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Volume No. :   9

Issue No. :  3
Year :  2018
ISSN Print :  0976-495X
ISSN Online :  2321-5763 [Abstract View] (AbstractView.aspx?PID=2018-9-3-5)      [View PDF]

A Study on Risk-Return Analysis of Indian Mutual Fund

Shruthi. M. P1, Dr. T. Manjunatha2
1Research Scholar, Visvesvaraya Technological University, Belagavi– 590 018Karnataka, India.
2Professor and Head, Dept. of M B A, Visvesvaraya Technological University B D T College of Engineering, Davangere-577 004, Karnataka, India.
*Corresponding Author E-mail: mpshruthigvt@gmail.com, tmmanju87@gmail.com

ABSTRACT:
Mutual fund is an association that pools funds from investors and invests scientifically in various securities to form efficient portfolio. The present paper tests to ascertain the risk return
relationship of ten mutual funds of different open-ended schemes for the period from Jan 01, 2017 to Dec 31, 2017. Daily Net Asset Values (NAV) of different schemes have been used to
calculate the returns, standard deviation, median, variance, skewness and kurtsis. The result shows that 10 percent of the sample mutual fund scheme is having high return and less risk, 10
percent of the sample mutual fund scheme is having negative returns and 80 percent of the sample mutual fund schemes are having high risk and less return, This will be helpful to the investors
to ascertain risk- return relationship in Indian mutual funds.

KEYWORDS: Mutual fund, NAV, rate of return, standard deviation, variance.

INTRODUCTION:
Mutual funds are collections of money and invest in stocks, bonds, and other financial assets that are owned by a group of investors. Mutual funds provide many important benefits to investor;
these benefits particularly apply to investors who are just beginning to invest. Since a mutual fund can include hundreds of different securities, the performance of the fund is not dependent on
any single security the risk is spread among the various securities. Investors invest money and get the units as per the unit value which we called Net Asset Value (NAV).
Mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in diversified portfolio management, good research team, professionally managed Indian
stock as well as foreign market, the main aim of fund manager is to taking the scrip that have under value and future well rising, then fund manager sell out the stock.
Fund manager concentration on risk –return trade off of the portfolio. The most common features of the mutual fund unit are low cost. Developed countries research studies by John (1974)
found that on an average the fund managers appeared to keep their portfolios within the stated risk. Some funds in the lower risk group possessed higher risk than funds in the most risky group.
Henriksson (1984) found that mutual fund managers were not able to follow an investment strategy that successfully times the return on the market portfolio. Grinblatt and Titman (1989) found
that some mutual funds consistently realize abnormal returns by systematically picking stocks that realize positive excess returns. Vincent (1995) found that an evidence of positive relation
between flows and subsequent. Jayadev (1996) found that performance of two growth-oriented mutual funds namely Mastergain and Magnum express by using monthly returns. Jensen, Sharpe
and Treynor measures have been applied in the study and the pointed out that according to Jensen and Treynor measure Mastergain have performed better and the performance of Magnum was
poor according to all three measures. Gupta Seghal (1998) found that the performance of 80 schemes managed by 25 mutual funds, 15 in private sector and 10 public sectors for the time period
of June 1992-96 found that mutual fund industries portfolio diversification has performed well. But its supported the consistency of performance. Rao (2002) found that performance open ended
mutual fund and found out that open ended mutual funds have been better returns than others and some of the funds provided excess returns over expected returns based on both premium for a
systematic risk and total risk. Sapar and Narayan (2003) found that the performance of Indian mutual fund in a Bear market through relative performance index, risk-return analysis, Treynor’s
ratio, sharp’s ratio, sharp’s measure, Jensen’s measure and fama’s measure with a sample of 269 open ended schemes (out of total schemes of 433) and found that the mutual fund schemes in the
sample of 58 were able to satisfy investor’s expectations by giving excess returns over expected returns based on both premium for a systematic risk and total risk. Agarwal (2007) found that
performance of mutual fund industry affected by saving and investment habits of the people at the second side confidence and loyalty of the fund manager and rewards. Afza and Rauf (2009)
found that open-ended Pakistani mutual fund performance using the quarterly data for the period of 1996-2006. The study measure the fund performance by using Sharpe ratio with the help of
pooled time-series and cross sectional data and also focused on different attributes such as fund size, expenses, age, turnover and liquidity. The results found significant impact on fund
performance. Soumya, Ashok and Chakrabarti (2009) found that the mutual funds generated positive monthly returns on the average, during the study period of January 2000 through June
2005. The Equity Linked Savings Schemes (ELSS) funds lagged the growth funds or all funds taken together, with respect to returns generated. The mean returns of the growth funds or all
funds were not only positive but also significant. The ELSS funds also demonstrated marginally higher volatility (standard deviation) than the Growth funds. Kavita (2009) found that
comparison of ELSS funds on the basis of return, risk (Standard Deviation, Beta, Alpha, Sharpe ratio) with its benchmarks SandP.CNX Nifty. Nidhi and Ravi (2010) found that Mutual fund
organizations have responsibility towards investors to provide them optimal returns using their abilities to efficiently tap market timings along-with desired diversification. Garg (2011)
found that performance on the basis of return, standard deviation, beta as well as Treynor, Jensen and Sharpe indexes. The study also used Carhart’s four-factor model for analyze the
performance of mutual funds. The results revealed that Reliance Regular Saving Scheme Fund had achieved the highest final score and Canara Robeco Infra had achieved the lowest final score
in the one year category. Debashish (2011) found that Franklin Templeton and UTI are the best performance and BSL, HDFC and LIC mutual funds showing poor below average performance
when measured against the risk- return relationship models.
OBJECTIVES:
To ascertain the risk and return relationship of Indian mutual fund schemes.

