Performance evaluation risk and return of  mutual funds  @ uti secureties project report mba finance
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Performance evaluation risk and return of mutual funds @ uti secureties project report mba finance

Performance evaluation risk and return of mutual funds @ uti secureties project report mba finance

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Performance evaluation risk and return of  mutual funds  @ uti secureties project report mba finance Performance evaluation risk and return of mutual funds @ uti secureties project report mba finance Document Transcript

  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”CONTENTS - Executive Summary - Introduction - Literature review - Purpose of the study - Objectives BABASAB PATIL -1-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” EXECUTIVE SUMMARY UTI securities ltd. (UTISEL) has been working as an independent professional entity for providing financial intermediary and advisory services to corporate institutional and retail clientele. This project emphasis on, “The Performance of Mutual Funds with reference to Risk and Returns”, conducted at UTI Securities Ltd. In this project I have analyzed the Mutual Funds Schemes, particularly the Equity Diversified open ended (growth) schemes and evaluated the returns and the risk associated with those schemes. OBJECTIVES OF THE STUDY  To know the performance of Mutual Fund of different companies.  To evaluate the returns and the risk associated with mutual funds.  To evaluate the investment performance of mutual funds with risk adjustment, by using the theoretical parameters as suggested by William. Sharpe, Treynor and Jensen. BABASAB PATIL -2-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”LIMITATIONS: Not single work is an exception to the limitations every work has got itslimitations. The data collection here in this project is strictly confined to thesecondary sources. No primary data was associated with the project. Collectinghistorical NAV is very difficult. Selection of the schemes for the study is also a verydifficult task because of the wide variety of schemes. The results of the study aresubjected to inconsistencies arising out of the assumptions made to make theportfolios comparable viz., sample selection procedure, portfolio proportionassumption etc.RESEARCH METHODOLOGY: Data source: Secondary data - Reports from UTI securities and other reports from related websites. BABASAB PATIL -3-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Introduction An investment means employment of funds on assets (i.e. securities or mutual funds or any of the investment avenues) with the aim of earning income as well as capital appreciation. There are mainly two attributes while investing to any of the funds i.e. time and risk. There are mainly four objectives, which the investments activities will carry on. Those are:  Return from the investment  Risk involved  Liquidity  Hedge against inflation  Safety  Convenience There are many alternatives investment avenues which are open to the investors to suit their needs and nature .The selection of investment alternatives depends up on the required level of return and the risk tolerance level. These alternatives range from financial securities to traditional non-securities investment. Following are the various investment alternatives. Negotiable and fixed income securities  Equity shares  Preference share  Debentures  Bonds  Indira vikas patra &Kisan Vikas patra  Government securities  Money market securities (i.e. treasury bill, commercial paper, certificate of Deposit etc) Non-negotiable securities BABASAB PATIL -4-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”  Bank deposit  Post office deposit  NBFC deposit  Tax saving schemes  Public provident fund scheme  National saving scheme  Life insurance  Mutual funds  Real estate BABASAB PATIL -5-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” LITERATURE REVIEWIntroduction to Mutual FundsWhat is a Mutual Fund? Like most developed and developing countries the mutual fund cult has beencatching on in India. There are various reasons for this. Mutual funds make it easyand less costly for investors to satisfy their need for capital growth, income and/orincome preservation. And in addition to this a mutual fund brings the benefits of diversification andmoney management to the individual investor, providing an opportunity for financialsuccess that was once available only to a select few. Understanding Mutual funds is easy as its such a simple concept: a mutualfund is a company that pools the money of many investors -- its shareholders -- toinvest in a variety of different securities. Investments may be in stocks, bonds, moneymarket securities or some combination of these. Those securities are professionallymanaged on behalf of the shareholders, and each investor holds a pro rata share of theportfolio -- entitled to any profits when the securities are sold, but subject to anylosses in value as well.For the individual investor, mutual funds provide the benefit of having someone elsemanage your investments and diversify your money over many different securitiesthat may not be available or affordable to you otherwise. Today, minimum investmentrequirements on many funds are low enough that even the smallest investor can get BABASAB PATIL -6-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”started in mutual funds.A mutual fund, by its very nature, is diversified that is, its assets are invested in manydifferent securities. Beyond that, there are many different types of mutual funds withdifferent objectives and levels of growth potential, furthering your chances todiversify. Evolution: In most of the countries, mutual funds have emerged as strong rivals to banking industry in mobilizing savings funds. The reason that may attributed to same is that in the banking sector there are many restrictions for investment in the capital market, there as the mutual funds have been a free access to these markets which in other words have given then an upper hand in the matter of operations. Consequently, the returns from mutual funds investment are higher compared to the returns out of savings in banks in an ideal market condition. Thus, he mutual funds i8ndusty has witnessed a tremendous growth in countries like Mexico and South Africa. Mutual Funds can be broadly classified under 3 heads namely BABASAB PATIL -7-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” a) Investment Trust b) Holding companies c) Finance Companies Out of the above the investment trust got a boost because of good public response and today we have in India Unit Trust of India that was constituted on similar lines with the unit trust in the U.S.A. The unit trusts are open-ended schemes where the investor can buy and sell ‘Unit’ at his only will and wish. The other advantage of unit Trust is that even a small investor can hold shares of many companies and enjoy the returns arising lot of the investment. The unit trust of India was constituted under the unit Trust of India act, 1963 and became operational in the year 1964 with the basic objectives of mobilizing savings through the sale of units and investing them in corporate securities with the idea of maximizing yield from them and capital appreciation with inbuilt liquidity. The unit trust of India still commands a good position among mutual fund in India and approximately 90% of the investments in mutual fund are in the schemes floated by unit trust of India. The unit trust of India has many highlights in its performance so far. The monopoly of unit trust of India was brought to an end with the entry of public sector mutual funds in the year 1987. Canara bank, State Bank of India, Punjab National Bank and Indian bank floated the premier mutual funds that came into being during 1987. DEFINITIONS: BABASAB PATIL -8-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” The reason for increased response towards mutual funds world over is on account of investment analyst, who takes investment decisions based on research. The concept of the lower risk carried on by the investor as the funds are diverted with professional body of investment analyst, who take investment decisions based on research. The concept of mutual fund has been defined in various ways. According to SEBI (Mutual Fund) regulatins1993, “Mutual fund means a fund established in the form of trust by sponsor to raise moneys by the trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations”. However in the Indian context it is safe to define “Mutual Fund as trusts accepting savings from the investors and invest the same as per the objectives incorporated in the trust deed to manage diversified portfolio which in turn assure reasonable returns to the investors.”Why invest in Mutual Funds. Investing in mutual has various benefits which makes it an ideal investmentavenue. Following are some of the primary benefits.Professional investment management One of the primary benefits of mutual funds is that an investor has access toprofessional management. A good investment manager is certainly worth the fees youwill pay. Good mutual fund managers with an excellent research team can do a betterjob of monitoring the companies they have chosen to invest in than you can, unlessyou have time to spend on researching the companies you select for your portfolio.That is because Mutual funds hire full-time, high-level investment professionals.Funds can afford to do so as they manage large pools of money. The managers havereal-time access to crucial market information and are able to execute trades on thelargest and most cost-effective scale. When you buy a mutual fund, the primary assetyou are buying is the manager, who will be controlling which assets are chosen tomeet the funds stated investment objectives.Diversification BABASAB PATIL -9-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” A crucial element in investing is asset allocation. It plays a very big part in thesuccess of any portfolio. However, small investors do not have enough money toproperly allocate their assets. By pooling your funds with others, you can quicklybenefit from greater diversification. Mutual funds invest in a broad range of securities.This limits investment risk by reducing the effect of a possible decline in the value ofany one