Sunteți pe pagina 1din 15

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Risk-Return Analysis of Mutual Fund Equity Growth Schemes

*Ms. Parul Kumar **Dr. Sunil K. Gupta ***Dr. R. K. Sharma

*Assistant Professor, Vivekananda Institute of Professional Studies, Delhi **Associate Professor, School of Management Studies, IGNOU ***Professor, BVIMR, Delhi

Abstract

After the downfall in 2008-2009, mutual fund industry has gained momentum in 2010 and, is now mapping its course onto the next echelon of growth and development. This research paper analyzed the change in the composition of Indian mutual fund selected growth schemes from the year 2010 till July 2015. Paper accomplishes the objective by way of analyzing the overall performance of open ended equity growth schemes along with the top gainers among them. Sample of 23 mutual fund schemes has been scrutinized by the way of performance indicators i.e. risk, return and beta, and also Sharpe, Treynor&Sortino ratios. These were used to unearth the best scheme, by way of ranking them on the basis of obtained results. All the schemes selected were open ended growth schemes and their relationship was also established by way of interpreting their correlation with the BSE Sensex. Paper also discusses the future prospects of India’s mutual fund industry, highlighting newer products needs to attract the new customer base, expanding reach to other cities, easy accessibility, newer norms & regulations & investors’ education.

Keywords: Open ended, Risk, Beta, Sharpe, Treynor, Sortino, Return

1. Introduction

Gone are the years when mutual fund’s asset under management stood at just 25, as now the scenario is more than flattering. Investors have started exploring the full potential of Mutual funds due to which they have been gaining vast popularity since many areas and also owing to changes in investor’s preferences, volatile market, risky shares, lack of professional experience in dealing in stock market, etc., have led to growth of mutual fund industryin the current scenario. This scenario is clearly reflected by Chart I, which shows the robust growthin assets under management since 1965. Despite of few downfalls, mutual fund industry has still kept its charm alive and even it is increasing with the each passing year. But still if the growth is compared with other countries, mutual fund penetration is still low in India.

www.aeph.in

1

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Growth In Assets Under Management (Chart I)

613979

592250 505152 417300 326388 231862 139616 121805 87190 149554 47000 25 4564 79464 Years Phase
592250
505152
417300
326388
231862
139616
121805
87190
149554
47000
25
4564
79464
Years
Phase I
Phase III
Phase II
Phase IV since Feb'03
Mar'65
Mar'87
Mar'93
Jan'01
Feb'03
Mar'03
Mar'04
Mar'05
Mar'06
Mar'07
Mar'08
Mar'09
Mar'10
Mar'11

Although India is in the strong league of being a super power and even bypass the economy of US by year 2045, as India is having high savings and investment rate which is not present in other countries. Indian GDP is also expected to quadruplet in the coming years as well as it has maximum of its population is below the age of 25 years, which will be the main reason of India shining in the next coming years, as the working population of India will be more as compared to US and china whose population is graying at a faster pace. Increasing middle class segment withincrease in income levels and household spending have led to increase in demands for almost everything be it infrastructure, development of alternate investment market, more savings avenues, FMCG products, roads, highways etc., and story doesn’t ends here the number of HNI segment is also increasing as there are almost more than 120,000 dollar millionaires in India, who are expected to invest huge amounts in Indian markets.

Chart II depicts the average assets under management in the last three years (Mar’12 – July’15), in which may’15 showed the highest interest of investors in mutual funds, rest of the year portrays mixed reaction of investors, as it is increasing with few units at times and then falling for the month of June. It seems that mutual fund industry is gaining momentum in the beginning of year 2011, as assets under management have increased till the current month of July. This increase can be attributed to the regained investor’s confidence; changes taking place in rules and regulations; new options being explored by mutual fund companies; better time to market by the funds; investors becoming more informed and calculative & searching for alternate investment opportunities, and many others.

www.aeph.in

2

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Growth in Assets Under Management (Chart II)

11,86,364 11,73,294 13,17,267 12,03,547 10,82,757 8,25,240
11,86,364
11,73,294
13,17,267
12,03,547
10,82,757
8,25,240

7,01,443

13,17,267 12,03,547 10,82,757 8,25,240 7,01,443 5,87,217 Mar'12 Mar'13 Mar'14 Mar'15

5,87,217

13,17,267 12,03,547 10,82,757 8,25,240 7,01,443 5,87,217 Mar'12 Mar'13 Mar'14 Mar'15 Apr'15

Mar'12

Mar'13

Mar'14

Mar'15

Apr'15

May'15

Jun'15

Jul'15

It is in the milieu of Indian statistics, the mutual fund industry of India is flourishing and

has travelled a long path after opening itself to retail investors and changing itself according to changing market scenario. Mutual fund is the pool of various investors’ funds. These are transparent and low cost investment avenues offering professional guidance to its investors. Lot of schemes areavailable in the market which investor has to evaluate in terms of benefits, returns, risk involved, duration and also past performance. Performance

of the scheme or the fund has to be analyzed to look for stability, risk return profile, i.e. how well or badly fund has returned as compared to its stated objectives and competitors.

