The document discusses exchange traded funds (ETFs) and index funds in India. It provides background on ETFs, noting they were introduced in India in 2001 and have grown annually at 37% between 2006-2011. Index funds have been available longer in India since the 1980s. The document examines the performance of major Indian ETFs and index funds that track benchmark indices like the Nifty. It aims to investigate whether ETFs or index funds have performed better in providing returns that match their underlying indices. The analysis will help understand these investment vehicles and which may be better for Indian investors.
Mutual Fund A case study on HDFC Mutual Fund Asset Management CompanyKezar Rajpiplawala
This document provides an overview of mutual funds in India including:
- A brief history of mutual funds in India from the 1960s to present day, divided into four phases of development.
- The key regulatory bodies that govern mutual funds including SEBI, AMFI, RBI, and the Ministry of Finance.
- An introduction to the main types of mutual funds based on execution, investment pattern, and taxation.
- An overview of investor rights and obligations as well as the role and responsibilities of trustees in overseeing mutual funds.
The document provides details about Manoj K Muliya's summer training project report on the scope of wealth advisory business model at NJ India Invest in Rajkot. The report includes an introduction, acknowledgements, executive summary, chapters on the theoretical perspective of wealth advisory models, research methodology, data analysis and findings. The report findings note the untapped potential in wealth advisory due to fewer advisors and lack of awareness, and provides suggestions to increase awareness of mutual funds and wealth management.
Mutual Fund in India and its Impact on InvestorsDevendra Uprade
The document is a research paper on mutual funds in India that provides:
1) An overview of the history and growth of the mutual fund industry in India, outlining four distinct phases from 1964 to the present.
2) Details on the types of mutual fund schemes available in India and how mutual funds work by pooling investor money and investing in stocks, bonds, and other securities.
3) The advantages of mutual funds like professional management, portfolio diversification, reduced costs and risk, liquidity, and tax benefits. And the disadvantages like fees, lack of control, and buried costs.
This document presents an analysis of the efficient frontier for a portfolio containing five stocks: Infosys, ICICI Bank, Ashok Leyland, Adani SEZ, and Canara Bank. Ten years of historical return data for these stocks was collected from the NSE website and used to calculate the mean, standard deviation, and variance of each stock. Portfolios X and Y were created by assigning different weights to the five stocks. The mean, variance, covariance, and correlation of the two portfolios were then calculated. By varying the weights and calculating the corresponding mean returns and standard deviations, an efficient frontier curve was obtained showing the highest possible returns for different levels of risk.
its a presentation which i and my friend have made on the Mutual Funds ,what are the various benefits of investing in MF , what are the various types of mutual funds ,how does one earn handsome returns in mutual funds, what the investor has to pay it's advantages and disadvantages and many more.............
investement planning through NJ INDIA invest pvt ltdAmanpreet Singh
This document provides an overview of the mutual fund industry in India. It discusses the evolution of the industry from the formation of Unit Trust of India in 1963 to the present day, where the industry has grown significantly and become more competitive. It also describes the basic concept of a mutual fund, how it pools investments from many investors and invests it according to the fund's objectives. The document focuses on providing a high-level history and introduction to mutual funds in India.
Dissertation-" Financial Plannning of individuals"Shubham Tandan
1. Introduction to Financial Planning
2.Six step process of Financial Planning
3. Constitute of Financial Planning
4. Objectives for the Study
5. Introduction to Financial Industry
6. Investment Avenues
7. RESEARCH METHODOLOGY
8. Case Study base Questions
9. CONCLUSION
10. SUGGESTIONS
Exchange traded funds (ETFs) are investment funds traded on stock exchanges like stocks. Most ETFs track an index such as a stock or bond index, holding assets like stocks, commodities, or bonds. ETFs may be attractive investments due to their low costs, tax efficiency, and stock-like features. While ETFs provide diversification and flexibility by being traded throughout the day, they also track narrow markets which can be volatile and lack long term track records.
Mutual Fund A case study on HDFC Mutual Fund Asset Management CompanyKezar Rajpiplawala
This document provides an overview of mutual funds in India including:
- A brief history of mutual funds in India from the 1960s to present day, divided into four phases of development.
- The key regulatory bodies that govern mutual funds including SEBI, AMFI, RBI, and the Ministry of Finance.
- An introduction to the main types of mutual funds based on execution, investment pattern, and taxation.
- An overview of investor rights and obligations as well as the role and responsibilities of trustees in overseeing mutual funds.
The document provides details about Manoj K Muliya's summer training project report on the scope of wealth advisory business model at NJ India Invest in Rajkot. The report includes an introduction, acknowledgements, executive summary, chapters on the theoretical perspective of wealth advisory models, research methodology, data analysis and findings. The report findings note the untapped potential in wealth advisory due to fewer advisors and lack of awareness, and provides suggestions to increase awareness of mutual funds and wealth management.
Mutual Fund in India and its Impact on InvestorsDevendra Uprade
The document is a research paper on mutual funds in India that provides:
1) An overview of the history and growth of the mutual fund industry in India, outlining four distinct phases from 1964 to the present.
2) Details on the types of mutual fund schemes available in India and how mutual funds work by pooling investor money and investing in stocks, bonds, and other securities.
3) The advantages of mutual funds like professional management, portfolio diversification, reduced costs and risk, liquidity, and tax benefits. And the disadvantages like fees, lack of control, and buried costs.
This document presents an analysis of the efficient frontier for a portfolio containing five stocks: Infosys, ICICI Bank, Ashok Leyland, Adani SEZ, and Canara Bank. Ten years of historical return data for these stocks was collected from the NSE website and used to calculate the mean, standard deviation, and variance of each stock. Portfolios X and Y were created by assigning different weights to the five stocks. The mean, variance, covariance, and correlation of the two portfolios were then calculated. By varying the weights and calculating the corresponding mean returns and standard deviations, an efficient frontier curve was obtained showing the highest possible returns for different levels of risk.
its a presentation which i and my friend have made on the Mutual Funds ,what are the various benefits of investing in MF , what are the various types of mutual funds ,how does one earn handsome returns in mutual funds, what the investor has to pay it's advantages and disadvantages and many more.............
investement planning through NJ INDIA invest pvt ltdAmanpreet Singh
This document provides an overview of the mutual fund industry in India. It discusses the evolution of the industry from the formation of Unit Trust of India in 1963 to the present day, where the industry has grown significantly and become more competitive. It also describes the basic concept of a mutual fund, how it pools investments from many investors and invests it according to the fund's objectives. The document focuses on providing a high-level history and introduction to mutual funds in India.
Dissertation-" Financial Plannning of individuals"Shubham Tandan
1. Introduction to Financial Planning
2.Six step process of Financial Planning
3. Constitute of Financial Planning
4. Objectives for the Study
5. Introduction to Financial Industry
6. Investment Avenues
7. RESEARCH METHODOLOGY
8. Case Study base Questions
9. CONCLUSION
10. SUGGESTIONS
Exchange traded funds (ETFs) are investment funds traded on stock exchanges like stocks. Most ETFs track an index such as a stock or bond index, holding assets like stocks, commodities, or bonds. ETFs may be attractive investments due to their low costs, tax efficiency, and stock-like features. While ETFs provide diversification and flexibility by being traded throughout the day, they also track narrow markets which can be volatile and lack long term track records.
1. The document discusses the growth and development of derivatives markets in India, including key milestones like SEBI permitting derivatives trading on Indian stock exchanges in 2000 and the introduction of various derivatives products over subsequent years.
2. It provides background on regulations governing derivatives trading in India and the objectives of regulation, including protecting investors and market integrity.
3. The document outlines the objectives of the study, which include understanding the Indian derivatives market scenario, analyzing whether derivatives have achieved their purpose, and suggesting methods based on observations. It discusses the scope and limitations of the study.
This document contains a 15-page summer internship project report submitted by Yash Bhati to Jai Narayan Vyas University. The report details Yash Bhati's internship at Angel Broking Pvt. Ltd., a stock brokerage firm, under the guidance of Mr. Kailash Purohit. The report includes sections on stock exchanges, capital markets, Angel Broking's business, products/services, account opening, equity/derivatives trading, research methodology, findings and conclusions. It also acknowledges those who helped with the internship and research.
Finance project report on a study on financial derivatives ...Mba projects free
This document is a study on financial derivatives (futures and options) submitted for a Master's degree in Business Administration. It discusses the emergence and growth of derivatives markets as a way for economic agents to hedge against price risks. Derivatives derive their value from an underlying asset and are used by banks, firms, and investors for hedging, speculation, and arbitrage. The main types of derivatives are futures, options, warrants, LEAPS, baskets, and swaps. The study analyzes derivatives trading in India and examines how it impacts market volatility.
This document appears to be a project report on mutual fund investment submitted for an MBA program. It includes an acknowledgements section thanking various parties for their support and guidance. The executive summary provides an overview of mutual funds in India and how awareness and information is increasing investment. The report appears to analyze data on mutual fund investors in Ahmedabad through surveys to understand preferences and criteria for investment. It includes sections comparing performance of public and private mutual funds in oil and petroleum sectors between 2008-2009.
Project report a study of sbi mutual funds uprangeshsatna
The document is a project report submitted by Snehal Chavan for the completion of a Bachelor of Business Administration degree. It investigates preferences of investors for investing in mutual funds. The report includes an introduction to mutual funds, an acknowledgement section thanking those who provided guidance and support, a declaration confirming the work is the student's own, and an executive summary outlining the project's purpose and methodology.
Rahul Gupta MBA Finance IVth SEMESTER ProjectRahul Gupta
This document provides an overview of a project report on mutual funds as a proven global investment avenue. It acknowledges the guidance provided by the project supervisor. The objectives are to provide an understanding of mutual fund benefits, types of schemes, market trends, specific fund schemes, distribution channels, and marketing strategies. It also aims to explore recent industry developments and regulations. Limitations include a lack of information sources and limited time/funds. The executive summary outlines what a mutual fund is, key advantages and disadvantages, costs and fees, how to purchase funds, factors to consider, different types of funds, and industry trends of consolidation among large players.
A study of investors perception towards the mutual fund investmenthingal satyadev
This document provides a project report on mutual funds submitted by Hingal Satyadev to the Shri Chimanbhai Patel Institute of Management and Research in partial fulfillment of an MBA degree. The report includes an introduction to mutual funds and ICICI Securities, a literature review on customer awareness of mutual funds, the research methodology used in the study, an analysis of findings, and conclusions and suggestions. The project aimed to examine customer awareness of mutual funds through a survey conducted with customers of ICICI Securities under the guidance of internal and external guides.
This document appears to be a project report submitted by a student for a course on analyzing the top 5 mutual funds offered by Motilal Oswal Securities Ltd. The report includes an introduction to mutual funds that describes their structure and workings. It then discusses various types of mutual funds, performance measures, and regulations governing mutual funds in India. The report also includes sections on the methodology used for the study, profiles of different asset management companies, and limitations and conclusions of the research.
This document appears to be a project report analyzing the performance of the top 100 mutual funds in India compared to the Opportunities Fund offered by UTI Mutual Fund. The 3-page introduction provides background on mutual funds, their importance and advantages in India. It discusses the basic concepts of how mutual funds operate and pool money from investors. It also outlines the different types of mutual fund schemes based on their structure and investment objectives.
