Professional Documents
Culture Documents
1
V.B. Karuna Moorthy, 2Dr. N. Rajendhiran
1
Ph.D Part Time Research Scholar, 2Retired Professor Cum Director
1
Department of Management Studies, 2Department of Management Studies
1
Periyar University, 2PRIMS, Periyar University,
Salem
Abstract
This study is an one of the attempt to know the importance of selected growth funds schemes with a
view to see its effect on investor’s thinking perception. In this study 16 growth funds schemes have
been taken as sample and the selection of schemes was on the basis of random sampling size of funds
in AMFI of particular company of last 5 years. The risk free rate of return taken is 3.5%. In order to
increase the return on investors domestic investments and boost the distribution of investments in
different sectors, the need and scope for mutual funds as an investment option has increased
tremendously. Investment in mutual funds is limited to cities of Tier 1 and Tier 2 while rural and
semi-urban communities are well known for their importance one reason for this is lack of knowledge
in rural areas. Therefore, there is a significant need for awareness rising in the mutual fund industry.
Compared to the public sector mutual funds, the private sector mutual funds have shown much better
performance mainly due to better distribution of funds, better management and efficient portfolio
manager performance with their quality investment. This result came after estimation and
comparison of the ratio of Sharpe, Treynor, and Jenson.
1. INTRODUCTION
The Securities and Exchange Board Of India (Mutual Funds) Regulations, 1996 describes a mutual
fund as “a fund established in the form of a trust to raise money through the sale of units to the
investors or a section of the investors under one or more schemes for investing in securities, including
money market instruments.”
According to the definition above, a mutual fund can be raised in India through the sale of units to the
public. It can give investors more protection by setting up under the Indian trust act in the form of a
trust. A mutual fund functions as a link between investors and the stock market by pooling investors'
investments and investing them in the different market to produce returns for investors. Thus a mutual
fund is similar to ‘Portfolio Management Services (PMS). While both are the same subject matter,
they are different from each other. PMS is provided to high net worth individuals; their portfolios are
handled separately, taking into account their risk profile. In the case of mutual funds, small investor
assets are mobilized under a scheme, and the return is distributed in the same proportion in which the
contributions are made in mutual funds in India by the investors or unit holders.
4. To evaluate the performance of each portfolio by considering both risk and return by
using Treynor’s index, Sharpe’s index, Jenson’s alpha.
3. LITERATURE REVIEW
A description of the theoretical literature analysed is presented here to fix the basis for the study of
comparative analysis of selected public sector and private sector mutual funds and risk and return
involved in mutual fund returns and the need for regulating mutual funds. Bhagaban Das, Sangeeta
Mohanty & Nikhil Chandra Shil (2008) Examines that the position of the Indian insurance industry
and the mutual fund industry as a major financial services in the financial sector has been truly
remarkable over the past decade or so. In addition, a number of research studies have been undertaken
since 1992 to know the importance of these two as important investment vehicles in the Indian capital
market climate. But the latest 'Behavioural Finance' research on factors affecting mutual fund
selection and life insurance schemes are very small, and very little information is available about
expectations, desires, attitudes and behaviours of investors. Again, maybe fewer efforts are being
made to analyze and compare Indian retail investors' selection behavior towards the industry of
mutual funds and life insurance, particularly in the post-liberalization period. With this context this
paper makes a new attempt to research the investors' actions in selecting these two investment
vehicles from an Indian perspective through a comparative analysis. Zoran Ivkovic, Scott
Weisbenner (2009) Studies the relationship between the flow of mutual funds and the features of the
fund, and identifies three main outcomes. First, individual investors are reluctant to sell mutual funds
that have an rise in value and are interested in selling losing funds, in line with tax motives. Second,
investors pay attention on investment costs and other hidden costs as saving decisions are prone to
both the percentages of expenditures and the loads. Third, the inflows and outflows of fund-level
investors are output related, but in different ways. Inflows are only linked to "relative" results,
indicating that new money is pursuing the industry's best performers in an target. Outflows are only
related to the success of "absolute" assets, the same benchmark for taxes. Udayasankar and Maran
(2018) describe that, in India, the mutual fund is four decades older. It was started in 1964 by UTI
with some schemes for small and medium-sized investors. During this short span of time Indian small
investors in mutual funds have risen enormously. Yet now a day is the amount of investors and
investment sources also rising tremendously in industry. In addition, the scheme of mutual funds
introduced a new dimension to effectively tackle the financial risk of small and medium-sized
investors as well as fund building capacity of corporate sectors. Mutual fund investors can spend even
more in diversification by purchasing various kinds of stocks that will help spread the money of
investors across various types of derivative instruments and thereby manage the risk to a greater
degree and are automatically diversified by deciding in advance investment group. It gives a link
between small investors and corporate sectors even considering certain points in it attempt to
understand the attitudes of the investors towards selected mutual funds in the Indian financial market.
This paper seeks to identify numerous factors that influence investor opinion regarding investing in
the mutual fund industry. The results will help to better define the base of interest and causes of
investors, as it shows that investors consider mutual funds as a compact investment option as
generates investment interest among small investors.
4. RESEARCH METHODOLOGY
4.1. Data Collection: The current analysis is a report that uses different financial and statistical
methods to review and evaluate selected public sector and private sector mutual funds
schemes. The schemes adopted to this end are mutual fund schemes for development. This
research compares 16 growth funds funded by mutual fund schemes in the public sector and
the private sector. The schemes have been selected using ranking method and simple random
sampling methods.