security. Mutual fund unit-holders can benefit from diversification techniquesusually available only to investors wealthy enough to buy significant positions in awide variety of securities.Low Cost A mutual fund lets you participate in a diversified portfolio for as little asRs.5,000, and sometimes less. And with a no-load fund, you pay little or no salescharges to own them.Convenience and Flexibility Investing in mutual funds has it’s own convenience. While you own just onesecurity rather than many, you still enjoy the benefits of a diversified portfolio and awide range of services. Fund managers decide what securities to trade, collect theinterest payments and see that your dividends on portfolio securities are received andyour rights exercised. It also uses the services of a high quality custodian andregistrar. Another big advantage is that you can move your funds easily from one fundto another within a mutual fund family. This allows you to easily rebalance yourportfolio to respond to significant fund management or economic changes. BABASAB PATIL -10-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”Liquidity In open-ended schemes, you can get your money back promptly at net assetvalue related prices from the mutual fund itself.Transparency Regulations for mutual funds have made the industry very transparent. Youcan track the investments that have been made on you behalf and the specificinvestments made by the mutual fund scheme to see where your money is going. Inaddition to this, you get regular information on the value of your investment.Variety There is no shortage of variety when investing in mutual funds. You can find amutual fund that matches just about any investing strategy you select. There are fundsthat focus on blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds.The greatest challenge can be sorting through the variety and picking the best for you.Mutual fund route offers several important advantages.  The popular saying, “don’t keep all the egg in one basket” is quite appropriate in the case of instruments, if an investor wishes to maximize his returns, he should invest in a variety of securities available across the market. However, a small investor with his limited savings can not acquire a number of securities of different companies and industries. Thus, the investor gets a proportion of the average market. This specific character of mutual fund investment avenues further, the modern portfolio they states that, diversification reduces the risk and improves the scope for higher returns.  Professionals who have knowledge and experience in security analysis and portfolio management manage the corpus amount mobilized by the mutual funds under various schemes. Research is continuous process in mutual funds, where they identify the under valued and high yielding securities and make will-timed purchases and sales. An investor of a mutual fund schemes may gain out its professional management. The BABASAB PATIL -11-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” investor can save his cost and time in identifying the securities; he can share the benefits of reach and management costs of the funds with other investor.  Mutual funds are floating different schemes with variety investment objectives. This creates an opportunity among investors to choose the schemes based on their objective, motivations, and requirements.  In addition to the above advantages, the Indian mutual funds are specifically offering the following benefits to the investors.  In the case of investment in equity shares or debentures, the allotment would be based on lost or proportional. Whereas, almost all the mutual funds promise assure allotment to all investors to the extent of amount subscribed by them. This reduces the investor’s time.  Mutual funds offer certain tax incentives to the investors and additional tax benefits for investing in tax planning schemes.The presence of the Mutual fund institutions in the economy offers certainadvantages to the economy-  Mutual funds are the financial intermediaries, which mobilize the savings from surplus units and transfer them to the capital and money market by investing in a variety of financial instruments.  Mutual funs with support of their professional managers, carefully analyses the prospects of new companies and new industries if the prospects are good, subscribe large amounts to he equity and debt capital of newly established companies.  Mutual funds as institutional investors, with their professional expertise in the stock trading. The increased participation of professional rational investment reduces the undesirable speculation in the capital market. BABASAB PATIL -12-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Classification of Mutual Fund Schemes Any mutual fund has an objective of earning income for the investor’s and/ or getting increased value of their investments. To achieve these objectives mutual funds adopt different strategies and accordingly offer different schemes of investments. On this basis the simplest way to categorize schemes would be to group these into Operational classification highlights the two main types of schemes, i.e., open- ended and close-ended which are offered by the mutual funds. Portfolio classification projects the combination of investment instruments and investment avenues available to mutual funds to manage their funds. Any portfolio scheme can be either open ended or close ended A. Operational Classification or on Structural basis: Open Ended Schemes: As the name implies the size of the scheme (Fund) is open – i.e., not specified or pre-determined. Entry to the fund is always open to the investor who can subscribe at any time. Such fund stands ready to buy or sell its securities at any time. It implies that the capitalization of the fund is constantly changing as investors sell or buy their shares. Further, the shares or units are normally not traded on the stock exchange but are repurchased by the fund at announced rates. Open-ended schemes have comparatively better liquidity despite the fact that these are not listed. The reason is that investor can any time approach mutual fund for sale of such units. No intermediaries are required. Moreover, the realizable amount is certain since repurchase is at a price based on declared net asset value (NAV). No minute-to-minute fluctuations in rates haunt the investors. The portfolio mix of such schemes has to be investments, which are actively traded in the market. Otherwise, it will not be possible to calculate NAV. This is the reason that generally open-ended schemes are Equity Based. BABASAB PATIL -13-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Moreover, desiring frequently traded securities, open-ended schemes hardly have in their portfolio shares of comparatively new and smaller companies since these are not generally traded. In such funds, option to reinvest its dividend is also available. Since there is always a possibility of withdrawals, the management of such funds becomes more tedious as managers have to work from crisis to crisis. Crisis may be on two fronts, one is, that unexpected withdrawals require funds to maintain a high level of cash available every time implying thereby idle cash. Fund managers have to face questions like ‘ what to sell’. He could very well have to sell his most liquid assets. Second, by virtue of this situation such funds may fail to grab favorable opportunities. Further, to match quick cash payments, funds cannot have matching realization from their portfolio due to intricacies of the stock market. Thus, success of the open-ended schemes to a great extent depends on the efficiency of the capital market. The holders of the shares in the fund can resell them to issuing Mutual Fund Company at any time They receive in turn the net asset value (NAV) of the shares at the time of resale. Such mutual funds companies place their funds in the secondary securities market. They do not participate in new issue markets to pension funds or life insurance investment companies. Can sell an unlimited number of shares and thus keep going larger. The open end mutual funds by or sell their own share. These companies ell new shares at NAV plus a loading or management fee and redeem scheme at NAV. UTI’S Unit scheme, 1964 and CANCIGO and CANGICT are few examples of such funds. The minimum corpus for and open-ended fund is fifty crores a per SEBI guidelines. (b) Close Ended Schemes: Such schemes have a definite period after which their shares/units can be redeemed. Unlike open-ended funds, these funds have fixed capitalization, i.e., their corpus normally does not change throughout its life period. Close ended fund units trade among the investors in the secondary market since these are to be quoted on the stock exchanges. Their price is determined on the basis of demand and supply in the market. Their liquidity depends on the efficiency and BABASAB PATIL -14-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” understanding of the engage broker. Their price is free to deviate from NAV, i.e., there is every possibility that the market price may be above or below its NAV. If one takes into account the issue expenses, conceptually close ended fund units cannot be traded at a premium or over NAV because the price of a package of investments, i.e., cannot exceed the sum of the prices of the investments constituting the package. Whatever premium exists that may exist only on account of speculative activities. In India as per SEBI (MF) Regulations every mutual fund is free to launch any or both types of schemes. Close– ended mutual funds are different form the open-ended mutual fund. Close-ended and investment company has definite target amount for the funds and can not sell more shares after its initial offering. Its growth in terms of numbers is limited. Its shares are issued like together company’s new issue listed and quoted at stock ex change. That minimum corpus for Close-ended fund is Rs20 crores. Close-ended funds changed funds the secondary market acquisition of corporate securities. There is no necessary relationship between the price of close-ended mutual fund share and its NAV. Its shares may les per the current NAV per share, per more,(at a premium) as per less(at discount). Investor’s doubts about the abilities of the funds management lack of sales effort (brokers earn