AN INDUSTRY DEFINED

PROBLEM
PROJECT REPORT ON:

A STUDY OF PERFORMANCE EVALUATION OF

MUTUALFUNDS IN INDIA

Submitted By

Patel Chaitali (Enroll No-157370592003)

Patel Mubassira (Enroll No-157370592032)

Faculty Guide:

Dr.Chetna Makwana

(Asso. Professor, NCM)

INTRODUCTION OF THE RESEARCH STUDY:

Mutual fund is a pool of money collected from investors and is invested

according to certain investment options. A mutual fund is a trust that pools the
saving of a no. of investors who share a common financial goal. A mutual fund
is created when investors put their money together.
The money thus collected is then invested in capital market instruments such
as shares, debentures and other securities.
Mutual Fund is area which is of enormous interest to researchers as well as
investors.
Mutual funds as a medium-to-long term investment option are preferred as a
suitable investment option by investors, with several market entrants the
question is the choice of mutual fund.
The study focuses on this problem of mutual fund selection by investors.
The investment objectives define investors preference among fund types
(balanced, growth, dividend etc.).

OVERVIEW OF INDUSTRY:

Financial intermidiaries become fund sponsors when they create and operate
mutual funds.
The fund provides shareholders with professional investment management,
diversification, liquidity and investing convenience.
For these services, the fund sponsor charges fees and incurs expenses for
operating the fund, all of which are charged proportionately against a
shareholder's assets in the fund.
The most prevalent and well-known type of mutual fund operates on an
open-endedbasis.
Mutual fund shares are bought and sold on the basis of a fund'snet asset value
(NAV).
A mutual is a set up in the form of trust, which has sponsor, trustee, assets
management company (AMC) and custodian.

The investment habit of the small investors particularly has undergone a sea
change.Increasing number of players from public as well as private sectors
has entered in to the market with innovative schemes to cater to the
requirements of the investors in India and abroad.
as it offers an opportunity to invest in a diversified, professionally managed
basket of securities at a relatively low cost.

LITERATURE REVIEW

Dr. Deepak Agrawal studied mutual fund activity in emerging markets. It describes
about their size and asset allocation.He analyzed the Indian Mutual Fund Industry
pricing mechanism with empirical studies on its valuation. He also analyzes data at both
the fund-manager and fund-investor levels. The study revealed that the performance is
affected by the saving and investment habits of the people and the second side the
confidence and loyalty of the fund Manager and rewards affects the performance of the
MF industry in India.(Dr.Deepak agrawal,June 2011)

Prof. Kalpesh P Prajapati, Prof. Mahesh K Patel, studied the performance evaluation of
Indian mutual funds which was carried out through relative performance index, riskreturn analysis, Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's measure, and
Fama's measure. The data used is daily closing NAVs. The source of data is website of
Association of Mutual Funds in India (AMFI). The study period is 1st January 2007 to
31st December, 2011. The results of performance measures suggest that most of the
mutual fund have given positive return during 2007 to 2011.( Prof. Kalpesh P
Prajapati, Prof. Mahesh K Patel Dec. 2011)
Suchita shukla analyzed the financial performance in terms of risk return relationship
of selected mutual fund schemes (5 categories 3 mutual fund= 15 schemes). The study
reveals that Overall the mutual funds have given better returns than the benchmark in
the above period subject to infrastructure fund in year 2013.( Suchita shukla ,2015)

Kozup, John C., Elizabeth Howlett and Michael Pagano explored whether a single page
supplemental information disclosure impacts investors fund evaluations and investment
intentions. Results indicated that while investors continue to place too much emphasis
on prior performance, the provision of supplemental information, particularly in a
graphical format, interacts with performance and investment knowledge to influence
perceptions and evaluations of mutual funds. (Kozup, John C., Elizabeth Howlett
and Michael Pagano ,2008)
Kum Martin in his article, Basics about Mutual Funds discussed about different types
of mutual funds .He stated that the equity funds involve just common stock investments.
They are extremely risky but can end up earning a lot of money. He concluded that the
low risk in investment will not earn a lot of returns. Mutual fund managers have to use
various investment styles depending upon investors requirement. 35 Most of the
empirical evidences showed that mutual fund investors purchase decision is influenced
by past performance.( Kum Martin ,October 2007)

