A

PROJECT REPORT

ON

“A STUDY OF PERFORMANCE EVALUATION OF SELECTED MUTUAL

FUNDS”

WITH REFERENCE TO ACUTUS BUSINESS ADVISORS LLP, PUNE.

Submitted to University Of Pune

In Partial Fulfillment of the Recruitment for Award of the Degree of

MASTERS IN BUSINESS ADMINISTRATIONS (MBA)

(FINANCE)

Submitted by

MISS. NIKITA. A. SONI

Under The Guidance of

PROF. JYOTI V. HOWALE(SHINDE)

NBN SINHGAD SCHOOL OF MANAGEMENT STUDIES, PUNE-4110041.

2016-2018

1
DECLARTION

I the undersigned, hereby declare that the project title “A STUDY OF PERFORMANCE
OF EVALUATION OF MUTUAL FUNDS” with reference to ACUTUS BUSINESS
ADVISORS LLP, PUNE is an original piece of research work carried out by me under the
guidance and supervision of Prof. JYOTI HOWALE (SHINDE). The information has been
collected from genuine and authentic sources. The work has been submitted in partial
fulfillment of the requirement of MBA to Savitribai Phule Pune University.

Signature: Date:

(Miss. Nikita. A. Soni)

Place: PUNE

2
ACKNOWLEDGEMENT

This project report could have been completed without the guidance & support of Honorable
Dean Dr. SUNIL UJAGARE and class coordinator Prof. HARSHAL RAJE, project Guide
Prof. JYOTI HOWALE (SHINDE).

I express my sincere thanks and gratitude to the above stated persons who have helped me
directly and also who have indirectly helped me.

Once again I express my gratitude to MR. OMKAR BHAGWAT of ACUTUS BUSINESS

ADVISORS LLP, PUNE for kind Co-operation.

Signature

Miss. Nikita A. Soni.

3
 INDEX

CHAPTER PAGE NO.

PARTICULARS
NO
EXECUTIVE SUMMURY 5

1. INTRODUCTION 6-11

2. COMPANY PROFILE 12-15

3. OBJECTIVE OF THE STUDY 16

4. RESEARCH METHODOLOGY 17-18

5. DATA ANALYSIS AND INTERPRETATION 19-29

6. FINDINGS 30-31

7. SUGGESTIONS 32

8. CONCLUSION& TAKEAWAYS 33

BIBLIOGRAPHY 34

ANNEXURE 35-38

4
EXECUTIVE SUMMARY

There are so many investment avenues. So that investors don’t know which avenue
provides the best returns. As per the financial role of “don’t put all the eggs in one baskets.”
Investor’s portfolio is most diversified. So that risk should be minimized. If the person don’t
have knowledge of getting maximum return with minimum risk or via-a-versa then they
should invest in mutual fund. There are so many funds and schemes available in mutual fund
market. Investors know that how much risk they can bear and based on that they have to
choose schemes. The primary object of the present project is to know about which mutual
fund gave the highest performance within a year.

This study has been undertaken to evaluate the performance of the Indian mutual
funds as of the Indian stock market. For the purpose of this study, 9 open ended equity based
mutual funds were selected.

Different statistical tools were used on the data obtained to calculate the average
returns, fund beta, trenyor’s performance index. These variables of the funds were compared
with the same variables of the market to assess how the different funds have performed
against the market.

Researchers have used return of portfolio (mutual fund) i.e. Rp, return of risk free
securities i.e. Rf and beta of portfolio to calculate Treynor’s Performance Index. Researchers
have used return of portfolio i.e. Rp, return of risk free securities i.e. Rf and standard
deviation of portfolio to calculate Sharpe’s Performance Index. Sharpe and Treynor model
are used to compare the performance of mutual funds and rank them according to their
performance.

In this project researcher have calculated Treynor and Sharpe performance index of
09 mutual funds and rank them according to that. Researchers have also calculated the same
for market to compare the performance of mutual funds with the market and to check whether
the mutual funds can beat the market or not.

5
1.1 Brief Introduction To Business Environment ( Indian/ Global).

Mutual Funds.

Investment which are diversified in various securities purchased with the money of many
investors and managed by an asset management companies are mutual funds.

Many small/large investors with a mutual understanding

+ Invest/ do funding in different securities

= Mutual Funds.

1.1.1 Indian Industry

MUTUAL FUNDS IN INDIA

More than 40 Asset Management Companies [AMC] have set up their operations since
the liberalization of the Indian economy in 1993. Currently, 46 AMCs are operating in
India and these comprise private sector companies, joint ventures (including those with
foreign entities), bank-sponsored, etc. The industry has a tiered structure with the top 7
AMCs having 70% of the industry Asset under Management [AUM].

Customer segments
Institutional investors currently hold 54% of assets with individual investors increasing
their share from 45% to 46% in the last one year (source: AMFI). The institutional
investor group comprises corporates (85%) as well as Indian and foreign institutions
and banks.

