Project Report on Factors Affecting Investors Preference for Investment in Mutual Funds

Page | 1

A Study on

“Factors Affecting Investors’ Preference for Mutual Funds in India and

Performance Evaluation of Mutual Funds in India”

With

Submitted to the

School of Management studies

University of Hyderabad

In Partial Fulfillment of the

Requirement for the Award of the Degree of

Master of Business Administration

Under the Guidance of

Dr. Chetan Srivastava

Lecturer, School of Management Studies

University of Hyderabad

By

Ankit Singh

08MBMA12

Page | 2

For Getting A Copy Feel Free to Contact

[email protected]

MBA 2008-2010

School of Management Studies,

University of Hyderabad,

Gachibowli, Hyderabad,

Andhra Pradesh.

Page | 3

CERTIFICATE

This is to certify that the project work entitled “Factors Affecting Investors’

Preference for Mutual Funds in India and Performance Evaluation of Mutual

Funds in India” has been carried out and submitted by Mr. Ankit Singh under my

guidance in partial fulfillment of his Masters Of Business Administration at

SCHOOL OF MANAGEMENT STUDIES, UNIVERSITY of HYDERABAD.

Date: 21/04/09 Dr. Chetan Srivastava

Faculty Member

School Of Management Studies

University Of Hyderabad

Page | 4

DECLARATION

This to declare that the project title “Factors Affecting Investors Preference for

Mutual Funds in India and Performance Evaluation of Mutual Funds in India” is an

authentic record of my original work carried out under the guidance of Dr. Chetan

Srivastava, Lecturer in Marketing, School of Management Studies, University of

Hyderabad.

The project work has been carried out solely for the purpose of submission in

partial fulfillment of Master of Business Administration at School of Management

Studies, University of Hyderabad.

I further declare that I have not submitted this document to any other School,

University, or Institution in whatever manner.

Date - Ankit Singh

08MBMA12

Page | 5

ACKNOWLEDGEMENTS

First of all I express my gratitude to my project guide Dr. Chetan Srivastava, Lecturer, School

of Management Studies, University of Hyderabad. His able guidance at each step of the project

helped me to broaden my outlook on the project and in successful completion of the project.

I shall always remember his polite way of correction and constant encouragement by asking

various questions.

I would like to express my gratitude to my Project Supervisor, Ms. Nandita Banerjee,

Centre Manager at Reliance Money Lucknow who had spared her valuable time in assisting me

during my project work. It has been a great privilege to work under the supervision of Mr.

Gaurav Nagar, Manager at Reliance Mutual Fund, Lucknow. Their sympathetic, accommodating

and constructive nature remained a constant source of inspiration for me throughout the duration

of this project work.

I convey my regards and special thanks to Dr. V. Venkata Ramana, Professor and Dean,

School of Management Studies, University of Hyderabad for giving me this opportunity for

doing summer internship at Reliance Money.

I would also thank Dr. Mary Jessica and Dr. G.V.R.K. Acharyulu, Faculty, School of

Management Studies, University of Hyderabad, for their guidance and support for the

completion of project work.

I specially thank all the faculty members of the School of Management Studies for

having equipped me with the skills and the ability through their inputs, which assisted me in the

completion of the project.

I am thankful to all the personnel at Reliance Money for their utmost co-operation also I

wish to thank all those people who have directly or indirectly been instrumental in successful

completion of this project work.

Finally, I would like to thank my Parents, Family, Friends, Colleagues and God Almighty

for their unending inspiration and encouragement.

Page | 6

(1) Executive Summary

The report contains the brief description of the Mutual Fund Industry in India. It contains

the findings and analysis of the survey conducted to gather primary data to judge the factors that

influence the investors most before taking decision to make any investment in mutual funds.

Further an attempt has been made to know as to how important the various qualities of a mutual

fund scheme, various qualities of an Asset Management Company (AMC) and importance of

various services provided by the AMCs are to the investor while making investment in a

particular scheme. The attempt has also been made to categorize investors based on various

demographic factors such as age, income, etc. and to present a comparative analysis of the

various demographic factors. The size of the sample is limited to 200 only. More than 33 % of

the investors prefer fixed deposits for making investment. The investors first look for safety of

capital in mutual funds. More than 67 % of the investors first prefer open ended funds. About

half of the total mutual fund investors have invested in equity schemes. The study also reveals

that the investors prefer to take decision regarding the investments on their own. The investors

consider the reputation of the portfolio managers as the least important factor in the selection of

the funds/schemes. The investors consider the reputation of the company as the most important

quality while making selection of a particular fund or scheme. They have given highest

importance to daily disclosure of NAV in case of investor services.

The report also deals with the performance evaluation of Mutual Funds in India vis-a-vis

the Benchmark Index of the funds with the help of Beta (a measure of systematic risk), Standard

Deviation (a measure of total risk), Sharpe Ratio, Treynor‟s Ratio, Jensen Measure (a measure of

fund manager performance), and Fama Measure. For this purpose, 10 similar equity schemes of

10 fund houses have been taken as sample, out of which 9 schemes are open ended and 1 scheme

is closed ended. The top 10 fund houses are selected on the basis of their Assets under

Management (AUM) as on 30th

June 2009. More than 75% of corpus of each scheme is invested

in equity stocks. The study covers the period of 36 months from 31st July 2006 to 30th June

2009. The data used is monthly closing NAVs. The source of data is the respective website of a

particular scheme and also the mutualfundsindia.com and amfi.com.

Page | 7

It is evident from the analysis that fund managers were not successful in satisfying the

investors with their performance. Under quarterly analysis only 7 funds out of the 10 funds

selected were able to earn more than market returns and only 6 funds were able to earn more than

the risk free rate.

Under half yearly analysis only 4 funds out of the 10 funds selected were able to earn

more than market returns and only 9 funds were able to earn more than the risk free rate.

Under yearly analysis only 6 funds out of the 10 funds selected were able to earn more

than market returns and only 9 funds were able to earn more than the risk free rate.

Page | 8

(2) Table of Contents

Certificate (i)

Declaration (ii)

Acknowledgements (iii)

1. Executive Summary 1-2

2. Table of Contents 3

3. Company Profile 4-7

4. History of Indian Mutual Funds Industry 8-9

5. Background and Need for Study 10

6. Statement of Problem 10-11

7. Objective of Study 12

8. Testable Hypothesis 13

9. Limitations of Study 13

10. Theoretical Framework 14

11. Literature Review 15-22

12. Research Methodology

(a) Designing of Questionnaire 23-24

(b) Duration of Study 24

(c) Sample Selection 24

13. Data Collection and Analysis 24-35

14. Performance analysis of Mutual Funds 36-56

15. Comparison of Funds on the basis of Index 57-59

16. Overall ranking of Mutual Funds

(a) On the basis of Jensen alpha 60

(b) On the basis of Jensen Alpha 61

(c) On the basis of Total Risk 62

(d) On the basis of Portfolio Diversification 63

17. Findings of the Study 64-65

18. Suggestions 66-67

19. Bibliography and References 68

20. Annexure I-II 69-72

Page | 9

(3) COMPANY PROFILE-

Reliance Capital Ltd is a part of the Reliance - Anil Dhirubhai Ambani (ADA) Group, and is

ranked among the 25 most valuable private companies in India. Reliance Capital is one of India's

leading and fastest growing private sector financial services companies, and ranks among the top

3 private sector financial services and banking groups, in terms of net worth. Reliance Capital

has interests in asset management and mutual funds, life and general insurance, private equity

and proprietary investments, stock broking, depository services, distribution of financial

products, consumer finance and other activities in financial services. The Reliance ADA Group

is one of India's top 2 business houses, and has a market capitalization of over Rs.2,90,000 crore

(US$ 75 billion), net worth in excess of Rs.55,000 crore (US$ 14 billion), cash flows of Rs.

11,000 crore (US$ 2.8 billion) and net profit of Rs. 7,700 crore (US$ 1.9 billion).

Reliance Money-

Reliance Money is a group company of Reliance Capital; one of India's leading and fastest

growing private sector financial services companies, ranking among the top 3 private sector

financial services and banking companies, in terms of net worth. Reliance Capital is a part of the

Reliance ADA Group.

Page | 10

About Reliance Money in brief

Reliance Money is a part of the Reliance Anil Dhirubhai Ambani Group and is promoted by

Reliance capital. The fastest growing private sector financial services company in India ranked

amongst the 3 private sector financial companies in terms of net worth. Reliance Money is a

comprehensive financial solution provider that enables one to carry out trading and investment

activities in a secure, cost-effective and convenient manner. Through Reliance Money, one can

invest in a wide range of asset classes from Equity, Equity and Commodity Derivatives, Mutual

Funds, Insurance products, IPO‟s to availing services of Money transfer and Money changing.

Reliance Money offers the convenience of on-line and off-line transactions through a variety of

means, including its, portal, call & Transact, Transaction Kiosks and at its network of affiliates.

Some key steps of the company are…

“Success is a journey, not destination” if we look for examples to prove this quote then

we can find many but there is none like that of Reliance Money. This company is today known

as the largest financial service provider of India.

Success sutras of Reliance Money-

The success story of the company is driven by 9 success sutras adopted by in namely Trust,

Integrity, Dedication, commitment, Enterprise, Hard work, Home work, Team work play ,

Learning and Innovation, Empathy and Humility and last but not least is it’s Network.

Mission statement:

Mission of the company is to be a leading and preferred service provider to the customers, and

aims to achieve this leadership position by building an innovative, enterprising and technology

driven organization which will set the highest standards of service and business ethics.

Page | 11

Vision of Reliance Money:

To achieve and in market leadership Reliance Money aimed for complete customer satisfaction,

by combining its human and technological resources, to provide world class quality services. In

the process Reliance Money strived to meet and exceed customer‟s satisfaction and set industry

standards.

ORGANIZATION HIERARCHY

RELIANCE MONEY

(Head Office Mumbai)

(

BRANCH OFFICE

Cluster Head

Business Development

Executives

Centre Manager

Executives

Sales Promoters

Page | 12

PRODUCTS AND SERVICES-

Equity- Reliance Money offers its clients competitively priced Equity broking, PMS and

Portfolio Advisory Services. Trading execution assistance provided to clients.

Mutual Funds- Reliance Money offers dedicated research & expert advice on Mutual Funds.

Life-Insurance- Clients can choose from different plans of almost all Insurance Companies

where they can invest their money. A team of experts will suggest the best Insurance scheme

which suits the client‟s requirement.

General Insurance- Reliance Money assists in areas of Health insurance, Travel insurance,

Home insurance and Motor insurance.

Commodities- Reliance Money is a single platform to trade on both the major commodity

exchanges i.e. NCDEX and MCX. In addition in-house research desk shall provide research

reports on all major commodities which shall enable in getting views for trading and diversify

client‟s holdings. Trade Execution assistance is also provided to clients.

Structured Products, Art Investments- Structured Products is a new class of financial products

for investors apprehensive of increased volatility in stock markets. Specially designed products

could include Equity, Index-linked in nature, Real Estate Funds, Art Funds, Overseas

Investments and Infrastructure Investments.

Tax Planning- Reliance Money‟s wealth management offerings include tax related services like:

Tax Planning & advisory services and filling Tax returns for individuals.

Real Estate Advisory Services- It provides Broking Model for lease/rent and buy/sell of

property, Property Valuation, Real-estate Consulting Corporate earning model, etc.

Offshore Investments- Reliance Money provides a unique opportunity to invest in international

financial markets through the online platform which includes different product ranges.

Page | 13

(4) HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the

initiative of the Government of India and Reserve Bank the. The history of mutual funds in India

can be broadly divided into four distinct phases

First Phase – 1964-87-

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. 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)-

1987 marked the entry of non- UTI, public sector mutual funds. These were set up by public

sector banks, Life Insurance Corporation of India (LIC) and General Insurance Corporation of

India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987

followed by Canbank Mutual Fund (Dec 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). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in

December 1990. At the end of 1993, the mutual fund industry had assets under management of

Rs.47, 004 crores.

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider 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.

Page | 14

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. As

at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 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-

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

into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets

under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the

assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of

Unit Trust of India, functioning under an administrator and under the rules framed by

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

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 assets under

management 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.153108 crores under 421

schemes.

Current status of Mutual Funds Industry in India-

At present there are 36 AMCs functioning in India. The total Assets under Management of all

these AMCs as on 31st August, 2009 are Rs. 749,915.52 crores with Reliance Mutual Fund on

the top with Rs. 117,313.78 crores under its management and Quantum Mutual Fund on the

lowest with Rs. 70.33 crores under its management. The total number of schemes under

operation is 3756 with ICICI Prudential Mutual Fund at the top with 323 Schemes and Quantum

Mutual Fund at the lowest with 11 schemes.

Page | 15

(5) BACKGROUND AND NEED FOR THE STUDY- MF is a retail product designed to

target small investors, salaried people and others who are intimidated by the stock market but,

nevertheless, like to reap the benefits of stock market investing. At the retail level, investors are

unique and are a highly heterogeneous group. Hence, designing a general product and expecting

a good response will be futile except the case of UTI monopoly during 1964-1987. But with the

entry of public sector banks and financial institutions in the field and the globalization and

liberalization measures announced by the government led to a paradigm shift in the mind set of

investors and the capital market environment became more unfriendly to retail investors. They

had no other choice but to turn to MFs to reap the benefits of stock market investing. Hence, the

need to be innovative in designing the product was not felt and investors had to choose from

among the limited schemes offered. After the entry of private sector companies into the industry

the competition started growing in the industry.

Currently (as on 31/8/2009) there are 3756 schemes running with 36 AMCs (Source:

Mutualfundsindia.com) with varied objectives and AMCs compete against one another by

launching new products or repositioning old ones. The investors are having a lot of options to

choose from so he is confused in his selection of the product. The choice of investors is affected

by the different features of the scheme, the reputation of the AMCs, various services provided by

the companies to the investors. Unless the MF schemes are tailored to his changing needs, and

unless the AMCs understand the fund selection/switching behavior of the investors, survival of

funds will be difficult in future. With this background an attempt is made in this paper to study

the factors influencing the fund/scheme selection behaviour of Retail Investors.

