Harsh

INTRODUCTIONINTRODUCTION

With the emphasis in increase in domestic savings and improvement in deployment of investment through markets, the need and scope for Mutual Fund operation has increased tremendously. Mutual Funds have become one of the largest financial intermediaries in the leading world economies, it is a vehicle that enables millions of small and large savers spread across the country as well as internationally to participate in and derive the benefit of the capital market growth. It is an alternative vehicle of intermediation between the suppliers and users of investible resources. The vehicle is becoming increasingly popular in India and abroad due to higher investor return, relatively lower risk and cost. Thus the involvement of Mutual Funds in the transformation of Indian economy has made it urgent to view their services not only as financial intermediary but also as pace setter as they are playing a significant role in spreading equity culture.

The Mutual Fund industry has been in India for a long time. This came into existence in 1963 with the establishment of Unit Trust of India, a joint effort by the Government of India and the Reserve Bank of India. The next two decades from 1986 to 1993 can be termed as the period of public sector funds with entry of new public sector players into the Mutual Fund industry namely, Life Insurance Corporation of India and General Insurance Corporation of India.

The year of 1993 marked the beginning of a new era in the Indian Mutual Fund industry with the entry of private players like Morgan Stanley, J.P Morgan, and Capital International This was the first time when the Mutual Fund regulations came into existence. SEBI (Security Exchange Board of India) was established under which all the Mutual Funds in India were required to be registered. SEBI was set up as a governing body to protect the interest of investor.

By the end of 2010, the number of players in the industry grew enormously with More than 50 fund houses functioning in the country. With the rise of the Mutual Fund industry, establishing a Mutual Fund association became a prerequisite. This is when AMFI (Association of Mutual Funds India) was set up in 1995 as a nonprofit organization.

Today AMFI ensures Mutual Funds function in a professional and health} manner thereby protecting the interest of the Mutual Funds as well as its investors.

The Mutual Fund industry is considered as one of the most dominant players in the world economy and is an important constituent of the financial sector and India is no exception. The industry has witnessed startling growth in terms of the products and services offered, returns churned, volumes generated and the international players who have contributed to this growth. Today the industry offers different schemes ranging from equity and debt to fixed income and money market.

It is interesting to note that the major benefits of investing in a Mutual Funds is to capitalize on the opportunity of a professionally managed fund by a set of fund managers who apply their expertise in investment. This is beneficial to the investors who may not have the relevant knowledge and skill in investing. Besides investors have an opportunity to invest in a diversified basket of stocks at a relatively low price. Each investor owns a portion of the fund and hence shares the rise and fall in the value of the fund. A Mutual Fund may invest in stocks, cash, bonds or a combination of these.

Mutual Funds are considered as one of the best available investment options as compare to others alternatives. They are very cost efficient and also easy to invest in. The biggest advantage of Mutual Funds is they provide diversification, by reducing risk & maximizing returns.

India is ranked one of the fastest growing-economies in the world. Despite this huge progression in the industry, there still lies huge potential and room for growth. India has a saving rate of more than 35% of GDP, with 80% of the population who save. These savings could be channelized in the Mutual Funds sector as it offers a wide investment option. In addition, focusing on the rapidly growing tier II and tier III cities within India will provide a huge scope for this sector. Further tapping rural markets in India will benefit Mutual Fund companies from the growth in agriculture and allied sectors. With subsequent easing of regulations, it is estimated regulations, it is estimated that the Mutual Fund will grow at a rate of 30% - 35% in the next 3 to 5 years and reach US 300 billion by 2015.

As it can be noted, there is huge growth and potential in the Mutual Fund industry. The development of this sector so far has been commendable and with the above positive factors we are looking at a more evolved industry.

Due to its academic and practical importance, Mutual Fund Performance assessment has been an important area of research in finance. One of the crucial factors ensuring efficient functioning of Mutual Funds is proper evaluation of their performance. This is important for investors who would like to make sure that their funds follow desirable strategies and earn positive risk-adjusted returns. The past four decades have witnessed the proliferation of managed funds, international diversifications to reduce market risks, and attractiveness to many investors around the globe. Hence, there is now a pressing need for a credible and robust measure for assessing and ranking the performance of managed funds.

This paper analyzes Mutual Fund Performance Evaluation of Equity Funds. The Study in this paper includes Equity Based Mutual Funds of 5 different Mutual Fund Company. This paper will provide a thorough analysis of Mutual Funds Performance Evaluation in respect to the Equity Market (BSE INDEX). In particular this study provides evidence on Performance Evaluation for Mutual Funds.

The Study comprises of evaluating the Returns, Standard Deviation, Beta, Sharpes Index and Treynors Index and comparing the Returns towards the Benchmarking (i.e., BSE SENSEX) over the period of 1 year (1 -April-2 OlJt to 31- March-2013).

0.1 PROBLEM DEFINITION STATEMENT:

Investment decisions mainly depend upon the investor's attitude towards risk and return of each of the avenues of investment. Planning and advisory services play an important role in facilitating an investor in investing process. For advising an investor for investment, performance evaluation is necessary. Hence the study is aimed at Performance Evaluation of Mutual Funds a study on Growth Funds

0.2 RESEARCH OBJECTIVES:

To understand the Equity Mutual Fund Industry in India.

To analyze the performance of the funds by calculating beta, standard deviation and co-efficient of variance.

To rank the fund of selected AMC's according to sharpess, treynors, Jensens.

To study the legal and regulatory environment of the funds.

To analyze the perception towards mutual funds.

To suggest measures for improving the performance of AMCs

0.3 SCOPE OF THE STUDY

The Study defines the preference for investment in various Mutual Funds. This study covers Equity Mutual Funds of five AMCs.The study covers the period of past one year i.e. from April 2012to March 2013.The study applies only three approaches to evaluate performance, namely Sharpes Index , Treynors Index, Jenson.

0.4 RESEARCH METHODLOGY

A research design is a plan of action to be carried out in connection with a research project. The research design which was carried out for the study is exploratory study which tries to bring out difference between the various investments avenues in mutual fund.

SOURCES OF DATA

Secondary data

Magazines and journals

Text books

News paper publications on internet.

Official website of the Company

SAMPLE DESIGN

1. BIRLA SUNLIFE EQUITY FUND

2. AXIS EQUITY FUND

3. HDFC EQUITY FUND

4. TATA MANAGEMENT EQUITY FUND

5. UTI EQUITY FUND

LIMITATIONS:

The primary data collected is only from the Fact Sheets, y deskwork cum discussion with work teams and Project guide of Angel Broking.

This fund considers only open ended funds growth option.

On account of the large diverse nature of the entire universe of mutual funds, only tax saver scheme has been selected for this fund.

The ranks are assigned on the basis of a few parameters.

In depth analysis could not be done due to the time constraint.

The comparison is done only for 5 AMC's.

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INDUSTRY PROFILE

ASSETS MANAGEMENT COMPANIESBIRLA SUNLIFE MUTUAL FUND

Mutual Fund

Birla Sun Life Mutual Fund

Setup Date

Dec-23-1994

Incorporation Date

Sep-05-1994

Sponsor

Aditya Birla Nuvo Limited, Sun Life (India) AMC Investments Inc.

