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COMPARATIVE STUDY ON PERFORMANCE

EVALUATION ON MUTUAL FUND SCHEMES

A SUMMER INTERNSHIP REPORT

Submitted by

Loyi Timba

Registration Number: 12016154

In partial fulfilment of Summer Internship for the award of degree of

BACHELOR OF BUSINESS ADMINISTRATION (BBA)

Mittal School of Business

LOVELY PROFESSIONAL UNIVERSITY

Phagwara, Punjab

Monday, 11 July 2022

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CERTIFICATE FROM THE INSTITUTE

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DECLARATION

I, Loyi Timba, hereby declare that the work presented herein is genuine work done
originally by me and has not been published or submitted elsewhere for the requirement
of a degree program. All sources of information, facts, or works by other people that
are cited in this dissertation have been properly acknowledged and are listed in the
reference section.

_______________________

Loyi Timba

Reg. No.: -12016154

Date: - Monday, 11 July 2022

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ACKNOWLEDGEMENT

The sincerity of my thankfulness cannot be adequately expressed in a few typewritten

sentences. But I'm still struggling to find the right words to express how appreciative I
am to everyone who has supported and encouraged me as I worked on this project.
Many persons who had a significant influence on my thinking, actions, and conduct
during my study period can be seen in this effort of mine.

We would like to appreciate the LOVELY PROFESSIONAL UNIVERSITY for

including summer training as a requirement for the MBA degree before anything else.
Without the steadfast and honest cooperation of the Mittal School of Business, LPU,
completing this project would have required a laborious effort. The personnel of the
department's constant and unwavering assistance greatly facilitated the work. It would
be selfish if this went ignored and unrecognized.

This project's structure and content have been influenced by many people, and many
others have supported me throughout. I would like to extend my sincere gratitude to
Mr. Varun Nayyar, Chief Marketing Officer at Itronix Solutions, who was always
willing to lend a hand. His direction, gentle encouragement, and active support allowed
me to finish this project.

I also owe gratitude to my respondents who made significant contributions to the

completion of my questionnaires. My relationships with my friends have been really
beneficial to me, and I am grateful for how much they have helped me learn.

Finally, all I can say is that "NO ONE IS FORGOTTEN, BUT ALL ARE NOT
MENTIONED."

Last but not least, I want to express my gratitude to God, who continues to watch over
us despite all of my imperfections.

In order to invest in shares, bonds, government securities, and money market

instruments, a mutual fund pools and collects money from a number of individuals.
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ABSTRACT

Professional fund managers invest the money raised through mutual fund schemes in
stocks, bonds, etc. in accordance with the investment goal of the scheme. After
deducting any necessary costs and fees, the income or profits from this collective
investment scheme are allocated equally among the investors by figuring out the "Net
Asset Value" of the scheme, or NAV. Mutual funds demand a little fee in exchange.

In a nutshell, a mutual fund is a pool of money that is provided by a number of investors

and is managed by a qualified fund manager.

In India, mutual funds are created as trusts under the Indian Trust Act of 1882 and in
line with the SEBI (Mutual Funds) Regulations of 1996.

The costs and fees that mutual funds charge to operate a scheme are regulated and are
limited by SEBI's guidelines.

We will comprehend and learn about mutual funds in this assignment, including their
characteristics and dangers.

To determine which mutual fund to invest in, we will examine 11 mutual fund samples,
determine their areas of effect, compare the various mutual fund schemes, and perform
analysis. and to do this, we will consider the annual returns of sample mutual fund
schemes for the past four years in a row, account for the average return, calculate their
standard deviation, and using the Sharpe's index.
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TABLE OF CONTENTS

1. LIST OF TABLES
2. LIST OF CHARTS
3. LIST OF DIAGRAMS
4. LIST OF FIGURES
5. LIST OF ABBREVIATIONS
6. INTRODUCTION
6.1 INTRODUCTION OF MUTUAL FUND
6.2 HOW DO MUTUAL FUNDS WORK?
6.3. HOW TO INVEST IN MUTUAL FUND?
6.2 WHY COMPARATIVE ANALYSIS OF MUTUAL FUNDS?
6.3 TYPES OF MUTUAL FUND SCHEMES
6.4 MAJOR MUTUAL FUND COMPANIES IN INDIA
7. INDUSTRY PROFILE
7.1 STRUCTURE OF MUTUAL FUNDS IN INDIA
7.2 ASSOSIATION OF MUTUAL FUNDS IN INDIA
7.3 REGULATORY AUTHORITIES
7.4 RISK ASSOCIATED WITH MUTUAL FUNDS
7.5 EMERGING ISSUES IN MUTUAL
8. REVIEW OF LITERATURE
9. OBJECTIVES OF THE STUDY
10. RESEARCH METHODOLOGY
10.1 SOURCE OF DATA
10.2 LIMITATIONS
11. ANALYSIS AND INTERPRETATION
12. CONCLUSION
13. REFRENCES
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1. LIST OF TABLES

• Table 1: Asset under management (AUM)

• Table 2: Yearly return of mutual fund schemes.
• Table 3: Average Return Standard deviation and Sharpe’s Index.

2. LIST OF CHARTS

• Chart 1: Average Return Standard deviation and Sharpe’s Index.

3. LIST OF DIAGRAMS

• Diagram 1: Introduction of Mutual Funds

• Diagram 2: Concept of Mutual Funds
• Diagram 3: Industry Profile
• Diagram 4: Structure of Mutual Fund on India

4. LIST OF FIGURES

• %: Percentage
• 𝐶𝑡 : Cash distributed in the time period ‘t’
• 𝐷𝑡 : Dividend in the form of bonus distribution in the period ‘t’
• 𝑅𝑓 : Risk free rate of return

• 𝑅𝑚 : Market average return

• 𝑅𝑝 : Portfolio return

• 𝑆𝑝 : Sharpe’s Index

• 𝑆𝑚 : Sharpe’s Index of benchmark portfolio

• 𝜎𝑝 : Standard deviation

• 𝜎𝑚 : Standard deviation of the market

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5. LIST OF ABBREVIATIONS
• AMC: Asset management
company
• Ltd: Limited
• e.g.: example
• AMFI: Association of Mutual
Funds in India
• Approx.: Approximately
• HNI: High net worth individual
• NAV: Net asset value
• etc.: Et cetera
• Rs.: Rupees
• KMBL: Kotak Mahindra Bank
Limited
• UTI: Union Trust of India
• HDFC: Housing Development
Financial Company Limited
• LIC: Life Insurance Corporation
of India
• BSE: Bombay Stock Exchange
• i.e.: Id Est
• Avg.: Average
• RTA: Registrar and transfer
agents
• MF: Mutual Fund
• ELSS: Equity linked saving
schemes
• FMCG: Fast moving Customer
Goods
• CRISIL: Credit Rating
Information Service of India
Limited
• NSE: National Stock Exchange
• AG: Aktiengesellschaft
(Germany term for public
limited company)
• AUM: Asset under management
• US: Under sections
• Cr.: Crore
• KMAMC: Kotak Mahindra
Asset Management Company
Limited
• RMF: Risk management frame
work
• ACAM: American capital asset
management company
• SEBI: Securities and Exchange
Board of India
• NPA: Non performing asset
• MNC: Multinational company
• NV: Net value
• SIP: Systematic Investment plan
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6. INTRODUCTION

6.1. INTRODUCTION OF MUTUAL FUND

Diagram 1: Mutual Funds

These days, there is a lot of talk around mutual funds. The market for mutual funds is
mostly untapped, but it is growing rapidly. Only a small portion of this industry's
potential has been realized. Consequently, there are several prospects in this area. This
explains why it is so engaging.

