereas 1.6 percent is due to expenses and transactions costs. Thus, funds pick stocks
well enough to cover their costs. Also, high-turnover funds beat the Vanguard Index 500 fund on
a net return basis. Our evidence supports the value of active mutual fund managers
 Keith Cuthbertson(2006) the academic research on mutual fund performance in the US
and UK concentrating particularly on the literature published over the last 20 years where
innovation and data advances have been most marked. The evidence suggests that ex-post, there
are around 2-5% of top performing UK and US equity mutual funds which genuinely outperform
their benchmarks whereas around 20-40% of funds have genuinely poor. Key drivers of relative
Performance are, load fees, expenses and turnover. There is little evidence of successful market
timing. Evidence on picking winners suggests past winner funds persist, particularly when
rebalancing is frequent (i.e. less than one year) – but transactions costs and fund fees imply that
economic gains to investors from actively switching into winner funds may be marginal.
However, recent research using more sophisticated sorting rules (e.g. Bayesian approaches)
indicates possible. Large gains from picking winners, when rebalancing monthly. The evidence
also clearly supports the view that past loser funds remain losers. Broadly speaking results for
bond mutual funds are similar to those for equity mutual funds but hedge funds show better ex-
post and ex-ante risk adjusted performance than do mutual funds. Sensible advice for most
Investors would be to hold low cost index funds and avoid holding past ‘active’ loser funds.
Only very sophisticated investors should pursue an active investment strategy of trying to pick
winners - and then with much caution.

John A. Haslem (2006) this article discusses mutual fund advertising and investor skill
in making fund choices. Research indicates unsophisticated investor choices are dominated by
fund advertising. Fund advertising appeals investor emotions by resonating with their current
beliefs, not by providing direct and objective information that enables more informed fund
choices. Sophisticated investors with self-assessed above average investment skills view
themselves as true “Wizards of Oz.” They believe their investment skills allow them to select
superior performing actively managed funds.

Marcin Kacperczyk(2007) Despite extensive disclosure requirements, mutual fund

investors do not observe all actions of fund managers. We estimate the impact of unobserved
actions on fund returns using the return gap – the difference between the reported fund return and
the return on a portfolio that invests in the previously disclosed fund holdings. We document that
unobserved actions of some funds persistently create value, while such actions of other funds
destroy value. Our main result shows that the return gap predicts fund performance.

Yonggan Zhao (2007) the author analyzes an optimal dynamic portfolio and asset
allocation policy for investors who are concerned with the performances of their portfolios
relative to a benchmark. Assuming that asset returns follow a multi-linear factor model similar to
the structure of Ross (1976) and that portfolio managers adopt a mean tracking error analysis
similar to Roll (1992), we develop a dynamic model of active portfolio management maximizing
risk adjusted excess return over a well diversified benchmark. Unlike the case of constant
proportional portfolios for the standard utility maximization, our optimal portfolio policy is state
dependent, namely a function of time to investment horizon, the return on the benchmark
portfolio, and the return on the investment portfolio itself. Based on the analysis in this paper, we
define a dynamic performance measure which relates portfolio’s return to its risk sensitivity.

Sharad Panwar(2007) The study used sample of public-sector sponsored & private-
sector sponsored mutual funds of varied net assets to investigate the differences in characteristics
of assets held, portfolio diversification, and variable effects of diversification on investment
performance for the period May, 2002 to May,2005. The study found that public-sector
sponsored funds do not differ significantly from private-sector sponsored funds in terms of mean
returns%. However, there is a significant difference between public-sector sponsored mutual
funds and private-sector sponsored mutual funds in terms of average standard deviation, average
variance and average coefficient of variation(COV).The study also found that there is a statistical
difference between sponsorship classes in terms of e SDAR(excess standard deviation adjusted
returns)as a performance measure. When residual variance (RV) is used as the measure of
mutual fund portfolio diversification characteristic, there is a statistical difference between
public-sector sponsored mutual funds and private-sector sponsored mutual funds for the study
period. The model built on testing the impact of diversification on fund performance and found a
statistical difference among sponsorship classes when residual variance is used as a measure of
portfolio diversification and excess standard deviation adjusted returns as a performance
measure. RV, however, has a direct impact on Sharpe fund performance measure.