Over the last few years mutual funds are giving impressive returns, especially Equity

Funds. There is a need to know the returns provided by the individual schemes and the risk levels

at which they are delivered in comparison with the market and the risk free rates. The aim is also

to identify the out-performers. There is a need to evaluate the performance of Indian Mutual

Fund Schemes.

(6) STATEMENT OF PROBLEM- The “expectations” of investors influence the price of the

securities, the volume traded and various other financial operations in actual practice. These

„expectations‟ of investors are influenced by their “perception” and humans generally relate

perception to action. The evidence of prevalence of such a psychological state is seen among MF

investors in India.

Page | 16

For instance, UTI, which is synonymous to mutual funds in India, had a glorious past

and perceived as a safe, high yield investment vehicle with the added tax benefit. Many UTI

account holders have justified their beliefs by staying invested in UTI schemes even after the

1999 bail out and the July 2001 episode of repurchase freeze on US 64 for 6 months. People also

believe that something they own is better than something they do not own. For instance, the

existence of many poor performing funds with investors staying invested with them? In general,

rules for investment, the analysis of investment and discussion of financial behaviour tend to

assume behaviour, which is logical and internally consistent in various ways. Investor behaviour

does not; however, always appear to conform to such expectational norms.

Much of economic and financial theory is based on the notion that individuals act

rationally and consider all available information in the decision making process. However, in the

financial literature, there are no clear models, which explain the influence of “perception” and

“beliefs” on “expectations” and “decision making”. No doubt, reality is so complex that trying to

fit individual investor‟s behaviour into a model is impossible. Investor‟s behaviour may change

from period to period even if the other variables influencing the behaviour are held constant.

However, to a certain extent, the concepts can be borrowed from social psychology where

behavioural patterns, rational and irrational are observed and empirically tested. On the same

lines certain models can be developed to identify the financial behaviour, to the extent of the

availability of the explanatory variables. Such models can help to understand the “why” and

“how?” aspect of investor behaviour, which can have managerial implications for policy makers.

The fund managers manage the portfolio of the mutual funds by undertaking the risk so

they are expected to perform better than the market. The investment strategy and management

style are qualitative but the fund return is the only quantitative indicator to judge the

performance of mutual funds. 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.

There must be some performance indicator that will reveal the quality of stock selection of

various AMCs.

Hence, with this background, this study attempts to evaluate the behavioural aspects of

fund selection techniques of individual investors during the period, May 2009 to August 2009

and also attempts to judge the performance of mutual funds using traditional measures.

Page | 17

(7) OBJECTIVES OF STUDY

The investors do not evaluate all possible product attributes while making a choice, but the

marketer‟s search is for identification of “The key buying criteria” or “The key choice criteria”

or “determinant attributes‟ which are defined as certain features of a product offering that are

closely associated with preferences.

The study has the following general objectives-

1. To identify preferred saving avenue among investors and to identify the saving pattern of

investors.

2. To categorize investors as being inclined towards investment products based on certain

parameters such as sex, age, qualifications, occupation, annual income etc.

The study has the following specific objectives-

1. To judge the importance of factors that influences the investors to invest in mutual funds

and to identify the scheme preference of investors.

2. To perceive the preferred communication mode of investors.

3. To identify the information sources influencing the scheme selection decision of

investors.

4. To evaluate fund qualities that would affect the selection of Mutual Funds.

5. To understand the fund sponsor qualities influencing the selection of MFs/Schemes.

6. To evaluate investor related services that would affect the selection of Mutual funds.

7. To compare the performance of the selected funds of different companies with the help

of Sharpe Measure, Treynor Measure and Beta, measures of performance.

8. To examine the degree of correlation that exists between fund and market return.

9. To evaluate the diversification of the Portfolio of the selected funds.

10. To assess the Performance and selectivity skills of fund managers.

Page | 18

(8) TESTABLE HYPOTHESIS- The following hypothesis is made in the study-

1. The investors consider all the qualities of the fund as important in the selection of the

fund/scheme.

2. The investors consider all the qualities of AMC important in the selection of the scheme.

3. The investors consider all the investor services important in the selection of the scheme.

4. The portfolios are well diversified and fund managers are able to generate returns more

than that of the market because of their knowledge and stock selection skills.

(9) LIMITATIONS OF STUDY-

1. Sample size was limited to 200 only out of which only 60 respondents had invested in

Mutual Funds. The sample size may not represent whole market.

2. The study has not been conducted over an extended period of time considering both

market ups and downs. The market state has a significant influence on the buying

patterns and preferences of investors. The study cannot capture such situations.

3. This study is limited to the investors of Lucknow, Varanasi and Kanpur only. Therefore

the inferences cannot be generalized.

4. A few respondents were not able to understand some of the terms of the questionnaire

which may affect the study to a little extent.

5. Only 10 selected equity schemes of top 10 AMCs based on their Assets under

Management as on June 30, 2009 are evaluated for their performance.

6. The performance evaluation of mutual funds is restricted to a period of three years

starting from June 30, 2006 to June 30, 2009 to evaluate the performance of selected

Mutual Funds but not from their inception.

7. The NAVs used in the study are obtained from amfi.com and also from

Mutualfundsindia.com, which in turn is supplied by the members. Members in turn

have not followed any uniform role in the computation of NAV due to the flexibilities

offered under SEBI Regulations.

8. This study excludes the effect of entry and exit loads of the Mutual funds.

9. The dividends if any are assumed to be paid in the end of the study period i.e. either at

the end of the last quarter, or at the end of the last half year, or at the end of the previous

year, as the case may be.

Page | 19

(10) THEORETICAL FRAMEWORK

Mutual Fund industry today is one of the most preferred investment avenues in India. However,

with a large number 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. There must be some performance indicator that will reveal the quality of stock selection

of various AMCs. The idea behind performance evaluation is to find the returns provided by the

individual schemes and the risk levels at which they are delivered in comparison with the market

and the risk free rates. The aim is also to identify the out-performers. The objective of the study

is to evaluate the performance of Indian Mutual Fund Schemes.

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

vis-a-vis market. 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 cannot. In order to determine the risk-adjusted 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. These measures are Sharpe Measure, Treynor Measure, Jensen Alpha and

Fama Measure.

Page | 20

(11) LITERATURE REVIEW-

Ippolito (1992) and Bogle (1992) says that fund/scheme selection by investors is based on past

performance of the funds and money flows into winning funds more rapidly than they flow out

of losing funds. Goetzman (1997) states that there is a evidence that investor psychology affects

the fund/scheme selection and switching. Lu Zheng (1998) examined the fund selection ability

of MF investors and found that the investor‟s decisions are based on short-term future

performance and investors use fund specific information in their selection decision.

Madhusudhan V. Jambodekar (1996) conducted a study to assess the awareness of MFs among

investors, to identify the information sources influencing the buyer decision and the factors

influencing the choice of a particular fund. The study revealed that income schemes and open-

ended schemes are preferred over growth schemes and close-ended schemes during the prevalent

market conditions. Investors look for Safety of Principal, Liquidity and Capital Appreciation in

order of importance; Newspapers and Magazines are the first source of information through

which investors get to know about MFs / Schemes and the investor service is the major

differentiating factor in the selection of MFs. Shanmugham (2000) conducted a survey of 201

individual investors to study the information sourcing by investors, their perceptions of various

investment strategy dimensions and the factors motivating share investment decisions, and

reports that among the various factors, psychological and sociological factors dominated the

economic factors in share investment decisions. Sujit Sikidar and Amrit Pal Singh (1996)

carried out a survey with an objective to understand the behavioural aspects of the investors of

the North Eastern region towards equity and mutual funds investment portfolio. The survey

revealed that the salaried and self employed formed the major investors in mutural fund

primarily due to tax concessions. Syama Sunder (1998) conducted a survey to get an insight

into the mutual fund operations of private institutions with special reference to Kothari Pioneer.

The survey revealed that Agents play a vital role in spreading the Mutual Fund culture; open-end

schemes were much preferred then; age and income are the two important determinants in the

selection of the fund/scheme; brand image and return are the prime considerations while

investing in any Mutual Fund. Anjan Chakarabarti and Harsh Rungta (2000) stressed the

importance of brand effect in determining the competitive position of the AMCs. Their study

reveals that brand image factor, though cannot be easily captured by computable performance

measures, influences the investor‟s perception and hence his fund/scheme slection.

Page | 21

SEBI – NCAER Survey (2000) was carried out to estimate the number of households and the

population of individual investors, their economic and demographic profile, portfolio size,

investment preference for equity as well as other savings instruments. This is a unique and

comprehensive study of Indian Investors, for, data was collected from 3,00,0000 geographically

dispersed rural and urban households. Some of the relevant findings of the study are :

Households preference for instruments match their risk perception; Bank Deposit has an appeal

across all income class; 43% of the non-investor households equivalent to around 60 million

households (estimated) apparently lack awareness about stock markets; and, compared with low

income groups, the higher income groups have higher share of investments in Mutual Funds

(MFs) signifying that MFs have still not become truly the investment vehicle for small investors.

Nevertheless, the study predicts that in the next two years (i.e., 2000 hence) the investment of

households in MFs is likely to increase. Sharad Panwar and Dr. R. Madhumathi found that

public-sector sponsored, private-sector Indian sponsored and private-sector foreign sponsored

mutual funds do not differ statistically in terms of portfolio characteristics such as net assets,

common stock%, market capitalization, holdings, Top Ten %. However, there is a statistical

difference between three classes of public-sector sponsored, private-sector Indian sponsored and

private-sector foreign sponsored mutual funds in terms of average standard deviation, average

variance and average coefficient of variation. Portfolio risk characteristics measured through

private-sector Indian sponsored mutual funds seems to have outperformed both Public- sector

sponsored and Private-sector foreign sponsored mutual funds. Residual variance is not linearly

related to investment performance in terms of Jensen‟s alpha and portfolio beta, regardless of the

benchmark index used. The general linear model of analysis of covariance establishes

differences in performance among the three classes of mutual funds in terms of portfolio

diversification. S.Narayan Rao , evaluated performance of Indian mutual funds in a bear market

through relative performance index, risk-return analysis, Treynor‟s ratio, Sharpe‟s ratio, Sharpe‟s

measure , Jensen‟s measure, and Fama‟s measure. The study used 269 open-ended schemes (out

of total schemes of 433) for computing relative performance index. Then after excluding funds

whose returns are less than risk-free returns, 58 schemes are finally used for further analysis. The

results of performance measures suggest that most of mutual fund schemes in the sample of 58

were able to satisfy investor‟s expectations by giving excess returns over expected returns based

on both premium for systematic risk and total risk

Page | 22

Jayadev (1996) evaluated the performance of 62 mutual funds schemes using NAV data for

varying period between 1987 and 1995. He reported superior performance for bulk (30 out of 44)

of the sample schemes when total risk was considered. However, in terms of systematic risk only

24 out of 44 schemes outperformed the benchmark portfolio. He also found that Indian mutual

funds were not properly diversified. Further, in terms of Fama‟s measure, he did not find

selectivity ability of the fund manager.

Amitab Gupta (2001)

in his study, the selected schemes were evaluated with respect to the

broad based BSE National Index to find out whether the schemes were able to beat the market.

The most important and widely used measures of performance are-

(1) (Beta) Co-efficient (A Measure of Systematic Risk)

(2) Sharpe‟s Measure of Performance

(3) Treynor‟s Measure of Performance

(4) Jensen‟s Measure of Performance

(5) Fama‟s Measure of Performance

(6) Standard Deviation (A Measure of Total Risk)

(7) Co-efficient of Determination: Measure of Diversification

a (Beta) Co-efficient - The beta is a measure of systematic risk or Non-diversifiable risk.

The beta of a stock measures the sensitivity or volatility of the stock with reference to a broad

based market index, e.g. SENSEX in India. In the case of Mutual Funds it represents fluctuations

in NAV of a Mutual Fund vis-à-vis base market. The more responsive the NAV of a Mutual

Fund is to the changes in the market the higher will be its beta and vice-versa. It is calculated by

relating the returns on a Mutual Fund with the returns in the Market. A beta of 1 indicates that

the security's price will move with the market, and the stock is called unity stock. A beta of less

than 1 means that the security will be less volatile than the market and the stock is called low

beta stock. A beta of greater than 1 indicates that the security's price will be more volatile than

the market and the stock is called high beta stock. In the study it is assumed that the Beta is

consistent during the period of study.

Page | 23

E.g. A beta of 1.2 for a stock would indicate that this stock is 20 per cent riskier than the

Index. Similarly, a beta of 0.9 would indicate that this stock is 10 per cent (100-90) less risky

than the Index. And, of course, a beta of one would mean that the stock is as risky as the stock

market indexBeta is calculated using the following formula-

=𝑵 𝑿𝒀 − 𝐗 ( 𝐘)

𝐍 𝐗𝟐− ( 𝐗)𝟐

Where, X = Market or Index Return, and,

Y = Return on Fund.

= Beta of the Fund.

N = Number of Periods

bSharpe’s Measure of Performance - This measure was developed by William Sharpe in

1966. Sharpe Measure measures the risk Premiums of the portfolio (average portfolio return less

risk free return) relative to the total amount of risk in the portfolio (standard deviation of the

portfolio). The Sharpe measure adjusts portfolio performance for total risk rather than market

risk. It is also called reward-to-variability ratio. The Sharpe ratio tells us whether a portfolio's

returns are due to smart investment decisions or a result of excess risk. The higher the Sharpe

ratio for a portfolio, the better the portfolio has performed. major limitation of the Sharpe ratio is

that it is based on the Capital Market Line (CML). The major character of the capital market line

is only the efficient portfolios can be plotted on the CML but not inefficient. Hence it is assumed

that a managed portfolio (mutual fund scheme) is an efficient portfolio.

E.g.- If the portfolio A has an average return of 10% with a standard deviation of 2%, and

portfolio B has an an average return of 12% with a standard deviation of 4%. Also risk free rate

of return is 5%. Then the Sharpe Index for A is equal to 2.5 and for B is equal to 1.75. Therefore

A will be ranked as better portfolio than B, because its Sharpe index is higher than that of

B (2.5 – 1.75) despite the fact that portfolio B had a higher return.