For foreign investors, the Indian stock market and firms are now profitable. Due to
increased market liquidity, more people now have access to more money, which
encourages investment. Given their promising future, Indian enterprises have several
potentials to grow their operations internationally and attract foreign investment.
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A mutual fund is a type of trust that unites the savings of several investors who have
similar financial objectives. Depending on the goal of the plan, the fund manager
invests the money thusly raised in various kinds of securities. These might include
securities such as shares, debentures, or money market products. According to the
number of units they own, the scheme's unit holders partake in the income generated
by these investments and the capital gains obtained by the program. Therefore, a mutual
fund is the best type of investment for the average person since it gives them the chance
to invest in a professionally managed, diversified portfolio at a reasonable price.
Anyone can invest in mutual funds with as little as a few thousand rupees in investible
surplus. Each Mutual Fund scheme has a clearly stated investing goal and plan.

The best investment instrument for the complex and contemporary financial
environment of today is a mutual fund. Markets for real estate, derivatives, other assets,
and stock shares have all developed into mature, information-driven markets. Global
events that are taking place in remote locations are what affects these assets' prices. An
average person is unlikely to possess the information, abilities, disposition, and time
necessary to monitor events, comprehend their implications, and act quickly.
Additionally, it can be challenging for an individual to remember who owns his assets,
investments, brokerage fees, bank transactions, etc.

The solution to all of these problems is a mutual fund. It employs professionals with
relevant expertise and professional qualifications to manage each of these tasks on a
full-time basis. Due to the fund's vast pool of money, each investor pays a very small
salary for its employees. The mutual fund vehicle effectively takes use of economies of
scale in all three areas: transaction processing, investments, and research. The idea of
people banding together to invest money collectively is not new, but the mutual fund
as it exists now is a phenomenon of the 20th century. In reality, mutual funds didn't
become widely used until after World War II. Thousands of companies worldwide
provide tens of thousands of mutual funds with various investing goals. Mutual funds
manage virtually as much money as banks do together now, if not more.

At the time the fund is launched, a draught offer document must be created. Typically,
it pre-specifies the fund's investment goals, the risk involved, the related charges, and
the general criteria for entering and leaving the fund, among other things. In India, as
in the majority of other nations, these sponsors must receive regulatory clearance, in
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this case from SEBI (Securities Exchange Board of India). When approving a fund to
start operating, SEBI takes into account the sponsor's track record and financial
stability. After that, a sponsor employs an asset management firm to invest the money
in line with the investment goal. Additionally, it employs a different organization to act
as the fund's custodian of assets and maybe a third to perform registry tasks for the
fund's unit holders (subscribers).

In the Indian setting, the sponsors also advertise the Asset Management Company, in
which they have a controlling interest. Frequently, a sponsor can own the entire stock
of the asset management company (AMC). For instance, Birla Global Finance sponsors
Birla Sun Life Asset Management Company Ltd., which has launched a number of
mutual fund schemes and also serves as an asset manager for the funds raised through
the schemes.
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6.2. HOW DO MUTUAL FUNDS WORK?

A mutual fund enables participants to pool their funds for a single investing goal. Based
on the goals of the program, it then invests the funds in different asset types.

As an investor, you invest your money in securities such as stocks, bonds, and other
financial assets. You have two options for purchasing them: directly or through
investment vehicles like mutual funds. Compared to direct investments, mutual funds
have a few advantages. For instance, it's possible that you lack the knowledge or time
necessary to constantly monitor market movements. In this situation, mutual funds are
a perfect substitute because they are managed by experts. How do mutual funds operate,
though? Here is a helpful list of important information. In order to invest in securities
such as stocks, bonds, money market instruments, and other assets, mutual funds
aggregate the funds from shareholders. Professional money managers run mutual funds,
allocating the assets and attempting to generate capital gains or income for the fund's
investors. The portfolio of a mutual fund is set up and kept up to date in accordance
with the specified investment goals in the prospectus.

Small or individual investors have access to professionally managed portfolios of

stocks, bonds, and other securities through mutual funds. As a result, each shareholder
shares proportionately in the fund's profits or losses. Mutual funds invest in a huge
variety of assets, and performance is typically gauged by changes in the fund's overall
market capitalization, which are obtained from the performance of its underlying
investments combined.

Larger financial institutions like Fidelity Investments, Vanguard, T. Rowe Price, and
Oppenheimer are the parent corporations of the majority of mutual funds. The fund
manager of a mutual fund, often known as the investment adviser, is required by law to
act in the best interests of mutual fund shareholders.

Key take away:

• An investment vehicle of this type that consists of a portfolio of stocks, bonds,

or other securities is known as a mutual fund.
• Small or individual investors can access diverse, expertly managed portfolios
through mutual funds.
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• The various categories that mutual funds fall under describe the different types
of securities, investing goals, and return types that they invest in.
• Annual fees, cost ratios, and commissions paid by mutual funds may have an
impact on their overall returns.
• Mutual funds are frequently used by employer-sponsored retirement plans to
invest.
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6.3. HOW TO INVEST IN MUTUAL FUND?

How to invest in mutual funds through a mutual fund distributor?

AMFI registered mutual fund distributors assist investors with mutual fund transactions
and offer financial advice. Distributors do not charge investors any fees because they
are compensated with commissions by the fund house. Mutual fund units purchased
through these distributors (ordinary plans) are more expensive than those bought
directly from AMCs. It will be sage to invest through a mutual fund distributor for
novice investors. You should be aware that market risks might affect mutual funds.
Risk and return profiles vary among various mutual fund products. You can get
assistance choosing the best mutual fund product for your risk tolerance and investing
requirements from a distributor of mutual funds or a financial advisor.

How to invest in mutual funds directly with the AMC?

By going to the AMC's office or via their web portal, you can make direct investments
with them. If you are a new investor, you must submit your KYC paperwork online or
in the AMC office. You can purchase direct plans from the AMC, which have a lower
expenditure ratio than standard plans. You can invest in direct plans if you are an
experienced investor, are aware of your risk tolerance, and are knowledgeable about
mutual fund products and the financial markets. Direct plans have larger returns than
conventional plans do.

How to invest in mutual funds through Registered Investment Advisors (RIA)?

Through SEBI Registered Investment Advisors, you can invest (RIA). Asset
Management Companies do not pay RIAs commissions. Direct plans can be invested
in through an RIA, who may also charge a fee for their services. As the RIA does not
receive fees from the AMC, there is supposedly no conflict of interest when investing
through an RIA. It must be emphasized, nonetheless, that according to the AMFI's Code
of Conduct for Mutual Fund Distributors, mutual distributors are also expected to
provide you with fair advice and prioritize your interests over their own. Before
choosing to invest through a mutual fund distributor or Registered Investment Advisor,
you should conduct your own due research.
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How to invest in mutual funds through Registrars and Transfer Agents (RTAs)?

On behalf of the fund houses, registrars and transfer agents handle mutual fund
transactions. If you are doing business through RTAs, you should be aware of the RTA
services provided by the AMC whose plan you wish to purchase. You can discover
whether AMCs are served by a certain RTA by visiting their websites or offices.
Through the RTAs, you can invest in both direct and regular plans. The ability to
conduct transactions (investments, redemptions, switches, etc.) involving several
mutual funds from various AMCs is one advantage of investing through RTAs,
assuming that the AMCs in question are serviced by the same RTA.

How to invest in mutual funds online?

Your KYC must be registered before you may invest through an online site. Some of
the portals even assist you in registering for KYC. There are various alternatives
available to those considering how to invest in mutual funds online.

How to invest in mutual funds online through AMC portals?

Every mutual fund company offers online investing via internet banking for payments
(investments). You should carefully verify whether you are investing in regular or direct
plans when making online investments.

How to invest in mutual funds online through RTA portals?

Additionally, all RTAs offer an online investing option via online banking for payments
(investments). When investing online, confirm whether you are using regular or direct
plans. You can access your portfolio of mutual fund schemes from AMCs served by
the RTA in one location, which is one benefit of investing online through RTA
websites. The RTA portals also allow you to view your capital gains statement.

How to invest in mutual funds online through mutual fund distributors’ websites?
Through their own websites, a number of mutual fund distributors also offer online
investment services. You may access your whole portfolio of mutual fund schemes in
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one location when you invest online through your distributor or financial advisor, which
is one benefit.

