Paper 07
Paper 07
Paper 07
INTRODUCTION:
Mutual Funds have become a widely popular and effective way for investors to participate in financial markets in an
easy, low-cost fashion, while muting risk characteristics by spreading the investment across different types of
securities, also known as diversification. It can play a central role in an individual's investment strategy. They offer
the potential for capital growth and income through investment performance, dividends and distributions under the
guidance of a portfolio manager who makes investment decisions on behalf of mutual fund unit holders. Over the
past decade, mutual funds have increasingly become the investor’s vehicle of choice for long-term investment. It
becomes pertinent to study the performance of the mutual fund. The relation between risk-return determines the
performance of a mutual fund scheme. As risk is commensurate with return, therefore, providing maximum return
on the investment made within the acceptable associated risk level helps in segregating the better performers from
the laggards. Many asset management companies are working in India, so it is necessary to study the performance of
it which may be useful for the investors to select the right mutual fund.
LITERATURE REVIEW:
Sapar & Narayan(2003) examines the performance of Indian mutual funds in a bear market through relative
performance index, risk-return analysis, Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's measure, and
Fama's measure with a sample of 269 open ended schemes (out of total schemes of 433) . The results of
performance measures suggest that most of the mutual fund schemes in the sample of 58 were able to satisfy
investor's expectations by giving excess returns over expected returns based on both premium for systematic
risk and total risk. Rao D. N (2006) studied the financial performance of select open-ended equity mutual fund
schemes for the period 1st April 2005 - 31st March 2006 pertaining to the two dominant investment styles and
tested the hypothesis whether the differences in performance are statistically significant. The analysis indicated
that growth plans have generated higher returns than that of dividend plans but at a higher risk studied
classified the 419 open-ended equity mutual fund schemes into six distinct investment styles. Agrawal Deepak
& Patidar Deepak (2009) studied the empirically testing on the basis of fund manager performance and
analyzing data at 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 at the second side the confidence and loyalty of
the fund Manager and rewards- affects the performance of the MF industry in India. Mehta Sushilkumar
(2010) analyze the performance of mutual fund schemes of SBI and UTI and found out that SBI schemes have
performed better then the UTI in the year 2007- 2008. Selvam et.al (2011) studied the risk and return
relationship of Indian mutual fund schemes. The study found out that out of thirty five sample schemes, eleven
showed significant t–values and all other twenty four sample schemes did not prove significant relationship
between the risk and return. According to t- alpha values, majority (thirty two) of the sample schemes' returns
were not significantly different from their market returns and very few number of sample schemes' returns
were significantly different from their market returns during the study period.
To evaluate and compare the performance of equity diversified mutual fund schemes of selected companies
To compare the performance of equity diversified mutual fund schemes of selected companies vis-à-vis the
market
RESEARCH METHODOLOGY:
Secondary data is taken as a basis of analysis in this research. Top five asset management companies is
selected as per AUM as on 30th September 2011. The sample AMCs are HDFC, ICICI Pru. Life, Reliance, UTI
and Birla sun life. Five equity diversified mutual fund schemes each from selected AMCs is selected randomly.
Daily data about the closing Net Asset Value of the selected schemes has collected from the websites
www.Amfiindia.com and www.Mutualfundsindia.com. The most popular and widely tracked BSE SENSEX is
used as a proxy for the market. The daily closing value of BSE SENSEX is collected from the website
www.bseindia.com. The reference period for the data is taken from January 2007 to December 2011. The yield
to maturity of 364 days treasury bills is taken as risk free rate of return. The data for that is collected from the
official website of Reserve Bank of India. Microsoft Excel is used for all the calculations.