It is calculated using the following formula-

𝑺𝒕 = 𝒓𝒕− 𝒓∗

𝒕

Page | 24

Where, St = Sharpe Index

r* = riskless rate of interest (T - bill)

t = Standard deviations of the returns of portfolio t

𝒓𝒕 = average return on portfolio t

cTreynor’s Measure of Performance - This measure was developed by Jack Treynor in

1965. The Treynor measure is a relative measure of performance for investment managers and

measures the return premium per unit of systematic risk (risk that cannot be diversified) as

measured by the beta or relative volatility of the portfolio. 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 performance. It is also called reward-to-volatility ratio.

The major limitation of the Treynor Index is that it can be applied to the schemes with

positive betas during the bull phase of the market. The results will mislead if applied during bear

phase of the market to the schemes with negative betas. The second limitation is it ignores the

reward for unsystematic or unique risk.

E.g.- If the portfolio A has an average return of 10% with a Beta of 0.5, and portfolio B

has an an average return of 12% with a Beta of 1.0. Also risk free rate of return is 5%. Then the

Treynor‟s Index for A is equal to 0.10 and for B is equal to 0.07. Therefore A will be ranked as

better portfolio than B, because its index is higher than that of B (0.10 – 0.07) despite the fact

that portfolio B had a higher return.


𝑻𝒏 = 𝒓𝒏− 𝒓∗

𝜷𝒏

Where, Tn = Treynor‟s Index

r* = riskless rate of interest (T - bill)

n = Beta coefficient of portfolio n

𝒓𝒏 = average return on portfolio n

Page | 25

dJensen’s Measure of Performance - This measure was developed by Michael Jensen in

1968. This measures the Portfolio Manager‟s predictive ability i.e. his ability to earn returns

through successful prediction of security prices which are higher than those which an ordinary

investor would expect given the level of riskiness of his portfolio and average market return i.e.

the expected (CAPM) returns. It is a measure of absolute performance on a risk adjusted basis.

A positive value for Jensen's alpha means that the fund manager has "beat the market"

with his or her stock picking skills and vice-versa. If it is equal to zero then it indicates neutral

performance by portfolio manager. A positive value of this would indicate that the scheme has

provided a higher return over the CAPM return and lies above Security Market Line (SML) and

a negative value would indicate it has provided a lower than expected returns and lies below

SML. The Jensen model assumes that the portfolio is fully invested and is subjected to the

limitations of CAPM.

Limitation of this model is that it considers only systematic risk not the entire risk

associated with the fund and an ordinary investor cannot mitigate unsystematic risk, as his

knowledge of market is primitive.


𝑹𝒋𝒕 − 𝑹𝑭𝒕 = 𝒋 + 𝒋 (𝑹𝑴𝒕 − 𝑹𝑭𝒕)

Where, 𝑹𝒋𝒕 = Average return on portfolio j for a period t

𝑹𝑭𝒕 = Riskless rate of interest for a period t

𝒋 = Intercept that measures the forecasting ability of the portfolio manager

𝒋

= A measure of systematic risk for Portfolio j

𝑹𝑴𝒕 = Average return of a market portfolio for period t

Page | 26

eFama’s Measure of Performance - This measure was developed by Eugene Fama in 1972.

This model is an extension of Jenson model. This model compares the performance, measured in

terms of returns, of a fund with the required return commensurate with the total risk associated

with it. The difference between these two is taken as a measure of the performance of the fund

and is called Net Selectivity. The Net Selectivity represents the stock selection skill of the fund

manager, as it is the excess returns over and above the return required to compensate for the total

risk taken by the fund manager.

A positive value for Fama indicates that the fund earned returns higher than expected

returns and lies above Capital Market Line (CML) and a negative value indicates that the fund

earned returns lower than expected returns and will lie below the Capital Market Line (CML).


𝑭𝑷 = 𝐫𝐏 − 𝐫𝐟 𝐏

𝐦

𝐫𝐦 − 𝐫𝐟

Where, FP = Fama‟s Measure for Portfolio,

rP = Portfolio Return,

rf = Risk Free Return,

P = Standard Deviation of the Portfolio Returns

m = Standard Deviation of the Market Returns

rm = Market Return.

The purpose of performance evaluation is that it should be in a position to identify the

mistakes and suggest a direction for the correction. A comparison of Sharpe‟s and Treynor‟s

ratio will help the fund managers to correct their actions from risk angle and comparison of

Jensen‟s and Fama‟s measures will help from return angle.

fStandard Deviation – It measures the absolute dispersion or variability or volatility. It shows

how the values in a series deviate from the mean value of the series. It is also used as a measure

of risk. The greater the Standard Deviation the greater the volatility in the fund returns i.e. the

greater the total risk associated with a particular fund. It is calculated using the following

formula-

= (𝐱 − 𝐱 )𝟐

𝐍

Page | 27

Where, = Standard Deviation,

X = Values of the series,

𝐱 = Mean of the series,

N = Number of items in a series.

(g) Co-efficient of Correlation – The correlation measures the degree of relationship between

two variables. The co-efficient of correlation varies between -1 to +1. The higher the correlation

the greater is the degree of relationship between the variables. The correlation is used in this

study to measure the relationship between the fund returns and market returns. It‟s formula is

similar to that of the Beta. It is as follows-

𝒓 = 𝑵 𝑿𝒀 − 𝐗 ( 𝐘)

𝐍 𝐗𝟐− ( 𝐗)𝟐

(h) Co-efficient of Determination – It measures the diversification of the portfolio. It is the

square of the Co-efficient of Correlation.

(i) Returns on Fund - Returns on fund is calculated using the following formula-

𝑹𝒇 =𝑵𝑨𝑽𝒕+𝟏 + 𝑫𝒕+𝟏 − 𝑵𝑨𝑽𝒕

𝑵𝑨𝑽𝒕

Where, 𝑅𝑓 = Returns on Mutual Fund.

𝑁𝐴𝑉𝑡 = Net Asset Value at the end of the previous Period,

𝑁𝐴𝑉𝑡+1 = Net Asset Value at the end of the current Period,

𝐷𝑡+1 = Dividend received during the current Period.

jReturns on Market Index - Returns on Market Index is calculated using the following

formula-

𝑹𝒎 =𝑴𝒕+𝟏 −𝑴𝒕

𝑴𝒕

Where, 𝑅𝑚 = Return on Market Index,

𝑀𝑡+1 = Market Index at the end of Current Period,

𝑀𝑡 = Market Index at the end of Previous Period,

Page | 28

(12) RESEARCH METHODOLOGY

(a) Designing of Questionnaire- To understand the savings preference, investment preference,

scheme preference, time horizon for investment and objectives for investment in Mutual Funds,

and to identify the information sources influencing scheme selection, and the preferred mode of

communication, a questionnaire (ANNEXURE I) was designed and the respondents were asked

to rank their preferences on a ranking scale.

The questionnaire also contains 21 factors that are of varied importance to investors

while taking decision to invest in Mutual Funds. These factors are divided into 3 major groups –

Scheme Qualities, AMC Qualities and Investor Services. The investors were asked to rate the

importance of each of these factors on a 5 point scale ranging from Highly Important (1) to not at

all Important (5). These factors are as follows-

(A) Scheme Qualities-

1. Fund‟s/Scheme‟s performance record

2. Fund‟s/Scheme‟s brand name

3. Scheme‟s portfolio constituents

4. Reputation of scheme(s), portfolio manager(s)

5. Investment/Withdrawal facilities

6. Rating by a rating agency

7. Innovativeness of the Scheme

8. Products with tax benefits

9. Entry and Exit load

10. Safety of capital

(B) AMC Qualities-

1. Private Sector / Public Sector ownership

2. Reputation of the company

3. Range of schemes with different qualities

4. Efficiency of research wing

5. Company‟s expertise in managing money

Page | 29

(C) Investor Services-

1. Disclosure of investment objectives, method and Periodicity of valuation in

advertisement.

2. Disclosure of method periodicity of scheme‟s sales and repurchase in offer document.

3. Announcement of NAV on every trading day

4. Disclosure of deviation of the investments from the expected pattern.

5. Disclosure of investments at regular intervals.

6. Mutual Fund Investors‟ grievance redressal machinery.

(b) Duration of Study- The survey is conducted for a period of two months starting from May

10, 2009 to July 10, 2009. The performance of the Mutual Funds is calculated for a period of

three years starting from July 2006 to June 2009.

(c) Sample Selection- The survey is conducted on 120 investors out of which 60 investors

invested in Mutual Funds. The sample for study includes 29 Government Employees, 26 Private

Sector Employees, 21 Self-Professionals, 27 Businessmen, and 13 Retired Government

Employees so as to get effective results. Out of total 120 respondents, 55 investors invested

through Reliance Money. The survey was conducted in certain areas of Lucknow, Kanpur and

Varanasi only.

For the second part of the study the sample includes 10 similar equity schemes of Top 10

fund houses selected on the basis of their Assets under Management (AUM) as on 30th

June

2009. This includes 9 open ended schemes and 1 closed ended scheme. More than 75% of corpus

of each scheme is invested in equity stocks.

(13) Data Collection and Analysis- The report is based on primary as well as secondary data.

For the first part of the study Primary data was collected through the above designed

Questionnaire using telephone calls, e-mails and also personal interviewing the respondents. The

data is analyzed using the correlation analysis, chi-square test and analysis of variance.

For the second part Secondary data is collected from the offer document of the funds, the

websites of respective AMCs, amfiindia.com and MutualFundsindia.com. The data is analyzed

using the Sharpe Measure, Treynor‟s Measure, Jensen Measure, Fama Measure, Standard

Deviation and Correlation Analysis. The profile of the investors is given below-

Page | 30

RESPONSES DURING THE SURVEY

INVESTOR PROFILE

NO. OF RESPONDENTS

SEX

Male 136

Female 64

AGE

Below 30 42

30-40 70

40-50 54

50 and above 34

OCCUPATION

Salaried 75

Businessman 47

Professional 41

Retired 37

ANNUAL INCOME

Below 2,00,000 51

2,00,000-3,00,000 77

3,00,000-4,00,000 38

Above 4,00,000 34

ANNUAL SAVINGS

Below 50,000 67

50,000 – 100,000 52

100,000 – 150,000 43

Above 150,000 38

INVESTMENTS

Fixed Deposits 75

Mutual Funds 60

Life Insurance 28

Stock Market 22

Postal Savings 6

Others 9

OBJECTIVE

Liquidity / Safety 21

Growth 16

Returns 12

Tax Benefits 11

TYPE OF FUNDS

Open-Ended Funds 41

Close-Ended Funds 13

Interval-Funds 6

Page | 31

INFLUENCE OF ENVIRONMENTAL FACTORS

ROUTE

NO OF RESPONDENTS

Self – Evaluation 21

Advisors 17

Commercials 13

Friends/Family 9

MODE OF COMMUNICATION FOR RECEIVING UPDATES AND PERFORMANCE

MODE

NO OF RESPONDENTS

Personal Communication 21

Internet / e-mail 16

Telephone 14

No Preference 9

SCHEME PREFERENCE

Equity (Growth) 19

Equity (Dividend) 8

Debt 17

Balanced 10

Sector Specific 6

Page | 32

Analysis of the Findings- The relationship between important factors has been analyzed with

the help of Chi-Square Test. The following pairs have been analyzed-

1. Income and Savings- The relationship between the savings and investment can be

presented with the help of following table and diagram,

Income / Savings Below 50,000 50,000-100,000 100,000-150,000 Above 150,000

Below 2,00,000 47 4 0 0

2,00,000-3,00,000 19 37 21 0

3,00,000-4,00,000 1 10 17 6

Above 4,00,000 0 1 5 32

0

10

20

30

40

50

Below 2,00,000

2,00,000-3,00,000

3,00,000-4,00,000

Above 4,00,000

Page | 33

2. Savings and Investments-

Investments /

Savings Below 50,000 50,000-100,000 100,000-150,000 Above 150,000

Fixed Deposits 42 16 9 8

Mutual Funds 13 16 15 16

Life Insurance 5 11 7 5

Stock Market 3 6 7 6

Postal Savings 3 1 2 0

Others 1 2 3 3

05

1015202530354045

Below 50,000

50,000-100,000

100,000-150,000

Above 150,000

Page | 34

3. Age and Time Horizon-

Age / Time Below 1 year 1-3 years 3-5 years Above 5 years

Below 30 7 10 13 12

30-40 15 16 25 14

40-50 8 19 12 15

50 and above 6 17 9 2

0

5

10

15

20

25

30

Below 1

year

1-3 years 3-5 years Above 5

years

Below 30

30-40

40-50

50 and above

Page | 35

4. Age and Investment-

Age / Investment Fixed

Deposits

Mutual

Funds

Life

Insurance

Stock

Market

Postal

Savings Others

Below 30 9 26 2 5 0 0

30-40 25 20 12 11 0 2

40-50 22 12 11 4 2 3

50 and above 19 2 3 2 4 4

0

5

10

15

20

25

30

Below 30

30-40

40-50

50 and above

Page | 36

5. Age and Scheme-

Age / Scheme Equity

(Growth)

Equity

(Dividend) Debt Balanced

Sector

Specific

Below 30 11 2 7 3 3

30-40 6 3 5 4 2

40-50 2 3 4 2 1

50 and above 0 0 1 1 0

0

2

4

6

8

10

12

Below 30

30-40

40-50

50 and above

Page | 37

A. RANKING OF AMC QUALITIES-

AMC QUALITIES

NO OF

RESPONDENTS RANK

(Based on Weighted Average) 1 2 3 4 5

Private Sector / Public

Sector ownership 21 16 12 7 4 One

Reputation of the

company

Reputation of the

company 25 17 11 6 1 Two

Range of schemes with

different qualities

Range of schemes with

different qualities 24 20 9 3 4 Three

Company‟s expertise in

managing money

Efficiency of research

wing 13 16 10 12 9 Four

Private Sector / Public

Sector ownership

Company‟s expertise in

managing money 19 20 16 4 1 Five

Efficiency of research

wing

Groups Count Sum Average Variance

Column 1 5 60 12 46.5

Column 2 5 60 12 88

Column 3 5 60 12 99.3

Column 4 5 60 12 7.5

Column 5 5 60 12 78.5

Source of Variation SS df MS F P-value F crit

Between Groups 0.64 4 0.16 0.0025 0.99999 2.86608

Within Groups 1279.2 20 63.96

Total 1279.84 24

Anova: Single Factor (AMC Qualities)

SUMMARY

ANOVA

The F Value is much less than the critical or table value which means that people

consider all the qualities of AMC as important while investing in a fund. Therefore the

hypothesis that investors consider all the qualities of the AMC as important factor while making

investment in mutual funds stands accepted. The difference in the sample is due to random

sampling error.

