“A STUDY ON PERFORMANCE EVALUATION OF MUTUAL FUNDS IN CHENNAI AT CD EQUISEARCH PRIVATE LIMITED”
By V. INDUMATHI (REGISTER NO: ) of
JEPPIAAR ENGINEERING COLLEGE
CHENNAI A PROJECT REPORT Submitted To The FACULTY OF MANAGEMENT STUDIES In partial fulfillment of the requirements For the award of the degree
MASTER OF BUSINESS ADMINISTRATION Anna university, chennai- 600 025 MAY -2012
The successful completion of any task would be incomplete without mentioning the names of persons who helped to make it possible. I take this opportunity to express my gratitude in few words and respect to all those who helped me in the completion of this project. I express my deep gratitude to Mr. V. Raja, Chairman, Mr. A. Mohammed Ilyas, Vice-Chairman, Mr. K. Shivram Alva, Secretary,I.F.E.T College of Engineering. I am extremely grateful to Our Principal Dr. S.S. Jayachandran, M.E, Ph.D, to provide necessary and essential facilities to do this project work. I express our sincere thanks and deep sense of gratitude to
Prof Dr. R. Maheswari, B.E., M.B.A., M.Phil., Ph.D.,Head of the Department, Department of Management Studies for providing me an opportunity to study and her encouragement, support and guidance to complete this project work successfully. It is my immense pleasure to express our profound gratitude to my beloved guideMr.R.SendamizhiChelvan, M.B.A., M.Phil.,Lecturer, Department of
Management Studies, I.F.E.TCollege of Engineering for his consistent guidance in my project and for constant encouragement. His advice and systematic approach has given a new dimension to my project. I convey my heartiest thanks to Mr. Deepak Kumar Giya, Branch Manager, at “UNICON INVESTMENT SOLUTION”, Pondicherry, who kindly granted permission to do this project work in his esteemed organization. . Finally, I express my sincere thanks and deep sense of gratitude to my parents and friends for giving timely advice in all the ways and in all aspects for the success of this project work.
This is to certify that the project report titled “A STUDY ON PERFORMANCE EVALUATION OF MUTUAL FUNDS IN CD EQUISEARCH PRIVATE LIMITED” is thebonafide work of Ms.V.INDUMATHI Reg. no. Who carried out the research under my supervision. Certified further , that to the best of myknowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.
Signature of Supervisor
Signature of HOD
Submitted to Project Viva Voce held on ……………….
Chennai affiliated to Anna University. for the award of any Degree or Diploma. INDUMATHI.Chennai. The study has been undertaken in partial fulfillment for the Degree of Master of Business Administration at JeppiaarEngineering College.hereby declare that this project work entitled “A STUDY ON PERFORMANCE EVALUATION OF MUTUAL FUNDS IN CHENNAI AT CD
EQUISEARCH PRIVATE LIMITED”is an authenticated work carried out is me at CD EQUISEARCH PRIVATELIMITED. V.DECLARATION
I also declare that this project has not been submitted to any other institutions or university.
The study provides some findings that were inferred from the analysis of the collected data. Sharpe. alpha.
SPECIMEN TABLE OF CONTENTS
. The suggestions and recommendations given by the analysis of data can be used in the company. treynor method. beta. The study has been conducted by secondary objectives.ABSTRACT
The project report entitled‖ A study on performance Evaluation of Mutual funds in CHANGING DIMENSION EQUI SEARCH” is intended to know the performance Evaluation of mutual funds at changing dimension equi search.
Analysis based on the different types of tools like average return. standard deviation.
1. List of Charts CHAPTER PARTICULARS INTRODUCTION Page No
1.5 Objectives of the Study 1. Acknowledgement 2.2 Suggestions 3.3 Conclusion
LIS T OF TABLES
. Abstract 3.2 Research Methodology 2. DISCUSSION AND CONCLUSION
28 37 43
3.1 Review of Literature 2.1 Findings
60 63 64 65 66
3.3 Company Profile 1.1 1.6 Scope of the Study 1. Table of Contents 4.2
Introduction of the study Industry Profile
10 14 19 23 24 25 26
1.3 Data Analysis and Interpretation
RESULTS. List of Tables 5.7 Limitations of the Study
MAIN THEME OF THE PROJECT
2.4 Need for the Study 1.
Sl. No 1.2.1 2.3.1a 2.3.1b 2.3.1c 2.3.1d 2.3.1e 2.3.1f 2.3.1g 2.3.1h 2.3.2a 2.3.2b 2.3.2c 2.3.2d 2.3.2e 2.3.2f 2.3.2g 2.3.2h 2.3.1 2.3.3a 2.3.3b 2.3.3c 2.3.3d 2.3.3e 2.3.3f 2.3.3g 2.3.4a 2.3.4b 2.3.4c 2.3.4d
List of Tables List of Commodities Calculating average return of HDFC Mutual fund for year 2010 Arithmetic Mean of HDFC Mutual fund for year 2010 Calculating Standard Deviation of HDFC Mutual fund for year 2010 Standard Deviation of HDFC Mutual fund for year 2010 Beta of HDFC Mutual fund for year 2010 Alpha of HDFC Mutual fund for year 2010 Sharpe ratio of HDFC Mutual fund for year 2010 Treynor Ratio of HDFC Mutual fund for year 2010 Calculating average return of ICICI Mutual fund for year 2010 Arithmetic Mean of ICICI Mutual fund for year 2010 Calculating Standard Deviation of ICICI Mutual fund for year 2010 Standard Deviation of ICICI Mutual fund for year 2010 Beta of ICICI Mutual fund for year 2010 Alpha of ICICI Mutual fund for year 2010 Sharpe ratio of ICICI Mutual fund for year 2010 Treynor Ratio of ICICI Mutual fund for year 2010 Comparison of HDFC & ICICI Mutual Funds for Year 2010 Calculating average return of HDFC Mutual fund for year 2011 Arithmetic Mean of HDFC Mutual fund for year 2011 Calculating Standard Deviation of HDFC Mutual fund for year 2011 Standard Deviation of HDFC Mutual fund for year 2011 Beta of HDFC Mutual fund for year 2011 Alpha of HDFC Mutual fund for year 2011 Sharpe ratio of HDFC Mutual fund for year 2011 Treynor Ratio of HDFC Mutual fund for year 2011 Calculating average return of ICICI Mutual fund for year 2011 Arithmetic Mean of ICICI Mutual fund for year 2011 Calculating Standard Deviation of ICICI Mutual fund for year 2011
Page No 7 36 36 37 37 37 37 38 38 39 39 40 40 40 41 41 42 42 42 43 43 43 44 44 44 44 45 45 46
2.3.4e 2.3.4f 2.3.4g 2.34h 2.3.4i 2.3.2
Standard Deviation of ICICI Mutual fund for year 2011 Beta of ICICI Mutual fund for year 2011 Alpha of ICICI Mutual fund for year 2011 Sharpe ratio of ICICI Mutual fund for year 2011 Treynor Ratio of ICICI Mutual fund for year 2011 Comparison of HDFC & ICICI Mutual Funds for Year 2011
46 47 47 47 47 48
commercial papers. and money market instruments. On the other hand they also provide a route into specialist markets where direct investment often demands both more time and more knowledge than an investor may possess. etc. bonds. which plays a crucial role in an economy by mobilizing savings and investing them in the capital market. Pooling is the key to mutual fund investing. Investors who invest in mutual funds are provided with units to participate in stock markets. certificates of deposits. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.CHAPTER 1
Mutual funds. A mutual fund is an institution that invests the pooled funds of public to create a diversified portfolio of securities. nor perhaps the expertise to undertake the direct investment in equities. Mutual funds are dynamic institution. as the name indicates is the fund where in numerous investors come together to invest in various schemes of mutual fund. Mutual fund as an investment company combines or collects money of its shareholders and invests those funds in variety of stocks. Each mutual fund has a specific investment objective and tries to meet that objective through active portfolio management. can go down as well as up. 10
. The latter include securities. Mutual fund cannot guarantee a fixed rate of return. It depends on the market condition. Hence it is said that mutual funds are subjected to market risk. like an investment in share. thus establishing a link between savings and the capital market. If the particular scheme is performing well then more return can be expected. These units are investment vehicle that provide a means of participation in the stock market for people who have neither the time. It is also seen that people invest in particular funds depending on who the fund manager is. nor the money. Mutual funds provide the investor with professional management of funds and diversification of investment. The value of an investor’s holding in a unit can therefore. It also depends on the fund manager expertise knowledge. The price of units in any mutual fund is governed by the value of underlying securities.