Ms. Kavitha Ranganathn (2007) Consumer behavior from the marketing world and
financial economics has brought together to the surface an exciting area for study and research:
behavioral finance. The realization that this is a serious subject is, however, barely dawning.
Analysts seem to treat financial markets as an aggregate of statistical observations, technical and
fundamental analysis. A rich view of research waits this sophisticated understanding of how
financial markets are also affected by the ‘financial behavior’ of investors. With the reforms of
industrial policy, public sector, financial sector and the many developments in the Indian money
market and capital market, Mutual Funds which has become an important portal for the small
investors, is also influenced by their financial behavior. Hence, this study has made an attempt to
examine the related aspects of the fund selection behavior of individual investors towards Mutual
funds, in the city of Mumbai. From the researchers and academicians point of view, such a study
will help in developing and expanding knowledge in this field..

Sofia B. Ramos (2007) the author use a new data set to study the determinants of the
performance of open-end actively managed equity mutual fund in 27 countries. We find that
mutual funds underperform the market overall. The results show important differences in the
determinants of fund performance in the U.S. and elsewhere in the world. The U.S. evidence
of diminishing returns to scale is not an universal truth as the performance of funds located
outside the U.S. and funds that invest overseas is not negatively affected by scale. Our findings
suggest that the adverse scale effects in the U.S. are related to liquidity constraints faced by
funds that, by virtue of their style, have to invest in small and domestic stocks. Country
characteristics also explain fund performance. Funds located in countries with liquid stock
markets and strong legal institutions display better performance.

Luigi guiso (2008) the paper documents lack of awareness of financial assets in the 1995
and 1998 Bank of Italy Surveys of Household Income and Wealth. It then explores the
determinants of awareness, and finds that the probability that survey respondents are aware of
stocks, mutual funds and investment accounts is positively correlated with education, household
resources, long-term bank relations and proxies for social interaction. Lack of financial
awareness has important implications for understanding the stockholding puzzle and for
estimating stock market participation costs.

Hong Zhang (2008) Consider an economy in which the underlying security returns
follow a linear factor model with constant coefficients. While portfolios that invest in these
securities will, in general, have a linear factor structure, it will be one with time-varying
coefficients.
However, under certain assumptions regarding the portfolio’s investment strategy, it is
possible to estimate these time-varying alphas and betas. Importantly, this can be done without
direct knowledge of either the portfolio manager’s exact investment strategy or of the alphas and
betas of the individual securities in which the portfolio invests. This paper develops and
estimates a Kalman filter statistical model to track time-varying fund alphas and betas. Several
tests indicate that relative to a rolling OLS model the Kalman filter model produces more
accurate fund factor loadings both in and out of sample.

Dr. S. Narayan Rao(2008) In this paper the performance evaluation of Indian mutual
funds in a bear market is carried out through relative performance index, risk-return analysis,
Treynor’s ratio, Sharp’s ratio, Sharp’s measure, Jensen’s measure, and Fama’s measure .The data
used is monthly closing NAVs. The source of data is website of Association of Mutual Funds in
India (AMFI). Study period is September 98-April 02(bear period). We started with a sample of
269 open ended schemes (out of total schemes of 433) for computing relative performance index.
Then after excluding the funds whose returns are less than risk-free returns, 58 schemes were
used for further analysis. Mean monthly (logarithmic) return and risk of the sample mutual fund
schemes during the period were 0.59% and 7.10%, respectively, compared to similar statistics of
0.14% and 8.57% for market portfolio. The results of performance measures suggest that most of
the mutual fund schemes in the sample of 58 were able to satisfy investor’s expectations by
giving excess returns over expected returns based on both premium for systematic risk and total
risk.