Page | 38

B. RANKING OF SCHEME QUALITIES

SCHEME QUALITIES

NO OF

RESPONDENTS RANK


Fund‟s/Scheme‟s

performance record 32 21 5 2 0 One Safety of Capital

Fund‟s/Scheme‟s brand

name 29 15 10 5 1 Two

Fund‟s/Scheme‟s

performance record

Scheme‟s portfolio

constituents 15 12 21 9 3 Three Products with tax benefits

Entry and Exit load 29 14 7 8 2 Four

Fund‟s/Scheme‟s brand

name

Investment/Withdrawal

facilities 21 19 11 5 5 Five Entry and Exit load

Rating by a rating agency 12 14 9 14 11 Six

Investment/Withdrawal

facilities

New Features of the

Scheme 13 21 10 6 10 Seven

Scheme‟s portfolio

constituents

Products with tax benefits 26 24 6 3 1 Eight New Features of the

Scheme

Reputation of scheme(s),

portfolio manager(s) 13 5 11 17 14 Nine Rating by a rating agency

Safety of Capital 32 18 7 2 1 Ten Reputation of scheme(s),

portfolio manager(s)

The F Value is much less than the critical value or table value which shows that investors

consider all the qualities of the a scheme as important factor while selecting a particular scheme.

Therefore the hypothesis that, investors consider all the qualities of the scheme important while

selecting a particular scheme stands accepted. The differences in the sample are due to the

random sampling error.

The ANOVA calculation is given on the next page-

Page | 39


Column 1 5 60 12 193.5

Column 2 5 60 12 118

Column 3 5 60 12 45

Column 4 5 60 12 108.5

Column 5 5 61 12.2 57.2

Column 6 5 60 12 4.5

Column 7 5 60 12 31.5

Column 8 5 60 12 144.5

Column 9 5 60 12 20

Column 10 5 60 12 170.5


Between Groups 2036.68 4 509.17 14.9142 7.8E-08 2.57874


Total 3572.98 49

Anova: Single Factor (Scheme Qualities)

SUMMARY

ANOVA

C. RANKING OF INVESTOR SERVICES-

SCHEME QUALITIES

NO OF

RESPONDENTS RANK


Disclosure of investment

objectives, method and

Periodicity of valuation in

advertisement

31 23 4 2 0 One Announcement of NAV

on every trading day

Disclosure of method,

periodicity of scheme‟s

sales and repurchase

in offer document

27 18 10 4 1 Two

Disclosure of investment

objectives, method and

Periodicity of valuation in

advertisement

Announcement of NAV

on every trading day 32 21 7 0 0 Three

Disclosure of method,

periodicity of scheme‟s

sales and repurchase

in offer document

Disclosure of deviation of

the investments from the

expected pattern

19 24 11 2 4 Four

Mutual Fund Investors‟

grievance redressal

machinery

Disclosure of investments

at regular intervals 18 24 13 3 2 Five

Disclosure of investments

at regular intervals

Mutual Fund Investors‟

grievance redressal

machinery

20 26 10 1 4 Six

Disclosure of deviation of

the investments from the

expected pattern

Page | 40


Column 1 5 60 12 197.5

Column 2 5 60 12 112.5

Column 3 5 60 12 198.5

Column 4 5 60 12 89.5

Column 5 5 60 12 90.5

Column 6 5 61 12.2 112.2


Between Groups 0.166667 5 0.03333 0.00025 1 2.62065


Total 3202.967 29

Anova: Single Factor (Scheme Qualities)

SUMMARY

ANOVA

The F value is less than the table value which means that the investor consider all the

investor services as important while selecting a particular scheme. Hence the hypothesis that

investor considers all the investor services as important in their fund scheme selection stands

true. The difference in the sample is due to the random sampling error.

Page | 41

(14) PERFORMANCE ANALYSIS OF MUTUAL FUNDS

The performance of Mutual Funds has been measured for a period of three years starting from

July 2006 to June 2009. The funds‟ performance is analyzed and a comparison is made between

the performance of various funds with their respective benchmark index with the help of above

discussed methods on Quarterly, Half-yearly, and Yearly basis in order to present a more

comparative analysis. It is done keeping in mind the different investment periods of the

investors. The funds chosen belong to the top 10 AMCs in India as on 30th

June 2009. The

rankings of the AMCs are based on the total AUM under them as on the date. The funds are

selected based on their corpus. More than 75% of the total corpus of each fund is invested in the

equity. The following 10 Equity funds are included in the study –

(1) Birla Sunlife Equity Fund

(2) Templeton India Equity Fund

(3) UTI Equity Fund

(4) SBI Equity Fund

(5) Kotak Emerging Equity Scheme

(6) HDFC Equity Fund

(7) LIC Equity Fund

(8) ICICI Discovery Fund

(9) IDFC Imperial Equity Fund

(10) Reliance Equity Fund

The analysis of the various mutual funds is as follows-

Page | 42

(1) Birla Sunlife Equity Fund - It is a open-ended equity fund. The date of inception is

August 27, 1998 with a NAV of Rs. 10. The Benchmark Index is BSE 200. The primary

investment objective is to provide long term capital appreciation through a portfolio with a target

allocation of 90% in Equity. Its Asset Allocation is 93.70% in Equity, 3.30% in Debt and 3.00%

in Cash and Cash Equivalent at the end of July 2009. The fund size is Rs. 1112.67 crores as on

July 31, 2009. Its results are as follows-

𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 - 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m) Sharpe

(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

6.16 5.12 4.58 1.04 1.58 0.54 22.40 0.02 0.54

Half-Yearly Results

12.65 11.91 4.64 0.74 8.01 7.27 35.33 0.21 7.27

Yearly Results

18.52 13.52 4.51 5.00 14.01 9.01 21.21 0.42 9.01

Where, 𝑹𝒑 = Average Returns for Fund for particular period,

𝑹𝒎 = Average Returns for the Market Index for particular period,

𝑹𝒇 = Risk free Rate of Return (T-Bill),

= Standard Deviation of the Returns,

r = Correlation of fund returns with market returns,

r2 = Co-efficient of Determination

eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

1.07 0.06 1.48 1.00 0.99 24.25 0.991 0.982

Half-Yearly Results

0.98 0.22 8.17 0.89 0.81 35.03 0.991 0.982

Yearly Results

1.30 0.50 10.78 2.29 2.30 27.66 0.999 0.998

Page | 43

(a) Quarterly Analysis- The Beta of fund and the standard deviation of the fund returns is

more than that of the market in relation to risk free rate. This shows that the fund is more

volatile and risky as compared to the market both in terms of Systematic Risk and Total

Risk but it is compensating for that risk by earning 1.04% more than market and also

earning 1.58% more than the Risk-Free rate.

Sharpe ratio and Treynor Ratio for the fund is more than that of the market which

shows that the fund has performed better than the market. The Jensen‟s Alpha and Fama

calculated for the fund is positive which shows that the fund manager has beaten the

market with his stock selection skills. There is a high degree of positive correlation

between the fund returns and market returns and portfolio is well diversified.

(b) Half-Yearly Analysis- The Beta of fund and the standard deviation of the fund returns is

less than that of the market in relation to risk free rate. This shows that the fund is less

risky and volatile as compared to the market both in terms of Systematic Risk and Total

Risk and it is also compensating for the risk by earning 0.74% more than market and

8.01 % more than the Risk-Free rate.






(c) Yearly Analysis- The Beta of fund and the standard deviation of the fund returns is more

than that of the market in relation to risk free rate. This shows that the fund is more risky

and volatile as compared to the market both in terms of Systematic Risk and Total Risk

but it is compensating for that risk by earning 5.00% more than market and also earning

14.01% more than the Risk-Free rate.






Page | 44

(2) Templeton India Equity Fund- It is a diversified open ended equity fund. The date of

inception is May 18, 2006 with a NAV of Rs. 10 per unit. The Benchmark Index is BSE 200.

The primary investment objective is to provide a combination of regular income and long term

capital appreciation by investing primarily in stocks that have a current or potentially attractive

dividend yield. Its Asset Allocation is 93.81% in Equity and 6.19% in Cash and Cash Equivalent

at the end of July 2009. The fund size is Rs. 1175.62 crores as on July 31, 2009. Its results are as

follows-


(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

16.70 5.12 4.58 11.58 12.12 0.54 22.40 0.02 0.54

Half-Yearly Results

34.52 11.91 4.64 22.61 29.88 7.27 35.33 0.21 7.27

Yearly Results

69.37 13.52 4.51 55.85 64.86 9.01 21.21 0.42 9.01







eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

0.91 0.40 13.31 11.62 11.39 30.37 0.672 0.452

Half-Yearly Results

1.17 0.74 25.53 21.37 21.50 40.37 0.737 0.543

Yearly Results

0.53 1.25 122.37 60.08 42.78 52.04 0.216 0.046

Page | 45

(a) Quarterly Analysis- The Beta of fund is less than that of the market and the standard

deviation of the fund returns is more than that of the market. This shows that the fund is

less risky as compared to the market in terms of Systematic Risk but it is more volatile

and risky as compared to the market in terms of Total Risk and it is compensating for the

risk by earning 11.58% more than market and also earning 12.12% more than the Risk-

Free rate.






(b) Half-Yearly Analysis- The Beta of fund and the standard deviation of the fund returns is

more than that of the market. This shows that the fund is more risky and volatile as

compared to the market both in terms of Systematic Risk and Total Risk but it is

compensating for the risk by earning 22.61% more than market and 29.88 % more than

the Risk-Free rate.






(c) Yearly Analysis- The Beta of fund is less than that of the market and the standard


less risky as compared to the market in terms of Systematic Risk but it more volatile and

risky as compared to the market in terms of Total Risk and it is compensating for the risk

by earning 55.85% more than market and also earning 64.86% more than the Risk-Free

rate. Sharpe ratio and Treynor Ratio for the fund is more than that of the market which



market with his stock selection skills. There is a low degree of positive correlation

between the fund returns and market returns and portfolio is not well diversified.

Page | 46

(3) UTI Equity Fund- It is an open ended equity fund. The date of inception is April 20, 1992

with a NAV of Rs. 10 per unit. The Benchmark Index is BSE 100. The principal investment

objective is to provide long term capital appreciation through investing at least 80% of its funds

in equity and equity related instrument with medium to high risk profile and upto 20% in debt

and money market instruments with low to medium risk profile. Its Asset Allocation is 90.68%

in Equity, 2.25% in Debt and 7.07% in Cash and Cash Equivalent at the end of July 2009. The

fund size is Rs. 1629.68 crores as on July 31, 2009. Its results are as follows-


(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

3.32 5.10 4.58 (-1.78) (-1.26) 0.52 21.78 0.02 0.52

Half-Yearly Results

6.55 11.84 4.64 (-5.29) 1.91 7.20 34.62 0.21 7.20

Yearly Results

10.37 13.81 4.51 (-3.44) 5.86 9.30 20.42 0.46 9.30







eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

0.71 -0.08 -1.77 (-1.63) (-1.64) 15.85 0.989 0.978

Half-Yearly Results

0.40 0.09 4.78 (-0.97) (-2.12) 19.47 0.726 0.527

Yearly Results

0.70 0.41 8.37 (-0.65) (-0.65) 14.23 0.999 0.998

Page | 47

(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is less than

that of the market. This shows that the fund is less risky and volatile as compared to the

market both in terms of Systematic Risk and Total Risk. It is earning 1.78% less than

market and also earning 1.26% less than the Risk-Free rate.

Sharpe ratio and Treynor Ratio for the fund is negative and less than that of the

market which shows that the fund‟s performance is not up to the mark when compared to

the market. The Jensen‟s Alpha and Fama calculated for the fund is negative which

shows that the fund manager has not been able to beat the market with his stock selection

skills. There is a high degree of positive correlation between the fund returns and market

returns and portfolio is well diversified.

(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is less

than that of the market. This shows that the fund is less risky and volatile as compared to

the market both in terms of Systematic Risk and Total Risk. It is earning 5.29% less than

market but is earning 1.91% more than the Risk-Free rate.

Sharpe ratio and Treynor Ratio for the fund is less than that of the market which

shows that the fund‟s performance is not up to the mark when compared to the market.

The Jensen‟s Alpha and Fama calculated for the fund is negative which shows that the

fund manager has not been able to beat the market with his stock selection skills. There is

a high degree of positive correlation between the fund returns and market returns and

portfolio is well diversified.

(c) Yearly Analysis- The Beta and the standard deviation of the fund returns is less than that

of the market. This shows that the fund is less risky and volatile as compared to the

market both in terms of Systematic Risk and Total Risk. It is earning 3.44% less than

market but is earning 5.86% more than the Risk-Free rate.


shows that the fund‟s performance is not up to the mark when compared to the market.

The Jensen‟s Alpha and Fama calculated for the fund is negative which shows that the

fund manager has not been able to beat the market with his stock selection skills. There is

a high degree of positive correlation between the fund returns and market returns and

portfolio is well diversified.

Page | 48

(4) SBI Equity Fund- It is a diversified open ended equity fund. The date of inception is January

1, 1991 with a NAV of Rs. 10 per unit. The Benchmark Index is BSE 100. The primary

investment objective is to provide the investor Long-term capital appreciation by investing in

high growth companies along with the liquidity of an open-ended scheme through investments

primarily in equities and the balance in debt and money market instruments. Its Asset Allocation

is 92.51% in Equity, 1.35% in Debt and 6.14% Cash and Cash Equivalent at the end of July

2009. The fund size is Rs. 370.56 crores as on July 31, 2009. Its results are as follows-


(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

5.80 5.10 4.58 0.70 1.22 0.52 21.78 0.02 0.52

Half-Yearly Results

12.54 11.84 4.64 0.70 7.90 7.20 34.62 0.21 7.20

Yearly Results

16.10 13.81 4.51 2.29 11.59 9.30 20.42 0.46 9.30






r2 = Co-efficient of Determination.

eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

0.99 0.05 1.23 0.71 0.62 25.17 0.907 0.822

Half-Yearly Results

1.03 0.22 7.67 0.48 0.48 35.70 0.995 0.990

Yearly Results

0.87 0.64 13.32 3.50 3.41 17.91 0.996 0.992

Page | 49

(a) Quarterly Analysis- The Beta of fund is less than that of the market and the standard



and risky as compared to the market in terms of Total Risk and it is compensating for the

risk by earning 0.70% more than market and also earning 1.22% more than the Risk-Free

rate.






