TABLE OF CONTENT

CHAPTER 1: INTRODUCTION

• What are Mutual fund

• How a Mutual fund works

• Why invest in Mutual funds

• Meaning of Mutual Funds

• Advantages of Mutual funds

• Disadvantages of Mutual funds

• History of Mutual funds in India

• Types of Mutual funds Schemes

• Risk factors

• Objective of study

• Statement of study

• Scope of the study

CHAPTER 2: REVIEW OF LITERATURE

• Review of Literature

CHAPTER 3: RESEARCH METHODOLOGY

• Performance evaluation technique

• Correlation

CHAPTER 4 : DATA ANALYSIS AND INTERPRETATION

• Data analysis and interpretation

CHAPTER 5: CONCLUSION

• Conclusion

• References
 CHAPTER 1

INTRODUCTION
 INTRODUCTION TO MUTUAL FUNDS

WHAT ARE MUTUAL FUNDS?

A mutual fund is a collective investment vehicle that collects & pools money from a number of investors and invests

the same in equities, bonds, government securities, money market instruments The money collected in mutual fund

scheme is invested by professional fund managers in stocks and bonds etc. in line with a scheme’s investment

objective. The income / gains generated from this collective investment scheme are distributed proportionately

amongst the investors, after deducting applicable expenses and levies, by calculating a scheme’s “Net Asset Value” or

NAV. In return, mutual fund charges a small fee. In short, mutual fund is a collective pool of money contributed by

several investors and managed by a professional Fund Manager. Mutual Funds in India are established in the form of

a Trust under Indian Trust Act, 1882, in accordance with SEBI (Mutual Funds) Regulations, 1996.The fees and

expenses charged by the mutual funds to manage a scheme are regulated and are subject to the limits specified by

SEBI.

HOW A MUTUAL FUND WORKS?

One should avoid the temptation to review the fund's performance each time the market falls or jumps up

significantly. For an actively-managed equity scheme, one must have patience and allow reasonable time - between

18 and 24 months - for the fund to generate returns in the portfolio. When you invest in a mutual fund, you are

pooling your money with many other investors. Mutual fund issues “Units” against the amount invested at the

prevailing NAV. Returns from a mutual fund may include income distributions to investors out of dividends, interest,

capital gains or other income earned by the mutual fund. You can also have capital gains (or losses) if you sell the

mutual fund units for more (or less) than the amount you invested. Mutual funds are ideal for investors who –

Lack the knowledge or skill / experience of investing in stock markets directly. Want to grow their wealth, but do not

have the inclination or time to research the stock market .Wish to invest only small amounts.
WHY INVEST IN MUTUAL FUNDS?

As investment goals vary from person to person – post-retirement expenses, money for children’s education or

marriage, house purchase, etc. – the investment products required to achieve these goals too vary. Mutual funds

provide certain distinct advantages over investing in individual securities. Mutual funds offer multiple choices for

investment across equity shares, corporate bonds, government securities, and money market instruments, providing

an excellent avenue for retail investors to participate and benefit from the uptrends in capital markets. The main

advantages are that you can invest in a variety of securities for a relatively low cost and leave the investment

decisions to a professional manager.

Meaning of mutual funds

A mutual fund is a pool of money managed by a professional Fund Manager.

It is a trust that collects money from a number of investors who share a common investment objective and invests the

same in equities, bonds, money market instruments and/or other securities. And the income / gains generated from

this collective investment is distributed proportionately amongst the investors after deducting applicable expenses and

levies, by calculating a scheme’s “Net Asset Value” or NAV. Simply put, the money pooled in by a large number of

investors is what makes up a Mutual Fund. Here’s a simple way to understand the concept of a Mutual Fund Unit.

Let’s say that there is a box of 12 chocolates costing ₹40. Four friends decide to buy the same, but they have only ₹10

each and the shopkeeper only sells by the box. So the friends then decide to pool in ₹10 each and buy the box of 12

chocolates. Now based on their contribution, they each receive 3 chocolates or 3 units, if equated with Mutual Funds.

And how do you calculate the cost of one unit? Simply divide the total amount with the total number of chocolates:

40/12 = 3.33. So if you were to multiply the number of units (3) with the cost per unit (3.33), you get the initial

investment of ₹10. This results in each friend being a unit holder in the box of chocolates that is collectively owned

by all of them, with each person being a part owner of the box. Next, let us understand what is “Net Asset Value” or

NAV. Just like an equity share has a traded price, a mutual fund unit has Net Asset Value per Unit. The NAV is the

combined market value of the shares, bonds and securities held by a fund on any particular day (as reduced by

permitted expenses and charges). NAV per Unit represents the market value of all the Units in a mutual fund scheme
on a given day, net of all expenses and liabilities plus income accrued, divided by the outstanding number of Units in

the scheme. Mutual funds are ideal for investors who either lack large sums for investment, or for those who neither

have the inclination nor the time to research the market, yet want to grow their wealth. The money collected in mutual

funds is invested by professional fund managers in line with the scheme’s stated objective. In return, the fund house

charges a small fee which is deducted from the investment. The fees charged by mutual funds are regulated and are

subject to certain limits specified by the Securities and Exchange Board of India (SEBI).

India has one of the highest savings rates globally. This penchant for wealth creation makes it necessary for Indian

investors to look beyond the traditionally favored bank FDs and gold towards mutual funds. However, lack of

awareness has made mutual funds a less preferred investment avenue. Mutual funds offer multiple product choices

for investment across the financial spectrum. As investment goals vary – post-retirement expenses, money for

children’s education or marriage, house purchase, etc. – the products required to achieve these goals vary too. The

Indian mutual fund industry offers a plethora of schemes and caters to all types of investor needs.

Mutual funds offer an excellent avenue for retail investors to participate and benefit from the uptrends in capital

markets. While investing in mutual funds can be beneficial, selecting the right fund can be challenging. Hence,

investors should do proper due diligence of the fund and take into consideration the risk-return trade-off and time

horizon or consult a professional investment adviser. Further, in order to reap maximum benefit from mutual fund

investments, it is important for investors to diversify across different categories of funds such as equity, debt and

gold. While investors of all categories can invest in securities market on their own, a mutual fund is a better choice

for the only reason that all benefits come in a package.

Advantages of mutual funds

Liquidity

Unless you opt for close-ended mutual funds, it is relatively easier to buy and exit a mutual fund scheme. You can sell

your open-ended equity mutual fund units when the stock market is high and make a profit. Do keep an eye on the

exit load and expense ratio of the mutual fund.

Diversification
Equity mutual funds have their share of risks as their performance is based on the stock market movements. Hence,

the fund manager spreads your investment across stocks of companies across various industries and different sectors

called diversification. In this way, when one asset class doesn’t perform, the other sectors can compensate to avoid

loss for investors.

Expert Management

A mutual fund is good for investors who don’t have the time or skills to do the research and asset allocation. A fund

manager takes care of it all and makes decisions on what to do with your investment. The fund manager and the team

of researchers decide on the appropriate securities such as equity, debt or a mix of both depending on the investment

objectives of the fund. Moreover, the fund manager also decides on how long to hold the securities.

Your fund manager’s reputation and track record in fund management should be an essential criterion for you to

choose a mutual fund. The expense ratio (which cannot be more than 2.25% annualized of the daily net assets as per

SEBI) includes the fees of the fund manager.

Less cost for bulk transactions

You must have noticed how price drops with the purchase of increased volumes. For instance, if a 100g toothpaste

costs Rs 10, you might get a 500g pack for say, Rs 40. The same logic applies to mutual fund units as well. If you buy

multiple mutual fund units at a time, the processing fees and other commission charges will be lesser as compared to

buying one mutual fund unit.

Invest in smaller denominations

By investing in smaller denominations of as low as Rs 500 per SIP instalment, you can stagger your investments in

mutual funds over some time. This reduces the average cost of investment – you spread your investment across stock

market lows and highs. Regular (monthly or quarterly) investments, as opposed to lumpsum investments, give you

the benefit of rupee cost averaging.

Suits your financial goals

There are several types of mutual funds available in India catering to investors across all walks of life. No matter

what your income is, you must make it a habit to set aside some amount (however small) towards investments. It is
easy to find a mutual fund that matches your income, time horizon, investment goals and risk appetite.