METHODOLOGY:
Data and sample:
The sample of the study has included scheme wise performance of various mutual fund schemes. Data pertaining to the performance of the funds were drawn from secondary sources through
data published by Association of Mutual Fund in India (AMFI), mutualfundsindia.com, moneycontrol.com and BSE.com, mutual funds books, journals and websites of other mutual funds.
hi d h ik d l i hi f lf d ll df 201 01 201 b 31

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This study proposes to test the risk and return relationship of mutual funds. Data collected from 2017 January 01 to 2017 December 31.
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Calculation of Returns: The daily returns of the mutual funds will be computed by using the following equation.
RPt = NAVt – NAVt-1/ NAVt-1
Where, Rpt is return on fund
NAVt is the Net Asset value of the scheme at the end of‘t’,
NAVt-1 is Net Asset value of the scheme at the end of the month‘t-1’.
Risk:
Standard deviation is a measure of risk. The standard deviation, variance, median, skewness, kurtsis of mutual fund has been calculated as under Table 2

RESULTS AND ANALYSIS:

Table 1 Shows rate of return of ten mutual fund’s net asset value .Axis mutual fund having highest total NAV-242926.9 and average NAV-1007.995436. Reliance nippon mutual fund is having
Lowest total NAV-3089.23 and average NAV-12.55784553.SBI mutual fund having highest total rate of return -36.65884543 and average rate of return-0.149019697. Aditya birla sun life
mutual fund having lowest total rate of return--2.164792587 and average rate of return--0.008982542.
Table 2 Shows standard deviation, variance, median, skewness and kurtsis. Franklin templeton mutual fund is having highest standard deviation-0.857062227. Axis mutual fund is having lowest
standard deviation-0.01566087. Franklin templeton mutual fund having highest variance-0.73455566. Axis mutual fund is having lowest Variance-0.000245263. Franklin templeton mutual
funds having highest median-0.177871447. Axis mutual fund, Aditya birla sun life mutual fund, Reliance nippon life mutual fund is having lowest median-0. Aditya birla sun life mutual fund
having highest skewness-4.319042727 and Reliance nippon life mutual fund is having lowest skewness--6.130945323. Franklin templeton mutual fund is having highest kurtsis-56.36249. SBI
mutual fund is having lowest kurtsis-0.801724.

Table 1: Shows Total NAV And Total Rate of Return.

Name of the Mutual Fund Total NAV Average NAV Total ROR Average ROR
Axis Banking and PSU Debt Fund-Daily-Dividend 242926.9 1007.995436 0.000293189 1.22E+00
Aditya Birla Sun Life Active Debt Multimanager Fof scheme 3541.42 14.63396694 -2.164792587 -0.008982542
Direct Dividend
Baroda Pioneer Balance Fund- Direct-Dividend 4875.6 19.73927126 21.48425945 0.087334388
Franklin Asian Equity Fund-Dividend 3353.96 13.57878543 22.7256855 0.092380835
HDFC Balanced Fund-Direct-Dividend 8123.39 33.15669388 19.3918443 0.079474772
ICICI Prudential Balanced-Direct-Growth 30767.35 124.56417 23.34436976 0.094895812
Kotak Asset Allocator Fund-Direct-Dividend 17950.67 72.67477733 13.15848841 0.05348979
Reliance Arbitrage Advantage fund-Direct-Dividend 3089.23 12.55784553 1.232877754 0.005032154
SBI Banking and Financial Service Fund-Direct-Dividend 3447.62 13.95797571 36.65884543 0.149019697
UTI MIS Advantage Fund Direct-Dividends 9323.06 38.36650206 12.30343511 0.050840641

Table 2: Shows Statistical Description of NAV Risk.