Since small investors generally do not have adequate time. The income earned through these investments and the capital appreciations realized by the schemes are shared by its unit holders in proportion to the number of units owned by them. they have to rely on an intermediary. The criticality such a measure comes in when you factor in the fluctuations that characterize stock markets. The interest of the investors is protected by the SEBI. experience & resources for directly accessing the capital market.The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. knowledge. This principle has been effective worldwide as more & more investors are going the mutual fund way. which acts as a watchdog. These could range from shares to debentures to money market instruments. Mutual funds are governed by SEBI (Mutual Funds) regulations. which undertakes informed investment decisions & provides consequential benefits of professional expertise. professionally managed basket of securities at a relatively low cost. A collected corpus can be used to procure a diversified portfolio indicating greater returns has also create economies of scale through cost reduction. This portfolio diversification ensures risk minimization.
Mutual Fund Operation Flow Chart
Thus a mutual fund is the most suitable investment for the common person as it offers an opportunity to invest in a diversified.
AMC. & appoints the trustees. holds the securities of various schemes of the fund in its custody. 12
. custodian. who is also registered with SEBI. The AMC is the business face of the mutual fund. 1996. trustees. custodians. Custodian.ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:
Mutual funds have a unique structure not shared with other entities such as companies of firms. transfer agents & of course. The structure of the mutual fund India is governed by the SEBI (Mutual Funds) regulations. the fund & the Asset Management Company(AMC) the legal structure also drives the inter-relationships between these constituents. The trustees are responsible to the investors in the mutual fund. sponsors. & appoint the AMC for managing the investment portfolio. These regulations make it mandatory for mutual funds to have a structure of sponsor. It is important for employees & agents to be aware of the special nature of this structure. as it manages all affairs of the mutual fund. trustee. The sponsor is the promoter of the mutual fund. The mutual fund & the AMC have to be registered with SEBI. because it determines the rights & responsibilities of the fund’s constituents viz..
Sponsor must have been profit making in at leastthree of the above five years. He appointsthe trustees. Custodians & the AMC with prior approval of SEBI.
A Board of Trustees – a body of individuals. Board of Trustees manages most of the funds in India. may manage the Trust. Sponsor:
The sponsor is the promoter of the mutual fund. They ensure that AMC’s operations are along professional lines. & in accordance with SEBI regulations. He must have at least five year track record of business interest in the financial markets. They are the primary guardian of the unit holder’s funds and assets. The sponsor establishes the Mutual fund & registers the same with SEBI. or a trust company – a corporate body. He must contribute at least 40% of the capital of theAMC.
. The Trust is created through a document called the Trust Deed that is executed by the Fund Sponsor in favors of the trustees.
which helps to resolve disputes by logging in the trade execution process entirety. at a single cost. In order to provide efficiency. No brainstorming over market direction. thus increasing the informational efficiency of markets. This was time consuming and inefficient. big or small. NSE introduced a nation-wide on-line fully automated screen based trading system where a member can punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds a matching sale or buy order from a counter party. It also provides a perfect audit trial. Indian commodity derivatives hedge both forex and commodity specific risk. cost and risk of error. improving the depth and liquidity of the market. Now dematerialization of shares is introduced ―a new concept‖ which converts paper based physical trading into electronic trading. as well as on fraud resulting in improved operational efficiency. irrespective of their geographical locations. It allows faster incorporation of price sensitive information into prevailing prices. Commodity trading is about the simple economics of supply and demand. It is a safe and convenient way to hold securities. Supports are known. No hedging on the NYMEX. thus providing equal access to everybody. Screen based electronic system electronically matches orders on a strict price/time priority and hence cuts down on time. P&L statement. Screen based trading system helps in faster transfer of securities and no stamp duty is required on transfer of securities.INDUSTRY PROFILE
The trading on stock exchanges in India used to take place through open outcry without use of information technology for immediate matching or recording of trades. Seasonality patterns quiet often provide a clue to both short-term and long-term players. EBITDA and reading between the lines. It enables market participants. No Dollar-Rupee premiums/discounts.
No balance sheet. to trade with one another simultaneous. liquidity and transparency. This imposed limits on trading volumes and efficiency. It provides full anonymity by accepting orders. from members without revealing their identity.
. only resistance matters! Minimum support price acts as a statutory support for many commodities.
24 trillion. and in terms of contracts traded. 3 in crude oil and gold in futures trading The highest traded item is gold. cardamom. MCX has several strategic alliances with leading exchanges across the globe As of early 2010. ferrous and non-ferrous metals. It was established in 2003 and is based in Mumbai. energy. the normal daily turnover of MCX was about US$ 6 to 8 billion MCX now reaches out to about 800 cities and towns in India with the help of about 126. 1 in silver. MCX ranks no. no. no.2. It is regulated by the Forward Markets Commission. MCX is India's No. and a number of agricultural commodities (mentha oil.000 trading terminals MCX COMDEX is India's first and only composite commodity futures price index METAL FIBER SPICES PULSES OIL&OIL SEEDS BULLION ENERGY PLANTATIONS PETROCHEMICALS CEREALS
Table 1. potatoes. MCX offers futures trading in bullion. 2 in natural gas.No scam. 1 commodity exchange with 83% market share in 2009 The exchange's main competitor is National Commodity & Derivatives Exchange Ltd Globally. Commodity trading comes with no insider trading information and company specific risk. The turnover of the exchange for the fiscal year 2009 was US$ 1. no price rigging. it was in 2009 the world's sixth largest commodity exchange.
Multi Commodity Exchange (MCX):
Multi Commodity Exchange (MCX) is an independent commodity exchange based in India.a: List of Commodities
. palm oil and others).
bonds. which include.
A mutual fund is a professionally managed type of collective investment that pools money from many investors to buy stocks. NCDEX is a closely held private company which is promoted by national level institutions and has an independent Board of Directors and professionals not having vested interest in commodity markets. It has commenced its operations on 15 December 2003. and/or other securities. It obtained its Certificate for Commencement of Business on 9 May 2003.National Commodity and Derivatives Exchange (NCDEX):
National Commodity & Derivatives Exchange Limited (NCDEX) is an online commodity exchange based in India. 1956. short-term money market instruments. Fees Less control over timing of recognition of gains Less predictable income No opportunity to customize 17
. It was incorporated as a private limited company incorporated on 23 April 2003 under the Companies Act. These include: Increased diversification Daily liquidity Professional investment management Ability to participate in investments that may be available only to larger investors Service and convenience Government oversight Ease of comparison
Disadvantages of Mutual Funds
Mutual funds have disadvantages as well.
Advantages of Mutual Funds
Mutual funds have advantages compared to direct investing in individual securities.
Types of Mutual Funds:
Open-end funds Closed-end funds Unit investment trusts Exchange-traded funds
Investments and Classifications:
Money market funds Bond funds Stock or equity funds Hybrid funds Index (passively-managed) versus actively-managed
Mutual Funds Expenses:
Distribution charges Front-end load or sales charge Back-end load 12b-1 fees No-load funds Share classes Management fee Other fund expenses Shareholder transaction fees Securities transaction fees Expense ratio Controversy
we at CD equi search have earned the investors goodwill our most important assets over the year. business is conducted by building long term relationships with our clients and associates by laying emphasis on ethical and clean dealings.
. At CD Equi search. you could besure of the best in class research. skill and transparency. At CD Equi search. we have very aggressive plans of expansion. people are not weighted down by tradition. branches. To achieve that. With an eye on the future and in keeping with the changing times. Continued growth which is so essential in today’s fast paced and ever changing capital market has been a constant feature at CD equi search. franchisees and sub-brokers. We would be offering a complete basket in financial services. operations back-end support and above all. Here. people practice the gentle art of finance with professionalism. we are planning to foray into the growing retail segment in a big way.COMPANY PROFILE
CD Equi search is one of the leading brokerage houses with a strong presence in the institutional and HNI broking segment. With over 30 years of experience. Here. a name which inspires trust. This quality has stood the test of time and has helped us secure business from all quarters.the emphasis is on transparent and clean dealings. We are looking at ourselves amongst one of the top ten broking houses in india by 2014. After having a track record of servicing institutions and HNIs for over 3 decades. This has earned us our clients’ goodwill. Rather. We would be expanding across the geography with a wide network of our regional offices. we are inspired by the heritage of the company.
the selection and recommendations of wealth creating opportunities are primarily based on the 3C principle. Continual cash inflow through handsome dividends. Conservation of capital Consistent growth in value of investment over a period of time. Following the highest standards of ethics is entrenched in the DNA of CD Equi search. At CD Equi search.MISSION AND VISSION
CDEqui search is passionate about providing friendly customer services on the greens of the investing world.