6
 Buying behaviour
The two segments of individual and institutional customers reflect significant
differences in the nature and rationale of their buy, usage of distribution channel, place
of origination of sale and ticket size. The choice of asset reflects the difference in
investment objectives of the two customer segments – capital protection and return
optimization for the institutional investor vis-à-vis long-term growth for a retail investor
With institutional investors located in Top-15 cities [T15], these cities continue to form
the core catchment area for fund collection for the industry. Focused outreach
programmes by AMCs has led Beyond-15 towns [B15] increasing their proportion in
asset collection.

Acquisition of individual investors has typically been done through the distributor
network, and around 60% of total assets are garnered through this route. The two client
segments with their separate preferences for different types of schemes demonstrate
varied preference for direct plans vis-à-vis those sold through distributors.
With non-equity oriented schemes purchased primarily by institutional investors, the
proportion of direct purchase is 60% for these schemes. AMFI data for reveal that
investment for 11% of retail investors and 15% of HNI investors was through the direct
route.

1.1.2 Global Industry.

THE GROWTH OF GLOBAL ASSET UNDER MANAGEMENT

7
8
THE FUNDS ARE DIVERSIFIED LIKE THE EXAMPLE ABOVE.

THESE ARE MOST COMMON INVESTMENT PLAN USED SINCE LAST FEW
YEARS.

9
1.2 Industry Analysis

1.2.1 History:

The first introduction of a mutual fund in India occurred in 1963, when the Government of
India launched Unit Trust of India (UTI). UTI enjoyed a monopoly in the Indian mutual fund
market until 1987, when a host of other government-controlled Indian financial companies
established their own funds, including State Bank of India, Canara Bank, and Punjab National
Bank. This market was made open to private players in 1993, as a result of the
historic constitutional amendments brought forward by the then Congress-led government
under the existing regime of Liberalization, Privatization and Globalization (LPG). The
first private sector fund to operate in India was Kothari Pioneer, which later merged
with Franklin Templeton. In 1996, SEBI, the regulator of mutual funds in India, formulated
the Mutual Fund Regulation which is a comprehensive regulatory framework.

Phase I (1964-87): Growth Of UTI , Phase II (1987-93): Entry of Public Sector Funds ,
Phase III (1993-96): Emergence of Private Funds , Phase IV (1996-99): Growth And
SEBI Regulation , Phase V (1999-2004): Emergence of a Large and Uniform Industry ,
Phase VI (From 2004 Onwards): Consolidation and Growth.

Types of securities available for investment

1. Debt- debentures, bonds, commercial paper etc.

2. Equity- shares

Process of mutual fund investments

Investors  Pool their money with  Fund Manager  Invest in  Securities

 Generate Returns  Pass it back  Investors

Investment strategies:

 Money market funds

 Bonds/ fixed income funds
 Stock/ equities
 Hybrid funds.

10
Mutual funds are basically managed by Securities And Exchange Board of India.

1.3 SWOT Analysis of the Industry.

Strengths
 Large numbers of potential customers are base.
 Government support by way of tax concession for MF investors
 Volatility of bank interest rate.
 Better scope for accessing market information
 Offer liquidity to the investors at any time.
 Offers variety of products to the investors.
 The size of the market is large.

Weaknesses
 Poor participation of retail investors
 Lack of focus
 Under performance
 Poor service conditions
 Distribution network is confines only to metro cities

Opportunities
 Huge untapped market in semi-urban and rural areas.
 High level of savings habit among the people
 Liberalized business environment.
 Using on-line mode of trading systems.
 Investment opportunities abound in the international market.
 Failures of non-bank financial company operations.

Threats
 Increasing competition among the players.
 High level of volatility in the stock market.
 Possibility of more stringent regulations by SEBI , RBI , AMFI , etc ., in future.

11
2.1. INTRODUCTION TO THE COMPANY

About Acutus

Acutus Business Advisors LLP strives to give its best to their clients in the field of Accounts
and Finance. Acutus is a team of Chartered Accountants, Cost Accountants, Company
Secretaries and MBAs striving to provide unified business solutions to its clients.

At Acutus, each business stream is led by a competent professional having domain and
Industry Experience. The collective experience of all professionals is of more than 50 years.

Currently, Acutus is based out of Pune having clients spread across India as well as
Internationally.

Moto: PAY ONLY IF WE ADD VALUE TO YOUR BUSINESS

Mission: Gone are the days when professionals just used to give advice for a pre-determined
remuneration, irrespective of the outcome. Researcher believes in being partners in our
clients’ business building and value addition is our mission.

Vision: For most of our services our remuneration depends on the value researcher add to the
client. So, no fixed commitment, if you see value … you pay as per agreed terms … if not,
our services are free.

Our Experience with Industries

 Hospitality
 IT/ ITES
 Manufacturing
 E- Commerce
 Pharmacy
 Consulting
 Telecom
 Trading
 Automobile
 Education
 Real Estate
 Banking

12
HOW RESEARCHER ARE DIFFERENT

 Bouquet Of Service
 Pay Only If Add Value
 Collectively 50+ Years of Experience
 Highly experienced professional overseeing the deliverables
 State of art structure and technology

2.2 Structure Of The Organisation

Mr Raunak Maniyar – CA

 Sonam Ma’am
 Aditi Ma’am
 Anup Sir

Mr Nitin Deshpande – CMA

 Advisor of the Firm.

