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    Performanceevaluationofindianmutualfunds 090708154941-phpapp02 Performanceevaluationofindianmutualfunds 090708154941-phpapp02 Document Transcript

    • ARP Report On “Performance Evaluation of Indian Mutual Funds” Submitted in partial fulfillment of the requirement of Global Masters in Business Administration (GMBA) Wealth Management and Investment BankingSubmitted by: Under the Guidance of:Name: Kanchan Chainani Dr. Parvinder AroraRoll No. GDEC08WM028Name: Rounak JhawarRoll No. GDEC08IB015Name: Sagar BavishiRoll No. GDEC08WM033GMBA Batch Dec 08 S P Jain Center of Management Dubai UAE / Singapore 1
    • ACKNOWLEDGEMENTWe would like to express our profound gratitude to all those who have been instrumental in thepreparation of this report which has been prepared in partial fulfillment of Global Masters inBusiness Administration (GMBA).We wish to thank our dean, Mr. Michael Barnes, Dr. Seetharaman, Dean, SPJCM Singapore,Mrs. Vinika Rao, Mr. Parvinder Arora, Mr. Sandeep Chakrobarty, Mr. Uday Bhate, Mr. AVRSrinivas, Mrs. Suparna Mallya and all the staff and Faculty members of SPJCM for their supportand vision.We wish to place on record our deep sense of gratitude to Mr. Parvinder Arora a highlyesteemed and distinguished mentor for his expert advice and help.This project could only be completed with the assistance of Mr. Sandeep Chakrobarty and Mr.Uday Bhate both having being a valued guide.Finally we would like to thank our Parents, Family, Friends and God almighty for their unendinginspiration and encouragement.Place: Singapore Kanchan ChainaniDate: 25.04.2009 Rounak Jhawar Sagar Bavishi 2
    • DECLARATIONWe hereby declare that the matter included in this ARPs report entitled “PerformanceEvaluation of Indian Mutual Funds”, is the result of study carried out by us. We further declarethat this is our original work and has not been published anywhere before.This Project Work has been carried out for the sole purpose of submission in partial fulfillment ofGlobal Masters in Business Administration (GMBA) in Wealth Management and InvestmentBanking at SP Jain Center of Management, Singapore.The above is true to the best of our knowledge and information.Name: Kanchan ChainaniRoll No. GDEC08WM028Name: Rounak JhawarRoll No. GDEC08IB015Name: Sagar BavishiRoll No. GDEC08WM033GMBA Batch Dec 08SP Jain Center of Management10, Hyderabad Road (Dr. Parvinder Arora)Singapore Project Mentor 3
    • INDEX PageSerial No. Topic Numbers 1 Executive summary 6-7 2 Introduction 8-9 3 Significance of the study 10 4 Literature review 11-17 5 Data 18 6 Research methodology 18-21 7 Data Analysis and interpretation 22-31 8 Findings and conclusion 32-33 9 References 34-35 10 Appendix 36-53 4
    • APPENDIX Appendix Page Description No. NumbersAppendix 1 List of funds selected for study 36Appendix 2 Average Returns of selected funds 37Appendix 3 Absolute Returns of selected funds 38Appendix 4 Standard Deviation of selected funds 39Appendix 5 Betas of selected funds 40Appendix 6 Relative Performance Index (RPI) 41Appendix 7 Mann-Whitney U-Test of Average Returns 42-47Appendix 8 Mann-Whitney U-Test of Absolute Returns 47-52 Hierarchical multiple clustering -Appendix 9 Agglomeration method 52 5
    • Executive Summary:This study has been undertaken to evaluate the performance of the Indian Mutual Funds vis-à-vis the Indian stock market. For the purpose of this study, 21 open ended equity based growthmutual funds were selected as the sample. The data, which is the weekly NAV’s of the fundsand the closing of the BSE Sensex, were collected for a period of 5 years starting 19/03/2004 to13/02/2009.Different statistical tools were used on the data obtained to get the average returns, absolutereturns, standard deviation, Fund Beta, R-squared value, residual value, Relative PerformanceIndex were calculated. These variables of the funds were compared with the same variables ofthe market to assess how the different funds have performed against the market.A Statistical test, Mann Whitney U-Test, was done on the returns of the fund with respect to theSensex returns. Another U-Test was done taking absolute return as the variable. These U- Testwere done to test the hypothesis which was that the fund returns over the period of time aresimilar to the market returns over the period of time.All the funds were classified into a hierarchical cluster on the basis of their average returns,absolute returns, standard deviation, fund beta, and relative performance index. Thisclassification was to see whether the funds have similar properties or not.All the mutual funds gave similar returns with respect to the market expect for certain timeperiod which was during the late 2005 and early 2006. There is a positive correlation with theabsolute returns of the market and the mutual funds over the period of time. The study showedthat the standard deviation of the funds were high during the boom period in comparison withthe market and were comparatively lower when the recessionary trend started. The fund betasalso show that there is significant correlation between the fund returns and the market returns.Of the 21 funds considered for this study, 7 funds had RPI less than 0.7, 3 funds had RPI ofalmost 1 and 11 funds had RPI of more than 1. 6
    • The results of the U-Test showed that all the funds are accepting the hypothesis that is they aregiving returns in sync with the market except for one fund which is UTI CCP Advantage growthfund, whose returns vary significantly from the market returns. With the help of clustering it wasseen that a lot of different funds have similar properties and so were classified into one cluster.There were a few outliers who didn’t have any property in common with the other funds but stillbehaved more or less in the same way as the market and other funds. A U-Test was also doneon the absolute returns and the results of this were also similar to the U-Test on averagereturns, that is, for UTI CCP Advantage Fund the returns were not similar to the market returnsand varied significantly. 7
    • Introduction:The mutual fund industry has been in India for a long time. This came into existence in 1963with the establishment of Unit Trust of India, a joint effort by the Government of India and theReserve Bank of India. The next two decades from 1986 to 1993 can be termed as the periodof public sector funds with entry of new public sector players into the mutual fund industrynamely, Life Insurance Corporation of India and General Insurance Corporation of India.The year of 1993 marked the beginning of a new era in the Indian mutual fund industry with theentry of private players like Morgan Stanley, J.P Morgan, and Capital International 1. This wasthe first time when the mutual fund regulations came into existence. SEBI (Security ExchangeBoard of India) was established under which all the mutual funds in India were required to beregistered. SEBI was set up as a governing body to protect the interest of investor. By the endof 2008, the number of players in the industry grew enormously with 462 fund housesfunctioning in the country.With the rise of the mutual fund industry, establishing a mutual fund association became aprerequisite. This is when AMFI (Association of Mutual Funds India) was set up in 1995 as anonprofit organization. Today AMFI ensures mutual funds function in a professional and healthymanner thereby protecting the interest of the mutual funds as well as its investors.The mutual fund industry is considered as one of the most dominant players in the worldeconomy and is an important constituent of the financial sector and India is no exception. Theindustry has witnessed startling growth in terms of the products and services offered, returnschurned, volumes generated and the international players who have contributed to this growth.Today the industry offers different schemes ranging from equity and debt to fixed income andmoney market.The market has graduated from offering plain vanilla and equity debt products to an array ofdiverse products such as gold funds, exchange traded funds (ETF’s), and capital protectionoriented funds and even thematic funds. In addition investments in overseas markets have alsobeen a significant step. Due credit for this evolution can be given to the regulators for buildingan appropriate framework and to the fund houses for launching such different products. All1 India infoline website under the link mutual fund school, history2 AMFI website as on April 21, 2009 8