KEY PRODUCT OFFERINGS ARE AS FOLLOWS:
Equities Commodities Currency derivatives Online broking Depository participant Structured products Distribution of mutual funds Life insurance Alternate investment Distribution of IPO / FPO Bonds
. Hussain Sheriff Mr. Chandravadan Desai . Nilesh Vasa Mr.Chairman Mr. Mahimai Raj Mr. JayeshVora .Director Mr. Thulasi Raman Mr.Assistant Vice President . VikashKalani. Krishna Kumar .Cluster Manager .Branch Manager
Mr.COO (Chief operating officer) Mr.Director ( Group companies) . Pranay Desai . Loganathan .Team Manager .CFO ( Chief financial officer) Mr.
workers and government.NEED FOR THE STUDY:
It helps in financial forecasting and planning to the organization.
. It helps on communicating and coordinating within and outside of the organization. It is useful in comparison of the performance of the organization. It makes useful to the shareholders. creditors. investors. It helps in decision making to the organization.
To identify the awareness of the financial product.
.OBJECTIVES: Primary Objective:
To analysis performance evaluation in mutual funds in Changing Dimension Equisearch private limited.
To compare the various mutual funds scheme in respect to their risk and return. To analyzing the performance of mutual funds scheme with bench mark.
o This study confines as how mutual funds is good investment avenue for investors. o The study considers performance evaluation of mutual funds based on measures such as average return. The scope of study of mutual funds is very large but my study is confined only 2 AMC’s mutual funds. sharpe’s measure and Treynor’s measure.
.SCOPE OF THE STUDY
o The project deals with mutual funds.
which may not represent the entire Mutual Fund industry. But the past performance may not be an indicator of future performance.LIMITATIONS:
The analysis is done on the basis of past performance of the funds. which may not suffice the required tenure to study the changing dimension equisearch private ltd. Performance of mutual funds is largely affected by environmental factors. I was given a time period of Ninety Days Only. whereas there are numerous mutual funds available. I have chosen only two mutual fund schemes. I have done the performance evaluation only for Two years (Jan2010-Dec2011) from this data we cannot get the results accurately. I have compared two funds of HDFC& ICICI.
. which are beyond the control of investors.
2.1 MAIN THEME OF THE PROJECT
Some theoretical papers related to the issue of performance evaluation are
Admati. and Malkiel (1995).Henriksson and Merton (1981) provide a theoretical model and Henriksson (1984)provide an empirical test of the timing ability of fund managers. and Connor and Korajczyk (1986) use APT frameworks to measure performance. Most performance evaluation methods depend on an asset pricing model to
measuresuperior performance. Sharpe(1966).
Papers thatprovide measures that do not depend on an asset pricing model include Cornell (1979)and Grinblatt and Titman (1993). Dybvig and Ross (1985b). Elton.D.1. Pﬂiederer. students prepare for their comprehensive exams. Das. period weighting measure. see Shukla and Trzcinka (1992) and Ippolito (1993). Lehmann and Modest (1987) discuss the effect of benchmark used on the performance. Some papers implementing performance evaluation methods are Grinblatt and Titman (1989a).The classics in mutual fund performance evaluation are Treynor (1965).Bhattacharya. and Ross (1986). Dybvig and Ross(1985a). and Hlavka (1993) provide an point out some ﬂaws in Ippolito (1989)’s test design and ﬁnd no evidence for superior performance after correcting these ﬂaws. Ippolito (1989) provides evidence to the contrary. Chang and Lewellen (1985). and Jensen (1968).2. Grinblattand Titman (1989b) discuss some important issues in performance evaluation and provide a more general. These measures suffer from Roll (1978)’s critique. 28
.1 REVIEW OF LITERATURE This document lists selected papers in mutual fund performance evaluation to helpSyracuse University Finance Ph. Gruber. Grinblatt and Titman (1994). Most tests of performance evaluation do not support the hypothesis that managershave superior ability and performance. For general literature review.
calculates the NAV.Two issues related with performance evaluation are persistence of performance andsurvivorship bias. 29
.1. and Zeckhauser (1993). For persistence of performance. compensates investors through dividends. It also exercises due diligence on investments & submits quarterly reports to the trustees. Brownand Goetzmann (1995). An AMC takes decisions.
2. Grinblatt and Titman (1992). Patel.2 RIGHT OF TRUSTEES
a) Appoint the AMC with the prior approval of SEBI b) Approve each of the schemes floated by the AMC c) Have the right to request any necessary information from the AMC concerning the operations of various schemes managed by the AMC Obligations of the AMC and its Directors They must ensure that: a) Investment of funds is in accordance with SEBI Regulations and the Trust Deed b) Take responsibility for the act of its employees and others whose services it has procured c) Do not undertake any other activity conflicting with managing the fund
Asset Management Company (AMC ):
The role of an Asset management companies is to act as the investment manager of the trust. maintains proper accounting & information for
Pricing of units. Gruber. Shukla and Trzcinka (1994). & provides information on listed schemes. and Blake (1996). They are the ones who manage money of investors. Elton. see Hendricks.
& keep the investor record up-to-date. process dividend payout to investor. Custodian: The custodian is appointed by the Board of Trustees for safekeeping of securities in terms of physical delivery and eventual safe keeping or participating in the clearing system through approved depository companies. as they maintain the records of investors in mutual funds. 30
The basic objectives of the Board were identified as: To protect the interests of investors in securities. by recording new investors & removing investors who have withdrawn their funds. and independent powers has been set up. record details provide by the investors on application forms. They process investor applications. to cover both development & regulation of the market. incorporate changes in information as communicated by investors. send out periodical information on the performance of the mutual fund. a statutory and autonomous regulatory board with defined responsibilities. and was subsequently upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992. Paradoxically this is a positive outcome of the Securities Scam of 1990 -91.
2. In place of Government Control. To promote the development of Securities Market.
Registrars & Transfer Agent(R & T Agent):
The Registrars & Transfer Agents(R & T Agents) are responsible for the investor servicing function.3 SEBI – Securities and Exchange Board of India:
In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution.AMCs have been set up in various countries internationally as an answer to the global problem of bad loans. send out to investors details regarding their investment in the mutual fund.
In this context the introduction of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real landmark.1. •It is used in derivative instruments like index futures and index options. so that there is an increase in number of traders including banks. prescribed registration norms. establishment of clearing corporations etc. risk identification and risk management systems for Clearing houses of stock exchanges. credit rating agencies. bankers to issue. brokers and sub -brokers. SEBI has introduced the comprehensive regulatory measures. financial institutions. mutual funds . and also to diversify the trading products. A market Index is a convenient and effective product because of the following reasons: •It acts as a barometer for market behavior.
To regulate the securities market Since its inception SEBI has been working targeting the securities and is attending
to the fulfillment of its objectives with commendable zeal and dexterity. The improvements in the securities markets like capitalization requirements. surveillance system etc.
2. merchant bankers. insurance companies. Two broad approaches of SEBI is to integrate the securities market at the national level. underwriters and others. reduced the risk of credit and also reduced the market. prima ry dealers etc.4 TYPES OF MUTUAL FUND SCHEMES :
. the eligibility criteria. It has framed bye -laws. which has made dealing in securities both safe and transparent to the end investor. •It can be used for passive fund management as in case of Index Funds. Another significant event is the approval of trading in stock indices (like S&P CNX Nifty & Sensex) in 2000. registrars. •It is used to benchmark portfolio performance. to transact through the Exchanges. portfolio managers. margining. the code of obligations and the code of conduct for different intermediaries like.
but with no proper definition of classifying a company.
. which look for capital appreciation by way of investing in blue chip stocks. By Structure Open-ended schemes Close-ended schemes Interval schemes By Investment Objective Growth schemes Income schemes Balance schemes Money Market schemes Other types of schemes Tax Saving schemes Special schemes Index schemes Sector specific schemes • Closed-end funds: A closed-end mutual fund bears a number of shares which are issued to the public by an initial public offering (IPO). • Mid-cap funds : Mid cap funds invest in small/medium sized companies. • Equity funds : Equity mutual funds. also known as stock mutual funds invest pooled amounts of money in public company stocks. • Open-end funds : Open end funds are managed by mutual fund houses for raising money from shareholders and they invest in a group of assets. • Large cap funds : Large cap funds are those mutual funds.