Mr Mangesh Mundankar – FCA

 Ramanuj Sir
 Vipul Sir
 Deeksha Ma’am

Mr Omkar Bhagavat – MBA (Finance)

 Kasturi Ma’am
 Rajat Bandhu (Intern)
 Sugandh Bakshi (intern)
 Nikita Soni (Intern)

Mr. Omkar Bhagavat

Partner – Corporate Debt and Portfolio Management

Omkar Bhagavat comes with the Banking background having worked in various capacities at
various levels. He has a total experience of more than 5 years and has excelled in client
relationship management. He has been part of numerous tricky deals and carries the problem

13
solving and positive attitude to the financial needs of the clients. He leads the Corporate Debt
Advisory and Portfolio Management Services.
Everything in business is done for money; hence managing it effectively
becomes the top priority. Acutus team ensure that you get the best financial services so that
you make the most of the money earned from business.
2.3 Department where project has been undertaken.

 Corporate Debt Structure Planning

 Corporate Debt optimization and strategies to reduce the cost of Debt
 Corporate Debt Syndication
 Import and Export Finance
 LC, Bill Discounting and other banking products advisory and syndication

Portfolio Management
Our dedicated team of experienced portfolio managers help you invest your hard-earned
money in the best possible manner based on your investment goals.

Mutual Fund Investments.

Debt Syndication.

2.4 Product Profile.

CFO Services

 Accounting
 Tax Compliance.
 Business Structuring.

Legal Secretarial

 Labour and Commercial Laws.

 FEMA / Companies Act.

Controlling

 Risk Analysis & Cost Management.

14
  Contract Negotiations.
 Budget / MIS.

Value Added Services

 Business Process Setup and Doc.

 Green Field Projects.
 Forensic and Special Audits.

Financial Services

 Debt Syndication.
 Portfolio Management.

Researcher are on continuous look out as to have researcher can add value to your
business. As regards debt, researcher try to find alternative sources of finance that can
help you in reducing your cost of debt servicing i.e. interest. Researcher also help you
raise fresh debt at the best possible terms. Researcher are on continuous look out as to
have researcher can add value to your business. As regards debt, researcher try to find
alternative sources of finance that can help you in reducing your cost of debt servicing i.e.
interest. Researchers also help you raise fresh debt at the best possible terms.

2.5 Manpower
25 Members
2.6 Turnover of Company
80 Lacs
2.7 Future Plans
To expand the business.
To make Mergers and acquisitions.

15
3.1 Objectives of the Study.

1. To study in detail different types of mutual funds.

2. To study different schemes and to know which schemes gives highest return in one-
year.

3. To measure the growth oriented Mutual Fund are earning higher returns than market
Portfolio.

4. To find the extent of diversification in the portfolio of securities of selected mutual

funds.

5. To compare the performance of selected mutual funds using traditional investment

measures.

3.2 Scope of the Study.

The scope of the study is completely related with advisory function of the Company.
The study is carried in Pune city. It is a total view towards mutual fund in India, and is related
with performance evaluation analysis. The study is limited for the period of two months only.
The data is related to limited period of one year. The calculations are made on the basis of
ratios and formula.

“Mutual funds are subject to market risk, read all the documents carefully” – Yes, they are
subject to market risk unless you know the schemes you are going to invest in. It was not
possible to reach all the respondents for the discussion.

16
RESEARCH METHODOLOGY

MEANING:-

The process used to collect information and data for the purpose of making business
decisions. The methodology may include publication research, interviews, surveys and other
research techniques, and could include both present and historical information.

This report is based on secondary data, however primary data collection was given more
importance since it is overhearing factor in attitude studies. One of the most important users
of research methodology is that it helps in identifying the problem, collecting, analyzing the
required information data and providing an alternative solution to the problem .It also helps
in collecting the vital information that is required by the top management to assist them for
the better decision making both day to day decision and critical ones.

DEFINATION:-
Research Methodology is the systematic, theoretical analysis of the methods applied to a field
of study. It comprises the theoretical analysis of the body of methods and principles
associated with a branch of knowledge

4.1 Research Design- Descriptive research design

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

Method of data collection

Secondary data- Secondary data refers to data that was collected by someone other than the
user. Common sources of secondary data for social science include censuses, information
collected by government departments, organizational records and data that was originally
collected for other research purposes.

Sources of data collection- Random

For this research activity

17
  Researcher has selected 9 mutual funds from Indian market. All funds are in equity
growth category.
 Data has been collected from money control, value research online, and mutual fund
India web sites.
 Funds selected are mostly preferable by investors.
 Treasury bill rate of return is selected as risk free return, which is 6.25% p.a.
 Collected NAV of funds of each quarter for the year 2016-2017 and define return.
 Defined standard deviation on the basis of Quarterly return.
 Found out average return.
 Defined beta of funds and market, S&P CNX Nifty index return is taken as market
return.
 Found out Treynor ratio and performance.
 Finally researcher has given rank to mutual funds according to each ratio.

4.2 Sampling Design

A Random Sample.

Convenient sample is one of the main types of non-probability sampling method. A

convenience sample is made up of people who are easy to reach.

Consider the following example. A pollster interviews shoppers at a local mall. If the mall
was chosen because it was a convenient site from which to solicit survey participants and/or
because it was close to the pollster's home or business, this would be a convenience sample.