    • these reasons have encouraged the traditional conservative investor, from parking fund in fixeddeposits and government schemes to investing in other products giving higher returns.It is interesting to note that the major benefits of investing in a mutual funds is to capitalize onthe opportunity of a professionally managed fund by a set of fund managers who apply theirexpertise in investment. This is beneficial to the investors who may not have the relevantknowledge and skill in investing. Besides investors have an opportunity to invest in a diversifiedbasket of stocks at a relatively low price. Each investor owns a portion of the fund and henceshares the rise and fall in the value of the fund. A mutual fund may invest in stocks, cash, bondsor a combination of these.Mutual funds are considered as one of the best available investment options as compare toothers alternatives. They are very cost efficient and also easy to invest in. The biggestadvantage of mutual funds is they provide diversification, by reducing risk & maximizing returns.India is ranked one of the fastest growing economies in the world. Despite this huge progressionin the industry, there still lies huge potential and room for growth. India has a saving rate ofmore than 35% of GDP, with 80% of the population who save 3. These savings could bechannelized in the mutual funds sector as it offers a wide investment option. In addition,focusing on the rapidly growing tier II and tier III cities within India will provide a huge scope forthis sector. Further tapping rural markets in India will benefit mutual fund companies from thegrowth in agriculture and allied sectors. With subsequent easing of regulations, it is estimatedthat the mutual fund industry will grow at a rate of 30% - 35% in the next 3 to 5 years and reachUS 300 billion by 20154.As it can be noted, there is huge growth and potential in the mutual fund industry. Thedevelopment of this sector so far has been commendable and with the above positive factorswe are looking at a more evolved industry.Significance of the Study:3 Deccanherald.com under national, detailed story an article called “Saving rate high in India due to lack of socialsecurity”4 Sify.com under the link finance, business an article called “Mutual fund sector to grow at 30%-35% in 3-5 years” 9
    • Over the last couple of years mutual funds have given impressive returns, especially equityfunds5. The growth period first started during early 2005 with markets appreciating significantly.With 2006 approaching more towards 2007, markets rallied like never before. The financial year2007-08 was a year of reckoning for the mutual fund industry in many ways. Most stocks weretrading in green. All fund houses boasted of giving phenomenal returns. Many fundsoutperformed markets. Equity markets were in the limelight. Investors who were not exposed toequity stocks suddenly infused funds. AUM grew considerably and fund houses were on a spreeof launching new schemes.Growth funds which aim at giving capital appreciation invest in growth stocks of the fastestgrowing companies. Since these funds are more risky providing above average earnings,investors pay a premium for the same. These funds have grown to become extensively popularin India. All the leading fund houses offer several schemes under the growth funds today.The remarkable performance of this industry has attracted many researchers to study andexamine the growth, the performance of funds, the players in the market and the regulators. It isinteresting to learn the growth phase of these funds over this period.The study aims at: 1. Comparing the performance of the selected funds vies-a-vies the benchmark index, BSE (Bombay Stock Exchange) Sensex 2. Capturing differences in the performance levels, if any. 3. Ascertaining whether the returns generated by the funds are purely attributable to market movement or individual fund performance.Literature Review:5 IBNlive.com under the link markets. Article called “Mutual Funds: The fading star of India” 10
    • Performance evaluation of mutual funds is one of the preferred areas of research where a goodamount of study has been carried out. The area of research provides diverse views of the same.For instance one paper 6evaluated the performance of Indian Mutual Fund Schemes in a bearmarket using relative performance index, risk-return analysis, Treynor’s ratio, Sharpe’s ratio,Jensen’s measure, Fama’s measure. The study finds that Medium Term Debt Funds were thebest performing funds during the bear period of September 98-April 2002 and 58 of 269 openended mutual funds provided better returns than the overall market returns.Another paper7 used Return Based Style Analysis (RBSA) to evaluate equity mutual funds inIndia using quadratic optimization of an asset class factor model proposed by William Sharpeand analysis of the relative performance of the funds with respect to their style benchmarks.Their study found that the mutual funds generated positive monthly returns on the average,during the study period of January 2000 through June 2005. The ELSS funds lagged the Growthfunds or all funds taken together, with respect to returns generated. The mean returns of thegrowth funds or all funds were not only positive but also significant. The ELSS funds alsodemonstrated marginally higher volatility (standard deviation) than the Growth funds.One study8 identified differences in characteristics of public-sector sponsored & private-sectorsponsored mutual funds find the extent of diversification in the portfolio of securities of public-sector sponsored and private-sector sponsored mutual funds and compare the performance ofpublic-sector sponsored and private-sector sponsored mutual funds using traditional investmentmeasures. They primarily use Jensen’s alpha, Sharpe information ratio, excess standarddeviation adjusted return (eSDAR) and find out that portfolio risk characteristics measuredthrough private-sector Indian sponsored mutual funds seems to have outperformed both Public-sector sponsored and Private-sector foreign sponsored mutual funds and the general linearmodel of analysis of covariance establishes differences in performance among the three classesof mutual funds in terms of portfolio diversification.6 Dr. Rao, Narayan “Performance Evaluation of Indian Mutual Funds”, www.ssrn.com, paper no.433100 and PP.1-247 Prof. Banerjee, Ashok et. Al (2007),”Performance Evaluation of Indian Mutual Funds vis-à-vis their stylebenchmarks”, www.ssrn.com, paper no.962827 and PP.1-188 Panwar,Sharad and Dr. Madhumathi (2006), “Characteristics and performance evaluation of selected mutualfunds in India”, www.ssrn.com, paper no.876402 and PP. 1-19 11
    • Another study9 examined the risk-adjusted performance of open-end mutual funds which investmainly in German stocks using Jenson’s measure and Sharpe’s measure. The study finds outthat the rates of return of the mutual funds and the rates of return of the chosen benchmark bothmust include identical return components. Either both must include dividends or exclude them.The performance estimates are not very sensitive with respect to the benchmark choice. Whenwe look at an investment strategy in which the investment in a specific fund has the same riskas the chosen benchmark, the average underperformance is small when we weight theindividual fund returns equally. The average performance is neutral, when we weight theindividual fund returns according to fund size, measured by assets under management.One more paper10 analyzed whether it was more appropriate to apply a factor-based or acharacteristic-based model - both known as benchmarks in portfolio performance measurementusing the Linear model, asset pricing model and Fama and French factors. The study showedthat if information on returns was used and a linear model was proposed that adjusted return toa set of exogenous variables, then the right side of the equation reported the achievedperformance and the passive benchmark that replicated the style or risk of the assessedportfolio. While, a factor model utilizes a replicate benchmark with short positions implicitlysymmetrical to the long positions. Performance of Russell indexes was analyzed by applyingvarious factor models, constructed from the indexes themselves, and other models that use theindexes directly as benchmarks; the presence of biases was detected. Therefore, according tothe empirical findings, selection of exogenous variables that define the replicate benchmarkwould appear to be more relevant than the type of model applied.Another study11 aimed at analyzing performance of select open-ended equity mutual fund usingSharpe Ratio, Hypothesis testing and return based on yield. The most important finding of thestudy had been that only four Growth plans and one Dividend plan (5 out of the 42 plansstudied) could generate higher returns than that of the market which is contrary to the generalopinion prevailing in the Indian mutual fund market. Even the Sharpe ratios of Growth plans andthe corresponding Dividend plans stand testimony to the relatively better performance of Growth9 Stehle,Richard and Grewe,Olaf (2001), “Long-Run Performance of German Stock Mutual Funds”,www.ssrn.com, paper no.271452 and PP. 1-3210 Carlos,Juan (2005), “Portfolio Performance: Factors or Benchmarks?”, www.ssrn.com, paper no.760204 andPP. 1-2611 Rao,D.N (2006), “Investment styles and Performance of Equity Mutual Funds in India”, www.ssrn.com, paperno. 922595 and PP. 1-30 12