(b) Half-Yearly Analysis- The Beta and the standard deviation of the fund returns is more

than that of the market. This shows that the fund is more risky and volatile as compared

to the market both in terms of Systematic Risk and Total Risk. It is compensating for the

risk by earning 0.70% more than market but is earning 7.90% more than the Risk-Free

rate.








market both in terms of Systematic Risk and Total Risk. But still it is earning 2.29%

more than market and 11.59% more than the Risk-Free rate.






Page | 50

(5) Kotak Emerging Equity Scheme- It is a diversified close-ended equity fund. The date of

inception is March 30, 2007 with a NAV of Rs. 10. The Benchmark Index is BSE Midcap. The

primary investment objective is to generate long-term capital appreciation from a portfolio of

equity and equity related securities, by investing predominantly in mid and small cap companies.

Its Asset Allocation is 81.77% in Equity and 3.35% in Debt and 14.88% in Cash and Cash

Equivalent at the end of July 2009. The fund size is Rs. 134.09 crores as on July 31, 2009. Its

results are as follows-

𝑹𝒑 (%) 𝑹𝒎 (%) 𝑹𝒇 (%) 𝑹𝒑 - 𝑹𝒎 𝑹𝒑 – 𝑹𝒇 𝑹𝒎 - 𝑹𝒇 (m) Sharpe

(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

0.14 3.98 4.58 (-3.84) (-4.44) (-0.60) 33.23 -0.02 (-0.60)

Half-Yearly Results

-1.33 5.49 4.64 (-6.82) (-5.97) 0.85 48.05 0.02 0.85

Yearly Results

-18.62 -11.61 4.51 (-7.01) (-23.13) (-16.12) 5.86 -2.75 (-16.12)







eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

0.74 -0.18 -6.00 (-3.99) (-4.00) 25.05 0.953 0.908

Half-Yearly Results

0.80 -0.15 -7.46 (-6.65) (-6.67) 39.96 0.972 0.945

Yearly Results

0.78 -3.10 -29.65 (-10.56) (-2.65) 7.47 1.000 1.000

Page | 51



market both in terms of Systematic Risk and Total Risk but it is earning 4.44% less than

market and 0.60% less than the Risk-Free rate.


market which shows that the fund‟s performance is not up to the mark with that of the

market. The Jensen‟s Alpha and Fama calculated for the fund is negative which shows

that the fund manager has not been able to beat the market with his stock selection skills.

There is a high degree of positive correlation between the fund returns and market returns

and portfolio is well diversified.









There is a high degree of positive correlation between the fund returns and market returns


(c) Yearly Analysis- The Beta of fund is less than that of the market and the standard



and risky as compared to the market in terms of Total Risk. It is earning 7.01% less than






There is a positive perfect correlation between the fund returns and market returns and

portfolio is highly diversified.

Page | 52

(6) HDFC Equity Fund - It is a open-ended equity fund. The date of inception is January 1,

1995 with a NAV of Rs. 10. The Benchmark Index is S & P CNX 500. The primary investment

objective is to provide capital appreciation through investments predominantly in equity oriented

securities. Its Asset Allocation is 94.74% in Equity and 5.26% in Cash and Cash Equivalent at

the end of July 2009. The fund size is Rs. 4337.71 crores as on July 31, 2009. Its results are as

follows-


(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

5.60 4.82 4.58 0.78 1.02 0.24 21.82 0.01 0.24

Half-Yearly Results

10.66 11.48 4.64 (-0.82) 6.02 6.84 35.19 0.19 6.84

Yearly Results

15.12 12.71 4.51 2.41 10.61 8.20 21.91 0.37 8.20







eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

0.98 0.05 1.04 0.78 0.78 21.80 0.982 0.964

Half-Yearly Results

0.82 0.20 7.34 0.41 0.34 29.31 0.994 0.988

Yearly Results

0.99 0.49 10.72 2.49 2.49 21.87 0.993 0.986

Page | 53



market both in terms of Systematic Risk and Total Risk but still it is earning 0.78% more

than market and 1.02% more than the Risk-Free rate.









market and 6.02% more than the Risk-Free rate.








market both in terms of Systematic Risk and Total Risk. But still it is earning 2.41%

more than market and 10.61% more than the Risk-Free rate.




market with his stock selection skills. There is a positive perfect correlation between the

fund returns and market returns and portfolio is highly diversified.

Page | 54

(7) LIC Equity Fund- It is a open ended equity fund. The date of inception is February 15, 1999

with a NAV of Rs. 10. The Benchmark Index is S & P CNX Nifty. The primary investment

objective is to obtain maximum possible capital growth consistent with reasonable levels of

safety and security by investing the funds mainly in equities and also in debts and other

permitted instruments of capital and money market. Its Asset Allocation is 96.22% in Equity and

3.68% in Cash and Cash Equivalent at the end of July 2009. The fund size is Rs. 103.49 crores as

on July 31, 2009. Its results are as follows-


(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

12.21 4.35 4.58 7.86 7.63 (-0.23) 18.63 -0.01 (-0.23)

Half-Yearly Results

29.70 10.31 4.64 19.39 25.06 5.67 31.21 0.18 5.67

Yearly Results

46.84 12.60 4.51 34.24 42.33 8.09 18.71 0.43 8.09







eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

1.45 0.24 5.26 7.96 8.01 31.34 0.860 0.739

Half-Yearly Results

1.54 0.44 16.27 16.32 14.68 57.09 0.843 0.710

Yearly Results

2.46 0.88 17.20 22.42 21.62 47.94 0.962 0.925

Page | 55

(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is more than

that of the market. This shows that the fund is more risky and volatile as compared to the

market both in terms of Systematic Risk and Total Risk and it is compensating for the

risk by earning 7.86% more than market and 7.63% more than the Risk-Free rate.








to the market both in terms of Systematic Risk and Total Risk and it is compensating for

the risk by earning 19.39% more than market and 25.06% more than the Risk-Free rate.






(c) Yearly Analysis- The Beta and the standard deviation of the fund returns is more than


market both in terms of Systematic Risk and Total Risk and it is compensating for the

risk by earning 34.24% more than market and 42.33% more than the Risk-Free rate.




market with his stock selection skills. There is a positive perfect correlation between the

fund returns and market returns and portfolio is well diversified.

Page | 56

(8) ICICI Discovery Fund - It is a open-ended equity fund. The date of inception is August 14,

2004 with a NAV of Rs. 10. The Benchmark Index is S & P CNX Nifty. The primary investment

objective is to generate returns through a combination of dividend income and capital

appreciation by investing primarily in a well diversified portfolio of value stocks. Its Asset

Allocation is 79.54% in Equity and 20.46% in Cash and Cash Equivalent at the end of July 2009.

The fund size is Rs. 300.74 crores as on July 31, 2009. Its results are as follows-


(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

4.40 4.35 4.58 0.05 (-0.18) (-0.23) 18.63 -0.01 (-0.23)

Half-Yearly Results

9.07 10.31 4.64 (-1.24) 4.43 5.67 31.21 0.18 5.67

Yearly Results

10.06 12.60 4.51 (-2.54) 5.55 8.09 18.71 0.43 8.09







eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

1.21 -0.01 -0.14 0.10 0.12 24.13 0.940 0.883

Half-Yearly Results

1.03 0.13 4.30 (-1.41) (-1.58) 33.02 0.976 0.952

Yearly Results

0.21 0.30 26.42 3.85 (-2.46) 18.55 0.922 0.850

Page | 57

(a) Quarterly Analysis- The Beta and the standard deviation of the fund returns is more than


market both in terms of Systematic Risk and Total Risk and it is earning 0.05% more

than market and 0.18% less than the Risk-Free rate.

Sharpe ratio and Treynor Ratio for the fund is negative but more than that of the

market which shows that the fund has performed better than the market. The Jensen‟s

Alpha and Fama calculated for the fund is positive which shows that the fund manager

has beaten the market with his stock selection skills. There is a high degree of positive

correlation between the fund returns and market returns and portfolio is well diversified.



to the market both in terms of Systematic Risk and Total Risk and it is earning 1.24% less


Sharpe ratio for the fund is less and Treynor Ratio for the fund is more than that

of the market which shows that the fund has performed better than the market in terms of

systematic risk but not in terms of total risk. The Jensen‟s Alpha and Fama calculated for

the fund is negative which shows that the fund manager has not able to beat the market

with his stock selection skills. There is a high degree of positive correlation between the

fund returns and market returns and portfolio is well diversified.



market both in terms of Systematic Risk and Total Risk and it is earning 2.54% less than


Sharpe ratio for the fund is less and Treynor Ratio for the fund is more than that

of the market which shows that the fund has performed better than the market in terms of

systematic risk but not in terms of total risk. The Jensen‟s Alpha for the fund is positive

but Fama for the fund is negative which again shows that the fund manager has beaten

the market with his stock selection skills in terms of systematic risk not in terms of total

risk. There is a positive perfect correlation between the fund returns and market returns


Page | 58

(9) IDFC Imperial Equity Fund - It is a open-ended equity fund. The date of inception is

March 16, 2006 with a NAV of Rs. 10. The Benchmark Index is S & P CNX Nifty. The primary

investment objective is to seek to generate capital appreciation and/or provide income

distribution from a portfolio of predominantly equity and equity related instruments. Its Asset

Allocation is 83.81% in Equity and 16.19% in Cash and Cash Equivalent at the end of July 2009.

The fund size is Rs. 353.59 crores as on July 31, 2009. Its results are as follows-


(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

5.20 4.35 4.58 0.85 0.62 (-0.23) 18.63 0.01 (-0.23)

Half-Yearly Results

6.52 10.31 4.64 (-3.79) 1.88 5.67 31.21 0.18 5.67

Yearly Results

17.52 12.60 4.51 4.92 13.01 8.09 18.71 0.43 8.09







eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

0.85 0.04 0.72 0.82 0.82 16.06 0.994 0.988

Half-Yearly Results

0.68 0.08 2.76 (-1.98) (-2.48) 23.90 0.890 0.792

Yearly Results

0.65 1.05 20.01 7.75 7.67 12.38 0.985 0.970

Page | 59












the market both in terms of Systematic Risk and Total Risk and it is earning 3.79% less



shows that the fund‟s performance is not up to the mark with market. The Jensen‟s Alpha

and Fama calculated for the fund is negative which shows that the fund manager has not

able to beat the market with his stock selection skills. There is a high degree of positive








for the fund is positive which again shows that the fund manager has beaten the market

with his stock selection skills. There is a positive perfect correlation between the fund

returns and market returns and portfolio is well diversified.

Page | 60

(10) Reliance Equity Fund- It is a diversified open ended equity fund. The date of inception is

March 28, 2006 with a NAV of Rs. 10. The Benchmark Index is S & P CNX Nifty. The primary

investment objective is to seek to generate capital appreciation and provide long-term growth

opportunities by investing in a portfolio constituted of equity and equity related securities of top

100 companies by market capitalization and the secondary objective is to generate consistent

returns by investing in debt and money market securities. Its Asset Allocation is 92.51% in

Equity, 1.35% in Debt and 6.14% Cash and Cash Equivalent at the end of July 2009. The fund

size is Rs. 370.56 crores as on July 31, 2009. Its results are as follows-


(𝑺𝒕)m

Treynor

(𝑻𝒏)m

Quarterly Results

4.14 4.35 4.58 (-0.21) (-0.44) (-0.23) 18.63 0.01 (-0.23)

Half-Yearly Results

9.01 10.31 4.64 (-1.3) 4.37 5.67 31.21 0.18 5.67

Yearly Results

12.49 12.60 4.51 (-0.11) 7.98 8.09 18.71 0.43 8.09







eta ()p

Sharpe

(𝑺𝒕)p

Treynor

(𝑻𝒏)p

Jensen

(𝒋) Fama

(𝑭𝑷) (p) (r) (𝒓𝟐)

Quarterly Results

0.93 -0.03 -0.47 (-0.23) (-0.22) 17.52 0.980 0.960

Half-Yearly Results

0.83 0.17 5.27 (-0.34) (-0.44) 26.40 0.986 0.972

Yearly Results

0.92 0.45 8.67 0.53 0.38 17.59 0.983 0.966

Page | 61






shows that the fund has not performed better than the market. The Jensen‟s Alpha and

Fama calculated for the fund is negative which shows that the fund manager has not been





the market both in terms of Systematic Risk and Total Risk and it is earning 1.3% less



shows that the fund‟s performance is not up to the mark with market. The Jensen‟s Alpha

and Fama calculated for the fund is negative which shows that the fund manager has not









for the fund is positive which again shows that the fund manager has beaten the market

with his stock selection skills. There is a positive perfect correlation between the fund

returns and market returns and portfolio is well diversified.

Page | 62

(15) COMPARISON OF FUNDS ON BASIS OF INDEX

(1) Base Index- BSE 200- There are two open-ended equity funds having benchmark index

of BSE 200, Birla Sunlife Equity Fund and Templeton India Equity Fund.

The second fund is better than the first one both in terms of systematic risk and

unsystematic risk under quarterly and yearly analysis and first fund is better than the

second one under half yearly analysis.

The first fund has underperformed as compared to the second one both on the Sharpe and

Treynor Measure of Performance under quarterly, half yearly and annual analysis.

The returns of the first fund are highly correlated to the market as compared to the second

fund under quarterly, half yearly and annual analysis.

The portfolio of the first fund is highly diversified as compared to second fund under

quarterly, half yearly and annual analysis.

The Jensen alpha and Fama which are the measures of fund manager‟s performance for

the second fund are more than the first fund under quarterly, half yearly and annual

analysis which shows that the second‟s fund manager has performed better than the first

fund‟s manager in terms of stock picking skills.