A Study of Mutual Funds in India- ReportSyril Thomas
This document is a report submitted by Mundakathil Syril Thomas to IBS Hyderabad as part of an internship at Stock Holding Corporation of India Limited. The report studies the growth of mutual funds in India. It provides details about Stock Holding Corporation, including its products and services. It also discusses the history and classification of mutual funds in India. The report analyzes indicators of growth for mutual funds such as assets under management and shift from traditional investments to mutual funds. It describes the research methodology used for a survey on consumer preferences related to investing. The findings of the survey and conclusions on the future of mutual funds in India are also summarized.
The document provides information about mutual funds in India, including their history and structure. It discusses how a mutual fund is a trust that pools money from investors and invests it in securities like stocks and bonds. It then summarizes the five phases of growth of the mutual fund industry in India from 1963 to 2003 and how regulations evolved. It also outlines the key constituents of mutual funds in India - sponsors, trustees, asset management companies and custodians - and their roles. Finally, it categorizes mutual fund types by structure, nature and investment objective.
A study on performance evaluation of equity shares & mutual fundsProjects Kart
The document provides an introduction and overview of evaluating the performance of equity shares and mutual funds. It discusses the objectives of comparing equity shares and mutual fund schemes in India by analyzing their risk, return, volatility and performance relative to benchmarks. The document outlines the research methodology, including the sources of data, sampling technique, and limitations. It also provides background information on equity capital and mutual funds in India, including different types of mutual fund schemes according to maturity period and investment objectives.
Fundamental analysis is a logical and systematic approach to evaluating securities by examining related economic, financial, and other qualitative and quantitative factors. It involves analyzing macroeconomic factors like GDP growth, as well as industry conditions and company-specific factors to estimate a security's intrinsic value and forecast future performance. The goal is to identify securities that are underpriced (presenting opportunities) or overpriced (presenting risks). Fundamental analysis uses various techniques including demand-supply analysis, price elasticity, balance sheets, and regression analysis to value assets and predict price movements.
The document provides an overview of a summer internship project conducted by Dhaval Manvar on the topic of "Investor's Attitude towards Mutual Fund - With Special Reference to Reliance Capital Assets Management Co. Ltd.". It includes a declaration, preface, acknowledgements, index, and sections on the industry overview, company overview, introduction to the study, research methodology, analysis and interpretation of data, results and findings, suggestions, and conclusion. The document was submitted in partial fulfillment of an MBA degree from Marwadi Education Foundation's Group of Institutions under the guidance of faculty and company guides.
Financial statement analysis is the process of reviewing and analysing a
company's financial statements to make better economic decisions. These statements include
the income statement, balance sheet, statement of cash flows, and a statement of changes in
equity. Financial statement analysis is a method or process involving specific techniques for
evaluating risks, performance, financial health, and future prospects of an organization.
A project report on technical analysis at share khanBabasab Patil
The document provides an overview of the stock market and technical analysis. It discusses the industry overview including definitions of a stock market and its key participants. It also examines the importance of stock markets and covers topics such as market indices, derivative instruments, investment strategies, taxation, irrational behavior and crashes. The document then provides a profile of Sharekhan, an Indian stock broker, outlining its services, achievements and competitors. It closes with an introduction to the Indian cement industry and profiles three major cement companies - ACC, Ultratech and Grasim.
This document is a summer internship project report submitted by Vaibhav Kumar Jhanwar to Advent Institute of Management Studies. The report analyzes the performance and investors' perceptions of mutual funds in Udaipur, Rajasthan, India. It was conducted under the guidance of Amit Soni at NJ India Invest in Udaipur. The report includes sections on the history of mutual funds in India, types of mutual funds, performance measures, prominent mutual fund companies, and insights from a survey of investors. It aims to understand the market potential and awareness of mutual funds while comparing the performance of different funds.
This document discusses mutual funds, providing definitions and history. It describes how a mutual fund pools investor money to invest in stocks, bonds, and other securities. The mutual fund industry in India began in 1963 with the formation of the Unit Trust of India. The document outlines the four phases of development of mutual funds in India and lists some of the major mutual fund companies. It also defines the different types of mutual funds including open-ended and close-ended funds, and growth, income, balanced, money market, and other categories. The advantages of investing in mutual funds are professional management, diversification, economies of scale, liquidity and divisibility.
A Study on investor's perception about mutual fund investmentVanishriKornu
This document discusses the conceptual framework of mutual funds in India. It defines what mutual funds are and how they work. It outlines the different types of mutual fund schemes based on their maturity periods such as open-ended, close-ended, and interval funds. It also discusses SEBI's categorization of mutual fund schemes into equity, debt, hybrid, solution-oriented and other schemes. The document is applicable to understanding investors' perceptions and preferences when investing in various mutual fund options.
This document provides an introduction and overview of a research project on comparative analysis of mutual fund schemes. It includes sections on the certificate, declaration, acknowledgement, index, and beginning of the introduction. The introduction provides background on mutual funds in India, including the structure of the Indian financial system and history of the mutual fund industry. It discusses advantages of mutual fund investment, importance of mutual funds, types of mutual funds, and risks associated with mutual funds.
The document discusses commodity markets in India. It provides background on the history and development of commodity exchanges in India, including some of the earliest organized futures markets in cotton, oilseeds, and wheat dating back to the late 19th century. It then describes the major participants in commodity markets, including hedgers who use futures markets to manage price risk, speculators who trade based on price expectations, and arbitrageurs.
1. The document discusses the growth and development of derivatives markets in India, including key milestones like SEBI permitting derivatives trading on Indian stock exchanges in 2000 and the introduction of various derivatives products over subsequent years.
2. It provides background on regulations governing derivatives trading in India and the objectives of regulation, including protecting investors and market integrity.
3. The document outlines the objectives of the study, which include understanding the Indian derivatives market scenario, analyzing whether derivatives have achieved their purpose, and suggesting methods based on observations. It discusses the scope and limitations of the study.
This document contains a 15-page summer internship project report submitted by Yash Bhati to Jai Narayan Vyas University. The report details Yash Bhati's internship at Angel Broking Pvt. Ltd., a stock brokerage firm, under the guidance of Mr. Kailash Purohit. The report includes sections on stock exchanges, capital markets, Angel Broking's business, products/services, account opening, equity/derivatives trading, research methodology, findings and conclusions. It also acknowledges those who helped with the internship and research.
Finance project report on a study on financial derivatives ...Mba projects free
This document is a study on financial derivatives (futures and options) submitted for a Master's degree in Business Administration. It discusses the emergence and growth of derivatives markets as a way for economic agents to hedge against price risks. Derivatives derive their value from an underlying asset and are used by banks, firms, and investors for hedging, speculation, and arbitrage. The main types of derivatives are futures, options, warrants, LEAPS, baskets, and swaps. The study analyzes derivatives trading in India and examines how it impacts market volatility.
This document appears to be a project report on mutual fund investment submitted for an MBA program. It includes an acknowledgements section thanking various parties for their support and guidance. The executive summary provides an overview of mutual funds in India and how awareness and information is increasing investment. The report appears to analyze data on mutual fund investors in Ahmedabad through surveys to understand preferences and criteria for investment. It includes sections comparing performance of public and private mutual funds in oil and petroleum sectors between 2008-2009.
Project report a study of sbi mutual funds uprangeshsatna
The document is a project report submitted by Snehal Chavan for the completion of a Bachelor of Business Administration degree. It investigates preferences of investors for investing in mutual funds. The report includes an introduction to mutual funds, an acknowledgement section thanking those who provided guidance and support, a declaration confirming the work is the student's own, and an executive summary outlining the project's purpose and methodology.
Rahul Gupta MBA Finance IVth SEMESTER ProjectRahul Gupta
This document provides an overview of a project report on mutual funds as a proven global investment avenue. It acknowledges the guidance provided by the project supervisor. The objectives are to provide an understanding of mutual fund benefits, types of schemes, market trends, specific fund schemes, distribution channels, and marketing strategies. It also aims to explore recent industry developments and regulations. Limitations include a lack of information sources and limited time/funds. The executive summary outlines what a mutual fund is, key advantages and disadvantages, costs and fees, how to purchase funds, factors to consider, different types of funds, and industry trends of consolidation among large players.
A study of investors perception towards the mutual fund investmenthingal satyadev
This document provides a project report on mutual funds submitted by Hingal Satyadev to the Shri Chimanbhai Patel Institute of Management and Research in partial fulfillment of an MBA degree. The report includes an introduction to mutual funds and ICICI Securities, a literature review on customer awareness of mutual funds, the research methodology used in the study, an analysis of findings, and conclusions and suggestions. The project aimed to examine customer awareness of mutual funds through a survey conducted with customers of ICICI Securities under the guidance of internal and external guides.
This document appears to be a project report submitted by a student for a course on analyzing the top 5 mutual funds offered by Motilal Oswal Securities Ltd. The report includes an introduction to mutual funds that describes their structure and workings. It then discusses various types of mutual funds, performance measures, and regulations governing mutual funds in India. The report also includes sections on the methodology used for the study, profiles of different asset management companies, and limitations and conclusions of the research.
This document appears to be a project report analyzing the performance of the top 100 mutual funds in India compared to the Opportunities Fund offered by UTI Mutual Fund. The 3-page introduction provides background on mutual funds, their importance and advantages in India. It discusses the basic concepts of how mutual funds operate and pool money from investors. It also outlines the different types of mutual fund schemes based on their structure and investment objectives.
A Study of Mutual Funds in India- ReportSyril Thomas
This document is a report submitted by Mundakathil Syril Thomas to IBS Hyderabad as part of an internship at Stock Holding Corporation of India Limited. The report studies the growth of mutual funds in India. It provides details about Stock Holding Corporation, including its products and services. It also discusses the history and classification of mutual funds in India. The report analyzes indicators of growth for mutual funds such as assets under management and shift from traditional investments to mutual funds. It describes the research methodology used for a survey on consumer preferences related to investing. The findings of the survey and conclusions on the future of mutual funds in India are also summarized.
The document provides information about mutual funds in India, including their history and structure. It discusses how a mutual fund is a trust that pools money from investors and invests it in securities like stocks and bonds. It then summarizes the five phases of growth of the mutual fund industry in India from 1963 to 2003 and how regulations evolved. It also outlines the key constituents of mutual funds in India - sponsors, trustees, asset management companies and custodians - and their roles. Finally, it categorizes mutual fund types by structure, nature and investment objective.
A study on performance evaluation of equity shares & mutual fundsProjects Kart
The document provides an introduction and overview of evaluating the performance of equity shares and mutual funds. It discusses the objectives of comparing equity shares and mutual fund schemes in India by analyzing their risk, return, volatility and performance relative to benchmarks. The document outlines the research methodology, including the sources of data, sampling technique, and limitations. It also provides background information on equity capital and mutual funds in India, including different types of mutual fund schemes according to maturity period and investment objectives.
Fundamental analysis is a logical and systematic approach to evaluating securities by examining related economic, financial, and other qualitative and quantitative factors. It involves analyzing macroeconomic factors like GDP growth, as well as industry conditions and company-specific factors to estimate a security's intrinsic value and forecast future performance. The goal is to identify securities that are underpriced (presenting opportunities) or overpriced (presenting risks). Fundamental analysis uses various techniques including demand-supply analysis, price elasticity, balance sheets, and regression analysis to value assets and predict price movements.