Cost-efficiency

You can check the expense ratio of different mutual funds and choose the one with the lowest expense ratio. The

expense ratio is the fee for managing your mutual fund. You can start with one mutual fund and slowly diversify

across funds to build your portfolio. It is easier to choose from handpicked funds that match your investment

objectives and risk tolerance. Tracking mutual funds will be a hassle-free process. The fund manager, with the help of

his team, will decide when, where and how to invest in securities according to the investment objectives. In short,

their job is to beat the benchmark index and deliver maximum returns to investors, consistently.

Tax-efficiency You can invest in tax-saving mutual funds called ELSS which qualifies for tax deduction up to Rs 1.5

lakh per annum under Section 80C of the Income Tax Act, 1961. Though a 10% tax on Long-Term Capital Gains

(LTCG) above Rs 1 lakh is applicable, they have consistently delivered higher returns than other tax-saving

instruments in recent years

Automated payments

It is common to delay SIPs or postpone investments due to some reason. You can opt for paperless automation with

your fund house or agent by submitting a SIP mandate, where you instruct your bank account to automatically deduct

SIP amounts when it’s due. Timely email and SMS notifications make sure you stay on track with mutual fund

investments.

Safety

There is a general notion that mutual funds are not as safe as bank products. This is a myth as fund houses are strictly

under the purview of statutory government bodies like SEBI and AMFI. One can easily verify the credentials of the

fund house and the asset manager from SEBI. They also have an impartial grievance redressal platform that works in

the interest of investors.

Systematic or one-time investment

You can plan your mutual fund investment as per your budget and convenience. For instance, starting a SIP

(Systematic Investment Plan) on a monthly or quarterly basis in an equity fund suits investors with less money. On
the other hand, if you have a surplus amount, go for a one-time lumpsum investment in debt funds.

Disadvantages of Mutual Funds

Costs of managing the mutual fund

The salary of the market analysts and fund manager comes from the investors along with the operational costs of the

fund. Total fund management charges are one of the first parameters to consider when choosing a mutual fund.

Higher management fees do not guarantee better fund performance.

Exit Load

You have exit load as fees charged by AMCs when exiting a mutual fund. It discourages investors from redeeming

investments for some time. This indirectly works like a lock-in period that fund houses use to maintain stability of

funds. It also helps the fund manager garner the required funds to purchase the appropriate securities at the right price

and time.

Dilution

While diversification averages your risks of loss, it can also dilute your profits. Hence, you should not invest in many

mutual funds at a time. As you have just read above, the benefits of mutual funds can undoubtedly override the

disadvantages, if you make informed choices. However, investors may not have the time, knowledge or patience to

research and analyze different mutual funds. Investing with Clear Tax could solve this problem as we have already

done the homework for you by handpicking the top-rated funds from the best fund houses in the country.

HISTORY OF MUTUAL FUNDS IN INDIA

A strong financial market with broad participation is essential for a developed economy. With this broad objective

India’s first mutual fund was establishment in 1963, namely, Unit Trust of India (UTI), at the initiative of the

Government of India and Reserve Bank of India ‘with a view to encouraging saving and investment and participation

in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal

of securities. In the last few years, the MF Industry has grown significantly. The history of Mutual Funds in India can

be broadly divided into five distinct phases as follows:

FIRST PHASE [1964-1987]

The Mutual Fund industry in India started in 1963 with formation of UTI in 1963 by an Act of Parliament and

functioned under the Regulatory and administrative control of the Reserve Bank of India (RBI). In 1978, UTI was

de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and

administrative control in place of RBI. Unit Scheme 1964 (US ’64) was the first scheme launched by UTI. At the end

of 1988, UTI had ₹ 6,700 crores of Assets Under Management (AUM).

SECOND PHASE [1987-1993] ENTRY OF PUBLIC SECTOR MUTUAL FUNDS

The year 1987 marked the entry of public sector mutual funds set up by Public Sector banks and Life Insurance

Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first

‘non-UTI’ mutual fund established in June 1987, followed by Canbank Mutual Fund (Dec. 1987), Punjab National

Bank Mutual Fund (Aug. 1989), Indian Bank Mutual Fund (Nov 1989), Bank of India (Jun 1990), Bank of Baroda

Mutual Fund (Oct. 1992). LIC established its mutual fund in June 1989, while GIC had set up its mutual fund in

December 1990. At the end of 1993, the MF industry had assets under management of ₹47,004 crores.

THIRD PHASE [1993 -2003] ENTRY OF PRIVATE SECTOR MUTUAL FUNDS

• The Indian securities market gained greater importance with the establishment of SEBI in April 1992 to protect

the interests of the investors in securities market and to promote the development of, and to regulate, the

securities market.

• In the year 1993, the first set of SEBI Mutual Fund Regulations came into being for all mutual funds, except

UTI. The erstwhile Kothari Pioneer (now merged with Franklin Templeton MF) was the first private sector MF

registered in July 1993. With the entry of private sector funds in 1993, a new era began in the Indian MF

industry, giving the Indian investors a wider choice of MF products. The initial SEBI MF Regulations were

revised and replaced in 1996 with a comprehensive set of regulations, viz., SEBI (Mutual Fund) Regulations,

1996 which is currently applicable.

• The number of MFs increased over the years, with many foreign sponsors setting up mutual funds in India.

Also, the MF industry witnessed several mergers and acquisitions during this phase. As at the end of January

2003, there were 33 MFs with total AUM of ₹1,21,805 crores, out of which UTI alone had AUM of ₹44,541
 crores.

FOURTH PHASE [SINCE FEBURUARY 2003 TO APRIL2014]

• In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was bifurcated into two

separate entities, viz., the Specified Undertaking of the Unit Trust of India (SUUTI) and UTI Mutual Fund

which functions under the SEBI MF Regulations. With the bifurcation of the erstwhile UTI and several mergers

taking place among different private sector funds, the MF industry entered its fourth phase of consolidation.

• Following the global melt-down in the year 2009, securities markets all over the world had tanked and so was

the case in India. Most investors who had entered the capital market during the peak, had lost money and their

faith in MF products was shaken greatly. The abolition of Entry Load by SEBI, coupled with the after-effects

of the global financial crisis, deepened the adverse impact on the Indian MF Industry, which struggled to

recover and remodel itself for over two years, in an attempt to maintain its economic viability which is evident

from the sluggish growth in MF Industry AUM between 2010 to 2013

FIFTH PHASE [SINCE MAY 2014].

• Taking cognizance of the lack of penetration of MFs, especially in tier II and tier III cities, and the need for

greater alignment of the interest of various stakeholders, SEBI introduced several progressive measures in

September 2012 to "re-energize" the Indian Mutual Fund industry and increase MFs’ penetration.

• In due course, the measures did succeed in reversing the negative trend that had set in after the global

melt-down and improved significantly after the new Government was formed at the Center.

• Since May 2014, the Industry has witnessed steady inflows and increase in the AUM as well as the number of

investor folios (accounts).

• The Industry’s AUM crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for the first time as on 31st May

2014 and in a short span of about three years the AUM size had increased more than two folds and crossed ₹ 20

trillion (₹20 Lakh Crore) for the first time in August 2017. The AUM size crossed ₹ 30 trillion (₹30 Lakh Crore)

for the first time in November 2020.

• The overall size of the Indian MF Industry has grown from ₹ 8.26 trillion as on 31st January 2013 to ₹ 39.62
 trillion as on 31st January 2023, around 5 fold increase in a span of 10 years.

• The MF Industry’s AUM has grown from ₹ 22.41 trillion as on January 31, 2018 to ₹39.62 trillion as on January

31, 2023, around 2- fold increase in a span of 5 years.

• The no. of investor folios has gone up from 6.83 crore folios as on 31-Jan-2018 to 14.28 crore as on

31-Jan-2023, more than 2-fold increase in a span of 5 years.

• On an average 12.42 lakh new folios are added every month in the last 5 years since January 2018.

• The growth in the size of the industry has been possible due to the twin effects of the regulatory measures taken

by SEBI in re-energizing the MF Industry in September 2012 and the support from mutual fund distributors in

expanding the retail base.

• MF Distributors have been providing the much-needed last mile connect with investors, particularly in smaller

towns and this is not limited to just enabling investors to invest in appropriate schemes, but also in helping

investors stay on course through bouts of market volatility and thus experience the benefit of investing in

mutual funds.