Steve Kaplan (2008) this paper investigates the performance of private equity
partnerships using a data set of individual fund returns collected by Venture Economics. Over
the sample period, average fund returns net of fees approximately equal the S&P 500 although
there is a large degree of heterogeneity among fund returns. Returns persist strongly across funds
raised by individual private equity partnerships. The returns also improve with partnership
experience. Better performing funds are more likely to raise follow-on funds and raise larger
funds than funds that perform poorly. This relationship is concave so that top performing funds
do not grow proportionally as much as the average fund in the market. At the industry level, we
show that market entry in the private equity industry is cyclical. Funds (and partnerships) started
in boom times are less likely to raise follow-on funds, suggesting that these funds subsequently
Performance worse. Aggregate industry returns are lower following a boom, but most of this
effect is driven by the poor performance of new entrants, while the returns of established funds
are much less affected by these industry cycles. Several of these results differ markedly from
those for mutual funds.

Joseph chen (2009) The author investigate the effect of scale on performance in the
active money management industry. They first document that fund returns, both before and after
fees and expenses, decline with lagged fund size, even after accounting for various performance
Bench marks. Then explore a number of potential explanations for this relationship. This
association is most pronounced among funds that have to invest in small and illiquid stocks,
suggesting that these adverse scale effects are related to liquidity. Controlling for its size, a
fund’s return does not deteriorate with the size of the family that it belongs to, indicating that
scale need not be bad for performance depending on how the fund is organized. Finally, using
data on whether funds are solo-managed or team-managed and the composition of fund
investments, that explore the idea that scale erodes fund performance because of the interaction
of liquidity and organizational diseconomies.

Hsiu-lang Chen (2009) the author tells about the mutual fund relation between prior
fund performance, the fund manager’s compensation, and the fund manager’s choice of portfolio
risk. This paper models the behavior of a fund manager who competes in such a tournament. The
paper performs non-parametric and parametric tests of the relation between mutual fund
performance and risk-taking for more than 4,000 equity mutual funds over the 1962 to 2001
period. The parametric tests allow a fund’s risk to respond continuously to its relative
performance and produces estimates of risk-taking behavior for each individual mutual fund. As
predicted by the model, there is a tendency for mutual funds to increase the standard deviation of
tracking errors, but not the standard deviation of returns, as their performance declines. The
effect is stronger for younger and smaller mutual funds.

Dr Nalini Prava (2009) the author talks about the new instruments which are expected to
impart greater competitiveness flexibility and efficiency to the financial sector. Growth and
development of various mutual fund products in Indian capital market has proved to be one of
the most catalytic instruments in generating momentous investment growth in the capital market.
There is a substantial growth in the mutual fund market due to a high level of precision in the
design and marketing of variety of mutual fund products by banks and other financial institution
providing growth, liquidity and return. In this context, prioritization, preference building and
close monitoring of mutual funds are essentials for fund managers to make this the strongest and
most preferred instrument in Indian capital market for the coming years.

K. Santhosh Kumar (2009) The author says that term investment is used to describe the
process of investing money in shares, debentures, fixed deposits, gold, real assets, life policies,
mutual funds and money market instruments. These outlets where the money is invested are
known as investment assets. By investing, an investor commits the present funds to one or more
assets to be held for some time in expectation of some future return in terms of interest (revenue)
or capital gain. Individual investors consider a number of factors before deciding to invest their
funds in various securities involving varying degrees of risk and return.

Antonella Basso (2009) the author says that ethical constraints forced on an investment
fund satisfy the fulfillment of humanitarian aims but may lower the investment profitability.
Hence, when the performance of ethical mutual funds we cannot disregard the ethical
component. In this contribution we propose a performance indicator which considers the
expected return, the investment risk, the ethical component and the subscription and redemption
costs together. The performance measure proposed is obtained using a data envelopment analysis
(DEA) approach, which allows measuring the relative efficiency of decision making units in
presence of a multiple input-multiple output structure.

Russ Wermers (2009) the author says that the persistent use of momentum investment
strategies by mutual funds has important implications for the performance persistence and
survivorship bias controversies. Using mutual fund portfolio holdings from a database free of
survivorship bias, we and that the best performing funds during one year are the best performers
during the following year, with the exception of 1981, 1983, 1988, and 1989. This pattern
corresponds exactly to the pattern exhibited by the momentum effect in stock returns, first
documented by Jegadeesh and Titman (1993) and recently studied by Chan, Jegadees.