It is also true that not every investor has that knack to analyze every aspect as well as

inclination to invest, so the professional expertise of mutual funds plays a key part in this

scenario. It also helps in diversifying one’s investment even by adding investment options of world markets. These investments are then affected by number of other factors like fluctuation in currency prices, hike in crude prices, and recession in international markets, and others.

Paper proceeds in the following way: Section 2 covers the conceptual discussion on mutual funds. Section 3 highlights the available literature covering performance & analysis of mutual funds, followed by objectives & methodology used to analyze the mutual funds in section 4. Analysis & findings are presented in section 5 and section 6 list the limitations of the study. Section 7 highlights the future prospects of the mutual fund industry followed by references.

2. Conceptual Discussion

Mutual Funds

A mutual fund is just the connecting bridge or as a Trust or a financial intermediary that

invest according to the certain investment objective, the money of various individual investors, who have common financial goal, into one pool of funds. When investor invests in a mutual fund he/she becomes shareholder or unit holder of the fund as he/she is buying portion of that mutual fund or scheme. The mutual fund manager is responsible for investing the gathered money into specific securities like stocks, bonds, gold, commodities, hedge funds, other alternative investments & international bonds or stock. The holders of the fund share the income and returns earned through these investments presented in the scheme in proportion to the number of units held by them. The value of these units changes every day with the changes in the portfolio’s value. This value is known as NAV or Net Asset Value. ((AMFI), About Mutual Funds, 2011). Benefits of Mutual Funds are presented in figure 1.

www.aeph.in

3

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Figure 1: Benefits of Mutual Funds

Professiona Reduction Portfolio Reduction l in Various Diversificat Liquidity in Risk Manageme Transaction
Professiona
Reduction
Portfolio
Reduction
l in
Various
Diversificat
Liquidity
in Risk
Manageme
Transaction
Schemes
ion
nt
Costs

Source: www.amfiindia.com

Various schemes of mutual funds can be divided into various categories. These are depicted in figure 2. First categorization is by Structure; this includes Open ended schemes and Close ended schemes. Open ended mutual funds remain open for throughout the year for subscription and/or redemption, they don’t have fixed maturity time thus their best feature is liquidity whereas Close ended mutual funds have fixed maturity usually ranging from 2-15 years, these can only be issued at the beginning and cannot be redeemed before their respective maturities and also these are traded at a discount to NAV. Open ended funds have less flexibility as they have to invest in readily marketable securities because they can face liquidity conditions at any time but on the other hand close ended funds are more flexible as they don’t face liquidity situations so often, so they is no need to invest in readily marketable securities.(Sisodiya & Pemmaraju,

2010)

Figure 2: Classification of Mutual Funds

Mutual Funds Nature/ Structure Investment Other Schemes Objectives Tax Saving Open Ended Equity Fund Debt
Mutual Funds
Nature/
Structure
Investment
Other Schemes
Objectives
Tax Saving
Open Ended
Equity Fund
Debt Fund
Balanced Funds
Schemes
Diversified
Close Ended
Index Schemes
Equity Fund
Mid Cap Fund
Sector Specific
Fund
Tax Savings
Fund

www.aeph.in

4

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

On the basis of Nature or Investment Parameters mutual are divided into 3 categories i.e. equity fund, debt fund and balanced fund.

Equity funds invest the major share of funds in equities holdings. These are also

known as growth schemes. Selection of stocks may depend on the fund manager’s outlook towards various stocks available. Since equity investments are usually for longer duration as compared to other investment avenues so these funds rank high on the risk-return profile. In other words, these are for longer durations and no regular income is guaranteed to the investor, so the investors who want their money back in short term or looking for regular income should not invest in this scheme. These are further classified as Diversified

Equity Funds, Mid-Cap Funds, Sector Specific Funds and Tax Savings Funds (ELSS).

Debt funds unlike equity funds invest majorly in debts. These are also known as

income schemes. These funds generate stable income for the unit holders as they carry a low risk as compared to equity funds which are highly volatile. Debt funds like bonds, debentures, are mostly issued by financial institutions, banks, government and authorities. unlike equity schemes these doesn’t provide much capital appreciation but generates regular and steady income for its investors thus suitable for the people looking for regular income or capital stability like retired persons, widows etc.

Balanced funds try to create the balance between the investment patter of the fund.