The document provides an overview of a summer internship project conducted by Dhaval Manvar on the topic of "Investor's Attitude towards Mutual Fund - With Special Reference to Reliance Capital Assets Management Co. Ltd.". It includes a declaration, preface, acknowledgements, index, and sections on the industry overview, company overview, introduction to the study, research methodology, analysis and interpretation of data, results and findings, suggestions, and conclusion. The document was submitted in partial fulfillment of an MBA degree from Marwadi Education Foundation's Group of Institutions under the guidance of faculty and company guides.
Financial statement analysis is the process of reviewing and analysing a
company's financial statements to make better economic decisions. These statements include
the income statement, balance sheet, statement of cash flows, and a statement of changes in
equity. Financial statement analysis is a method or process involving specific techniques for
evaluating risks, performance, financial health, and future prospects of an organization.
A project report on technical analysis at share khanBabasab Patil
The document provides an overview of the stock market and technical analysis. It discusses the industry overview including definitions of a stock market and its key participants. It also examines the importance of stock markets and covers topics such as market indices, derivative instruments, investment strategies, taxation, irrational behavior and crashes. The document then provides a profile of Sharekhan, an Indian stock broker, outlining its services, achievements and competitors. It closes with an introduction to the Indian cement industry and profiles three major cement companies - ACC, Ultratech and Grasim.
This document is a summer internship project report submitted by Vaibhav Kumar Jhanwar to Advent Institute of Management Studies. The report analyzes the performance and investors' perceptions of mutual funds in Udaipur, Rajasthan, India. It was conducted under the guidance of Amit Soni at NJ India Invest in Udaipur. The report includes sections on the history of mutual funds in India, types of mutual funds, performance measures, prominent mutual fund companies, and insights from a survey of investors. It aims to understand the market potential and awareness of mutual funds while comparing the performance of different funds.
This document discusses mutual funds, providing definitions and history. It describes how a mutual fund pools investor money to invest in stocks, bonds, and other securities. The mutual fund industry in India began in 1963 with the formation of the Unit Trust of India. The document outlines the four phases of development of mutual funds in India and lists some of the major mutual fund companies. It also defines the different types of mutual funds including open-ended and close-ended funds, and growth, income, balanced, money market, and other categories. The advantages of investing in mutual funds are professional management, diversification, economies of scale, liquidity and divisibility.
A Study on investor's perception about mutual fund investmentVanishriKornu
This document discusses the conceptual framework of mutual funds in India. It defines what mutual funds are and how they work. It outlines the different types of mutual fund schemes based on their maturity periods such as open-ended, close-ended, and interval funds. It also discusses SEBI's categorization of mutual fund schemes into equity, debt, hybrid, solution-oriented and other schemes. The document is applicable to understanding investors' perceptions and preferences when investing in various mutual fund options.
This document provides an introduction and overview of a research project on comparative analysis of mutual fund schemes. It includes sections on the certificate, declaration, acknowledgement, index, and beginning of the introduction. The introduction provides background on mutual funds in India, including the structure of the Indian financial system and history of the mutual fund industry. It discusses advantages of mutual fund investment, importance of mutual funds, types of mutual funds, and risks associated with mutual funds.
The document discusses commodity markets in India. It provides background on the history and development of commodity exchanges in India, including some of the earliest organized futures markets in cotton, oilseeds, and wheat dating back to the late 19th century. It then describes the major participants in commodity markets, including hedgers who use futures markets to manage price risk, speculators who trade based on price expectations, and arbitrageurs.
Este documento describe varios procesos mentales como la inteligencia, el aprendizaje, la memoria, la creatividad, los sentimientos y las emociones. Explica teorías sobre la inteligencia como la de las inteligencias múltiples de Gardner y la triárquica de Sternberg. También define la inteligencia emocional y describe tipos de aprendizaje como el receptivo, por descubrimiento y significativo. Finalmente, analiza conceptos como el sentimiento, la emoción, la percepción y la conciencia.
A 70-Year-old man is seen in follow-up at your office after he has been hospitalized for a myocardial infarction. He underwent successful angioplasty and is currently asymptomatic. Prior to his MI, he was not on medications. He is not a smoker and is not diabetic. During his hospitalization, he was noted to have persistently elevated blood pressure readings. He had asthma as a child, but has not had any recent wheezing episodes . While in the hospital, he was started on oral metoprolol.
This report provides a comparative analysis of two Chinese herbal medicine shops located in different geographical areas of Malaysia. The report analyzes Poh Aun Tong Medical Hall in Georgetown, Penang and Huah Shan Medical Hall in Klang Valley, Selangor. Interviews were conducted at each shop to gather information. The analysis finds that Huah Shan Medical Hall has greater annual revenue, more customers, and a wider variety of goods compared to Poh Aun Tong Medical Hall. Both shops serve local customers and senior citizens but differ in factors such as location, number of employees, services provided, and business operations.
Now that you have chosen the right business productivity platform for your business, you must consider the factors when migrating your data to your new platform. The planning and processes involved in transitioning from one platform to another is a major undertaking. And with so many different migration paths to and from the cloud, the migration process can be a challenge, especially if you do not have the expertise or technical staff in-house.
Learn from two Microsoft Exchange & Office 365 migration experts on how to make the migration easy, no matter which platform you have selected.
During this presentation you will learn:
• The differences between mindSHIFT’s Hosted Exchange Security Bundle and Office 365 Business Premium Package
• How to make the migration as easy as possible for whatever business productivity platform you select
• The different migration methods for each platform and how to determine what is best for your business
To view part 1 of this 2-part series, please visit: http://www.mindshift.com/Resources/Webinars/Hosted-Exchange-vs-Office-365.aspx
Private label, or store brand, products are manufactured and sold exclusively by retailers under their own brand names rather than nationally branded manufacturers. Retailers opt for private labels to gain more control over pricing and reduce marketing dependence. Private labels provide higher profit margins for retailers since costs are lower without national brand marketing expenses. Establishing high-quality private labels can also foster customer loyalty by giving shoppers a cheaper alternative to national brands only available at that particular store. Major retailers worldwide like Walmart, Target, and Tesco now earn 25-40% of their sales from private label products.
In many respects the dairy industry occupies a special position among the other sectors of agriculture. Milk is produced everyday and gives a regular income to the numerous small producers. Milk production is highly labour-intensive and provides a lot of employment.
This document discusses issues related to energy, agriculture, and population growth. It notes that the world population is rapidly growing and may reach 10 billion, placing increasing demands on food and energy production. Food production must keep pace with population growth in terms of quantity, quality, and balanced nutrition. It also discusses peak oil and notes that the world's conventional oil production capacity is declining at a rate of over 1 million barrels per day each year. If oil becomes scarce and prices rise, it will negatively impact transportation, agriculture, food security, and economic activity globally. Adaptation will be needed to address declining energy resources and their consequences.
This document discusses the debate around whether the English curriculum should be different for vocational students compared to general studies students in Norway. It provides background on the current English curriculum, which aims to provide all students with the same competence in English regardless of their program of study. However, some argue vocational students struggle more with the literature and culture-focused curriculum. The document also examines attitudes from teachers and industry representatives through interviews on this topic. It reviews literature on high dropout rates in vocational programs and debates around reducing theory in vocational curriculums. Overall, the document aims to understand different perspectives on the English curriculum for vocational students in Norway.
O documento resume a disputa entre a Apple e o FBI sobre o desbloqueamento do iPhone de um dos atacantes de San Bernardino. A Apple se recusa a criar uma versão modificada do iOS que permitiria ao FBI desbloquear o iPhone, citando preocupações com a privacidade dos usuários. O documento também discute os lados do debate e casos semelhantes envolvendo o WhatsApp no Brasil.
Lucky Crystal Collection (LCC) is a Taiwanese company that designs and markets products made from natural crystals. It was founded in 2003 and is led by Chairman Rebecca Lee. LCC differentiates itself by using only natural crystals in its products rather than artificial crystals. It designs pieces intended to be fashionable while representing authentic Formosan culture. LCC aims to expand its retail presence through exclusive counters in department stores and franchised stores in Taiwan, China, and the United States.
Developing an argumentative essay introductionraynerhd
The document discusses the negative effects of reality TV on children. It argues that while reality TV could make children famous and wealthy, it will likely destroy their lives by causing high stress, allowing people to take advantage of them, and leading to behavioral issues as they mature into adulthood. For these reasons, the document concludes that children should not participate in reality television.
This document outlines the assessment components for PSYC 0203, totaling 100%. It includes 3 assignments, 2 tests, and an e-portfolio. Assignment 1 is a journal entry worth 20% and requires discussing 5 concepts from class in 5 personal entries. Assignment 2 is a group comic project worth 10% that incorporates 5 concepts into a storyline. Assignment 3 has 3 parts worth 30%: a 3-5 minute video clip (10%), a 1500 word report (15%) explaining the concepts in the clip, and a presentation (5%) of the clip to the class. The document provides requirements and weighting for each assessment component.
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This document is a project report submitted by Aditya Mahindrakar for his summer internship at UTI Mutual Fund in Hyderabad. The report details his study titled "A Study on Performance and Analysis of Mutual Funds in India". The 3-page report includes sections acknowledging the guidance received from his mentors at UTI Mutual Fund and ArthChakra Advisory Services, a table of contents outlining the topics covered in the report, and an executive summary defining mutual funds and how investors can make money from them.
Performance Evaluation of Selected Open – Ended Mutual Funds in Indiainventionjournals
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1. 1
PERFORMANCE OF ETFS AND INDEX FUNDS: A
COMPARATIVE ANALYSIS
A Project Report submitted in
Partial Fulfillment of the
Degree of Bachelor of Business Studies
Submitted by:
Kawaljeet Kaur
Roll No. 12035234015
KESHAV MAHAVIDYALAYA
(University of Delhi)
2. 2
Certificate
This is to certify that the project report entitled
“Performance of ETFS and Index Funds: a Comparative
Analysis” is the project work carried out by Kawaljeet
Kaur at Keshav Mahavidyalaya for partial fulfillment of
BBS. This report has not been submitted to any other
organization for the award of any other Degree /Diploma.
(Signature of Student) (Signature of Supervisor)
Kawaljeet Kaur Ms Kangan Jain
3. 3
EXECUTIVE SUMMARY
Investment is the commitment of funds in an asset of financial instruments with the aim of
generating future returns in the form of interests, dividends or appreciation in the value of the
instrument. Instrument is involved in many areas of economy, such as, business, management,
and finance no matter from households, firms, or governments.
An investor has numerous investment options to choose from, depending on his risk profile and
expressions of returns. Different investment options represent a different risk- reward trade off.
Low risk investments are those that offer assured, but lower returns, while high risk investments
provide the potential to earn greater returns. Hence, an investor’s risk tolerance plays a key role
in choosing the most suitable investment. Various investments option available are Bank
Deposits, Commodities like Gold, Silver etc., Post Office Savings Schemes, Public Provident
Fund, Company Fixed Deposits and Stock Market Option like Bond and Debentures, Mutual
Fund, Equity Shares etc., of the various types of investment option in the stock market,
Exchange Traded Funds and index funds.