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www.researchersworld.com ■ Vol–III, Issue3(3), July
2012 [48]
-Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172
DATA ANALYSIS:
HDFC
2011
2010
2009
2008
2007
Average
Average
-28.3740
19.6114
66.2331
-73.8787
47.4648
ICICI PRUDENTIAL
Fund
ICICI Prudential Top 100 Fund
-22.7232
16.0985
55.5050
-64.6314
35.5478
3.9593
Average
-26.5407
18.9921
63.1792
-76.3656
37.2062
RELIANCE
Reliance Growth
-32.0251
15.7926
67.7225
-77.5665
55.7800
5.9407
Equity
Reliance Short Term Equity Fund
7.5988
4.8791
8.4483
11.4118
9.2583
8.3192
Reliance Vision
-33.6102
14.1459
59.7041
-72.9243
44.2235
2.3078
Average Return
-24.3534
30.2877
38.7495
-58.8821
43.5384
UTI
Average
-21.6091
17.8763
53.1242
-77.5864
44.1745
Average
-26.7054
15.9088
63.5285
-74.2324
46.6285
INFERENCE:
Table 4.1 depicts the performance of selected equity diversified schemes return for a period of 2007 to 2011. It also
depicts the average Portfolio return and scheme return performance in comparison to the benchmark. The analysis
of table 1.1 clearly reveals that compounded annualized percentage return since inception ranges between -94.0731
percent and 97.8366 percent. The fifth column shows the schemes-wise return for five years in which HDFC Top
200 Fund-Growth scheme of HDFC Company.
Reliance regular saving equity– Growth gives highest return of 97.8366 in the year 2010 and also from the inception. It is
followed by ICICI Prudential Discovery Fund - IP- Growth, Birla Sun Life Mid Cap Fund - Plan A - Growth, UTI Master
Value Fund - Growth, UTI Mid Cap Fund - Growth with, HDFC Equity Fund - Growth, with 84.7972, 77.8366, 77.3095,
74.2088, and 71.7624 return respectively. UTI Mid Cap Fund - Growth has given the minimum compounded annualized
percentage return of -94.0731percent. In year 2009, all schemes outperformed compare to other years except UTI Equity
Fund - Growth. In year 2008 and 2011, the
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-Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172
performance of all the all schemes was found to be poor with the exception of Reliance Short Term Equity Fund -
Growth. In all five years duration HDFC Top 200 Fund-Growth is performed well compare to others schemes.
HDFC
Fund
HDFC Top 200 Fund
1.2000
0.8929
1.8654
2.3773
1.4088
1.5488
Average Risk
2.2491
0.8270
1.7270
2.2494
1.3133
ICICI PRUDENTIAL
Fund - IP
ICICI Prudential Dynamic
1.0879
0.6576
1.3384
2.3078
1.2435
1.32704
Plan
Industries Fund
Average Risk
1.1924
0.8688
1.6463
2.4480
1.3354
RELIANCE
Reliance Growth
1.1890
0.9444
1.7038
2.2265
1.3725
1.4872
Fund - Equity
Reliance Short Term Equity
0.0481
0.0324
0.1055
0.0959
0.0417
0.0647
Fund
Reliance Vision
2.0735
0.9829
1.8555
2.2753
1.4246
1.7223
Average Risk
1.1264
1.8274
2.0604
1.9289
1.1942
UTI
UTI Equity Fund
1.1169
0.8547
1.4677
1.9942
1.3011
1.3469
Plus
Plan A
Average Risk
1.1126
0.9251
1.9431
2.5322
1.4012
International Refereed Research Journal ■ www.researchersworld.com ■ Vol–III, Issue3(3), July 2012 [50]
-Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172
INFERENCE:
Table 4.3. Reveals the Risk in terms of Standard Deviation of Return of selected schemes of selected
companies and it is found that on an average HDFC and Reliance Schemes are riskier than the ICICI
Prudential, UTI, and Birla Sun Life Schemes during 2007 to 2011. The variation in return is observed to be
higher during 2009 as compare to others years, in case of all selected schemes.