less commission of close ended schemes then open ended schemes) risk ness of the fund. BABASAB PATIL -15-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” B. Portfolio classification of mutual funds. These are specific mutual funds, which are structured for feeding a particular invests able purpose. The objective of funds provide fixed return for those who design safety Equity (Stock) Funds: Equity Funds are those that invest primarily in stock. The actual portfolio holing, trading style, portfolio turnover, etc, are widely depending on the fund’s investment objectives and manager’s style. Aggressive Growth: These funds are also called capital Appreciation fund. Having an investment objective of maximum capital gains, with minimal or no concern for dividends or income. These funds tend to be some of the most volatile, with share price rise that can be thrilling and drop that can be frightening. Not only do the portfolios holding them be volatile, but many aggressive growth funds magnify the volatility by using borrowed money (leverage) to increase the size of the position held. Some funds in this category growth funds fall into the aggressive growth area. Aggressive growth funds purchase shares of stock in smaller companies, which have a chance to grow at a faster pace than more “mature” companies. Of course, there is also greater risk involved with investing in less established companies. Aggressive growth funds are usually recommended for the investors who seek long- term capital appreciation and will not need access to money for at least ten years.Balanced: Funds invest in a mix of common stock and corporate bonds. The weighting ofgoing piece of the mix depends on the fund manager’s perceptions of where themarkets and economy are going. Some preferred stock and convertible securities arecommonly allowed, as are cash equivalents such and Treasury Bills, CDs, andcommercial paper. BABASAB PATIL -16-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”Global: It is Similar to international, but with the option of investing anywhereglobally including the U.S.Growth: The goal for these funds is long-term growth of capital. Growth funds ownshares of medium to large companies, and could include such familiar “blue chip”names as IBM and GENERAL ELECTRIC. Normally, these established companieswill grow at a moderate pace, and will pay regular dividends to owner of its shares. Ifmutual fund is the owner the fund will collect these dividend and pass them to mutualfunds shareholders once are more per year. While capital appreciation is majorobjective of these type of fund income derived from dividends is secondary objectivesinvestments are typically in long – growth stocks, with a lower portfolio turnover thenthe aggressive growths funds. Dividends yield tend to be low.Growth and income: Despite the name, fund in this category are typically more interested in growththan income with typical dividend rates on the portfolios in the 1% range. The usualportfolio is Blue Chip stock, with some income enhancing securities like convertiblepreferred stocks are bonds thrown in to the mix.Index: Unlike traditional stock funds, which are managed actively by a portfoliomanager based on analysis of economic and market movements, index funds arepassively managed. A passively managed fund buys and holds securities selected torepresent its unmanaged target index, such as standard and poor 500 index.Sector: BABASAB PATIL -17-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Concentrates investments on a narrow market sector like Health care, internalstocks, bio technology, and so on. Sector funds tend to be volatile as industry groupsfall into and out of favor; portfolios are diversified only within industry group.Real estate funds: Real estate funds are of close-ended type. The funds are named so becauseprimary investment is real estate ventures.Bond funds: Bond funds are objective of safety. Bond funds are liquid prices of fundsfluctuates with changing interest rates. C. Geographical Classification of Mutual Funds BABASAB PATIL -18-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” National boundaries provide territorial restrictions on the sale and purchase of mutual funds units or share, as is the case in commodity trade or service in view of the, Mutual funds which operate with in the nation boundaries are different form those which are meant for subscription of foreigners or the countries national living out side its share. The classification is of broadly tow types. 1) Domestic Mutual Funds 2) Offshore Mutual Funds Domestic Mutual Funds Domestic Mutual Funds are the saving schemes, which are open for mobilizing saving of the nationals with in the country. All the Mutual fund schemes in vogue in the country vis-à-vis, UTI, GIC Mutual Fund, LIC Mutual Fund, SBI Mutual fund, CAN Bank Mutual Fund, PNBMF and BOIMF are the domestic schemes. Offshore Mutual Funds The basic objective of opening offshore Mutual fund scheme is to attract foreign capital for investment purposes in the country of the issuing company. Offshore Mutual Funds thus facilitate cross border fund flow, which is a direct route for getting foreign currency without political strings or domination on the issue country. From investment point of view too, offshore Mutual funds open up domestic capital market to the international investor and global portfolio investments. The major point of difference between offshore Mutual funds and Domestic Mutual funds is the currency and country risk for the global investors as the source of funds from am broad because of high risk in a higher return in the invested funds can be expected. Like domestic mutual funds, the offshore BABASAB PATIL -19-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Mutual funds can also be functionally classified into Close-ended or Open- ended funds. The Major Offshore Mutual Funds opened so far have been close-ended schemes providing redemption of the units for individual investors only at the end of the period specified in the scheme. UTIs India funds 1986, India growth fund, SBIs India Magnum, Can Bank’s Indo-Swiss Himalayan fund, 1990 and Common wealth equity fund are all close-ended offshore funds. Characteristics of Mutual Fund Schemes BABASAB PATIL -20-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” The following are mutual fund scheme characteristics of the Indian mutual fund schemes.  Assurance of minimum returns: Mutual funds in general do not assure any minimum returns to their investors. Returns are paid to the investors, commensurate with the returns earned by the fund on the portfolio, as portfolio consists of various securities, whose returns are subject to market risks. Contrary to this, the Indian mutual fund schemes launched during 1987 to 1990 assured specific returns while marketing their schemes. I n 1991, SEBI together with the union ministry of finance ordered the mutual funds not assume minimum returns. Recently, SEBI has formulated of policy that, mutual funds with a track record ;of 5 years will be allowed to offer fixed returns. SEBI shall prescribe the returns to be assured from time to time. However, no fund will be allowed to offer fixed return for more than 1 year.  Multiple Option Most of the mutual fund schemes are offering different option to the investor under one scheme. For example growth oriented scheme may offer option of either regular income plan, dividend shall be distributed to the investor, and under second dividend will be re-invested and the total amount at the time of redemption.  Immediate monthly income.  Deferred monthly income.  Accumulated income and benefits under section 80 1 of the income act.  Growth with capital gain.  Lock in period BABASAB PATIL -21-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Mutual fund schemes offer documents that contain a clause of lock in period ranging from one year to 3 years. Till the completion of the minimum period, the investors are neither allowed to trade the units on the stock exchange nor avail repurchased facility.  Liquidity a) Open-ended mutual funds offer the facility of repurchase, and the close- ended schemes are also offering repurchase after a minimum period of two to three year. b) Mutual funds units can be pledged or mortgaged in favor of commercial banks or financial institutions, and can obtain a loan according to the rules and regulations of the bank or financial institution. c) Mutual fund can be transferred in favors of any individuals. PURPOSE OF THE STUDY BABASAB PATIL -22-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” The purpose of the study is to know the returns and the risk associated withthe Mutual Fund’s Equity Diversified schemes and to find out which best scheme torecommend. SCOPE OF THE STUDY  The present study includes 4 years average returns of the mutual funds, which have the total corpus (mass, quantity, amount,) value, of more than 10000 crores.  For my study I have scanned all the mutual funds companies and have taken only those schemes which are having the corpus value of more than 400 crores and age of the fund is more than 3 years.  This study covers only equity diversified schemes which are subject to more fluctuating risks and returns.  Since the number and nature of stocks, the proportion of stocks in the portfolio and the relative ness of portfolio to the index considered, differs, the portfolios are averaged at 0.5 for these factors for variance determination.  To evaluate the performance of the Mutual Fund schemes, Sharpe’s index, Treynor’s index and Jensen’s Alpha measures are applied. OBJECTIVES OF THE STUDY BABASAB PATIL -23-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”  To know the performance of Mutual Fund of different companies.  To evaluate the returns and the risk associated with mutual funds.  