In other words. the less any one of them can hurt you (think about Enron). The
Advantages of investing in a Mutual Fund are:
• Professional Management – The primary advantage of funds (at least theoretically) is the professional
management of your money. • Diversification – By owning shares in a mutual fund instead of owning individual stocks or bonds. bonds. the more stocks and bonds you own. just similar to that of a stock. • Sector funds : These funds are funds that restrict the investments to a specific segment or sector. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments. • Exchange traded funds : Exchange Traded Funds (ETFs) are a basket of securities being traded on an exchange. your risk is spread out.• Balanced funds : Balanced funds are also known as hybrid fund.
. Large mutual funds typically own hundreds of different stocks in many different industries. • Growth funds : Growth funds are mutual funds that target at capital appreciation by investing in growth stocks. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money. buying a combination of common stock. They are not like the conventional mutual funds. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. and short-term bonds. preferred stock. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. • Index funds : An index fund aims to replicate the actions of an index of a specific financial market.
• Low Costs – Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage.• Economies of Scale –
Because a mutual fund buys and sells large amounts of securities at a time. its transaction costs are lower than you as an individual would pay. the proportion invested in each class of assets and the fund manager's investment strategy and outlook. Demat costs. In closed-end schemes.
. custodial. Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. depository costs etc and other fees translate into lower costs for investors. • Liquidity – In open-end schemes. • Convenient Administration – Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries. the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. • Return Potential – Over a medium to long-term. • Transparency – You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme. delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. the investor gets the money back promptly at net asset value related prices from the Mutual Fund.
and the minimum investment is small. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.
• Well-Regulated –
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors.• Flexibility –
Through features such as regular investment plans. you can systematically invest or withdraw funds according to your needs and convenience. The operations of Mutual Funds are regularly monitored by SEBI. Most companies also have automatic purchase plans whereby as little as $100 can be invested on a monthly basis
• Simplicity –
Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds. AMFI is the supervisory body of Mutual Fund Industry. • Affor dability – Investors individually may lack sufficient funds to invest in high -grade stocks. regular withdrawal plans and dividend reinvestment plans.
• Choice of Schemes –
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
When money pours into funds that have had strong success. the manager often has trouble finding a good investment for all the new money. Management is by no means infallible. high returns from a few investments often don't make much difference on the overall return. fund managers don't consider your personal tax situation. Dilution is also the result of a successful fund getting too big.
• Costs –
Mutual funds don't exist solely to make your life easier--all funds are in it for a profit. Because funds have small holdings in so many different companies. For example. a capital -gain tax is triggered.
• Dilution –
It's possible to have too much diversification (this is explained in our article entitled "Are You Over-Diversified?". • Taxes – When making decisions about your money. which affects how profitable the individual is from the sale. The mutual fund industry is masterful at burying costs under layers of jargon.
. These costs are so complicated that in this tutorial have devoted an entire section to the subject. the manager still takes his/her cut.TheDisadvantages of investing in a Mutual Fund are: • Professional Management Many investors debate over whether or not the so-called professionals are any better than you or I at picking stocks. We'll talk about this in detail in a later section. It might have been more advantageous for the individual to defer the capital gains liability. even if the fund loses money. when a fund manager sells a security. and.
2.2 RESEARCH METHODOLOGY
2.2.2. According to redmen and Mary research is a ―systematic effort to gain knowledge‖. is known as Descriptive study.1 Research Meaning
Research is an art of scientific investigation.2. which wants to portray the characteristics of a group or individual or situation. It is a plan of action for a research project and explains in detail how data are collected and analyzed. Research methodology is away to systematically solve the research problem.
2.3 Descriptive study
A study is defined as the characteristics of a group or individuals or situation. This research study is a descriptive research study.2. is known as descriptive study .2 Research Design
A research design is the arrangement of conditions for collection and analysis data in a manner that aims to combine relevance to the researcher purpose with economy in procedure‖.4 Data Used
The data is collected from secondary data by using BSE and Nifty. It is mostly qualitative in nature. A study.2. The research design undertaken for the study is descriptive one.
2.it is mostly qualitative in nature.
THE TOOLS USED FOR CALCULATION
Arithmetic Mean Standard Deviation Beta Alpha Sharpe ratio Treynor ratio
.D is used to measure the variability of return i. Indirect relations are very rare. It indicates that stock moves along with the market.0 It indicates that one percent change in market index return causes exactly one percent change in the stock return. The arithmetic average return is appropriate as a measure of the central tendency of a number of returns calculated for a particular time i. There can be direct or indirect relation between stock’s return and index return. N= Number of Observation Average return that can be expected from investment.D= √ (y-Y) ² N The standard deviation is a measure of the variables around its mean or it is the square root of the sum of the squared deviations from the mean divided by the number of observations.e. for five years.
Beta describes the relationship between the stock’s return and index returns.
S.∑ = Y/N Where. the variation between the actual and expected return.
2) Beta= + 0. Y= Return of NAV values. 1) Beta = + 1.
Positive alpha values would yield profitable return.(∑X) (∑Y) / N(∑X) * (∑x) 2 Where. The stocks with more than 1 beta val ue are considered to be very risky. 4) Negative beta value indicates that the stocks return move in opposite direction to the market return. A positive value of alpha is a healthy sign. It indicates that it is less volatile compared to market. Y = Average return to nav return X =Average return to market index.One percent changes in the market index return causes 0. The stock return is more volatile. 3) Beta= + 2.
S t= Rp — Rf 40
.beta(X) Where. Alpha indicates that the stock return is independent of the market return. N= No of observation X = Total of market index value Y = Total of return to Nav
Alpha = Y.0 One percent change in the market index return causes 2 percent change in the stock return.5 percent change in the stock return. 5) Beta= N*∑XY .
Higher the value of sharpe ratio better the fund has performed. Sharpe ratio can be used to rank the desirability of funds or portfolios. The fund that has performed well comapred to other will be ranked first then the others.D = Standard Deviation Sharpe’s performce index gives a single value to be used for the performance ranking of various funds or portfolios. The ideal fund’s return rises at a faster rate 41
Ty= R p — R f B WHERE. Sharpe index measures the risk premium of the portfolio relative to the total amount of risk in the portfolio. The standard deviation of the portfolio indicates the risk. The fund’s performance is measured in relation to market performance. R p = Average Return to Portfolio R f= Risk Less Rate of Interest. Characteristic line gives the relation between a given market return and fund’s return. B = Beta Coeffecient
Treynor ratio is based on the concept of characteristic line. The risk premium is the dif ference between the portfolio’s average rate of return and the risk less rate of return. R p = Avereage Return on Portfolio R f= Risk Free Rate of Interest S.S.D Where.
The risk premium depends on the systematic risk assumed in a portfoilo.
. in the decline. Treynor’s risk premium of the portfolio is the difference between t he aveage return and the risk less rate of return.than the market performance when the market is moving upwards and its rate of return declines slowly than the market return.
Beta.3 The Calculations.2. Alpha. Sharpe Ratio &Treynor Ratio
. Analysis and Interpretation
Calculating Average Return.