• MF distributors have also had a major role in popularizing Systematic Investment Plans (SIP) over the years. In

April 2016, the no. of SIP accounts has crossed 1 crore mark and as on 31st January 2023 the total no. of SIP

Accounts are 6.22 crore.

TYPES OF MUTUAL FUND SCHEMES

MUTUAL FUND SCHEME CLASSIFICATION

Mutual funds come in many varieties, designed to meet different investor goals. Mutual funds can be broadly

classified based on –

1. Organization Structure – Open ended, Close ended, Interval

2. Management of Portfolio – Actively or Passively

3. Investment Objective – Growth, Income, Liquidity

4. Underlying Portfolio – Equity, Debt, Hybrid, Money market instruments, Multi Asset

5. Thematic / solution oriented – Tax saving, Retirement benefit, Child welfare, Arbitrage
6. Exchange Traded Funds

7. Overseas funds

8. Fund of funds

• SCHEME CLASSIFICATION BY ORGANIZATION STRUCTURE

1. • Open-ended schemes are perpetual, and open for subscription and repurchase on a continuous basis on all

business days at the current NAV.

2. • Close-ended schemes have a fixed maturity date. The units are issued at the time of the initial offer and

redeemed only on maturity. The units of close-ended schemes are mandatorily listed to provide exit route before

maturity and can be sold/traded on the stock exchanges.

3. • Interval schemes allow purchase and redemption during specified transaction periods (intervals). The

transaction period has to be for a minimum of 2 days and there should be at least a 15-day gap between two

transaction periods. The units of interval schemes are also mandatorily listed on the stock exchanges.

• SCHEME CLASSIFICATION BY PORTFOLIO MANAGEMENT

1. Active Funds

• In an Active Fund, the Fund Manager is ‘Active’ in deciding whether to Buy, Hold, or Sell the underlying

securities and in stock selection. Active funds adopt different strategies and styles to create and manage the

portfolio.

• The investment strategy and style are described upfront in the Scheme Information document (offer document)

• Active funds expect to generate better returns (alpha) than the benchmark index.

• The risk and return in the fund will depend upon the strategy adopted.

• Active funds implement strategies to ‘select’ the stocks for the portfolio.

2. Passive Funds

• Passive Funds hold a portfolio that replicates a stated Index or Benchmark e.g. –

• Index Funds

• Exchange Traded Funds (ETFs)

• In a Passive Fund, the fund manager has a passive role, as the stock selection / Buy, Hold, sell decision is driven

by the Benchmark Index and the fund manager / dealer merely needs to replicate the same with minimal

tracking error.

• ACTIVE V/S PASSIVE FUNDS

• Active Fund –

• Rely on professional fund managers who manage investments.

• Aim to outperform Benchmark Index

• Suited for investors who wish to take advantage of fund managers' alpha generation potential.

• Passive Funds –

• Investment holdings mirror and closely track a benchmark index, e.g., Index Funds or Exchange Traded Funds

(ETFs)

• Suited for investors who want to allocate exactly as per market index.

• Lower Expense ratio hence lower costs to investors and better liquidity

• CLASSIFICATION BY INVESTMENT OBJECTIVES

Mutual funds offer products that cater to the different investment objectives of the investors such as –

1. Capital Appreciation (Growth)

2. Capital Preservation

3. Regular Income

4. Liquidity

5. Tax-Saving

6. Mutual funds also offer investment plans, such as Growth and Dividend options, to help tailor the investment to

the investors’ needs.

1. GROWTH FUNDS

• Growth Funds are schemes that are designed to provide capital appreciation.

• Primarily invest in growth-oriented assets, such as equity

• Investment in growth-oriented funds requires a medium to the long-term investment horizon.

• Historically, Equity as an asset class has outperformed most other kinds of investments held over the long term.

However, returns from Growth funds tend to be volatile over the short term since the prices of the underlying

equity shares may change.

• Hence investors must be able to take volatility in the returns in the short term.

2. INCOME FUNDS

• The objective of Income Funds is to provide regular and steady income to investors.

• Income funds invest in fixed-income securities such as Corporate Bonds, Debentures, and Government

securities.

• The fund’s return is from the interest income earned on these investments as well as capital gains from any

change in the value of the securities.

• The fund will distribute the income provided the portfolio generates the required returns. There is no guarantee

of income.

• The returns will depend upon the tenor and credit quality of the securities held.

3. LIQUID / OVERNIGHT /MONEY MARKET MUTUAL FUNDS

• Liquid Schemes, Overnight Funds and Money market mutual fund are investment options for investors seeking

liquidity and principal protection, with commensurate returns.

– The funds invest in money market instruments* with maturities not exceeding 91 days.

– The return from the funds will depend upon the short-term interest rate prevalent in the market.

• These are ideal for investors who wish to park their surplus funds for short periods.

– Investors who use these funds for longer holding periods may be sacrificing better returns possible from

products suitable for a longer holding period.

* Money Market Instruments includes commercial papers, commercial bills, treasury bills, Government

securities having an unexpired maturity up to one year, call or notice money, certificate of deposit, usance bills,

and any other likens as specified by the Reserve Bank of India from time to time.
• CLASSIFICATION BY INVESTMENT PORTFOLIO

1. Mutual fund products can be classified based on their underlying portfolio composition

– The first level of categorization will be on the basis of the asset class the fund invests in, such as equity / debt /

money market instruments or gold.

– The second level of categorization is on the basis of strategies and styles used to create the portfolio, such as,

Income fund, Dynamic Bond Fund, Infrastructure fund, Large-cap/Mid-cap/Small-cap Equity fund, Value fund,

etc.

– The portfolio composition flows out of the investment objectives of the scheme.

RISK FACTORS

STANDARD RISK FACTORS

1. Mutual Fund Schemes are not guaranteed or assured return products.

2. Investment in Mutual Fund Units involves investment risks such as trading volumes, settlement risks, liquidity

risks, and default risks including the possible loss of principal.

3. As the price/value/interest rates of the securities in which the Scheme invests fluctuate, the value of the

investment in a mutual fund Scheme may go up or down.

4. In addition to the factors that affect the value of individual investments in the Scheme, the NAV of the Scheme

may fluctuate with movements in the broader equity and bond markets and may be influenced by factors affecting

capital and money markets in general, such as, but not limited to, changes in interest rates, currency exchange

rates, changes in Government policies, taxation, political, economic or other developments and increased

volatility in the stock and bond markets.

5. Past performance does not guarantee the future performance of any Mutual Fund Scheme.
 SPECIFIC RISK FACTORS

1. RISKS ASSOCIATED WITH INVESTMENTS IN EQUITIES

a) Risk of losing money:

Investments in equity and equity-related instruments involve a degree of risk and investors should not invest in

equity schemes unless they can afford to take the risk of possible loss of principal.

b) Price Risk:

Equity shares and equity-related instruments are volatile and prone to price fluctuations on a daily basis.

c) Liquidity Risk for listed securities:

The liquidity of investments made in the equities may be restricted by trading volumes and settlement periods.

Settlement periods may be extended significantly by unforeseen circumstances. While securities that are listed on the

stock exchange carry lower liquidity risk, the ability to sell these investments is limited by the overall trading volume

on the stock exchanges. The inability of a mutual fund to sell securities held in the portfolio could result in potential

losses to the scheme, should there be a subsequent decline in the value of securities held in the scheme portfolio and

this may thus lead to the fund incurring losses till the security is finally sold.

d) Event Risk:

Price risk due to company or sector-specific events.

2. RISKS ASSOCIATED WITH INVESTMENT IN DEBT SECURITIES AND MONEY

MARKET INSTRUMENTS

Debt Securities are subject to the risk of an issuer’s inability to meet principal and interest payments on the obligation

(Credit Risk) on the due date(s) and may also be subject to price volatility due to such factors as interest rate

sensitivity, market perception of the creditworthiness of the issuer and general market liquidity (Market Risk).

The timing of transactions in debt obligations, which will often depend on the timing of the Purchases and

Redemptions in the Scheme, may result in capital appreciation or depreciation because the value of debt obligations
generally varies inversely with the prevailing interest rates.