They carry a mix of both equity and debt funds usually 50:50. Their main aim is to fulfill growth objective as well as return stability to its diversified pool of investors. Growth objective is met with equity investments and stability in returns is ensured by debt papers, thus providing the better of the two worlds in one fund to the investors. These are best for those investors who are looking for capital appreciation and income & are also willing to take some risk.

Money Market Schemes as the name suggests deals only in money market, since

these are for shorter duration so they provide easy liquidity, average income and also protection of capital. Money market instruments are like treasury bills, commercial papers, certificate of deposits etc., all of these are considered as safe investments, can easily be

liquidated and mostly preferred by those investors (corporate or individual) who want to park their surplus or excess funds for shorter durations.

Asset of the mutual funds have mixed effects. In some cases it helps in manager in investing funds as the money in the fund increases but the flip side is that with the increase in asset size, investment manager also faces problems in selecting more funds to invest the newly added money and then they need to buy wide variety of securities to balance their risk or other option is to increase their holdings in the already existing portfolio of securities, thus surrounded with option confusions.

3. Literature Review

Arora & Deepa (2009) in their report analyzed the current & future aspects of the Indian mutual fund industry. Report showed the growth in asset under management in various countries; as compared to GPD ratio of India; share of mutual funds in hosuehold savings; industry investor composition and groth rate across various types of mutual funds, from year 2005 till 2009. They interpreted the drivers of growth for the mutual fund from the customer point of view, which highlighted many key issues faced by them. Few issues were less knowledge of the funds, not enough coverage, financial literacy, distribution of funds, quality of advice and many others.

Duggimpudi, Abdou, & Zaki (2010) analyzed the risk & return of equity diversified funds for the period of 2000 till 2009. They also compared the risk adjusted parameteres of all the funds with the BSE Sensex, to analyze their performance. Their study concluded that risk & return of selected mutual funds had positive relation and their beta values were less 1, indicating less risky nature than market.

Kumar (2011) studied the performance of the mutual funds by way Sharpe, Treynor & Jensen. He also analyzed the funds senstivity to the market movements. Paper concluded that all the schemes have beta less than the market, thus explaining that they are less

5

www.aeph.in

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

risky than the market. Also top 5 performing mutual funds suggested by the paper were Reliance Growth Fund, Reliance Vision Fund, ICICI Prudential Tax Plan, HDFC Top 200 and Birla Sun Life Equity Fund. These funds also perform better according to the risk adjusted measures used by the author.

Goel, Sharma, & Mani (2012) evaluated the open ended mutual schemes on the

parameters of asset soze, risk adjusted performance & expense ratio for the peirod of Apr

2006 to Mar 2011. By regression analysis they concluded that future performance of the

mutual funds is dependednt on their past performance. Also as the expense ratio lowers &

asset size increases, mutual funds results in high risk adjusted returns.

Jain (2012), studied the risk return relationship of 45 equitymutual funds and also used Capital Asset Price Model (CAPM) for the perios of 15 years from 1997 2012. He concluded that ICICI & HDFC were best performers in terms of return adjusted with their return and UTI & LIC were average to worst performers.

Mehta & Shah (2012) conducted a survey of 100 investors to unearth the preferrred mutual schemes and then analyzed their performance. They concluded that Equity tax saving, Equity diversified and Equity sectoral schemes were mostly preferred by the investors. Study then concluded the best performing mutual scheme in all the three categories based on NAV, sharpe, treynor & beta.

Narayanasamy & Rathnamani, (2013) analyzed the risk return parameters of the selected equity large cap mutual funds for the period of Jan 2010 Dec 2012. Study concluded that all the funds have perofrmed well in the selecetd period and downfall in CNX Nifty in

2011 had an adverse impact on the mutual funds selected. They also highlighted that for a

investor it is very important to analyze & study the risk parameters of mutual funds i.e.

sharpe, treynor, and beta of fund along with NAV & total returns. As then only true performance of the fund can be known and analyzed.

Vasantha, Maheswari, & K.Subashini (2013) by using Sharpe, Treynor & Jensen analyzed the performance of growth equity mutual fund schemes for the period of Jan 2008 Dec 2012. They concluded that all the selected funds were less risky than the market as their betas were less than 1. HDFC top 200 fund was the best performer among the lot in terms of retunrs of last 5 years. Even the standard deviation of HDFC top 200 fund & Birla Sunlife front line equity fund was least w.r.t other funds. Also it conclude that investors who need regular income should invest in HDFC top 200 fund & Canara Robeco equity diversified fund.