Here in this research project researcher have used convenient sample method for sampling.
Researcher has taken the Sample of “9 Equity Growth mutual funds” on the basis of their
highest annual average return in the year 2016-2017.

18
5.1 ANALYSIS OF MUTUAL FUND PERFORMANCE

5.1.1 Types Of Mutual Funds

There are seven common types of mutual funds.

 Money market funds.

 Fixed income funds.
 Equity funds.
 Balanced funds.
 Index funds.
 Specialty funds.
 Fund - of - funds.

19
 These are some of the common funds which are usually preferred by the investors.

DEBT FUNDS: Debt funds are mutual funds that invest in fixed income securities like
bonds and treasury bills. Gilt fund, monthly income plans (MIPs), short term plans (STP),
liquid funds, and fixed maturity plans (FMPs) are some of investment options in debt funds.
Apart from these category debt funds include various funds investing in short term and long
term bonds. The fees ratios on debt funds are lower, on average , than equity funds because
the overall management costs are lower. The main investing objective of a debt fund will
usually be preservation of capital and generation of income.

EQUITY FUNDS: A fund that invests in stocks also called equity securities. Stock funds can
be contrasted with bond funds and money funds. Fund assets are typically mainly in stock,
with some amount of cash, which is generally quite small, as opposed to bonds, notes, or
other securities. This may be a mutual fund or exchange-traded fund. The objective of an
equity fund is long-term growth through capital gains, although historically dividends has
also been an important source of total return. Specific equity funds may focus on a certain
sector of the market or may be geared toward a certain level of risk. Stock funds can be
distinguished by several properties. Funds may have a specific style, for example, value or
growth. Funds may invest in solely the securities from one country, or from many countries.

BALANCED FUNDS: A balanced fund combines a stock component, a bond component and
sometimes a money market component in a single portfolio. Generally, these hybrid funds
stick to a relatively fixed mix of stocks and bonds that reflects either a moderate, or higher
equity. component, or conservative, or higher fixed-income, component orientation. Balanced
funds are geared toward investors who are looking for a mixture of safety, income and
modest capital appreciation. The amounts this type of mutual funds invests into each asset
class usually must remain within a set minimum and maximum.

Type of Funds Available For Investment

LARGE CAP FUNDS

Large-cap funds comprise companies with market caps of $8 billion or more - the "big fish"
of Wall Street. However, because of their enormous size, large-cap funds are often forced to
imitate a larger index, such as the S&P 500. This is because mutual funds have restrictions on
the level of ownership they can have in any one company, which is generally no more than

20
10% of their outstanding shares. This results in large-cap funds being forced to buy large
companies - the same ones that make up the major market indexes.

Large-cap funds can be great for investors who have longer-term investment timelines
and would like to "buy and hold". There are many large-cap income funds that are great
income vehicles for those who want to take on less risk. But for those seeking greater
diversification in smaller, more aggressive companies, large-cap funds probably aren't the
answer.
MID CAP FUNDS

The most popular choice among the general investing public, mid-cap funds are those that
invest in companies with market caps of $1 billion to $8 billion. Mid-cap companies share
some of the growth characteristics of small-cap companies, but they entail less risk (at least in
theory) because they are slightly larger. You might say that mid-cap funds are to the mutual
fund market what mid-size cars are to the automobile market. The mid cap is a compact
vehicle for the market, falling somewhere between those sporty little small caps and the
massive SUV type large caps.

SMALL CAP FUNDS

Small-cap funds typically include companies with market capitalization of less than $1 billion
(bear in mind that these numbers are only approximations that change over time, and the
exact definition of these categories can also vary between brokerage houses). Generally
speaking, smaller companies are those in the early stages of business. They are presumed to
have significant growth potential, but are not as financially strong or as established as larger
companies.

Because small-cap funds invest in companies that are less stable than large-cap
companies, the funds can be quite volatile. This has its advantages and disadvantages. In
times of market instability, small-cap funds can suffer greatly as less-established companies
go out of business. On the other hand, small-cap funds can also be great investments for those
who can tolerate more risk and are looking for more aggressive growth. Investors hoping for
aggressive returns will certainly want to park some money behind these funds when it comes
to the fund's holdings.

21
Types of securities available for investment

3. Debt- debentures, bonds, commercial paper etc.

4. Equity- shares

Structure of Mutual Fund

a. Open ended- here the investors can invest and redeem the amount any time after the NFO
is closed
b. Close ended- once the NFO is closed the investor cannot redeem his investment till
certain period of time.

Interpretation: There are several kind of investments available in market. Mutual funds are
one of those kinds. From the above classification the researcher is able to advise the clients
regarding the types in mutual funds.