    • plans. The statistical tests in terms of F-test and t-Test further corroborate the significantperformance differences between the Growth plans and Dividend plans.Another study12 investigated mutual fund performance using a survivorship bias controlledsample of 506 funds from the 5 most important mutual fund countries using Carhart (1997) 4-factor asset-pricing model. The study revealed a preference of European funds for small andhigh book-to-market stocks (value). Secondly, it showed that small cap mutual funds as aninvestment style out-performed their benchmark, even after control for common factors in stockreturns. Finally 4 out of 5 countries delivered positive aggregate alphas, where only UK fundsout-performed significantly.One more study13 looked at some measures of composite performance that combine risk andreturn levels into a single value using Treynor’s ratio, Sharpe’s ratio, Jenson’s measure. Thestudy analyzed the performance of 80 mutual funds and based on the analysis of these 80funds, it was found that none of the mutual funds were fully diversified. This implied there is stillsome degree of unsystematic risk that one cannot get rid of through diversification. This also ledto another conclusion that none of those funds would land on Markowitz’s efficient portfoliocurve.Another paper14 aimed to evaluate if mutual fund managers exhibit persistently superior stockselection skills over a short-horizon of one year using risk-adjusted abnormal returns (RAR),One-factor capital asset pricing model or CAPM three-factor, Fama-French model, Four-factorCarhart model. Their study demonstrated that short-term persistence in equity mutual fundsperformance does not necessarily imply superior stock selection skills. Common factors in stockreturns explained some of the abnormal returns in top ranking mutual fund schemes. Only thewinner portfolios sorted on four-factor alphas provided an annual abnormal return of about 10%on post-formation basis using daily data. The short-term persistence results were much betterwhen daily data was used rather than monthly observations, thus implying that data frequencydoes affect inferences about fund performance.12 Otten,Rogér and Bams,Dennis, “European Mutual Fund Performance”, www.ssrn.com, paper no.213808 andPP. 1-4213 Wolasmal,Hewad, “Performance evaluation of mutual funds”, published by Econ WPA, paper no. 0509023 andPP. 1-2014 Prof. Sehgal,Sanjay and Jhanwar,Manoj (2007),”Short-Term Persistence In Mutual Funds Performance:Evidence From India”, www.ssrn.com, paper no.962829 and PP. 1-23 13
    • A similar study15 examined the empirical properties of performance measures for mutual fundsusing Simulation procedures combined with random and random-stratified samples of NYSEand AMEX securities and other performance measurement tools employed are Sharpemeasure, Jensen alpha, Treynor measure, appraisal ratio, and Fama-French three-factor modelalpha. The study revealed that standard mutual fund performance was unreliable and couldresult in false inferences. In particular, it was easy to detect abnormal performance and market-timing ability when none exists. The results also showed that the range of measuredperformance was quite large even when true performance was ordinary. This provided abenchmark to gauge mutual fund performance. Comparisons of their numerical results withthose reported in actual mutual fund studies raised the possibility that reported results were dueto misspecification, rather than abnormal performance. Finally, the results indicated thatprocedures based on the Fama-French 3-factor model were somewhat better than CAPM basedmeasures.One more paper16 evaluated whether or not the selected mutual funds were able to outperformthe market on the average over the studied time period. In addition to that by examining thestrength of interrelationships of values of PCMs for successive time periods , the study also triedto infer about the extent to which the future values of fund performance were related to its pastby using single index model. The study revealed that there were positive signals of informationasymmetry in the market with mutual fund managers having superior information about thereturns of stocks as a whole. PCM also indicated that on an average mutual funds providedexcess (above-average) return, but only when unit of time period was longer (1 qtr or 4 qtr).Therefore, they concluded that for assessing the true performance of a particular mutual fund, alonger time horizon is better.Another study17 examined the effect of incorporating lagged information variables into theevaluation of mutual fund managers’ performance in Indian context with the monthly data for 89Indian mutual fund schemes using Treynor - Mazuy Model, Merton-Henriksson Model. Thestudy revealed the use of conditioning lagged information variables causing the alphas to shifttowards the right and reducing the number of negative timing coefficients, though it could not be15 Kothari,S.P. and Warner,Jerold (1997), “Evaluating Mutual Fund Performance”, www.ssrn.com, paper no.75871and PP. 1-4616 Bhattacharjee,Kaushik and Prof. Roy,Bijan (2006), “Fund Performance Measurement Without Benchmark - ACase Of Select Indian Mutual Funds”, www.ssrn.com, paper no.962035 and PP. 1-1017 Roy,Bijanand and Deb,Saikat (2003), “The Conditional Performance of Indian Mutual Funds- An EmpiricalStudy”, www.ssrn.com, paper no.593723 and PP. 1-24 14
    • concluded that alphas of conditional model were better compared to its unconditionalcounterpart as they were not found to be statistically significant. The noticeably different resultsof the unconditional timing models vis-à-vis conditional timing models testified superiority of themodelOne more study18 talked about a 4-step model for selecting the right equity fund and illustratedthe same in the context of equity mutual funds in Saudi Arabia. The 4 step model was asfollows:1. Compare returns across funds within the same category.2. Compare fund returns with the returns of benchmark index.3. Compare against the fund’s own performance.4. Risk-related parameters : as indicated by the Standard Deviation (SD) and risk-adjustedreturns as calculated by the Sharpe Ratio (SR).The study revealed that most of the funds invested in Arab stocks had been in existence for lessthan a year and the volatility of the GCC stock markets contributed to the relatively poorperformance of these funds and the turnaround of these funds could take place only with therallying of GCC and other Arab markets. Out of the six categories of equity mutual funds inSaudi Arabia discussed above, Funds invested in Asian and European stocks were moreconsistent in their performance and yielded relatively higher returns than other categories,though funds invested in Saudi stocks yielded higher 3-year returns. Given the future outlook ofAsian economies, particularly China and India and the newly emerging economies such asBrazil and Russia, funds invested in the stocks of these countries are likely to continue theircurrent performance in near future.One more paper19 studied the performance and portfolio characteristics of 828 newly launchedU.S. equity mutual funds over the time period 1991-2005 using Carhart (1997) 4-factor asset-pricing model. Their study revealed new U.S. equity mutual funds outperformed their peers by0.12% per month over the first three years. However, there were distinct patterns in this superiorrisk-adjusted performance estimated using Carhart’s (1997) 4-factor model. The number of fund18 Rao,D.N. (2006), “4 Step model to evaluate performance of Mutual Funds in Saudi Arabia” www.ssrn.com,paper no.946937 and PP. 1-1619 Karoui,Aymen and Meier,Iwan (2008), “Performance and Characteristics of Mutual fund”, www.ssrn.com, paperno.1313284 and PP. 1-37 15