Trustee

Birla Sun Life Trustee Company Private Limited

Chairman

Mr. Donald Stewart

CEO / MD

Mr. A. Balasubramanian

CIO

N.A

Compliance Officer

Mr. Rajiv Joshi

Investor Service Officer

Mrs. Molly Kapoor

Assets Managed

Rs. 77046.43 crore (Mar-31-2013)

AXIS MUTUAL FUND

Mutual Fund

Axis Mutual Fund

Setup Date

Sep-04-2009

Incorporation Date

Jan-13-2009

Sponsor

Axis Bank Limited

Trustee

Axis Mutual Fund Trustee Limited

Chairman

Dr. T. C. Nair

CEO / MD

Mr.Chandresh Nigam

CIO

Mr.Chandresh Nigam

Compliance Officer

Mr.GopalMenon


Mr.MilindVengurlekar

Assets Managed

Rs. 12114.34 crore (Mar-31-2013)

HDFC MUTUAL FUND

Mutual Fund

HDFC Mutual Fund

Setup Date

Jun-30-2000

Incorporation Date

Dec-10-1999

Sponsor

Housing Development Finance Corporation Limited, Standard Life Investments Limited

Trustee

HDFC Trustee Company Limited

Chairman

Mr. Deepak Parekh

CEO / MD

Mr.MilindBarve

CIO

Mr.Prashant Jain

Compliance Officer

Mr.YezdiKhariwala


Mr. John Mathews

Assets Managed

Rs. 101720.28 crore (Mar-31-2013)

TATA MANAGEMENT EQUITY FUND

Mutual Fund

Tata Mutual Fund

Setup Date

Jun-30-1995

Incorporation Date

Mar-15-1994

Sponsor

Tata Sons Limited & Tata Investment Corp. Ltd.

Trustee

Tata Trustee Company Pvt Limited

Chairman

Mr. F. K. Kavarana

CEO / MD

Mr.ArvindSethi

CIO

N.A

Compliance Officer

Mr.Upesh Shah


Ms.KashmiraKalwachwala

UTI MUTUAL FUND

Mutual Fund

UTI Mutual Fund

Setup Date

Feb-01-2003

Incorporation Date

Nov-14-2002

Sponsor

State Bank of India / Punjab National Bank / Bank of Baroda / Life Insurance Corporation

Trustee

UTI Trustee Co (P) Ltd

Chairman

Mr.JankiBallabh

CEO / MD

N.A

CIO

N.A

Compliance Officer

Mr. S C Dikshit


Mr. G S Arora

Assets Managed

Rs. 69450.40 crore (Mar-31-2013)

LITERATURE REVIEW

1.1 INTRODUCTION

With the emphasis in increase in domestic savings and improvement in deployment of investment through markets, the need and scope for Mutual Fund operation has increased tremendously. Mutual Funds have become one of the largest financial intermediaries in the leading world economies, it is a vehicle that enables millions of small and large savers spread across the country as well as internationally to participate in and derive the benefit of the capital market growth. It is an alternative vehicle of intermediation between the suppliers and users of investible resources. The vehicle is becoming increasingly popular in India and abroad due to higher investor return, relatively lower risk and cost. Thus the involvement of Mutual Funds in the transformation of Indian economy has made it urgent to view their services not only as financial intermediary but also as pace setter as they are playing a significant role in spreading equity culture.

The Mutual Fund industry has been in India for a long time. This came into existence in 1963 with the establishment of Unit Trust of India, a joint effort by the Government of India and the Reserve Bank of India. The next two decades from 1986 to 1993 can be termed as the period of public sector funds with entry of new public sector players into the Mutual Fund industry namely, Life Insurance

Corporation of India and General Insurance Corporation of India

The year of 1993 marked the beginning of a new era in the Indian Mutual Fund industry with the entry of private players like Morgan Stanley, J.P Morgan, and Capital International. This was the first time when the Mutual Fund regulations came into existence. SEBI (Security Exchange Board of India) was established under which all the Mutual Funds in India were required to be registered. SEBI was set up as a governing body to protect the interest of investor. By the end of 2010, the number of players in the industry grew enormously with More than 50 fund houses functioning in the country. With the rise of the Mutual Fund industry, establishing a Mutual Fund association became a prerequisite. This is when AMFI (Association of Mutual Funds India) was set up in 1995 as a nonprofit organization. Today AMFI ensures Mutual Funds function in a professional and healthy manner thereby protecting the interest of the Mutual Funds as well as its investors

The Mutual Fund industry is considered as one of the most dominant players in the world economy and is an important constituent of the financial sector and India is no exception. The industry has witnessed startling growth in terms of the products and services offered, returns churned, volumes generated and the international players who have contributed to this growth. Today the industry offers different schemes ranging from equity and debt to fixed income and money market.

It is interesting to note that the major benefits of investing in a Mutual Funds is to capitalize on the opportunity of a professionally managed fund by a set of fund managers who apply their expertise in investment. This is beneficial to the investors who may not have the relevant knowledge and skill in investing. Besides investors have an opportunity to invest in a diversified basket of stocks at a relatively low price. Each investor owns a portion of the fund and hence shares the rise and fall in the value of the fund. A Mutual Fund may invest in stocks, cash, bonds or a combination of these.

Mutual Funds are considered as one of the best available investment options as compare to others alternatives. They are very cost efficient and also easy to invest in. The biggest advantage of Mutual Funds is they provide diversification, by reducing risk & maximizing returns.

India is ranked one of the fastest growing economies in the world. Despite this huge progression in the industry, there still lies huge potential and room for growth, India has a saving rate of more than 35% of GDP, with 80% of the population who save. These savings could be channelized in the Mutual Funds sector as it offers a wide investment option. In addition, focusing on the rapidly growing tier II and tier III cities within India will provide a huge scope for this sector.

(Further tapping rural markets in India will benefit Mutual Fund companies from the growth in agriculture and allied sectors. With subsequent easing of regulations, it is estimated that the Mutual Fund industry will grow at a rate of 30% - 35% in the next 3 to 5 years and reach US 300 billion by 2015)

1.2 ORIGIN OF THE FUND

Mutual funds go back to the times of the Egyptians and Phoenicians when they sold shares in caravans and vessels to spread the risk of these ventures. The foreign and colonial government Trust of London of 1868 is considered to be the forerunner of the modern concept of mutual funds. The USA is, however, considered to be the Mecca of modem mutual funds. By the early - 1930s quite a large number of close - ended mutual funds were in operation in the U.S.A. Much latter in 1954, the committee on finance for the private sector recommended mobilization of savings of the middle class investors through unit trusts. Finally in July 1964, the concept took root in India when Unit Trust of India was set up with the twin objective of mobilizing household savings and investing the funds in the capital market for industrial growth. Household sector accounted for about 80 percent of nations savings and only about one third of such savings was available to the corporate sector It was felt that UTI could be an effective vehicle for channelizing progressively larger shares of household savings to productive investments in the corporate sector. (The process of economic liberalization in the eighties not only brought in dramatic changes in the environment for Indian industries, corporate sector and the capital market but also led to the emergence of demand for newer financial services such as issue management, corporate counseling, capital restructuring and loan syndication. After two decades of UTI monopoly, recently some other public sector organizations like LIC (1989), GIC (1991), SBI (1987), Can Bank (1987). Indian Bank (1990), Bank of India (1990), Punjab National Bank (1990) have been permitted to set up mutual funds. Mr. M.R.Mayya the Executive Director of Bombay Stock Exchange opined recently that the decade of nineties will belong to mutual funds because the ordinary investor does not have the time, experience and patience to take independent investment decisions on his own.