However, in case of HDFC Capital Builder Fund-Growth (3.0012) in 2011, Reliance Regular Saving Fund-
Equity-Growth (6.2563) in 2009 and (4.6582) in 2010, UTI Equity Fund-Growth (4.7910) in 2009 and Birla
Sun Life Advantage Fund –Growth (3.0017) in 2008 were riskier than the market. Reliance Short Term Equity
Fund-Growth is least riskier than other companies schemes from 2007 to 2011. Reliance Regular Savings
Fund - Equity - Growth risk is high for all five years compare to the others schemes. This mean that if any
investor want to earn good return on scheme at low risk than, that person can invest in this reliance scheme.
Scheme Name
HDFC
2011
2010
2009
2008
2007
Average
Fund
Average Value
0.7723
0.6138
0.7091
0.7225
0.7830
ICICI Prudential
ICICI Prudential
0.6814
0.6992
0.5417
0.7160
0.5957
0.6468
Discovery Fund - IP
Industries Fund
Fund
Fund
Average Value
0.8429
0.8051
0.7047
0.8142
0.7780
Reliance
Reliance Growth
0.8157
0.8323
0.7126
0.7152
0.7698
0.7691
Fund
Equity Fund
Reliance Vision
0.8132
0.9154
0.8189
0.7571
0.8536
0.8316
Average value
0.6568
0.5737
0.6392
0.6334
0.6803
UTI
Fund
Yield Plus
Birla Sun Life Equity
0.8345
0.6220
0.8697
0.8346
0.8673
0.8056
Fund
Fund - Plan A
Birla Sun Life Top 100
0.8291
0.6466
0.7953
0.7562
0.8944
0.7843
Fund
Average Value
0.7411
0.6243
0.7897
0.7473
0.7950
Source: calculated data
INFERENCE:
Table 4.5 clearly shows that on an average, all schemes had been defensive as the average beta value is less
than one. However the selected ICICI Prudential, UTI and Birla Sun Life schemes had been more defensive
than the HDFC and Reliance schemes. ICICI Prudential Top 200 Fund – Growth (0.9264) in 2010 and (0.9442)
in 2011, ICICI Prudential Top 100 Fund – Growth (0.9132) in 2011, Reliance Vision – Growth (0.9154) in
2010, UTI Opportunities Fund - Growth(0.9367) in 2007, UTI Equity Fund – Growth(0.9008) in 2010 and
Birla Sun Life Advantage Fund – Growth(0.9386) in 2009 having beta value nearby one.
In average beta value as per scheme-wise Birla Sun Life Advantage Fund - Growth is having a higher beta
value than compare to the all other schemes, while UTI Opportunities Fund - Growth scheme average beta
value is lower than average because it assimilates the changes with sensex value.
Scheme Name
HDFC
2011
2010
2009
2008
2007
Average
39.4122
-40.2063
35.7473
9.8834
Fund
34.9955
-41.8675
19.8033
-0.4340
Satellite Fund
35.6436
-32.5168
24.8026
3.5170
HDFC Long Term
-31.2863
10.0565
34.5156
-38.2081
19.5048
-1.0835
ICICI Prudential
-27.8877
21.4198
39.8205
-28.8131
20.3687
4.9816
Average Value
-29.054
20.54326
35.4568
-36.2391
29.8536
ICICI Prudential
Dynamic Plan
ICICI Prudential
-33.5185
22.8694
52.7596
-36.9140
20.8751
ICICI Prudential
-28.0785
10.5028
27.8703
-43.5125
28.2019
-1.0032
Service Industries
ICICI Prudential Top
-28.0785
15.1048
31.8309
-34.1325
22.0622
1.3573
Average Value
-28.3227
16.48304
36.03096
-34.2322
21.97532
Equity Fund
UTI Equity Fund
-25.7993
15.5788
38.2580
-33.7656
23.0613
3.46664
Reliance Vision
-19.8887
9.1917
29.3737
-35.2761
25.4745
1.77502
Fund
UTI
Birla Sun Life
Fund
Average Value
-26.4142
13.7322
25.57156
-38.8952
25.67318
Dividend Yield Plus
Fund
Fund
Average Value
-32.8947
12.27362
31.1142
-33.4704
27.83628
INFERENCE:
Table 4.7 reflects Sharpe’s Index value for the selected schemes of selected company’s scheme during 2007 to
2011. In year 2007, 2009 and 2010, the performance of all schemes is poor in the market on the basis of
Sharpe’s Index. Only Reliance Regular Saving Fund - Equity – Growth (-3.1661) in 2009 and Reliance Short
Term Fund – Growth (-7.1732) in 2010 Schemes were having a good performance. Reliance Short Term
Equity Fund - Growth sharp value is higher, these mean scheme risk premium is high compare to other
schemes. And portfolio value of HDFC Company is higher in year 2010.