Annapoorna & Gupta (2013) evaluated the performance of the top rated schemes by the CRISIL w.r.t. SBI domestic term deposit rates. NAV, returns & asset size has been used to analyse their performance with respect to term deposit rates for that period. Study concluded that many mutual fund have delivered returns above term deposit rates and returns were also remarkeable for the period of 1 year & 5 years. Also hybrid mutual funds provided capital appreciation as well as income appreciation, thus fulfilling their motive and debt funds were beneficial only when invested for more than 1 year. Lastly returns were average & positive for money market mutual funds as compared to SBI term deposit rates.

4. Objective & Methodology

The objective of the paper is to analyze the Indian mutual fund scenario from the year

2010 2015 by way of analyzing 23 Open Ended Equity Mutual Fund Growth (G) Schemes.

These schemes have been scrutinized by the way of performance indicators i.e. risk, return, beta, Sharpe &Sortino ratios to unearth the best scheme during the span of 5 years. Secondary data is used in the research which is extracted from Mutualfundindia.com,

Morningstar.in, Economictimes.com and Moneycontrol.com. Convenience sampling was used to select the various mutual fund schemes. Monthly returns of various schemes have been annualized to draw out the return for the various years. In the end giving appropriate ranking to all 23 mutual funds according to the Return, Risk (measured by Standard deviation (SD), Beta, Sharpe, Sortino and even by the correlation with the market and thus top 5 mutual fund schemes are zeroed in.

www.aeph.in

6

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Data analysis forms the main part of the research paper. It adds meaning to the theoretical practices quoted. The data analysis techniques used in the paper are as follows:

Return on the Mutual fund scheme is calculated as:

Annualized Return = Rp = ∑Monthly Return / 12

Beta refers to the systematic risk attached to each mutual fund, which is compared with the market. It reflects how significantly the return of the fund or security varies with the changes in the market and is calculated as follows:

β = Cov (RpRm) / σm 2

Where σ m 2 = Variance of the market

R m = Market Return

R p = Portfolio Return

Sharpe Ratio helps in measuring the reward of the fund based on its total risk. When this ratio is compared with the market return its shows whether the fund or security has performed better (if Sharpe ratio > Market return) or worse (if Sharpe ratio < Market return) than the market. It is calculated as follows:

(Rp Rf) / σ

Where R f = Risk Free Rate

σ = Standard Deviation of the fund/portfolio

Treynor Ratio also helps in measuring the return of the portfolio but it is based on the systematic risk measure i.e. beta. To conclude the performance of the fund Treynor measure of the fund is compared with the Treynor measure of the market, since market beta is also equal to 1, market risk premium i.e. (Rp Rf) becomes the slope of security market line and if the Treynor ratio of fund >Treynor of market, the fund has outperformed and vice-a-versa.

(Rp Rf) / β

Where β = Beta of the fund/portfolio

Expected Returnis calculated by way of Capital Asset Pricing Model (CAPM). If the fund actual returns are more than the expected returns, then it can be said that it has outperformed.

Re = Rf+β (Rm Rf)

Sortino is the risk adjusted measure and the only difference with Sharpe &Treynor is that, it penalizes the negative returns.

5. Analysis & Findings

Mutual funds were analyzed by way of various risk return measures, so that best scheme can be selected. Table 1 analyzes the performance of the mutual funds by way of calculation of relative return. If the fund’s relative actual return is less than expected return calculated by way of CAPM, then it is considered to be underperformed otherwise over performed. Out of 23 schemes selected only 6 schemes over performed according to their expectation during the period under study. These were UTI transportation & logistics, Kotak Midcap fund, Religare Invesco banking fund, Kotak emerging equity, Sundaram select midcap and HSBC mid cap equity fund. Top fund according to the returns generated in the period of 5 years came out to be DSP Blackrock Micro cap fund (2.39%) followed by UTI transportation & logistics fund (2.25%). Reliance pharma fund, ICICI prudential FMCG fund, ICICI prudential value discovery fund, and IDFC premier equity fund were among the top 10 performers in the market but still they were projected to have more returns. Worst performing funds were Mirae asset global commodity stock fund, Franklin India index fund,

www.aeph.in

7

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Templeton India Equity Income fund & Edelweiss absolute return fund. These funds underperformed as well as generated very low returns & even in negative.