(2) Base Index- BSE 100- There are two open-ended equity funds having benchmark index

of BSE 100, UTI Equity Fund and SBI Equity Fund.

The first fund is better than the second one both in terms of systematic risk and

unsystematic risk under quarterly, half-yearly and yearly analysis.

The first fund has underperformed as compared to the second one both on the Sharpe and

Treynor Measure of Performance under quarterly, half yearly and annual analysis.

The returns of the first fund are highly correlated to the market as compared to the second

fund under quarterly and yearly analysis and are less correlated to the market as

compared to the first one under half yearly analysis.

The portfolio of the first fund is highly diversified as compared to second fund under

quarterly and yearly analysis and less diversified under the half-yearly analysis.

Page | 63

The Jensen alpha and Fama which are the measures of fund manager‟s performance for the

second fund are more than the first fund under quarterly, half yearly and annual analysis

which shows that the second‟s fund manager has performed better than the first fund‟s

manager in terms of stock picking skills.

(3) Base Index- S & P CNX Nifty- There are four open-ended equity funds having

benchmark index of S & P CNX Nifty, LIC Equity Fund, ICICI Discovery Fund, IDFC

Imperial Equity Fund and Reliance Equity Fund.

The third fund is best both in terms of systematic risk and total risk followed by the

fourth fund, second fund and first find under quarterly, half yearly and yearly analysis.

The first fund has performed best on the Sharpe Measure under quarterly analysis

followed by third second and fourth fund. It is also best on the Sharpe measure under

half-yearly analysis followed by fourth, second and third fund. The third fund is best on

Sharpe measure under the yearly analysis followed by first, fourth and second fund.

The first fund has performed best on the Treynor measure under quarterly analysis

followed by third, second and fourth fund. It is also best on the Treynor measure under

half-yearly analysis followed by fourth, second and third fund. The second fund is best on

Treynor measure under the yearly analysis followed by third, first and fourth fund.

The returns of the third fund are highly correlated to the market followed by fourth,

second and first fund under quarterly analysis. The returns of the fourth fund are highly

correlated to the market followed by second, third and first fund under half yearly

analysis. The returns of the third fund are highly correlated to the market followed by

fourth, first and second fund under yearly analysis.

The portfolio of the third fund is highly diversified followed by fourth, second and first

fund under quarterly analysis. The portfolio of the fourth fund is highly diversified

followed by second, third and first fund under half yearly analysis. The portfolio of the

third fund is highly diversified followed by fourth, first and second fund under yearly

analysis.

Page | 64

The Jensen alpha and Fama for the first fund is the highest positive followed by third and

second fund under quarterly analysis which shows that fund manager for the first fund has

done the best in terms of stock picking skills. The Jensen alpha for the fourth fund is negative

under quarterly analysis which shows that the fund manager has not been able to beat the

market with the stock selectivity skills. The Jensen alpha and Fama for the first fund is

positive under half yearly analysis which shows that the fund manager has beaten the market

with his stock picking skills. The Jensen alpha and Fama for the second, third and fourth fund

is negative under half-yearly analysis which shows that the fund manager has not been able

to beat the market with his stock selection skills. The Jensen alpha for the first fund is highest

positive under yearly analysis followed by the third, second and fourth fund which shows

that the fund manager for the first fund has performed the best in terms of stock selection

skills. The Fama for the first fund is highest positive under yearly followed by third and

fourth fund which shows that the fund manager for the first fund has performed the best in

terms of stock selection skills whereas the Fama for the second fund is negative which shows

that the fund manager has not been able to beat the market with the stock selectivity skills.

Page | 65

(16) OVERALL RANKING OF TEN MUTUAL FUNDS

(a) ON THE BASIS OF JENSEN ALPHA- The Jensen Alpha measures the performance of the

Fund Manager in terms of his predictive ability and stock selection skills, considering the

systematic risk associated with the fund. On the basis of this measure all the fund can be ranked

as follows-

RANK FUND

QUARTERLY HALF-YEARLY YEARLY

1. Templeton India Equity

Fund

Templeton India Equity

Fund


Fund

2. LIC Equity Fund LIC Equity Fund LIC Equity Fund

3. Birla Sunlife Equity Fund Birla Sunlife Equity Fund IDFC Imperial Equity

Fund

4. IDFC Imperial Equity

Fund SBI Equity Fund ICICI Equity Fund

5. HDFC Equity Fund HDFC Equity Fund SBI Equity Fund

6. SBI Equity Fund Reliance Equity Fund HDFC Equity Fund

7. ICICI Equity Fund UTI Equity Fund Birla Sunlife Equity Fund

8. Reliance Equity Fund ICICI Equity Fund Reliance Equity Fund

9. UTI Equity Fund IDFC Imperial Equity

Fund UTI Equity Fund

10. Kotak Emerging Equity

Scheme

Kotak Emerging Equity

Scheme


Scheme

It can be seen from the above table in terms of the performance of fund manager in terms

of his predictive ability and stock selection skills, considering the systematic risk associated

with the fund, top performer is Templeton India Equity Fund in quarterly, half yearly and

yearly analysis. The Kotak Emerging Equity Scheme is at the lowest.

Page | 66

(b) ON THE BASIS OF FAMA- The Fama Measures the performance of fund manager in

terms of his predictive ability and stock selection skills considering the total risk associated with

the fund. On the basis of this measure the funds can be ranked as follows-


of his predictive ability and stock selection skills, considering the total risk associated with the

fund, top performer is Templeton India Equity Fund in quarterly, half yearly and yearly analysis.

The Kotak Emerging Equity Scheme is at the lowest.

RANK FUND



Fund


Fund


Fund

2. LIC Equity Fund LIC Equity Fund LIC Equity Fund

3. Birla Sunlife Equity Fund Birla Sunlife Equity Fund IDFC Imperial Equity

Fund


Fund SBI Equity Fund SBI Equity Fund

5. HDFC Equity Fund HDFC Equity Fund HDFC Equity fund

6. ICICI Equity Fund Reliance Equity Fund Birla Sunlife Equity Fund

7. Reliance Equity Fund ICICI Equity Fund Reliance Equity fund

8. SBI Equity Fund UTI Equity Fund UTI Equity Fund

9. UTI Equity Fund IDFC Imperial Equity

Fund ICICI Equity fund


Scheme


Scheme


Scheme

Page | 67

(c) ON THE BASIS OF TOTAL RISK- The Total Risk is measured with the help of Standard

Deviation. On this basis funds can be ranked as follows-

RANK FUND


1. LIC Equity Fund LIC Equity Fund Templeton India Equity

Fund


Fund


Fund LIC Equity Fund

3. SBI Equity Fund Kotak Emerging Equity

Scheme Birla Sunlife Equity Fund


Scheme SBI Equity Fund HDFC Equity fund

5. Birla Sunlife Equity Fund Birla Sunlife Equity Fund ICICI Equity Fund

6. ICICI Equity Fund ICICI Equity Fund SBI Equity Fund

7. HDFC Equity Fund HDFC Equity Fund Reliance Equity fund

8. Reliance Equity Fund Reliance Equity Fund UTI Equity Fund


Fund

IDFC Imperial Equity

Fund


Fund

10. UTI Equity Fund UTI Equity Fund Kotak Emerging Equity

Scheme


of his predictive ability and stock selection skills, considering the total risk associated with the

fund, top performer is Templeton India Equity Fund in quarterly, half yearly and yearly analysis.

The Kotak Emerging Equity Scheme is at the lowest.

Page | 68

(d) ON THE BASIS OF PORTFOLIO DIVERSIFICATTION- This is measured with the

help of Coefficient of Determination. On this basis the funds can be ranked as follows-

RANK FUND



Fund SBI Equity Fund


Scheme

2. Birla Sunlife Equity Fund HDFC Equity Fund Birla Sunlife Equity Fund

3. UTI Equity Fund Birla Sunlife Equity Fund UTI Equity Fund

4. HDFC Equity Fund Reliance Equity Fund SBI Equity fund

5. Reliance Equity Fund ICICI Equity Fund HDFC Equity Fund


Scheme


Scheme


Fund

7. ICICI Equity Fund IDFC Equity Fund Reliance Equity fund

8. SBI Equity Fund LIC Equity Fund LIC Equity Fund

9. LIC Equity Fund Templeton India Equity

Fund ICICI Equity Fund


Fund UTI Equity Fund


Fund

It can be seen from the above table in terms of the diversification of the portfolio of the

fund top performer is IDFC Imperial Equity Fund in quarterly ranking; SBI Equity Fund is the

top performer in half yearly ranking, and Kotak Emerging Equity Scheme in yearly ranking. The

Templeton India Equity Fund is the lowest performer in quarterly and annual analysis; UTI

Equity Fund is the lowest performer in half yearly analysis.

Page | 69

(17) FINDINGS OF THE STUDY- The study conducted during May 2009 to July 2009 reveals

the following-

1. Savings Instrument Preference among Individual Investors- The study reveals that

the most preferred investment is Fixed Deposits as it is one of the few investments which

enable an average investor to get reasonable and regular returns along with safety of

capital. The Mutual Funds are on the second and Life Insurance is on the third among 6

choices.

2. Objective of Investment in Mutual Funds- The investors first look for safety in mutual

funds, followed by growth, returns and Tax Benefits.

3. Type of Mutual Fund- More than 67 % of the investors first prefer open ended funds,

less than 23 % of the investors favor close-ended equity funds and only 10 % of the

investors favor Interval funds.

4. Scheme Preference of investors- Out of the 60 respondents 27 have invested in Equity

Schemes (19 in growth schemes and 8 in dividend schemes), 17 in debt schemes, 10 in

balanced schemes and only 6 in sector specific schemes.

5. Preferable Route to Mutual Fund Investing Among Individual Investors- The study

reveals that the scheme decision is made by the respondents on their own and other

factors influencing their decisions are followed by advisors, commercials and the least by

suggestions of friends and family.

6. Preferred Mode of Communication for receiving Updates- The factors are ranked on

the basis of the weighted average. The survey shows that 21 persons used personal visit

to distribution centers to know about the updates, 16 wanted to use internet to know about

the same, 14 preferred to call directly to the office to know about the performance of

mutual funds and rest 9 preferred nothing to know about the updates.

7. Importance of Scheme Qualities- The weighted average is calculated by assigning

weights from 1 to 5 in the order of importance i.e. 5 to Rank 1, 4 to rank 2, 3 to rank 3, 2

to rank 4 and 1 to rank 5. The study reveals that the investors consider the safety of

capital as the most important factor in the selection of their scheme followed by scheme‟s

performance record and tax benefits and they consider the reputation of the portfolio

managers as the least important factor in the selection of fund.

Page | 70

8. Importance of AMC Qualities- The investors consider the reputation of the AMC as the most

important factor affecting their choice of the mutual funds followed by range of different

schemes, company‟s expertise in managing money, ownership of the company and they give least

importance to the efficiency of research wing of the company.

9. Importance of Investor Services- The investors give more importance to daily

disclosure of NAV by the companies followed by disclosure of facts relating to mutual

fund investments and they give least importance to disclosure of deviation of the

investments from the expected pattern which shows that investors focus on the

performance of funds rather than the pattern of investments.

10. Performance Evaluation of Mutual Funds- It is evident from the above analysis that

fund managers were not successful in satisfying the investors with their performance.

Under quarterly analysis only 7 funds out of the 10 funds selected were able to earn more

than market returns and only 6 funds were able to earn more than the risk free rate.

Under half yearly analysis only 4 funds out of the 10 funds selected were able to

earn more than market returns and only 9 funds were able to earn more than the risk free

rate.

Under yearly analysis only 6 funds out of the 10 funds selected were able to earn

more than market returns and only 9 funds were able to earn more than the risk free rate.

Page | 71

(18) SUGGESTIONS- The following suggestions can be given based on the study-

1. Since the investors are highly focused towards liquidity in the schemes more and more

open-ended schemes should be brought into the market by the companies.

2. The investors are also having more interest in Equity schemes, so the companies should

pay more focus on marketing of Equity schemes.

3. The investors prefer Personal visit to know about the updates regarding their Mutual

Funds, so the companies should focus on opening up of service centers in the country to

provide the investors knowledge about the mutual funds.

4. The investors give priority to self evaluation in scheme selection in spite of their less

knowledge about the market so there is a need on the part of the middlemen to win the

confidence of the investors. This will help the middlemen in getting more number of

customers in long term.

5. Out of the total audience of 200 only 60 have invested in Mutual Funds. Thos shows that

there may be less knowledge of mutual funds among the investors regarding the mutual

funds or there may be negative perception regarding mutual funds in the minds of

investors. The AMCs and Sponsors etc. should pay focus on the education of the

investors and try to remove the negativity in the minds of the investors about the mutual

funds.

6. When it comes to the qualities of the fund/scheme the investors prefer safety of capital

invested in mutual funds followed by fund‟s performance record and tax benefits. So the

companies should focus on safety of capital i.e. the company should design balanced

schemes in order to protect the capital invested and the funds should offer tax benefits.

The fund managers should be able to perform well in order to build up the image of the

funds.

7. The qualities of an AMC also affect the scheme selection of investors. The reputation of

the AMCs is highly important factor for the investors affecting their selection of a

particular AMC followed by range of schemes and their expertise in managing money.

Therefore the companies should focus on building up of their brand in the market in order

to gain more customers. This can be done by improving the performance of the funds in

the market and also by offering wide range of schemes in the market to target different

group of investors.

Page | 72

8. The investor services are also important for the investors in their selection of a particular

fund/AMC. The daily NAV disclosure is the most important factor which affects the

choice of the investors followed by disclosure of objectives of investment, method and

periodicity of valuation and Disclosure of method of sale and repurchase in offer

document. So the AMCs should be as transparent as possible and follow the norms

stipulated by SEBI and AMFI in order to gain the confidence of investors and thereby

building up the image in tn the market.

Page | 73

Bibliography and References-

1. Customer Orientation in Designing Mutual Fund Products - An Analytical Approach

to Indian Market Preferences by Dr Tapan K Panda and Dr Nalini Prava Tripathy.

2. An Empirical Study on Factors Influencing the Mutual Fund/Scheme Selection by

Retail Investors by - Ms. T.R. Rajeswari and Prof. V.E. Rama Moorthy.