Exchange Traded Funds (ETFs) are marketable securities that track an index, a
commodity, bonds, or a basket of assets like an Index Funds. Unlike Mutual Funds, an
ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout
the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees
than mutual fund shares, making them an attractive alternative for individual investors.
The concept of Exchange-Traded Funds (ETFs) is very popular in foreign countries, but in India,
it is still in the initial growth phase. On an average, ETFs grew at 37% annually during the period
2006 -2011in India. These funds consistently outperformed the market index and generated
higher returns.
An Index Fund is a fund that specializes in the purchase of securities that match or represent a
specific index. Investing in an index fund is a form of passive investing. The primary advantage
to such a strategy is the lower management expense ratio on an index fund. Index Funds today
4. 4
are a source of investment for investors looking at a long term, less risky form of investment.
The success of index funds depends on their low volatility and therefore the choice of the index.
Although Index mutual funds and Exchange traded funds look similar but they in real term they
differ in various aspect. Index funds have been around for quite some time but the popularity of
Exchange Traded Funds (ETFs) among retail investors is rising. ETFs and index funds are
simply 2 different ways of investing in a similar portfolio of shares.
Exchange-traded funds are one of the best known innovations in financial markets. ETFs hold
assets such as stocks, commodities, or bonds, and trade close to their net asset value (NAV)
throughout the day. ETFs can track a specific index, a particular sector of an industry, or even
the stock markets of a foreign country. ETFs that are passively managed and track their
benchmark indices are known as classical ETFs. ETFs combine the positive aspects of closed-
ended and open-ended mutual funds. ETFs have several advantages over traditional mutual
funds, such as lower expense ratios, trading flexibility, tax efficiency, transparency, and
exposure to diverse asset classes. Mutual funds have higher expense ratios than ETFs because of
entry and exit loads. It is pertinent to note that in India, entry loads for mutual funds have been
banned while exit loads do exist. ETFs can be traded like stocks throughout the day while open-
ended mutual funds can be accessed only at the end of the day. ETFs are more tax efficient
because of their in-kind creation and redemption process, which allows for arbitrage and pricing
efficiency. In the case of ETFs, only the transacting shareholder is taxed, while the gains are
distributed to the other shareholders. On the other hand, the transactions of mutual funds
generate tax consequences for all the unit holders. ETFs are more transparent than mutual funds
as they declare their daily holdings, unlike mutual funds, which declare their holdings at the end
of the quarter. In addition to the numerous advantages of ETFs, investors can have exposure to
various asset classes, from commodities to livestock. The phenomenal growth of ETFs globally
has attracted the attention of researchers and investors, and extensive studies have been done on
ETFs in the context of the developed markets of the U.S. and Europe.
In India, the Nifty Benchmark Exchange Traded Scheme (Nifty BeES), was the first ETF to be
introduced in 2001. Nifty BeES was subsequently taken over by Goldman Sachs Asset
5. 5
Management Company. At present, there are over 40 ETFs listed in India and a majority of the
ETFs are still passively managed, meaning that the ETFs track their underlying benchmark
indices.
On the other hand, the first mutual fund in India was set up by the Government of India. When
the Unit Trust of India (UTI) was created in 1963, UTI had a monopoly in the mutual fund
business and the next mutual fund—the SBI Mutual Fund—was established only in 1987. From
the late 90s onwards, there was a proliferation of mutual funds in India. At the end of December
2013, there were 1430 mutual fund schemes managing around INR 8,50,000 crore Several
prominent fund houses such as SBI Mutual Fund, ICICI Mutual Fund, Reliance Mutual Fund,
and so on have schemes that invest predominantly in the benchmark indices. The AUM for ETFs
stood at INR 10,273 crore as on December 2013—the AUM for gold ETFs stood at INR 8784
crore and that for other ETFs was INR 1489 crore. These figures are very low compared to those
of mutual funds and it is obvious that ETFs have a long way to go in India. ETFs are already
challenging the dominance of mutual funds, and this trend will continue with greater intensity.
6. 6
TABLE OF CONTENTS
Chapter No. Title of the Chapter Page No.
Acknowledgement………………………………………………………………………. 9
Introduction……………………………………………………………………………. 10-13
Comparison between ETFs and Index Funds…………………………………………..14-15
Review of Literature………………………………………………………………….. .16-18
Objectives of the Study……………………………………………………………..…... 19
Hypothesis…………………………………………………………………………….. 20--21
Data Source…………………………………………………………………………….. 22
Characteristic of ETFs and Index Funds………………………………….………..…..23-25
Research Methodology………………………………………………….. ………….... 26-27
Performance of ETFs and Index Funds……………………………………………….. 28-29
Tracking Error of Funds………………………………………………………………. 30-31
SPSS Analysis………………………………………………………………………….32-46
Conclusions……………………………………………………………….……….……. 47
Limitations……………………………………………………………………...….…… 48
Bibliography………………………………………………………………….…….……49
Appendices……….………………………………………………………….…50-55
7. 7
LIST OF CHARTS
Charts Page No.
1. Performance of Kotak Nifty ETF and Its benchmark index………………………..50
2. Performance of GS Nifty BeEs ETF and Its benchmark index……………………. 50
3. Performance of Kotak Sensex ETF and Its benchmark index………………………51
4. Performance of Birla Sun Life Index Fund and its benchmark index. …………….. 51
5. Performance of Franklin India Index Fund and its benchmark index……………… 52
6. Performance of HDFC Index Fund-Nifty Plan and its benchmark index…………... 52
7. Performance of HDFC Index Fund-Sensex Plan and its benchmark index………… 53
8. Performance of IDBI Index Fund and its benchmark index………………………... 53
9. Performance of Principal Index Fund and its benchmark index…………………….54
10. Performance of Reliance Index Fund and its benchmark index……………………. 54
11. Performance of Tata Index Sensex and its benchmark index………………………. 55
12. Performance of UTI Fund and its benchmark index………………………………... 55
8. 8
LIST OF TABLES
Tables Page No. (12, bold)
Fig. 1. Characteristics of Exchange-Traded Funds…………………………………….23
Fig. 2. Characteristics of Index Funds…………………………………………………24
Fig. 3. Active Returns of Exchange-Traded Funds and Index funds…………………...29
Fig. 4. Table 4: Tracking Error of Exchange-Traded Funds and Index funds………....30
9. 9
ACKNOWLEDGEMENT
Behind every achievement lays an unfathomable sea of gratitude to those who have extended
their support and without whom this project would have ever come into existence. It gives me a
great pleasure in acknowledging the invaluable assistance extended to me by various
personalities in the successful completion of this project.
I am indebted to my guide Ms. Kangan Jain, for her useful insights and valuable suggestions
that she gave me during the preparation of this project. Her unremitting inspiration and
encouragement helped this report, to take the final shape.
I would also like to thank all my batch mates for their help and support throughout the project.
(Kawaljeet Kaur)
10. 10
Introduction
Exchange Traded Fund is a security that tracks an index, a commodity or a sector like an index
fund or a sectoral fund but trades like a stock on an exchange. It is similar to a close-ended
mutual fund listed on stock exchanges. ETF's experience price changes throughout the day as
they are bought and sold. Exchange Traded Funds (ETFs) have been in existence in India for
quite some time now. But so far ETFs have not enjoyed the kind of popularity that the
conventional Mutual Funds enjoy. One reason could be the lack of understanding of the concept
of ETF amongst the general investor. Second, and probably the more important reason, is that
ETFs by nature track a certain index (e.g. SENSEX or the BANKEX). Hence, the returns one
can expect from ETFs will be equal to the rise in the index. Whereas, India is a growing market
and hence offers huge opportunities in the non-index shares too. Therefore, it is not difficult for
an active fund manager to beat the index and offer better returns.
Exchange-traded funds (ETFs) are increasingly finding favor in the global financial markets;
foreign institutional investors (FIIs) in particular are using ETFs to gain exposure to emerging
markets. In India, ETFs are making their presence felt gradually. In fact, ETFs are one of the
disinvestment modes proposed by the Indian government for public sector undertakings (PSUs).
After liberalization in 1991, FIIs have played a significant role in the Indian stock market. It has
been estimated that a sizable chunk of FII flows comes through offshore and India-focused
equity funds and ETFs. 1 Notably, several India-specific ETFs that exist in the U.S. such as
WisdomTree India Earnings Funds, iShares MSCI India ETF, and PowerShares India Portfolio
concentrate exclusively on Indian stocks. The assets of offshore equity funds and India-focused
ETFs were USD 55.84 billion in 2010 and USD 37 billion in 2012.
Exchange-Traded Funds (ETFs) were first introduced in USA in 1993. About 60% of trading
volumes on the American Stock Exchange are reported to be from ETFs. As per the ETF
landscape report released by BlackRock Inc. (a US-based AMC), ETFs have grown by 33.2%,
compounded annually in the past 10 years, and 26.1% in the past five years, globally. ETFs are
referred to as passive schemes that fund managers resort to, to avoid risk and offer low-cost
options to the investors. These funds rely on an arbitrage mechanism to maintain the prices at
which they trade, in line with the net asset values of their underlying portfolios.
11. 11
On an average in India, ETFs grew at 37% annually during 2006 -2011. These funds also
generated excess returns of 3% p.a. as against CNX NIFTY, the Indian equity market’s
benchmark. Gold ETFs provided 13% excess returns as compared to the returns on the equity
market and attracted large investments in the post financial crisis years. While the concept of
ETFs is very much popular in foreign countries, in the Indian markets it is still in the initial
growth phase. According to the Association of Mutual Funds of India (AMFI) data, the Indian
mutual fund (MF) industry has been holding Rs. 6.75 trillion worth of assets over the past
decade. On an average, during 2006-2011, Indian ETFs comprised of only 1.4% of the total
industry assets. In comparison, in the US, ETFs comprise about 9% of the MF industry. This
trend often raises the query among the investors as to whether or not Exchange-Traded Funds
(ETFs) will be able to perform well in India.
In 2001, Benchmark was the first company to launch the first ETF in India - Nifty BeES, which
was listed on the NSE for trade. In 2007, Benchmark also launched the first Gold Exchange-
Traded Fund. Figure 1 presents a comparison of the growth in the total assets of the Indian MF
industry and the growth of ETFs in India. The growth rate in ETFs was found to be higher than
the industry growth rate during 2006 - 07. However, ETFs did not continue to grow at that pace
in the post financial crisis period. Figure 2 presents the percentage of ETF assets with respect to
the total assets of the Indian MF industry. While in 2006-07, the share of ETFs in the total
industry was about 3%, it fell subsequently to around 1.4%. After 2011, the share of ETFs in the
total industry is again rising.
12. 12
In India, only three classifications of ETFs exist, namely:
Index ETFs- ETF is actually index funds that hold and keep certain securities and
attempt to duplicate the performance of a stock market index. An index fund main
objective is to track the performance of an index by holding in its portfolio either a
sample of the securities in the index or the contents of the index.
Commodity ETFs- Commodity ETF invests in commodities such as precious metals and
futures. In India, we only have Gold ETF
Bond ETFs- In case of Bond ETF’s there is currently only one such ETF available in
India, i.e. Liquid BeES.