M. Jayadev (2009) In this paper an attempt is made to evaluate the performance of two
growth oriented mutual funds (Mastergain and Magnum Express) on the basis of monthly returns
compared to benchmark returns. For this purpose, risk adjusted performance measures suggested
by Jenson, Treynor and Sharpe are employed. It is found that, Mastergain has performed better
according to Jenson and Treynor measures and on the basis of Sharpe ratio, its performance is
not up to the benchmark. The performance of Magnum Express is poor on the basis of all these
three measures. However, Magnum Express is well diversified and has reduced its unique risk
where as Mastergain did not. These two funds are found to be poor in earning better returns
either adopting marketing or in selecting under priced securities. It can be concluded that, the
two growth oriented funds have not performed better in terms of total risk and the funds are not
offering advantages of diversification and professionalism to the investors.
 Timotej jagric (2009) the development of a stock market depends to a great extent on
the development of institutional investors. The paper studies the mutual fund industry and
applies various tests to evaluate the performance capacity of mutual funds. First, we briefly
explain the data, and then we introduce the performance measures used to evaluate funds.
Finally, we calculate the performance measures of mutual funds and rank them according to the
results. We find the rankings obtained by performing both the Sharpe and Treynor rules to be
almost the same, implying that funds are well diversified. The rankings reveal that all analyzed
funds outperformed the market on a risk-adjusted basis.

Christopher James (2009) a number of mutual funds cater exclusively to institutional

investors. Although institutional funds might be a natural place to look for ‘‘smart money’’,
agency costs associated with delegated monitoring may lead to less monitoring and worse overall
performance. funds based on proxies for the degree of investor oversight, and find that
institutional funds with low initial investment requirements and funds with retail mates perform
significantly worse than other institutional funds both before and after adjusting for risk and
expenses. Tracking error is especially important in the flow-performance relationship of
institutional funds with high minimum investment requirements.

Katerina Simons (2009) the number of mutual funds has grown dramatically in recent
years. The Financial Research Corporation data base, the source of data for this article, lists
7,734 distinct mutual fund portfolios. Mutual funds are now the preferred way for individual
investors and many institutions to participate in the capital markets, and their popularity
has increased demand for evaluations of fund performance. Business Week, Barron’s, Forbes,
Money, and many other business publications rank mutual funds according to their performance.
Information services, such as Morningstar and Lipper Analytical Services, exist specifically for
this purpose. There is no general agreement, however, about how best to measure and compare
fund performance and on what information funds should disclose to investors.

NEED OF THE STUDY

Mutual Fund Company is a fast booming industry in the present scenario having a net asset of
153000 crores. Mutual fund is a simple way to invest our savings as compared to investing in
shares and debentures. We can invest our savings based on our investment objectives. This study
focuses on analyzing the equity diversified schemes of mutual funds, which is very crucial for
investors and capital appreciation. Majority of the investors are looking in for balanced schemes
because of regular incomes and capital appreciation. In the emerging scenario of fluctuations in
interest rates and unpredictable performance of stock markets balanced schemes have gained
more popularity. Thus it provides potential customer database to the organization. This will serve
as the future cash in for the company

SCOPE

 The scope of this research is limited to top 6 mutual fund (AUM wise) in India.
 This research covers open ended scheme of equity diversified mutual fund Scheme.
 This paper considers 2 year data of 6 mutual funds.

RESEARCH METHODOLOGY

The project consisted of visiting different distributors in rich localities of Phagwara region
for the survey. The reason for choosing these particular areas has to be that the region has a lot of
potential for investors. It consisted of
Two stages:
Stage 1: Collecting data by survey method, on the basis of Questionnaires.
Stage 2: Analyzing and interpreting the primary data collected.