1.3 History of Mutual Funds in India:

The Mutual Fund industry can be broadly put into four according to the development of the sector. Each phase is briefly described as under.

First Phase - 1964-1987

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and Administrative control of the Reserve Bank of India. 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. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.

Second Phase - 1987-1993 (Entry of Public Sector Funds)

Entry of Non-UTI Mutual Funds. SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). The end of 1993 marked Rs.47, 004 as assets under management.

Third Phase - 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in Indian Mutual Fund Industry, giving the Indian investors a choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all Mutual Funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector Mutual Fund registered in July 1993

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of Mutual Fund houses went on increasing, with many foreign Mutual Funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. Act at the end of January 2003, there were 33 Mutual Funds with the assets of Rs.l, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other Mutual Funds.

Fourth Phase - (Since February 2003)

This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29.835 crores (as on January 2003).

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.

The Second is the UTI Mutual Fund Ltd., sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of AUM and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the Mutual Fund industry has entered its current phase of consolidation and growth. As at the end of September 2004, there were 29 funds, which manage assets of Rs.l,53,108 corers under 421 schemes

1.4 CONCEPT OF MUTUAL FUND

Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer Document.

Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.

The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.

What Is Mutual Fund?

A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds)

When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification by minimizing risk & maximizing

Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Frequently Used Terms Sale Price

Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.

Repurchase Price

Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

Redemption Price

Is the price at which open-ended schemes repurchase their units and close- ended schemes redeem their units on maturity. Such prices are NAV related.

Sales Load

Is a charge collected by a scheme when it sells the units. Also called, Front- end load. Schemes that do not charge a load are called ;No Load schemes.

Repurchase or Back-end Load

Is a charge collected by a scheme when it buys back the units from the unit holders.

Banks Vs Mutual Funds:

India is at the first stage of a revolution that has already peaked in the U.S. he U.S. boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund assets are not even 10% of the bank deposits, but this trend is beginning to change.

This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets, which improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not close down Completely. Their role as intermediaries cannot be ignored. It is just that Mutual Funds are going to change the way banks do business in the future.

Organization of Mutual Funds in India

There are many entities involved and the diagram below illustrates the organisational set up of a mutual fund:

The structure consists of:1. Sponsor

Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fond. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations. 1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund.

2. Trust

The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.

3. Trustee

Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The main responsibility of the Trustee is to safeguard the interest of the unit holders and inter alias ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the respective Schemes. At least 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner.

Asset Management Company (AMC)

The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. Atlas 50% of the directors of the AMC is an independent director who is not associated with the Sponsor in any manner. The AMC must have a net worth of at least 10 crore at all times.

Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form; redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor records.

Working of mutual funds

A mutual fund is set up by a sponsor. However, the sponsor cannot run the funddirectly. He has toset up two arms: a trust and Asset Management Company. The trustis expected toassure fair business practice, while the AMC manages the money.

The mutual fund collects money directly or through brokers from investors. The money is invested in various instruments depending on the objective of the scheme. The income generated by selling securities or capital appreciation of these securities is passed on to the investors in proportion to their investment in the scheme. The investments are divided into units and the value of the units will be reflected in Net Asset Value or NAV of the unit.NAV is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the valuation date. Mutual fund companies provide daily net asset value of their schemes to their investors. NAV is important, as it will determine the price at which you buy or redeem the units of a scheme. Depending on the load structure of the scheme, you have to pay entry or exit load.

1.5 CHARACTERISES OF MUTUAL FUNDSome of distinctive characteristics of mutual funds include the following:

Investors purchase mutual fund shares from the fund itself (or through a broker)instead of from other investors in a secondary market (in Stock Exchange)

The mutual funds shares are purchased at per share net asset value (NAV) of the fund. Apart from that price an investor may have to pay any fees that the fund imposes at the time of purchase in the form of specified entry loads.

Mutual fund shares are "redeemable," means one can sell ones shares back to the fund or to a broker for the fund.

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Mostly Mutual funds are constantly creating and selling new shares to attract and accommodate new investors

1.6 Types of Mutual Fund Schemes

Mutual fund schemes may be classified on the basis of its structure and its investment objective.

1. By Structurea) Open-end Funds

An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

b) Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed.

In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.

c) Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

2. By Investment Objectivea) Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proved that returns from stocks have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time.

b) Income Funds

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.

c) Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

d) Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

3. Other Schemes

a) Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues.

Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds.

b) Special Schemes Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50.

1.7 The Benefits of Mutual Funds:

1. Professional Investment Management.

By pooling the funds of thousands of investors, Mutual Funds provide fulltime, high-level professional management that few individual investors can afford to obtain independently. Such management is vital to achieving results in today's complex markets. Your fund managers interests are tied to yours, because their compensation is based not on sales commissions, but on how the fund performs. These managers have instantaneous access to crucial market information and are able to execute trades on the largest and most cost-effective scale. In short, managing investments is a full-time job for professionals.

2. Diversification:

Mutual Funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual Funds shareholders can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities.

3. Low Cost:

If you tries to create your own diversified portfolio of 50 stocks, you'd need at least Rs. 1,00,000 and you'd pay thousands of dollars in commissions to assemble your portfolio. A Mutual Fund lets you participate in a diversified portfolio for as little as Rs. 1,000 and sometimes less. And if you buy a no-load fund, you pay or no sale charges to own them.

4. Conveniences and Flexibility:

You own just one security rather than many; yet enjoy the benefits of a diversified portfolio and a wide range of services.

Fund managers decide what securities to trade, clip the bond coupons, collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised. Its easy to purchase and redeem Mutual Fund shares, either directly online or with a phone call.

5. Life Cycle Planning:

With no-load Mutual Funds, you can link investment plans to future individual and family needs - and make changes as your life cycles. You can invest in growth funds for future college tuition needs, then move to income funds for retirement, and adjust your investments as your needs change throughout your life.

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6. Market Cycle Planning:

For investors who understand how to actively manage their portfolio, Mutual Fund investments can be moved as market conditions change. You can place your funds in equities when the market is on the upswing and move into money market funds 011 the downswing or take any number of steps to ensure that your investments are meeting your needs in changing market climates. A word of caution: since it is impossible to predict what the market will do at any point in time, staying on course with a long-term, diversified investment view is recommended for most investors.

7. Investor Information:

Shareholders receive regular reports from the funds, including details of transactions on a year-to-date basis. The current net asset value of your shares (the price at which you may purchase or redeem them) appears in the Mutual Fund price listings of daily newspapers. You can also obtain pricing and performance results for the all Mutual Funds at this site, or it can be obtained by phone from the fund.

8. Periodic Withdrawals:

If you want steady monthly income, many funds allow you to arrange for monthly fixed checks to be sent to you, first by distributing some or all of the income and then, if necessary, by dipping into your principal.

9. Dividend Options:

You can receive all dividend payments in cash. Or you can have them reinvested in the fund free of charge, in which case the dividends are automatically compounded. This can make a significant contribution to your long-term investment results.

With some funds you can elect to have your dividends from income paid in cash and your capital gains distributions reinvested.