To evaluate the investment performance of mutual funds with risk adjustment, by using the theoretical parameters as suggested by William. Sharpe, Treynor and Jensen. BABASAB PATIL -24-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”CONTENTS - Organization Profile - Date Collection Methods - Measuring Tools BABASAB PATIL -25-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” ORGANIZATION PROFILE UTI SECURITIES LTD., (UTISEL) was incorporated on June 28, 1994 byUnit Trust of India as its 100% subsidiary and on the repealing of the UTI Act, thecapital was now held by the Administrator of the Specified Undertaking of Unit Trustof India (ASUUTI), on April 17, 2006 the entire share capital of the company wastransferred from SUUTI to Securities Trading Corporation Of India Ltd. [STCI] andits nominees. UTISEL has been working as an independent professional entity forproviding financial intermediary and advisory services to corporate institutional andretail clientele. The Company has built up a reputation for transparent and fairexecution of transactions, which have been well received and appreciated by itsclientele. The staff at UTI Securities strives to maintain the quality of services offeredto its clients at the highest degree. The Company has grown from an institutional brokerage house to a full-fledged financial intermediary having nationwide presence in major cities withbranches and franchisees to service a wide range of clients. We are committed togradually enhancing our network in the near future. The Company has also invested in the joint-venture company with StandardChartered Bank viz. Standard Chartered UTI Securities (P) Ltd. that is engaged inprimary dealership and Government securities. The Company has started CommodityTrading through its subsidiary, UTISEC COMMODITIES LIMITED, which providesfacility of commodity trading on NCDEX and MCX.Mission and Vision:To emerge as one of the leading providers of stock brokerage, investment banking andrelated services, at par with the best in the world".Management profile: BABASAB PATIL -26-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”Mr. Dipankar Basu: ChairmanMr. Dipankar Basu was appointed as Chairman and Director on the Board of UTISecurities Limited at the Meeting of the Board of Directors held on April 17, 2006. Mr. Basu is the non-executive Chairman of Securities Trading Corporation ofIndia Limited and Rain Calcining Limited. Mr. Basu brings with him long experienceand specialized knowledge of financial markets in India. He has been the Chairman ofState Bank of India until August 1995. While acting as the Chairman, Mr. DipankarBasu served as a Member on the Boards of number of SBI subsidiaries includingthose engaged in investment banking and fund management. He has been a Boardmember of number of companies engaged in both financial and non-financialbusinesses.Even after retirement in 1995, Mr. Basu has been actively engaged in wide spectrumof functions including being a member of the Disinvestment Commission set up toadvise the Government of India on public sector disinvestments. He has also been amember of the Narsimhan Committee on Banking Sector Reforms.Mr. Gopalakrishnan Narayanan: DirectorMr. Gopalakrishnan Narayanan, currently the Managing Director of SecuritiesTrading Corporation of India Limited has been appointed as an Additional Director onthe Board of our Company with effect from April 17, 2006.Being qualified as BSc and CAIIB, Mr. Narayanan brings with him more than 36 BABASAB PATIL -27-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”years of experience and knowledge. He joined Bank of India in 1970. Large part ofMr. Narayanan’s career was in International Treasury and Foreign Exchange relatedareas. He has had two stints of Overseas Assignments at Tokyo and Jersey Branchesof Bank of India.Mr. Narayanan has attended number of trainings conducted by in-house trainingcollege, Bankers Training College of Reserve Bank of India in Treasury and Forexrelated areas. He has been a regular guest faculty on Treasury & Forex relatedsubjects in in-house training colleges & Bankers Training College of Reserve Bank ofIndia.Dr. D C Anjaria: DirectorAn MBA in finance from the IIM (A), he has had 20 years of experience withCitibank N.A. in India and overseas. He worked as Chief of Staff with CiticorpInvestment Bank in Paris, France. In 1988, Dr. Anjaria joined the Unit Trust of Indiato establish and head UTI Institute of Capital Markets, a unique specialised trainingand research institution. Currently he runs an independent consulting operation-International Financial Solutions Pvt. Ltd. to advise clients in areas includingcorporate strategy, financial risk management and use of derivative products.Shri A Rama Mohan Rao: Managing DirectorChartered Accountant by profession, Shri Rao is the Managing Director of theCompany since July 2002. He has worked with UTI for a period of 22 years invarious functional areas of marketing, accounting, operations, Investments and Fund BABASAB PATIL -28-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”Management in different capacities.He worked as Branch Manager at UTI Branches, as Functional Head in InternationalFinance and Investment Department and also as one of the Chief Investment Officersfor UTI schemes. He has represented as one of the Indian Delegates at the AsiaOceania Regional Meeting for Investment Managers held at Singapore in 2002. AtUTISEL he is responsible for the overall management and performance of theCompany.Products and services:You have the right to pursue financial independence ... your way. Usectrade iscommitted to help you do just that. We deliver State-of-the-art Tools, excellentCustomer Care, Affordable Pricing and Innovative Technology so you can followyour own path. Need based solutions, that is, what our Product Bouquet is all about…Equity:At Usectrade, you can place online trades for virtually any stock listed on NSE &BSE. Usectrade offers plenty of powerful ways to place stock orders ... along with thetrading tools and services that help you move quickly and conveniently. Ways to tradestockDelivery based Trading:Place delivery based orders for all stocks listed on NSE & BSEIntra-day Trading:Execute Margin Orders upto 3 to 4 times your available funds. The same is availablefor select group of stocks listed on NSE & BSE.ANST: Sell shares before you receive the same in your demat account. You can availof this facility 1st and 2nd day after the buy order date. BABASAB PATIL -29-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”Derivative:With a Derivative-approved Usec trade account, you can pursue a wide range ofFutures & Options trading strategies with speed and ease. We deliver the support,information and structure that quickly lets you spot potential opportunities and act onthem fastMutual Fund:At Usectrade, we offer access to more than 1000 mutual fund schemes from leadingfund families. These funds provide broad diversification and cover a range ofinvestment objectives, philosophies, asset classes and risk exposures. Trades may beplaced via the Internet, Interactive Voice Response (IVR) phone system or with abroker.IPO:IPO or Initial Public Offer presents excellent opportunities for gaining high returns onyour investments in a relatively short period of time. We have made investing in IPOshassle free. All that is required is “Buying POWER” and rest is at the click of abutton. No paperwork no queues. Get information on IPO news, Forthcoming IPOsand a lot more on Usectrade.comCommodities:Metals, energies, grains and livestock — whatever you wish to trade, youll find it onour commodity trading system. Plus, youll get a comprehensive suite of educational,analytical, and execution tools that makes trading commodities easy.Insurance: Usectrade in association with Birla Sunlife brings you a secure insurance optionwithout the hassles and worries of a conservative insurance plan. With least BABASAB PATIL -30-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”paperwork, you get the dual benefit of a risk cover and savings. Whats more, we shallsend you regular reminders about your premium payments due.Bonds Fixed income securities can help reduce your risk within an investmentportfolio while providing a steady stream of income over time. Currently you canchoose to invest online in GOI Bonds. If you are looking to diversify your portfolio,possibly improve your tax efficiency and/or reducing your risk exposure, you maywant to consider making fixed income securities part of your personal investmentstrategyResearch:Charting Tools - Get a combined view of stocks, rapid price changes and volumeincreases with this pre-trade analytic tool. Enables you to do technical market analysisof stocks on price, volume, market cap and P/E for NSE/BSE Benchmark againstDomestic as well as International Indices.Sector Watch - You can access sector-wise information to track sectors and individualscrips within the sector, which makes analysis easy for you.Corporate Infohub - We provide you with exhaustive company information, detailedfinancials and ratios. And we also allow you to evaluate financials across peercompanies. Our extensive database covers more than 4000 companies.Newsroom - View live market news from the most reliable sources on equity, debt,politics and general events. You even have access to live news analysis, marketcommentary and happening stocks. BABASAB PATIL -31-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”Customer Service & Other Value Added ServicesOnline Query Resolution - With our "Quick Mail" tool you can resolve all yourproblems online.Online Ledger - View your Digital Contract Note, summary of your transactionsusing Online "Bills & Accounts"My Inbox - Maintain records of all Important notifications related to your accountSMS Alerts - Set Price based Alerts for Stocks of your choiceDedicated Customer Care Centre & State-of- the-art Phone-2-Trade DeskInteractive Demo - A step-by-step guide to enable you to navigate through theprocess of Investing Online on our website Usectrade.comSubscription to Mailers - Subscribe to our Inhouse Research Reports covering ourentire Product BouquetInvestment Banking and Advisory ServicesInvestment Banking is one of the prime focus areas of the company and we providevalue added, customized solutions to our clients. Leveraging on the knowledge,expertise and experience of our professionals, we offer services that range frommanaging public issues, debt and equity placements, corporate advisory services andfinancial consultancy to facilitating mergers and acquisitions. BABASAB PATIL -32-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”The Investment Banking Teams business philosophy emphasizes:- • Long-term relationship with clients. • A strong research-based advice. • Innovative solutions and speedy execution. • Ethical and transparent conduct of business. It has always been the endeavor of UTI