Table 1: The Performance & Ranking according to Relative Measure of Return

 
 

Relative

Relative

   

Mutual Fund Scheme

Expected

Actual

Performance

Rank

Return

Return

Reliance Pharma Fund (G)

4.85%

1.84%

Underperformed

3

CanaraRobeco Equity Diversified (G)

2.20%

1.21%

Underperformed

17

ICICI Prudential Value Discovery Fund(G)

1.94%

1.73%

Underperformed

5

SBI Magnum Balanced Fund (G)

3.26%

1.12%

Underperformed

19

Birla Sun Life Dividend Yield Plus (G)

2.03%

1.21%

Underperformed

17

IDFC Premier Equity Fund - Plan A (G)

2.61%

1.71%

Underperformed

6

UTI Transportation And Logistics Fund(G)

0.79%

2.25%

Overperformed

2

Edelweiss Absolute Return Fund (G)

6.01%

0.99%

Underperformed

20

Franklin India Index Fund NSE Nifty Plan

0.92%

0.86%

Underperformed

22

DSP Blackrock Micro Cap Fund - Regular Plan (G)

3.12%

2.39%

Underperformed

1

ICICI Prudential Balanced (G)

3.59%

1.34%

Underperformed

12

Kotak Midcap Fund

1.01%

1.57%

Overperformed

8

ICICI Prudential FMCG Fund (G)

4.56%

1.79%

Underperformed

4

Religare Invesco Banking Fund - Regular Plan (G)

-1.23%

1.51%

Overperformed

10

Mirae Asset Global Commodity Stocks Fund (G)

3.79%

-0.17%

Underperformed

23

HDFC Balanced Fund (G)

3.68%

1.41%

Underperformed

11

UTI Equity Fund (G)

1.72%

1.25%

Underperformed

16

Franklin Infotech Fund (G)

4.51%

1.29%

Underperformed

14

TATA Dividend Yield Fund (G)

2.48%

1.32%

Underperformed

13

Kotak Emerging Equity Regular Fund (G)

1.04%

1.56%

Overperformed

9

Sundaram Select Midcap (G)

1.14%

1.62%

Overperformed

7

HSBC Midcap Equity (G)

-1.24%

1.27%

Overperformed

15

Templeton India Equity Income Fund (G)

2.58%

0.88%

Underperformed

21

Beta of more than 1 indicates that fund is more risky than the market. As shown in table 2, only three stocks have beta more than i.e. UTI transportation & logistics, Religareinvesco banking fund & HSBC midcap equity. Among them also UTI transportation & logistics fund had a beta equal to 1, which means that it is same as market. Rest all the mutual funds were less risky than the market as their betas were less market beta of 1. Also variation in their returns, as measured by standard deviation, also shows that HSBC midcap equity &Religareinvesco banking fund were the most deviating funds. In other words they had the maximum standard deviation of 26.48 % & 25.39% respectively. Due to so much variation & risky nature of these funds, they were not able to generate great return in the period of 5

8

www.aeph.in

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

years as calculated by way of absolute returns. Absolute returns were calculated by way of average difference in the value of fund NAV on the last day i.e. 31 st July 2015 & on 31 st July 2010. Highest return were generated by UTI transportation& logistics funds, Reliance Pharma fund, ICICI prudential FMCG fund, DSP Blackrock microcap fund and ICICI prudential value discovery fund. These results were almost in conjunction with the results obtained by way of relative return of the funds. Worst performing according to absolute returns also was Mirae asset global commodity stocks fund, Franklin India index fund & IDFC premier equity fund, which were also same according to the relative returns.

Table 2: Absolute Risk & Return of Funds

Mutual Fund Scheme

S.D

Return

Rank

Beta

(%)

(%)

Reliance Pharma Fund (G)

14.57

21.96

2

0.45

CanaraRobeco Equity Diversified (G)

14.92

13.46

17

0.81

ICICI Prudential Value Discovery Fund (G)

17.46

20.26

5

0.85

SBI Magnum Balanced Fund (G)

12.54

14.19

15

0.67

Birla Sun Life Dividend Yield Plus (G)

16.51

11.87

21

0.83

IDFC Premier Equity Fund - Plan A (G)

16.22

19.08

7

0.75

UTI Transportation And Logistics Fund (G)

21.98

27.50

1

1.00

Edelweiss Absolute Return Fund (G)

6.95

12.12

20

0.29

Franklin India Index Fund NSE Nifty Plan

17.06

9.85

22

0.98

DSP Blackrock Micro Cap Fund - Regular Plan

20.10

20.97

4

0.69

(G)

ICICI Prudential Balanced (G)

11.75

16.98

9

0.62

Kotak Midcap Fund

20.13

16.50

10

0.97

ICICI Prudential FMCG Fund (G)

13.57

21.37

3

0.49

Religare Invesco Banking Fund - Regular Plan

25.39

13.85

16

1.27

(G)

Mirae Asset Global Commodity Stocks Fund (G)

17.46

-2.03

23

0.60

HDFC Balanced Fund (G)

12.50

16.18

11

0.61

UTI Equity Fund (G)

15.62

15.73

12

0.87

Franklin Infotech Fund (G)

21.40

14.63

13

0.50

TATA Dividend Yield Fund (G)

14.96

14.25

14

0.77

Kotak Emerging Equity Regular Fund (G)

19.44

17.45

8

0.95

Sundaram Select Midcap (G)