Interest Rate Risk

Market value of fixed income securities is generally inversely related to interest rate movement. Generally, when

interest rates rise, prices of existing fixed income securities fall and when interest rates drop, such prices increase.

Accordingly, value of a scheme portfolio may fall if the market interest rate rises and may appreciate when the market

interest rate comes down. The extent of fall or rise in the prices depends upon the coupon and maturity of the security.

It also depends upon the yield level at which the security is being traded.

Credit Risk

This is risk associated with default on interest and /or principal amounts by issuers of fixed income securities. In case

of a default, scheme may not fully receive the due amounts and NAV of the scheme may fall to the extent of default.

Even when there is no default, the price of a security may change with expected changes in the credit rating of the

issuer. It may be mentioned here that a government security is a sovereign security and is safer. Corporate bonds carry

a higher amount of credit risk than government securities. Within corporate bonds also there are different levels of

safety and a bond rated higher by a rating agency is safer than a bond rated lower by the same rating agency.

Spread Risk

Credit spreads on corporate bonds may change with varying market conditions. The market value of debt securities in

the portfolio may depreciate if the credit spreads widen and vice versa. Similarly, in the case of floating rate

securities, if the spreads over the benchmark security/index widen, then the value of such securities may depreciate.

Liquidity Risk

Liquidity risk refers to the ease with which securities can be sold at or near their valuation yield-to-maturity (YTM)

or true value. Liquidity condition in the market varies from time to time. The liquidity of a bond may change,

depending on market conditions leading to changes in the liquidity premium attached to the price of the bond. In an

environment of tight liquidity, the necessity to sell securities may have higher than usual impact costs. Further, the

liquidity of any particular security in the portfolio may lessen depending on market conditions, requiring a higher

discount at the time of selling.

The primary measure of liquidity risk is the spread between the bid price and the offer price quoted by a dealer.

Trading volumes, settlement periods, and transfer procedures may restrict the liquidity of some of these investments.

Different segments of the Indian financial markets have different settlement periods, and such periods may be

extended significantly by unforeseen circumstances. Further, delays in the settlement could result in temporary

periods when a portion of the assets of the Scheme are not invested and no return is earned thereon or the Scheme

may miss attractive investment opportunities.

At the time of selling the security, the security may become illiquid, leading to a loss in the value of the portfolio. The

purchase price and subsequent valuation of restricted and illiquid securities may reflect a discount, which may be

significant, from the market price of comparable securities for which a liquid market exists.

Counterparty Risk

This is the risk of failure of the counterparty to a transaction to deliver securities against consideration received or to

pay consideration against securities delivered, in full or in part or as per the agreed specification. There could be

losses to the fund in case of a counterparty default.

Prepayment Risk

This arises when the borrower pays off the loan sooner than the due date. This may result in a change in the yield and

tenor for the mutual fund scheme. When interest rates decline, borrowers tend to pay off high-interest loans with

money borrowed at a lower interest rate, which shortens the average maturity of Asset-backed securities (ABS).

However, there is some prepayment risk even if interest rates rise, such as when an owner pays off a mortgage when

the house is sold or an auto loan is paid off when the car is sold. Since prepayment risk increases when interest rates

decline, this also introduces reinvestment risk, which is the risk that the principal may only be reinvested at a lower

rate.

Re-investment Risk

Investments in fixed-income securities carry re-investment risk as the interest rates prevailing on the coupon payment

or maturity dates may differ from the original coupon of the bond (the purchase yield of the security). This may result

in the final realized yield being lower than that expected at the time
The additional income from reinvestment is the "interest on interest" component. There may be a risk that the rate at

which interim cash flows can be reinvested is lower than that originally assumed.

OBJECTIVE OF STUDY

1. To evaluate the performance of a selected equity mutual funds in India

2. To study and analyze Risk-Returns relationship.

3. To advise mutual fund investors in choosing better funds as investment avenues.

STATEMENT OF THE STUDY

Generally large companies are tending to invest their funds in the large cap equity mutual fund. Large companies

which have a market capitalization of over 20,000 crores. These are well established companies with strong market

share. Large cap equity funds are less unstable than the small and midcap equity mutual funds. Therefore, investors

have the proper information about the asset management companies in order to get the good return and also contact

the advisory securities of knowing which fund gives good return for their investment.

SCOPE OF THE STUDY

The study contains of 10 selected large cap equity mutual fund schemes launched by the different private sector

fund house. The NAV of the selected scheme have been taken for five years with an annual return i.e., 1st Jan 2013

to 29th December 2017. This study focuses on the comparison of risk and return of each equity schemes and these

funds have been equated with the bench mark return to evaluate the performance of these schemes.
 CHAPTER 2

REVIEW OF LITERATURE
Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance. Drawing on results

obtained in the field of portfolio analysis, economist Jack L. Treynor has suggested a new predictor of mutual fund

performance, one that differs from virtually all those used previously by incorporating the volatility of a fund's return

in a simple yet meaningful manner.

Jensen Michael (1968) developed a composite portfolio evaluation technique concerning risk-adjusted returns. He

evaluated the ability of 115 fund managers in selecting securities during the period 1945-66. Analysis of net returns

indicated that, 39 funds had above average returns, while 76 funds yielded abnormally poor returns. Using gross

returns, 48 funds showed above average results and 67 funds below average results. Jensen concluded that, there was

very little evidence that funds were able to perform significantly better than expected as fund managers were not able

to forecast securities price movements.

Fama (1972) developed methods to distinguish observed return due to the ability to pick up the best securities at a

given level of risk from that of predictions of price movements in the market. He introduced a multi period model

allowing evaluation on a period-by-period and on a cumulative basis. He branded that, return on a portfolio

constitutes of return for security selection and return for bearing risk. His contributions combined the concepts from

modern theories of portfolio selection and capital market equilibrium with more traditional concepts of good portfolio

management.

M. Vijay Anand (2000) focused on the schemes of Birla Sunlife and the competitor’s schemes available in the

market. Author studied the analysis of Performance of Equity fund for 3 years and SWOT Analysis of Birla Sunlife

by Literature survey and Delphi technique. In depth financial review the author identifies among the selected equity

funds that earns higher returns than benchmark and competitors and concluded that Birla Sunlife performs well

compared to the benchmarks and competitors.

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate

entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. 29,835

crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain
other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the

rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

Subha and Bharathi (2007) study was carried out for open end mutual fund schemes of sample of 51 schemes

chosen by convenient sampling method. NAV’s were taken for a period of one year from 1st October 2004 to 30th

September, 2005. Out of the 51 funds as many as 18 schemes earned higher returns than the market return. The

remaining 33 funds generated lower returns than the market return.

Dubravo Mihaljek (2008) focused on particular the implications of policy responses. He has identified two

important issues: i) under estimation of the build-up in credit risk arising from rapid credit growth, ii) Risk of a sharp

slowdown or reversal in bank-intermediated capital flows

Agarwal, R K. et al. (2010) has reviewed since long the performance of mutual funds has been receiving a great deal

of attention from both practitioners and academics. With an aggregate investment of trillion dollars in India, the

investing public’s interest in identifying successful fund managers is understandable. From an academic perspective,

the goal of identifying superior fund managers is interesting as it encourages development and application of new

models and theories.

Dhanda (2011) made an attempt to study the performance evaluation of selected open ended schemes in terms of

risk and return relationship by using rate of return, Beta, Standard Deviation, Sharp Ratio and Treynor Ratio. BSE-30

has been used as a benchmark to study the performance of mutual fund in India and the study period has been taken

from April 1, 2009 to March 31, 2011. The finding of the study revealed that only three scheme have performed

better than benchmark. Kumar Lenin Nooney and Devi Rama.

A Study of performance of mutual fund has become more controversial. Conversely, Rajesh Kumar, Rituraj

Chandrakar (2012) evaluates the performance of 29 open-ended, growth-oriented equity schemes for the period

from April 2005 to March 2011 (six years) of transition economy. The study revealed that 14 out of 29 (48.28

percent) sample mutual fund schemes had outperformed the benchmark return. The results also showed that some of

the schemes had underperformed; these schemes were facing the diversification problem.