Securities to bring all the market constituents together in a mutually beneficial relationship.Equity capital Markets The Issue Management group focuses on public issues, open offers and buyback issues. Our proximity to large institutions gives us an added advantage in placinglarge equity issues. This division is supported by a nationwide network comprising of12 branches, 15 franchisees and sub-brokers across the country for retail distribution.Within a short span, UTISEL has already been recognized as one of the leadingmerchant bankers in India. UTI Securities has consistently provided professional guidance and expertservices. Over the years, it has developed strong relationships with institutionalinvestors and other market intermediaries, enabling it to structure and successfullyplace a wide array of Capital Market products that meet the requirements of theissuer, investor and the market.The Equity Capital Markets group offers the following services: • Initial Public Offerings • Rights Issues • Buy-Back • Underwriting • Open Offers • Delisting of Securities BABASAB PATIL -33-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” • Private EquityThe Equity Capital Markets group seamlessly draws on the expertise provided by theEquity Research and Equity Sales teams on all the public offerings. We have been associated with a number of issues in different capacities asLead Managers, Co Managers, Syndicate/Sub-syndicate Members, etc. in the past.We successfully lead managed recently the public issue of Four Soft Ltd., a softwareproducts company, with an issue size aggregating Rs. 200 million. We were alsoinvolved as a syndicate member in the issue of Indraprastha Gas Ltd. where weprocured over 12,000 applications.Our Clients:We are currently lead managing the issues of SMS Pharmaceuticals, a bulk drugsmanufacturer; Glenmark Laboratories Ltd. which is in formulations segment;Vivimed Labs Ltd., manufacturer of pharmaceutical ingredients catering to thepersonal care industry and Crew BOS Products Ltd., a fashion accessoriesmanufacturer. The size of the said issues ranges from Rs. 150 million to Rs. 500million. We are also Lead Managing Rights Issue of Varun Shipping Company Ltd ofRs.130 -150 Crores. We also pursue Buyback/Delisting offers amongst others.We are aiming at making further inroads by securing mandates of premier companiesin the Pharmaceutical, Textiles, Information Technology, Hospitality, Banking andHousing Finance industries amongst others.Private Equity The Private Equity Group arranges equity placement through the off-market BABASAB PATIL -34-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”route using its privileged relationships with various Venture Capital and Strategic &Portfolio Equity investor who operate from within the country as well as from abroad.The Private Equity group assists companies seeking capital infusions in the form ofseed capital, venture capital, angel investment, strategic investment, and mezzaninefinancing from the private equity marketplace. The private equity group identifies start –up, later stage projects for investingin well-managed companies, which are placed to grow rapidly and to take advantageof the favourable economic conditions existing within the space with a clearly definedbusiness model. Private Equity Group has followed the philosophy of being a multi-sector player, as it believes that in the Indian context it ensures an optimum balance ofrisk and return to its investors. Private Equity Group has demonstrated its industryexpertise in different sectors by backing diverse sectors like Pharma, Power,Entertainment, Information Technology etc. The Private Equity division has been successful in arranging pre IPO fundingfrom venture capitalists/Private Equity investors. Recently we have done theplacement for Four Soft Ltd. and Glenmark Laboratories Ltd. aggregating Rs. 140million. Data Collection: Data source: Secondary data - Reports from UTI securities and other reports from related websites. Measuring tools and Techniques: BABASAB PATIL -35-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Techniques of analysis: 1. Return: Return on a typical investment consists of two components. The basic is the periodic cash receipts (or income) on the investment, either in the form of interest or dividends. The second component is the change in the price of the assets-commonly called the capital gain or loss. This element of return is the difference between the purchase price and the price at which the assets can be or is sold; therefore, it can be a gain or a loss. The return has been calculated as under: NAVt – NAVt-1 Portfolio return: Rit =--------------------------------- NAV t-1 Where Rit is the difference between Net Asset Values for two consecutive days dividend by the NAV of the preceding day. M.indt – M.indt-1 Market return: Rmt =-------------------------------- M.indt-1 Where Rmt is the difference between market indices of two consecutive days dividend by the market index for the preceding day 2. Risk : Risk is neither good nor bad. Risk in holding securities is generally associated with the possibility that realized returns will be less than expected returns. The difference between the required rate of returns on mutual fund investment and the BABASAB PATIL -36-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” risk free return is the risk premium. Risk can be measured in terms of Beta & standard deviations. Standard deviation: It is used to measure the variation in individual returns from the average expected returns over a certain period. Standard deviation is used in the concept of risk of a portfolio of investments. Higher standard deviation means a greater fluctuation in expected return. SD = n ∑X2 – (∑X)2 n (n-1) Beta : Beta measures the systematic risk and shows how prices of securities respond to the market forces. It is calculated by relating the return on a security with return for the market. By convention, market will have beta 1.0.Mutual fund is said to be volatile, more volatile or less volatile. If beta is grater than 1 the stock is said to be riskier than market. If beta is less than 1, the indication is that stock is less risky in comparison to market. If beta is zero then the risk is the same as that of the market. Negative beta is rare. ß = Covar / (SD)2 Where, Covariance (covar) is the average of the products of deviations for each data point pair. And, covar is calculated as: Covar = 1/n Σ(xi –µ x)(yi - µy) Where, x = scheme returns. y = market returns. BABASAB PATIL -37-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” µ = mean. β = nΣxy - (Σx)( Σy) nΣx2-(Σx) 2 Where, n = number of years X = rolling returns of the BSE index Y = rolling returns of the schemes 3. Sharpe index Sharpe index measures risk premium of a portfolio, relative to the total amount of risk in the portfolio. Sharpe index summarizes the risk and return of a portfolio in a single measure that categorizes the performance of funds on the risk- adjusted basis. The larger the Sharpe’s index the portfolio over performs the market and vise versa.Formula to calculate Sharpe’s measure is: RP - Rf St = BABASAB PATIL -38-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” SDWhere,st = Sharpe’s indexRp= portfolio returnRf= Risk free rate of return (5%)SD= Standard Deviation of the port folio 4. Treynor’s Index Treynor’s model is on the concept of the characteristics straight line. The characteristics line has drawn a relationship between the market return and a specific portfolio without taking into consideration any direct adjustment for risk. It is also known as reward to volatility ratio and is defined as: The formula for Treynor’s Index is: Portfolio avg return (Rp) – risk-free rate of interest (Rf) BABASAB PATIL -39-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Treynor index (Tn) = Beta coefficient of portfolio (Bp) Rp -Rf Tn = Bp It measures portfolio risk in terms of beta, which is weighted average of individual security beta. The ratio is investors, for who the fund represents only a fraction of their total assets. The higher the ratio better is the performance. 5. Alpha The size of the alpha exhibits the stock’s unsystematic return and its average return independent of market return. If the fund produces the expected return at the level of risk assumed, the fund would have an alpha equal to zero. A positive alpha indicates that the manager produced return greater than expected for the risk taken. Alpha is calculated by comparing the fund’s actual performance with the risk- adjusted expected return. Where Rp = portfolio return Rf = Risk free rate of return (5%) BABASAB PATIL -40-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Rm = average market return - α =(Rp Rf) - Beta (Rm- Rf) BABASAB PATIL -41-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” CONTENTS - Methodology - Results & Discussion with Charts & Graphs - Conclusion - Bibliography Methodology The following table shows the list of AMC in India & the corpus value of individual AMC in the month of October and November 2006.S.No Mutual Fund AUM AUM Increase/ Change 31/01/2007 31/12/2006 % Decrease 1. LIC Mutual Fund 16480.90 12458.88 4022.02 32.28 2. UTI Mutual Fund 41622.51 37789.97 3832.54 10.14 3. Benchmark Mutual Fund 8951.09 5659.42 3291.67 58.16 4. Reliance Mutual Fund 34636.90 3152.28 3064.62 9.71 5. Kotak Mahindra Mutual Fund 13542.09 10938.29 2603.8 23.80 BABASAB PATIL -42-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return”6. Pru ICICI Mutual Fund 35232.16 32664.03 2568.13 7.867. DSP Merrill Lynch Mutual Fund 14277.26 11781.10 2559.16 21.848. HDFC Mutual Fund 29555.13 27552.96 2002.17 7.279. PRINCIPAL Mutual Fund 11887.17 10050.54 1836.63 18.2710. Deutsche Mutual Fund 6138.66 5155.57 982.72 19.0611. Birla Mutual Fund 17474.97 16821.57 653.2 3.8812. HSBC Mutual Fund 10312.24 9691.28 620.95 6.4113. JM Mutual Fund 4664.6 4097.05 567.55 13.8514. SBI Mutual Fund 15961.26 15496.18 465.09 3.0015. ABN AMRO Mutual Fund 5738.67 5335.14 403.53 7.5616. Fidelity Mutual Fund 5786.05 5399.96 386.09 7.1517. Standard Chartered Mutual Fund 12894.13 12541.59 352.54 2.8118. ING Vysya Mutual Fund 3834.43 35781.17 256.26 7.1619. DBS Chola Mutual Fund 2145.33 1938.74 206.59 10.6620. Morgan Stanley Mutual Fund 3026.44 2864.58 161.87 5.6521. Tata Mutual Fund 12521.86 12472.36 47.51 0.3822. Sahara Mutual Fund 203.33 160.94 