13. 13
Classical ETFs are those that invest in the benchmark indices, which is a passive investing
technique. Passively managed ETFs, at first glance, appear to be a simple exercise; in reality
however, this is not the case. Similar to mutual funds that have exposure to the benchmark
indices (i.e., the S&P BSE SENSEX index and the CNX Nifty index), passively managed ETFs
also have exposure to these benchmark indices. The most popular classical ETFs include the GS
Nifty BeES, the Kotak Nifty ETF, the MOST Shares M50 ETF, and the Birla Sun Life Nifty
ETF.
The most popular classical ETFs include the GS Nifty BeES, the Kotak Nifty ETF, the MOST
Shares M50 ETF, and the Birla Sun Life Nifty ETF. As on February, 2015, the AUM for the GS
Nifty BeES was INR 724.11 crore, the AUM for the MOST Shares M50 was INR 29.78 crore,
and the AUM for the Kotak Nifty ETF was around INR 97.90 crore. Some of the most popular
index funds are the ICICI Prudential Index Fund– Nifty Plan, the Franklin Index Fund, the UTI
Nifty Index Fund, and the Reliance Index Fund–Nifty Plan. As on February, 2015, the AUM for
the ICICI Prudential Index Fund– Nifty Plan was INR 95.19 crore, the AUM for the UTI Nifty
Index Fund was INR 193.24 crore, and the AUM for the Franklin Index Fund was INR 214.82
crore. It is pertinent to note that both classical ETFs as well as index funds track the benchmark
indices. Given that ETFs and index funds track similar indices, it would be interesting to
investigate which fund is actually performing better—index funds or passively managed ETFs.
Hence, in this study, we examine the performance of ETFs compared to that of index funds in
the Indian context.
14. 14
COMPARISON
Index mutual funds have been around for quite some time but the popularity of Exchange Traded
Funds (ETFs) among retail investors is rising. ETFs and index funds are simply 2 different ways
of investing in a similar portfolio of shares. Both have their own advantages and disadvantages.
We will examine some parameters to know which one is best suited for an investor.
Structure
ETFs - An ETF is made up of stocks making a particular index like Sensex or Nifty. Each of the
stock would have the same weightage as it has on the index. Some portion of its assets may be
held in cash or money market securities for liquidity purpose. Returns of an ETF are usually
close to that of the index. However since the percentage of debt or liquid assets varies with ETF
so does return from different ETFs thought they all track the same index.
Index funds - The portfolio of index funds also replicates a stock exchange index. Since index
funds have no liquidity of their own, usually they have higher percentage of assets in cash and
liquid securities than ETFs. Therefore this leaves for what is known in industry terminology as
Tracking Error. Higher the tracking error, greater the deviation from actual index returns (in any
direction).
Transacting
ETFs- ETFs as the name suggest, are bought and sold on the exchange. So you need a demat account
for investing in ETF. Minimum one unit of the ETF has to be bought and it is done in the same way as
shares are bought through a broker.
Index Funds-These are mutual funds and units can be bought lump sum or periodically through
SIP. Automating investment through SIP (Systematic Investment Plan) is a strong advantage of
index funds.
15. 15
Charges
ETFs-There are no recurring charges in case of ETFs. Apart from the annual maintenance
charge (1%) on your demat account the only other charge is transaction charge of maximum
0.5%. Overall charges in an ETF would come to be about 0.5%.
Index Funds- This is the worst demerit of index funds compared to ETFs. First there is the fixed
transaction fee of Rs 100 for all investments above Rs 10,000. Second there is a recurring AMC
charge called as expense ratio which presently ranges from 1% -1.8%. This is deducted from
your investment even if there are no transactions. Finally if you redeem investment before exit
period a flat percentage is deducted as exit load. This can be ignored because anyway index
funds are supposed to be held long term.
There is however a way to dodge some of these charges in index funds. Direct investment with
the AMC does not involve transaction fee and expense ratio of such plans are also lower. Since
direct was introduced only in January 2013, this has not been concluded how much the
difference might come to.
16. 16
Review of Literature
Many prior studies examined the pricing efficiency of ETFs, wherein the difference between
ETF prices and NAVs was investigated. Ackert and Tian (2000) found that the U.S. ETFs are
priced closer to their NAVs than the country ETFs are. Examining the tracking error and
performance of ETFs, Elton et al. (2002) found that SPDR ETFs underperformed the S&P 500
index by an average of 28 basis points per annum; they also found the tracking errors to be very
small
Poterba and Shoven (2002) examined the performance of SPDRs and highlighted the tax
advantages of ETFs due to their unique in-kind creation and redemption. Rompotis (2005)
compared the performance of ETFs and index funds that track the same indices and showed that
the returns produced by them are almost similar and that they do not provide any excess returns
over their underlying indices. Rompotis (2005) also demonstrated that tracking error is strongly
dependent on the expense ratio and risk of ETFs. Gallagher and Seagara (2006) investigated the
performance of classical ETFs in Australia and reported that the variation between the NAV and
the traded price is small. Svetina (2010) found that although ETFs underperform their benchmark
indices, they actually outperform the index funds. In the Indian context, Prasanna (2012)
examined the performance of Indian ETFs and found that gold ETFs provide returns in excess of
13% compared to the returns offered by the equity market. However, the performance of ETFs
was not compared to that of index funds.
Adjei Frederick (2009) found no significant difference between the performances of the ETFs
and the S&P 500 index. He found weak evidence of performance persistence on both the half-
yearly and the yearly horizons. Johnson (2009) reported the existence of tracking errors between
foreign ETFs and the underlying home index returns.
Blitz David et al. (2010) investigated the performance of index mutual funds and the ETFs that
are listed in Europe. They found that European index funds and ETFs underperform their
benchmarks by 50 to 150 basis points per annum. William (2009) found the existence of tracking
errors between foreign ETFs and the underlying home index in US.
17. 17
Blitz David and Huij (2011) evaluated the performance of ETFs that provide passive exposure to
global emerging markets (GEM) equities and found that GEM ETFs exhibit higher tracking
error.
Houweling (2011) found that treasury ETFs were able to track their benchmark but investment
grade corporate bond ETFs and high yield corporate bond ETFs underperform their benchmarks.
Charupat & Miu (2011) analyzed the performance of leverage ETFs, and concluded that price
deviations are small among leverage ETFs and that price volatility is more, as a result of
rebalancing, at the end of the day.
Patrick (2011) found that in Hong Kong the magnitude of tracking errors is negatively related to
the size but positively related to the expense ratio of the ETFs. He further commented that
replicating the performance of underlying securities involves more risk, since they have a higher
tracking error than in the US and Australia.
Chang and Krueger (2012) investigated the performance of Exchange-Traded Funds and Closed-
End Funds over the 2002 to 2011 period. They studied investment results such as returns, risks
and risk-adjusted returns and found that though ETFs have significantly lower expenses, their
performance is statistically worse than those of close-ended funds. On the contrary, there was
equal evidence of positive performance of ETFs. Ching-Chung et.al. (2005) indicated that the
Taiwanese ETF and, the Taiwan Top 50 Tracker Fund (TTT) are price efficient and trading on
them produces almost identical returns to the Taiwan stock market. Joel et al. (2006) compared
the risk and return performances of ETFs available for foreign markets and closed-end country
funds. They found higher mean returns and Sharpe ratios for ETFs, and concluded that a passive
investment strategy through ETFs is observed to be superior to an active investment strategy
using closely held country funds.
Huang and Guedj (2009) investigated as to whether an Exchange-Traded Fund (ETF) is a more
efficient indexing vehicle than an Open-Ended Mutual Fund (OEF). They noted that ETFs are
better suited for narrower and less liquid underlying indexes, and also for investors with long
investment horizons.
18. 18
Meric et al. (2009) reported that from October 9, 2007 to March 9, 2009, the U.S. stock market
experienced the worst bear market and lost about 56% of its value during this period. They
compared the performances of 38 sector index funds using the Sharpe and Treynor portfolio
Performance measures and found that the healthcare and consumer staples sector index funds
had the best performance and the financials and home construction sector index funds had the
worst performance in the October 9, 2007-March 9, 2009 bear market run.
Wong and Shum (2010) examined the performances of 15 worldwide ETFs across bearish and
bullish markets over the period 1999 to 2007. They observed that ETFs always provide higher
returns in a bullish market than in a bearish market. They noted from the Sharpe ratios that ETF
returns are not positive and proportional to the market volatility.
Yuexiang et al. (2010) investigated the pricing efficiency of the Shanghai 50 ETF (SSE 50 ETF),
the first Exchange-Traded Fund (ETF) in China. They demonstrated that ETF market prices and
their Net Asset Values are co-integrated and there is a unidirectional causality from price to
NAV. They also found that the fund’s prices did not closely follow the NAV during the second
half of 2007, when the Chinese stock market experienced substantial volatility, reflecting sudden
increased market risks as well as potential arbitrage opportunities during financial turbulences.
Gerasimos (2011) found that the performance of ETFs is predictable and the return superiority is
persistent in the short term level.
There are many research papers on the Indian mutual fund (MF) industry. Sivakumar et al.
(2010) observed that private players were able to mobilize greater resources in the Indian MF
industry than public institutions. Jaspal Singh (2004) evaluated the performance of various
mutual funds and found that ICICI prudential floated and managed by a private AMC is the best
performer in India. Madhumita et al. (2008) evaluated the performance of mutual funds on the
basis of rate of returns as well as risk-adjusted methods, and found that the majority of equity
funds outperformed the benchmark index. Most of these studies evaluated the growth and
performance of equity funds.
This mixed evidence about performance of ETFs across developed as well as emerging
economies warrants and motivated the present research about the performance of ETFs in India.
19. 19
Objectives of the Study
While the concept of Exchange-Traded Funds (ETFs) is very popular in the US and some
developed European countries, the growth in ETF markets is still in an early stage in the global
emerging markets that comprise countries such as China, India, South Africa, Russia, South
Korea and Brazil. Since these countries have become increasingly important to investors due to
their fast growing economies, it is necessary to analyze the performance of ETFs. Thus, this
research paper examines the characteristics of ETFs and index funds.
The Objectives are:
To evaluate the performance of ETFs and Index Funds.
To test whether there is a correlation between ETFs Returns and Index Funds Returns.
To test whether some independent variables have an impact on the returns of ETFs and
Index Funds.
20. 20
Hypothesis
Hypothesis 1:
H0: There is no significant difference between the performance of ETFs and Index Funds.
Ha: There is a significant difference between the performance of ETFs and Index Funds.
Hypothesis 2:
H0: There is no significant difference between the means of Tracking Error of ETFs and Index
Funds.
Ha: There is a significant difference between the means of Tracking Error of ETFs and Index
Funds.
Hypothesis 3:
H0: There is no significant correlation between the Average Returns of ETFs and Index Funds.
Ha: There is a significant correlation between the Average Returns of ETFs and Index Funds.
Hypothesis 4:
H0: Independent variables (Inflation Rate and Market Return CNX Nifty) have no impact on the
Average Returns of ETFs.
Ha: Independent variables (Inflation Rate and Market Return CNX Nifty) have an impact on the
Average Returns of ETFs.
Hypothesis 5:
H0: Independent variables (Inflation Rate and Market Return S&P BSE SENSEX) have no
impact on the Average Returns of ETFs.
Ha: Independent variables (Inflation Rate and Market Return S&P BSE SENSEX) have an
impact on the Average Returns of ETFs.