RESEARCH DESIGN:

It is a framework or blueprint for conducting the marketing research project. The research
design used here is Descriptive Research Design which is used for description of something.
For this purpose Primary Data has to be collected through Questionnaires filled by the
investors. Questionnaires filled through e –mails, Inputs from the employees of the company. It
also consists of Secondary Data analysis through: Internet and Web Search. Fact Sheets and
annexure collected from different Mutual Fund companies.

OBJECTIVES OF THE STUDY

 To study the performance of equity diversified mutual fund schemes of six prominent
mutual fund players in India.
Sub objective:-
 To study the awareness among the sample respondents.

Research instrument

The various research instruments we are using in our study are the Sharpe ratio, Alpha, Beta, R-
square, Standard deviation and also questionnaire for the second objective.

Data collection – survey method

The survey method of collecting data is based on the questioning of respondents. They are
asked variety of questions regarding their behavior, intentions, attitude, awareness and
motivations. In structured data collection, a formal questionnaire is prepared thus the process is
direct.
The questionnaire designed for this project consists of questions based on various parameters
which a relationship manager would consider before selling a mutual fund. Each question
is based on different variables like investment decisions, selling decisions, company
policies, servicing issues etc.

Sample size: - we are taking the sample size of 40respondent.

We are taking six prominent equity growth option schemes.

 HDFC TOP (200) EQUITY (G)

 RELIANCE EQUITY FUND (G)
 SBI MAGNUM EQUITY FUND (G)
 TATA PURE EQUITY (G)
 TEMPLETON INDIA GROWTH FUND (G)
 BIRLA SUN LIFE EQUITY FUND (G)

Sampling technique: - Convenience sampling.

TERMINOLOGY

SHARPE RATIO:-
The Sharpe ratio is the returns generated over the risk free rate, per unit of risk. Risk in this case
is taken to be the fund's standard deviation. As standard deviation represents the total risk
experienced by a fund, the Sharpe ratio reflects the returns generated by undertaking all possible
risks.
A higher Sharpe ratio is therefore better as it represents a higher return Generated per unit
of risk. However, while looking at Sharpe ratio a few points have to be kept in mind to obtain an
accurate reading of the fund's Performance.

BETA:-
It measure of the volatility, or systematic risk, of a security or a portfolio in comparison
to the market as a whole. A beta of 1 indicates that the security's price will move with the
market. A beta of less than 1 indicates that the security will be less volatile than the market. A
beta of greater than 1 indicates that the security's price will be more volatile than the market. For
example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.

ALPHA:-

The basic idea is that to analyze the performance of an investment manager you must
look not only at the overall return of a portfolio, but also at the risk of that portfolio. For
example, if there are two mutual funds that both have a 12% return, a rational investor will want
the fund that is less risky. Jensen's measure is one of the ways to help determine if a portfolio is
earning the proper return for its level of risk. If the value is positive, then the portfolio is earning
excess returns. In other words, a positive value for Jensen's alpha means a fund manager has
"beat the market" with his or her stock picking skills

R -SQUARED
R-squared values range from 0 to 1. A R-squared of 1 means that all movements of a
security are completely explained by movements in the index. A high R-squared (between 0.85
and 1) indicates the fund's performance patterns have been in line with the index. A fund with a
low R squared (0.70 or less) doesn't act much like the index.

STANDARD DEVIATION:-
 A high Standard Deviation may be a measure of volatility, but it does not necessarily
mean that such a fund is worse than one with a low Standard Deviation. If the first fund is a
much higher performer than the second one, the deviation will not matter much.

DATA ANALYSIS AND INTERPRETATION:-

BETA Values:

HDFC Top 200 Equity (G) 0.12

Reliance Equity Fund (G) 0.04
SBI Magnum Equity Fund (G) 0.11
Tata Pure Equity (G) -0.06
Templeton India Growth Fund
(G) 0.04
Birla Sun Life Equity Fund (G) 0.01
Beta is a measure of non-diversifiable risk. We can say that the beta of a stock measures
the sensitivity of the stock with reference to a broad based market index. Here all the funds have
been least volatile when compared to their benchmark indices. Birla sun life Equity fund was the
least risky mutual fund during 2009-10. Tata pure Equity fund on the other hand showed
negative movements wrt its benchmark index.