    • that started to outperform older funds shrunk substantially after one to three years. Theseresults suggested that the initially favorable performance was to some extent due to risk takingand not necessarily superior manager skill. Scrutinizing the returns further confirmed that thereturns of fund started to exhibit higher standard deviations and higher unsystematic risk thatcould not be explained by the risk exposure to the four factors of the Car hart model.Another paper20, analyzed the Indian Mutual Fund Industry pricing mechanism with empiricalstudies on its valuation. It also analyzed data at both the fund-manager and fund-investor levels.It stated that mispricing of the Mutual funds could be evaluated by comparing the return onmarket and return on stock. During the pricing period, if the return on stock is negative, then itindicates overpricing and if are positive indicates under pricing. Relative performancemeasurement was used to measure the performance of the MF with SENSEX and it usedStandard Deviation, Correlation analysis, Co-efficient of Determination and Null Hypothesis.This study revealed that standard deviations of the 3-month returns were significant with theincrease in the period. The Standard Deviation increase indicated higher deviations from theactual means. The variance and coefficient of variation (COV) were also significant. Varianceincreases in the later periods indicated higher variability in the returns. As the time horizonincreased COV decreased implying value are less consistent as compared to small duration ofinvestments.One more study21, provided extensive evidence on portfolio characteristics of mutual funds andstudied the relation between fund performance and the fund managers investment strategyusing both the traditional unconditional alpha model, as in Jensen (1968), and the conditionalalpha, following Ferson and Schadt (1996). The study showed that a weak negative relationexists between performance and past stock returns in the portfolio. Investing in value stockscould help to improve overall performance. It also showed that mutual funds with a morediversified portfolio performed somewhat better than funds with a less diversified portfolio.However, diversification could be achieved by extending the funds investment universe andinvesting in non-listed stocks. Elton, Gruber, Das and Hlavka (1993) showed that fundsinvesting in these types of assets could achieve superior performance simply because theseassets were not captured within the benchmark model. This paper, however, found no evidence20 Agrawal,Deepak (2007), “Measuring Performance of Indian Mutual funds”, www.ssrn.com, paper no.1311761and PP. 1-1721 Engström,Stefan (2004), “Investment Strategies, Fund Performance and Portfolio Characteristics”,www.ssrn.com, paper no.520442 and PP. 1-29 16
    • to indicate that investment outside the funds primary investment universe would enhanceperformance. Moreover, the effects of cash holdings on performance were explored, and someweak evidence suggested that large cash holdings implied better tactical decisions.Another paper22 examined the performance of equity and bond mutual funds that investedprimarily in the emerging markets using Treynor’s ratio, Sharpe’s ratio, Jensen’s measure. Withthis research they found that on an average the U.S. stock market outperformed emergingequity markets but the emerging market bonds outperformed U.S. bonds. They also found thatoverall emerging market stock funds under-performed the respective MSCI indexes. Thesewere evident by their lower return, higher risk, and thus lower Sharpe ratios.One more paper23 studied the performance of mutual funds around the world using a sample of10,568 open-end actively managed equity funds from 19 countries using different models,mainly, domestic market model, international market model, Carhart (1997) domestic four-factor model, Carhart (1997) international four-factor model. With the help of this research theycame to a conclusion that the funds size was positively related with fund performance. Largerfunds performed better suggesting the presence of significant economies of scale in the mutualfund industry worldwide. This conclusion is consistent among domestic and foreign funds, andin several other robustness tests. Fund age is negatively related with fund performanceindicating that younger funds tend to perform better. This finding seemed mainly driven by thesamples of foreign and U.S. funds. When investing abroad, young mutual funds seemed to offerinvestors higher returns.Data:22 Ahmed,Parvez; Gangopadhyay, Partha & Nanda, Sudhir (2001), “Performance of Emerging Market MutualFunds”, www.ssrn.com, paper no.289278 and PP. 1-4123 Ferreira, Miguel A.; Miguel, António F.; Ramos, Sofiann (2006), “The Determinants of Mutual FundPerformance: A Cross-Country Study”, www.ssrn.com, paper no.947098 and PP. 1-58 17
    • For the purpose of this study, out of 46 fund houses available in India, 21 Funds across 5 fundhouses have been selected. On the basis of the highest AUM (assets under management)24;these 5 fund houses were selected. All the funds were selected by simple random sampling.First the sample size was 30, but because of the non availability of data for 9 funds, only 21funds were considered for the study. All the funds selected for the study are open-ended equityfunds under the growth option. The Net Asset Values (NAV) for all the 21 funds are from March2004 to March 2009, which is the period of this study.Since, all these are equity funds, the BSE Sensex (Bombay Stock Exchange Sensitive Index);which is the oldest, most widely and commonly used benchmark index in India; has beenconsidered as the benchmark index. The funds selected for this study can be found in Annexure- appendix 1.Research Methodology:The funds which have been evaluated for this study have been randomly selected from theIndian fund houses like Reliance, Birla, UTI, HDFC, and ICICI. The data, which is the weeklyNAV’s (Net Asset Value), of the selected fund was collected from Reuters.To compare the funds with a market index the BSE Sensex was selected for the only reasonthat it is India’s most widely and commonly used Benchmark index. The weekly NAV’s and theSensex closing were collected over a period of 5 years. The NAV’s and the Sensex closingwere then divided into 32 periods with 8 weekly NAV’s (on an average) in each group.After this the returns were calculated for both the funds and the BSE Sensex. Once thegrouping of weekly NAV’s of the funds and the BSE Sensex were done the average return,standard deviation, and absolute returns were calculated both for Fund NAV’s and the Sensexclosing. These calculations were done for each group for all the 21 funds.Hierarchical Clustering:24 As on April 21, 2009. AUM which is assets under management refers to the total assets managed by a fund. It isoften used as a measure of comparison vis-à-vis competitors. 18
    • For the purpose of this study we have used agglomerative hierarchical clustering, which is amethod which builds a hierarchy of clusters using a bottom up approach, wherein it starts with asingle cluster and then merges a pair of cluster as it moves up the hierarchy.For the purpose of clustering, an appropriate metric should be used and for this study,Euclidean distance method is used. This is a metric which is an ordinary distance between andtwo given points on a scale and can be measured by a ruler, proven by the Pythagorastheorem.This can be represented by the following formula:These results are then graphically represented using a dendogram, which an arrangement ofclusters obtained from hierarchical clustering.Hypothesis Testing:It is a method of making statistical decisions using experimental data. For this study, we have21 funds with a 5 year weekly data, which is divided into 32 periods which effectively gives us32 average returns and 32 absolute returns for the period. The main purpose of this exercise isto obtain significant sample size in order to conduct a non-parametric Mann-Whitney U-Testwhich was proposed by Mann and Whitney (1947). This kind of hypothesis testing is used onsamples which are not normally distributed and since the sample used for the purpose of thisstudy is not normally distributed, we have used the Mann-Whitney U-Test.Mann-Whitney U-Test for Average Returns: 19