21. 21
Hypothesis 6:
H0: Independent variables (Inflation Rate and Market Return CNX Nifty) have no impact on the
Average Returns of Index Funds.
Ha: Independent variables (Inflation Rate and Market Return CNX Nifty) have an impact on the
Average Returns of Index Funds.
Hypothesis 7:
H0: Independent variables (Inflation Rate and Market Return S&P BSE Sensex) have no impact
on the Average Returns of Index Funds.
Ha: Independent variables (Inflation Rate and Market Return CNX Nifty) have an impact on the
Average Returns of Index Funds.
22. 22
DATA SOURCE
Secondary data is taken as a basis of analysis in this research. In this study, we examine ETFs
and index funds that track either the S&P BSE SENSEX index or the CNX NIFTY index. In
India, although ETFs were introduced in 2001, there are only around 40 ETFs at present. Gold
ETFs are more popular in India than ETFs that track indices. Due to the unavailability of AUM
data of some of the index funds and ETFs, the data was restricted to the following ETFs and
Index Funds:
The three ETFs examined in this study are the Goldman Sachs Nifty BeES, the Kotak Sensex
ETF, and the Kotak Nifty ETF.
The index funds that are considered in this study are growth funds that track either the S&P BSE
SENSEX or the CNX Nifty index. The nine Index Funds examined are Birla Sun Life Nifty
Index Fund, Franklin Nifty Index Fund, HDFC Index Fund – Nifty Plan, HDFC Index Fund -
Sensex Plan, IDBI Nifty Index Fund, Principal Nifty Index Fund, Reliance Index Fund - Nifty
Plan, Tata Index Fund - Sensex Plan, UTI Nifty Index Fund.
Hence, this study was restricted to three ETFs and 9 index funds.
The data was collected from the Bombay Stock Exchange, the National Stock Exchange,
www.motilaloswal.com and the respective fund houses. The daily closing prices and NAV of the
funds were considered from the January, 2010 of the funds up to March 10, 2015
Data for variable like Inflation Rate is collected from www.inflation.eu.
23. 23
Characteristics of ETFs and Index Funds
Table 1: CharacteristicsofExchange-TradedFunds
S.
NO.
ETFs
Underlying
Index
Listed
on
Launch
Date
AUM as
on
February
2015 (INR
crore
Expense
Ratio
(%)
Min. Investment
(INR)
1
Kotak Nifty
ETF
Nifty NSE
19 Jan
2010
97.90 0.49 10000
2
Goldman Sachs
Nifty
ExchangeTraded
Scheme
Nifty NSE
28 Dec
2001
724.11 0.80 10000
3
Kotak Sensex
ETF
Sensex BSE
7 May
2008
8.31 0.50 10000
The Goldman Sachs Nifty Exchange-Traded Scheme, also known as GS Nifty BeES, was the
first ETF introduced in India in 2001. Subsequently, many ETFs were introduced. At present,
there are around 40 ETFs in India. ETFs tracking indices used to be popular in India; of late
however, ETFs tracking gold are more popular with the investing fraternity. The characteristics
of the ETFs examined in this study are given in Table 1.
The GS Nifty BeES is the most popular ETF and has the highest AUM, followed by the Kotak
Nifty ETF. The expense ratio of the Kotak Nifty ETF is 0.49 and the Kotak Sensex ETF’s is
0.5% and that of the GS Nifty BeES is 0.8%. The minimum investment required for all the ETFs
is INR 10000.
24. 24
Table 2: CharacteristicsofIndex funds
S.
No.
Index Funds
Underlying
Index
Launch
Date
AUM as on
February, 2015
(INR crore)
Min.
Invest.
(INR)
Fund
Type
Exit Load
(%)
1 Birla Sun Life
Index Fund (G)
Nifty
10 Sept
2002
288.36 5000 Open 1
2
Franklin India
Index Fund-NSE
Nifty Plan (G)
Nifty
4 Aug
2000
214.82 5000 Open 1
3 HDFC Index Fund-
Nifty Plan
Nifty
3 July
2002
101.02 5000 Open 1
4 HDFC Index Fund-
Sensex Plan
Sensex
3 July
2002
88.60 5000 Open 1
5
IDBI Nifty Index
Fund (G)
Nifty
3 May
2010
96.69 5000 Open 0
6
Principal Index
Fund - (G) Nifty
30 June
1999
15.21 5000 Open 1
7
Reliance Index
Fund - Nifty (G) Nifty
9 Sept
2010
36.93 5000 Open 1
8
Tata Index Sensex
Fund - Plan A Sensex
20 Feb
2003
6.86 5000 Open 0.25
9
UTI-Nifty Index
Fund (G) Nifty
14 Feb
2000
193.24 5000 Open
Less than
15 days -
1%.
Greater
than or
equal to
15 days –
0
25. 25
Index funds are passively managed and are designed to replicate the underlying index that they
track. Index funds hold their stocks in the same proportion as that of the underlying index. Index
funds are very popular worldwide and even in India, index funds have found favor with the
investing fraternity. The characteristics of the index funds examined in this study are given in
Table 2.
The most popular index funds are the Franklin Index Fund, the UTI Nifty Index Fund, and the
Reliance Index Fund–Nifty Plan. Birla Sun Life Index Fund (G) has the Highest AUM followed
by Franklin India Index Fund-NSE Nifty Plan (G). Second there is a recurring AMC charge
called as expense ratio which presently ranges from 1% -1.8%. This is deducted from your
investment even if there are no transactions. Finally if you redeem investment before exit period
a flat percentage is deducted as exit load. Table 2 shows that most of the index funds used in our
study have an exit load of 1% for their schemes (except IDBI Nifty Index Fund (G) and Tata
Index Sensex Fund- Plan A) and the minimum investment required is INR 5000.
26. 26
Research Methodology
The performance of ETFs and index funds was measured by comparing their daily returns with
the returns of the underlying indices. The tracking error of ETFs and index funds was analyzed
to examine how closely the ETFs and mutual funds track their underlying indices. Tracking error
was measured as the standard deviation of the difference between the returns of the underlying
index and the returns of ETFs or index funds.
Further, Independent T-Test has been conducted to know if there is significant difference
between the tracking error of ETFs and Index Funds. The t-test is used for testing differences
between two means. A t-test for independent groups is useful when the same variable has been
measured in two independent groups. Here, Two Independent groups are: ETFs and Index Funds
and the test variable is Tracking Error of ETFs and Index Funds.
Multiple regression analysis is carried out to check the effect of market returns, and inflation rate
on the returns of ETFs and Index Funds. Multiple Regression analysis also allows us to
determine the overall fit (variance explained) of the model and the relative contribution of each
of the predictors to the total variance explained. Regression model focuses on the relationship
between a dependent and one two or more independent variables.
For the study,
There are two dependent variables resulting into 4 different results:
ETF Returns
Index Fund Returns
The Independent variables are as follows:
Inflation Rates
BSE Sensex Returns
CNX Nifty Returns
27. 27
Multiple regression equation used to compute the relationship is given below:
Y = α + β1X1 + β2X2
Where,
Y = Dependent Variable (ETFs Returns/ Index Funds Returns)
β1 = Slope of Inflation Rates
β2 = Slope of S&P BSE Sensex Returns/ CNX Nifty Returns
The “β” values are called the regression weights.
In this case, there are 2 predictor variables (Independent Variables), hence, 3 regression weights
are estimated, one for each of the 2 predictor variable and one for the constant (α) term. In the
Regression Analysis, Non standardized coefficients have been used, instead of standardized
coefficients. Non standardized relationships are expressed in terms of the variable’s original, raw
units. , Non standardized coefficients indicate how much the dependent variable varies with an
independent variable, when all other independent variables are held constant.
28. 28
Performance of ETFs and Index funds
The performance of ETFs and index funds was measured by analyzing their active returns. The
analysis showed that all the ETFs considered in this study outperformed their underlying index
(Table 3). The active return for the Kotak Sensex ETF was 0.0185, followed by the Kotak Nifty
ETF with a return of 0.0149 and the GS Nifty BeES with a return of 0.0061.
In the case of index funds, the performance was mixed (Table 3). The analysis of active returns
showed that index funds that tracked the S&P BSE SENSEX and CNX Nifty have mixed
outcomes. Some of them outperformed the underlying index while others underperformed the
underlying Index. The Tata Index Sensex Fund - Plan A, the Birla Sun Life Index Fund (G), the
IDBI Nifty Index Fund (G) and the UTI – Nifty Index Fund (G) underperformed the underlying
index, the other index funds—the HDFC Index Fund-Sensex Plan, the Franklin India Index
Fund-NSE Nifty Plan (G), the HDFC Index Fund-Nifty Plan, the Principal Nifty Index Fund, and
the Reliance Index Fund - Nifty (G)—outperformed their respective indices.
Thus, the analysis showed that ETFs outperformed their underlying indices while the
performance of index funds was mixed.
29. 29
Table 3: Active Returns of Exchange-TradedFunds and Index funds
Fund
No. of
Observations
ETF Returns
Annualized
Index Returns
Annualized
Active Returns
Exchange – Traded Funds
Kotak Nifty ETF
1239 0.819872624 0.804914178 0.014958446
GS Nifty BeES
1291 0.671139274 0.665083521 0.006055753
Kotak Sensex ETF
1268 0.653597 0.635076683 0.018520317
Index Funds Tracking S&P BSE SENSEX
HDFC Index Fund-
Sensex Plan
1182 0.658939 0.635076683 0.023862317
Tata Index Sensex Fund -
Plan A
1012 0.411117 0.43385808 -0.02274108
Index Funds Tracking CNX Nifty
Birla Sun Life Index
Fund (G)
1223 0.639066 0.665083521 -0.026017521
Franklin India Index
Fund-NSE Nifty Plan (G)
1350 0.667509596 0.665083521 0.002426074
HDFC Index Fund-Nifty
Plan
1181 0.665119136 0.665083521 0.000035615
IDBI Nifty Index Fund
(G)
1004 0.42143 0.440489116 -0.019059116
Principal Index Fund -
(G)
1279 0.67236 0.665083521 0.007276479
Reliance Index Fund -
Nifty (G)
1019 0.471858 0.440489116 0.031368884
UTI-Nifty Index Fund
(G)
1001 0.43987 0.440489116 -0.000619116
30. 30
Tracking Error of Funds
The tracking error of funds in relation to the underlying index was also examined for ETFs and
index funds. Frino and Gallagher (2001) suggested different methods for calculating the tracking
error of funds. In the extant literature, the most commonly used method to calculate tracking
error is the standard deviation of the difference between the returns of the underlying index and
the returns of the ETFs or index funds. This method was adopted in this study. The various
factors responsible for tracking error are transaction costs, fund cash flows, benchmark volatility,
and the replication strategy adopted by the funds. Table 4 shows the tracking error of the ETFs
and the index funds considered in this study with respect to their underlying index.
