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Pe of Tax Saving Schemes-1

Pe of Tax Saving Schemes-1

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Published by: prashant13_4 on May 07, 2010
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10/08/2010

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PERFORMANCE
 
EVALUATION
 
OF
 
TAX
 
SAVING
 
MUTUAL
 
FUNDS
 
SCHEMES
 
IN
I
 NDIA
S
.
DURGA
,
A
SSISTANT
P
ROFESSOR 
TJPS
 
COLLEGE
,
GUNTUR 
.
CELL
 
 NO
: 09160028805sdms1234@gmail.com
 
PERFORMANCE
 
EVALUATION
 
OF
 
TAX
 
SAVING
 
MUTUAL
 
FUNDS
 
SCHEMES
 
IN
I
 NDIA
ABSTRACT
 
The objective of this paper is to evaluate the performance of Indian Mutual  fund tax saving schemes during the period 2003-2007.. 1,3,&5 absolute returns werecalculated. Since the absolute returns does not account for overall markemovements during the period we have calculated Excess returns for 1,3,&5 years. Performance measures used are Sharpe ratio, Treynor ratio and Jensen measure.
…………………………………………………………………………………………………….I
NTRODUCTION
Each one of us need finance at various stages of our life and to ensure that we have themoney available at the right time and when needed, financial needs of an individual,translating the needs into monetarily measurable goals at different times in the futureand planning the financial investments that will allow the financial needs and achievehis life's goals. With the emergence of capital markets at the centre stage of the Indianfinancial system from its marginal role a decade earlier, the Indian capital market alsowitnessed during the same period a significant constitutional development in the formof a diversified structure of Mutual funds. The large amounts of money collected bymutual funds from 2004 onwards indicates that they have emerged as an importantsavings vehicle of investors and with their war chests of money they also becamesignificant institutional investors in the capital market. The accelerated growth of mutual funds highlights a need for a study on the performance of Mutual Funds.
 I. D
ATA
 
The data used for analysis is mainly the secondary data. Data on mutual funds is drawnfrom the respective web-sites. The sample is restricted to 19 tax saving funds whosedata is available on a daily basis for the sample period. The schemes considered in the
 
study are only those with the growth option as this will not warrant any dividendadjustments to the published NAV data. The sample period spans over the 2003-2007.
II.M
ETHODOLOGY
:
 
1,3,5 yrs absolute returns were calculated for all the 19 schemes.1,3,5 yrs Excess returns were also calculated as absolute returns doesn't account for overall market movements.we then used have used Sharpe's, Treynor's and Jensen'smeasures which takes into account not only the market performance but also theriskiness of the scheme.
III PERFORMANCE ANALYSIS
We started the performance evaluation by looking at raw returns which is defined asunder:WhereRt = Daily return of a mutual fund in the period t NAVt = Daily net asset value per unit of the mutual fund in the period tSince the sample is restricted only to growth oriented schemes there is nointermediate income and hence no adjustments for dividends are required. Return aloneshould not be considered as the basis of measurement of the performance of a mutualfund scheme, it should also include the risk taken by the fund manager becausedifferent funds will have different levels of risk attached to them. Risk associated with afund, in a general, can be defined as variability or fluctuations in the returns generated by it.The higher the fluctuations in the returns of a fund during a given period, higher will bethe risk associated with it. These fluctuations in the returns generated by a fund areresultant of two guiding forces.First, general market fluctuations, which affect all the securities, present in the market,called market risk or systematic risk and second, fluctuations due to specific securities present in the portfolio of the fund, called unsystematic risk. The total risk of themutual funds under consideration is measured by the standard deviation of the dailyreturns which was calculated as follows: Where,S = Standard deviation (total risk) of the mutual fundn = Number of daily returns

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