3. Performance Evaluation of Indian mutual Funds by – Dr. S. Narayan Rao.

4. Analysis of components of investment performance – an empirical study of mutual

funds in India by Dr. S. Anand

& Dr. V Murugaiah.

5. What’s the right investment mix for you? Business India, August 2, 2004.

6. Investor Home – Psychology and Behavior finance.

7. Security Analysis and Portfolio Management, by Fisher and Jordan.

8. Mutualfundsindia.com

9. Amfiindia.com

10. Investopedia.com

11. Review of Marketing research Volume-5 by Naresh Malhotra.

Page | 74

Annexure - I

Questionnaire for Study

Page | 75

NAME ______________________________

E-MAIL ___________________________________________

Please tick mark-

I. AGE: Below 30 [ ] 30 – 40 [ ] 40 – 50 [ ] 50 and above [ ]

II. GENDER: Male [ ] Female [ ]

III. INCOME: < 200,000 [ ] 200,000-300,000 [ ] 300.000-400,000 [ ] 400,000 > [ ]

IV. OCCUPATION: Salaried [ ] Businessman [ ] Professional [ ] Retired [ ]

V. QUALIFICATION: Below graduate [ ] Graduate [ ] Above Graduate [ ]

VI. MARITAL STATUS: Married [ ] Unmarried [ ]

Please fill in-

SAVINGS = Rs ____________ / Year

What % of your savings are invested for 5 years and above __________________ (approx.)

What % of your savings are invested for 3-5 years__________________ (approx.)

What % of your savings are invested for 1-3 years___________________ (approx)

What % of your savings are invested for less than one year________________ (approx)

Please rank the choices according to your preferences as indicated in example-

Give Rank 1 to the most preferred option.

Give Rank 2 to the next best option and so on.

EXAMPLE: Which season do you like most?

Rainy [3] Winter [1] Summer [2]

1. Which of the following do you prefer for investment?

[ ] Mutual funds [ ] Fixed Deposits [ ] Life Insurance [ ] Postal Savings

[ ] Stock Market [ ] Others

2. What were the most important factors while selecting a mutual fund scheme?

[ ] Liquidity [ ] Risk factor [ ] Returns [ ] Growth [ ] Tax Benefits

3. Which funds do you prefer for investment?

[ ] Open-Ended Funds [ ] Closed-Ended Funds [ ] Interval Funds

4. Which schemes you are interested to invest in?

[ ] Equity [ ] Debt [ ] Balanced [ ] Sector Specific

5. Which environmental forces influenced you the most to invest in mutual fund?

[ ] Friends/family [ ] Commercials [ ] Advisors [ ] Self-evaluation

Page | 76

6. Which mode of communication do you prefer most for receiving updates and

performance of your scheme/portfolio of mutual fund investment?

[ ] Telephone [ ] Internet/E-mail [ ] Direct Mail [ ] Self-Visit

GIVE MARKS OUT OF 5 TO EACH OF THE ATTRIBUTES FOR THEIR

IMPORTANCE WHILE MAKING A INVESTMENT DECISION.

Give: 1 for Highly Important Factor

Give: 2 for Important

Give: 3 for Moderately Important / Unmarked

Give: 4 for Less Important

Give: 5 for Not at all Important.