19.29

19.65

6

0.94

HSBC Midcap Equity (G)

26.48

12.67

18

1.26

Templeton India Equity Income Fund (G)

15.15

12.66

19

0.75

Table 3shows ranks the various open ended equity growth mutual funds on the basis of three years Sharpe ratio, Treynor ratio and Sortino ratio. UTI Transportation and Logistics Fund holds the top position on the basis of Sharpe ratio i.e. per unit return measured by way of total risk and as well as on the basis of Sortino& second rank on the basis of Treynor measure. DSP Blackrock microcap fund holds the first rank according to the risk measured by the Treynor ratio but in terms of Sharpe ratio it came on rank 3. From the

9

www.aeph.in

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

analysis it also came to light that out of 23 funds four mutual funds have same ranking in either of the two ratios and even these risk adjusted measures proved that Mirae asset global commodity stock fund was the worst performer in the whole lot. Franklin India index fund &Religareinvesco banking fund performed badly according to almost all the three ratios i.e. Sharpe, Treynor&Sortino.

Table 3: 3 years Risk Parameters of Funds

 

Mutual Fund Scheme

 

Treynor

Rank

Sharpe

Rank

Sortin

Rank

 

o

Reliance Pharma Fund (G)

 

26.95

3

1.62

4

2.86

2

CanaraRobeco Equity Diversified (G)

13.96

20

0.97

18

1.84

15

ICICI

Prudential

Value

Discovery

24.22

6

1.48

7

2.62

5

Fund (G)

 

SBI Magnum Balanced Fund (G)

20.81

9

1.66

2

2.57

7

Birla Sun Life Dividend Yield Plus

13.08

21

0.85

20

1.69

17

(G)

IDFC Premier Equity Fund - Plan A

24.99

5

1.49

6

2.50

8

(G)

UTI

Transportation

And

Logistics

30.64

2

1.72

1

3.28

1

Fund (G)

 

Edelweiss Absolute Return Fund (G)

16.46

18

1.24

11

2.36

10

Franklin India Index Fund NSE Nifty Plan

10.92

22

0.80

21

1.50

19

DSP Blackrock Micro Cap Fund - Regular Plan (G)

31.49

1

1.65

3

2.42

9

ICICI Prudential Balanced (G)

17.62

15

1.51

5

2.70

3

Kotak Midcap Fund

 

18.99

12

1.17

12

1.84

15

ICICI Prudential FMCG Fund (G)

14.63

19

0.99

17

1.33

20

Religare Invesco Banking Fund - Regular Plan (G)

19.11

11

0.69

22

1.13

22

Mirae Asset Global Commodity Stocks Fund (G)

-51.49

23

-0.69

23

-1.25

23

HDFC Balanced Fund (G)

 

16.90

16

1.33

10

2.65

4

UTI Equity Fund (G)

 

16.70

17

1.17

12

2.21

11

Franklin Infotech Fund (G)

 

19.52

10

0.86

19

1.21

21

TATA Dividend Yield Fund (G)

17.97

14

1.14

15

2.12

12

Kotak

Emerging

Equity

Regular

23.84

7

1.37

9

1.91

14

Fund (G)

 

Sundaram Select Midcap (G)

25.63

4

1.44

8

2.6

6

HSBC Midcap Equity (G)

 

22.29

8

1.16

14

1.97

13

Templeton

India

Equity

Income

18.33

13

1.00

16

1.69

17

Fund (G)

 

www.aeph.in

10

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

As in the previous table comparative analysis of the fund’s performance was done by way ranking their 5 years ratios, same is done in table 4. In this analysis now the ratio of last five years ending on 31 st July 2015 was taken. As the Treynor ratio of many mutual funds were not available for the period of 5 years, so only Sharpe&Sortino ratios were taken into consideration. Major analysis which came into light was that out of 23 mutual fund schemes, 17 schemes had same ranking in both the ratios. All of these 17 fundsperformed same according to both the measure of performance, top fund being ICICI prudential FMCG fund followed by UTI transportation & logistics and ReliancePharma fund. These results again correspond with the 3 years performance as well as the relative & absolute returns.Least performing funds were again the same i.e. Mirae asset global commodity fund, Franklin India Index fund and HSBC midcap equity fund.