42.39 26.3423. Sundaram Mutual Fund 6854.99 6818.87 36.12 0.5324. Escorts Mutual Fund 127.70 123.18 4.52 3.6725. Quantum Mutual Fund 55.15 51.51 3.65 7.0926. BOB Mutual Fund 150.21 165.49 -15.28 -9.2327. Taurus Mutual Fund 258.29 275.92 -17.63 -6.3928. Franklin Templeton Investments 23832.70 23920.26 -87.57 -.03729. Canbank Mutual Fund 2304.91 2737.86 -332.85 -12.62 The AMC which have the AUM of more than 10,000Crs 1st STEP: The selection of AMCs for analysis is on the basis of AUM value of individual AMC. From all the AMCs, the fund, which have the AUM of more than 10,000crs only those AMCs are taken for the study. The following table shows the list of AMCs, which have the AUM of more than 10,000Crs in the month of December 2006 and January 2007, & the % change in the values in a month also are shown. BABASAB PATIL -43-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return”S. No AMC AUM AUM Absolute %Change 31/01/2007 31/12/2006 change 1. UTI Mutual Fund 41622.51 37789.97 3832.54 10.14 2. Pru ICICI Mutual Fund 35232.16 32664.03 2568.13 7.86 3. Reliance Mutual Fund 34636.90 3152.28 3064.62 9.71 4. HDFC Mutual Fund 29555.13 27552.96 2002.17 7.27 5. Franklin Templeton Investments 23832.70 23920.26 -87.57 -.037 6. Birla Mutual Fund 17474.97 16821.57 653.2 3.88 7. LIC Mutual Fund 16480.90 12458.88 4022.02 32.28 8. SBI Mutual Fund 15961.26 15496.18 465.09 3.00 9. DSP Merrill Lynch Mutual Fund 14277.26 11781.10 2559.16 21.84 10. Kotak Mahindra Mutual Fund 13542.09 10938.29 2603.8 23.80 11. Standard Chartered Mutual Fund 12894.13 12541.59 352.54 2.81 12. Tata Mutual Fund 12521.86 12472.36 47.51 0.38 13. PRINCIPAL Mutual Fund 11887.17 10050.54 1836.63 18.27 14. HSBC Mutual Fund 10312.24 9691.28 620.95 6.41 BABASAB PATIL -44-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”2nd STEPEquity diversified Schemes: There are varieties of schemes offered by the AMCs. Equity diversified is one ofthe schemes offered by the AMC. The selection criteria of schemes are totally basedon the fund size and age of the fund. The scheme, which has the corpus value of morethan 400crs and the age of the fund, is more then 3yrs only those funds are qualifiedfor the analysis. Equity Diversified Fund diversifies their portfolio evenly across stocks andindustry sectors. The returns from them tend to be moderately high over a long-termhorizon but since the prices of equity shares fluctuate on the stock markets, the netasset value is subject to these fluctuations. These funds suit investors who havemoderate risk appetite. In a diversified fund, the risk of down-side is mitigated by thebreadth of variety of stocks in the portfolio. Since the portfolio is diversified, the BABASAB PATIL -45-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” under-performance in some stocks or sectors in which the fund has invested is balanced by the superior performance of other stocks or sectors The following are the equity-diversified schemes in the selected funds at the current date.1/02/2007 Tables for fund size and fund age UTI Mutual FundS. No Scheme Name Fund Size Date of Fund Fund Inception Age Class 1. UTI Master Plus 91(G) 863.52 31/12/1991 15.16 ED 2. UTI Index Select Equity (G) 216.36 12/05/97 9.58 ED 3. UTI Mastergrowth 93 (G) 346.95 18/01/93 14.08 ED 4. UTI Large Cap (G) 25.53 07/04/04 2.83 ED 5. UTI Mastershare (G) 1,828. 19/09/1986 20.33 ED 6. UTI Equity Fund (G) 1,451.73 18/05/92 14.75 ED 7. UTI Growth & Value Fund (G) 151.96 28/10/99 7.33 ED 8. UTI Leadership Equity Fund (G) 1,027.84 30/01/06 1.08 ED 9. UTI Dividend Yield Fund (G) 516.88 03/05/05 1.91 ED 10 UTI India Advantage Equity (G) 55.84 05/02/00 7 ED . 11 UTI Dynamic Fund (G) 128.27 12/09/03 3.41 ED . 12 UTI Master Value Fund (G) 647.68 9.08 ED . 01/06/98 13 UTI Mid Cap (G) 80.70 07/04/04 2.83 ED . 14 UTI Opportunities Fund (G) 497.79 1.58 ED . BABASAB PATIL 20/07/05 15 UTI Contra Fund (G) -46- 640.04 0.91 ED . 22/03/06 16 UTI Wealth Builder Fund (G) 905.02 07/09/06 0.41 ED .
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return”S. No Scheme Name Fund Date of Age of Fund Size inception the fund class 1. Pru ICICI Infrastructure (G) 1,562.32 1.5 ED 16/08/05 2. Pru ICICI Dynamic Plan (G) 1,533.33 18/10/2002 4.33 ED 3. Pru ICICI Services Indus. (G) 424.02 1.25 ED 18/11/05 4. Pru ICICI Growth (G) 406.88 19/06/98 8.66 ED 5. Pru ICICI Emerging S.T.A.R.(G) 933.66 2.75 ED 05/10/04 6. Pru ICICI Discovery Fund (G) 908.60 2.58 ED 23/07/04 7. Pru ICICI Fusion Fund (G) 634.15 27/02/06 ED (1) 8. Pru ICICI Power (G) 1,025.49 ED 05/10/01(5.33) Prudential ICICI Mutual Fund BABASAB PATIL -47-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” S. No Scheme Name Fund Date of Age of Fund Size inception the class fund 1. Reliance RSF – Equity (G) 160.50 10/05/05 1.75 ED 2. Reliance NRI Equity Fund 121.23 01/11/04 2.25 ED (G) 3. Reliance Equity Opp. Fund 2,214.79 07/03/05 1.58 ED (G) 4. Reliance Vision Fund (G) 2,415.31 07/09/95 11.58 ED 5. Reliance Growth Fund (G) 3,243.92 08/09/95 10.5 ED 6. Reliance Equity Fund (G) 4,455.25 07/03/06 0.58 ED Reliance Mutual Fund HDFC Mutual FundS. No Scheme Name Fund Date of Age of the Fund Size inception fund class 1. HDFC Growth Fund (G) 379.40 11/09/00 6.41 ED BABASAB PATIL -48-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” 2. HDFC Core & Satellite Fund 646.03 10/09/04 1.41 ED (G) 3. HDFC Top 200 Fund G) 1,621.10 19/08/96 10.5 EDS. No SchemeEquity Fund (G) 4. HDFC Name 3,907.14 08/12/94 of Age Fund Date 12.5 ofEDFund 5. HDFC Premier Multi-Cap (G) 673.81 21/03/05 1.91 Size (crs.) inception the fund ED class 1. Franklin India Opportunity. (G) 687.15 19/02/2000 7 ED 6. HDFC Capital Builder Fund (G) 657.84 16/12/93 13.16 ED 2. Franklin India Growth Fund 25.06 07/02/2000 7 ED 7. HDFC Long Term Equity Fund 1,478.01 27/01/06 1.08 ED (G) 3. Franklin India Prima Plus (G) 878.70 28/09/94 12.41 ED 4. Franklin India Blue chip (G) 2575.97 30/11/1993 13.25 ED 5. Franklin (I) Flexi Cap (G) 3,364.79 09/02/05 2 ED 6. Franklin (I) Smaller Cos (G) 1,211.47 14/12/05 1.16 ED 7. Templeton (I) Equity Income(G) 1,749.86 20/04/06 0.83 ED Franklin Templeton Mutual Funds Birla Mutual FundS. No Scheme Name Fund Date of Age of Fund Size inception the fund class 1. 396.18 08/09/2006 0.42 ED Birla Long Term Adv. Fund (G) 2. Birla Infrastructure Fund (G) 474.08 24/02/2006 1 ED 3. Birla India GenNext Fund (G) 159.40 12/07/2005 1.58 ED 4. Birla India Opportunities (G) 83.17 25/08/2003 3.5 ED 5. Birla Advantage Fund (G) 475.06 24/02/95 12 ED BABASAB PATIL -49-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” 6. Birla Midcap Fund (G) 228.43 01/10/02 4.33 ED 7. Birla Top 100 Fund (G) 440.00 28/09/05 1.42 ED 8. Birla Equity Fund (G) 506.37 08/27/98 7.77 ED 9. Birla Frontline Equity (G) 124.74 30/08/2002 4.5 ED v. Birla Dividend Yield Plus (G) 415.89 02/07/03 3.32 LIC Mutual FundS. No Scheme Name Fund Date of Age of the Fund Size inception fund class 1. 99.28 10/08/94 12.5 ED 1. LIC MF Growth Fund 2. 82.93 11/01/93 14.08 ED 2. LIC MF Equity Fund (G) SBI Mutual FundS. No Scheme Name Fund Date of Age of Fund Size inception the fund class 1. Magnum Global Fund (G) 954.15 22/09/199 12.42 ED 4 2. Magnum Midcap Fund (G) 427.81 17/03/05 1.91 ED 3. Magnum Contra Fund (G) 1,448.78 31/07/99 7.57 ED 4. SBI Magnum Equity Fund (D) 265.98 1/01/1991 16.03 ED 5. Magnum Comma Fund (G 457.58 25/07/05 1.58 ED 6. Magnum Multiplier Plus (G) 745.07 01/03/93 13.91 ED 7. Magnum Multicap Fund (G) 1,079.18 16/09/05 1.41 ED BABASAB PATIL -50-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” 8. Magnum Emerging Businesses 267.94 17/09/04 2.41 ED (G) 9. Magnum NRI Fund - FA Plan (G) 13.64 13/01/04 3.08 ED 10 SBI Arbitrage Oppor. Fund (G) 214.38 15/09/06 0.41 . 11 SBI Blue Chip Fund (G) 1,936.34 20/01/06 1.08 . DSP Merrill Lynch Mutual FundS. No Scheme Name Fund Date of Age of the Fund Size inception fund class 1. DSP-ML Small & MidCap- Inst 54.59 29/09/06 0.41 ED (G) 2. DSP-ML Small & Mid Cap Fund 1,389.79 29/09/06 0.41 ED (G) 3. DSP-ML Opportunities (G) 1,356.20 18/04/00 6.83 ED 4. DSP-ML Equity Fund 695.41 07/04/97 9.83 ED 5. DSP-ML Top 100 Equity (G) 299.47 21/02/03 4 ED 6. DSP-ML India T.I.G.E.R. (G) 1,481.34 25/05/04 2.75 ED Kotak Mutual FundS. No Scheme Name Fund Date of Age of the Fund BABASAB PATIL -51-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” Size inception fund class 1. Kotak Lifestyle Fund (G) 384.15 22/02/06 1 ED 2. Kotak 30 (G) 432.01 22/12/98 8.16 ED 3. Kotak Opportunities Fund (G) 224.26 25/08/04 2.5 ED 4. Kotak Global India Scheme (G) 111.85 16/01/04 3.08 ED 5. Kotak Contra (G) 143.59 01/07/05 1.58 ED Standard Chartered Mutual FundS. No Scheme Name Fund Date of Age of the Fund Size inception fund class 1. StanChart Imperial Equity (G) 251.16 21/02/06 1 ED 2. StanChart Classic Equity (G) 372.11 14/07/05 3.16 ED 3. StanChart Premier Equity (G) 161.21 26/09/05 2.83 ED BABASAB PATIL -52-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” Tata Mutual FundS. No Scheme Name Fund Size Date of Age of the Fund inception fund class 1. Tata Infrastructure Fund (G) 1,187.91 22/12/04 2.16 ED 2. Tata Select Equity Fund (G) 106.38 24/05/96 10.75 ED 3. Tata Pure Equity Fund (G) 292.23 07/05/98 8.75 ED 4. Tata Equity Opp. Fund (G) 440.12 30/03/93 13.96 ED 5. Tata Service Industries (G) 181.46 10/05/05 1.75 ED 6. Tata Equity P/E Fund (G) 84.53 15/06/04 2.66 ED 7. Tata Growth Fund (G) 33.29 15/06/94 12.66 ED 8. Tata Mid Cap Fund (G) 154.51 15/06/05 1.66 ED 9. Tata Dividend Yield Fund (G) 146.18 27/10/04 2.33 ED 10 Tata Contra Fund (G) 201.42 25/10/05 1.33 ED . BABASAB PATIL -53-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” Principal Mutual FundS. No Scheme Name Fund Date of Age of Fund Size inception the fund class 1. Principal Large Cap Fund 251.90 19/10/05 1.33 ED (G) 2. Principal Resurgent IEF 260.89 30/06/00 6.66 ED (G) 3. Principal Growth Fund 260.03 25/10/00 6.33 ED (G) 4. Principal Junior Cap Fund 71.00 08/06/05 1.66 ED (G) 5. Principal Focussed Adv. 60.31 22/02/05 2 ED (G) 6. Principal Global Oppor 436.71 19/03/04 2.91 ED (G) 7. Principal Infra & Serv Ind 266.92 07/02/06 1 ED (G) 8. Principal Dividend Yield 139.01 22/09/04 2.41 ED (G) HSBC Mutual FundS. No Scheme Name Fund Date of Age of the Fund Size inception fund class 1. HSBC India Opportunities (G) 607.88 13/02/04 3 ED 2. HSBC Equity Fund (G) 936.53 03/12/02 4.16 ED 3. HSBC Midcap Equity Fund (G) 311.51 03/05/05 1.75 ED 4. HSBC Advantage India Fund (G 1,216.90 27/01/06 1.08 ED 4 Step: Absolute returns: BABASAB PATIL -54-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” The selected funds returns from date of launch to date of inception DOIScheme Name 1yr 2yr 3yr 4yr NAV () 1. UTI Master Plus 91(G) 62.79 13.8 98.8 120.5 309.2 2. UTI Mastershare (G) 33.08 7.8 66.8 110.4 -- 3. UTI Equity Fund (G) 30.86 -2.2 64.9 121.3 313.5 4. UTI Master Value Fund (G) 27.23 -5.4 44.2 90.5 389.1 5. Pru ICICI Dynamic Plan 63.59 23.4 143.4 258.5 -- (G) 6. Pru ICICI Growth (G) 89.80 14.5 105.9 160.5 354.2 7. Pru ICICI Power (G) 78.11 15.6 116.6 191.0 559.2 8. Reliance Vision Fund (G) 171.46 13.7 100.3 185.8 795.4 9. Reliance Growth Fund (G) 259.81 17.1 124.8 267.3 982.5 10. HDFC Top 200 Fund G) 105.32 12.3 104.4 178.8 553.7 11. HDFC Equity Fund (G) 144.18 15.3 119.8 197.9 554.2 12. HDFC Capital Builder Fund 59.74 2.5 69.4 184.2 444.6 (G) 13. Franklin India Opportunity. 