Please Refer Example- Grade Funds Popularity

SCHEMES QUALITIES

1. Fund‟s/Scheme‟s performance record

2. Fund‟s/Scheme‟s brand name

3. Scheme‟s portfolio constituents

4. Reputation of scheme(s), portfolio manager(s)

5. Investment/Withdrawal facilities

6. Rating by a rating agency

7. Innovativeness of the Scheme

8. Products with tax benefits

9. Entry and Exit load

10. Safety of capital

4

Page | 77

AMC QUALITIES

1. Private Sector / Public Sector ownership

2. Reputation of the company

3. Range of schemes with different qualities

4. Efficiency of research wing

5. Company‟s expertise in managing money

INVESTOR SERVICES

1. Disclosure of investment objectives, method and

Periodicity of valuation in advertisement

2. Disclosure of method periodicity of scheme‟s sales and

repurchase in offer document

3. Announcement of NAV on every trading day

4. Disclosure of deviation of the investments from

the expected pattern

5. Disclosure of investments at regular intervals

6. Mutual Fund Investors‟ grievance redressal machinery

Page | 78

Annexure – II

Name, NAV History, Fund Returns, Index History and Index Returns of

Selected Schemes

Page | 79

(1) BIRLA SUNLIFE EQUITY FUND

Year Month NAV DivFund

Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun 55.64 1271.02

Sep 67.39 21.117901 1495.48 17.659832 311.87 372.9386

Dec 76.87 14.067369 1655.74 10.716292 114.839 150.75

2007 Mar 64.09 10 -3.616495 1556.72 -5.980408 35.7653 21.62812

Jun 76.37 19.160555 1804.81 15.936713 253.979 305.3563

Sep 77.44 10 14.495221 2118.86 17.400724 302.785 252.2273

Dec 98.95 27.776343 2656.52 25.374966 643.889 704.8238

2008 Mar 68.8 -30.46993 1932.41 -27.25784 742.99 830.5446

Jun 57.54 -16.36628 1644.18 -14.91557 222.474 244.1124

Sep 54.31 -5.613486 1555.7 -5.381406 28.9595 30.20845

Dec 42.93 -20.95378 1156.59 -25.65469 658.163 537.5628

2009 Mar 39.85 -7.17447 1140.43 -1.397211 1.9522 10.02425

Jun 64.39 61.580928 1767.09 54.949449 3019.44 3383.838

Sum () 20 74.003868 61.450849 3776.21 4547.601

Average 11.385211 5.1209041

2006 Jun 55.64 1271.02

Dec 76.87 38.156003 1655.74 30.268603 916.188 1154.929

2007 Jun 76.37 10 12.358527 1804.81 9.0032251 81.0581 111.2666

Dec 98.95 10 42.660731 2656.52 47.191117 2227 2013.208

2008 Jun 57.54 -41.84942 1644.18 -38.10775 1452.2 1594.787

Dec 42.93 -25.39103 1156.59 -29.65551 879.449 752.9841

2009 Jun 64.39 49.988353 1767.09 52.784479 2786.2 2638.609

Sum () 20 75.923163 71.484162 8342.1 8265.783

Average 12.65386

2006 Jun 55.64 1271.02

2007 Jun 76.37 10 55.23005 1804.81 41.996979 1763.75 2319.495

2008 Jun 57.54 10 -11.56213 1644.18 -8.900106 79.2119 102.9042

2009 Jun 64.39 11.904762 1767.09 7.4754589 55.8825 88.99356

Sum () 20 55.572681 40.572332 1898.84 2511.393

Average 18.524227 13.524111

QUARTERLY ANALYSIS

HALF YEARLY ANALYSIS

YEARLY ANALYSIS

Page | 80

(2) TEMPLETON INDIA EQUITY INCOME FUND

z

Year Month NAV Div.Fund

Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun 9.52 1271.02

Sep 10.56 10.92437 1495.48 17.659832 311.87 192.9225

Dec 11.82 11.931818 1655.74 10.716292 114.839 127.8648

2007 Mar 11.87 0.4230118 1556.72 -5.980408 35.7653 -2.529783

Jun 12.72 7 66.133109 1804.81 15.936713 253.979 1053.944

Sep 14.71 15.644654 2118.86 17.400724 302.785 272.2283

Dec 16.75 7 61.454793 2656.52 25.374966 643.889 1559.413

2008 Mar 13.14 -21.55224 1932.41 -27.25784 742.99 587.4675

Jun 12.1 7 45.357686 1644.18 -14.91557 222.474 -676.5358

Sep 10.39 -14.13223 1555.7 -5.381406 28.9595 76.05127

Dec 7.59 -26.94899 1156.59 -25.65469 658.163 691.3679

2009 Mar 7.83 3.1620553 1140.43 -1.397211 1.9522 -4.418058

Jun 11.59 48.020434 1767.09 54.949449 3019.44 2638.696

Sum () 21 200.41847 61.450849 6337.11 6516.473

Average 16.701539 5.1209041

2006 Jun 9.52 1271.02

Dec 11.82 24.159664 1655.74 30.268603 916.188 731.2793

2007 Jun 12.72 7 66.835871 1804.81 9.0032251 81.0581 601.7384

Dec 16.75 7 86.713836 2656.52 47.191117 2227 4092.123

2008 Jun 12.1 7 14.029851 1644.18 -38.10775 1452.2 -534.646

Dec 7.59 -37.27273 1156.59 -29.65551 879.449 1105.342

2009 Jun 11.59 52.700922 1767.09 52.784479 2786.2 2781.791

Sum () 21 207.16742 71.484162 8342.1 8777.627

Average 34.527903 11.914027

2006 Jun 9.52 1271.02

2007 Jun 12.72 7 107.14286 1804.81 41.996979 1763.75 4499.676

2008 Jun 12.1 14 105.18868 1644.18 -8.900106 79.2119 -936.1904

2009 Jun 11.59 -4.214876 1767.09 7.4754589 55.8825 -31.50813

Sum () 21 208.11666 40.572332 1898.84 3563.486

Average 69.37222 13.524111

QUARTERLY ANALYSIS


YEARLY ANALYSIS

Page | 81

(3) UTI EQUITY FUND


Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun 26.52 5382.11

Sep 28.48 2 14.932127 6328.33 17.580837 309.086 262.5193

Dec 30.14 5.8286517 6982.56 10.338114 106.877 60.25727

2007 Mar 28.4 -5.773059 6587.21 -5.661964 32.0578 32.68685

Jun 32.36 13.943662 7605.37 15.45662 238.907 215.5219

Sep 36.9 14.029666 8967.41 17.908925 320.73 251.2562

Dec 44.3 20.054201 11154.4 24.387978 594.773 489.0814

2008 Mar 35.2 -20.54176 8232.82 -26.19204 686.023 538.0307

Jun 30.91 -12.1875 7029.74 -14.61322 213.546 178.0986

Sep 30.29 -2.005823 6691.57 -4.810562 23.1415 9.649138

Dec 24.17 -20.20469 4988.04 -25.45785 648.102 514.368

2009 Mar 23.92 -1.03434 4942.51 -0.912783 0.83317 0.944128

Jun 31.78 1 32.859532 7571.49 53.191192 2829.3 1747.838

Sum () 3 39.900668 61.215244 6003.38 4300.251

Average 3.3250556 5.1012703

2006 Jun 26.52 5382.11

Dec 30.14 2 21.191554 6982.56 29.736479 884.258 630.1622

2007 Jun 32.36 6.6357001 7605.37 8.919508 79.5576 59.18718

Dec 44.3 -0.679852 11154.4 46.664528 2177.58 -31.72496

2008 Jun 30.91 -27.44921 7029.74 -36.97776 1367.35 1015.01

Dec 24.17 3.9792947 4988.04 -29.04375 843.539 -115.5736

2009 Jun 31.78 1 35.622673 7571.49 51.792889 2682.5 1845.001

Sum () 3 39.300159 71.091894 8034.79 3402.062

Average 6.5500266 11.848649

2006 Jun 26.52 5382.11

2007 Jun 32.36 2 29.562594 7605.37 41.308334 1706.38 1221.182

2008 Jun 30.91 -4.480841 7029.74 -7.568731 57.2857 33.91428

2009 Jun 31.78 1 6.0498221 7571.49 7.7065439 59.3908 46.62322

Sum () 3 31.131576 41.446147 1823.06 1301.719

Average 10.377192 13.815382

QUARTERLY ANALYSIS


YEARLY ANALYSIS

Page | 82

(4) SBI EQUITY FUND


Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun 25.51 5382.11

Sep 29.02 13.75931 6328.33 17.580837 309.086 241.9002

Dec 27.57 5 12.232943 6982.56 10.338114 106.877 126.4656

2007 Mar 26.56 -3.663402 6587.21 -5.661964 32.0578 20.74205

Jun 30.58 15.135542 7605.37 15.45662 238.907 233.9443

Sep 30.06 -1.700458 8967.41 17.908925 320.73 -30.45337

Dec 41.52 5 54.757152 11154.4 24.387978 594.773 1335.416

2008 Mar 29.06 -30.00963 8232.82 -26.19204 686.023 786.0136

Jun 24.34 -16.24226 7029.74 -14.61322 213.546 237.3517

Sep 23.36 -4.026294 6691.57 -4.810562 23.1415 19.36874

Dec 18.16 -22.26027 4988.04 -25.45785 648.102 566.6988

2009 Mar 18.03 -0.715859 4942.51 -0.912783 0.83317 0.653424

Jun 27.48 52.412646 7571.49 53.191192 2829.3 2787.891

Sum () 10 69.679414 61.215244 6003.38 6325.992

Average 5.8066179 5.1012703

2006 Jun 25.51 5382.11

Dec 27.57 5 27.675421 6982.56 29.736479 884.258 822.9696

2007 Jun 30.58 10.917664 7605.37 8.919508 79.5576 97.38019

Dec 41.52 5 52.125572 11154.4 46.664528 2177.58 2432.415

2008 Jun 24.34 -41.37765 7029.74 -36.97776 1367.35 1530.053

Dec 18.16 -25.3903 4988.04 -29.04375 843.539 737.4296

2009 Jun 27.48 51.321586 7571.49 51.792889 2682.5 2658.093

Sum () 10 75.27229 71.091894 8034.79 8278.341

Average 12.545382 11.848649

2006 Jun 25.51 5382.11

2007 Jun 30.58 5 39.474716 7605.37 41.308334 1706.38 1630.635

2008 Jun 24.34 5 -4.054938 7029.74 -7.568731 57.2857 30.69073

2009 Jun 27.48 12.900575 7571.49 7.7065439 59.3908 99.41885

Sum () 48.320353 41.446147 1823.06 1760.744

Average 16.106784 13.815382

QUARTERLY ANALYSIS


YEARLY ANALYSIS

Page | 83

(5) KOTAK EMERGING EQUITY SCHEME


Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun --- --- --- --- --- ---

Sep --- 0 --- --- --- --- ---

Dec --- 0 --- --- --- --- ---

2007 Mar 10.01 0 --- 5384.12 --- --- ---

Jun 11.65 0 16.383616 6527.03 21.227424 450.604 347.782

Sep 12.43 0 6.695279 7422.43 13.718337 188.193 91.8481

Dec 17.02 0 36.92679 9789.49 31.890634 1017.01 1177.619

2008 Mar 11.1 0 -34.78261 6427.82 -34.33958 1179.21 1194.42

Jun 8.61 0 -22.43243 5386.48 -16.20052 262.457 363.417

Sep 7.75 0 -9.988386 4798.29 -10.91975 119.241 109.0706

Dec 5.92 0 -23.6129 3235.05 -32.57911 1061.4 769.2873

2009 Mar 5.49 0 -7.263514 2956.23 -8.618723 74.2824 62.60221

Jun 7.65 0 39.344262 5076.34 71.71668 5143.28 2821.64

Sum () 0 1.2701042 35.895401 9495.68 6937.686

Average 0.1411227 3.9883779

2006 Jun --- --- --- --- --- ---

Dec --- 0 --- --- --- --- ---

2007 Jun 11.65 0 --- 6527.03 --- --- ---

Dec 17.02 0 46.094421 9789.49 49.983836 2498.38 2303.976

2008 Jun 8.61 0 -49.41246 5386.48 -44.97691 2022.92 2222.42

Dec 5.92 0 -31.24274 3235.05 -39.9413 1595.31 1247.876

2009 Jun 7.65 0 29.222973 5076.34 56.916895 3239.53 1663.281

Sum () 0 -5.337803 21.982525 9356.15 7437.552

Average -1.334451 5.4956312

2006 Jun --- --- --- --- --- ---

2007 Jun 11.65 0 --- 6527.03 --- --- ---

2008 Jun 8.61 0 -26.09442 5386.48 -17.47426 305.35 455.9806

2009 Jun 7.65 0 -11.14983 5076.34 -5.757749 33.1517 64.1979

Sum () 0 -37.24425 -23.23201 338.501 520.1785

Average -18.62212 -11.616

QUARTERLY ANALYSIS


YEARLY ANALYSIS

Page | 84

(6) HDFC EQUITY FUND


Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun 33.98 2562.5

Sep 39.95 17.569158 2988.25 16.614634 276.046 291.9051

Dec 43.4 8.6357947 3295.05 10.266879 105.409 88.66266

2007 Mar 37.42 -2.258065 3145.35 -4.543178 20.6405 10.25879

Jun 43.38 15.927312 3625.75 15.27334 233.275 243.2632

Sep 47.98 10.603965 4188.55 15.522306 240.942 164.598

Dec 58.61 22.155065 5354.7 27.841377 775.142 616.8275

2008 Mar 38.25 5.5 -25.35404 3825.85 -28.55155 815.191 723.8971

Jun 33.03 -13.64706 3203.35 -16.27089 264.742 222.0498

Sep 33.62 1.7862549 3058.6 -4.518707 20.4187 -8.071563

Dec 25.92 -22.90303 2295.75 -24.94115 622.061 571.228

2009 Mar 21.85 3 -4.128086 2294.85 -0.039203 0.00154 0.161833

Jun 34.71 58.855835 3469.7 51.195067 2620.93 3013.128

Sum () 8.5 67.243106 57.848918 5994.8 5937.909

Average 5.6035921 4.8207432

2006 Jun 33.98 2562.5

Dec 43.4 27.72219 3295.05 28.587317 817.235 792.503

2007 Jun 43.38 11.474654 3625.75 10.036267 100.727 115.1627

Dec 58.61 35.108345 5354.7 47.685306 2273.89 1674.152

2008 Jun 33.03 5.5 -34.26037 3203.35 -40.17685 1614.18 1376.474

Dec 25.92 -21.52589 2295.75 -28.33284 802.75 609.8895

2009 Jun 34.71 3 45.486111 3469.7 51.135794 2614.87 2325.968

Sum () 8.5 64.005049 68.934991 8223.65 6894.149

Average 10.667508 11.489165

2006 Jun 33.98 2562.5

2007 Jun 43.38 42.377869 3625.75 41.492683 1721.64 1758.371

2008 Jun 33.03 5.5 -11.18027 3203.35 -11.65 135.723 130.2502

2009 Jun 34.71 3 14.168937 3469.7 8.314733 69.1348 117.8109

Sum () 8.5 45.366539 38.157412 1926.5 2006.433

Average 15.12218 12.719137

QUARTERLY ANALYSIS


YEARLY ANALYSIS

Page | 85

(7) LIC EQUITY FUND


Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun 11.13 3128.2

Sep 18.54 66.576819 3588.4 14.711336 216.423 979.4339

Dec 21.27 2.5 28.209277 3966.4 10.533943 110.964 297.1549

2007 Mar 19.17 -9.873061 3821.55 -3.651926 13.3366 36.05569

Jun 21.39 11.580595 4318.3 12.998652 168.965 150.5321

Sep 25.16 17.625058 5021.35 16.280712 265.062 286.9485

Dec 34.71 5 57.829889 6138.6 22.249993 495.062 1286.715

2008 Mar 22.45 -35.32123 4734.5 -22.87329 523.188 807.9129

Jun 19.08 -15.01114 4040.55 -14.6573 214.837 220.0228

Sep 19.23 0.7861635 3921.2 -2.953806 8.72497 -2.322174

Dec 14.83 -22.88092 2959.15 -24.53458 601.946 561.3737

2009 Mar 14.45 -2.562374 3020.95 2.0884376 4.36157 -5.351357

Jun 21.62 49.619377 4291.1 42.044721 1767.76 2086.233

Sum () 7.5 146.57846 52.236885 4390.63 6704.708

Average 12.214872 4.3530737

2006 Jun 11.13 3128.2

Dec 21.27 2.5 113.56694 3966.4 26.794962 717.97 3043.022

2007 Jun 21.39 0.5641749 4318.3 8.872025 78.7128 5.005374

Dec 34.71 5 85.647499 6138.6 42.153162 1776.89 3610.313

2008 Jun 19.08 -45.03025 4040.55 -34.17799 1168.13 1539.043

Dec 14.83 -22.27463 2959.15 -26.76368 716.295 596.1512

2009 Jun 21.62 45.78557 4291.1 45.011236 2026.01 2060.865

Sum () 7.5 178.2593 61.889714 6484.01 10854.4

Average 29.709883 10.314952

2006 Jun 11.13 3128.2

2007 Jun 21.39 2.5 114.6451 4318.3 38.044243 1447.36 4361.586

2008 Jun 19.08 5 12.57597 4040.55 -6.431929 41.3697 -80.88775

2009 Jun 21.62 13.312369 4291.1 6.2008885 38.451 82.54852

Sum () 7.5 140.53344 37.813202 1527.19 4363.247

Average 46.844481 12.604401

QUARTERLY ANALYSIS


YEARLY ANALYSIS

Page | 86

(8) ICICI DISCOVERY FUND

Year Month NAVFund

Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun 16.76 3128.2

Sep 20.14 20.167064 3588.4 14.711336 216.423 296.6845

Dec 18.76 2 3.0784508 3966.4 10.533943 110.964 32.42822

2007 Mar 16.8 -10.44776 3821.55 -3.651926 13.3366 38.15445

Jun 17.88 2 18.333333 4318.3 12.998652 168.965 238.3086

Sep 18.44 3.1319911 5021.35 16.280712 265.062 50.99105

Dec 22.19 1.2 26.843818 6138.6 22.249993 495.062 597.2747

2008 Mar 15.4 -30.59937 4734.5 -22.87329 523.188 699.9084

Jun 12.91 1.2 -8.376623 4040.55 -14.6573 214.837 122.7787

Sep 11.83 -8.365608 3921.2 -2.953806 8.72497 24.71038

Dec 9.31 -21.30178 2959.15 -24.53458 601.946 522.6301

2009 Mar 8.98 -3.544576 3020.95 2.0884376 4.36157 -7.402625

Jun 13.52 1.2 63.919822 4291.1 42.044721 1767.76 2687.491

Sum () 7.6 52.838767 52.236885 4390.63 5303.958

Average 4.4032306 4.3530737

2006 Jun 16.76 3128.2

Dec 18.76 2 23.866348 3966.4 26.794962 717.97 639.4979

2007 Jun 17.88 2 5.9701493 4318.3 8.872025 78.7128 52.96731

Dec 22.19 1.2 30.816555 6138.6 42.153162 1776.89 1299.015

2008 Jun 12.91 1.2 -36.4128 4040.55 -34.17799 1168.13 1244.516

Dec 9.31 -27.88536 2959.15 -26.76368 716.295 746.3149

2009 Jun 13.52 1.2 58.10956 4291.1 45.011236 2026.01 2615.583

Sum () 7.6 54.464453 61.889714 6484.01 6597.895

Average 9.0774089 10.314952

2006 Jun 16.76 3128.2

2007 Jun 17.88 4 30.548926 4318.3 38.044243 1447.36 1162.211

2008 Jun 12.91 2.4 -14.3736 4040.55 -6.431929 41.3697 92.44999

2009 Jun 13.52 1.2 14.020139 4291.1 6.2008885 38.451 86.93732

Sum () 7.6 30.195464 37.813202 1527.19 1341.598

Average 10.065155 12.604401

QUARTERLY ANALYSIS


YEARLY ANALYSIS

Page | 87

(9) IDFC IMPERIAL EQUITY FUND


Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun 9.58 3128.2

Sep 11.02 15.031315 3588.4 14.711336 216.423 221.1307

Dec 11.89 7.8947368 3966.4 10.533943 110.964 83.16271

2007 Mar 11.4 -4.12111 3821.55 -3.651926 13.3366 15.04999

Jun 12.77 12.017544 4318.3 12.998652 168.965 156.2119

Sep 15.16 18.71574 5021.35 16.280712 265.062 304.7056

Dec 18.29 20.646438 6138.6 22.249993 495.062 459.3831

2008 Mar 14.64 -19.95626 4734.5 -22.87329 523.188 456.4654

Jun 11.66 1.5 -10.10929 4040.55 -14.6573 214.837 148.1749

Sep 11.72 0.5145798 3921.2 -2.953806 8.72497 -1.519969

Dec 9.65 -17.66212 2959.15 -24.53458 601.946 433.3326

2009 Mar 9.88 2.3834197 3020.95 2.0884376 4.36157 4.977623

Jun 12.35 1.2 37.145749 4291.1 42.044721 1767.76 1561.783

Sum () 2.7 62.500746 52.236885 4390.63 3842.857

Average 5.2083955 4.3530737

2006 Jun 9.58 3128.2

Dec 11.89 24.112735 3966.4 26.794962 717.97 646.0998

2007 Jun 12.77 7.4011775 4318.3 8.872025 78.7128 65.66343

Dec 18.29 43.226312 6138.6 42.153162 1776.89 1822.126

2008 Jun 11.66 1.5 -28.04811 4040.55 -34.17799 1168.13 958.6281

Dec 9.65 -17.23842 2959.15 -26.76368 716.295 461.3637

2009 Jun 12.35 1.2 9.7165992 4291.1 45.011236 2026.01 437.3561

Sum () 2.7 39.170288 61.889714 6484.01 4391.237

Average 6.5283813 10.314952

2006 Jun 9.58 3128.2

2007 Jun 12.77 33.298539 4318.3 38.044243 1447.36 1266.818

2008 Jun 11.66 1.5 3.0540329 4040.55 -6.431929 41.3697 -19.64332

2009 Jun 12.35 1.2 16.209262 4291.1 6.2008885 38.451 100.5118

Sum () 2.7 52.561834 37.813202 1527.19 1347.686

Average 17.520611 12.604401

QUARTERLY ANALYSIS


YEARLY ANALYSIS

Page | 88

(10) RELIANCE EQUITY FUND


Returns (Y)

Market

Index

Market

Returns (X)X^2 XY

2006 Jun 9.46 3128.2

Sep 10.75 0 13.636364 3588.4 14.711336 216.423 200.6091

Dec 11.69 0 8.744186 3966.4 10.533943 110.964 92.11075

2007 Mar 11.04 0 -5.560308 3821.55 -3.651926 13.3366 20.30583

Jun 12.75 0 15.48913 4318.3 12.998652 168.965 201.3378

Sep 14.47 0 13.490196 5021.35 16.280712 265.062 219.63

Dec 17.77 0 22.805805 6138.6 22.249993 495.062 507.429

2008 Mar 13.28 0 -25.2673 4734.5 -22.87329 523.188 577.9465

Jun 11.7 0 -11.89759 4040.55 -14.6573 214.837 174.3866

Sep 11.74 0 0.3418803 3921.2 -2.953806 8.72497 -1.009848

Dec 9.8 0 -16.5247 2959.15 -24.53458 601.946 405.4266

2009 Mar 9.29 0 -5.204082 3020.95 2.0884376 4.36157 -10.8684

Jun 12.98 0 39.720129 4291.1 42.044721 1767.76 1670.022

Sum () 0 49.773705 10.192163 4390.63 4057.326

Average 4.1478087 4.3530737

2006 Jun 9.46 3128.2

Dec 11.69 0 23.572939 3966.4 26.794962 717.97 631.636

2007 Jun 12.75 0 9.0675791 4318.3 8.872025 78.7128 80.44779

Dec 17.77 0 39.372549 6138.6 42.153162 1776.89 1659.677

2008 Jun 11.7 0 -34.15869 4040.55 -34.17799 1168.13 1167.475

Dec 9.8 0 -16.23932 2959.15 -26.76368 716.295 434.6239

2009 Jun 12.98 0 32.44898 4291.1 45.011236 2026.01 1460.569

Sum () 0 54.064036 61.889714 6484.01 5434.429

Average 9.0106726 10.314952

2006 Jun 9.46 3128.2

2007 Jun 12.75 0 34.778013 4318.3 38.044243 1447.36 1323.103

2008 Jun 11.7 0 -8.235294 4040.55 -6.431929 41.3697 52.96883

2009 Jun 12.98 0 10.940171 4291.1 6.2008885 38.451 67.83878

Sum () 0 37.48289 37.813202 1527.19 1443.911

Average 12.494297 12.604401

QUARTERLY ANALYSIS


YEARLY ANALYSIS

Page | 89

Thank You

Documents

Project Report on Factors Affecting Investors Preference for Investment in Mutual Funds