10. Automatic Direct Deposit:

You can usually arrange to have regular, third party payments - such as Social Security or Pension checks - deposited directly into your account. This puts your money to work immediately, without waiting to clear your checking account, and it saves you from worrying about checks being lost in the mail.

11. Record keeping Service:

With your own portfolio of stocks and bonds, you would have to do your own record keeping of purchases, sales, dividends, interest, short-term and long-term gains and losses. Mutual Funds provide confirmation of your transactions and necessary tax forms to help you keep track of your investments and tax reporting.

12. Safekeeping:

When you own shares in Mutual Fund, you own securities in many companies without having to worry about keeping stock certificates in safe deposit boxes or sending them by registered mail. You dont even have to worry about handling the Mutual Fund stock certificates; the fund maintains your account on its books and sends you periodic statements keeping track of all your transactions

13. Retirement and College Plans:

Mutual Funds are well suited to individual retirement accounts and most funds offer IRA-approved prototype and master plans for individual retirement accounts (IRAs) and Keogh, 403(b), SEP-IRA and 401(k) retirement plans. Funds also make it easy to invest - for college, children or other long-term goals.

Many offer special investment products or programs tailored specifically for investments for children and college.

15. Online Services:

The internet provides a fast, convenient way for investors to access financial information. A host of services are available to the online investor including direct access to on-load companies.

16. Sweep Accounts:

With many funds, if you choose not to reinvest your stock or bond fund dividends, you can arrange to have them swept into money market fund automatically. You get all the advantages of both accounts with no extra efforts.

17. Asset Management Accounts:

These master accounts, available from many of the larger fund groups, enable you to manage all financial service needs under a single umbrella from unlimited check writing and automatic bill paying to discount brokerage and credit card accounts.

Drawbacks of Mutual Funds

Mutual Funds have their drawbacks and may not be for everyone:

1. No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of Mutual Fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in Mutual Funds than when they buy and sell stocks on their own. However, anyone who invests through a Mutual Fund runs the risk of losing money.

2. Fees and Commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads to compete brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy in a Load Fund.

3. Taxes: During a typical year, most actively managed Mutual Funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.

4. Management Risk: When you invest in a Mutual Fund, you depend on the funds manager to make the right decisions regarding the funds portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.

1.8 INVESTORS RIGHT

The offer documents of a scheme lay down the investors right. The important rights of the unit holders are as below:

1. Unit holders have a proportionate right in beneficial ownership of the scheme assets as well as any dividend or income declared under the scheme.

2. They have the right to information regarding any adverse happening.

3. They are entitled to receive dividend warrant within 42 days of the date of dividend declaration.

4. AMC can be terminating by 75%of the unit holders of the scheme present and voting at a special meeting.

5. The holders have the right to inspect major documents of the fund i.e. material contract, the investment management agreement, the custodian services agreement, registrar and transfer agencies agreement, memorandum and articles of association of the AMC, recent audited financial statements and the offer documents of the scheme.

6. With the consent of 75% of the unit holders they have the right to approve any changes in the close ended scheme.

7. Every unit holder has the right to receive a copy of the annual statement and periodic statement regarding his transactions.

1.9 GENERAL GUIDELINES (SEBI):

For proper functioning of mutual funds and for ensuring investor protections, the following important guidelines have been trained by the government of India and regulated by SEBI.

GENERAL

(1) Money market mutual funds would be regulated by the RBI while other mutual funds would be regulated by the Securities and Exchange board of India.

(2) Mutual fund shall be established in the Trusts under The Indian Trust Act and be authorized for business by the SEBI.

(3) Mutual funds shall be operated only by separately established Asset Management Companies

(4) At least 50% of the Board of AMC must be independent directors who have no connections with the sponsoring organization. The directors must have professional experience of at least 10 years in the relevant fields such as portfolio management, financial administration etc.

(5) The AMC should have minimum net worth of Rs.5 crores at all times.

(6) The SEBI is given the power to withdraw the authorization given to any AMC if it is found to be not serving the best interest of investors

1.10 Mutual Fund Expenses

All mutual funds (MFs) have charges that have to be borne by investors. This reduces the returns that investors finally receive in their hands.

But, this isnt the only MF charge that you need to pay. There are other costs as well. These costs bring down the amount that is finally invested, which, in turn, impacts the returns that come back into the investors hands. Lets take a closer look at what these expenses are and how they impact returns.

Type Of ExpensesOne-time expenses

Entry/exit and initial issue expenses (during the launch of a fund) have to be paid once. Entry load has been abolished by Securities and Exchange Board of India (SEBI) from 1 August 2009. Exit loads, however, still have to be paid. These vary across schemes, but there is cap of 1 per cent.

Recurring expenses

These include fund management charge, marketing expenses, registrar fee, custodian fee, and others. These are also called operating expenses and the fund charges these once a year. Recurring expenses (REs) depend on the fund's corpus, but cannot go beyond 2.5 per cent of the total corpus, for an equity scheme. Usually, investment management and advisory charges account for half of the REs, that is, 1.25 per cent for equity schemes.

RISK INVOLVE IN MUTUAL FUNDS

Risk is an inherent aspect of every form of investment. For mutual fund investments, risks would include variability, or period-by-period fluctuations in total return. The value of the scheme's investments may be affected by factors affecting capital markets such as price and volume volatility in the stock markets, interest rates, currency exchange rates, foreign investment, changes in government policy, political, economic or other developments.

Market Risk:

At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the stock prices of both an outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is due to "market risk.'

Liquidity Risk:

Thinly traded securities carry the danger of not being easily saleable at or near their real values the fund manager may therefore be unable to quickly sell an illiquid bond and this might affect the price of the fund unfavourably. Liquidity risk is characteristic of the Indian fixed income market.

Credit Risk:

In short, how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised, or repay your principal when the investment matures?

Interest Rate Risk:

Changing interest rates affect both equities and bonds in many ways. Bond prices are influenced by movements in the interest rates in the financial system. Generally, when interest rates rise, prices of the securities fall and when interest rates drop, the prices increase. Interest rate movements in the Indian debt markets can be volatile leading to the possibility of large price movements up or down in debt and money market securities and thereby to possibly large movements in the NAV.

Investment Risks:

In the sector all fund schemes; investments will be predominantly in equities of select companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities.

1.11 THEORITICAL ASPECTS OF PERFORMANCE EVALUATION

In order to determine the risk adjustment returns of investment portfolios, several eminent authors have worked since 1960s to develop composite performance indices to evaluate a portfolio by comparing alternative portfolios within a particular risk class.

One obvious method of adjusting for risk is to look at the reward per unit of risk. We know that investment in shares is risky. Risk free rate of interest is the return that an investor can earn on risk less security, i.e., without bearing any risk. The return earned over and above the risk free rate is the risk premium that is the reward for bearing. If this premium is divided by a measure of risk. We get the premium per unit of risk.

Thus, the reward per unit of risk for different portfolios or mutual funds may be calculated and the funds may be ranked in descending order of the ratio. A higher ratio indicates better performance.

Performance Evaluation of Mutual Funds

Mutual Fund industry today, with about 34 players and more than five hundred schemes, is one of the most preferred investment avenues in India. However, with a plethora of schemes to choose from, the retail investor faces problems in selecting funds. Factors such as investment strategy and management style are qualitative, but the funds record is an important indicator too.