8 2-Jun-11 1-Jul-11 3-Aug-11 1-Sep-11 1-Oct-11 3-Nov-11 1-Dec-11 TOTAL 14874.3
16.13 17.48 16.20 -2.52 8.0018 1300.4 38.66 -3.832 148.34 10.20 -2.692 36.13 363.54 8.433 15.15 8.594 X*Y NAV 26.52 1879.7 8427.196 12.356 363.112 26.981 16.4176 0.305 38.29 -2.25 8.00 -4.6491 50.6558 107.95 -7.845 19.2 17134.346 17.63 NAV 13.73 306.73 -2.18 -10.213 24.49 1.6485 50.22 508.49 X*Y 0 41.04 1217.5659 85.5 15924.77 -0.55 22.756 395.72 5.598 17.343 41.49 103.99 X 0.356 43.66 101.4858 27.9 14645.64 X2 0.30 0 41.15 8.31
405.7012 24.34773 83.733 54.376 35.582 10.184 1.50 395.786
Table2.487 40.992 24.039 -2.00 -8.91 2.44 509.2 15551.6 15404.1a: Calculating average return of HDFC Mutual fund for year 2011
TOOLS FOR CALCULATION
.5186 84.09 11.89 135.73 7.663 11.HDFC MUTUAL FUND FROM JANUARY 2011 TODECEMBER 2011
HDFC MUTUAL BOND 2010 BSE-100 Date 4-Jan-11 2-Feb-11 2-Mar-11 1-Apr-11 Close 9958.58 -1.783 16.24 5.3.73 7.955 18.158 30.38 76.77 -0.5 63.05 17.50 22.3852 0.5306 27.00 80.553 42.487
4-May-11 12134.15 49.00 -4.299 Growth Y 0.567 13.72 5.054 16.29 9901.65 -15.9 17198.22 9066.35868 83.561 148.148 Dividend Y 0.895
1d: Standard Deviation of HDFC Mutual fund for year 2011
.00 -4.112 26.299 7.81 2.913 195.95 12.66 -3.343 41.89
16.00 1.76 1.3.00 -4.00 83.66 52.613 24.16 -8.487 40.158 30.13 11.213 24.567 13.48 16.3.05447 13.86 135.1b: Arithmetic Mean of HDFC Mutual fund for year 2011
ARITHMETIC MEAN X= ∑ Y N
DIVIDEND OPTION 42.ARITHMETIC MEAN: Table 2.582 10.39 15.845 Y 0.1486 14.73 Z 0.26 3.8956 352.68 -6.2042 NAV 26.94 7.11 3.148 7.346 17.305 38.31 12 = 3.30 182.68 4.98 Z2 0.65 -15.52 8.15 8.356 Growth Y Z 0.1c: Calculating Standard Deviation of HDFC Mutual fund for year 2011 HDFC MUTUAL BOND 2011 Dividend Date 4-Jan-11 2-Feb-11 2-Mar-11 1-Apr-11 4-May-11 2-Jun-11 1-Jul-11 3-Aug-11 1-Sep-11 1-Oct-11 3-Nov-11 1-Dec-11 TOTAL NAV 13.70 -7.61 21.29 2.992 24.97 -1.07 168.61 13.65 3.13 17.663 11.3.00 -8.23
19.521 158.04 4.733 54.31
43.62 17.981 16.79 1.77 -0.77 -0.25 8.196 12.26 7.955 18.73 -2.054 16.692 36.50 13.2561 895.20 -2.78 572.79 405.4 38.52
GROWTH OPTION 54.53 Z2 0 66.18 -18.27251 5.64 13.04 = 4.25 -3.5362 21.72 5.78 4.93 64.49 0 -9.72 5.20 -2.50
STANDARD DEVIATION: Table 2.49 1.8839 39.27 -4.78 3.783 16.02 3.15 8.50 12
CALCULATION FOR STANDARD DEVIATION:
Table 2.433 15.553 42.376 35.
63 GROWTH = 4.69
12(1217.1g: Sharpe ratio of HDFC Mutual fund for year 2011 SHARPE RATIO Rp-Rf S.1f: Alpha of HDFC Mutual fund for year 2011 ALPHA = Y-B(X) DIVIDEND = 3.64 6.20)(42.63
GROWTH √(572.31) 12(1879.3.2042) √12 = 8.1h: Treynor Ratio of HDFC Mutual fund for year 2011 46
.(63.78)-(63.068 GROWTH = 4.50 – 0.398 8.50-0.60
ALPHA:Table 2.63) .2) = 1.D S.S.38
SHARPE RATIO: (RF is assumed to be 8 %) Table 2.63) .20)(54.1e: Beta of HDFC Mutual fund for year 2011 BETA DIVIDEND GROWTH
= N*∑XY .60(220.127.116.11(5.52 – 0.(63.D DIVIDEND = 3.9
TREYNOR RATIO: (RF is assumed to be 8 %) Table 2.9
Table 2.20) 2 = 0.04) 12(1879.(∑X) (∑Y) N* ∑(X)² -(∑X)²
= 12(1300.2) = -0.89) √12 = 6.08 = 0.20) 2 = 0.08 = 0.52-0.594)-(63.3.D= √(Z)² √(N)
08 = 4.99 Growth Y 0.98 0.15 13.06 7.48 12.00408 2.01 6.00 21.30 151.42 6.44 6.82869 -6.44 6.21 2.48 NAV 10.26 -20.28 -64.69736 35.2a Calculating average return of ICICI Mutual fund for year 20 11
ICICI MUTUAL BOND 2011 BSE-100 Date 4-Jan-11 1-Feb-11 2-Mar-11 1-Apr-11 3-May-11 1-Jun-11 1-Jul-11 2-Aug-11 1-Sep-11 1-Oct-11 1-Nov-11 1-Dec-11 TOTAL Close 17558.63 -0.00 X2 0.25 10 10.49 33.67 0.39 0 X*Y NAV 26.69
GROWTH 4.78367 -0.07
111.34 -2.77 -1.76 309.3231 -63.00 46.31
216785.13 13.19 6.40294 35.6572 24.09 3.46 -6.42 87.7 20355.87922 -19.21133 36.08 -1.32
40.60 = 7.52 – 0.00 -5.20157 36.33 18081.73 X 0.86 13.66 3.70 11.18
II.49 30.08433 385.04 12.231802 -20.86 10.8939
16356.9558 -22.97 -5.TREYNOR RATIO Rp-Rf B
DIVIDEND = 3.ICICI MUTUAL FUND FROM JANUARY 2011 TO DECEMBER 2011:
Table 2.67 11.85 16772.03 -6.73 16572.05 -5.92 31.08 0.3129 38.47372 25.51 29.8334 39.62 2.27 14.94 13.92 6.49
38.62 -2.1 13.00 -5.67 -2.63
17386.44 19850 -2.46 33.364372 20.27 0.3.41 X*Y 0 38.39
20445.10 8.56 17692.09 75.87 5.03 -4.66 -4.99 10.0504 2.231218 36.68 0.21 18205.68 17509.17 13.93351
TOOLS FOR CALCULATION
.95 15.10 8.03 9.50 – 0.72 11.69
20.48 Dividend Y 0.84 26.73243 98.48 0.76 13.55 5.36 -1.12 151.
68 0.42 0 -9.84 26.26 39.67 33.4097 Growth Y Z Z2 0.34 -2.ARITHMETIC MEAN: Table 2.01 6.00 81.60 -8.466 49.2b: Arithmetic Mean of HDFC Mutual fund for year 2011 ARITHMETIC MEAN X= ∑ Y N DIVIDEND OPTION 36.36 12
CALCULATION FOR STANDARD DEVIATION:
Table 2.15 13.42 6.00 GROWTH OPTION 40.34835 113.41 40.66 -4.03 9.09
NAV 26.21 36.44 6.13 13.94 13.48 12.63 21.45 3.71 8.42 = 3.38 3.43 4.31 385.77 25.62 -2.25 60.49 33.04 -5.15 10.67 -2.76 13.51 29.70 11.47 5.06 7.10 8.04 6.76 10.63592 66.3.18567 11.37 0.04 3.77 35.94205 514.99 -4.80
Date 4-Jan-11 1-Feb-11 2-Mar-11 1-Apr-11 3-May-11 1-Jun-11 1-Jul-11 2-Aug-11 1-Sep-11 1-Oct-11 1-Nov-11 1-Dec-11 TOTAL
NAV 10.67 11.12 151.97 19.66261 13.25 10 10.80 3.72 11.51942 65.46 24.99 25.62 -5.95 15.69 8.00 -5.21 106.32
STANDARD DEVIATION: Table 2.65 -7.07
Y 0.01 0 74.37782 29.00 -8.39 38.31 -2.00 -5.95 2.16 71.68 11.35 7.01 3.3.63 35.43 448.76165 28.48 14.2d: Standard Deviation of HDFC Mutual fund for year 2011 48
.97 -5.7 13.42377 36.36 -1.32 8.44 6.09 12 = 3.04 -8.33 -5.3.2c: Calculating Standard Deviation of HDFC Mutual fund for year 2011
ICICI MUTUAL BOND 2011 Dividend Z Z2 0.39 36.0864 25.11 5.05 -5.10 8.86 10.46 33.86 13.
80) √12 = 6.4097) √12 = 6.08)-(13.S.141
ALPHA: Table 2.(13.14) = 2.18) .76) 2 = 0.08 = 25.D= √(Z)² √(N)
DIVIDEND √(514.08 0.114(1.61 0.3.26
SHARPE RATIO: (Rf is assumed to be 8 %) Table 2.2i: Sharpe ratio of HDFC Mutual fund for year 2011
TREYNOR RATIO: (Rfis assumed to be 8 %) Table 2.D S.9335)-(13.(∑X) (∑Y) N* ∑(X)² -(∑X)² DIVIDEND GROWTH
= 12(75.76)(36.36-0.3.36 – 0.141 = 23.(13.76)(40.2h: Treynor Ratio of HDFC Mutual fund for year 2011 TREYNOR RATIO Rp-Rf B DIVIDEND = 3.42) 12(309.2f: Alpha of HDFC Mutual fund for year 2011 ALPHA = Y-B(X) DIVIDEND = 3.00 – 0.141(1.11
BETA: Table 2.0-0.14) = 3.87 GROWTH = 3.09) 12(309.3.3.54
GROWTH √(448.2e: Beta of HDFC Mutual fund for year 2011 BETA = N*∑XY .76) 2 = 0.114
12(87.114 GROWTH 3.18) .