How to invest in mutual funds through stock broker?

Internet mutual fund investments are available from stock brokers who also offer online
trading and Demet services. These services are provided by stock brokers, who are also
AMFI licensed MF distributors and hence provide regular plans.

How to invest in mutual funds through your bank?

The majority of banks provide wealth management services that allow for mutual fund
investments. You'll invest in standard programs because banks distribute mutual funds
as well. Some banks may give facilities for online mutual fund investments as well as
wealth managers at their bank branches to provide services linked to mutual funds.

How to invest in mutual funds through mobile apps?

All RTAs and many AMCs offer the ability to transact in mutual funds via their mobile
apps. Through these mobile apps, you can do any form of mutual fund transaction,
including initial investments, extra purchases, SIPs, STPs, SWPs, switches,
redemptions, etc. For Android phones, these apps are available for download from the
Google Play Store. Some distributors of mutual funds also offer mobile apps for
purchasing mutual funds.

How to invest in mutual funds from your bank account?

Investors need to be aware that you can only invest in mutual funds using your own
bank account by check or internet banking. Cash investments are also permitted, but
only up to a maximum of Rs 50,000 every fiscal year. Additionally, you should be
aware that mutual funds do not permit transactions with third parties. In other words,
you cannot invest on behalf of another person. If you are making payments via online
banking, your name must be printed on the check leaf or you must be the account holder
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(first or joint holder) of the savings bank account. The same applies to investing on
behalf of others, such as parents, siblings, family members, or any other account.

If the investment is made through a joint account in which both you and your spouse
are account holders, you can invest jointly with your spouse. If the minor child is the
only account holder represented by the parent or guardian, you may also invest on their
behalf. In the mutual fund portfolio of a minor, joint ownership is not permitted. From
your bank account, you can invest money for your young child. The first thing you as
a parent or guardian must do when a child turns 18 and becomes a major is to change
the status of the single account holder from Minor to Major. Your child will now be
accountable for any tax repercussions as an adult.

How to invest in mutual funds based on asset classes?

Based on various asset classes including equity, fixed income, etc., mutual funds can
be divided into three basic categories: equity, debt, and hybrid.

Mutual equity funds: These mutual funds invest in securities that are related to
equities and equity. These funds' primary goal in investing is capital growth. Market
capitalization segments, such as large cap (top 100 stocks by market cap), midcap
(101st to 250th stocks by market cap), small cap (251st and smaller stocks by market
cap), large and midcap (top 250 stocks by market cap, with a minimum of 35 percent
in large cap and 35 percent in midcap), and Multicap, can further categorize equity
mutual funds (25 percent each in large cap, midcap and small cap). Based on diverse
investment approaches, such as targeted, value, contra, etc., there are several types of
equity funds. Additionally, there are equity funds that focus on certain industries or
themes (e.g. healthcare, consumption, financial services, FMCG, infrastructure, IT
etc.). There are several equities funds with various risk and return profiles. In order to
determine which equity funds might be appropriate for your investments, speak with
your financial advisor.

Debt mutual funds: These mutual funds make investments in debt and securities used
in the money market. These funds' primary investment goal is to generate income. Debt
mutual funds can be further divided into categories based on maturity (the date on
which the instruments mature) or duration (interest rate sensitivity, which is also closely
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related to the maturity of the instruments), such as overnight (instruments that mature
immediately), liquid (instruments that mature within 91 days), ultra-short duration
(average duration of 3 to 6 months), low (average duration of 6 to 12 months), money
market (instruments that mature within 1 year), and short duration (average duration of
6 to 12 months) (average duration of more than 7 years). Depending on the securities
they invest in, such as corporate bonds, banks and PSU securities, gilts, and credit risk,
there are many types of debt funds (lower rated instruments etc.). Different debt funds
have various risk and return profiles, including interest rate risk and credit risk. In order
to determine which debt funds might be appropriate for your investments, speak with
your financial advisor.

Hybrid mutual funds: In numerous asset classes, such as equity, fixed income, gold,
real estate investment trusts, etc., hybrid funds invest. These funds' investing goals
include income and capital growth. The allocation of assets is the key advantage of
hybrid funds. Spreading investments over two or more asset classes reduces investment
risk through asset allocation. A hybrid fund's risk profile is determined by the scheme's
asset allocation. Aggressive Hybrid (65 to 80 percent in equity, 20 to 35 percent in fixed
income), Dynamic Asset Allocation or Balanced Advantage (which manages equity
and fixed income asset allocation dynamically, with no upper or lower limit), are some
examples of hybrid funds with different asset allocation profiles. Equity Savings
(minimum 65% in equity, including hedging or arbitrage, and minimum 10% in fixed
income), Multi Asset Allocation (minimum 10% in each of at least 3 asset classes, such
as equity, fixed income, and gold), Conservative Hybrid (75-90% in fixed income, and
10% to 25% in equity), and Arbitrage Funds (minimum 65 percent in equity, using
arbitrage strategy). There are various hybrid funds with various risk and return profiles.
In order to determine whether hybrid funds might be appropriate for your investments,
speak with your financial advisor.

How to invest in mutual funds for tax savings?

Under Section 80C of the Income Tax Act, investments in mutual funds' Equity Linked
Savings Schemes (ELSS) are eligible for a deduction from your taxable income. ELSS
units are non-redeemable for three years following the date of investment due to a lock-
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in period. While there is no upper limit for ELSS investments, Section 80C allows for
deductions up to a maximum of Rs 150,000.

How to invest in mutual fund lump sum?

Your full sum is invested all at once when you make a lump sum investment, also
known as a one-time investment. The simplest type of investment is this one. If you
want to invest a lump sum, you must choose a mutual fund strategy that fits your
financial objectives and risk tolerance. Depending on your preferences, you can invest
in the Regular Plan or the Direct Plan. If you require assistance in choosing the mutual
fund plan, speak with your financial counsellor. The plan option, such as Growth,
Income Distribution and Capital Withdrawal (IDCW), etc., should also be chosen. In
the Growth Option, the plan's profits will be reinvested in the scheme, whilst in the
IDCW option, the AMC may choose to distribute the scheme's profits to the
participants. If building wealth or increasing your capital is your aim, investing in the
Growth Option will allow you to take advantage of the power of compounding. You
can invest in the IDCW option if you want regular cash flows from your investments.
You should keep in mind that any IDCW payments or dividends you receive will be
taxed to you according to your individual tax rate.

How to invest in mutual fund SIPs?

The Systematic Investment Plan (SIP) is a mutual fund investment tool that allows you
to make regular, small-scale investments. You can invest a fixed amount through SIPs
at intervals of your choosing in any open-ended mutual fund plan (e.g., daily, weekly,
fortnightly, monthly etc.). You must submit a bank Electronic Clearing Services (ECS)
mandate with the SIP amount, interval, and start date specified in order to register for a
Systematic Investment Plan (SIP). The Systematic Investment Plan (SIP) is a mutual
fund investment tool that allows you to make regular, small-scale investments. You can
invest a fixed amount through SIPs at intervals of your choosing in any open-ended
mutual fund plan (e.g., daily, weekly, fortnightly, monthly etc.). You must submit a
bank Electronic Clearing Services (ECS) mandate with the SIP amount, interval, and
start date specified in order to register for a Systematic Investment Plan (SIP).
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6.4. WHY COMPARATIVE ANALYSIS OF MUTUAL FUNDS?

Mutual funds are among the most widely used investment vehicles globally. The mutual
fund has a long and profitable history, and consumer popularity has grown significantly
over the past several years. Mutual funds have become much more popular. Mutual
funds have nearly surpassed bank deposits and the total assets of insurance funds in
industrialized financial markets like the United States.

The Association of Mutual Funds in India oversees the mutual fund business in that
country (AMFI). India's mutual fund market is estimated to be worth 493,287 crores.
Over 4.6 million investors have put their trust in the Mutual Fund's ability to create
wealth. Mutual fund schemes have regularly beaten benchmark indexes, becoming the
investment of choice for millions of investors and HNIs.