Though past performance alone cannot be indicative of future performance, it is, frankly, the only quantitative way to judge how good a fund is at present. Therefore, there is a need to correctly assess the past performance of different mutual funds.

Worldwide, good mutual fund companies over are known by their AMCs and this fame is directly linked to their superior stock selection skills. For mutual funds to grow, AMCs must be held accountable for their selection of stocks. In other words, there must be some performance indicator that will reveal the quality of stock selection of various AMCs.

Return alone should not be considered as the basis of measurement of the performance of a mutual fund scheme, it should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them. Risk associated with a fund, in a general, can be defined as variability or fluctuations in the returns generated by it.

The higher the fluctuations in the returns of a fund during a given period, higher will be the risk associated with it. These fluctuations in the returns generated by a fund are resultant of two guiding forces.

First, general market fluctuations, which affect all the securities present in the market, called market risk or systematic risk and second, fluctuations due to specific securities present in the portfolio of the fund, called unsystematic risk.

The Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is measured in terms of Beta, which represents fluctuations in the NAV of the fund.

The more responsive the NAV of a mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a mutual fund with the returns in the market. While unsystematic risk can be diversified through investments in a number of instruments, systematic risk can not. By using the risk return relationship, we try to assess the competitive strength of the mutual funds vis-a-vis one another in a better way.

PERFORMANCE EVALUATION MEASURES

Sharpes measure

The portfolios average excess per unit of total risk

Treynors measure

The portfolios' average excess per unit of systematic risk

Jensens measure

The excess of the portfolios return over that predicted by the CAPM.

SHARPES INDEX (SI)

38

It is the measure of risk premium related to the total risk. It gives a single value to be used for the performance ranking of various funds or portfolios. This risk premium is the difference between the portfolio's average rate of return and the risk free rate of return. The standard deviation of the portfolio indicates the risk. It assigns the highest values to assets that have best risk-adjusted rate of return.

The Sharpes ratio is a versatile measure that has endured the test of time. Its focus is on the standard deviation as the measure of risk does bias it against portfolios that are diversified widely across the market. A sector specific Mutual Fund (such as Pharma or Banking fund) will tend to do poorly on a Sharpes ratio basis because its standard deviation will be higher because of the presence of sector-specific. Since investors in these funds can diversify the risk by only way of holding multiple funds, it does seem unfair to penalize these funds for them.

Sharpes Index SI given by the formulae

Rp-Rf

St =

p

Where,

Rp : Average rate of return of Portfolio A

Rf : Average rate of return on a risk-free investment

p : Standard deviation of return of portfolio

TREYNORS INDEX (TI)

It measures the fund's performance in relation to the market performance. To understand it better one must know about the Characteristic line. The relationship between the given market return and the fund return is given by the characteristic line. The ideal fund's return rises at a faster rate than the general market performance when the market is moving upwards and its rate of return declines slowly than the market return, in the decline.

Treynors Index (TI) given by the formulae

Tn = Rp-Rf

p

Where

Rp : Average rate of return of Portfolio A

(Rf): Average rate of return on a risk-free investment

p : Beta of portfolio A

(SHARPES INDEX (SI))

: All risk-averse investors would like to maximize this value. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor's Index is an indication of unfavorable

(37)

JENSEN'S MEASURE

Jensen (1968), 011 the other hand, writes the following formula in terms of realized rates of return, assuming that CAPM is empirically valid.

A risk-adjusted performance measure that represents the average return on a portfolio over and above that predicted by the capital asset pricing model (CAPM), given the portfolio's beta and the average market return. This is the portfolio's alpha. In fact, the concept is sometimes referred to as "Jensen's alpha."

The basic idea is that to analyze the performance of an investment manager you must look not only at the overall return of a portfolio, but also at the risk of that portfolio. For example, if there are two mutual funds that both have a 12% return, a rational investor will want the fund that is less risky. Jensen's measure is one of the ways to help determine if a portfolio is earning the proper return for its level of risk. If the value is positive, then the portfolio is earning excess returns. I11 other words, a positive value for Jensen's alpha means a fund manager has "beat the market" with his or her stock picking skills.

Jensen's Measure is calculated as:

ERp = Rp -(Rf + (Rm- Rf)

Where:

P = Expected total portfolio return

Rf = Risk free rate

= Beta of the portfolio

Rm = Expected market return

STANDARD DEVIATION

The standard deviation measure the extent of variability of possible returns from the expected return, several other measure such as range, semi-variance and mean absolute deviation have been used to measure risk. But standard deviation has been the most popularly accepted measure. Standard deviation provides a measure of the total risk associated with a fund. It gives a quality rating' of an average. The standard deviation of an average is the amount by which the numbers that go into an average deviate from the average it tells us how closely an average represents the underlying number.

y = (y - y)2 / N

OR

x = (x - x)2 / N

Beta

The sensitivity of a security to market movements is called beta (). A measure of risk commonly advocated is beta. It represents the most widely accepted measure of the extent to which the return on a security fluctuates with the return on the market portfolio. It describes the relationship between the securities return and the index returns. To calculate the beta of a portfolio, regress the rate of return of the portfolio on the rate of return of a market index.

nxy - (x)( y)

=

nx2 (x) 2

The slope of this regression line is the portfolio beta. By definition, the beta for the market portfolio is 1.

FINDINGSFINDINGS AND ANALYSIS:

The purpose of the study was to evaluate the performance of Equity Mutual Funds. To accomplish the purpose of the study, the requisite information had been collected from different, during March to APRIL, 2012-2013

To fulfill the objective of the study, required data had been collected from the selected Mutual Fund Companies i.e.

1. AXIS MUTUAL

2. UTI MUTUAL

3. TATA Equity Fund

4. BIRLA SUNLIFE MUTUAL FUND

5. HDFC MUTUAL FUND

BSE SENSEX is considered for Benchmarking.

Calculation of Standard Deviation, Beta, And Alpha for the funds based on the monthly NAV and BSE SENSEX.