    • For the purpose of this study, hypothesis is used to test the changes in the average returns overthe given 32 periods and compare these average returns with the BSE Sensex returns for thesame period, to conclude whether the average returns of the fund and the benchmark index arethe same.The U-test can be represented in an equation as per the below:Where,n1 and n2 = sample size of the mutual fund and BSE Sensex index.The following formula is used to compute the Z value:Where,U = U value,mu = mean of the U values andσu = standard deviation of the U values.On the basis of the above inputs, the U-test hypothesis is established as per below:H0: x1 = x2Ha: x1 ≠ x2x1 = Mean returns for the BSE Sensex Index.x2 = Mean returns for the Mutual Fund.Mann-Whitney U-Test for Absolute Returns: 20
    • For the purpose of this study, hypothesis is used to test the changes in the absolute returnsover the given 32 periods and compare these absolute returns with the BSE Sensex returns forthe same period, to conclude whether the absolute returns of the fund and the benchmark indexare the same.U-test hypothesis is as per below:H0: x1 = x2Ha: x1 ≠ x2Where,x1 = Absolute returns for the Base Sensex Index.x2 = Absolute returns for the Mutual Fund.Data analysis and Interpretation: 21
    • Returns:Returns are the yield that an asset generates over a period of time. It is the percentage increaseor decrease in the value of the investment over a period of time.In this study the fund returns and the Sensex returns have been calculated for each of theperiod.There are 21 funds with a 5 year weekly data, which is divided into 32 periods which effectivelygives us 32 betas and 32 average returns for the period. The main purpose of this exercise is toobtain significantly large sample size in order to conduct a non-parametric Mann-Whitney U-Test.The fund returns for each of the period were calculated as follows: Current NAV – Previous NAV x 100 Previous NAVThe BSE Sensex returns were calculated as follows: Current Closing – Previous Closing x 100 Previous ClosingAverage Returns:Average return is the simple average of the returns generated by an asset. In this study dailyaverage return of both the Sensex and the funds were calculated for each of the 32 periods.Average returns of the BSE Sensex returns and the fund’s returns have been calculated withthis formula: 22
    • Where, = average return, n = number of weeks in the period, x1 – xn = return of the corresponding weekIn the data collected for the study, the selected mutual funds have given average returns invarying degrees. During late 2004, funds posted average returns in the range of 0.50% - 2.75%while markets in the same period gave average returns of 0.69%. Similar average returns wereseen in late 2005 and early 2006 when markets went up significantly. However, with the fall inmarkets in mid 2006, negative average returns were seen. Average returns posted by thesefunds were in the range of -1.7% to -3.75% while markets had returns of roughly -2%. Beginningof 2008 and onwards faced worse returns to the extent of -6% by funds and similar returns bymarkets. On the whole, mutual funds provided average returns in the same range as marketswith the exception of certain time periods as represented in Table 1 and Table 2 in the Appendix2.The average returns of the funds are not significantly different over the period, this has beenproved by conducting a Mann Whitney U-test on the average returns of the 21 funds and with95% confidence we can conclude that the average returns of the funds were not significantlydifferent from the average returns of the BSE Sensex index. This study shows that although themarkets slumped in the later half of the 2nd period, the gains out of the bull run in the 1st halfwhere the average returns for these funds were in the range of 0.5% to 2.75% of the 2nd periodoffsets the losses where the average returns of these funds were in the range of -1.7% to-3.75%, and hence the overall returns in the 1st period and the 2nd period are quite similar.Absolute Returns: 23
    • After analyzing the average returns a clears no conclusion could be drawn hence absolutereturn were calculated to give a clearer indication of the returns generated. Absolute Returnsrefers to the returns that an asset achieves over a period of time. It measures the percentageappreciation or depreciation in the value of an asset over a certain time frame.The absolute returns of the BSE Sensex returns and the fund returns were calculated asfollows: Return of the last week – Return of the first week x 100 Return of the first weekAbsolute return measures the appreciation or fall in the fund’s performance as a percentage ofthe initial invested amount. These returns were compared to the benchmark index to in order toascertain the extent to which the portfolio has outperformed / underperformed in relation to theindex. Typically there should be a low correlation between the fund’s performance and the index(refer), as the fund is expected to outperform and deliver positive absolute return vis-à-vis index.Form the analysis in appendix 3 Table 3 and 4, it can be noted that mutual funds have deliveredvarying returns over different time periods. During the last quarter of 2004, mutual fundsdelivered impressive returns. On an average the selected mutual funds had returns ofapproximately 10% whilst markets gave returns of around 6% during the same period. A similarphase was witnessed in mid 2005 where on an average funds gave returns of 13% and marketsposted returns on the same lines. During 2006 and 2007 funds gave comparable returns to theprevious years but this time around the index outperformed the funds significantly.The absolute returns of the funds till the end of 2007 was in the range of 10% to 13% and theabsolute returns of the BSE Sensex in the same period ranged from 6% to 17%, in the periodbetween 2004 to end of 2005 the funds have managed to outperform the BSE Sensex,however, we observe that in the period between 2006 to end of 2007 the funds havesignificantly underperformed compared to the BSE Sensex. However, there was massive slumpin the period of September 2008 to October 2008, during which the funds returns fell to -35% ascompared to BSE Sensex returns of -40%. This study shows the correlation in the absolutereturns of the funds and the BSE Sensex and shows us that in the long-run the absolute returnsof the fund and index are quite similar as represented in Table 3 and Table 4 in the appendix. 24
    • Hence it can be seen, that on the whole, it can be concluded that in terms of absolute returns,funds have been performing in line with markets. However, the extent of the impact andmovement has been lesser or more in relation to markets in certain periods.Standard Deviation:Standard Deviation is a tool which measures the variability of the data set. It is the square rootof the square of the mean deviations from the arithmetic mean of a data series. It is calculatedto measure the riskiness of a fund, stock or portfolio. Higher the standard deviation meanshigher the risk and higher the returns of the asset and a low standard deviation mans that theasset is less risky and will generate less returns.The standard deviation of the fund returns and the BSE Sensex returns were calculated with thefollowing formula:Where, s = Standard Deviation, N= number of weeks in the period, = mean of the period, xi = return of the corresponding week.Standard deviation which measures variability and extent of dispersion from data, expresses thevolatility of the fund. It mainly indicates the risk associated with the given fund.Form the analysis in appendix 4 table 5 and table 6; it was observed that mutual funds havewitnessed high standard deviation in booming markets. During mid 2004 and mid 2006Standard deviation is in the range of 3% - 9%; which is fairly high compared to the market. Themarkets in the same period had an average volatility of approximately 2%. This shows thatduring these periods, funds were more volatile compared to the other time periods. This shows 25