24.20 16.9 124.5 193.0 376.4 (G) 14. Franklin India Prima Plus 133.87 21.5 116.1 170.3 469.2 (G) 15. Franklin India Blue chip (G) 124.12 13.2 99.3 144.9 449.7 16. Birla Advantage Fund (G) 120.87 10.3 91.0 155.9 368.9 17. Birla Dividend Yield Plus 40.07 -2.6 45.0 98.7 -- (G) 18. Magnum Global Fund (G) 41.40 17.3 148.9 380.9 770.8 19. Magnum Contra Fund (G) 35.71 15.1 133.6 334.2 790.3 20. Magnum Multiplier Plus 50.92 11.2 139.8 260.9 544.9 (G) 21. DSP-ML Opportunities (G) 52.64 11.9 102.8 178.5 562.9 22. DSP-ML Equity Fund 37.47 16.0 112.3 205.2 541.5 23. Kotak 30 (G) 65.64 12.1 106.9 176.2 471.0 24. Tata Equity Opp. Fund (G) 55.55 5.8 101.0 180.1 25. HSBC India Opportunities 27.13 21.6 109.7 198.8 -- (G) 26. HSBC Equity Fund (G) 68.72 16.7 91.1 164.3 -- By observing the absolute returns of the schemes we find that RelianceGrowth Fund (G) is the one which is giving the good returns from the date of launch. BABASAB PATIL -55-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” 5th STEP: METHODOLOGY  ReturnsScheme Names DOI Annualized returns (%) 4 yrs NAV Avg Rtn (28/02/07 ) 1 yr 2yr 3yr 4yr 1. UTI Master Plus 91(G) 62.79 13.8 41.0 30.2 32.6 29.4 2. UTI Mastershare (G) 33.08 7.8 29.2 28.1 -- 21.7 3. UTI Equity Fund (G) 30.86 -2.2 28.4 30.3 32.8 22.33 4. UTI Master Value Fund (G) 27.23 -5.4 20.1 24.0 37.4 19.03 5. Pru ICICI Dynamic Plan (G) 62.25 52.5 57.2 41.8 52.5 51 6. Pru ICICI Growth (G) 89.80 14.5 43.5 37.6 35.3 32.73 7. Pru ICICI Power (G) 78.11 15.6 47.2 42.8 45.8 37.85 BABASAB PATIL -56-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”8. Reliance Vision Fund (G) 171.46 13.7 41.5 41.9 55.0 38.039. Reliance Growth Fund (G) 259.81 17.1 49.9 54.3 61.0 45.5810. HDFC Top 200 Fund G) 105.32 12.3 43.0 40.7 45.6 35.411. HDFC Equity Fund (G) 144.18 15.3 48.3 43.9 45.6 38.2812. HDFC Capital Builder Fund (G) 59.74 2.5 30.2 41.6 40.3 28.6513. Franklin India Opportunity. (G) 24.20 16.9 49.8 43.1 36.6 36.614. Franklin India Prima Plus (G) 133.87 21.5 47.0 39.3 41.6 37.3515. Franklin India Blue chip (G) 124.12 13.2 41.2 34.8 40.6 32.4516. Birla Advantage Fund (G) 120.87 10.3 38.2 36.8 36.2 30.3817. Birla Dividend Yield Plus (G) 40.07 -2.6 20.4 25.7 -- 14.518. Birla Equity Fund(G) 175.05 16.4 49.1 50.0 46.1 40.419. Magnum Global Fund (G) 41.40 17.3 57.8 68.8 54.2 49.5320. Magnum Contra Fund (G) 35.71 15.1 52.8 63.1 54.8 46.4521. Magnum Multiplier Plus (G) 50.92 11.2 54.9 53.4 45.2 41.1822. DSP-ML Opportunities (G) 52.64 11.9 42.4 40.7 46.0 35.2523. DSP-ML Equity Fund 37.47 16.0 45.7 45.1 45.0 37.9524. Kotak 30 (G) 65.64 12.1 43.8 40.3 41.7 34.4825. Tata Equity Opp. Fund (G) 55.55 5.8 41.8 41.0 -- 29.5326. HSBC India Opportunities (G) 27.13 21.6 44.8 44.0 -- 36.827. HSBC Equity Fund (G) 68.72 16.7 38.2 38.3 -- 31.07 Market Return Market Return 1 yr 2yr 3yr 4yr Avg rtrn Sensex 22.60 43.50 35.00 30.80 32.98 BABASAB PATIL -57-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Risk  Standard Deviation: BABASAB PATIL -58-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Scheme Names DOI Annualized Returns (%) 4 yr (SD) NAV Avg 1 yr 2 yr 3 yr 4 yr 1. UTI Master Plus 62.79 13.8 41.0 30.2 32.6 29.4 11.38 91(G) 2. UTI Mastershare 33.08 7.8 29.2 28.1 -- 21.7 12.05 (G) 3. UTI Equity Fund 30.86 -2.2 28.4 30.3 32.8 22.33 16.45 (G) 4. UTI Master Value 27.23 -5.4 20.1 24.0 37.4 19.03 17.89 Fund (G) 5. Pru ICICI Dynamic Plan 62.25 52.5 57.2 41.8 52.5 51 6.52 (G) 6. Pru ICICI Growth (G) 89.80 14.5 43.5 37.6 35.3 32.73 12.63 7. Pru ICICI Power 78.11 15.6 47.2 42.8 45.8 37.85 14.95 (G) 8. Reliance Vision Fund 171.4 13.7 41.5 41.9 55.0 38.03 17.39 (G) 6 9. Reliance Growth Fund 259.8 17.1 49.9 54.3 61.0 45.58 19.52 (G) 1 10. HDFC Top 200 Fund G) 105.3 12.3 43.0 40.7 45.6 35.4 15.53 2 11. HDFC Equity Fund (G) 144.1 15.3 48.3 43.9 45.6 38.28 15.42 8 12. HDFC Capital Builder 59.74 2.5 30.2 41.6 40.3 28.65 18.16 Fund (G) 13. Franklin India 24.20 16.9 49.8 43.1 36.6 36.6 14.20 Opportunity. (G) 14. Franklin India Prima 133.8 21.5 47.0 39.3 41.6 37.35 11.05 Plus (G) 7 15. Franklin India Blue 124.1 13.2 41.2 34.8 40.6 32.45 13.15 chip (G) 2 16. Birla Advantage Fund 120.8 10.3 38.2 36.8 36.2 30.38 13.41 (G) 7 17. Birla Dividend Yield 40.07 -2.6 20.4 25.7 -- 14.5 15.04 Plus (G) 18. Birla Equity Fund(G) 175.0 16.4 49.1 50.0 46.1 40.4 16.09 5 19. Magnum Global Fund 41.40 17.3 57.8 68.8 54.2 49.53 22.36 (G) 20. Magnum Contra Fund 35.71 15.1 52.8 63.1 54.8 46.45 21.37 (G) 21. Magnum Multiplier Plus 50.92 11.2 54.9 53.4 45.2 41.18 20.43 (G) 22. DSP-ML Opportunities 52.64 11.9 42.4 40.7 46.0 35.25 15.72 (G) 23. DSP-ML Equity Fund 37.47 16.0 45.7 45.1 45.0 37.95 14.64 24. Kotak 30 (G) 65.64 12.1 43.8 40.3 41.7 34.48 14.99 25. Tata Equity Opp. Fund 55.55 BABASAB 5.8PATIL 41.8 41.0 -- 29.53 20.56 (G) -59- 26. HSBC India 27.13 21.6 44.8 44.0 -- 36.8 13.17 Opportunities (G) 27. HSBC Equity Fund (G) 68.72 16.7 38.2 38.3 -- 31.07 12.44
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” SD = n ∑X2 – (∑X)2 n (n-1) It is used to measure the variation in individual returns from the average expected returns over a certain period. Standard deviation is used in the concept of risk of a portfolio of investments. Higher standard deviation means a greater fluctuation in expected return.  BETA:S.No Scheme Names 4 Years avg Beta Returns 1. UTI Master Plus 91(G) 29.4 0.45974 2. UTI Mastershare (G) 21.7 0.5195 3. UTI Equity Fund (G) 22.33 0.51445 4. UTI Master Value Fund (G) 19.03 0.38752 5. Pru ICICI Dynamic Plan (G) 51 0.04588 6. Pru ICICI Growth (G) 32.73 0.50621 7. Pru ICICI Power (G) 37.85 0.53133 BABASAB PATIL -60-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” 8. Reliance Vision Fund (G) 38.03 0.42884 9. Reliance Growth Fund (G) 45.58 0.53642 1 HDFC Top 200 Fund G) 35.4 0.50859 0. 1 HDFC Equity Fund (G) 38.28 0.55997 1. 1 HDFC Capital Builder Fund (G) 28.65 0.47609 2. 1 Franklin India Opportunity. (G) 36.6 0.58826 3. 1 Franklin India Prima Plus (G) 37.35 0.43023 4. 1 Franklin India Blue chip (G) 32.45 0.46015 5. 1 Birla Advantage Fund (G) 30.38 0.48017 6. 1 Birla Dividend Yield Plus (G) 14.5 0.57688 7. 1 Birla Equity Fund(G) 40.4 0.57362 8. 1 Magnum Global Fund (G) 49.53 0.74307 9. 2 Magnum Contra Fund (G) 46.45 0.67269 0. 2 Magnum Multiplier Plus (G) 41.18 0.77797 1. 2 DSP-ML Opportunities (G) 35.25 0.50358 2. 2 DSP-ML Equity Fund 37.95 0.50899 3. 2 Kotak 30 (G) 34.48 0.53857 4. 2 Tata Equity Opp. Fund (G) 29.53 0.87693 BABASAB PATIL -61-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” 2 HSBC India Opportunities (G) 36.8 0.56432 6. 2 HSBC Equity Fund (G) 31.07 0.52537 7. ß = Covar / σm2 Where, Covariance (covar) is the average of the products of deviations for each data point pair. And, covar is calculated as: Covar = 1/n Σ(xi –µ x)(yi - µy) σm2 = Market Variance Beta describes the relationship between the stock’s return and the index returns. it describes the risk in the portfolio with comparing market risk as 1 . If beta =1 One percent changes in market index return causes exactly one percent change in the stock returns. it indicates that the stock moves in tandem with the market . If Beta <1 Then the stock is less volatile compared to the market. If Beta >1Then the stock is more volatile compared to the market. The stock valueWith more then 1 beta value is considered to be risky.If Beta –ve: native Beta indicates that the stock returns moves in the oppositedirection to the market return. BABASAB PATIL -62-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Returns and risk for the top 10 companies having the highest portfolio returns (Rp).Scheme Names DOI nav 5 yrs SD Beta Avg Rtrn 1. Pru ICICI Dynamic Plan 62.25 51 6.52 0.05 (G) 2. Magnum Global Fund (G) 41.40 49.53 22.36 0.74 3. Magnum Contra Fund (G) 35.71 46.45 21.37 0.67 4. Reliance Growth Fund (G) 259.81 45.58 19.52 0.54 5. Magnum Multiplier Plus 50.92 41.18 20.43 0.78 (G) 6. Birla Equity Fund(G) 175.05 40.4 16.09 0.57 7. HDFC Equity Fund (G) 144.18 38.28 15.42 0.56 8. Reliance Vision Fund (G) 171.46 38.03 17.39 0.43 9. DSP-ML Equity Fund 37.47 37.95 14.64 0.51 10. Pru ICICI Power (G) 78.11 37.85 14.95 0.53Sharpe’s Index: Sharpe’s index measures the risk premium of the portfolio relative to the totalamt of risk in the portfolio. This risk premium is the difference between the BABASAB PATIL -63-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”portfolio’s average rate of return and the risk less rate of return. The index assigns thehighest values to assets that have best risk-adjusted average rate of returns. 