Table 4: 5 years Sharpe &Sortino Ratios of Funds

 

Mutual Fund Scheme

Sharpe

Rank

Sortino

Rank

Reliance Pharma Fund (G)

0.96

2

1.60

3

CanaraRobeco Equity Diversified (G)

0.45

16

0.73

16

ICICI Prudential Value Discovery Fund (G)

0.74

5

1.30

5

SBI Magnum Balanced Fund (G)

0.56

13

0.85

13

Birla Sun Life Dividend Yield Plus (G)

0.33

20

0.53

20

IDFC Premier Equity Fund - Plan A (G)

0.73

6

1.17

8

UTI Transportation And Logistics Fund (G)

0.91

3

1.61

2

Edelweiss Absolute Return Fund (G)

0.68

9

1.24

6

Franklin India Index Fund NSE Nifty Plan

0.22

22

0.34

22

DSP Blackrock Micro Cap Fund - Regular Plan (G)

0.71

7

1.12

9

ICICI Prudential Balanced (G)

0.81

4

1.40

4

Kotak Midcap Fund

0.52

14

0.80

14

ICICI Prudential FMCG Fund (G)

0.98

1

1.63

1

Religare Invesco Banking Fund - Regular Plan

       

(G)

0.36

19

0.59

19

Mirae Asset Global Commodity Stocks Fund

       

(G)

-0.44

23

-0.58

23

HDFC Balanced Fund (G)

0.71

7

1.20

7

UTI Equity Fund (G)

0.57

11

0.92

11

Franklin Infotech Fund (G)

0.40

17

0.62

17

TATA Dividend Yield Fund (G)

0.50

15

0.78

15

Kotak Emerging Equity Regular Fund (G)

0.57

11

0.88

12

Sundaram Select Midcap (G)

0.67

10

1.08

10

HSBC Midcap Equity (G)

0.32

21

0.42

21

Templeton India Equity Income Fund (G)

0.40

17

0.62

17

From the all the above 4 tables few conclusions can be made i.e.:

www.aeph.in

11

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Least performing funds were Mirae asset global commodity fund, Franklin India Index fund and HSBC midcap equity fund according to all the risk & return parameters.

Best performer among the lot of 23 open ended equity growth schemes were UTI

transportation & logistics fund, ICICI prudential FMCG fund and Reliance Pharma fund.

Average

prudential value

discovery fund, ICICI prudential balanced fund, and HDFC balanced fund.

All of these funds have almost same risk return profile and as the risk increase their returns also increase to some extend but not in the same proportion.

performer

being

DSP

Blackrock

microcap

fund,

ICICI

Table 5: Funds Correlation with BSE SENSEX

Mutual Fund Scheme

r

Rank

Reliance Pharma Fund (G)

0.51

22

CanaraRobeco Equity Diversified (G)

0.92

3

ICICI Prudential Value Discovery Fund (G)

0.83

11

SBI Magnum Balanced Fund (G)

0.90

5

Birla Sun Life Dividend Yield Plus (G)

0.86

8

IDFC Premier Equity Fund - Plan A (G)

0.78

17

UTI Transportation And Logistics Fund (G)

0.78

16

Edelweiss Absolute Return Fund (G)

0.73

18

Franklin India Index Fund NSE Nifty Plan

1.00

1

DSP Blackrock Micro Cap Fund - Regular Plan (G)

0.59

19

ICICI Prudential Balanced (G)

0.91

4

Kotak Midcap Fund

0.82

12

ICICI Prudential FMCG Fund (G)

0.57

20

Religare Invesco Banking Fund - Regular Plan (G)

0.86

7

Mirae Asset Global Commodity Stocks Fund (G)

0.56

21

HDFC Balanced Fund (G)

0.84

9

UTI Equity Fund (G)

0.95

2

Franklin Infotech Fund (G)

0.40

23

TATA Dividend Yield Fund (G)

0.88

6

Kotak Emerging Equity Regular Fund (G)

0.80

14

Sundaram Select Midcap (G)

0.80

13

HSBC Midcap Equity (G)

0.79

15

Templeton India Equity Income Fund (G)

0.83

10

Last but not the least Table 5 explains the relationship between mutual funds & the stock market. It shows the correlation between returns of various funds and the BSE Sensex as the benchmark index. All funds have positive correlation with the Sensex and Franklin India index fund have the perfect positive relation i.e. r = 1. This is followed by UTI equity fund, CanaraRobeco Equity Diversified, ICICI Prudential Balanced, SBI Magnum Balanced Fund, & Tata dividend yield fund. All of these funds have a strong correlation with the market. Franklin Infotech Fund, Reliance Pharma Fund, Mirae Asset Global Commodity

www.aeph.in

12

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Stocks Fund and ICICI Prudential FMCG Fundhas low correlation with the market, but still ICICI Prudential FMCG Fund was able to generate favorable & impressive returns for its investors.

Overall from the analysis it can be said that overall performance of equity mutual funds is above the market and maximum of the funds generated money for their investors thus keeping their faith in the fund.

6. Limitations Of The Study

Simple random sampling is used, so results may vary, if different schemes are

included.

Sample is selected from a small universe of Open Ended Equity funds, thus limiting research’s scope & analysis to one type of mutual funds only.