The research, "Comparative Study on Performance Evaluation of Mutual Fund

Schemes," offers me the chance to expand my understanding of the mutual funds sector
and provides me with a window into the operational procedures of various clientele.

Diagram 2: Concept of Mutual fund

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When an investor purchases a mutual fund's units, he shares ownership of the fund's
assets in the same proportion as the amount of money he contributed to the corpus (the
total amount of the fund). A unit holder or shareholder of a mutual fund are other names
for a mutual fund investor.

The Net Asset Value (NAV) of the scheme changes whenever the value of investments
made in capital market instruments (such as shares, debentures, etc.) changes. The
market value of a mutual fund scheme's assets less its liabilities is known as NAV. By
dividing the total number of units distributed to investors by the market value of the
scheme's assets, net asset value (NAV) is determined.
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6.5. TYPES OF MUTUAL FUND SCHEMES

A mutual fund scheme's structure and investing goal might be used to categorize it.

By Structure:

Open-ended Funds: An open-end fund is one that accepts subscriptions all year round.
There is no set maturity for these. At prices that are related to Net Asset Value ("NAV"),
investors can acquire and sell units with ease. Liquidity is the main characteristic of
open-end schemes.

Closed ended Funds: The specified maturity period for a closed-end fund typically
ranges from three to fifteen years. Only within that time period are subscriptions to the
fund accepted. At the time of the initial public offering, investors can purchase units of
the plan and later sell them on stock exchanges where they are listed. Some close-ended
funds offer the option of selling the units back to the Mutual Fund through recurring
repurchases at NAV-related prices in order to give investors an exit route. According
to SEBI Regulations, the investor must be given access to at least one of the two exit
options.

Interval Funds: The advantages of both open-ended and closed-ended plans are
combined in interval funds. At NAV-related prices, they are available for purchase or
redemption at predetermined intervals.

By Investment Objective:

Growth Funds: Growth funds are designed to offer capital growth over the medium to
long term. These programs typically invest the majority of their corpus in stocks. It has
been demonstrated that long-term stock returns have outpaced most other types of
investments. For investors with a long-term vision looking for growth over time, growth
schemes are perfect.

Income Funds: Investors' regular and steady income is the goal of income funds. These
programs typically invest in government securities, corporate debentures, and fixed
income products like bonds. The best option for consistent income and capital stability
is an income fund.
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Balanced Fund: Balanced funds are designed to offer both growth and dependable
income. These programs periodically disperse a portion of their profits and invest in
fixed income and equity securities in the amounts specified in their offer agreements.
The NAV of these schemes may not typically rise along with the market in a bull market
or decline in lockstep with the market in a bear market. For investors seeking a balance
of income and moderate growth, they are perfect.

Money Market Funds: Money market funds are designed to offer simple liquidity,
capital preservation, and moderate income. These programs typically invest in less risky
short-term financial products such treasury bills, CDs, commercial paper, and interbank
call money. The returns on these strategies could change based on the market interest
rates. These are the best options for corporate and individual investors looking to
temporarily park their excess cash.

Other Schemes:

Tax Saving Schemes: As the government provides tax incentives for investment in
specific avenues, these programs offer tax rebates to the investors in accordance with
specific sections of the Indian Income Tax Act. Investments made in pension plans and
equity linked savings schemes (ELSS) are deductible under Section 88 of the Income
Tax Act of 1961. By investing in mutual funds, investors have additional chances under
the Act to conserve capital gains under Sections 54EA and 54EB.

Special Schemes:

Industry Specific Schemes: Investments made through industry-specific schemes are

limited to those covered by the offer document. These funds can only be invested in a
select few industries, such as pharmaceuticals, FMCG, and information technology.

Index Schemes: Industry-specific schemes only make investments in the sectors

included in the offer document. These funds can only be invested in certain sectors,
such as information technology, fast-moving consumer goods, and pharmaceuticals.
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Sectoral Schemes: Sectoral funds are ones that only make investments in a certain
industry. This could be a particular sector, a collection of sectors, or other subsectors
like "A" Group shares or initial public offerings.
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6.6. MAJOR MUTUAL FUND COMPANIES IN INDIA

ABN AMRO MUTUAL FUND

ABN AMRO Trustee (India) Pvt. Ltd. served as the trustee company when ABN
AMRO Mutual Fund was established on April 15, 2004. On November 4, 2003, the
AMC, ABN AMRO Asset Management (India) Ltd., was established. ABN AMRO
Mutual Fund's custodian is Deutsche Bank AG.

ADITYA BIRLA SUN LIFE MUTUAL FUND

Aditya Birla Group and Sun Life Financial have partnered to create Aditya Birla Sun
Life Mutual Fund. Apart from India, Sun Life Financial is a multinational corporation
that was founded in 1871 and has representation in Canada, the United States, the
Philippines, Japan, Indonesia, and Bermuda. Aditya Birla Sun Life Mutual Fund adopts
a cautious, long-term investing strategy. As of recently, it has an AUM of Rs. 281527.1
crores, according to the company's AUM report from June 30th 2022.

BANK OF BARODA MUTUAL FUND

The Bank of Baroda sponsored Bank of Baroda Mutual Fund, also known as BOB
Mutual Fund, was established on October 30, 1992. The BOB Mutual Fund's AUM is
managed by BOB Assets Management Company Limited, which was established on
November 5, 1992. Custodian is Deutsche Bank AG.

HDFC MUTUAL FUND

On June 30, 2000, HDFC Mutual Fund was established with support from Standard
Life Investments Limited and Housing Development Finance Corporation Limited.

ING VYSYA MUTUAL FUND

26

On February 11, 1999, ING VYSYA Mutual Fund was established with the same-
named Trustee Company. It is a partnership between ING and VYSYA. On April 6,
1998, the AMC, ING Investment Management (India) Pvt. Ltd., was established.

PRUDENTIAL ICICI MUTUAL FUND

A joint venture between Prudential Plc. of America, one of the biggest life insurance
companies in the US, and ICICI has created a mutual fund. On October 13, 1993,
Prudential ICICI Mutual Fund was established with two sponsors: Prudential Plc. and
the AMC, Prudential ICICI Asset Management Company Limited, which had been
established on June 22, 1993.

STATE BANK OF INDIA MUTUAL FUND

The India Magnum Fund, with a capital of roughly Rs. 409.66 crore, was launched by
State Bank of India Mutual Fund as the first bank-sponsored mutual fund. 61 initiatives
have already been introduced. As of June 2022, the AUM for the State Bank of India
Mutual Fund is greater than Rs. 647464.35 crores.

TATA MUTUAL FUND

According to the Indian Trust Act of 1882, TATA Mutual Fund is a trust. Tata Sons
Ltd. and Tata Investment Corporation Ltd. are the sponsors of the Tata Mutual Fund.
With more than Rs. 88096.28 Crores (as of June 2022) in AUM, Tata Management
Limited is one of the fastest growing investment managers in the nation.

KOTAK MAHINDRA ASSTE MANAGEMENT COMPANY

A division of KMBL is Kotak Mahindra Asset Management Company. KMAMC began

conducting business in December 1998. Schemes are available from Kotak Mahindra
Mutual Fund for investors with various risk and return characteristics. The dedicated
gilt program it launched, which only invested in government securities, was the first of
its kind.
27

UNIT TRUST OF INDIA MUTUAL FUND

With the assistance of UTI Trustee Company Private Limited, UTI Asset Management
Company Private Limited, founded on January 24, 2003, runs the UTI Mutual Fund.
The AUM managed by UTI Asset Management Company is currently around Rs.
224279.12 crore (June 2022). Bank of Baroda, Punjab National Bank, State Bank of
India, and Life Insurance Corporation of India are the sponsors of UTI Mutual Fund.
Liquid Funds, Asset Management Funds, Index Funds, and Balanced Funds are among
UTI Mutual Fund's investment strategies.