Jensen’s Alpha:

Al
Fund pha
HDFC Top 200 Equity (G) 0.46
Reliance Equity Fund (G) 0.14
SBI Magnum Equity Fund (G) 0.35
Tata Pure Equity (G) 0.38
Templeton India Growth Fund
(G) 0.49
Birla Sun Life Equity Fund (G) 0.38

  Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted
performance to a benchmark index. The excess return of the fund relative to the return of the
benchmark index is a fund's alpha.

Templeton India Growth Fund (G) fund stands a clear winner when it comes to generating
excess return over the benchmark index. Followed closely by HDFC top 200 Equity fund.
Sharpe Ratio:

Fund Sharpe Ratio

 HDFC Top 200 Equity (G) 1.97
Reliance Equity Fund (G) 0.70
SBI Magnum Equity Fund (G) 1.69
Tata Pure Equity (G) 1.58
Templeton India Growth Fund
(G) 2.11
Birla Sun Life Equity Fund (G) 1.49

The Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the
performance of a portfolio. The ratio helps to make the performance of one portfolio comparable
to that of another portfolio by making an adjustment for risk.
The risk-adjusted performance with a sharpe ratio of 2.11 of Templeton India growth Fund is
better than the other funds. This means that this fund has been able to give higher returns on
risk-adjusted basis. Relaince Equity fund had been the worst performer since it could not
generate enough return per unit risk taken.

Standard Deviation:

Stand
Fund ard Deviation
HDFC Top 200 Equity (G) 23.36%
Reliance Equity Fund (G) 21.67%
SBI Magnum Equity Fund (G) 23.28%
Tata Pure Equity (G) 22.84%
Templeton India Growth Fund
(G) 22.85%
Birla Sun Life Equity Fund (G) 24.59%

Standard deviation is also a measure of volatility. Generally speaking, dispersion is the

difference between the actual value and the average value. The larger this dispersion or
variability is, the higher the standard deviation. The smaller this dispersion or variability is, the
lower the standard deviation.
In this case however all the funds have S.D.’s in the same range. Birla sun life equity
fund turns out to be slightly more volatile than others. Templeton India Growth Fund has a low
volatility when compared to the returns it has generated. Reliance Equity fund has the lowest
volatility of 21% however this volatility is can be attributed to the lower return s generated by
the fund.

Annualized Returns:
 Benchmark Annualized Return Annualized
Fund Index (Fund) Return (Index)
HDFC Top 200 Equity (G) BSE 200 54.04% 43.67%
S&P CNX
Reliance Equity Fund (G) Nifty 23.15% 40.42%
SBI Magnum Equity Fund (G) BSE 100 47.26% 43.09%
Tata Pure Equity (G) BSE 30 44.15% 43.63%
Templeton India Growth Fund
(G) BSE 30 56.11% 43.63%
Birla Sun Life Equity Fund (G) BSE 200 44.60% 43.33%

The annualized return, also known as the compound annual growth rate, is used to measure the
average rate of return per year when taking into consideration the effects of interest
compounding. It is evident from the data that all the benchmark indices gave abnormal returns
during the last two years. When compared their respective benchmark indices Tempeton India
Growth fund gave the highest returns during 2009-10 at 56.11%; this was followed closely by
HDFC top 200 Equity fund t %4.04%. All the other funds were near the same level of return of
their respective benchmark index. Reliance Equity Fund with a return of 23.15% remained the
worst performer of all during 2009-10.

Questionnaire Interpretation
1. Most of the investor would like to invest in mutual funds as they think that mutual fund is a better
option after saving option as the mutual funds diversify the risk, liquidity, tax benefit and professional
management.
2. The investor want to invest for the future growth as they want to increase their profit whereas the
second most preferable objective is tax saving. There is a minute 1% difference in growth and tax saving
objective.

3. The investor want to invest in private mutual funds as they think it gives more profit and provide with
different types of schemes.

4. and 5. The amount of investment of the most investor is 100000 p.a. and there are 10-20% people who
invest their 55% of income in mutual fund. And majority of investor 20-50% invest approx 18% of their
income in mutual fund.