4 Yr DOI NAV Avg Scheme Names 28/02/07 Rtrn Rf Sd(σ) St Rp 1. Pru ICICI Dynamic Plan 62.25 51 7.06 5 6.52 (G) 2. Magnum Global Fund (G) 41.40 49.53 5 22.36 1.99 3. Magnum Contra Fund (G) 35.71 46.45 5 21.37 1.94 4. Reliance Growth Fund 259.81 45.58 2.08 5 19.52 (G) 5. Magnum Multiplier Plus 50.92 41.18 1.77 5 20.43 (G) 6. Birla Equity Fund(G) 175.05 40.4 5 16.09 2.20 7. HDFC Equity Fund (G) 144.18 38.28 5 15.42 2.16 8. Reliance Vision Fund (G) 171.46 38.03 5 17.39 1.90 9. DSP-ML Equity Fund 37.47 37.95 5 14.64 2.25 10. Pru ICICI Power (G) 78.11 37.85 5 14.95 2.20 Rp - Rf St = Sd(σ) Where, Rp = Average portfolio returns Rf = Risk free rate of rate (5%) Sd(σ) = Standard Deviation (Risk) of returns Treynor’s Index: Treynor’s index sums up the risk and return of the portfolio in a single number, while categorizing the performance of the portfolio. BABASAB PATIL -64-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” 4 Yr DOI NAV Scheme Names Avg Rtrn Beta 28/02/07 Rp Rf Tr β 1. Pru ICICI Dynamic Plan 62.25 51 5 0.05 1002.62 (G) 2. Magnum Global Fund (G) 41.40 49.53 5 0.74 59.93 3. Magnum Contra Fund (G) 35.71 46.45 5 0.67 61.62 4. Reliance Growth Fund 259.81 45.58 5 0.54 75.65 (G) 5. Magnum Multiplier Plus 50.92 41.18 5 0.78 46.51 (G) 6. Birla Equity Fund(G) 175.05 40.4 5 0.57 61.71 7. HDFC Equity Fund (G) 144.18 38.28 5 0.56 59.43 8. Reliance Vision Fund (G) 171.46 38.03 5 0.43 77.02 9. DSP-ML Equity Fund 37.47 37.95 5 0.51 64.74 10. Pru ICICI Power (G) 78.11 37.85 5 0.53 61.83 Rp – Rf Tr = βp Tr = Treynor’s Performance index Rp = Average portfolio returns Rf = Risk free rate of rate (5%) βp = A Measure of systematic risk ( Co-efficient to be estimated)Jensen’s Alpha index: DOI AlfaScheme Names BetaRm NAV Rp Rf α/β 28/02/07 α β 1. Pru ICICI 62.25 51 5 0.05 32.98 44.7 974.636 Dynamic Plan 2 BABASAB PATIL -65-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” (G) 2. Magnum 41.40 23.7 Global Fund 49.53 5 0.74 32.98 31.947 4 (G) 3. Magnum 35.71 22.6 Contra Fund 46.45 5 0.67 32.98 33.638 3 (G) 4. Reliance 259.81 25.5 Growth Fund 45.58 5 0.54 32.98 47.670 7 (G) 5. Magnum 50.92 14.4 Multiplier Plus 41.18 5 0.78 32.98 18.526 1 (G) 6. Birla Equity 175.05 19.3 40.4 5 0.57 32.98 33.733 Fund(G) 5 7. HDFC Equity 144.18 17.6 38.28 5 0.56 32.98 31.452 Fund (G) 1 8. Reliance Vision 171.46 21.0 38.03 5 0.43 32.98 49.042 Fund (G) 3 9. DSP-ML 37.47 18.7 37.95 5 0.51 32.98 36.756 Equity Fund 1 10. Pru ICICI 78.11 17.9 37.85 5 0.53 32.98 33.846 Power (G) 8 α = ( Rp- Rf)-beta(Rm- Rf) Where, Rp = Average Portfolio Return Rf = Risk Free rate of interest (5%) β = A measure of systematic risk Rm = Average Market Return Performance evaluation for Top 10 equity diversified schemes on the basis of three Performance Indexes i.e., (Sharpe’s, Treynor’s and Jensen’s Performance Index). NAV Scheme Names Rp Beta SD Sharpe’s Treynor’s Jensen’s 28/02/07 1. Pru ICICI Dynamic 62.25 51 0.05 6.52 7.06 1002.62 974.636 Plan (G) 2. Magnum 41.40 49.53 0.74 22.36 1.99 59.93 31.947 Global Fund BABASAB PATIL -66-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” (G) 3. Magnum Contra Fund 35.71 46.45 0.67 21.37 1.94 61.62 33.638 (G) 4. Reliance Growth 259.81 45.58 0.54 19.52 2.08 75.65 47.670 Fund (G) 5. Magnum Multiplier 50.92 41.18 0.78 20.43 1.77 46.51 18.526 Plus (G) 6. Birla Equity 175.05 40.4 0.57 16.09 2.20 61.71 33.733 Fund(G) 7. HDFC Equity Fund 144.18 38.28 0.56 15.42 2.16 59.43 31.452 (G) 8. Reliance Vision Fund 171.46 38.03 0.43 17.39 1.90 77.02 49.042 (G) 9. DSP-ML 37.47 37.95 0.51 14.64 2.25 64.74 36.756 Equity Fund 10. Pru ICICI 78.11 37.85 0.53 14.95 2.20 61.83 33.846 Power (G)RANKING OF SCHEMES Ranking on the basis of Sharpe’s Performance index: DOI Sharpe’s Scheme Names NAV Rp SD Rank Index 28/02/07 1. Pru ICICI Dynamic 7.055 62.25 51 6.52 1 Plan (G) 2. DSP-ML Equity Fund 14.64 2.251 37.47 37.95 2 3. Birla Equity Fund(G) 16.09 2.200 175.05 40.4 3 4. Pru ICICI Power (G) 14.95 2.197 78.11 37.85 4 BABASAB PATIL -67-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” 5. HDFC Equity Fund (G) 15.42 2.158 144.18 38.28 5 6. Reliance Growth Fund 19.52 2.079 259.81 45.58 6 (G) 7. Magnum Global Fund 22.36 1.992 41.40 49.53 7 (G) 8. Magnum Contra Fund 21.37 1.940 35.71 46.45 8 (G) 9. Reliance Vision Fund 17.39 1.899 171.46 38.03 9 (G) 10. Magnum Multiplier 20.43 50.92 41.18 1.77 10 Plus (G) Chart showing the performance according to Sharpe’s Index Chart showing the performance according to Sharpes Index Pru ICICI Dynamic Plan (G) 8 DSP-ML Equity Fund 7 Birla Equity Fund(G) 6 Pru ICICI Power (G) Sharpes Measure 5 HDFC Equity Fund (G) 4 Reliance Growth Fund (G) 3 Magnum Global Fund (G) 2 Magnum Contra Fund 1 (G) BABASAB PATIL Reliance Vision Fund 0 -68- (G) Magnum Multiplier Plus Equity Diversified Schemes (G)
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” According to Sharpe’s performance index Pru ICICI Dynamic Plan is thebest Equity Diversified Scheme because this scheme is having the best risk-adjustedrate of return. Ranking on the basis of Treynor’s index:Scheme Names DOI RP Beta Treynor’s Rank NAV Index 28/02/07 1. Pru ICICI Dynamic 0.05 62.25 51 1002.62 1 Plan (G) 2. Reliance Vision 38.03 0.43 171.46 77.02 2 Fund (G) 3. Reliance Growth 0.54 259.81 45.58 75.65 3 Fund (G) 4. DSP-ML Equity 0.51 64.74 37.47 37.95 4 Fund 5. Pru ICICI Power 78.11 0.53 61.83 37.85 5 (G) 6. Birla Equity 0.57 61.71 175.05 40.4 6 Fund(G) 7. Magnum Contra 0.67 35.71 46.45 61.62 7 Fund (G) 8. Magnum Global 0.74 41.40 49.53 59.93 8 Fund (G) 9. HDFC Equity Fund 0.56 144.18 38.28 59.43 9 (G) 10. Magnum Multiplier 0.78 50.92 41.18 46.51 10 Plus (G) BABASAB PATIL -69-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Chart showing the performance according to Treynor’s IndexChart showing the performance according to Treynors Index 1. Pru ICICI Dynamic Plan (G) 1200 2. Reliance Vision Fund (G) 3. Reliance Growth Fund 1000 (G) 4. DSP-ML Equity Fund Treynors measure 800 5. Pru ICICI Power (G) 600 6. Birla Equity Fund(G) 400 7. Magnum Contra Fund (G) 8. Magnum Global Fund 200 (G) 9. HDFC Equity Fund 0 (G) Equity Diversified Schems 10. Magnum Multiplier Plus (G) BABASAB PATIL -70-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” According to Treynor’s performance index Pru ICICI Dynamic Plan rankedas first best Equity Diversified Scheme because this scheme is having the best risk-adjusted rate of return followed by Reliance Vision Fund (G). DOI Jensen’s Scheme Names NAV Rp Measur Rank 28/02/07 e 1. Pru ICICI Dynamic Plan (G) 974.64 62.25 51 1 2. Reliance Vision Fund (G) 49.04 171.46 38.03 2 3. Reliance Growth Fund (G) 47.67 259.81 45.58 3 4. DSP-ML Equity Fund 36.76 37.47 37.95 4 5. Pru ICICI Power (G) 33.85 78.11 37.85 5 6. Birla Equity Fund(G) 33.73 175.05 40.4 6 7. Magnum Contra Fund (G) 33.64 35.71 46.45 7 8. Magnum Global Fund (G) 31.95 41.40 49.53 8 9. HDFC Equity Fund (G) 31.45 144.18 38.28 9 10. Magnum Multiplier Plus (G) 18.53 50.92 41.18 10 Ranking on the basis of Jensen’s Alfa Measure: BABASAB PATIL -71-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Chart showing the performance according to Jensens performance measure Chart showing the performance according to Jensens Performance Measure 1. Pru ICICI Dynamic Plan (G) 1200 2. Reliance Vision Fund (G) 1000 3. Reliance Growth Fund (G) 4. DSP-ML Equity Fund Jensens Measure 800 5. Pru ICICI Power (G) 600 6. Birla Equity Fund(G) 400 7. Magnum Contra Fund (G) 200 8. Magnum Global Fund (G) 9. HDFC Equity Fund 0 (G) Equity Diversified Schemes 10. Magnum Multiplier Plus (G) BABASAB PATIL -72-
  • A study on “Performance Evaluation of Mutual Funds with Reference to risk and return” According to Jensen’s performance Measure, Pru ICICI Dynamic Plan ranked as first best Equity Diversified Scheme followed by Reliance Vision Fund (G). Classification of Risk into Systematic (un-diversifiable) and Unsystematic (diversifiable)Scheme 5 yrs SD Beta Systematic Unsystematic (% ) (%) Risk Risk Un-Names Avg (ß) Systemat (SD - (ß2*σm2) ic Systematic Rtrn Systematic Risk risk) Risk 1. Pru 51 ICICI 0.0458 Dynami 6.52 0.002105 6.3605499 2.45 97.55 c Plan 8 (G) 2. Magnu 49.5 m 0.7430 3 22.3 Global 0.552153 -19.465133 100.00 0.00 6 Fund 7 (G) 3. Magnu 46.4 m 5 21.3 0.6726 Contra 0.4525118 -12.907396 100.00 0.00 Fund 7 9 (G) 4. Reliance 45.5 Growth 8 19.5 0.5364 Fund 0.2877464 -2.2765522 100.00 0.00 2 (G) 2 5. Magnu 41.1 m 8 0.7779 20.4 Multipli 0.6052373 -25.416225 100.00 0.00 3 er Plus 7 (G) 6. Birla 40.4 Equity 16.0 0.5736 0.3290399 -8.8344997 100.00 0.00 Fund(G) 9 2 7. HDFC 38.2 15.4 0.3135664 -8.3323946 100.00 0.00 Equity 0.5599 8 2 BABASAB PATIL -73-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Fund (G) 78. Reliance 38.0 Vision 3 17.3 0.4288 Fund 0.1839037 3.4594439 80.11 19.89 9 (G) 49. DSP- 37.9 ML 5 14.6 0.5089 Equity 0.2590708 -4.9843996 100.00 0.00 4 Fund 910. Pru 37.8 ICICI 5 14.9 0.5313 Power 0.2823116 -6.434867 100.00 0.00 5 (G) 3 When we consider the systematic and un-systematic risk Pru ICICI Dynamic (G)has got 2.45% of systematic risk and 97.55% of unsystematic risk and RelianceVision Fund (G) 80.11% systematic risk and 19.89% of unsystematic risk. And otherall schemes have got 0% of Unsystematic risk. BABASAB PATIL -74-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Finding and Suggestions:  According to the Absolute returns of the scanned Equity Diversified Schemes of the top listed AMCs, Reliance Growth Fund (G) is the one which is giving good returns from the date of launch.  According to Sharpe’s performance Index we find that Pru ICICI Dynamic Plan (G) is ranked as 1st and DSP-ML Equity Fund as 2nd rank and Birla Equity Fund (G) as 3rd Rank. The Sharpe’s index considers total risk of the Scheme.  According to Treynor’s Performance Index, Pru ICICI Dynamic Plan (G) is ranked as 1st followed by Reliance Vision Growth (G) (2nd Rank) and Reliance Growth Fund (G) (3rd Rank). The Treynor’s index considers the return premium for systematic risk undertaken.  According to Jensen’s Performance Index, Pru ICICI Dynamic Plan (G) is ranked as 1st followed by Reliance Vision Fund (G) (2nd Rank) and Reliance Growth Fund (G) (3rd Rank). The Jensen’s index compares the actual or relized return of the portfolio with calculated return and hence depicts the predictive ability of the managerial personnel.  According to all the three indexes Pru ICICI Dynamic Plan (G). is the best equity diversified scheme because this particular scheme is having the best risk adjusted rate of return. BABASAB PATIL -75-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return”  When we consider the systematic and un-systematic risk, Pru ICICI Dynamic (G) has got 2.45% systematic risk and 97.55% of unsystematic risk and Reliance vision (G) 80.11% systematic risk and 19.89% of unsystematic risk. And other all schemes have 0% of Unsystematic risk which means that they are diversified to the fullest extent and the risk is only due to market factors. Conclusion The construction of the mutual fund scheme’s portfolio is done by takingvarious factors so even after evaluating the mutual funds and ranking them we cannotsay which is the best scheme in all. BABASAB PATIL -76-
  • A study on “Performance Evaluation of Mutual Funds withReference to risk and return” Bibliography  UTI records  Text Books referred:  Punithvathy. Pandian  Fisher and Jorden  Web Sites:  www.moneycontrol.com  www.amfiindia.com  www.icicidirect.com BABASAB PATIL -77-