    • that the risk associated with these funds were much higher during these periods compared tothe market.This also meant that since the mutual funds were having much higher risks and volatility; theywere susceptible to high returns also. During this period, standard deviation in the range of 1%- 14 % was seen. However, with the fall of markets in 2008 and recession beating down themarkets, returns collapsed and the funds posted negative returns. Standard deviation marginallycame down and is currently hovering in the range of 2% - 6.5%.The standard deviation of the fund returns were significantly high during the 2007 to 2008 periodwhen the BSE Sensex moved up sharply from 12000 levels in March 2007 to 21000 levels inDecember 2007, here the standard deviation moved up sharply from the 3% to 8% levels to 3%to 14% levels. This trend was observed in the period from January 2008 to June 2008 when theBSE Sensex plummeted from the 21000 levels to 13000 levels, this shows that sudden rise orfall in the markets result in the similar movement in the standard deviation of the fund returns.Regression:Regression is a statistical tool to analyze the fund returns with respect to the market returns tocalculate the fund beta and the R squared value. Here the fund returns are the dependentvariables and the market returns are the independent variables. The regression Equation is asfollows. Y = a + bx + cWhere, Y = dependent Variable X = independent variable a = y – intercept of the line b = slope of the regression line c = residual value.With the help of this the fund beta is calculated. Beta is the measure of volatility of a stock, fund,portfolio, etc with respect to the market. If the beta is positive then the fund returns are directly 26
    • proportional to the market returns and if the beta is negative then the fund returns are inverselyproportional to the market.Beta of a fund is calculated with the following formula:Where, βa = fund beta Cov (ra,rp) = covariance of the returns of the fund and the market, Var rp = variance of the market returns.The beta of the portfolio expresses how the expected return of the mutual fund is correlated withthe returns of the markets in the given period.The study takes into consideration each beta of the 32 periods of 21 funds, here the averagebetas of 20 funds is in the range of 0.6 to 0.9 and for one fund the average beta exceeds 1 asper appendix 5 in Table 7 and Table 8. This shows that there is a significant level of correlationin the returns of the funds as compared to BSE Sensex index and that most the funds haveperformed as much or near the market performance.Overall it can be concluded that from the data collected for the study, most of the funds aresensitive to the market and have given returns as much as the market has or near the marketreturns.Residual Value:Using the regression equation and the regression analysis the ‘c’ value or the residual value hasbeen calculated for all the 32 periods for each of the 21 funds. 27
    • The residual value shows that how much portion of the return can be attributed to the fund orthe portfolio and how much is the attributed to the market. Residual value shows whatpercentage of return is independent of the market and is that because of the fund properties.The residual value for each of the 21 funds for all the 32 periods is coming up to 0. So it can beinferred that the funds are responding to the markets only. And the funds returns cannot toattributed to the fund properties or the fund components. This is true for all the funds duringeach of the 32 periods.Relative Performance Index:The Relative Performance Index for the sample size has been computed. This is calculated toshow how each fund has performed in relation to the market. Here, we take the market index asthe BSE Sensex Index.On the basis of the RPI analysis, we graded the funds as:Under-performers (X<=0.7),Par-performers (0.8<=X<=1.1) andOver-performers (X>=1.2)Relative Performance Index has been calculated for all the funds. It has been calculated withthe following formula: (Current NAV-Beginning Period NAV) / Beginning Period NAV___ (Current BSE – BSE at Beginning Period) / BSE at Beginning PeriodThis is calculated to show how each fund has performed in relation to the market. BSE Sensexhas been taken as the market index. The following observations were made in this study asseen in appendix 6 Table 9: • There were a total of 7 funds that gave a return that was lower than the market return over the 5 year period and hence had a RPI of less than 0.7 28
    • • There were a total of 3 funds that gave approximately the same return as the market return over the 5 year period. • The remaining 11 funds gave a return in excess of the market return over the 5 year period and hence they all have a RPI of over 1. This shows that some fund managers were able to diversify the risks and generate an overall positive return even after over a year long bear market run from January 2008 onwards.Mann-Whitney U-Test for Average Returns:To measure the performance of the mutual fund a U-test has been conducted on the averagereturns of the mutual funds and the BSE Sensex index. For the purpose of this study,hypothesis is used to test the changes in the average returns of the fund and the BSE SensexIndex over the given 32 periods, to conclude whether the average returns of the fund and theBSE Sensex Index are the same.In this study each fund has 32 average returns and these average returns are then compared tothe returns of the BSE Sensex Index, hypothesis is used to test the changes in the averagereturns over the given 32 periods and compare these average returns with the BSE Sensexreturns for the same period, to conclude whether the average returns of the fund and thebenchmark index are the same. The null hypothesis is accepted if the average returns of thetwo are same. If not then the null hypothesis is rejected.H0: x1 = x2Ha: x1 ≠ x2On conducting the U-Test for the 32 average returns for each fund the following was observedas per the appendix7.At 95% confidence interval, the significance level for 20 funds is more than 0.05, which helps usaccept the null hypothesis, which says that the average returns of the funds over the tested twoperiods are similar. 29
    • One fund in particular, UTI CCP growth fund, has a significant value of 0.003 which is less than0.05. This shows that for UTI CCP growth fund the null hypothesis is rejected; that the fundreturns are similar to the market returns.UTI CCP growth fund has given returns which are not similar to the market returns given overthe period of 5 years which have been considered for this study. UTI CCP growth fund hasgiven an average return of 0.0058% where as the BSE Sensex during the same 5 year periodhas given an average return of 0.2919%, which is significantly higher than the return given UTICCP growth fund.Mann-Whitney U-Test for Absolute Returns:For the purpose of this study, hypothesis is used to test the changes in the absolute returns ofthe fund and the BSE Sensex Index over the given 32 periods, to conclude whether theabsolute returns of the fund and the BSE Sensex Index are the same.In this study each fund has 32 absolute returns and these absolute returns are then comparedto the returns of the BSE Sensex Index, hypothesis is used to test the changes in the absolutereturns over the given 32 periods and compare these absolute returns with the BSE Sensexreturns for the same period, to conclude whether the absolute returns of the fund and thebenchmark index are the same. The null hypothesis is accepted if the absolute returns of thetwo are same. If not then the null hypothesis is rejected.On conducting the U-Test for the 32 average returns for each fund the following was observedas per the appendix 8.At 95% confidence interval, the significance level for 20 funds is more than 0.05, which helps usaccept the null hypothesis, which says that the average returns of the funds over the tested twoperiods are similar.One fund in particular, UTI CCP growth fund, has a significant value of 0.006 which is less than0.05. This shows that for UTI CCP growth fund the null hypothesis is rejected; that the fundreturns are similar to the market returns. 30