Dr.R.Narayanasamy, v.rathnamani, (2013) evaluate the performance of selected equity large cap mutual funds

schemes in terms of risk- return relationship . The performance analysis of the selected five equity are large cap
funds. The study may conclude that all the funds have performed well in the high volatile market movement expect

Reliance vision

Walia and Kiran (2009) studied investors’ risk and return perception toward mutual funds. The study examined

investors' perception of risk involved in mutual funds, return from mutual funds in comparison to other financial

avenues, and transparency and disclosure practices. The study investigated problems investors encountered due to the

unprofessional services of mutual funds. The study found that the majority of individual investors don’t consider

mutual funds as a highly risky investment. In fact on a ranking scale, it is considered to be on the higher side when

compared with other financial avenues. The study also reported that a significant relationship of interdependence

exists between the income level of investors and their perception of investment returns from mutual funds investment

.. Saini et., al. (2011) analyzed investor’s behavior, investors’ opinions, and perceptions relating to various issues like

type of mutual fund scheme, its objective, the role of financial advisors/brokers, sources of information, deficiencies

in the provision of services, investors’ opinion relating to factors that attract them to invest in mutual and challenges

before the Indian mutual fund industry, etc. The study found that investors seek liquidity, simplicity in offer

documents, online trading, regular updates through SMS, and stringent follow-up of provisions laid by AMFI. Singh

(2012) conducted an empirical study of Indian investors and observed that most of the respondents do not have much

awareness about the various function of mutual funds and they are a bit confused regarding investment in mutual

funds. The study found that some demographic factors like gender, income, and level of education have a significant

impact on the attitude toward mutual funds. On the contrary age and occupation have not been found to influence the

investor’s attitude. The study noticed that return potential and liquidity have been perceived to be the most lucrative

benefits of investing in mutual funds and the same are followed by flexibility, transparency, and affordability

Dr. Sandeep Bansal, Deepak Garg, and Sanjeev K Saini (2012) have studied the Impact of Sharpe Ratio &

Treynor’s Ratio on Selected Mutual Fund Schemes. This paper examines the performance of selected mutual fund

schemes, that the risk profile of the aggregate mutual fund universe can be accurately compared by a simple market

index that offers comparative monthly liquidity, returns, systematic & unsystematic risk, and complete fund analysis

by using the special reference of Sharpe ratio and Treynor’s ratio.

 Dr. K. Veeraiah and Dr. A. Kishore Kumar (Jan 2014), conducted research on Comparative Performance

Analysis of Select Indian Mutual Fund Schemes. This study analyzes the performance of Indian-owned mutual funds

and compares their performance. The performance of these funds was analyzed using five-year NAVs and portfolio

allocation. The findings of the study reveal that mutual funds outperform naïve investments. Mutual funds as a

medium-to-long-term investment option are preferred as a suitable investment option by investors.

Dr. Yogesh Kumar Mehta (Feb 2012), has studied Emerging Scenario of Mutual Funds in India: An Analytical

Study of Tax Funds. The present study is based on selected equity funds of public sector and private sector mutual

funds. Corporate and Institutions form only 1.16% of the total number of investor accounts in the MFs industry and

contribute a sizeable amount of Rs.2,87,108.01 crore which is 56.55% of the total net assets in the MF industry. It is

also found that MFs did not prefer the debt segment.

Dr. Surender Kumar Gupta and Dr. Sandeep Bansal (Jul 2012), have done a Comparative Study on the Debt

Scheme of the Mutual Fund of Reliance and Birla Sunlife. This study provides an overview of the performance of the

debt scheme of the mutual fund of Reliance, and Birla Sunlife with the help of the Sharpe Index after calculating Net

Asset Values and Standard Deviation. This study reveals that returns on Debt Schemes are close to Benchmark return

(Crisil Composite Debt Fund Index: 4.34%) and Risk-Free Return: 6% (average adjusted for the last five years).

Prof. V. Vanaja and Dr. R. Karrupasamy (2013), have done a Study on the Performance of select Private Sector

Balanced Category Mutual Fund Schemes in India. This study of performance evaluation would help the investors to

choose the best schemes available and will also help the AUMs in better portfolio construction and can rectify the

problems of underperforming schemes. The objective of the study is to evaluate the performance of select Private

sector balanced schemes on the basis of returns and comparison with their benchmarks and also to appraise the

performance of different categories of funds using risk-adjusted measures as suggested by Sharpe, Treynor, and

Jensen.

E. Priyadarshini and Dr. A. Chandra Babu (2011), have done Prediction of The Net Asset Values of Indian

Mutual Funds Using Auto- Regressive Integrated Moving Average (Arima). In this paper, some of the mutual funds
in India had been modeled using Box-Jenkins autoregressive integrated moving average (ARIMA) methodology.

Validity of the models was tested using standard statistical techniques and the future NAV values of the mutual funds

have been forecasted.

Dr. Ranjit Singh, Dr. Anurag Singh and Dr. H. Ramananda Singh (August 2011), have done research on

Positioning of Mutual Funds among Small Town and Sub-Urban Investors. In the recent past the significant

proportion of the investment of the urban investor is being attracted by the mutual funds. This has led to the

saturation of the market in the urban areas. In order to increase their investor base, the mutual fund companies are

exploring the opportunities in the small towns and sub-urban areas. But marketing the mutual funds in these areas

requires the positioning of the products in the minds of the investors in a different way. The product has to be

acceptable to the investors, it should be affordable to the investors, it should be made available to them and at the

same time the investors should be aware of it. The present paper deals with all these issues. It measures the degree of

influence on acceptability, affordability, availability and awareness among the small town and sub-urban investors on

their investment decisions.

Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel (Jul 2012), have done a Comparative Study on Performance

Evaluation of Mutual Fund Schemes Of Indian Companies. In this paper the performance evaluation of Indian mutual

funds 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 daily closing NAVs. The source of data is website

of Association of Mutual Funds in India (AMFI). The study period is 1st January 2007 to 31st December, 2011. The

results of performance measures suggest that most of the mutual fund have given positive return from 2007 to 2011.

C.Srinivas Yadav and Hemanth N C (Feb 2014), have studied the Performance of Selected Equity Growth Mutual

Funds in India: An Empirical Study from 1st June 2010 To 31st May 2013. The study evaluates the performance of

selected growth equity funds in India, carried out using portfolio performance evaluation techniques such as Sharpe

and Treynor measure. S&P CNX NIFTY has been taken as the benchmark. The study conducted with 15 equity

growth Schemes (NAV) were chosen from the top 10 AMCs (based on AUM) for the period 1st June 2010 to 31st

May 2013(3 years).

Rashmi Sharma and N. K. Pandya (2013), have done an overview of Investing in Mutual Funds. In this paper, the

structure of mutual funds, the comparison between investments in mutual funds and other investment options, and the

calculation of NAV, etc. have been considered. In this paper, the impacts of various demographic factors on

investors’ attitudes toward mutual funds have been studied. For measuring various phenomena and analyzing the

collected data effectively and efficiently for drawing sound conclusions, drawing pie charts have been used for

analyzing the various factors responsible for investment in mutual funds. Rahul Singal, Anuradha Garg, and Dr.

Sanjay Singla (May 2013), have done a Performance Appraisal of Growth Mutual Fund. The paper examines the

performance of 25 Growth Mutual Fund Schemes. Over the time period Jan 2004 to Dec 2008. For this purpose, three

techniques are used (I) Beta (II)Sharpe Ratio, and (III) Treynor Ratio. Rank is given according to results drawn from

this scheme and a comparison is also made between results drawn from different schemes and normally the

differences are insignificant.

Dhimen Jani and Dr. Rajeev Jain (Dec 2013), have studied the Role of Mutual Funds in Indian Financial System as

Key Resource Mobilisers. This paper attempts to identify, the relationship between AUM mobilized by mutual fund

companies and GDP growth of India. To find out correlation coefficient Kendall’s tau b and Spearman’s rho

correlation ship was applied, the data range was selected from 1998-99 to 2009-10.
 CHAPTER 3

RESEARCH METHODOLOGY
This paper makes an attempt to study and analyze the performance evaluation of top 10 Indian equity mutual funds

(on the basis of CRISIL). The mutual funds were analyzed in detail from January 2013 to December 2017 and this

study is based on the secondary data obtained from the various sources like websites, journals, magazines etc. For the

performance of these mutual fund schemes, different statistical and financial tools are to be used. The tools and

techniques are alpha, beta, correlation, Sharpe, Treynor and Jenson measure.