76

4.4 DATA ANALYSIS

Table 4.1: Market Index of Mutual Funds for one Years

Date

Open

Close

Price/Earnings

30/04/2012

17,370.93

16,218.53

16.49

31/05/2012

16,217.48

17,429.98

16.37

29/06/2012

17,438.68

17,236.18

16.71

31/07/2012

17,244.44

17,429.56

16.68

31/08/2012

17,465.60

18,762.74

17.04

28/09/2012

18,784.64

18,505.38

17.31

31/10/2012

18,487.90

19,339.90

16.9

30/11/2012

19,342.83

19,426.71

17.43

31/12/2012

19,513.45

19,894.98

17.88

31/01/2013

19,907.21

18,861.54

17.43

28/02/2013

18,876.68

18,835.77

17.19

28/03/2013

17,370.93

16,218.53

16.49

BIRLA SUNLIFE EQUITY FUND

Table 4.2.1: Net Asset Value of Birla Sunlife Mutual Fund

Date

NAV

30/04/2012

82.91

31/05/2012

78.21

29/06/2012

81.85

31/07/2012

84.13

31/08/2012

84.61

28/09/2012

92.18

31/10/2012

91.96

30/11/2012

96.61

31/12/2012

99.32

31/01/2013

101.31

28/02/2013

95.15

28/03/2013

94.67

AXIS MUTUAL EQUITY FUND

Table 4.3.1: Net Asset Value of Axis Funds

Date

NAV

30/04/2012

10.41

31/05/2012

9.85

29/06/2012

10.5

31/07/2012

10.5

31/08/2012

10.6

28/09/2012

11.47

31/10/2012

11.35

30/11/2012

11.92

31/12/2012

12.08

31/01/2013

12.32

28/02/2013

11.95

28/03/2013

12.12

HDFC EQUITY FUND

Table 4.4.1: Net Asset Value of HDFC Equity Fund

Date

NAV

30/04/2012

259.508

31/05/2012

242.224

29/06/2012

257.736

31/07/2012

255.127

31/08/2012

247.687

28/09/2012

276.571

31/10/2012

272.421

30/11/2012

284.387

31/12/2012

293.424

31/01/2013

299.668

28/02/2013

273.88

28/03/2013

271.109

TATA MANAGEMENT EQUITY FUND

Table 4.4.1: Net Asset Value of TATA MANAGEMENT MUTUAL Funds

Date

NAV

30/04/2012

76.156

31/05/2012

74.183

29/06/2012

78.205

31/07/2012

78.688

31/08/2012

80.734

28/09/2012

84.691

31/10/2012

83.618

30/11/2012

88.645

31/12/2012

88.282

31/01/2013

89.236

28/02/2013

85.032

28/03/2013

84.384

UTI EQUITY FUND

Table 4.2.1: Net Asset Value Of UTI Mutual Fund

Date

NAV

30/04/2012

54.40

31/05/2012

51.45

29/06/2012

54.97

31/07/2012

55.27

31/08/2012

55.41

28/09/2012

59.65

31/10/2012

59.38

30/11/2012

61.86

31/12/2012

62.72

31/01/2013

63.42

28/02/2013

59.804

28/03/2013

59.004

BIRLA SUNLIFE MUTUAL FUND

Table 4.5.1: Mean Calculation of Portfolio Returns

SL NO.

NAV(AVERAGE)

Y

y-y

(y- y )2

y2

1

80.560

0.0000

-0.02867

0.00082

0.00000

2

82.990

0.0302

0.00150

0.00000

0.00091

3

88.395

0.0651

0.03646

0.00133

0.00424

4

94.285

0.0666

0.03797

0.00144

0.00444

5

100.315

0.0640

0.03529

0.00125

0.00409

6

94.910

-0.0539

-0.08255

0.00681

0.00290

0.1720

0.0117

y = y = 0.1720 = 0.0287

N 6

Calculation of Standard Deviation

y = (y - y)2 / N

= 0.0117 / 6

= 0.00195

y= 0.044

Table 4.5.2: Mean calculation of market index

SL NO.

MARKETINDEX

(AVERAGE)

x

x-x

(x-x)2

x2

Xy

1

17.060

0.0000

-0.00267

0.00001

0.00000

0.00000

2

16.540

-0.0305

-0.03315

0.00110

0.00093

-0.00092

3

16.860

0.0193

0.01668

0.00028

0.00037

0.00126

4

17.105

0.0145

0.01186

0.00014

0.00021

0.00097

5

17.655

0.0322

0.02949

0.00087

0.00103

0.00206

6

17.310

-0.0195

-0.02221

0.00049

0.00038

0.00105

0.0160

0.00289

0.00293

0.00442

x = x = 0.0160 = 0.0027

N 6

Calculation of Standard Deviation\

x = (x - x)2 / N

= 0.00289/ 6

= 0.00048

x = 0.0219

Figure 4.1: Market index and Portfolio Returns of Birla Sunlife

Calculation of

= nxy - (x)( y)

nx2 (x) 2

= 6(0.00442) (0.0160)(0.1720)

6(0.00293) (0.0160)2

= 1.372

SHARPESS PERFORMANCE INDEX:

For Market Index

St = Rm-Rf

x

= 0.0027 0.085

0.0219

= -3.758

For Portfolio Returns

St = Rp-Rf

y

= 0.0287 0.085

0.044

= -1.27

TREYNORS PERFORMANCE INDEX:

For Market Index

Tn = Rm-Rf

p

= 0.0027 0.085

1.372

Tn = - 0.059


Tn = Rp-Rf

p

= 0.0287 0.085

1.372

Tn = - 0.041

JENSENS PERFORMANCE MEASURE:


= 0.0287-(0.085+1.372(0.0027-0.085)

ERp = 0.0566

Differential Returns = Rp - ERp

= 0.0287 0.0566

= -0.0279

Calculation of Correlation (To find the relationship between market returns and portfolio returns)

r = xy (X) (Y)

*Type equation here.

r = 0.02376

-0.1324

r = -0.179

AXIS MUTUAL FUND

Table 4.6.1: Mean Calculation of portfolio returns

SL NO.

NAV(AVERAGE)

Y

y-y

(y- y )2

y2

1

10.130

0.00000

-0.02948

0.00087

0.00000

2

10.500

0.03653

0.00704

0.00005

0.00133

3

11.035

0.05095

0.02147

0.00046

0.00260

4

11.635

0.05437

0.02489

0.00062

0.00296

5

12.200

0.04856

0.01908

0.00036

0.00236

6

12.035

-0.01352

-0.04301

0.00185

0.00018

0.17689

0.00421

0.00943

y = y = 0.1769 = 0.0259

N 6


y = (y - y)2 / N

= 0.00421/ 6

= 0.0007

y = 0.0264

Table 4.6.2: Mean Calculation of market index

SL NO.

MARKETINDEX

(AVERAGE)

x

x-x

(x-x)2

x2

Xy

1

17.060

0.00000

-0.00267

0.00001

0.00000

0.00000

2

16.540

-0.03048

-0.03315

0.00110

0.00093

-0.00111

3

16.860

0.01935

0.01668

0.00028

0.00037

0.00099

4

17.105

0.01453

0.01186

0.00014

0.00021

0.00079

5

17.655

0.03215

0.02949

0.00087

0.00103

0.00156

6

17.310

-0.01954

-0.02221

0.00049

0.00038

0.00026

0.01601

0.00289

0.00293

x = x = 0.0160 = 0.0027

N 6


x = (x - x)2 / N

= 0.00289 / 6

= 0.00048

= 0.0219

Figure 4.2: Market index and Portfolio Returns of AXIS

Calculation of

= nxy - (x)( y)

nx2 (x) 2

= 6(0.00249) (0.01601)(0.17689)

6(0.00293) (0.01601)2

= 0.699


For Market Index

St = Rm-Rf

x

= 0.0027 0.085

0.0219

St = - 3.758


St = Rp-Rf

y

= 0.0295 0.085

0.0264

St = -2.102


For Market Index

Tn = Rm-Rf

p

= 0.0027 0.085

0.699

Tn = - 0.117


Tn = Rp-Rf

p

= 0.0295 0.085

0.699

Tn = - 0.079



= 0.0295-(0.085+0.699(0.0027-0.085)

ERp = 0.0020


= 0.0295 0.0020

= 0.0275

Calculation of Correlation (to find the relationship between market returns and portfolio returns)

r = xy (X) (Y)

*

= 0.01211

0.0209

r = 0.579

HDFC MUTUAL FUND


SL NO.