    • By running the Mann-Whitney U-test on the Average returns as well as Absolute returns of theBSE Sensex Index and the average returns confirms the hypothesis that at 95% confidence, 20out of the 21 funds have returns quite similar to the returns of the BSE Sensex Index. Also, theUTI CCP growth is one common outlier which has generated significantly lower returns ascompared to the benchmark index.Hierarchical Clustering:Hierarchical Clustering has been done for all the funds considered in this study. Clustering hasbeen done on the basis of different properties which are, Average Returns, Absolute Returns,Standard Deviation, Beta, R Squared, and Relative Performance Index.With the help of the agglomeration schedule table 10 appendix 9 the clusters of mutual fundswere formed. The graphical representation of the clusters formed can be seen in the form of adendogram figure1, appendix 9. Birla Sun Life Advantage Fund, UTI Master Equity Plan andHDFC Top 200 Fund, form one cluster. Another cluster is being formed by ICICI PrudentialPower, ICICI Prudential Growth fund , UTI Master Index Fund and ICICI Prudential Ind. Theseclusters are formed because they are closely related to each other and the variables values thatthey have with each other are more or less the same. Birla Sun Life Midcap, ICICI PrudentialTax, HDFC Equity Fund-Growth, Reliance Vision Fund, HDFC Growth Fund-Growth, Birla SunLife Equity, Birla Sun Life Buy and HDFC Long Term Advantage have again been clustered intosimilar groups. 31
    • Findings and Conclusions:The study done on the performance evaluation of Indian mutual funds was fruitful as all theobjectives of the study were successfully achieved. The following are the findings from thisstudy. • The selected for the study gave returns in synchronization with the markets. When there was boom in the stock market the funds gave positive returns a little more than what the market had given. During the recessionary phase the markets declined steadily and so did the fund returns. Overall the fund returns and the market returns, for the period of 5 years taken into consideration for this study, was the more or less same with a very nominal difference in them. • The performance of the funds were different from each other, though a few firm had common attributes which can be seen from the clusters that they make, a few funds didn’t fall into any cluster at all. One such fund UTI CCP Advantage Fund was an outlier and gave returns very less than the market and also when compared to the other funds. • It can be easily concluded that most of the fund returns can be attributed to the market that is they were in direct correlation with the market. But in the sample of 21 funds considered for this study one fund; UTI CCP Advantage Fund; didn’t perform as the market and for this fund the returns generated cannot be attributed to the market. The performance of this fund can be attributed to both the market and as well as the fund composition and properties. 32
    • Limitations of the Study: • Since the funds selected for this study were open ended equity based growth mutual funds the fund composition kept on changing over the time period, so it became difficult to understand the fund properties as historical data pertaining to the fund composition was not available. • Because of unavailability of historical data and fund composition it was difficult to ascertain the performance to the fund properties and a simple evaluation was done against the market performance. 33
    • BibliographyBooks and PapersBlack, Ken “Business Statistics”, PP 302-381Cooper, Donald and Schindler, Pamela “Business Research Methods”, PP. 494-526DeRoon, Frans A et. Al (2000),” Evaluating Style Analysis”, www.ssrn.com, paper no.1118582and PP.1-37Lynch, Anthony W et Al (2002). “Does Mutual Fund Performance Vary over the BusinessCycle?” ”, www.ssrn.com, paper no.470783 and PP.1-21WebsitesArticle base, Finance, Investing, www.articlebase.comAssociation of Mutual in India, www.amfiindia.comBusiness Maps of India, Mutual Fund, Performance, http://business.mapsofindia.comDeccan herald, National, Detailed Story, www.deccanherald.comDomain-b, Markets, Mutual Fund, www.domain-b.comEconomic Times, Personal Finance, Mutual fundnews,http://economictimes.indiatimes.com/Personal_Finance/Mutual_Funds/MF_News/Mutual_funds_assets_jump_4_pc_in_Dec_add_Rs_16300_cr/articleshow/3926747.cmsEmail wire, Home, News by company, RNCOS, www.emailwire.comFinance Research, www.financeresearch.netFinancial chronicle, My Money, Mutual Funds, www.mydigitalfc.comFind articles, business serviceindustry,http://findarticles.com/p/articles/mi_m1TSD/is_1_6/ai_n25012619/pg_1?tag=artBody;col1I Trust, Mutual Funds, www.itrust.inIBN Live, Markets, www.ibnlive.in.comIndia Finance and Investment Guide, Mutual Funds, http://finance.indiamart.comIndia Funds Research, Mutual Funds, www.indiafund.netKarvy, Mutual Funds, Articles, www.karvy.com 34
    • Live mint, money matters, www.livemint.comMoney control, mutual funds, www.moneycontrol.comMutual funds India, www.mutualfundsindia.comMyiris, mutual funds, www.myiris.comPresentation on Evolution of India’s mutual fund industry, A P Kurien, www.amfiindia.comReuters UK, News, Article, http://uk.reuters.comRNCOS, www.rncos.comSify, Business, Mutual funds, http://sify.com/finance/mutualfunds/SSRN papers, www.ssrn.com 35
    • AnnexureAppendix 1The list of Funds selected for the study is:Birla Sun Life India Opportunities Fund - GrowthBirla Sun Life Advantage Fund-GrowthBirla Sun Life Equity Fund-GrowthBirla Sun Life Midcap Fund-GrowthBirla Sun Life Buy India Fund-GrowthUTI Mastershare-IncomeUTI CCP Advantage Fund-GrowthUTI Master Index Fund-GrowthUTI Energy Fund-IncomeUTI MNC Fund-IncomeUTI Master Equity Plan Unit SchemeICICI Prudential Power Plan-GrowthICICI Prudential Tax Plan-GrowthICICI Prudential Index FundICICI Prudential Growth Plan-GrowthHDFC Equity Fund-GrowthHDFC Long Term Advantage Fund-GrowthHDFC Growth Fund-GrowthHDFC Top 200 Fund-DividendReliance Growth Fund-Growth PlanReliance Vision Fund-GrowthAppendix 2 36
    • Table 1: Average Returns for the period ending from 14th May, 2005 to 1st September, 2006 Table 2: Average Returns for the period ending from 27th September, 2006 to 13th February, 2009Appendix 3 37
    • Table 3: Absolute Returns for the period ending from 14th May, 2005 to 1st September, 2006Table 4: Absolute Returns for the period ending from 27th September, 2006 to 13th February, 2009 38
    • Appendix4 Table 5: Standard deviation of returns for the period ending from 14th May, 2005 to 1st September, 2006 39
    • Table 6: Standard deviation of returns for the period ending from 27th September, 2006 to 13th February, 2009Appendix 5 Table 7: Betas for the period ending from 14th May, 2005 to 1st September, 2006 40
    • Table 8: Betas for the period ending from 27th September, 2006 to 13th February, 2009Appendix 6Relative Performance Index: 41
    • Table 9: Relative Performance IndexAppendix 7 Ranks Test Statistics Mean Sum of Name N Rank Ranks 42
    • Avg. Birla Sun Lifereturns Advantage 32 32.06 1026.00 Fund-Growth BSE Sensex 32 32.94 1054.00 Returns Avg. Total 64 returns Mann-Whitney U 498.000 Wilcoxon W 1026.000 Z -.188 Asymp. Sig. (2- .851 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. Birla Sun Lifereturns Buy India 32 32.38 1036.00 Fund-Growth BSE Sensex 32 32.63 1044.00 Returns Avg. Total 64 returns Mann-Whitney U 508.000 Wilcoxon W 1036.000 Z -.054 Asymp. Sig. (2- .957 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. Birla Sun Lifereturns Equity Fund- 32 33.78 1081.00 Growth BSE Sensex 32 31.22 999.00 Returns Total 64 43
    • Avg. returns Mann-Whitney U 471.000 Wilcoxon W 999.000 Z -.551 Asymp. Sig. (2- .582 tailed) Ranks Test Statistics Mean Sum of Avg. Name N Rank Ranks returnsAvg. Birla Sun Life Mann-Whitney U 433.000returns India 32 30.03 961.00 Wilcoxon W 961.000 Opportunities Z -1.061 Fund-Growth BSE Sensex Asymp. Sig. (2- 32 34.97 1119.00 .289 Returns tailed) Total 64 Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. Birla Sun Lifereturns Midcap Fund- 32 33.59 1075.00 Growth BSE Sensex 32 31.41 1005.00 Returns Avg. Total 64 returns Mann-Whitney U 477.000 Wilcoxon W 1005.000 Z -.470 Asymp. Sig. (2- .638 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 32.13 1028.00returns Returns HDFC Equity Fund-Growth 32 32.88 1052.00 Total 64 44