5.1.2 Number Of Schemes Selected For The Calculation

Table no 5.1

No of
Names investors
ICICI Prudential Top 100 Fund (G) 50
Kotak Select Focus Fund - Regular (G) 65
SBI Blue Chip Fund - (G) 78
DSP-BR Micro Cap Fund - RP (G) 70
Mirae Emerging Bluechip Fund (G) 40
Principal Emerging Bluechip(G) 38
Sundaram Rural India Fund (G) 56
Birla Sun Life Equity Fund (G) 55
Tata Equity P/E Fund (G) 36

22
 Tata Equity
P/E Fund (G) Chart Title ICICI Prudential
8% Top 100 Fund
(G)
Birla Sun Life 10%
Equity Fund (G)
Kotak Select
11%
Focus Fund -
Regular (G)
Sundaram
13%
Principal Rural India
Emerging Fund (G)
Bluechip(G) 12%
8% SBI Blue Chip
Mirae Emerging Fund - (G)
Bluechip Fund DSP-BR Micro 16%
(G) Cap Fund - RP
8% (G)
14%

The chart is showing investment in percentage.

Chart Title
ICICI Prudential Top 100 Fund (G)
Kotak Select Focus Fund - Regular (G)
SBI Blue Chip Fund - (G)
DSP-BR Micro Cap Fund - RP (G)
Mirae Emerging Bluechip Fund (G)

8% 10%
11% 13%
12%
16%
8%
8% 14%

5.2 Ratios Used For Calculation.

Mutual fund performance can be analyzed through performance measurement ratios which
are used in portfolio analysis. Researcher here are using Treynor, Sharpe, and Jensen ratio to
evaluate mutual funds and rank accordingly. Composite portfolio performance measures have
the flexibility of combining risk and return performance into a single value. The most
commonly used composite measures are: Treynor, Sharpe and Jensen measures. While
Treynor measures only the systematic risk summarized by beta, Sharpe concentrates on total
risk of the mutual fund.

23
Treynor Ratio:

A ratio developed by Jack Treynor that measures returns earned in excess of that which could
have been earned on a riskless investment per each unit of market risk. The Treynor ratio is a
measurement of the returns earned in excess of that which could have been earned on a
riskless investment (i.e. Treasury Bill) (per each unit of market risk assumed). The Treynor
ratio (sometimes called reward-to-volatility ratio) relates excess return over the risk-free rate
to the additional risk taken; horesearcherver systematic risk instead of total risk is used. The
higher the Treynor ratio, the better the performance. The Treynor measure adjusts excess
return for systematic risk. It is computed by dividing a portfolio’s excess return by its beta as
shown in equation. This ratio indicates return per unit of systematic risk, it is a valid
performance criterion when one wishes to evaluation a portfolio in combination with the
benchmark portfolio and other actively managed portfolios.

rp-rf

Treynor Ratio (Ti) = ___________

βp

Treynor ratio (T) does not quantify the value added, if any, of active portfolio management. It
is a ranking criterion only. A ranking of portfolios based on the Treynor Ratio is only useful
if the portfolios under consideration are sub-portfolios of a broader, fully diversified
portfolio. If this is not the case, portfolios with identical systematic risk, but different total
risk, will be rated the same. But the portfolio with a higher total risk is less diversified and
therefore has a higher unsystematic risk which is not priced in the market.

Where: Ti = Treynor’s Performance Index

Rp = Portfolio’s actual return during a specified time period

Rf = Risk-free rate of return during the same period

βp = beta of the portfolio

Whenever Rp> Rf and βp > 0 a larger T value means a better portfolio for all investors
Regardless of their individual risk preferences. In two cases researcher may have a negative T
value: when Rp < Rf or when βp < 0. If T is negative because Rp < Rf researcher judge the
portfolio performance as very poor. Horesearcherver, if the negativity of T comes from a

24
negative beta, fund’s performance is superb. Finally when Rp- Rf, and βp are both negative,
T will be positive.

Demonstration of Comparative Treynor Measures.

Assume researcher have the following data for three mutual funds; ZBY, with their respective
annual rate of return and systematic risk, Beta. The risk free rate is 8 %. The systematic risk
for M (market) is 1.0 and the rate of return for M is 14%.

Table no 5.2

Investment Manager Rate of Return Beta

Z 0.12 0.90
B 0.16 1.05
Y 0.18 1.2
M 0.14 1.0

Researcher can calculate the T values for each investment manager:

Table no 5.3

TM (0.14-0.08) / 1.00 = 0.06

TZ (0.12-0.08) / 0.90 = 0.044
TB (0.16-0.08) / 1.05 = 0.076
TY (0.18-0.08) / 1.20 =0.083

These results show that Z did not even "beat-the-market." Y had the best performance, and
both B and Y beat the market. SAMPLE OF 9 MUTUAL FUNDS

Table 5.4

returns
Name
12.6
ICICI Prudential Top 100 Fund (G)

20
Kotak Select Focus Fund - Regular (G)

25
 16.3
SBI Blue Chip Fund - (G)
30.1
DSP-BR Micro Cap Fund - RP (G)
28.8
Mirae Emerging Bluechip Fund (G)
24
Principal Emerging Bluechip(G)
24
Sundaram Rural India Fund (G)
17.4
Birla Sun Life Equity Fund (G)
19.8
Tata Equity P/E Fund (G)
Source: Moneycontrol.com