NAV(AVERAGE)

Y

y-y

(y- y )2

y2

1

250.866

0.0000

-0.01509

0.00023

0.00000

2

256.445

0.0222

0.00715

0.00005

0.00049

3

262.129

0.0222

0.00707

0.00005

0.00049

4

278.404

0.0621

0.04700

0.00221

0.00385

5

296.546

0.0652

0.05007

0.00251

0.00425

6

272.495

-0.0811

-0.09620

0.00925

0.00658

0.0906

0.0000

0.0143

0.0157

y = y = 0.0906 = 0.0151

N 6


y = (y - y)2 / N

= 0.0143 / 6

= 0.0024

y= 0.0489


SL NO.

MARKETINDEX

(AVERAGE)

x

x-x

(x-x)2

x2

Xy

1

17.060

0.0000

-0.00267

0.00001

0.00000

0.00000

2

16.540

-0.0305

-0.03315

0.00110

0.00093

-0.00068

3

16.860

0.0193

0.01668

0.00028

0.00037

0.00043

4

17.105

0.0145

0.01186

0.00014

0.00021

0.00090

5

17.655

0.0322

0.02949

0.00087

0.00103

0.00210

6

17.310

-0.0195

-0.02221

0.00049

0.00038

0.00158

0.0160

0.0000

0.0029

0.0029

0.0043

x = x = 0.0160 = 0.0027

N 6


x = (x - x)2 / N

= 0.00289 / 6

= 0.00048

x = 0.0219

Figure 4.3 Market index and portfolio returns of HDFC

Calculation of

= nxy - (x)( y)

nx2 (x) 2

= 6(0.0043) (0.0160)(0.0906)

6(0.00293) (0.0160)2

= 1.405


For Market Index

St = Rm-Rf

x

= 0.0027 0.085

0.0219

St = - 3.758


St = Rp-Rf

y

= 0.0151 0.085

0.0489

St = - 1.429


For Market Index

Tn = Rm-Rf

p

= 0.0027 0.085

1.405

Tn = - 0.0585


Tn = Rp-Rf

p

= 0.0151 0.085

1.405

Tn = - 0.0497



= 0.0151-(0.085+1.405(0.0027-0.085)

ERp = 0.0457


= 0.0151 0.0457

= -0.0306

Calculation of Correlation

(To find the relationship between market returns and portfolio returns)

r = xy (X) (Y)

*

= 0.02435

0.0386

r = 0.631

TATA EQUITY MANAGEMENT FUND


SL NO.

NAV(AVERAGE)

Y

y-y

(y- y )2

y2

1

75.170

0.0000

-0.02070

0.00043

0.00000

2

78.447

0.0436

0.02290

0.00052

0.00190

3

82.713

0.0544

0.03368

0.00113

0.00296

4

86.132

0.0413

0.02064

0.00043

0.00171

5

88.759

0.0305

0.00980

0.00010

0.00093

6

84.708

-0.0456

-0.06634

0.00440

0.00208

0.1242

-0.00002

0.00701

0.00958

y = y = 0.1242 = 0.0207

N 6


y = (y - y)2 / N

= 0.0143 / 6

y = 0.034


SL NO.

MARKETINDEX

(AVERAGE)

x

x-x

(x-x)2

x2

Xy

1

17.060

0.00000

-0.00267

0.00001

0.00000

0.00000

2

16.540

-0.03048

-0.03315

0.00110

0.00093

-0.00133

3

16.860

0.01935

0.01668

0.00028

0.00037

0.00105

4

17.105

0.01453

0.01186

0.00014

0.00021

0.00060

5

17.655

0.03215

0.02949

0.00087

0.00103

0.00098

6

17.310

-0.01954

-0.02221

0.00049

0.00038

0.00089

0.01601

-0.00267

0.00289

0.00293

0.00220

x = x = 0.0160 = 0.0027

N 6


x = (x - x)2 / N

= 0.00701 / 6

x = 0.034

Figure 4.3 Market index and portfolio returns of TATA EQUITY MANAGEMENT FUND

Calculation of

= nxy - (x)( y)

nx2 (x) 2

= 6(0.00220) 0.0028

0.01732

= 0.6


For Market Index

St = Rm-Rf

x

= 0.0027 0.085

0.034

St = - 3.758


St = Rp-Rf

y

= 0.0207 0.085

0.034

St = - 1.8


For Market Index

Tn = Rm-Rf

p

= -0.0823

0.6

Tn = - 0.137


Tn = Rp-Rf

p

= 0.0207 0.085

0.6

Tn = - 0.107



= 0.0207-(0.085+0.6(-0.0823)

ERp = -0.0149


= 0.0207+ 0.0149

= 0.0356

Calculation of Correlation

(To find the relationship between market returns and portfolio returns)

r = xy (X) (Y)

*

= 0.01211

0.0269

r = 0.450

UTI MUTUAL FUND

Table 4.5.1: Mean Calculation of Portfolio Returns

SL NO.

NAV(AVERAGE)

Y

y-y

y-y2

y2

1

52.925

0.0000

-0.02020

0.00041

0.00000

2

55.12

0.0370

0.02127

0.00045

0.00172

3

57.53

0.0536

0.02352

0.00055

0.00191

4

60.62

0.0489

0.03351

0.00112

0.00288

5

63.07

0.0320

0.02022

0.00041

0.00163

6

59.404

-0.0224

-0.07833

0.00613

0.00338

0.1212

0.00908

0.01153

y = y = 0.12120 = 0.0202

N 6


y = (y - y)2 / N

= 0.00908 / 6

y = 0.0389


SL NO.

MARKETINDEX

(AVERAGE)

x

x-x

(x-x)2

x2

Xy

1

17.060

0.00000

-0.00267

0.00001

0.00000

0.00000

2

16.540

-0.03048

-0.03315

0.00110

0.00093

-0.00126

3

16.860

0.01935

0.01668

0.00028

0.00037

0.00085

4

17.105

0.01453

0.01186

0.00014

0.00021

0.00078

5

17.655

0.03215

0.02949

0.00087

0.00103

0.00130

6

17.310

-0.01954

-0.02221

0.00049

0.00038

0.00114

0.01601

0.00289

0.00293

0.00280

x = x = 0.0160 = 0.0027

N 6


x = (x - x)2 / N

= 0.00289/ 6

= 0.00048

x = 0.0219

Figure 4.1: Market index and Portfolio Returns of UTI Mutual Funds

Calculation of

= nxy - (x)( y)

nx2 (x) 2

= 0.0168 0.00280

6(0.00293) (0.0160)2

= 0.808


For Market Index

St = Rm-Rf

x

= 0.0027 0.085

0.0219

= -3.758


St = Rp-Rf

y

= 0.0202 0.085

0.0389

= -1.66


For Market Index

Tn = Rm-Rf

p

= -0.0823

0.808

Tn = -0.1019


Tn = Rp-Rf

p

= 0.0202 0.085

0.0808

Tn = - 0.0802



= 0.0202-(0.085+0.808(0.0027-0.085)

ERp = 0.0017


= 0.0202 0.0017

= 0.0185

Calculation of Correlation (To find the relationship between market returns and portfolio returns)

r = xy (X) (Y)

*

r = 0.01211

0.0306

r = 0.396

SUMMARY OF FINDINGS

1. Ranking of funds according to Sharpes Model:

Sl.NO

Funds

S

Rank

1

AXIS EQUITY FUND

-2.102

5

2


-1.279

1

3

HDFC EQUITY FUND

-1.429

2

4

TATA EQUITY FUND

-1.89

4

5

UTI EQUITY FUND

-1.66

3

A high and positive Sharpes ratio shows a superior risk adjusted performance of a fund, a low and negative Sharpes ratio is an indication of unfavorable performance. We consider standard deviation as a base for calculation for this model.