Dr.R.karrupasamy,Mrs.v.vanaja,studied that majority of the public sector schemes

selected for the study outperformed the category average and also benchmark indices
and majority of the diversified schemes performed well on the basis of performance
index. (Dr.R.karrupasamy,Mrs.v.vanaja, 2014)
Dr.Vikaskumar analyses of the open ended schemes shows that out of twenty five
schemes namely Reliance Growth Fund, Reliance Vision Fund, ICICI Prudential Tax
Plan, HDFC Top 200 and Birla Sun Life Equity Fund, performs better in comparison to
benchmark index BSE-100 index in terms of monthly average return and risk involved in
these schemes less then benchmark. (Dr.Vikaskumar ,2011)

Dr.R.Narayanasamy, v.rathnamani, evaluate the performance of selected equity large

cap mutual funds schemes in terms of risk- return relationship . The performance
analyse of the selected five equity are large cap funds. The study may conclude that all
the funds have performed well in the high volatile market movement expect Reliance
vision. (Dr.R.Narayanasamy, v.rathnamani, 2013)
Dr.S.Narayanrao,evaluate the performance evaluation of Indian mutual funds in a bear
market is carried out through relative performance index. The results of performance
measures suggest that most of the mutual fund schemes in the sample of 58 were able
to satisfied investors expectations by giving excess returns over expected returns based
on both low-grade for systematic risk and total risk.( Dr.S.Narayanrao,2003)
Kalpesh.p.prajapati,mahesh.k.patels evaluation of the Indian mutual funds is carried
out through relative performance index, risk-return analysis, Sharp's measure, Jensen's
measure, and Fama's measure. All selected mutual fund companies have positive return
during 2007 to 2011. HDFC and Reliance mutual fund have performed well as
compared to the Sensex return. ICICI prudential and UTI Mutual fund has lower level
of
risk
compare
to
HDFC
and
Reliance
mutual
fund.
(Kalpesh.p.prajapati,mahesh.k.patel,2012)

PROBLEM STATEMENT OF THE RESEARCH

STUDY:

There are so many investment avenues. So that investors does not know which avenues
provides best return.
As per the financial rule of Do not put all the eggs in one basket investors portfolio
are most diversified. So that risk should be minimized.
If the person do not have knowledge of how to get maximum return with minimum risk
or vice-versa then they should invest in mutual fund. There are so many funds and
schemes available in mutual fund market.
Investors must know how much risk they can take. Based on which they have to
choose schemes.
Problem is that, does chosen scheme provides the best return as compare to the
market and other schemes?
It is very important to select the right benchmark to evaluate a funds performance. So
the problem arises that in which scheme they should invest according to their
preferences.

OBJECTIVE OF THE STUDY:

To evaluate the performance of selected schemes on mutual

funds in India by using portfolio performance evaluation
model namely Sharpe, Treynore and Jensen.

RESEARCH METHODOLOGY:
Research Design:
Descriptive research design is used to conduct study.

Research Design is the roadmap for carrying out the research activity in the
project. In our project of Performance Evaluation of Mutual Fund we have
carried out the research of which mutual fund is providing higher return by
comparing the returns of different mutual funds and we have also compared
whether the mutual fund can beat the market return or not.

Sources

The study was mainly secondary data based.Data were obtained from the web
site of www.mutualfundindia.com and www.amfiindia.com.

Time period:
Schemes are studied for the period of 3 months,6 months, 1 year,3 year and 5
year from April 2011 to March 2015.

Tools And Techniques:

1. Sharpe Model:

Where:
Si = Sharpe performance index
= Portfolio standard deviation
Sharpe index, evaluates funds performance based on both rate of return
and diversification.

2. Treynor model:

Where:
Ti = Treynors Performance Index
Rp = Portfolios actual return during a specified time period
Rf = Risk-free rate of return during the same period
p = beta of the portfolio

3. Jensens Alpha model:

Jensen uses as his performance measure. A superior portfolio manager

would have a significant positive value because of the consistent positive
residuals.

SIGNIFICANCE OF THE STUDY:

Our study will compare the different mutual fund schemes
according to their risk and returns.
Which will provide investors rank of different schemes their in
heirarchal order.
It will help investor to compare different schemes and invest in the
most profitable funds according to their priorities i.e risk and
returns.

REFERENCES:

Dr. Deepak Agrawal,Indore Institute of Science & Technology,September 15,

2007,Finance India , June 2011

Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel, Journal of Arts, Science &
Commerce , International Refereed Research Journal ,
www.researchersworld.com ,VolIII, Issue3(3), July 2012