19 0.54 = 0.446
GROWTH = 3.50 0.60 6.3.1: Comparison of HDFC &ICICI Mutual Funds for Year 2011 HDFC MUTUAL FUND 2011 Dividend Average Return Beta SD Alpha Sharpe ratio Treynor ratio 3.398 4.114 6.69 8.068 0.61 Growth 3.36 0.63 -0.38 0.52 0.536
Table 2.SHARPE RATIO Rp-Rf D
DIVIDEND = 3.90 1.141 6.36 – 0.640 7.08 6.87 0.54 2.536 23.446 25.11 = 0.26
ANALYSIS & INTERPRETATION:
.00 – 0.11 3.08 6.36 ICICI MUTUAL FUND 2011 Dividend 3.00 0.98 Growth 4.
In case of ICICI MUTUAL FUND. This shows that the stock is less volatile compared to market. in HDFC MUTUAL FUND returns are low and the risk is high. As per the Treynor index. beta for dividend option is 0.114 which indicates that one percent change in market index return has caused 0. Since the funds objective is to invest in Diversified portfolios the benchmarks index has performed very good. better the fund is performing. it changes to 0.60 percent in growth option while ICICI MUTUAL FUND changes to 0. When comparing. all options show the positive value. HDFC MUTUAL FUND has high risk when compared to ICICI MUTUAL FUND. the HDFC MUTUAL FUND has a greater Sharpe ratio compared to ICICI FUND in Growth option.69 percent in dividend & 0.114 percent in dividend & 0.114 per cent change in the stock return.141 percent in growth option. the ICICI MUTUAL FUND has given higher returns compared to HDFC MUTUAL FUND. Also in growth option HDFC MUTUAL FUND has given high returns compared to ICICI MUTUAL FUND. ICICI MUTUAL FUND gives high returns in growth option also.69 percent change in the stock return. Date HDFC MUTUAL FUNDS2012 Since the market has risen up. So. which has resulted in good performance of the fund. The Beta for dividend option of HDFC MUTUAL FUND is 0. This shows that the stock is less volatile compared to the market. The HDFC MUTUAL FUND Dividend option has given high returns compared to ICICI MUTUAL FUND. in Dividend option due to which the risk is also high. this has resulted in funds positive return. which has resulted in low returns compared to ICICI MUTUAL FUND in Dividend Option. When comparing the Beta for Dividend & Growth option. When market index changes to 1%. HDFC MUTUAL BOND FROM JANUARY 2012 TO DECEMBER 2012
. The negative value of Alpha incase of HDFC MUTUAL FUND. The larger the Sharpe ratio.
III. and this means funds are performing well. But in case of Dividend option ICICI MUTUAL FUND is better performing fund compared to HDFC MUTUAL FUND. In Growth option also.69 which indicates that one percent change in market index return has caused 0.
40 5481.283 265.549 48.185 18.324 48.02 150.20 4826.64 -0.645 47.252 56.176 4.367 0.50 5222.901 20.62 -0.44 0.27 124.67 -2.07 0.46 1.00 5290.83 5.97 363.30 3.40 6117.16 4.82 2.462 20.996 19.49 15.01 3.41 65.73
Growth Y X*Y
0.42 -1.30 -0.062 20.25 -9.45 -1.13 12
GROWTH OPTION 22.6 = 0.6 -4.27 -0.85 5017.615 22.16 0.993 53.018 18.47 56.Oct-12 1-Nov-12 1.89 12.09 0.76 2.6
-4.14 45.152 20.3b: Arithmetic Mean of HDFC Mutual fund for year 2012
ARITHMETIC MEAN X= ∑ Y N
DIVIDEND OPTION 1.44 29.3a Calculating average return of HDFC Mutual fund for year 2012
TOOLS FOR CALCULATION
ARITHMETIC MEAN: Table 2.63 23.76 2.62 22.47 22.3.70 1.714 19.956 22.88 12
CALCULATION FOR STANDARD DEVIATION:
.39 X X2 NAV 20.81 2.75 4970.448 0.6 = 1.5 0.28 1.16 1.11 -4.17 12.18 0.079 22.41 5.67 -2.38 -0.89 12.92 19.09 0.55 5980.53 26.62 -39.35 2.20 5251.BSE-100 Close 4-Jan-12 11-Feb-12 2-Mar-12 1-Apr-12 3 -May-12 1-Jun-12 1.566 51.65 5471.35 -0.Dec-12 TOTAL 5323.57 45.49
Table 2.01 3.11 4.42 -1.3.July-12 1-Aug-12 1.23 13.Sep-12 1.40 65.109 57.625 606.268 50.53 -26.32 31.85 6143.45 86.42 5.88
Dividend Y X*Y NAV 45.42 -2.16 -7.90 65096.36 2.64 -1.65 4.28 -4.93 5.25 8.76 -1.
22 47.3e: Beta of HDFC Mutual fund for year 2012 53
.714 19.268 50.52 126.566 51.324 48.72 2.76 2.901 20.109 57.48 0.185 18.22 0.018 18.625 606.88 0.3d: Standard Deviation of HDFC Mutual fund for year 2012 S.54 -3.24 0.41 1.28 1.3702 (Z)2
STANDARD DEVIATION: Table 2.3.003 (Z)2 NAV 45.54 3.31 0.63 2.003) √12 = 3.07 2.17 1.59 Growth Y 0 -1.82 2.42 -1.079 22.4 7.24 GROWTH √(47.096 0.42 0 0.2916 12.11 0.47 22.36 2.44 -1.59 9.29 -0.993 53.44 0.3.76 2.11 4.2916 11.067 3.3c: Calculating Standard Deviation of HDFC Mutual fund for year 201 2 HDFC MUTUALFUNDS 2011 Date 4 Jan 12 11 Feb12 2 Mar 12 1 Apr 12 3 May12 1 Jun 12 1 July 12 1 Aug 12 1 Sep 12 1 Oct 12 1 Nov 12 1 Dec 12 TOTAL Dividend NAV 20.549 48.62 -0.252 56.283 245.18 5.D= √(Z)² √(N) DIVIDEND √(126.46 11.03 -7.44 0.88 0.3.2 5.22 2.062 20.996 19.42 5.35 1.11 4.057 21.367 45.98
BETA: Table 2.615 22.29 -1.673 0 0.16 -7.D S.Table 2.12 Y 0 0.94 0.956 22.645 47.47 56.24 4.95 5.462 20.29 0.91 Z 0 2.9 2.99 2.41 5.152 20.69 Z 0 0.81 2.49 -0.0009 54.62 -0.57 45.3702) √12 = 1.68 2.42 -1.19 27.28 5.26 -1.96 8.24 2.35 2.16 4.
3.08 = 0.3. ICICI MUTUAL BOND FROM JANUARY 2012 TO DECEMBER 2012:
Table 2.08 = 2.28
SHARPE RATIO: (Rf is assumed to be 8 %) Table 2.14)-(13.39) .018
12(124.4a Calculating average return of ICICI Mutual fund for year 2012
.45)(22.45)(1.08 0.015 3.88 – 0.77 0.28 = 6.45) 2 = 0.3g: Treynor Ratio of HDFC Mutual fund for year 2012 TREYNOR RATIO Rp-Rf B DIVIDEND = 0.6) 12(363.(∑X) (∑Y) N* ∑(X)² -(∑X)²
= 12(8.13 – 0.3f: Sharpe ratio of HDFC Mutual fund for year 2012 SHARPE RATIO Rp-Rf S.08 = 0.D DIVIDEND = 0.45) 2 = 0.6) 12(363.(13.88– 0.(13.018 GROWTH 1.49)-(13.24 GROWTH = 1.42
TREYNOR RATIO: (Rfis assumed to be 8 %) Table 2.BETA = N*∑XY .13 – 0.39) .3.