Table 4: Tracking Errorof Exchange-TradedFunds and Index funds
Fund
No. of
Observations
Tracking Error
Exchange Traded Funds
Kotak Nifty ETF 1239 0.047212588
GS Nifty BeEs 1291 0.008169263
Kotak Sensex ETF 1268 0.040345204
Index Funds Tracking S&P BSE Sensex
HDFC Index Fund-Sensex Plan 1182 0.011183719
Tata Index Sensex Fund - Plan A 1012 0.004806641
Index Funds Tracking CNX Nifty
Birla Sun Life Index Fund (G) 1223 0.017130202
Franklin India Index Fund-NSE Nifty Plan (G) 1350 0.001608218
HDFC Index Fund-Nifty Plan 1181 0.004509319
IDBI Nifty Index Fund (G) 1004 0.014473892
Principal Index Fund - (G) 1279 0.005420746
Reliance Index Fund - Nifty (G) 1019 0.003867541
UTI-Nifty Index Fund (G)
1001 0.003317917
31. 31
We found the tracking error of the GS Nifty BeES to be the lowest at 0.008169, followed by that
of the Kotak Sensex ETF (0.04035) and the Kotak Nifty ETF (0.04721). The analysis of the
index funds that tracked the S&P BSE SENSEX showed that the tracking error was minimal—
the Tata Index Sensex Fund - Plan A had the lowest tracking error 0.0048, HDFC Index Fund-
Sensex Plan with tracking error 0.01118.
The tracking error analysis performed for the index funds that tracked the CNX Nifty index also
revealed that the tracking error was minimal. The tracking error of 0.001608 for the Franklin
India Index Fund-NSE Nifty Plan (G) was the lowest in the study, followed by the UTI Nifty
Index Fund (G) and Reliance Index Fund - Nifty (G) the with a tracking error of 0.00332 and
0.0039, respectively. The Birla Sun Life Index Fund (G) had the maximum tracking error of
0.01713.
The tracking error analysis of the ETFs and the index funds threw up some interesting facts. The
analysis showed that the average tracking error of the ETFs tracking the SENSEX and the Nifty
indices is actually higher than that of index funds. One possible explanation for the tracking error
of ETFs being higher is the higher bid-ask spreads of ETFs compared to those of the index funds
(Kostovetsky, 2003). The other possible factors that could lead to tracking error are transaction
costs, volatility of the benchmark index, index composition changes, and corporate activity
(Chiang 1998).
Further, Independent T-Test conducted using SPSS was conducted. It tells a different story. The
analysis shows that there is no significant difference between the means of tracking error of the
ETFs and Index Funds. However, Levene’s Test for Equality of Variances shows that the
variability in ETFs and Index Funds is not the same.
32. 32
Independent T- Test
In the Group Statistics box, the mean for ETFs is 0.319. The mean for Index Fund is 0.007. The
standard deviation for ETF is 0.208 and for Index Fund is 0.005.
Independent Samples Test
Levene's Test for Equality of
Variances
t-test for Equality
of Means
F Sig. t df
Tracking_Err
or
Equal variances
assumed
16.880 .002 3.494 10
Equal variances not
assumed
2.016 2.093
Levene’s Test for Equality of Variances is a test that determines if the two conditions have
about the same or different amounts of variability between scores. The value in the Sig. column
is 0.02. A value less than .05 means that the variability in your two conditions is not the same.
Independent Samples Test
t-test for Equality of Means
Sig. (2-tailed) Mean
Difference
Std. Error
Difference
Tracking_Error
Equal variances assumed .006 .024540330 .007022675
Equal variances not
assumed
.176 .024540330 .012172398
Sig. (2-tailed) value tells if the two condition Means are statistically different. Here the value to
take into consideration is 0.176 and hence null hypothesis accepted.
Group Statistics
Security_Ty
pe
N Mean Std.
Deviation
Std. Error
Mean
Tracking_Err
or
ETF 3 .03190902 .020843997 .012034288
INDEX
FUND
9 .00736869 .005485320 .001828440
33. 33
Independent Samples Test
t-test for Equality of Means
95% Confidence Interval of the
Difference
Lower Upper
Tracking_Error
Equal variances assumed .008892834 .040187826
Equal variances not assumed -.025662476 .074743136
34. 34
Multiple Regression Analysis
1. Dependent variable is Average ETF Returns and Independent variables
are inflation rate and CNX Nifty Average returns
Descriptive Statistics
Mean Std.
Deviation
N
AVERAGE_RETURN
S_ETF
.09259633 .224524065 4
INFLATION_Rate .08170000 .024455674 4
MARKET_RETURNS
_NIFTY
.09956201 .257896159 4
Correlations
AVERAGE_
RETURNS_
ETF
INFLATION
_Rate
MARKET_R
ETURNS_NI
FTY
Pearson
Correlation
AVERAGE_RETURN
S_ETF
1.000 .239 .995
INFLATION_Rate .239 1.000 .306
MARKET_RETURNS
_NIFTY
.995 .306 1.000
Sig. (1-tailed)
AVERAGE_RETURN
S_ETF
. .380 .003
INFLATION_Rate .380 . .347
MARKET_RETURNS
_NIFTY
.003 .347 .
N
AVERAGE_RETURN
S_ETF
4 4 4
INFLATION_Rate 4 4 4
MARKET_RETURNS
_NIFTY
4 4 4
The Correlations table shows the “Pearson’s r” value. The Pearson’s r for the correlation
between the average returns of ETFs and inflation rate, and inflation rate and market returns is
35. 35
0.239 and 0.306 respectively. This means that there is a weak relationship between the two
variables. This means that changes in one variable are not correlated with changes in the second
variable. On the other hand, the Pearson’s r for the correlation between the average returns of
ETFs and market return is 0.995. This means that changes in one variable are strongly correlated
with changes in the IVs.
Model Summary
Mode
l
R R Square Adjusted R
Square
Std. Error of
the Estimate
1 .997a .995 .984 .028337261
a. Predictors: (Constant), MARKET_RETURNS_NIFTY,
INFLATION_Rate
This table tells what % of variability in the DV is accounted for by all of the IVs together (it’s a
multiple R-square).
ANOVAa
Model Sum of
Squares
df Mean
Square
F Sig.
1
Regression .150 2 .075 93.668 .073b
Residual .001 1 .001
Total .151 3
a. Dependent Variable: AVERAGE_RETURNS_ETF
b. Predictors: (Constant), MARKET_RETURNS_NIFTY, INFLATION_Rate
This table gives an F-test to determine whether the model is a good fit for the data. According to
this p-value, it is not. Since the Sig. value is 0.07 which is greater than 0.05 shows that the model
is not a good fit by accepting null hypothesis i.e. the model is not a good fit for data.
36. 36
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t
B Std. Error Beta
1
(Constant) .059 .058 1.020
INFLATION_Rate -.663 .703 -.072 -.944
MARKET_RETURNS
_NIFTY
.885 .067 1.017 13.288
Again, this table gives beta coefficients so that the regression equation can be constructed. .
Based on this table, the equation for the regression line is:
ETFs Average return = 0.59 – 0.663(Inflation Rates) + 0.885(Market Returns_Nifty)
37. 37
Multiple Regression Analysis
2. Dependent variable is Average ETF Returns and Independent variables
are inflation rate and S&P BSE SensexAverage Returns
Descriptive Statistics
Mean Std.
Deviation
N
AVERAGE_RETURN
S_ETF
.09259633 .224524065 4
INFLATION_Rate .08170000 .024455674 4
MARKET_RETURNS
_BSE
.09645158 .245040332 4
Correlations
AVERAGE_
RETURNS_
ETF
INFLATION
_Rate
MARKET_R
ETURNS_B
SE
Pearson
Correlation
AVERAGE_RETURN
S_ETF
1.000 .239 .997
INFLATION_Rate .239 1.000 .303
MARKET_RETURNS
_BSE
.997 .303 1.000
Sig. (1-tailed)
AVERAGE_RETURN
S_ETF
. .380 .001
INFLATION_Rate .380 . .348
MARKET_RETURNS
_BSE
.001 .348 .
N
AVERAGE_RETURN
S_ETF
4 4 4
INFLATION_Rate 4 4 4
MARKET_RETURNS
_BSE
4 4 4
38. 38
The Pearson’s r for the correlation between the average returns of ETFs and inflation rate, and
inflation rate and market returns is 0.239 and 0303 respectively. This means that there is a weak
relationship between the two variables. This means that changes in one variable are not
correlated with changes in the second variable. On the other hand, the Pearson’s r for the
correlation between the average returns of ETFs and market return is 0.997. This means that
changes in one variable are strongly correlated with changes in the IVs.
Model Summary
Mode
l
R R Square Adjusted R
Square
Std. Error of
the Estimate
1 1.000a .999 .998 .010232640
a. Predictors: (Constant), MARKET_RETURNS_BSE,
INFLATION_Rate
The coefficient of determination is 0.999; therefore, about 99.9% of the variation in the ETFs
Average Return is explained by the independent variable i.e. market return. The regression
equation appears to be very useful for making predictions since the value of R Square is close to
1.
ANOVAa
Model Sum of
Squares
df Mean
Square
F Sig.
1
Regression .151 2 .076 721.674 .026b
Residual .000 1 .000
Total .151 3
a. Dependent Variable: AVERAGE_RETURNS_ETF
b. Predictors: (Constant), MARKET_RETURNS_BSE, INFLATION_Rate
This table gives an F-test to determine whether the model is a good fit for the data. According to
this p-value, it is. Since the Sig. value is 0.02 which is lesser than 0.05 which shows that the
model is a good fit by rejecting null hypothesis i.e. the model is not a good fit for data.
39. 39
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t
B Std. Error Beta
1
(Constant) .055 .021 2.650
INFLATION_Rate -.641 .254 -.070 -2.530
MARKET_RETURNS
_BSE
.933 .025 1.019 36.889
Based on this table, the equation for the regression line is:
ETFs Average return = 0.55 – 0.641(Inflation Rates) + 0.933(Market Returns_BSE)
40. 40
Multiple Regression Analysis
3. Dependent variable is Average Index Fund Returns and Independent
variables are inflation rate and CNX Nifty Average Returns
Descriptive Statistics
Mean Std.
Deviation
N
AVERAGE_RETURN
S_IndexFunds
.09798895 .254720820 4
INFLATION_Rate .08170000 .024455674 4
MARKET_RETURNS
_NIFTY
.09956201 .257896159 4
Correlations
AVERAGE_
RETURNS_I
ndexFunds
INFLATION
_Rate
MARKET_R
ETURNS_NI
FTY
Pearson
Correlation
AVERAGE_RETURN
S_IndexFunds
1.000 .303 1.000
INFLATION_Rate .303 1.000 .306
MARKET_RETURNS
_NIFTY
1.000 .306 1.000
Sig. (1-tailed)
AVERAGE_RETURN
S_IndexFunds
. .349 .000
INFLATION_Rate .349 . .347
MARKET_RETURNS
_NIFTY
.000 .347 .
N
AVERAGE_RETURN
S_IndexFunds
4 4 4
INFLATION_Rate 4 4 4
MARKET_RETURNS
_NIFTY
4 4 4
41. 41
The Pearson’s r for the correlation between the average returns of Index Funds and inflation rate,
and inflation rate and market returns is 0.303 and 0.306 respectively. This means that there is a
weak relationship between the two variables. This means that changes in one variable are not
correlated with changes in the second variable. On the other hand, the Pearson’s r for the
correlation between the average returns of ETFs and market return is 1. This means that changes
in one variable are strongly correlated with changes in the IVs.