6. The investor want to invest in balanced kind of mutual fund scheme as it comprise of mixture of debt
and equity and fewer scheme selection need to be taken.

7. Most of the investor rely upon the financial institution for investment and afterwards would like to take
help of the financial advisor.

8. The investor would like to invest more in systematic investment plan so compare to one time
investment as it he has to invest a constant amount at regular interval.

9. The investors would like to invest more in open ended scheme as they can enter or exit at any time
even after the NFO. On the other hand they can buy unit only during the NFO in a close ended scheme.

10. There is a tendency of the most of the investor to wait for the recovery when the market is not
favorable as they think one day the market will regain its previous position and they don’t want to bear
the switching charges. On the other hand 31% investor tends to shift to other scheme or investment option
as they are patience less.

12. The attitude of the most of the investors is positive for mutual funds while 24% don’t want to invest in
mutual fund.

13. The investor can bear the moderate risk according to their risk appetite. While the 25% investor want
to bear more risk in a wish to earn more profit.

14.overall investors wants to increase their investment in mutual funds as they are earning profits and
other facilities like professional management, diversification, liquidity, growth and tax benefits.

Findings and Suggestion

Questionnaire
We are the students of Lovely Professional University, conducting the research on performance of
Mutual Funds in India. The Purpose of this survey is to gather the investor’s feedback regarding
their investment in the Mutual Funds. Your Feedback will highly be appreciated.
Q1. What kind of investments have you made so far? Rank Accordingly (1to6)

a. Saving option ( ) d. Fixed deposits ( )

b. Insurance ( ) e. Mutual funds ( )

c. Share & debenture ( ) f. Real estate ( )

Q2. What is your primary objective for investments?

a. Income ( ) b. Growth ( )

c. Tax Saving ( ) d. Others…………….

Q3. Which Mutual Fund sector do you prefer investing upon?

a. Public Sector ( ) b. Private Sector ( )

Q5. What is your amount of investment?

a. Less than 10000 p. a. ( ) b. 10000-20000 p.a. ( )

c. Between 20000-30000 p.a. ( ) d. 30000-40000 p.a. ( )

e. 50000 and above ( )

Q6. What is your amount of investment in mutual funds?

a. 5 -10%. ( ) b. 10-20% ( )

c. 20 -50% ( ) d. More than 50% ( )

Q7. In which type of scheme would you like to invest your money?

a. Equity ( ) b. Debt ( )

c. Balanced ( ) d. Index ( )

Q8. Which channel would you prefer while investing in mutual funds?

a. Financial advisor ( ) b. Financial institution ( )

c. AMC ( ) d. Insurance Agents ( )

Q9. Which mode of investment do you prefer in mutual funds?

a. One time investment ( ) b. S.I.P ( )

Q10. In which type of Mutual Fund you invest?

a. Open- Ended ( ) b. Close Ended ( )

c. Specify the Period…………………. .

Q11. What is your action towards your investment when the market is not favorable ?
a. Stay invested ( ) b. Withdraw money ( )

c. Wait for recovery ( ) d. Shift to other funds ( )

Q12. What is your attitude towards investment in mutual funds ?

Strongly-1 Agree-2 Neutral-3 Dis Agree-4 Strongly Disagree-5

Statement Strongly Agree Neutral Disagree Strongly

Agree Disagree
It is easy to understand the policy of mutual funds

Liquidity is the main preference factor for while

investing in mutual funds
tax benefits is the main preference factor for you
while investing in mutual funds.
Capital appreciation is the main preference factor
for you while investing in mutual funds

Q13. What is the level of risk you can afford ?

a. Very High ( ) b. High ( )

c. Moderate ( ) c. Low ( )

d. No Risk ( )

Q14. Do you want to increase your investment in Mutual Fund?

a. Yes ( ) b. No ( )

Please specify the investment amount_________________%.

Respondent’s Profile:-
1. Name……………………………………………………….

2. Age………………………………………………………...

3. Qualification……………………………………………….

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