In year 2008 and 2011, on basis of Sharpe’s Index and return, the performance of various schemes of all five
companies is not found good because overall market condition was not favorable. HDFC Top 200 Fund –
Growth (49.4100) in 2007, ICICI Prudential Discovery Fund – IP- Growth (52.7596) in 2009 and UTI Master
Value Fund – Growth (43.3841) in 2009 performed well compare to others selected schemes. Reliance Short
Term Fund – Growth (-0.6244) in 2011 is near on par performance as compared to the market.
Scheme Name
HDFC
2011
2010
2009
2008
2007
Average
HDFC Capital Builder
-47.7611
29.3917
67.9314
-132.2609
65.5632
-3.4271
Fund
84.5318
-140.0134
32.6437
-10.4946
Fund
26.0707
83.5489
-97.4316
40.8622
1.2610
22.5476
114.4280
117.7012
32.9543
1.7831
Equity Fund
20.3260
95.9869
-82.6399
79.1970
14.5470
Average Value
-47.1771
25.3264
89.2854
-66.9289
50.2440
ICICI Prudential
ICICI Prudential
-50.9614
27.5278
146.9374
-119.9725
41.6955
9.0453
Discovery Fund - IP
ICICI Prudential
-39.1201
23.0800
92.2834
-85.8104
34.0010
4.8867
Dynamic Plan
ICICI Prudential
-39.7497
11.2627
63.2274
-131.3037
49.8820
-9.3362
12.9108
61.8746
-80.3199
29.3866
-1.8767
100 Fund
ICICI Prudential Top
-35.7741
15.6658
71.0027
-100.4128
36.2810
-2.6474
200 Fund
Average Value
-39.7682
18.0894
87.0651
-103.564
38.2492
Reliance
Reliance Growth
-48.6105
12.8340
87.7440
-118. 7244
62.1527
-0.9208
Reliance NRI Equity
-45.2352
16.6690
72.2437
-93.4693
39.7860
-2.0011
Fund
Reliance Regular
-52.6016
339.808
-20.5224
-113.0302
67.0655
44.144
Reliance Vision
-50.7142
9.8699
24.7893
-106. 0141
42.5177
-15.9103
Average value
-39.572
74.1556
40.5086
-62.8946
50.4512
UTI
UTI Opportunities
-28.6901
14.8305
79.1862
-105.7180
48.2485
1.57142
Fund
Average Value
-40.8934
16.0237
74.24818
-126.554
50.2849
Birla Sun Life
Advantage Fund
Birla Sun Life
-47.3757
44.7799
110.2812
-116.7793
59.7840
10.1380
Fund - Plan A
Birla Sun Life Top 100
-37.2087
17.0944
62.9336
-99.5120
32.9364
-4.7512
Fund
Average Value
-48.3214
18.2624
77.7771
-113.725
50.1946
Table 4.9 reveals the risk adjusted measure of Treynor for market during year 2007 to 2011. In the year 2007,
2009 and 2010, the performance of all the schemes is found to be poor. But Reliance Regular Saving Fund -
Equity – Growth (-20.5224) in 2009 and Reliance Short Term Fund – Growth (-8.4034) in 2010 and UTI
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-Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172
Equity Fund – Growth (-27.9206) in 2009 Schemes were perform better on systematic risk adjusted return.