Top ranked Large Cap Equity Mutual Fund in India on the basis of CRISIL

1. Aditya Birla Sun Life Top 100 Fund

2. Invesco India Dynamic Equity Fund

3. Kotak Select Focus Fund

4. Aditya Birla Sun Life Frontline Equity Fund

5. ICICI Prudential Focused Bluechip Equity Fund

6. ICICI Prudential Top 100 Fund

7. Reliance Top 200 Fund

8. SBI Blue Chip Fund

9. BNP Paribas Equity Fund

10. DSP BlackRock Focus 25 Fund

Large Cap Funds

Large cap funds are those funds in which the investors want to invest their larger share of their amount in companies

with large market capitalization. Large cap equity funds are less unstable than the small and midcap equity mutual

funds. When compared with mid-cap and small-cap funds, large cap funds deliver steady returns with relatively lower

risk on the risk return scale. Large cap funds are ideal for investors with lower risk and well-diversified.
Performance Evaluation Techniques:

Sharpe’s Performance Index

The Sharpe ratio is most extensively used for the calculation of risk – adjusted return. This ratio is the average return

earned in excess of the risk-free rate per unit of volatility or total risk. Sharpe ratio evaluates risk and return together

to help the investors to choose the investment that generates higher return but optimal risk taken.

The difference between the average return of a fund and the risk-free investment gives us return generated by the

fund by taking risk and standard deviation is the risk of portfolio.

Mathematically, shape ratio is represented as the difference between the average return of a portfolio and the risk free

invest divided by standard deviation.

S (P) = (Rp – Rf) / σ (p)

Where, Rp = Average return of portfolio

Rf = Risk free rate

σ = Standard deviation of portfolio

Treynor’s Performance Index

The Treynor ratio have the similarities with the Sharpe ratio. The difference between two metrics is that to measure

volatility instead of using total risk (standard deviation). The Treynor ratio utilizes beta and the ratio is based on the

principle that risk intrinsic to the entire market (represented by beta). Treynor ratio is the difference between the

average return of a fund and the risk-free investment divided by the beta. The risk premium depends on the

systematic risk assumed in a portfolio.

Tn (P) = (Rp – Rf) / β (p)

Where, Rp = Average return of portfolio,

 Rf = Risk free rate

β = Measure of systematic risk

Jensen’s Performance Index

The risk adjusted performance measure known as the Jensen’s measure, that denotes the average return portfolio or

investment above or below that projected by CAPM (capital asset pricing model) given the portfolios or investment’s

beta and the average market return. In this measure a definite standard is set and against that the performance is

measured, so it is mentioned as a measure of absolute performance. The standard is based on the manager’s

predictive ability. The basic model of Jensen is given below

Rp = α + β (Rm – Rf)

Where, Rp = Average return of portfolio,

Rf = Risk free rate,

α = The intercept,

β = Measure of systematic risk

Rm = average market return

Correlation

The correlation analysis is the statistical tool that can use to describe the degree to which one variable is linearly

related to another. Correlation indicates a predictive relationship that can be exploited in practice hence it is more

useful. Correlation analysis is required for testing whether certain data is consistent with hypothesis, predicting one

variable on the basis of the knowledge of the others, grouping measure for tightfisted interpretation of data and

isolating influence of variables.

•If r lies between 0 to 1, that means positive correlation where r lies between 0 to 0.3 is weak positive correlation and
r lies between 0.3 to 0.7 is moderate positive correlation and r lies between 0.7 to 1 is strong positive correlation

• If r is exactly 1, the correlation is perfect positive correlation

• If r lies between -1 to 0, that means negative correlation where r lies between 0 to -0.3 is weak negative

• If correlation and r lie between -0.3 to -0.7 is moderate negative correlation and r lies between -0.7 to -1 is strong

negative correlation.

• If r is -1, that implies perfect negative correlation.

 CHAPTER 4

DATA ANALYSIS AND

INTERPRETATION
 Table1:Correlation Matrix

Aditya Invesco Kotak Aditya ICICI ICICI Reliance SBI BNP DSP
BirlaSun India select Birla Sun Prudential Prudential Top 200 Blue Pariba BlackR
Life Top Dynamic Focus Life focused Top 100 Fund Chip s ock
100 Equity fund Frontline bluechip Fund Fund Equity fucus25
Fund Fund Equity equity fund Fund fund
Fund

Aditya 1.00
Birila
Sun
Life
Top
100
Fund
Invesco 0.89 1.00
India
Dynami
c
Equity
Fund
Kotak 0.12 0.10 1.00
Select
Focus
Fund
Aditya 0.99 0.89 0.12 1.00
Birla
sun
Life
frontlin
e
Equity
Fund
ICICI 0.97 0.87 0.12 0.98 1.00
Prudent
ial
Focuse
d
Bluechi
p
equity
Fund
ICICI 0.94 0.82 0.11 0.94 0.95 1.00
Prudent
ial
Top100
Fund
Relianc 0.96 0.86 0.11 0.96 0.95 0.92 1.00
e Top
200
Fund
SBI 0.14 0.12 -0.06 0.14 0.12 0.12 0.13 1.00
Blue
Chip
Fund
BNP 0.94 0.89 0.12 0.94 0.93 0.89 0.91 0.16 1.00
Paribas
Equity
Fund
DPS 0.85 0.78 0.08 0.85 0.83 0.79 0.84 0.22 0.82 1.00
BlackR
ock
Focus2
5 fund

Interpretation

This result shows that all the equity mutual funds are almost strongly positively correlated except Kotak Select

Focus Fund and SBI Blue Chip Fund as they are negatively correlated. Aditya Birla Sun Life Top 100 Fund is very

strongly positively correlated with Aditya Birla Sun Life Frontline Equity Fund (r = 0.99), ICICI Prudential Focused

Bluechip Equity Fund (r = 0.97) and Reliance Top 200 Fund (r = 0.96). Similarly, Aditya Birla Sun Life Frontline

Equity Fund is strongly positively correlated with ICICI Prudential Focused Bluechip Equity Fund (r = 0.98) and

Reliance Top 200 Fund (r = 0.96). SBI Blue Chip Fund and Kotak Select Focus Fund are negatively correlated with r

= -0.06.

Descriptive Statistics

Table 2 (a): Summary of basic descriptive statistics parameter

Aditya Invesco Kotak Aditya ICICI Sensex

Birla sun India Select Birla Sun Prudential

life Top100 Dynamic Focus Fund Life foused

 fund Equity fund frontline bluechip

equity fund equity fund

Mean 0.07 0.06 0.07 0.06 0.06 0.04

Standard 0.03 0.02 0.03 0.03 0.03 0.03

Error

Median 0.11 0.09 0.10 0.11 0.09 0.06

Standard 0.90 0.73 0.89 0.89 0.88 0.91

Deviation

Sample 0.81 0.53 0.79 0.79 0.78 0.82

Variance

Minimum -6.29 -4.82 -6.50 -6.45 -6.52 -6.31

Maximum 3.25 2.95 2.94 3.24 3.04 3.64

Interpretation

Descriptive statistics will give a summary of funds and nature of funds. The above table depicts that all the funds

have mean return more than the market return (benchmark) Sensex. Aditya Birla Sun Life Top 100 Fund, Kotak

Select Focus Fund, Aditya Birla Sun Life Frontline Equity Fund, ICICI Prudential Focused Bluechip Equity Fund

have almost equal standard error compared to Sensex whereas, Invesco India Dynamic Equity Fund have less. The

median value compared with Sensex have above the distribution.