RELIANCE MUTUAL FUND

In accordance with the Indian Trusts Act of 1882, Reliance Mutual Fund was created
as a trust. Reliance Capital Limited is the sponsor of RMF, while Reliance Capital
Trustee Co. Limited is the trustee. On June 30, 1995, it was registered as Reliance
Mutual Fund; on March 11, 2004, the name was changed. In order to contribute to the
capital market and give investors the chance to participate in a variety of securities,
Reliance Mutual Fund was established and has since launched a number of schemes.
Nippon India Mutual Fund has replaced Reliance Mutual Fund as its name. The change
in name came when Reliance Capital completed the sale of its 75% ownership in
Reliance Nippon Life Asset Management to Nippon Life Insurance of Japan.

STANDARD CHARTERED MUTUAL FUND / INFRASTRUCTURE

DEVELOPMENT FINANCE COMPANY.

On March 13, 2000, Standard Chartered Mutual Fund was established with support
from the bank. Standard Chartered Trustee Company Pvt. Ltd. is the trustee. On
December 20, 1999, Standard Chartered Asset Management Company Pvt. Ltd. was
established as an AMC with SEBI. Standard chartered mutual fund was purchased by
IDFC for $208 million USD in May 2008.

FRANKLIN TEMPLETON MUTUAL FUND

28

Franklin Templeton Investment Group is a California-based business with a $58656.54

billion global AUM (as on June 2022). Investors can purchase or sell mutual funds
online, by mail, or through their financial advisor. They provide open-end fund of funds
schemes, open-end sector equity schemes, open-end hybrid schemes, open-end tax
saving schemes, open-end income and liquid schemes, and open-end income schemes.

MORGAN STANLEY MUTUAL FUND

The market leader in securities, investment management, and credit services is Morgan
Stanley, a global provider of financial services. In 1975, Morgan Stanley Investment
Management was founded. It offers specialized asset management services and goods
to nonprofits, enterprises, governments, and pension funds. Additionally, high-net-
worth individuals and regular investors are now eligible for its services. Its AMC is
Morgan Stanley Mutual Fund, and its full name in India is Morgan Stanley Investment
Management Private Ltd. This is the first closed-end, diversified equities program
designed specifically for Indian retail investors who are interested in long-term capital
growth. All of Morgan Stanley Mutual Fund's assets were transferred to HDFC Asset
Management in 2014. Following that, SEBI deregistered it that same year.

ESCORT MUTUAL FUND / QUANT MUTUAL FUND

On April 15th, 1996, Escort Mutual Funds was established with Escorts Finance Ltd.
as its sponsor. Escorts Investments Trust Ltd. serves as the trustee company. Escorts
Asset Management Ltd. was the name under which its AMC was incorporated on
December 1st, 1995. With effect from April 13, 2018, Escorts Investment Trust Limited
has changed its name to Quant Capital Trustee Limited. With effect from July 4, 2018,
Escorts Mutual Fund has become Quant Mutual Fund.
29

TABLE 1: ASSET UNDER MANAGEMENT (AUM)

30

ALLIANCE CAPITAL MUTUAL FUND

Alliance Capital Management Corp. of Delaware (USA) served as the fund's sponsor
when it was established on December 30, 1994. Alliance Capital Asset Management
India Pvt. Ltd. and ACAM Trust Company Pvt. Ltd., both of which have their corporate
offices in Mumbai, are the trustees. Alliance Capital Mutual Fund was bought by Birla
Sun Life Asset Management on October 18, 2004.

CANARA ROBECO MUTUAL FUND

The second-oldest mutual fund in India is Canara Robeco Mutual Fund, which was
originally founded as Can bank Mutual Fund in December 1987. The mutual fund was
renamed Canara Robeco Mutual Fund as a result of a partnership between Canara Bank
and Robeco, which is now a division of the Japanese company ORIX Corporation.
Since that time, it has regularly had one of the fastest mutual fund AUM growth rates
in India.

LIC MUTUAL FUND

On June 19, 1989, the Life Insurance Corporation of India established LIC Mutual
Fund. In compliance with the Indian Trust Act of 1882, the LIC Mutual Fund was
established as a trust. The company officially opened for business on April 29, 1994.
The Investment Managers for the LIC Mutual Fund have been named by the Trustees
as Jeevan Bima Sahyog Asset Management Company Ltd.

AXIS MUTUAL FUND

An AMC in India is called Axis Mutual Fund. It was founded in 2009, and Mumbai
serves as its corporate headquarters. Equity funds, hybrid funds, debt funds, and other
forms of mutual fund schemes are among those made available by Axis Mutual Fund
for investing in India. Axis Mutual Fund launched its operations in 2009 with the launch
of Axis Equity Fund, its first equity program. Asset management firm Schroders
purchased a 25% stake in Axis Mutual Fund in April 2012. Axis Mutual Fund
31

introduced the Axis Nifty 100 index fund, an index fund based on the Nifty 100, in
September 2019. ESG fund was introduced by the corporation on January 22, 2020.

UNION MUTUAL FUND

Product development, sales and support marketing, and devoted coaching officers for
training the marketing staff are the major areas of focus for Union Mutual Fund. Union
KBC Mutual Fund was the previous name for Union Mutual Fund. Union Bank of India
and KBC Asset Management NV, based in Belgium, formed a cooperation to launch
the asset management firm. Union Bank of India controlled 51% of the partnership's
shares, and KBC Asset Management NV held the remaining portion. KBC Asset
Management announced its withdrawal from the joint venture in August 2016, at which
point Union Bank of India bought the company's remaining portion. As a result, Union
Bank now owns all of the stock in the mutual fund firm.
32

7. INDUSTRY PROFILE

Diagram 3: Industry Profile

INDUTRY
STRUCTURE
UTI PRIVATE
SECTOR MF's

PUBLIC

JV WITH
FOREIGN
FOREIGN
MF's
FUNDS

INDIAN
PRIVATE
SECTOR

7.1 STRUCTURE OF MUTUAL FUNDS IN INDIA

Diagram 4: Structure of Mutual fund in India

33

India, like other nations, has a legal framework that mutual funds must be established
under. Open-end and closed-end mutual funds are both governed by the same regulatory
framework in India, where all mutual funds are organized as unit trusts. Under a
common legislative framework, a mutual fund in India is permitted to issue both open-
end and close-end plans. The framework established by the SEBI (Mutual Fund)
Regulations, 1996, which mutual funds in India are supposed to adhere to.

The Fund Sponsor

According to SEBI Regulations, a sponsor is any individual who launches a mutual

fund either independently or in collaboration with another body corporate. Similar to a
company's promoter, a fund's sponsor registers the fund with SEBI. The sponsor will
establish the Trust and choose the trustee board. The SEBI Regulations have been
followed in making all of these appointments. According to the current SEBI
Regulations, in order to qualify as a sponsor, a person must contribute at least 40% of
the AMC's net worth and provide a strong financial track during a five-year period
previous to registration.

Mutual Funds as Trusts

In India, a mutual fund is established as a public trust in accordance with the Indian
Trust Act of 1882. By purchasing units issued by various trust-established schemes as
proof of their beneficial interest in the fund, investors are invited to contribute their
money to the common pool. The Trustee is the only party with legal authority over the
Fund or Trust; as a result, the Trustees are responsible for any actions relating to the
Trust itself.

Trustees

The Trust may be managed by a Board of Trustees, a group of people, or a trust

corporation, a business entity. Most of the funds in India are managed by the Board of
Trustees. The Trust is established through the execution of a Trust Deed by the Fund
Sponsor on behalf of the trustees. They are primarily responsible for looking after the
34

unit holder's money and assets. They make sure that AMC runs its business in a
professional manner.

The trustees' right

1) appoint the AMC with SEBI's prior consent

2) Accept each of the AMC's proposed plans.
3) possess the right to ask the AMC for whatever information they deem essential
regarding the functioning of the different schemes they supervise.

Obligations of the AMC and its Directors

They must ensure that:

1. Investment of funds is in accordance with SEBI Regulations and the Trust

Deed.
2. Take responsibility for the act of its employees and others whose services it
has procured
3. Do not undertake any other activity conflicting with managing the fund

Asset Management Company

Under the direction of the Board, an Asset Management Company (AMC) serves as the
trust's investment manager.