TREYNORS PERFORMANCE INDEX

Table 5.5

Name Rp Rf Beta Ti

DSP-BR Micro Cap Fund - RP (G) 30.1 6.25 0.556 42.89

Mirae Emerging Bluechip Fund (G) 28.8 6.25 -0.233 -96.78

Principal Emerging Bluechip(G) 24 6.25 0.26 68.26

Sundaram Rural India Fund (G) 24 6.25 0.233 76.18

Kotak Select Focus Fund - Regular (G) 20 6.25 0.392 35.07

Tata Equity P/E Fund (G) 19.8 6.25 -0.0733 -185.6

Birla Sun Life Equity Fund (G) 17.4 6.25 0.66 16.89

SBI Blue Chip Fund - (G) 16.3 6.25 0.82 12.25

ICICI Prudential Top 100 Fund (G) 12.6 6.25 0.56 11.33

RANKING ACCORDING TO TREYNOR

Table 5.6

Rank Name
1 Sundaram Rural India Fund (G)

26
 2 Principal Emerging Bluechip(G)
3 DSP-BR Micro Cap Fund - RP (G)
4 Kotak Select Focus Fund - Regular (G)
5 Birla Sun Life Equity Fund (G)
6 SBI Blue Chip Fund - (G)
7 ICICI Prudential Top 100 Fund (G)
8 Mirae Emerging Bluechip Fund (G)
9 Tata Equity P/E Fund (G)

Ti
100

50
treynor's index

0
0 2 4 6 8 10
-50

-100

-150

-200
Ranking

Graph 1.1 (showing the ranking)

INTERPRETATION

In our analysis researcher have given ranks on the basis of higher Treyner’s index. Higher
Treyner’s index gets 1st rank. Treyner’s performance index measures (Beta) systematic risk
of portfolio. This model does not consider total risk (systematic risk + unsystematic risk).

In our analysis researcher have found out that Tata Equity P/E Fund (G) – growth has lower
beta i.e. -0.0733 as compared to other nine funds. Same way SBI Blue Chip Fund - (G) has
higher beta i.e. 0.82.

27
This analysis represents that Tata Equity P/E Fund(G) – growth gets higher Treyner’s
performance index and it stands on 9th rank. Same way SBI Blue Chip Fund(G) – growth
gets lower Treyner’s performance index and it stands on 6th rank.

This analysis also represents that though DSP-BR Micro Cap Fund - RP (G) has higher return
i.e.30.1 % as compared to other eight funds, it stands on third rank as it is having higher beta
i.e. 0.556.

Thus at last researcher want to conclude that according to Treyner’s Performance Index, it is
not necessary that fund with higher return is always well performing fund and stands on first
rank because researcher also have to consider risk associated with that fund. The fact that
Sharpe uses Standard deviation as a measurement of risk which is the total risk and Treynor
uses Beta or systematic risk, but yet it is claimed that, if researcher are examining a well-
diversified portfolio, the rankings should be similar for all three methods. Due to this
interesting theory researcher have decided to analyze the performance of the portfolios and
they will be ranked identically according to all three; Sharpe’s, Treynor’s and Jensen’s
performance measurement. Sundaram Rural India Fund (G) get 1st rank from all method.

SHARPE’S PERFORMANCE INDEX

Sharpe (1966) developed a composite index which is very similar to the Treynor
measure, the only difference being the use of standard deviation, instead of beta, to measure
the portfolio risk, in other words except it uses the total risk of the portfolio rather than just
the systematic risk.

Si= Rp – Rf / αp

Where:

Si = Sharpe performance index

αp = Portfolio standard deviation

Sharpe index, evaluates funds performance based on both rate of return and diversification.
For a completely diversified portfolio Treynor and Sharpe indices would give identical
rankings.

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Demonstration of Comparative Sharpe Measures

Assume researcher have the following data for three portfolios; BOP, with their respective
annual rate of return and standard deviation of their return. The risk free rate is 8 %. The
standard deviation for M (market) is 0.20 and the rate of return for M is 14%.

Table 5.6

Portfolio Annual rate of Return S.D of Return

B 0.13 0.18

O 0.17 0.22

P 0.16 0.23

M 0.14 0.20

Researcher can calculate the S values for each portfolio.

Table 5.7

B (0.13-0.08) / 0.18 = 0.278

O (0.17-0.08) / 0.22 = 0.409
P (0.16-0.08) / 0.23 = 0.348
M (0.14-0.08) / 0.20 = 0.30

Thus, portfolio O did the best, and B failed to beat the market.

The trouble with both Sharpe and Treynor techniques for evaluating "riskadjusted" returns is
that they equate risk with short-term volatility. Therefore these measures may not be
applicable in evaluating the relative merits of long-term investments.

29
6.1 FINDINGS.

The study done on the performance evaluation of Indian mutual funds was fruitful as all the
objectives of the study were successfully achieved. The following are the findings from this
study.

 There are various kind of Mutual Funds where researcher can invest our savings for
the present as well as future plans. With the help of this study researcher can also see
that the stock market gives better returns compared to the government bonds or resrve
bank rate.
 The schemes selected for the study gave returns in coordination with the markets.
When there was boom in the stock market the funds gave positive returns a little more
than what the market had given.
 During the recessionary phase the markets declined steadily and so did the fund
returns. Overall the fund returns and the market returns, for the period of 1 year taken
into consideration for this study.
 Mostly all the mutual fund schemes are able to beat the market. That means the
schemes are well diversified.
 From the entire 9 schemes best scheme is Sundaram Rural India Fund (G) because in
all the two models it stands on 1st rank and also it provides good return.