Data used is of only 5 years i.e. analysis time span is small & also previous year volatility is not considered.

7. Future Prospects

After analyzing the current scenario of various mutual funds, let’s discuss the future prospects of India’s mutual fund industry. The road ahead for mutual fund industry is not easy as lot have to be done by the government and fund houses in order to gain continuous attention of the investors. Also the success of the mutual fund industry will depend upon the capital market movements, expanding of mutual fund houses investment avenues by regulators of markets and adoption of these changes by fund houses. Thus it is now vital for the mutual fund industry to proactively map its course onto the next echelon of growth. So, the key issues on which mutual fund industry has to evolve further for its sustained future growth or challenges faced by the industry which are in the way hampering the true potential of mutual funds are presented in Figure 3.

www.aeph.in

13

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Figure 3: Future Prospects of Indian Mutual Industry

Products innovation should be there. Should look for comprehensive life cycle planning. Schemes should be customer focused rather than product focused. Inclusion of well structured debt market.

Newer Products Expanding the Reach Easy Accessibility • Newer Norms • & Regulations •
Newer
Products
Expanding the
Reach
Easy
Accessibility
Newer Norms
& Regulations
Investor's Education
Investor's
Education

Increase the distribution reach.

Move beyond Tier I and II

cities. Tap the needs of new age investors i.e. growing middle class.

Increase the distribution channels and investor servicing.

Indian post network should be involved more in providing mutual funds to rural areas.

Build norms for green funds, fund of hedge funds, renewable energy funds etc.

Fees structure should be made flexible.

Regulations conflict with other counterparts like insurance, ULIPs, etc, should be answered. Investor's awareness programes should be designed according to the segment of investors.

Informed about all the vital details of investing in mutual funds. Educate the investors about nuances of financial planning.

References

(AMFI), A. o. (2011, October). About Mutual Funds. Retrieved from www.amfiindia.com:

http://www.amfiindia.com/showhtml.aspx?page=mfconcept

(AMFI), A. o. (2011, October). Investors Zone - Average AUM. Retrieved from www.amfiindia.com:

http://www.amfiindia.com/AUMReport_Frm_Po.aspx?rpt=fwise

Annapoorna, M., & Gupta, P. K. (2013, October). A Comparative Analysis of Returns of Mutual Fund Schemes Ranked 1 By CRISIL. Tactful Management Research Journal, 2(1).

www.aeph.in

14

Journal of Exclusive Management Science July 2016 - Vol 5 Issue 7 ISSN 2277-5684

Arora, V., & Deepa, P. S. (2009). Indian Mutual Fund Industry - The Future in a Dynamic Environment. KPMG.

Duggimpudi, R. R., Abdou, H. A., & Zaki, M. (2010). An evaluation of equity diversified mutual funds: the case of the Indian market. Investment Management and Financial Innovations, 7(4).

Goel, S., Sharma, R., & Mani, M. (2012). A study of performance and characteristics of open ended mutual funds. Asian Journal of Management Research, 3(1), 116-124.

ICFAI. (2007). The Concept and Role of Mutual Funds. In T. F. Universities, Mutual and Other Funds (pp. 2, 15-21). ICFAI University Press.

ICRA.

http://www.mutualfundsindia.com/fundfact.asp

Jain, S. (2012, July- Aug). Analysis of Equity Based Mutual Funds in India. IOSR Journal of Business and Management (IOSRJBM), 2(1), 01-04.

Jayadev, M. (1996). Mutual Fund Performance: An Analysis of Monthly Returns. Finance India, X(1), 73-84.

Kumar, D. V. (2011, December). Performance Evaluation of Open Ended Schemes of Mutual Funds. International Journal of Multidisciplinary Research, 1(8), 428 - 446.

Mehta, D. S., & Shah, C. (2012, September). Preference of Investors for Indian Mutual Funds and its Performance Evaluation. Pacific Business Review International, 5(3), 62-76.

Narayanasamy, D. R., & Rathnamani, V. (2013, April). Performance Evaluation of Equity Mutual Funds (On Selected Equity Large Cap Funds). International Journal of Business and Management Invention, 2(4), 18-24.

PwC. (2010). Indian Mutual Fund Industry - Towards 2015. CII 6th Mutual Fund Summit 2010.

Singh, J. (2006). Mutual Funds: Growth, Performance and Prospects. Deep and Deep Publications Pvt. Ltd.

Sisodiya, A. S., & Pemmaraju, R. (2010, July 2010). Mutual Fund 2010. The Analyst.

Vasantha, D. S., Maheswari, U., & K.Subashini. (2013, September). 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, 2(9), 4735 - 44.

(2011,

October).

Fund

Fact

Sheet.

Retrieved

from

www.mutualfundindia.com:

www.aeph.in

15