    • Avg. returns Mann-Whitney U 500.000 Wilcoxon W 1028.000 Z -.161 Asymp. Sig. (2- .872 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 32.00 1024.00returns Returns HDFC Growth Fund-Growth 32 33.00 1056.00 Avg. Total 64 returns Mann-Whitney U 496.000 Wilcoxon W 1024.000 Z -.215 Asymp. Sig. (2- .830 tailed) Ranks Test Statistics Mean Sum of Name N Rank Ranks Avg.Avg. BSE Sensex returns 32 33.03 1057.00 Mann-Whitney U 495.000returns Returns HDFC Long Wilcoxon W 1023.000 Term Z -.228 32 31.97 1023.00 Asymp. Sig. (2- Advantage .819 Fund-Growth tailed) Total 64 Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 33.53 1073.00returns Returns HDFC Top 200 Fund- 32 31.47 1007.00 Dividend Total 64 45
    • Avg. returns Mann-Whitney U 479.000 Wilcoxon W 1007.000 Z -.443 Asymp. Sig. (2- .658 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 32.50 1040.00returns Returns ICICI Prudential 32 32.50 1040.00 Growth Plan- Growth Avg. Total 64 returns Mann-Whitney U 512.000 Wilcoxon W 1040.000 Z .000 Asymp. Sig. (2- 1.000 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 32.31 1034.00returns Returns ICICI Prudential 32 32.69 1046.00 Avg. Index Fund returns Total 64 Mann-Whitney U 506.000 Wilcoxon W 1034.000 Z -.081 Asymp. Sig. (2- .936 tailed) Ranks Test Statistics Mean Sum of Avg. Name N Rank Ranks returnsAvg. BSE Sensex Mann-Whitney 32 31.88 1020.00 492.000returns Returns U ICICI Wilcoxon W 1020.00 Prudential 0 32 33.13 1060.00 Power Plan- Z -.269 Growth Asymp. Sig. (2- Total 64 .788 tailed) 46
    • Ranks TestStatistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 31.44 1006.00returns Returns ICICI Prudential 32 33.56 1074.00 Avg. Tax Plan- Growth returns Total 64 Mann-Whitney U 478.000 Wilcoxon W 1006.000 Z -.457 Asymp. Sig. (2- .648 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 30.44 974.00returns Returns Reliance Growth Fund- 32 34.56 1106.00 Avg. Growth Plan returns Total 64 Mann-Whitney U 446.000 Wilcoxon W 974.000 Z -.886 Asymp. Sig. (2- .376 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 31.94 1022.00returns Returns Reliance Vision Fund- 32 33.06 1058.00 Growth Total 64 47
    • Avg. returns Mann-Whitney U 494.000 Wilcoxon W 1022.000 Z -.242 Asymp. Sig. (2- .809 tailed) Ranks Test Statistics Avg. returns Mann-Whitney U 290.000 Wilcoxon W 818.000 Z -2.981 Asymp. Sig. (2- .003 tailed) Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 39.44 1262.00returns Returns UTI CCP Advantage 32 25.56 818.00 Fund-Growth Total 64 Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 36.13 1156.00returns Returns UTI Energy 32 28.88 924.00 Fund-Income Avg. Total 64 returns Mann-Whitney U 396.000 Wilcoxon W 924.000 Z -1.558 Asymp. Sig. (2- .119 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 33.44 1070.00returns Returns 48
    • UTI Master Equity Plan 32 31.56 1010.00 Avg. Unit Scheme returns Total 64 Mann-Whitney U 482.000 Wilcoxon W 1010.000 Z -.403 Asymp. Sig. (2- .687 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 32.56 1042.00returns Returns UTI Master Index Fund- 32 32.44 1038.00 Avg. Growth returns Total 64 Mann-Whitney U 510.000 Wilcoxon W 1038.000 Z -.027 Asymp. Sig. (2- .979 tailed) Ranks Test Statistics Avg. returns Mann-Whitney U 449.000 Wilcoxon W 977.000 Z -.846 Asymp. Sig. (2- .398 tailed) Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 34.47 1103.00returns Returns UTI Mastershare- 32 30.53 977.00 Income Total 64 Ranks Test Statistics 49
    • Mean Sum of Name N Rank RanksAvg. BSE Sensex 32 36.03 1153.00returns Returns UTI MNC 32 28.97 927.00 Fund-Income Avg. Total 64 returns Mann-Whitney U 399.000 Wilcoxon W 927.000 Z -1.517 Asymp. Sig. (2- .129 tailed) Mann-Whitney U- Test Results for Average Returns of 21 fundsAppendix 8 Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. Birla Sun LifeReturns Buy India 32 32.94 1054.00 Fund-Growth BSE Sensex Abs. 32 32.06 1026.00 Returns Returns Total 64 Mann-Whitney U 498.000 1026.000 Z -.188 Asymp. Sig. (2- .851 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. Birla Sun LifeReturns Equity Fund- 32 34.34 1099.00 Growth BSE Sensex 32 30.66 981.00 Returns Total 64 50
    • Abs. Returns Mann-Whitney U 453.000 Wilcoxon W 981.000 Z -.792 Asymp. Sig. (2- .428 tailed) Ranks Test Statistics Mean Sum of Name N Rank Ranks Abs.Abs. Birla Sun Life ReturnsReturns India Mann-Whitney U 454.000 32 30.69 982.00 Wilcoxon W 982.000 Opportunities Fund-Growth Z -.779 BSE Sensex Asymp. Sig. (2- .436 32 34.31 1098.00 Returns tailed) Total 64 Ranks Test Statistics Mean Sum of Abs. Name N Rank Ranks ReturnsAbs. Birla Sun Life Mann-Whitney U 460.000Returns Midcap Fund- 32 34.13 1092.00 Wilcoxon W 988.000 Growth Z -.698 BSE Sensex Asymp. Sig. (2- 32 30.88 988.00 .485 Returns tailed) Total 64 Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 31.94 1022.00Returns Returns HDFC Equity Fund-Growth 32 33.06 1058.00 Abs. Total 64 Returns Mann-Whitney U 494.000 Wilcoxon W 1022.000 Z -.242 Asymp. Sig. (2- .809 tailed) Ranks Test Statistics 51
    • Abs. Returns Mann-Whitney U 495.000 Wilcoxon W 1023.000 Z -.228 Asymp. Sig. (2- .819 tailed) Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 31.97 1023.00Returns Returns HDFC Growth Fund-Growth 32 33.03 1057.00 Total 64 Ranks Test Statistics Mean Sum of Name N Rank Ranks Abs.Abs. BSE Sensex Returns 32 32.56 1042.00Returns Returns Mann-Whitney U 510.000 HDFC Long Wilcoxon W 1038.000 Term 32 32.44 1038.00 Z -.027 Advantage Fund-Growth Asymp. Sig. (2- .979 Total 64 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 33.25 1064.00Returns Returns HDFC Top 200 Fund- 32 31.75 1016.00 Dividend Abs. Total Returns 64 Mann-Whitney U 488.000 Wilcoxon W 1016.000 Z -.322 Asymp. Sig. (2- .747 tailed) Ranks Test Statistics 52
    • Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 32.38 1036.00Returns Returns ICICI Prudential 32 32.63 1044.00 Abs. Growth Plan- Returns Growth Total Mann-Whitney U 508.000 64 Wilcoxon W 1036.000 Z -.054 Asymp. Sig. (2- .957 tailed) Ranks Test Statistics Mean Sum of Name N Rank Ranks Abs.Abs. BSE Sensex Returns 32 32.00 1024.00 Mann-Whitney U 496.000Returns Returns ICICI Wilcoxon W 1024.000 Prudential 32 33.00 1056.00 Z -.215 Index Fund Asymp. Sig. (2- .830 Total 64 tailed) Ranks Test Statistics Mean Sum of Name N Rank Ranks Abs. ReturnsAbs. BSE Sensex 32 31.84 1019.00 Mann-Whitney U 491.000Returns Returns ICICI Wilcoxon W 1019.000 Prudential Z -.282 32 33.16 1061.00 Asymp. Sig. (2- Power Plan- .778 Growth tailed) Total 64 Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 31.88 1020.00Returns Returns 53
    • ICICI Prudential 32 33.13 1060.00 Tax Plan- Growth Abs. Total 64 Returns Mann-Whitney U 492.000 Wilcoxon W 1020.000 Z -.269 Asymp. Sig. (2- .788 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 30.56 978.00Returns Returns Reliance Growth 32 34.44 1102.00 Fund-Growth Abs. Plan Returns Total 64 Mann-Whitney U 450.000 Wilcoxon W 978.000 Z -.832 Asymp. Sig. (2- .405 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 31.75 1016.00Returns Returns Reliance Vision Fund- 32 33.25 1064.00 Abs. Growth Returns Total 64 Mann-Whitney U 488.000 Wilcoxon W 1016.000 Z -.322 Asymp. Sig. (2- .747 tailed) Ranks Test Statistics 54
    • Abs. Returns Mann-Whitney U 309.000 Wilcoxon W 837.000 Z -2.726 Asymp. Sig. (2- .006 tailed) Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 38.84 1243.00Returns Returns UTI CCP Advantage 32 26.16 837.00 Fund-Growth Total 64 Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 35.56 1138.00Return Returnss UTI Energy 32 29.44 942.00 Fund-Income Abs. Total 64 Returns Mann-Whitney U 414.000 Wilcoxon W 942.000 Z -1.316 Asymp. Sig. (2- .188 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 32.72 1047.00Returns Returns UTI Master Equity Plan 32 32.28 1033.00 Unit Scheme Total 64 55
    • Abs. Returns Mann-Whitney U 505.000 Wilcoxon W 1033.000 Z -.094 Asymp. Sig. (2- .925 tailed) Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 32.69 1046.00Returns Returns UTI Master Index Fund- 32 32.31 1034.00 Abs. Growth Returns Total 64 Mann-Whitney U 506.000 Wilcoxon W 1034.000 Z -.081 Asymp. Sig. (2- .936 tailed) Ranks Test Statistics Mean Sum of Abs. Name N Rank Ranks ReturnsAbs. BSE Sensex Mann-Whitney U 446.000 32 34.56 1106.00Returns Returns Wilcoxon W 974.000 UTI Z -.886 Mastershare- 32 30.44 974.00 Asymp. Sig. (2- Income .376 tailed) Total 64 Ranks Test Statistics Mean Sum of Name N Rank RanksAbs. BSE Sensex 32 35.38 1132.00Returns Returns UTI MNC 32 29.63 948.00 Fund-Income Total 64 56
    • Abs. Returns Mann-Whitney U 420.000 Wilcoxon W 948.000 Z -1.235 Asymp. Sig. (2- .217 tailed) Mann-Whitney U- Test Results for Absolute Returns of 21 fundsAppendix 9 Table 10 : Hierarchical multiple clustering using agglomeration method 57
    • Figure 1: Dendogram of the hierarchical clustering 58