3.4 6117.99 -0.72 -1.27 180.7143 -0.64 23.01 19.92351 9.00 -2.48 43.97 15.4b: Arithmetic Mean of ICICI Mutual fund for year 2012 ARITHMETIC MEAN X= ∑ Y N DIVIDEND OPTION 13.18 X2 0.50015 23.1921 -0.41 16.23 4.72 -1.89 14.22 3.25 15.64 Growth Y 0.97 47.94 4.81 13.16 1.27 14.6004 X*Y NAV 40.521 514.35 12
CALCULATION FOR STANDARD DEVIATION:
Table 2.51 3.4c: Calculating Standard Deviation of ICICI Mutual fund for year 2012 55
12.01 0.96 4.97 -0.33 188.57 14.24 7.99 16.9159 9.01 41.00 2.28 -4.02 15.27 150.43 X*Y 0 16.2098 0.4 5481.89 65006.07 15.0234 -0.22588 47.28 39.15 180.87 7.00 -2.09 1.3 40.94834 21.15 -1.21 3.3.85 5017 5290.03 2.21 43.75 4970.01 337.9976 21.07 1.43 0 16.7469 0.71 Dividend Y 0.38 15.65 5471.15 12 = 1.7331 5.36673 23.85 6143.52 3.42 0.01 -2.1562 87.6 41.38 32.62 16.94 5.72 1.86 46.8882 13.75 3.03 NAV 14.38 -0.18 17.ICICI MUTUAL BOND 2012 BSE-100 Date 4-Jan-12 1-Feb-12 2-Mar-12 1-Apr-12 3-May-12 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 TOTAL Close 5232.9 -2.6495 5.6 16.00 60.09 GROWTH OPTION 16.52 29.82 -0.15 1.45 -1.2 5251.79 15.66 4.3297
TOOLS FOR CALCULATION
ARITHMETIC MEAN: Table 2.22 0.06
5980.5 5222.6642 0.55 X 0.5 42.41 40.27 = 1.84 5.02
-1.2 4826.2975 13.00 -7.
3768 96.3.65 -0.07 15.08 -3.27
STANDARD DEVIATION: Table 2.87 7.1275 35.3 40.16 1.41 16.01 0.64 47.89 14.33657
NAV 40.41 2.16
188.00 12.71 16.52 3.51 3.69 84.4e: Beta of ICICI Mutual fund for year 2012 BETA DIVIDEND GROWTH
.24 7.82 17.87 1.03 6.03
Z 0 -3.83 GROWTH √(84.00 -3.10974 4.11 1.33 -2.27904 9.92 -3.89 0.52 0.97 -0.34 5.31 10.22 3.72 -1.00 -2.67574 11.5 42.68964 3.06 3.4d: Standard Deviation of ICICI Mutual fund for year 2012 S.00 -2.09 1.09 1.15
514.36504 9.02 13.79 15.86 46.73 0.57 14.43 -1.97 47.ICICI MUTUAL FUND 2012 Date 4-Jan-12 1-Feb-12 2-Mar-12 1-Apr-12 3-May-12 1-Jun-12 1-Jul-12 1-Aug-12 1-Sep-12 1-Oct-12 1-Nov-12 1-Dec-12 TOTAL Dividend NAV Y Z 14.84 8.3.00 5.97 0.07 -2.48 43.17 2.85 4.73 0.94 4.D= √(Z)² √(N) DIVIDEND √(96.38 1.21 43.01 41.64
BETA: Table 2.89 0.6 41.6 16.97 15.37283 3.22 2.27 14.29 2.89 -1.6405 0.62 -2.38 15.72 -1.D S.336) √12 = 2.00 0.36 0.15 1.10 Z 0 10.24 0.36
Growth Y 0.48 5.17169 8.99 -0.07 1.23 32.21 3.528 0.81 -3.16) √12 = 2.06 16.41 40.01 -2.43 -1.28 39.96 4.
TREYNOR RATIO: (Rfis assumed to be 8 %) Table 2.521)-(15.722
SHARPE RATIO: (Rfis assumed to be 8 %) Table 2.25) = 0.27) 12(337.0.3297)-(15.D DIVIDEND = 1.09 – 0.4h: Treynor Ratio of ICICI Mutual fund for year 2012 TREYNOR RATIO Rp-Rf B DIVIDEND = 1.33) – (15.515
12(180.15) 12(337.3.09 .08 0.08 = 0.0.356 2.09 – 0.01)(13.446 GROWTH = 1.52
.01) 2 = 0.515(1.25) = 0.4f: Alpha of ICICI Mutual fund for year 2012 ALPHA = Y-B(X) DIVIDEND = 1.(∑X) (∑Y) N* ∑(X)² -(∑X)²
= 12(180.08 = 0.96 0.83 GROWTH = 1.33) – (15.08 = 1.= N*∑XY .35 – 0.515 GROWTH 1.481 2.35 – 0.36 .502(1.502 = 2.4g: Sharpe ratio of ICICI Mutual fund for year 2012 SHARPE RATIO Rp-Rf S.01) 2 = 0.502
ALPHA: Table 2.
2: Comparison of HDFC &ICICI Mutual Funds for Year 2012 HDFC MUTUAL FUND 2012 Dividend Average Return Beta SD Alpha Sharpe ratio Treynor ratio 0.42 ICICI MUTUAL FUND 2012 Dividend 1.24 0.Table 2.09 0.64 0.88 0.015 2.52
ANALYSIS & INTERPRETATION:
.90 6.35 0.28 1.722 0.356 1.446 0.11 0.98 1.48 2.96 Growth 1.83 0.018 3.515 2.13 0.502 2.77 Growth 1.3.56 0.
in Dividend option due to which the risk is also high. and this means funds are performing well. the HDFC MUTUAL FUND has a greater Sharpe ratio compared to ICICI FUND in Growth option. all options show the positive value. Since the funds objective is to invest in Diversified portfolios the benchmarks index has performed very good. Since the market has risen up. beta for dividend option is 0.515 which indicates that one percent change in market index return has caused 0. When market index changes to 1 Percent.018 percent change in the stock return.502 percent in growth option while HDFC MUTUAL FUND changes to 0. ICICI MUTUAL FUND has high risk when compared to HDFC MUTUAL FUND.28 percent in growth option. the HDFC MUTUAL FUND has given higher returns compared to ICICI MUTUAL FUND. it changes to 0. The larger the Sharpe ratio. which has resulted in good performance of the fund. This shows that the stock is less volatile compared to the market. But in dividend option. When comparing the Beta for Dividend & Growth option.515 percent in dividend & 0. But when comparing the alpha values. So. The value of Alpha incase of HDFC MUTUAL FUND. The HDFC MUTUAL FUND growth option has given high returns compared to ICICI MUTUAL FUND.018 which indicates that one percent change in market index return has caused 0. this has resulted in funds positive return. But in case of Dividend option ICICI MUTUAL FUND is better performing fund compared to HDFC MUTUAL FUND. Positive alpha values would yield profitable return.
. In case of ICICI MUTUAL FUND.018 percent in dividend & 0. in ICICI MUTUAL FUND returns are low and the risk is high.515 per cent change in the stock return. ICICI MUTUAL FUND has given high returns compared to HDFC MUTUAL FUND. As per the Treynor index. This shows that the stock is less volatile compared to market. which has resulted in low returns compared to ICICI MUTUAL FUND in Dividend Option. ICICI MUTUAL FUND gives low returns in growth option. better the fund is performing. The Beta for dividend option of HDFC MUTUAL FUND is 0. In Growth option also.
FINDINGS AND SUGGESTIONS
13 in 2012. ICICI mutual fund had the average return for the dividend option Maximum of 3 for the year 2011 and minimum of 1.98 in 2012.35 in 2012. HDFC mutual fund had the Treynor’s Ratio for the dividend option for the year 2011 and minimum of 2.42 in 2012.77 in 2012. HDFC mutual fund had the Standard Deviation for the growth option Maximum of 6. HDFC mutual fund had the Standard Deviation for the dividend option 8.5 for the year 2011 and minimum of 1.FINDINGS:
HDFC mutual fund had the average return for the dividend option Maximum of 3. HDFC mutual fund had the Beta for the growth option Maximum of 0.38 in 2012.36 for the year 2011 and minimum of 1.068 in 2012. ICICI mutual fund had the average return for the growth option Maximum of 3. HDFC mutual fund had the Sharpe’s Ratio for the growth option Maximum of 0. HDFC mutual fund had the Treynor’s Ratio for the growth option Maximum of 7.09 in 2012 Maximum of 4.63 for the year 2011 and minimum of 3.56 for the year 2011 and minimum of 1.88 in 2012.9 for the year 2012 and minimum of 0.28 in 2012.018 in 2012.9 for the year 2011and minimum of 1. HDFC mutual fund had the average return for the growth option Maximum of 4. HDFC mutual fund had the alpha for the dividend option Maximum of 0. HDFC mutual fund had the Sharpe’s ratio for the dividend option Maximum of 0.69 for the year 2011 and minimum of 0.11 for the year 2011 and minimum of -0.24 in 2012.6 for the year 2011and minimum of 0.398 for the year 2011 and minimum of 0.64 in 2011.015 in 2012.52 for the year 2011 and minimum of 0.36 for the year 2011 and minimum of 6. HDFC mutual fund had the Beta for the dividend option Maximum of 0.