The risk (SD) of fund Aditya Birla Sun Life Top 100 Fund (0.90), Invesco India Dynamic Equity Fund (0.73),

Kotak Select Focus Fund (0.89), Aditya Birla Sun Life Frontline Equity Fund (0.89), ICICI Prudential Focused

Bluechip Equity Fund (0.88) have less than the market risk (0.91). All the funds are in-line with market (Sensex)

minimum returns and maximum returns. However, the risk is comparatively less or almost equal.
 Table 2 (b): Summary of basic descriptive statistics parameters

Aditya Invesco Kotak Aditya ICICI Sensex

birla Sun India Select BirlaSun Prudential

Life Dynamic Focus Fund Life Focused

Top100 Equity Frontline Bluechip

Fund Fund Equity Equity

Fund Fund

Mean 0.07 0.06 0.07 0.06 0.06 0.04

Standard 0.03 0.02 0.03 0.03 0.03 0.03

Error

Median 0.11 0.09 0.10 0.11 0.09 0.06

Standard 0.90 0.73 0.89 0.89 0.88 0.91

Deviation

Sample 0.81 0.53 0.79 0.79 0.78 0.82

Variance

Minimum -6.29 -4.82 -6.50 -6.45 -6.52 -6.31

Maximum 3.25 2.95 2.94 3.24 3.04 3.64

Interpretation

Descriptive statistics will give a summary of funds and nature of funds. The above table depicts that all the funds

have mean return more than the market return (benchmark) Sensex. Reliance Top 200 Fund, DSP BlackRock Focus

25 Fund have almost equal standard error compared to Sensex whereas, ICICI Prudential Top 100 Fund, SBI Blue

Chip Fund, and BNP Paribas Equity Fund have less. The median value compared with Sensex have above the
distribution. The risk (SD) of fund ICICI Prudential Top 100 Fund (0.87), SBI Blue Chip Fund (0.84), BNP Paribas

Equity Fund (0.85) have less risk and Reliance Top 200 Fund (0.92), DSP BlackRock Focus 25 Fund(0.96) have

more risk compared to market risk (0.91).

The fund Reliance Top 200 Fund and DSP BlackRock Focus 25 Fund are having more variation compared to

benchmark Sensex. As the funds selection is based on top ten CRISIL ranking, it is understood and validated that

funds’ performance is in line with the benchmark Sensex.

Table 3: Risk-Return Relationship

Funds Beta SD Avg Return

Aditya Birla Sun Life Top 100 Fund -0.06 0.90 0.0734

Invesco India Dynamic Equity Fund -0.04 0.73 0.0635

Kotak Select focus fund -0.02 0.89 0.0739

Aditya Birla Sun Life Frontline Equity Fund -0.06 0.89 0.0644

ICICI Prudential focused Bluechip Equity Fund -0.06 0.88 0.0635

ICICI Prudential Top 100 F -0.05 0.87 0.0628

Reliance Top 200 Fund -0.04 0.96 0.0656

SBI Blue Chip Fund 0.05 0.84 0.0679

BNP Paribas Equity Fund -0.04 0.85 0.0635

DSP BlackRock Focus 25 Fund -0.06 0.96 0.0557

Sensex 1.00 0.91 0.0396

Interpretation

From the table it is clear that all the selected funds’ performance is best and outperformed against benchmark Sensex.

This shows that how mutual funds upbeat the market performance and the fund’s managers role in bringing best kind
of portfolio with right mix of securities is excellent and hence investors will have better returns compared to market.

Table 4: Sharpe Performance

Funds Sharpe Rank SD

Aditya Birla Sun Life Top 100 Fund -0.015 1 0.90

Kotak Select Focus Fund -0.016 2 0.89

Reliance Top 200 Fund -0.018 3 0.96

Aditya Birla Sun Life Frontline Equity Fund -0.026 4 0.89

SBI Blue Chip Fund -0.027 5 0.84

ICICI Prudential Focused Bluechip Equity Fund -0.027 6 0.88

DSP BlackRock Focus 25 Fund -0.028 7 0.96

ICICI Prudential Top 100 Fund -0.029 8 0.87

BNP Paribas Equity Fund -0.030 9 0.85

Invesco India Dynamic Equity Fund -0.046 10 0.73

Interpretation

The above result shows the performance ranking of various funds under Sharpe performance index measures. As per

the Sharpe, the top 3 performance of equity mutual funds are Aditya Birla Sun Life Top 100 Fund (-0.015) has rank

1, Kotak Select Focus Fund (-0.016) has rank 2 and Reliance Top 200 Fund (-0.018) has rank 3. For the poor

performance, the equity mutual funds are ICICI Prudential Top 100 Fund (-0.029) rank 8, BNP Paribas Equity Fund

(-0.030) has rank 9, and Invesco India Dynamic Equity Fund (-0.046) has rank 10. The investor has to select the three

best performance of equity mutual fund for the better investment decision.

Standard deviation will make us to understand how much the returns are deviated from each other. The better

investment choice will be those which have a less variation and more of returns. Funds such as Reliance Top 200
Fund (0.96), DSP BlackRock Focus 25 Fund (0.96) and Aditya Birla Sun Life Top 100 Fund (0.90) have high risk

and Invesco India Dynamic Equity Fund (0.73), SBI Blue Chip Fund (0.84), BNP Paribas Equity Fund (0.85) have

less risk.

Table 5: Treynor Performance Index

Funds Treynor Rank Beta

Kotak Select Focus Fund 4.013 1 -0.02

BNP Paribas Equity Fund 2.079 2 -0.04

Reliance Top 200 Fund 1.904 3 -0.04

Invesco India Dynamic Equity Fund 1.851 4 -0.04

ICICI Prudential Top 100 Fund 1.565 5 -0.05

Aditya Birla Sun Life Frontline Equity Fund 1.486 6 -0.06

DSP BlackRock Focus 25 Fund 1.451 7 -0.06

Aditya Birla Sun Life Top 100 Fund 1.379 8 -0.06

ICICI Prudential Focused Bluechip Equity Fund 1.342 9 -0.06

SBI Blue Chip Fund -1.483 10 0.05

Interpretation

The results show per the Treynor measure shows the top 3 performance of equity mutual fund Kotak Select Focus

Fund (4.013) rank 1, BNP Paribas Equity Fund (2.079) has rank 2 and Reliance Top 200 Fund (1.904) has rank 3.

Contrary, the poor performance of the equity mutual funds is Aditya Birla Sun Life Top 100 Fund (1.379) has rank 8,

ICICI Prudential Focused Bluechip Equity Fund (1.342) has rank 9and SBI Blue Chip Fund (-1.483) has rank 10. The

investor has to select the three best performance of equity mutual fund for the better investment decision. Beta

measures the sensitivity of a fund to the market index, higher the beta indicates the fund has risen more than the

markets returns, lower the beta indicates the lesser the market return. The funds have lesser beta are Kotak Select
Focus Fund (-0.02), BNP Paribas Equity Fund (-0.04), Reliance Top 200 Fund (-0.04).

The funds have higher beta are Aditya Birla Sun Life Frontline Equity Fund (-0.06), DSP BlackRock Focus 25 Fund

(-0.06), Aditya Birla Sun Life Top 100 Fund (-0.06), ICICI Prudential Focused Bluechip Equity Fund (-0.06).

Table 6: Jensen Performance Index

Funds Jenson Rank Beta

Kotak Select Focus Fund -0.007 1 -0.02

Aditya Birla Sun Life Top 100 Fund -0.009 2 -0.06

SBI Blue Chip Fund -0.010 3 0.05

Reliance Top 200 Fund -0.016 4 -0.04

Aditya Birla Sun Life Frontline Equity Fund -0.018 5 -0.06

BNP Paribas Equity Fund -0.018 6 -0.04

Invesco India Dynamic Equity Fund -0.018 7 -0.04

ICICI Prudential Focused Bluechip Equity Fund -0.019 8 -0.06

ICICI Prudential Top 100 Fund -0.019 9 -0.05

DSP BlackRock Focus 25 Fund -0.027 10 -0.06

Interpretation

The result as per the Jenson measure shows the top 3 performance of equity mutual fund and they are Kotak Select

Focus Fund (-0.007) has rank 1, Aditya Birla Sun Life Top 100 Fund (-0.009) has rank 2 and SBI Blue Chip Fund

(-0.010) has rank 3. For the poor performance, the equity mutual funds are ICICI Prudential Focused Bluechip Equity

Fund (-0.019) has rank 8, ICICI Prudential Top 100 Fund (-0.019) has rank 9 and DSP BlackRock Focus 25 Fund

(-0.027) has rank 10. Therefore, investor has to select the three best performance of equity mutual fund for the better

investment decision
Table 7: Summary of Sharpe, Treynor and Jensen’s performance measure rank list for the

selected funds

Funds Sharpe rank Treynor rank Jensen rank

Aditya Birla Sun Life Top 100 Fund 1 8 2

Invesco India Dynamic Equity Fund 10 4 7

Kotak Select Focus Fund 2 1 1

Aditya Birla Sun Life Frontline Equity Fund 4 6 5

ICICI Prudential Focused Bluechip Equity Fund 6 9 8

ICICI Prudential Top 100 Fund 8 5 9

Reliance Top 200 Fund 3 3 4

SBI Blue Chip Fund 5 10 3

BNP Paribas Equity Fund 9 2 6

DSP BlackRock Focus 25 Fund 7 7 10

CHAPTER 5

CONCLUSION
Mutual Funds now represent perhaps most appropriate investment opportunity for most investors. As financial

markets become more sophisticated and complex, investors need a financial intermediary who provides the required

knowledge and professional expertise on successful investing. As the investor always try to maximize the returns and

minimize the risk. Mutual fund satisfies these requirements by providing attractive returns with affordable risks

For the investment decision process, the portfolio performance measure should be a key aspect. These tools provide

the necessary information for investors to assess how effectively their money has been invested or may be invested.