6.2 LIMITATIONS OF THE STUDY.

 Researcher have selected 9 fund houses out of 46 fund houses due to time constrains.
Researcher have not studied all types of mutual fund of 46 fund houses. Researcher
have studied only equity growth fund. Researcher also have not studied all schemes of
9 mutual fund houses. These schemes researcher have selected randomly, which are
mostly preferable by the investors.

 Since the funds selected for this study were open ended equity based growth mutual
funds the fund composition kept on changing over the time period, so it became
difficult to understand the fund properties as historical data pertaining to the fund
structure was not available.

30
 Because of unavailability of historical data and fund composition it was difficult to
ascertain the performance of the fund properties and a simple evaluation was done
against the market performance.

31
7.1 SUGGESTIONS

Mutual funds are one of the most highly growing products in financial services
market. Mutual funds are suitable for all types of investors from risk adverse to risk bearer.
Mutual funds have many options of return, risk free return, constant return, market associated
returned. Mutual funds are suitable to all age of investors, businessmen, salary person, etc.
Investors need not to be expert in equity market; mutual funds can satisfy their need. Fund
managers are expert in this area and invest fund in well diversified portfolio, high return with
low risk is possible inn mutual fund.

In today’s world, investors are showing more trust in mutual fund than any other
financial product. There is no need of a financial consultant, if you have good knowledge of
mutual funds and their type to invest.

Mutual fund is subject to market risk, despite of that it have low risk than stock market.
This is proved in performance evaluation section of this report. Performance evaluation
measurement ratios i.e. Treynor’s and Sharpe’s are used by fund managers to take decision of
investment and to diversify portfolio.

 Mutual Fund is subject to market risk, analysing particular fund before investing.
 Study historical return of funds, risk measurement ratios to evaluate fund.
 There should be similarity in your and fund’s objective.
 For high return invest in diversified funds, for tax saving invest in ELSS equity funds,
for moderate risk and return invest in balance funds, for assure return invest in debt
and liquid funds.
 As per our opinion, investor should invest around 30% in mutual fund.

LEARNING

1. Performance measurement of funds

2. How to choose best funds
3. How to convince investors
4. Up to some extend I realize life as an employee
5. How to recommend suitable fund to investors

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CONCLUSION

Mutual funds are one of the most highly growing products in financial services market.
Mutual funds are suitable for all types of investors from risk adverse to risk bearer. Mutual
funds have many options of return, risk free return, constant return, market associated return,
etc. mutual funds are suitable to all age of investors, businessmen, salary person, etc.
Investors need not to be expert in equity market; mutual funds can satisfy their need.

Fund managers are expert in this area and invest fund in well diversified portfolio, high
return with low risk is possible inn mutual fund. In today’s world, investors are showing
more trust in mutual fund than any other financial product. There is no need of a financial
consultant, if you have good knowledge of mutual funds and their type to invest. Mutual
fund is subject to market risk, despite of that it have low risk than stock market.

This is proved in performance evaluation section of this report. Performance evaluation

measurement ratios i.e. Treynor’s and Sharpe’s are used by fund managers to take decision of
investment and to diversify portfolio.

TAKE AWAYS

1. Mutual Fund is subject to market risk, analyzing particular fund before investing.
2. Study historical return of funds, risk measurement ratios to evaluate fund.
3. There should be similarity in your and fund’s objective.
4. For high return invest in diversified funds, for tax saving invest in ELSS equity funds,
for moderate risk and return invest in balance funds, for assure return invest in debt
and liquid funds.
5. As per my opinion, investor should invest around 30% in mutual fund.

33
BIBLOGRAPHY

Books-

1. Arvind Dhond - Financial Management(2015)

This book is related to the basic concepts of financial intermediaries.

2. Dr. Madhulika Gupta And Prof. Amey Deshpandey – Financial System of India,
Markets and Services

This book help us to know about financial systems, markets , institutions and the services
offered within the frame work.

Websites

1. www.amfiindia.com
2. www.bseindia.com
3. www.nseindia.com
4. www.moneycontrol.com
5. www.mutualfundsindia.com

34
 ANNEXTURE

Appendix-1

1.1 RETURNS OF MUTUAL FUNDS FOR THE YEAR 2016-2017

Name returns qu1 qu2 qu3 qu4 Arvg

ICICI Prudential Top 100 Fund (G) 12.6 6.8 -4.3 12.7 1.4 4.15
Kotak Select Focus Fund - Regular (G) 20 7.2 -7.1 14.5 4.5 4.78
SBI Blue Chip Fund - (G) 16.3 5.8 -8.9 12.2 3.6 3.175
DSP-BR Micro Cap Fund - RP (G) 30.1 7.4 -4.9 15.6 4 4.165
Mirae Emerging Bluechip Fund (G) 28.8 10.9 -7.3 18.6 6.3 7.125
Principal Emerging Bluechip(G) 24 12.2 -9.2 17.7 3.9 6.15
Sundaram Rural India Fund (G) 24 9.3 -7.4 13.5 6.1 5.375
Birla Sun Life Equity Fund (G) 17.4 14 -7.8 13.5 4.3 6
Tata Equity P/E Fund (G) 19.8 10 -3.8 15.9 4 6.525
Table 1.1 (calculation)