Transfer Agents

The mutual fund's units are issued and redeemed by transfer agents, who also perform
other related tasks like preparing transfer documentation and maintaining investor
records. A fund may decide to carry out this function internally or through a third-party
transfer agent.
35

Distributors

Distributors or brokers are typically chosen by AMCs to sell units on behalf of the fund.
Some funds mandate that these brokers handle all transactions.

Bankers

A fund's activities included dealing with money continuously, especially in relation to

purchasing and selling units, paying for investments made, receiving the earnings from
sales of investments, and paying its debts related to operational expenses. Therefore, a
fund's banker is essential to its financial transactions.

Custodian and Depository

The custodian is chosen by the Board of Trustees to oversee the physical delivery of
securities, their final safekeeping, or their participation in the clearing system through
authorized depository firms.
36

7.2. ASSOCIATION OF MUTUAL FUNDS IN INDIA

A requirement for an Indian mutual fund association to operate as a non-profit

organization was created by the rise of mutual fund players in India. On August 22,
1995, the Association of Mutual Funds in India (AMFI) was officially established.

All Asset Management Companies (AMCs) that have registered with SEBI are under
the umbrella of AMFI. All AMCs that have introduced mutual fund schemes up to this
point are its members. It operates under the direction and rules set forth by its board of
directors.

The Indian Mutual Fund Industry has been reduced down to a professional and healthy
market with ethical lines strengthening and sustaining standards thanks to the
Association of Mutual Funds India. It adheres to the tenet that mutual funds' and their
unit holders' interests should be both protected and promoted.

THE OBJECTIVES OF ASSOCIATION OF MUTUAL FUNDS IN INDIA:

Working with 30 AMCs that are officially registered in India is the Association of
Mutual Funds of India. It has several clearly stated goals that contrast with the directives
of its board of directors. The following are the objectives:

• In all facets of the business, the Indian Mutual Fund Association upholds the
highest moral and professional standards.
• Additionally, it urges members and other participants in asset management
and mutual fund activities to uphold the highest standards of ethical conduct
and business conduct.

The following organizations are also covered by this association's code of conduct and
are anyway related to or participating in the capital markets and financial services
industry:

• It builds a group of skilled and knowledgeable Agent distributors. It

implements a training and certification program for all intermediaries and
other industry participants.
37

• On issues pertaining to the mutual fund industry, the Association of Mutual

Fund in India does represent the Government of India, the Reserve Bank of
India, and other associated entities.
• In the mutual fund sector, AMFI cooperates with SEBI and operates in
accordance with its rules.
• To encourage a proper knowledge of the idea and operation of mutual funds,
AMFI runs investor awareness campaigns around the country.
• The association of mutual funds of India, last but not least, also disseminates
information about the mutual fund industry and conducts studies and research
either independently or in collaboration with other organizations.
38

7.3. REGULATORY AUTHORITIES

In order to safeguard investors' interests, SEBI develops rules and controls mutual
funds. It announced regulations in 1993 (which were completely changed in 1996) and
periodically releases guidelines. These Regulations apply to MF that are either
sponsored by public or private sector entities, including those that are marketed by
foreign companies. The funds are managed by an Asset Management Company (AMC)
that has received SEBI approval and invests in a variety of assets. Securities from a
number of the fund's schemes are kept in the custody of a custodian that is registered
with SEBI.

Two-thirds of the trustee company's directors or board of trustees must be independent,

per SEBI regulations.

Investors in mutual fund units are reassured by the Association of Mutual Funds in
India (AMFI) that the mutual funds operate within a rigid regulatory framework. Its
goal is to make the mutual fund business more widely known.

In a number of different areas, including valuation, disclosure, and transparency, among

others, AMFI is also working to improve professional standards and promote best
practices.
39

7.4. RISK ASSOCIATED WITH MUTUAL FUNDS

Market Risk

One is at risk of losing their principal if they take on market risk. Most likely, changes
in a company's financial situation, earnings, or the effects of an economic downturn on
the company will have an impact on how much a stock's market value changes. Debt
funds are also susceptible to market risk. Bond and government security prices alter in
response to changes in interest rates. Instead of placing all of your money in one or two
equities, one can reduce market risk by diversifying among a number of other products.
Diversification reduces risks. As a result, another asset class may be less affected when
market or other events negatively impact one asset class. Mutual funds are the best way
to invest because they put money into a variety of businesses.

Credit Risk

The credit risk you face is based on a company's ability to service its debt using its cash
flows. Independent rating organizations that grade businesses and their paper, like
CRISIL, quantify this credit risk. A rating of "AAA" is the safest while a grade of "D"
indicates poor credit quality. An appropriately diversified portfolio could reduce this
risk.

Inflation Risk

The decrease of purchasing power over time is referred to as inflation. Many times,
investors make cautious choices in order to protect their capital, but as a result, they
end up with a sum of money that is less valuable than the principal at the time of the
investment. This risk could be reduced with a well-diversified portfolio that includes
some investments in stocks.

Interest Rate Risk

Interest rates are challenging to anticipate in a free-market economy, but not

impossible. Bond and equity values are both impacted by changes in interest rates. Bond
prices will decrease if interest rates increase and vice versa. In an environment of rising
40

interest rates, equity may also suffer. Having a well-diversified portfolio could reduce
this risk.

Political Risk

Political and governmental decisions can alter the investment environment. They have
the power to either improve the atmosphere for investment or the opposite.

Liquidity Risk

When it becomes difficult to sell the securities one has bought, liquidity risk develops.
Diversification, a staggered maturity schedule, and internal risk controls that Favour
the acquisition of liquid securities can all help to reduce it. It only means that you must
diversify your investments by using a variety of securities (stocks, bonds, money
market instruments, real estate, fixed deposits etc.). This type of diversification may
increase the stability of your returns. For instance, during one period of time, bonds and
money market instruments may outperform equities, but their performance may be
sufficient to counteract the impact of a decline in the equity markets.

Manager Risk

This risk derives from the potential for the investment adviser of an actively managed
mutual fund to be ineffective in carrying out the fund's investment plan, which would
lead to the failure of the stated objectives.

Industry Risk

This risk derives from the potential for a cluster of companies in a single industry to
lose value as a result of trends in that sector.

Exchange risk

Many businesses have revenues that are denominated in foreign currencies and may
also have assets or expenses that are in foreign currencies. Therefore, change rates may
41

have a favorable or unfavorable effect on businesses, which would then have an impact
on the fund's investment.

Investment risks

Investments made through sectoral fund schemes will mostly be made in the stock of a
few specialized companies operating in the relevant industries. Because of this, the
NAV of the schemes may be more volatile than a stock portfolio with a wider range of
holdings because it is tied to the equity performance of such companies.
42

7.5. EMERGING ISSUES IN MUTUAL FUND

Rating of Mutual Fund Schemes:

The standard for evaluating the performance of mutual funds has been total returns. As
a result, CRISIL has created a composite performance ranking that evaluates each of
the open-ended schemes' performance. Only those schemes that are at least two years
old and fully disclose their portfolios are subject to this measure, according to CRISIL.

Changes in Mutual Fund due to the Advent of Net:

According to SEBI regulations, administrative costs for bond funds and equity funds
may not exceed 2.25 percent and 2.5 percent, respectively. If trading is done online,
Mutual Funds might reduce their administrative costs to 0.75 percent, which would
increase the return potential of their schemes. Through the Internet, mutual funds could
offer their investors greater guidance or services.

New Norms on NPA Classification:

Important suggestions have been made by the Malegan committee regarding the
classification of NPAs in debt securities and the pricing of liquid securities in mutual
fund schemes. If the principal or interest is not received for six months, the committee
has suggested that debt instruments owned by mutual funds in their portfolio be classed
as NPA. The mutual funds will be required to inform unit holders of NPAs every six
months.