1. Birla Sunlife Equity Fund is a high risk adjusted fund. It ranks first and is performing extremely well in the market.

2. HDFC Equity Fund ranks second and is performing well in the market.

3. UTI Equity Fund ranks third and is performing moderately in the market.

4. TATA Equity Fund is not performing that well in the market.

5. AXIS Equity Fund is performing very low in the market compared to the other funds.

2. Ranking of funds according to Treynors Model

Sl.NO

Funds

T

Rank

1

AXIS EQUITY FUND

-0.079

3

2


-0.041

1

3

HDFC EQUITY FUND

-0.0497

2

4

TATA EQUITY FUND

-0.107

5

5

UTI EQUITY FUND

-0.0802

4

A high and faster Treynors ratio shows a superior risk adjusted performance of a fund. A low and negative Treynors ratio is an indication of unfavorable performance. We consider beta as a base for calculation for this model.

1. Birla Sunlife Equity Fund is a high risk adjusted performing fund. It ranks first and is performing extremely well in the market.


3. AXIS Equity Fund ranks third and is performing well in the market.

4. UTI Equity Fund is performing reasonably in the market.

5. TATA Equity Fund is performing moderately in the market.

3. Ranking of funds according to Jensens Model:

Sl.NO

Funds

J

Rank

1

AXIS EQUITY FUND

0.0020

3

2


0.0566

1

3

HDFC EQUITY FUND

0.0457

2

4

TATA EQUITY FUND

-0.0149

5

5

UTI EQUITY FUND

0.0017

4

A high and positive Jensens ratio shows a superior risk adjusted performance and low negative ratio shows unfavorable performance.

1. Birla Sunlife Equity Fund is a high risk adjusted fund. It ranks first and is performing extremely well in the market.


3. AXIS Equity Fund ranks third and is performing well in the market.

4 .UTI Equity Fund is performing unfavorably in the market.

5. TATA Equity Fund is performing unfavorably in the market.

CONCLUSION AND SUGGESTIONS

CONCLUSION

From the study we can conclude that mutual fund is a safe investment tool. Mutual fund is the only opportunities many investors have for investing in an intelligent, diversified manner, the performance for the growth mutual fund are quite satisfactory. Birla Sunlife equity mutual fund is performing very well where other funds are also performing well but compared to Birla Sunlife equity funds the performance is not so good.

In a country like India, mutual fund have a important role to play an important role in channelizing savings into capital market by building up expertise to answer financial viability of projects and prospects for individuals. These institutions help in minimizing the risk for individual investors. Mutual fund will be the wave of the future as they represent an excellent instrument for the mobilization of savings of the rising middle class in India.

A Mutual Fund is a vehicle through which an investor is able to acquire a pool of securities. Each investor in a mutual fund holds a share of debt funds assets in proposition to the cash invested in turn share the investment returns that the fund generated in the form of current or capital appreciation or both.

Though Mutual Fund industry has enjoyed remarkable prosperity, it is always hazardous to predict the future markets but clearly it will be formidable challenge to sustain the industrys growth. Perhaps the only certainty is that change and innovation will continue to alert the financial landscape. Increased market globalization, round the clock trading, wider spread securitization and all these will likely help to shape the financial culture. In a nation with a large middle class population, most of who dream to have a better financial comfort for tomorrow, mutual fund is obviously seen as the perfect place to invest.

SUGGESTIONS

If professional management cannot guarantee controlled risk adjustment, then a lot of new investment will flow directly into the market. That is precisely why the inflow into mutual fund might slow down.

Slow market analyst also agrees that new products like index futures and derivatives, the option before a retail investor have enlarged. Funds that will survive even thrive, in both bullish and bearish markets are one to chase. Hence endurance and consistency should be the order of the day.

1. Most of the people are unaware of mutual fund schemes and asset management companies. Right kind of awareness has to be created, particularly among the middle class sector, which from largest part of Indian population.

2. Mutual funds must be managed by AMCS in the more transparent manner to be backed by proper research and expertise.

3. The customer may be the single best source of ideas. Intermediaries who listen to customers description will maintain strength.

4. Intermediaries of the mutual funds must maintain a commitment to high quality in existing services. They should avoid diversifying outside their areas of expertise at the expenses of exiting business and customer.

5. Proper education should be imparted to clients about mutual fund scheme.

6. The company should try to expand their networks not only in urban areas but also in rural areas.

7. Follow up should be made to see if the customers are facing any problems.

8. To cater the individual risk, the mutual funds should introduced wide variety of innovative schemes.

9. The company should target the foreign institutional investors and individual investors who invest in the capital market.

BIBLIOGRAPHY

Books:

Publishing House Pvt Ltd.

AMFI Work Book.

AMFI Investor Guide.

Websites:

www.amfiindia.com

www.bseindia.com

www.moneycontrol.com

www.ssrn.com

www.google.com

31/531/728/930/1131/128/317.05999999999999916.5416.8617.10517.65500000000000117.30999999999999931/531/728/930/1131/128/380.5682.99000000000002388.39499999999999694.284999999999997100.31594.910000000000025

31/531/728/930/1131/128/317.05999999999999916.5416.8617.10517.65500000000000117.30999999999999931/531/728/930/1131/128/310.13000000000000110.511.03511.63512.212.035

31/531/728/930/1131/128/317.05999999999999916.5416.8617.10517.65500000000000117.30999999999999931/531/728/930/1131/128/3250.86600000000001256.44499999999999262.12900000000002278.404296.54599999999999272.49499999999887

31/531/729/930/1131/129/317.05999999999999916.5416.8617.10517.65500000000000117.30999999999999931/531/729/930/1131/129/375.16999999999998778.44700000000030182.71299999999999486.13199999999999188.75984.708000000000013

31/531/729/930/1131/129/317.05999999999999916.5416.8617.10517.65500000000000117.30999999999999931/531/729/930/1131/129/352.92500000000001155.12000000000001257.5360.62000000000001263.0759.404000000000003

AXIS EQUITY FUNDBIRLA SUNLIFE EQUITY FUNDHDFC EQUITY FUNDTATA EQUITY FUNDUTI EQUITY FUND-2.1019999999999999-1.2789999999999957-1.4289999999999949-1.8900000000000001-1.6600000000000001

AXIS EQUITY FUNDBIRLA SUNLIFE EQUITY FUNDHDFC EQUITY FUNDTATA EQUITY FUNDUTI EQUITY FUND-7.9000000000000237E-2-4.1000000000000002E-2-4.9700000000000133E-2-0.10700000000000012-8.0200000000000021E-2

AXIS EQUITY FUNDBIRLA SUNLIFE EQUITY FUNDHDFC EQUITY FUNDTATA EQUITY FUNDUTI EQUITY FUND2.0000000000000052E-35.6599999999999998E-24.5699999999999998E-2-1.4900000000000005E-21.7000000000000049E-3