. HDFC mutual fund had the alpha for the growth option Maximum of 1.98 Maximum of
141 in 2011.87 forthe year
. ICICI mutual fund had the Beta for the growth option Maximum of 0.52 in 2010.61 for the year 2011 and minimum of 1.11 for the year 2011 and minimum of 2.722 in 2012.114 in 2011. ICICI mutual fund had the alpha for the growth option Maximum of 3.515 for the year 2012 and minimum of 0.19 for the year 2011 and minimum of 0. ICICI mutual fund had the alpha for the dividend option 2011 and minimum of 0. ICICI mutual fund had the Treynor’s Ratio for the dividend option Ma ximum of 25.83 in 2012.446 in 2012. ICICI mutual fund had the Standard Deviation for the dividend option Maximum of 6. ICICI mutual fund had the Treynor’s Ratio for the growth option Maximum of 23. Maximum of 2.356 in 2012.64 in 2012. ICICI mutual fund had the Sharpe’s Ratio for the growth option Maximum of 0. ICICI mutual fund had the Sharpe’s ratio for the dividend option Maximum of 0.54 for the year 2011 and minimum of 2. ICICI mutual fund had the Standard Deviation for the growth option Maximum of 6.536 for the year 2011 and minimum of 0.502 for the year 2012 and minimum of 0.
ICICI mutual fund had the Beta for the dividend option Maximum of 0.48 in 2012.446 for the year 2011 and minimum of 0.96 in 2012.26 for the year 2009 and minimum of 2.
nature of work. Compared to the two funds of HDFC & ICICI. So. the company should see how best it advises the investors and also provide the entire information about the Mutual Fund. Higher the ratio better the fund has performed. As the customers are not aware. The risk taking ability of the investor should also be analyzed by looking into his income.o The financial advisory is recommended that they should first analyze the needs of the investors and recommend that fund which fulfills the requirements of the investor. and time period of the investment. the ICICI Mutual fund has a higher Treynor ratio in Growth option and dividend option of ICICI MUTUAL FUND which relates to excess return over risk free rate. o Complete information should be provided regularly to the advisors as well as to the investors to keep them updated about developments.
. o As Treynor ratio speaks about the risk premium associated with the fund. age of the investor. I would recommend that the advisor should concentrate on this fund & recommend the investors the same.
In Indian scenario the investments are spread over Bank Deposits. The volatility in the market might have affected the ratios but defin itely not the performance of the schemes.
. Savings Certificate. so it is difficult to analyze each and every fund in order to known their riskiness and return. which helps an investor to find out their risk.
The mutual fund industry has gained a higher growth in the recent years. There are around 34 Asset Management Companies which are currently operating and the numbers of Mutual funds are over 630 funds. The schemes taken for study proved to be a good investment avenue for all the investors as the risk associated with these schemes are low and they are yielding a very good return. Since Mutual Funds are subject to market risk the investor take help of advisory services for financial planning which helps the investor to take calculated risk. Post Office. Equity Markets and the latest Mutual Fund. Some tools are used to find risk and return of the fund. The schemes have been the one of the best schemes of HDFC & ICICI.
Reference Books: Donald E.com
. Himalaya publishing house 2008.
http://in.yahoofinance.A.Fischer&RonaldJ.Jordan-SecurityAnalysis portfolio Management V.Avadhan-Security Analysis Portfolio Management.com/q/hp?s=^NSEI&a=07&b=12&c=2009&d=07&e=15&f=2011 &g=d http://www.aspx www.yahoo.amfiindia.finance.com/NavHistoryReport_Frm.
198. 2010 2 Feb.00 1. 2011 3 May.00 3.500 1.239.200 344.00 2.073.10 2.209.50 2.520.800 376.372.10 2. 2011 1 Dec.80 1.40 2.085.SENSEX HISTORICAL DATA 2010-2011
1 Jan.00 1.91 2.00 2.00 1.00 2.00 1.200 398.00 3.786.800 182.00 2.300.00 2. 2011 1 Oct.90 2.00
1.80 3.261.80 3.779.00 2.50 2.300.879.179.45 1.201.800 290.011.80 3.273.80 2.599. 2010 1 Dec.00 2.30 1.10
793.100 381.299.20 3.88 1.00 2. 2010 1 Jul.320.776.820.299.272.15 2.10
.600 327.776.95 1.709.700 536.00 980.085.998. 2011 2 Nov.50
1.222.511.50 2.00 1.900 552.10 1.50
1.190.00 3.279.000 808.825.00 1.05 988. 2010 3 Aug.00 2.05 2.55 1.259.80 1.079.290.94 1.67 1.366.175.846.95 2. 2011 2 Mar.10 2.202.13 1.021.600 305.079.010.65 995.16 1.300 676.00 2.141.00 2.760.108.265.10 1.990.103.772.294.20 1.05 2. 2010 4 Jan.10 2.90 2.309.00 2.119.05 2. 2011 1 Feb.015.31 2.09 2.261.780.292.864.60 1.100 477.00 2.50 1. 2010 1 Sep 2010 1 Oct. 2011
1.738.018.045.202.700 883.090.315.733.00 2. 2010 4 May.581.15 2.29 1.993.230.80 2.00 3.25 1.200 521.261.00 2.00 2.276. 2011 1 Sep.60 2. 2010 2 Mar.103.291.70 2.728.800 397.00 2.755.907.00 1.500 329.260.971.500 1.074.33 1.105.062.261.10 2.25 1.80 1.00 1.079.00 2.55 1.00 1.724.254.50 2.300.75 3. 2011 2 Aug.795. 2011 1 Jul.144.180.42 2.260.00 2.70 2.059.275.00 1.265. 2011 1 Jun.170.041.70 1.00 2.823.38 2.00 1.875.737.50 2.00 1.00 2.244. 2010 1 Apr.71 965.28 2.277.203.833.500 862.200 369.978.00 3.210. 2011 1 Apr.988.90 1.10 3.978.80 2.41 2.091.581. 2010 3 Nov.283.40 2.325.900 762.00 2.792.70 1.190.00 1.250.00 1.095.10 2.00 2.291.12 1. 2010 1 Jun.296.100 972.00 1.00 3.105.20 3.253.300 602.
083.478.30 4.023.110.450.20 4.030.70 2.965.403.90 4.90 4.625.85 4.65 4.312.00 6.55 2.35 4.312.90 3.75 5.40 5.471.55 5.50 3.65 3.85 5.167.069.729.30
5.132. 2011 3 May.538.55 6.633.143.45 4. 2011 1 Jul. 2010
5.039.65 3.249.20 5.40 4.960.85 5.40 4.70 2. 2011 1 Apr.529.290.00 3.10 5.017.25
5.25 18.104.22.1685.05 5.222.40 3.029.232.30 5.563.086.438. 2011 1 Jun.35 4.05 4.35 4.90 4.45 3.662.40 4.038.85 5.05 5.75 5.086.20 5.723.935.80 5.85 5. 2010 1 Jun.40 4.35 2.00 4.60 5.654.970.00 3.030.00 4.238.970.153.NIFTY HISTORICAL DATA 2010-2011
1 Dec.826.05 22.214.171.124 4.90 3.340.85 5.45 5.35 4.40 3.00 4.971.060.033.711.251.369.122.90 6.05 5.960.431.843.674.60 5.963.431.757.00 6.35 2.130.766.935.873.60 2. 2010 3 Aug.40 4.10 5.70 4.35 2. 2010 1 Jul.298.659. 2010 1 Oct.865.20 5.90 6.292.654.403.766. 2010 2 Feb.90 5.70 5.017.40 3.664.764.20 4.65 5.674.40 5.826. 2010 4 May. 2011 4 Jan.75 4.65 5.249. 2011 1 Nov.70 4.60 4.55 5.40 6.039.90 5.563.117.30 2.50 5. 2010 1 Apr. 2011 1 Oct.712. 2011 2 Aug.75 4.25 5.871.278.60 2.60 2. 2011 1 Sep.200.70 2.087.711.963.872.961.340.60 2.50 5.764.70 3.40 5. 2011 1 Dec. 2010 2 Mar.30 4.30 5.25 5.529.278. 2010 1 Jan.290.05 5.50 4.757.033.55 6.617.478.478.45
.060.092.20 4.30 5.083.232.00 4.20 5.450.25 5.210.20 126.96.36.199 6.85 2.362.471. 2011 2 Mar.545.084.30
5.40 4. 2010 3 Nov.90 5.760. 2010 1 Sep.351.625.10 4.251.45
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5.600. 2011 11 Feb.55 6.057.95 5.50 5.30 6.85 5.