Model Summary
Mode
l
R R Square Adjusted R
Square
Std. Error of
the Estimate
1 1.000a .999 .998 .011939009
a. Predictors: (Constant), MARKET_RETURNS_NIFTY,
INFLATION_Rate
The coefficient of determination is 0.999; therefore, about 99.9% of the variation in the Index
Funds Average Return is explained by the independent variable i.e. market return. The regression
equation appears to be very useful for making predictions since the value of R Square is close to
1.
ANOVAa
Model Sum of
Squares
df Mean
Square
F Sig.
1
Regression .195 2 .097 682.284 .027b
Residual .000 1 .000
Total .195 3
a. Dependent Variable: AVERAGE_RETURNS_IndexFunds
b. Predictors: (Constant), MARKET_RETURNS_NIFTY, INFLATION_Rate
This table gives an F-test to determine whether the model is a good fit for the data. According to
this p-value, it is. Since the Sig. value is 0.02 which is lesser than 0.05 which shows that the
model is a good fit by rejecting null hypothesis i.e. the model is not a good fit for data.
42. 42
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t
B Std. Error Beta
1
(Constant) .003 .024 .104
INFLATION_Rate -.036 .296 -.003 -.121
MARKET_RETURNS
_NIFTY
.988 .028 1.001 35.204
Based on this table, the equation for the regression line is:
Index Funds Average return = 0.003 – 0.036(Inflation Rates) + 0.988(Market
Returns_Nifty)
43. 43
Multiple Regression Analysis
4. Dependent variable is Average Index Fund Returns and Independent
variables are inflation rate and S&P BSE SensexAverage Returns
Descriptive Statistics
Mean Std.
Deviation
N
AVERAGE_RETURN
S_IndexFunds
.09798895 .254720820 4
INFLATION_Rate .08170000 .024455674 4
MARKET_RETURNS
_BSE
.09645158 .245040332 4
Correlations
AVERAGE_
RETURNS_I
ndexFunds
INFLATION
_Rate
MARKET_R
ETURNS_B
SE
Pearson
Correlation
AVERAGE_RETURN
S_IndexFunds
1.000 .303 1.000
INFLATION_Rate .303 1.000 .303
MARKET_RETURNS
_BSE
1.000 .303 1.000
Sig. (1-tailed)
AVERAGE_RETURN
S_IndexFunds
. .349 .000
INFLATION_Rate .349 . .348
MARKET_RETURNS
_BSE
.000 .348 .
N
AVERAGE_RETURN
S_IndexFunds
4 4 4
INFLATION_Rate 4 4 4
MARKET_RETURNS
_BSE
4 4 4
The Pearson’s r for the correlation between the average returns of Index Funds and inflation rate,
and inflation rate and market returns is 0.303 and 0.303 respectively. This means that there
44. 44
is a weak relationship between the two variables. This means that changes in one variable are not
correlated with changes in the second variable. On the other hand, the Pearson’s r for the
correlation between the average returns of ETFs and market return is 1. This means that changes
in one variable are strongly correlated with changes in the IVs.
Model Summary
Mode
l
R R Square Adjusted R
Square
Std. Error of
the Estimate
1 1.000a 1.000 .999 .008246593
a. Predictors: (Constant), MARKET_RETURNS_BSE,
INFLATION_Rate
The coefficient of determination is 1; therefore, the variation in the Index Funds Average Return
is explained by the independent variable i.e. market return.
ANOVAa
Model Sum of
Squares
df Mean
Square
F Sig.
1
Regression .195 2 .097 1430.604 .019b
Residual .000 1 .000
Total .195 3
a. Dependent Variable: AVERAGE_RETURNS_IndexFunds
b. Predictors: (Constant), MARKET_RETURNS_BSE, INFLATION_Rate
This table gives an F-test to determine whether the model is a good fit for the data. According to
this p-value, it is. Since the Sig. value is 0.01 which is lesser than 0.05 which shows that the
model is a good fit by rejecting null hypothesis i.e. the model is not a good fit for data.
45. 45
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t
B Std. Error Beta
1
(Constant) -.002 .017 -.115
INFLATION_Rate -.004 .204 .000 -.021
MARKET_RETURNS
_BSE
1.039 .020 1.000 50.977
Based on this table, the equation for the regression line is:
Index Funds Average return = -0.002 – 0.004(Inflation Rates) + 1.039(Market
Returns_Nifty)
46. 46
Correlation Analysis
Descriptive Statistics
Mean Std.
Deviation
N
AVERAGE_RETURN
S_ETF
.09259633 .224524065 4
AVERAGE_RETURN
S_IndexFunds
.09798895 .254720820 4
Correlations
AVERAGE_
RETURNS_
ETF
AVERAGE_
RETURNS_I
ndexFunds
AVERAGE_RETURN
S_ETF
Pearson
Correlation
1 .997**
Sig. (2-tailed) .003
N 4 4
AVERAGE_RETURN
S_IndexFunds
Pearson
Correlation
.997** 1
Sig. (2-tailed) .003
N 4 4
**. Correlation is significant at the 0.01 level (2-tailed).
Pearson Correlation - These numbers measure the strength and direction
of the linear relationship between the two variables. The correlation
coefficient can range from -1 to +1, with -1 indicating a perfect negative
correlation, +1 indicating a perfect positive correlation, and 0 indicating no
correlation at all.
Sig. (2-tailed) - This is the p-value associated with the correlation. The
footnote under the correlation table explains what the single and double
asterisks signify.
47. 47
Conclusions
This study examined the performance of ETFs and index funds that tracked their underlying
index, either the S&P BSE SENSEX index or the CNX Nifty index. The study examined the
tracking error of ETFs and index funds. This study was limited to only some and restricted to
those funds for which data was available.
From the analysis of the active returns of ETFs, we found that ETFs outperformed their
underlying index—the S&P BSE SENSEX or the CNX Nifty. On the other hand, the index funds
showed mixed results. The reason why ETFs outperformed their underlying index could be their
lower expense ratios. Since index funds have higher management fees and are also subject to
higher capital gains tax compared to ETFs, underperformance would be seen more in the case of
index funds than in the case of ETFs.
Further, the analysis revealed that the tracking error was minimal and insignificant for most of
the funds. More importantly, the tracking error was higher for the ETFs compared to the index
funds. Funds do maintain some portion of their capital as cash and are not fully invested in
stocks, which could be the cause of tracking error, apart from other factors such as the volatility
of the benchmark, the replication strategy followed by the fund, and the transaction costs
involved (Chiang, 1998). The tracking error of ETFs was found to be higher than that of index
funds; this was probably due to the higher bid-ask price of ETFs. Thus, the analysis highlighted
that ETFs performed better than index funds; this finding is similar to the findings reported in
Svetina (2010).
In India, although ETFs have been in existence for more than a decade, they are making their
presence felt slowly. The major reason why ETFs have not caught up as much in India as they
have in the U.S. and in Europe is probably because of the lesser incentives to market ETFs as
compared to mutual funds, which earmark higher amounts for marketing their products.
Moreover, the ETFs in India are passively managed. If the ETFs were to be actively managed
(thereby giving higher returns to the investors), ETFs would definitely catch the attention of the
investing fraternity. Policymakers should come up with better policies to enhance the growth of
ETFs. Moreover, since ETFs are one of the modes of disinvestment in the future, policymakers
should actively consider promoting the growth of ETFs.
48. 48
Limitations
The major limitation of this study is that the sample size was reduced considerably due to the
non-availability of data. Further, the results of this study could have been different if more
number of mutual fund schemes were included for analysis. The other limitation of this study is
that there may be structural breaks in the time period and this has not been considered in the
study. The study also has not considered macroeconomic factors like exchange rate and political
risks which could have impacted the performance of the funds.
49. 49
Bibliography
Wikipedia
Investopedia
www.moneycontrol.com
P. Krishna Prasanna study on
Performance of Exchange-Traded Funds in India
www.etfguide.com
www.nseindia.com
www.bseindia.com
www.valueresearchonline.com
www.yahoofinance.com
Respective Fund Houses of ETFs and Index Funds
www.personalfn.com
www.investinganswers.com
www.onemint.com
http://articles.economictimes.indiatimes.com/2013-04-29/news/38904782_1_expense-
ratio-index-funds-active-funds
http://www.forbes.com/sites/mitchelltuchman/2013/11/01/index-fund-vs-etfs-get-the-
facts/
http://www.moneycontrol.com/master_your_money/stocks_news_consumption.php?auto
no=890915
50. 50
Appendices
ETFs
1. Kotak Nifty ETF-The scheme is ranked 2 in Index category by CRISIL (for quarter
ended Mar 2014).
Historic Graph: Good performance in the category
Chart 1: Closing prices, and NAVs of Benchmark
2. GS Nifty BeEs- The scheme is is ranked 1 in Index category by CRISIL (for quarter
ended Mar 2014).
Historical Graph: Very Good performance in the category.
Chart 2: Closing Prices, and NAVs of Benchmark
51. 51
3. Kotak SensexETF- This scheme is not ranked by CRISIL (for quarter ended Mar 2014)
since it does not fulfill certain eligibility criteria of CRISIL.
Historical Graph:
Chart 3: Closing Prices, and NAVs of Benchmark
Index Funds
1. Birla Sun Life Index Fund (G) - The scheme is ranked 5 in Index category by
CRISIL (for quarter ended Mar 2014).
Historical Graph: Relatively Weak performance in the category
Chart 4: Closing Prices, and NAVs of Benchmark
52. 52
2. Franklin India Index Fund-NSE Nifty Plan (G) -The scheme is ranked 4 in
Index category by CRISIL (for quarter ended Mar 2014).
Historical Graph: Below average performance in the category
Chart 5: Closing Prices, and NAVs of Benchmark
3. HDFC Index Fund-Nifty Plan- The scheme is ranked 3 in Index category by
CRISIL (for quarter ended Mar 2014).
Historical Graph: Average performance in the category.
Chart 6: Closing Prices, and NAVs of Benchmark
53. 53
4. HDFC Index Fund-SensexPlan- The scheme is ranked 3 in Index category by
CRISIL (for quarter ended Mar 2014).
Historical Graph: Average performance in the category.
Chart 7: Closing Prices, and NAVs of Benchmark
5. IDBI Nifty Index Fund (G) - The scheme is ranked 3 in Index category by CRISIL
(for quarter ended Mar 2014).
Historical Graph: Average performance in the category.
Chart 8: Closing Prices, and NAVs of Benchmark
54. 54
Principal Index Fund - (G) - This scheme is not ranked by CRISIL (for quarter ended Mar
2014) since it does not fulfill certain eligibility criteria of CRISIL.
Historical Graph:
Chart 9: Closing Prices, and NAVs of Benchmark
6. Reliance Index Fund - Nifty (G) - The scheme is ranked 3 in Index category by
CRISIL (for quarter ended Mar 2014).
Historical Graph: Average performance in the category.
Chart 10: Closing Prices, and NAVs of Benchmark
55. 55
7. Tata Index SensexFund - Plan A- This scheme is not ranked by CRISIL (for
quarter ended Mar 2014) since it does not fulfill certain eligibility criteria of CRISIL.
Historical Graph:
Chart 11: Closing Prices, and NAVs of Benchmark
8. UTI-Nifty Index Fund (G) - The scheme is ranked 3 in Index category by CRISIL
(for quarter ended Mar 2014).
Historical Graph: Average performance in the category.
Chart 12: Closing Prices, and NAVs of Benchmark