Type Name nav aum

LC ICICI Prudential Top 100 Fund (G) 310.13 1,546.32
LC Kotak Select Focus Fund - Regular (G) 31.4 6,335.80
LC SBI Blue Chip Fund - (G) 36.2 8,582.51
S & MC DSP-BR Micro Cap Fund - RP (G) 61.89 4,258.41
S & MC Mirae Emerging Bluechip Fund (G) 47.17 2,785.30
diversify Principal Emerging Bluechip(G) 98.26 695.81
diversify Sundaram Rural India Fund (G) 40.62 679.92
diversify Birla Sun Life Equity Fund (G) 677.87 3,391.00
diversify Tata Equity P/E Fund (G) 127.16 781.1
Table 1.2 (NAV and AUM)

35
 Appendix 2

Beta is the measure of volatility of a stock, fund, portfolio, etc with respect to the
market. If the beta is positive then the fund returns are directly proportional to the market
returns and if the beta is negative then the fund returns are inversely proportional to the
market.

Formula:

Where,

βa = fund beta

Cov (ra,rp) = covariance of the returns of the fund and the market,

Var rp = variance of the market returns.

Rfr- Rfr-
calculation of beta rfr srr mrr Srr Mrr Beta
ICICI Prudential Top 100 Fund (G) 6.25 4.15 10 2.1 3.75 0.56
Kotak Select Focus Fund - Regular (G) 6.25 4.78 10 1.47 3.75 0.392
SBI Blue Chip Fund - (G) 6.25 3.175 10 3.075 3.75 0.82
DSP-BR Micro Cap Fund - RP (G) 6.25 4.165 10 2.085 3.75 0.556
Mirae Emerging Bluechip Fund (G) 6.25 7.125 10 -0.875 3.75 -0.233
Principal Emerging Bluechip(G) 6.25 6.15 10 0.1 3.75 0.26
Sundaram Rural India Fund (G) 6.25 5.375 10 0.875 3.75 0.233
Birla Sun Life Equity Fund (G) 6.25 6 10 0.25 3.75 0.66
Tata Equity P/E Fund (G) 6.25 6.525 10 -0.275 3.75 -0.0733
Table2.1 (calculation of Beta)

36
 HARSHAD MEHTA SCAM

Harshad Mehta was an Indian stockbroker, well known for his wealth and for having been
charged with numerous financial crimes that took place in 1992. 28 criminal charges brought
against him, he was only convicted of four, before his death at age 47 in 2001. . Mehta was
convicted by the Bombay High Court and Supreme Court of India for his part in a financial
scandal valued at ₹ 4999 Crores which took place on the Bombay Stock Exchange (BSE). In
1984, Mehta was able to become a member of the Bombay Stock Exchange as a broker and
established his own firm called Grow More Research and Asset Management, with the
financial assistance of associates, when the BSE auctioned a broker's card.

The 1992 scam

Up to the early 90s, banks in India were not allowed to invest in the equity markets. So
Mehta cleverly squeezed capital out of the banking system to address this requirement of
banks and pumped this money into the share market . He also promised the banks higher rates
of interest, while asking them to transfer the money into his personal account, under the
appearance of buying securities for them from other banks. Mehta used this money
temporarily in his account to buy shares, thus hiking up demand of certain shares (of good
established companies like ACC, Sterlite Industries and Videocon) dramatically, selling them
off, passing on a part of the proceeds to the bank and keeping the rest for himself. This
resulted in stocks like ACC (which was trading in 1991 for Rs. 200/share) to nearly Rs. 9000
in just 3 months.

On 23 April 1992, journalist Sucheta Dalal exposed Mehta's illegal methods in a column in
The Times of India. Mehta was dipping illegally into the banking system to finance his
buying. Once the scam was exposed, though, a lot of banks were left holding BRs which did
not have any value – the banking system had been swindled of a whopping ₹40 billion
(US$620 million). He knew that he would be accused if people came to know about his
involvement in issuing cheques to Mehta. M J Pherwani of UTI was also linked to Mehta.

Exploiting several loopholes in the banking system, Mehta and his associates
siphoned off funds from inter-bank transactions and bought shares heavily at a premium
across many segments, triggering a rise in the BSE SENSEX. When the scheme was exposed,
banks started demanding their money back, causing the collapse. He was later charged with
72 criminal offences, and more than 600 civil action suits were filed against him. He was

37
arrested and banished from the stock market with investors holding him responsible for
causing a loss to various entities. Mehta and his brothers were arrested by the CBI on 9
November 1992 for allegedly misappropriating more than 2.8 million shares (2.8 million) of
about 90 companies, including ACC and Hindalco, through forged share transfer forms. The
total value of the shares was placed at ₹2.5 billion (US$39 million).

Mehta made a brief comeback as a stock market guru, giving tips on his own website as well
as a weekly newspaper column. However, in September 1999, Bombay High Court convicted
and sentenced him to five years rigorous imprisonment and a fine of ₹25,000 (US$390).

38