During 2008 and 2011, none of the schemes had underperformed. The performance of HDFC Long Term
Equity Fund – Growth (114.4280) in 2009, ICICI Prudential Discovery Fund – IP - Growth (146.9374) in
2009, Reliance Regular Saving Fund - Equity – Growth (339.8087) in 2010, UTI Master Value Fund – Growth
(119.7503), UTI Mid Cap Fund – Growth (110.8672) in 2009 is more compare to others selected schemes. In
year 2007, 2009 and 2010, 90% of selected schemes give even a return equal to risk free return. Year 2008 and
2011 was really bad as 100% of selected schemes did not give even a return equal to risk free return because
Its Treynor Index is more than benchmark as its beta value is negative. Here we can see that Reliance Short
Term Equity Fund - Growth Treynor value is high compare to other companies schemes.
Scheme Name
HDFC
2011
2010
2009
2008
2007
Average
10.4080
12.4365
-33.3293
3.7751
-3.0405
Fund
HDFC Core & Satellite
-14.3150
12.1250
23.5386
-41.3804
2.5200
-3.5023
Fund
9.3079
4.6718
7.5948
27.6977
-23.9078
2.4492
1.6218
Equity Fund
HDFC Top 200 Fund
-4.0767
7.9613
26.7565
-1.0407
43.7505
14.6701
Average Value
-8.3146
9.9951
22.8092
-22.4293
12.3605
ICICI Prudential
ICICI Prudential
-10.2466
11.6317
50.3972
-27.6438
7.2209
6.2718
Discovery Fund - IP
ICICI Prudential
-2.4795
7.4385
22.1652
-3.4443
3.2981
5.3956
Dynamic Plan
ICICI Prudential
-3.4441
11.2627
7.5220
-40.5411
15.2125
-1.9976
1.7180
6.4797
0.9373
-0.1758
2.2826
100 Fund
4.4222
13.4087
-16.6126
5.7726
1.7890
200 Fund
Average Value
-2.3524
7.29462
19.99456
-17.4609
6.26566
Reliance
Reliance Growth
-10.3499
1.6160
24.1131
-26.7178
25.0808
2.7484
Reliance NRI Equity
-7.3526
4.7386
15.7966
-10.8787
9.1725
2.2952
Fund
Reliance Regular
-13.7205
89.7536
-53.4871
-24.0949
31.7706
6.0443
Savings Fund - Equity
-0.5329
-4.7432
6.9102
0.3634
0.7024
Equity Fund
Reliance Vision
-12.0278
-0.9359
10.3624
-18.6621
11.0485
-2.0429
Average value
-8.38722
18.9278
-1.59164
-14.6887
15.48716
UTI
UTI Equity Fund
20.3360
4.7908
22.2786
-13.3684
6.6566
8.1387
Advantage Fund
Birla Sun Life Dividend
-6.5859
14.7979
30.0695
-19.9837
18.4396
7.3474
Yield Plus
Fund
Birla Sun Life Mid Cap
-14.4594
-1.7675
29.1029
-39.0502
27.7528
0.3157
Fund - Plan A
Fund
Average Value
-8.9359
2.98406
17.0508
-23.3717
15.30878
INFERENCE:
Table 4.11 presents value of Jensen’s absolute measure. i.e., Alpha for selected schemes of selected companies
during 2007 to 2011. In 2008 and 2011, all schemes performed poor compare to all other years. Table also
show that Jensen alpha values for HDFC is higher than others schemes.
In year 2009 and 2010 , most of the schemes outperformed except Reliance Regular Saving Fund - Equity –
Growth (-53.4871), Reliance Short Term Fund – Growth(-4.7432), Reliance Vision – Growth(-0.9359), UTI
Master Value Fund – Growth(-241.1316), Birla Sun Life Advantage Fund – Growth(-1.6914), Birla Sun Life
Mid Cap Fund – Plan - A – Growth(-1.7675). Here Jensen Alpha value is more in HDFC Top 200 Fund-
Growth scheme 14.67 than other companies.