INFLUENCE OF TECHNOLOGY:

Most mutual funds have their own websites that offer basic details about the programs.
Mutual funds have started to send their dividend payments and redemption revenues
using electronic money transfers. However, investor servicing is where technology is
most clearly apparent. Therefore, technology can close the knowledge gap between
investors and product positioning.
43

PRODUCT INNOVATION:

In the Indian mutual fund sector, product innovation is a new trend. The majority of
mutual fund products fall into one of three categories: cash funds, income funds, or
equity funds. A debt fund that will invest mostly in variable rate bonds was introduced
by Templeton India.

INDICES FOR MUTUAL FUNDS:

Four new indices for gilt funds have been released by the AMFI, along with a second
set of indices for balanced funds, bond funds, monthly income plans, and liquid funds.
Mutual funds must use the indices, which were created and will be maintained by ICICI
Securities and Finance Companies and CRISIL.com, respectively, in order to compare
performance.

FUNDS OF FUNDS:

A new kind of funds termed "funds of funds," which would invest in other mutual fund
schemes, may soon be allowed by the SEBI for mutual funds to flog. Through these
programs, individuals will be able to invest in various mutual fund programs.
44

8. REVIEW OF LITERATURE

The necessity and justification for the research project are established by reviewing
prior studies, and the research methodology describes how the research is conducted.
A variety of mutual fund-related topics have been covered in literature written by
academics and professionals. To evaluate and analyze the financial success of mutual
fund schemes as well as the performance of funds managers, numerous technical and
quantitative indicators have been created. These metrics offer ways to compare a
portfolio's risk-adjusted returns to those of benchmarks or comparable portfolios.

Abey (2017) - The many factors influencing investment choice in mutual fund plans
were discussed in the study. It was discovered that the investing inclination is
unaffected by age or instructional capacity. The study demonstrates that making short-
term investments is preferable to waiting for great yield at the expense of significant
risk. The article supported investing in mutual funds for improved improvement.
Investors prefer retirement compensation plans based on their assignment or pay grade.
By providing pertinent financial data, the professional management framework also
influences mutual fund investment decisions as well as investment portfolios.

Banerjee et al (2017) - The various factors impacting people's investment decisions are
taken into account in this research. It has been determined that investors in the current
investment roadways have a solid educational and professional background. Only 10 to
25 percent of total investment funds are put in mutual funds, and they also expect a 15
to 20 percent return on their investment. People in their 30s to 50s are interested in
specialized investment design. Young investors are adventurous. Plans with open
finishes are preferred over those with close finishes. Along with the fund, organization
reputation and the track record of the fund managers also play a key role in determining
investment decisions. Market-based investments with typical compensation also have
an effect on investments.

Dwivedi (2016) - The influence of the financial crisis of 2008 on the mutual fund
investment market will be examined in this article. It was discovered that there are
basically five free factors that affect an investor's decision regarding whether to
45

continue investing in mutual funds or not, including the investor's pay, the investment's
time horizon, the investor's risk tolerance, past returns, and the quantity and quality of
data. The investigation discovered that the utility hypothesis led big league salary
investors to invest in mutual funds. According to their point of view, those investors
moved on to mutual funds since they didn't anticipate a future short-term liquidity crisis.
Risk-averse investors chose mutual funds out of fear of bad luck due to excessive risk
in the capital market. The past performance of mutual funds has an additional impact
on investors since extremely satisfied investors continue to invest in mutual funds
because of their confidence, while less satisfied investors will quickly withdraw their
money. Investors who have clear information about the types, fund administrators, load
structures, general financial designs, and advantages of mutual funds will move forward
in the mutual fund sector.

Margi Choksi, Dr. Priyanka Bhatt (2020) - The performance of 15 open-ended, large-
cap equities mutual fund schemes was examined for the four years beginning in January
2015 and ending in December 2019 in this study. The returns from the fund schemes
have been calculated using the monthly opening and closing NAV of various schemes.
The past performance of the chosen mutual fund schemes was examined in order to
assess performance using the Sharpe, Treynor, and Jensen ratios to measure results. The
findings will provide current and potential future investors with useful information for
making informed investment and financial decisions. Positive returns have been
represented by all of the schemes. Further, it was observed that the performance of the
schemes Mirae Asset Large Cap Fund, Edelweiss Large Cap Fund, and Kotak Blue-
chip Fund did not meet expectations. This was due to a lack of diversification.
Additionally, all of the mutual fund schemes that were chosen had positive Sharpe ratio
results, indicating that they had performed as well as or better than risk-free rates.

Equity funds are performing better than debt funds, according to Srivastava S and
Malhotra S (2015) in their work "A Paradigm Shift in Risk Measuring Tools of Mutual
Fund Industry" from the International Journal of Informative & Futuristic Research.
Risk and return were discovered to have an excellent linear relationship. Calmar ratio
and safety-first ratio are two tools that fund managers might use to assess the risk of
46

particular investments. No fund is risk-free, so investors should diversify their risk by

investing in equities and equity-related securities.

The study "A study on Investor's perception towards mutual fund investment" by
Sehdev R and Ranjan P from Scholars Journal of Economics, Business and
Management (2014). The advantages and transparency, returns, redemption period,
liquidity, and institutional investor activity are the driving forces behind investors'
preference for mutual funds as an investment alternative. People rely more on the
internet than any other media outlet for information on mutual funds.
47

9. OBJECTIVES OF THE STUDY

The performance evaluation of a few mutual fund schemes from among the many
mutual funds that operate in the nation is the main subject of the current study. The
following are the study's particular goals:

1. to assess mutual fund performance, specifically with the Sharpe model in

mind.
2. to identify the scheme that is outperforming or underperforming by comparing
the performance of mutual funds to a benchmark index.
48

10. RESEARCH METHODOLOGY

Numerous studies looking at the performance of mutual funds have shown that this is
something that researchers, academics, fund managers, and financial experts are
concerned about. These studies are the subject of criticism on a number of reasons,
including the sample size, the length of the study, and the use of a particular scheme.

This work is a unique attempt to make a contribution to the area and may pave the way
for more extensive research on the several relevant facets of portfolio management
techniques. Mutual funds are using a variety of tactics to attain their investment goals.
The secondary data form the sole basis of the study. The study's scope is constrained to
a 4-year time frame (June 2018 to June 2022). Ten mutual fund schemes that were
selected at random make up the sample. The fact that NAVs have been taken on a
monthly basis must be emphasized. These 10 mutual fund schemes' NAVs and returns
have been noted using information from www.amfindia.com. Each program was
assessed in relation to the BSE Sensex, which served as a stand-in for the market index.

Return alone shouldn't be used to judge the success of a mutual fund scheme;
performance should also take into account the level of risk taken and the diversification
of the funds. The performance of a portfolio as a whole can be determined by the excess
of portfolio return over risk-free return. Given that the average yield during the study
period was 5%, the interest rate on Treasury Bills was regarded as a risk-free return.
Calculations were performed using Microsoft Excel.
49

10.1. SOURCE OF DATA

The majority of the information used in this study was gathered from secondary
sources, including books, journals, magazines, and numerous websites, including
www.bseindia.com, www.amfiindia.com, www.mutualfundsindia.com,
www.sebi.gov.in, and www.moneycontrol.com.

NAV was collected from a variety of sources:

1. SEBI annual filings,

2. Amfindia.com
3. mutualfundsindia.com
4. Annual Reports of Companies
50

10.2. LIMITATIONS OF THE STUDY

The time frame for mutual fund schemes is June 2018 to June 2022. As a result, it may
not be possible to extrapolate the study's results to other mutual fund schemes or to the
same schemes over different time periods.

A scheme's success can be assessed based on a number of factors; in this case, the
average return of the schemes and Sharpe's ratio have been computed to compare the
various schemes.
51

11. ANALYSIS & INTERPRETATION

NET ASSET VALUE

Instead of taking into account changes in the market price, the portfolio return based on
NAV takes into account changes in the net asset value of units of mutual funds
throughout the course of the calculation period.