Name of the Mutual Fund Std. Dev Variance Median Skewness Kurtsis
Axis Banking and PSU Debt Fund-Daily-Dividend 0.01566087 0.000245263 0 -3.284341213 50.85037
Aditya Birla Sun Life Active Debt Multimanager Fof 0.150246572 0.022574032 0 4.319042727 40.82668
scheme Direct Dividend
Baroda Pioneer Balance Fund- Direct-Dividend 0.589902438 0.347984886 0.147898148 -0.525405448 1.387175
Franklin Asian Equity Fund-Dividend 0.857062227 0.73455566 0.177871447 -5.3854727 56.36249
HDFC Balanced Fund-Direct-Dividend 0.485112557 0.235334193 0.125098421 -0.592924244 1.213029
ICICI Prudential Balanced-Direct-Growth 0.464495824 0.215756371 0.118175268 0.08376074 0.989932
Kotak Asset Allocator Fund-Direct-Dividend 0.220885638 0.048790465 0.027273967 1.413519543 8.193098
Reliance Arbitrage Advantage fund-Direct-Dividend 0.159891778 0.025565381 0 -6.130945323 42.51463
SBI Banking and Financial Service Fund-Direct- 0.688029559 0.473384674 0.147173957 0.193553725 0.801724
Dividend
UTI MIS Advantage Fund Direct-Dividends 0.177435806 0.031483465 0.054697116 -0.531683206 1.275733

SUMMARY AND CONCLUSION:

The present paper investigates the performance of 10 open-ended, equity schemes for the period from 2017 Jan 01 to 2017 Dec 31(one year) of transition economy. The historical NAV of the
selected schemes was evaluated on the basis of risk return, standard deviation, median, variance, skewness, kurtsis. Axis mutual fund scheme shows high return and low risk, Aditya birla is
having negative returns. Baroda pioneer, Franklin templeton, HDFC, ICICI, Kotak Mahindra, Reliance Nippon, SBI, and UTI is having Low return and High risk. The result shows that 10
percent of the sample mutual fund scheme is having high return and less risk, 10 percent of the sample mutual fund scheme is having negative returns and 80 percent of the sample mutual fund
schemes are having high risk and less return, This will be helpful to the investors to ascertain risk- return relationship in Indian mutual funds. The efficient mutual fund may be suggested to the
existing and potential investors for their investment.

REFERENCES:
1. Afza, Talat and Rauf, Ali “Performance Evaluation of Pakistani Mutual Fund”. Pakistani Economic and Social Review, 47(2), 2009, pp199-214.
2. Deepak Agarwal “Measuring Performance of Indian Mutual fund” International Journals of Advanced Research in Management and Social Sciences 5(3), 2007, pp 361-370
3. Garg, Sanjay A Study on “Performance Evaluation of Selected Indian Mutual Funds”. International Journal of Innovation Creativity and Management (IJICM), 1(1), 2011, pp 1-10.
4. Grinblatt. Market andTitman. Sheridin. “Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings”, Journal of Business, . 62 (3), 1989, pp393-416.
5. Gupta O.P and Seghal Sanjay. “Investment Performance of Mutual fund: The Indian experience”, ICFAI Journal of Applied Finance, 3(1), 1996, pp661-669
6. Henriksson Roy.D.“Market Timing and Mutual Fund Performance: An Empirical Investigation,” Journal of Business part1, 1984, pp73-96.
7. Jayadev, M. Mutual Fund Performance: “An Analysis of Monthly Returns. Finance India”, 10 (1), 1996, pp 73-84.
8. John G. Mc Donald, “Objectives and Performance of Mutual Funds 1960-1967”, Journal of Financial and Quantitative Analysis, 1974, pp311-33.
9. Kavita Chavali, “Investment performance of equity – linked saving schemes” Indian Journal of Finance, III (2) 2009.
10. Nidhi Walia and Ravi Kiran ,"Efficient Market Hypothesis, Price volatility and performance of Mutual Funds Efficient Market Hypothesis,’ Price volatility and performance of Mutual Funds”, Global Journal of Management and Business
Research, 10, (2),2010 pp42-50.
11. Sapar, Rao and Madava, Ravindra, “Performance Evaluation of Indian mutual fund” International Refereed Research Journal, III,3(3), (2003) pp48
12. Satya swaroop debashish,“Investigating Performance of Equity- based Mutual Fund Schemes in Indian Scenario”, KCA Journal of Business Management, . 2(2), 2009.
13. S Narayan Rao “Performance Evaluation of Indian mutual funds” IITB, Chennai(2002)
14. Sowmya Guha, , “Downside Risk Analysis of Indian Equity Mutual Funds: A Value at Risk Approach” International Research Journal of Finance and Economics, ISSN 1450-2887(2), 2009.
15. Vincent A. Warther. “Aggregate Mutual Fund Flows and Security Returns”, Journal of Financial Economics, 39, 1955, pp209-235.

Received on 26.03.2018 Modified on 20.04.2018

Accepted on 23.05.2018 ©A&V Publications All right reserved
Asian Journal of Management. 2018; 9(3):1062-1064.
DOI: 10.5958/2321-5763.2018.00167.1

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