Scheme Name
HDFC
2011
2010
2009
2008
2007
Average
56.3684
-26.4616
20.3871
21.7804
Fund
10.8993
-32.9043
0.9969
-4.3518
Fund
20.6051
-9.5199
7.7921
4.4615
HDFC Long Term Equity
-4.4796
-1.0768
15.0292
-19.8205
0.5877
-1.952
ICICI Prudential
-1.3970
6.9573
20.4834
-0.8853
1.9005
5.4117
Average Value
4.08478
7.97824
23.60512
-17.7257
14.5302
ICICI Prudential
Dynamic Plan
ICICI Prudential
-7.1635
10.1468
42.7245
-19.7449
2.4210
-14.7804
4.6167
1.9580
Average Value
-0.83636
4.48266
17.63986
-14.2263
4.1493
Reliance Growth
-7.7086
0.4431
20.9562
-21.7436
21.9632
2.7820
Fund
Fund - Equity
Reliance Vision
14.4720
-1.6207
9.0126
-15.7224
9.4236
3.1130
UTI
UTI Mid Cap Fund
-6.2394
1.7919
26.8981
-40.6458
5.0568
-2.6276
Average Value
-0.97228
2.7263
-78.2188
-22.719
9.38754
Fund - Plan A
Average Value
-6.84352
-0.1729
13.5669
-16.0998
12.5819
INFERENCE:
Fama’s measure, whose positive value indicates superior stock selection skills of the managers, is presented in Table
4.13 for selected schemes of selected companies during 2007 to 2011. In 2007, managers all of the schemes
portrayed superior stock selection skills. Only the manager of ICICI Prudential Top 100 Fund – Growth (-0.6484) is
not having a superior stock selection skills. HDFC Top 200 Fund – Growth (0.0776), ICICI Prudential Top 100
Fund – Growth (1.6592), Reliance Short Term Fund – Growth (6.8191) in 2008 and HDFC Capital Builder Fund –
Growth(47.0211), ICICI Prudential Top 100 Fund – Growth(3.2224), ICICI Prudential Top 200 Fund –
Growth(3.0355), Reliance Short Term Fund – Growth(1.2381), Reliance Vision – Growth(14.4720), UTI
Opportunities Fun – Growth(6.7828) and UTI Equity Fund – Growth(3.9352) in 2011, have a positive value of
Fama’s measures which means that the managers of the schemes have really done superior stock selection. In 2009
and 2010, 70% of selected schemes have a positives value of Fama’s measures. Fama value is higher in this HDFC
Capital Builder Fund – Growth for last five years as compare to the others schemes
CONCLUSION:
Overall, 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. Beta is less than one to all selected
mutual fund companies which means the funds are less volatile than the Index. Funds with beta close to one,
means the fund’s performance closely match the benchmark index. Sharpe’s Index of HDFC Mutual fund is
higher than the other, so it shows good performance compared to other funds. Treynor’s Index result revealed
that the HDFC and Reliance mutual fund offers better return in comparison to ICICI Prudential, UTI, and
Birla Sun Life Mutual funds for the same level of risk exposure.
REFERENCES:
Guha, S. (2008). Performance of Indian Equity Mutual Funds vis-a-vis their Style Benchmarks. The ICFAI
Journal of Applied Finance , 49-81.
Madhumathi, S. P. (2005). Characteristics & performance evaluation of selected Mutual Funds in India .
9th Indian Institute of Capital Market Conference.
Michael, C. J. (1967). The Performance of Mutual Funds in the period 1945-1964. Journal of Finance , 389-416.
Selvam, Murugesan and Palanisamy, Bhuvaneswari, Analysis of Risk and Return Relationship of Indian
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