The following formula is used to determine the return on a portfolio (Rn):

(𝑁𝐴𝑉𝑡   −  𝑁𝐴𝑉𝑡 − 1 ) 𝐷𝑡   +  𝐶𝑡

𝑅𝑝   =  
𝑁𝐴𝑉𝑡 − 1

Were,

𝑅𝑝 = Portfolio return

𝑁𝐴𝑉𝑡 = Net asset value in time period t

𝑁𝐴𝑉𝑡 − 1 = Net asset value in the period t-l

𝐷𝑡 = dividend in the form of bonus distributed in the period t

𝐶𝑡 = cash dividend distributed in the time period t

Since the beginning of the research period, or from June 2018 through June 2022,
annual returns have been estimated for every mutual fund plan. The portfolio yields 𝑅𝑝
was calculated monthly in the way outlined above. The geometric mean of monthly
NAV-based returns was used to calculate the holding period return. The geometric
mean formula has been applied as follows:

𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟 𝑟𝑒𝑡𝑢𝑟𝑛(𝐻𝑃𝑅)  =  [{𝑅𝑝𝑡−1 + 𝑅𝑝𝑡−2 … … … . . 𝑅𝑝𝑡−𝑛 }]

The benchmark portfolio return is determined using the same methodology. This is
done in order to analyze the performance of particular mutual fund schemes using tools
for return analysis, risk analysis, and a particular model for performance analysis.

SHARPE’S MODEL

The Sharpe ratio, which measures the fund's returns relative to the risk-free rate of
return and the total risk attached to it, is used in this model to assess a fund's
performance. Investors are more worried about the fund's overall risk, according to
52

Sharpe. As a result, the model assesses investments based on reward per unit of total
risk. It is possible to write it symbolically as:

(𝑅𝑝   −  𝑅𝑓 )
𝑆𝑝   =  
𝜎𝑝

𝑆𝑝 = Sharpe’s index

𝑅𝑝 = Portfolio average return

𝑅𝑓 = Risk free rate of return

𝜎𝑝 = Standard deviation of the return

The benchmark in this case is the proportion of market portfolio returns over the risk-
free rate of return divided by the standard deviation of the market portfolio, and it may
be computed as follows:

(𝑅𝑚   −  𝑅𝑓 )
𝑆𝑚   =  
𝜎𝑚

𝑆𝑚 = Sharpe index of benchmark portfolio

𝑅𝑚 = Market average return

𝑅𝑓 = Risk free rate of return

𝜎𝑚 = Standard deviation of market

Low and negative ratios are an indication of poor performance, whilst high and positive
ratios demonstrate superior risk-adjusted performance of a fund.

Ten mutual funds were selected for this investigation. Table 1.1 displays the market
return on the BSE SENSEX and the year-by-year return on sample schemes for a period
of 4 years (June 2018–March 2022). The average return, standard deviation, and
Sharpe's Index for the chosen sample schemes are displayed in table 1.2. Market risk
53

as measured by standard deviation is 0.147. The outcome demonstrates that, with the
exception of Birla Sun Life MNC Fund, all of the chosen mutual fund schemes had
lower standard deviations than market indices. It means that, with the exception of Birla
Sun Life MNC Fund, these plans are less hazardous than market portfolio.

While HDFC Liquid Fund, with a return deviation of 0.147, shows the lowest variation.
All of the chosen mutual fund schemes have positive Sharpe Index values, which show
that the fund has performed better when risk is taken into account. Since HDFC Mutual
Fund's Sharpe's Index is greater than the others', it has outperformed other funds.
Accordingly, it appears from the preponderance of positive indicators that the funds
were able to accurately predict future security prices to cover their research,
management, and commission costs. In other words, there are a lot of funds where the
managers have been able to add value to the portfolio over the returns of any random
selection of securities.
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TABLE 2: YEARLY RETURN OF MUTUAL FUND SCHEMES

Scheme Name 2018- 2019- 2020- 2021-

19 20 21 22
Birla Sun Life MNC Fund 0.167 0.131 0.041 0.310

Franklin India Blue chip 0.136 -0.029 0.058 0.167

Fund
HDFC Liquid Fund 0.068 0.101 0.103 0.113

Kotak Gilt 0.062 0.098 0.144 -0.006

ICICI Prudential Balanced 0.131 0.055 0.124 0.234

Fund
Tata Ethical Fund 0.066 0.013 0.085 0.256

Axis Long Term Equity Fund 0.148 0.009 0.132 0.387

Reliance Equity 0.153 0.021 0.133 0.226

Opportunities Fund
SBI MAGNUM GILT FUND 0.057 0.071 0.135 0.059

UTI - nifty Index Fund 0.110 -0.024 0.082 0.195

BSE Sensex -0.126 0.282 0.019 0.059

55

TABLE 3: AVERAGE RETURN, STANDARD DEVIATION AND SHARPE'S

INDEX OF THE SAMPLE SCHEMES

Scheme Name Avg. Std. Sharpe's

Return Deviation Index
Birla Sun Life MNC Fund 0.254 0.534 0.957

Franklin India Blue chip 0.083 0.077 0.319

Fund
HDFC Liquid Fund 0.096 0.017 2.290

Kotak Gilt 0.217 0.153 0.321

ICICI Prudential Balanced 0.136 0.064 1.075

Fund
Tata Ethical Fund 0.105 0.091 0.455

Axis Long Term Equity 0.169 0.137 0.721

Fund
Reliance Equity 0.180 0.087 0.913
Opportunities Fund
SBI MAGNUM GILT 0.080 0.032 0.654
FUND
UTI - nifty Index Fund 0.091 0.078 0.125

BSE Sensex 0.045 0.147 -0.054

56

CHART 1: RETURN, STANDARD DEVIATON AND SHARPE INDEX OF

SAMPLE MUTUAL FUND SCHEMES
57

12. CONCLUSION

The primary market's future is expanding quickly. Given this, there are numerous
potentials for mutual fund companies to take advantage of the lucrative opportunities
in the Indian market.

Due to their competent management, diversification, easy administration, return

potential, cheap cost, and liquidity, mutual funds are popular among investors.

I learned the risk return relationship between the defined schemes by comparing the
aforementioned plans. Therefore, investors should research the relationship between
risk and return before participating in any mutual fund schemes. And only the investor
should use Mutual Fund schemes if the risk and return are compatible with their
planning.

Based on the analysis, it is possible to say that the majority of the mutual fund
schemes chosen during the study period are doing well and will go on to play a very
important and significant part in the capital market in the future.
58

13. REFERENCES

1. Modern Investment and Security Analysis, McGraw Hill Book Company,

International Edition, New York, 1987. Fuller, Russell J. and Fazzel Jr., James
L.
2. Security Analysis and Portfolio Management, by Donald E. Fisher and Ronald
J. Jorden, Prentice Hall of India Pvt. Ltd., New Delhi, 2009.
3. Financial Management, Vikas Publishing Houses Pvt. Ltd., New Delhi, I.M.
Pandey, 2010.
4. The Investment Game: How to Win by Chandra Prasanna, Tata McGraw Hill
Publishing Company Ltd., New Delhi, 2013.
5. Financial Institutions and Market Structure, Growth and Innovations, Tata
McGraw Hill Publication, New Delhi, 2004. Bhole, L. M.
6. Financial Express, Vol. XIV, No. 4, Chander Ramesh, "Performance Appraisal
of Mutual Funds in India," 2002.
7. Performance Analysis of Mutual Funds in India by M. S. Narsimhan and
Vijayalakshmi S. was published in the March 2001 issue of Finance India, pp.
155–174.
8. Mutual Fund Management and Working, by Lalit K. Bansal, Deep & Deep
Publications, New Delhi, 1996.
9. D. Agrawal (2006). Prabandhan, 179–185, Measuring Performance of Indian
Mutual Funds
10. S P Madhumathi (2005). Characteristics and performance assessment of a few
Indian mutual funds.
11. http://www.amfiindia.com
12. http://www.bseindia.com
13. http://www.rbi.org.in
14. http://www.mutualfundsindia.com