From the above analysis we see the performance ranking of various funds under Sharpe, Treynor and Jensen

performance Index. As per the Sharpe, the top 3 performance of equity mutual funds are Aditya Birla Sun Life Top

100 Fund has rank 1, Kotak Select Focus Fund has rank 2 and Reliance Top 200 Fund has rank 3. For the poor

performance, the equity mutual funds are ICICI Prudential Top 100 Fund rank 8, BNP Paribas Equity Fund has rank

9, and Invesco India Dynamic Equity Fund has rank 10. The investor has to select the three best performance of

equity mutual fund for the better investment decision.

As per the Treynor measure shows the top 3 performance of equity mutual fund Kotak Select Focus Fund rank 1,

BNP Paribas Equity Fund has rank 2 and Reliance Top 200 Fund has rank 3. Contrary, the poor performance of the

equity mutual funds is Aditya Birla Sun Life Top 100 Fund has rank 8, ICICI Prudential Focused Bluechip Equity

Fund has rank 9and SBI Blue Chip Fund has rank 10. The investor has to select the three best performance of equity

mutual fund for the better investment decision.

The result as per the Jenson measure shows the top 3 performance of equity mutual fund and they are Kotak Select

Focus Fund has rank 1, Aditya Birla Sun Life Top 100 Fund has rank 2 and SBI Blue Chip Fund has rank 3. For the

poor performance, the equity mutual funds are ICICI Prudential Focused Bluechip Equity Fund has rank 8, ICICI

Prudential Top 100 Fund has rank 9 and DSP BlackRock Focus 25 Fund has rank 10. Therefore, investor has to select

the three best performance of equity mutual fund for the better investment decision
After analyzing the different mutual fund schemes, it is concluded that while making the investment decision the first

and most important consideration is risk and return aspect followed by the safety and liquidity. If the investors want

to go for less risk fund, then they should go for higher rank in the Treynor measure. The investors who want to

diversify their funds and get higher rate of return should go for higher rank in Sharpe measure.

The investors have to analyze the fund performance and portfolio manager performance through Jenson measure.

The investors who have the moderate knowledge should go for the mutual fund investment. For the investors there

will be various stocks available to invest, among those avenues has to select the right one and keep track of the

investment made. The investors have the proper information about the asset management companies in order to get

the good return and also contact the advisory securities of knowing which fund gives good return for their investment.

The fund industry has already overtaken the banking industry, more funds being under mutual fund management than

deposited with banks. With the emergence of tough competition in this sector mutual funds are launching a variety of

schemes which caters to the requirement of the particular class of investors. Risk takers for getting capital

appreciation should invest in growth, equity schemes. Investors who are in need of regular income should invest in

income plans. The stock market has been rising for over three years now. This in turn has not only protected the

money invested in funds but has also to help grow these investments. This has also instilled greater confidence among

fund investors who are investing more into the market through the MF route than ever before.

REFERENCES

[1] Alka Solanki (2016) A Study of Performance Evaluation of Mutual Fund and Reliance Mutual Fund (Vol.5).

[2] Dr. Kuberudu Burlakanti and Ravi Varma Chiruvoori (2013) Performance Evaluation of Select Equity Funds in

India (Vol.2) International Journal for Social Science Interdisciplinary Research. Dr. M.M. Goyal Performance

Evaluation of Top 10 Mutual Funds in India, Indian Journal of Commerce and Management Studies, (Vol.6)

[3] Dr. Sunil M. Adhav1 and Mr. Anoop Waghmare2 (2016) Comparative Study Of Selected Large Cap Equity

Mutual Funds, International Journal For Science Technology And Management (Vol.5).
[4] Dr. Y Rama Krishna and R. Raju (2014), Comparative Performance Evaluation Of Open Ended Equity Mutual

Fund, International Journal For Commerce Business And Management (Ijcbm), (Vol.3).

[5] Dr.R.Narayanasamy and V. Rathnamani (2013) Performance Evaluation of Equity Mutual Funds (On Selected

Equity Large Cap Funds) (Vol.2) International Journal Of Business And Management Invention Issn.

[6] Dr Vikas Choudhary, And Preeti Sehgal Chawla (2014) Performance Evaluation of Mutual Funds: A Study of

Selected Diversified Equity Mutual Funds in India (Icblcsr’14).

[7] Dr. V. Santhi and S. Revathy (2013) A Study on Performance Evaluation of Selected Banks Equity Mutual Funds,

Indian Journal For Research (Vol.3).

[8] Karrupasamy, R., And Vanaja, V. (2013). A Study on The Performance Of Selected Large Cap And Small &

Mid Cap Mutual Fund Schemes In India. The International Journal of Management (Vol.2).

[9] Hajee. Cma. Dr. M. Sheik Mohamed1 And Mr. M. Kaja Muhaideen2 (2017) A Study On Performance Evaluation

Of Selectedopen-Ended Equity Mutual Fund Schemes In India,Ijar.

[10] Mr. Ashok Bantwa and Mr. Krunal Bhuva (2012) Performance Evaluation Of Selected Indian Equity

Diversified Mutual Fund Schemes: An Empirical Study Gjrim (Vol. 2).

[11] Mrs. B. Kishori and N. Bhagyasree (2016) A Study on Performance Evaluation Of Mutual Funds Schemes In

India, (Vol.2).

[12] Priyanka G. Bhatt and Prof. (Dr.) Vijay H.Vyas (2014) A Study On Performance Evaluation Of Selected Equity

Mutual Funds In India (Vol. 3) International Journal For Research In Management.

[13] Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel (2012) Comparative Study on Performance Evaluation of

Mutual Fund Schemes of Indian Companies (Vol.3) International Refereed Research Journal.

[14] R.Nandhinil And Dr.V.Rathnamani A Study On The Performace Of Equity Mutual Funds (With Special

Reference To Equity Large Cap and Mid Cap Mutual Funds) Vol.19.
 [15] Syed Husain Ashraf and Dhanraj Sharma (2014) Performance Evaluation of Indian Equity Mutual Funds

against Established Benchmarks Index (Vol.2.1) Int J Account Res ISSN.

[16] Sayed Mohammad Tariq Zafar And Dr.Dhani.Shanker Chaubey (2015) an Empirical Study on Indian Mutual

Funds Equity Diversified Growth Schemes” And Their Performance Evaluation, International Journal of Research

(Vol.2).

[17] S.Masiperiyannan And Dr.Mohanamani.P (2016), Performance Evaluation Of Selected Open – Ended Mutual

Funds In India, International Journal Of Business And Management Invention (Vol.5).

[18] Subashini, K. (2013). Evaluating The Performance of Some Selected open-ended Equity Diversified Mutual

Fund in Indian Mutual Fund Industry. International Journal of Innovative Research in Science, Engineering and

Technology (Vol.2).

[19] Shukla, S. (2015). A Comparative Performance Evolution of Selected Mutual Funds. International Journal of

Science Technology & Management (Vol.4).

[20] Sukhwinder Kaur Dhanda, Dr. G.S.Batra And Dr Bimal Anjum (2012), Performance Evaluation of Selected

Open Ended Mutual Funds in India, International Journal of Marketing, Financial Service and Management Research

(Vol.1)

Websites:

www. amfiindia. Com

www. mutualfundsindia. com

www. indiainfoline. Com

www. investsmart. com