Net Asset Opening and Closing Values of the chosen schemes are taken on a monthly basis to
determine favorable outcomes. The analysis is based on both primary and secondary data,
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International Journal of Advanced Science and Technology
Vol. 29, No. 6s, (2020), pp. 2214-2222
gathered from various websites, journals, and fact sheets of various mutual fund schemes
published by them from time to time.
4.2. Tools & Techniques: Different portfolio metrics are used as Sharpe Index, Treynor Index
and Jensen Index financial instruments are used in this analysis to know the best performing
funds in the selected funds for the results of the mutual fund schemes.
4.3. Risk-Free Rate of Return (Rf): We take interest rate received on savings bank deposit from
state bank of India as the risk-free return rate in this report. The return rate on savings bank
deposits provided by RBI is 3.5 per cent per annum. The average annual risk-free rate is
3.5%/12= 0.292%. For this study intent this 0.292 is considered as risk-free rate (Rf).
Analysis of Treynor’s Index for Both Public Sector and Private Sector Mutual Funds
for the year 2018-19
Treynor’s Index for Equity Fund (2018-19)
NAME OF THE Treynor,s
S.NO RP RF COV(RP,RM) σ2Rm Beta
SCHEME Index
Table 5.1
From the above Table 5.1 it clearly shows the calculation of Treynor’s Index. It is clearly
understood from the above table that in the year 2018-19, the performance of funds where very good
because the Treynor’s Index shows all the positive results of the selected schemes. By observing all
the above schemes we can easily understood that HDFC Equity Fund and SBI Equity Fund is
performing far better than UTI Equity Fund and ICICI Prudential Equity Fund.
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Vol. 29, No. 6s, (2020), pp. 2214-2222
Table 5.2
From the above Table 5.2 it clearly shows the calculation of Treynor’s Index. It is clearly
understood from the above table that in the year 2018-19, the performance of all funds were not good
because the Treynor’s Index shows all the mixed results of the selected schemes. By observing all the
above schemes we can easily understood that ICICI Prudential Balanced Fund and SBI Balanced
Fund is performing better and showing positive values than UTI Balanced Fund and HDFC Balanced
Fund
ICICI Prudential
Long Term
3 Equity Fund (Tax 0.6500 0.292 0.0015 0.0031 0.4880 0.7337
Saving) - Direct
Plan - Growth
Table 5.3
From the above Table 5.3 it clearly shows the calculation of Treynor’s Index. It is clearly
understood from the above table that in the year 2018-19, the performance of funds where very good
because the Treynor’s Index shows all the positive results of the selected schemes. By observing all
the above schemes we can easily understood that ICICI Prudential Tax Saving and SBI Tax Saving
Fund is showing good positive results than HDFC Tax Saving Fund and UTI Tax Saving Fund.
2 SBI nifty index fund 1.1298 0.292 0.0017 0.0031 0.5443 1.5394
ICICI Prudential Nifty
-
3 Next 50 Index Fund - 0.292 0.0019 0.0031 0.6269 -0.7702
0.1908
Growth
HDFC Index Fund Nifty
4 1.1439 0.292 0.0017 0.0031 0.5432 1.5683
Dirct Plan
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International Journal of Advanced Science and Technology
Vol. 29, No. 6s, (2020), pp. 2214-2222
Table 5.4
From the above Table 5.4 it clearly shows the calculation of Treynor’s Index. It is clearly
understood from the above table that in the year 2018-19, the performance of funds where very good
because the Treynor’s Index shows all the positive results of the selected schemes except ICICI
Prudential Index Fund. By observing all the above schemes we can easily understood that HDFC
Index Fund and UTI Index Fund is showing good positive results.
Analysis of Sharpe’s Index for Both Public Sector and Private Sector Mutual Funds for the
year 2018-19
Sharpe’s Index for Equity Fund (2018-19)
sharpe's
S.NO NAME OF THE SCHEME RP RF σp
index
1 UTI - Equity Fund-Growth Option 0.7738 0.292 0.0485 9.9403
SBIequity hybrid fund regular plan(equity
2 0.7166 0.292 0.0315 13.4975
fund)
ICICI Prudential Focused Bluechip Equity
3 0.7446 0.292 0.0376 12.0472
Fund - Growth
4 HDFC Equity Fund Growth 1.1285 0.292 0.0466 17.9527
Table 5.5
From the above Table 5.5 it clearly shows the calculation of Sharpe’s Index. It is clearly
understood from the above table that in the year 2018-19, the performance of funds where very good
because the Sharpe’s Index shows all the positive results of the selected schemes. By observing all the
above schemes we can easily understood that HDFC Equity Fund and SBI Equity Fund is performing
far better than UTI Equity Fund and ICICI Prudential Equity Fund.
Sharpe’s Index for Balanced Fund (2018-19)
sharpe's
S.NO NAME OF THE SCHEME RP RF σp index
1 UTI - Balanced Fund-Growth 0.2512 0.292 0.0306 -1.3335
Table 5.6
From the above Table 5.6 it clearly shows the calculation of Sharpe’s Index. It is clearly
understood from the above table that in the year 2018-19, the performance of all funds were not good
because the Sharpe’s Index shows all the mixed results of the selected schemes. By observing all the
above schemes we can easily understood that ICICI Prudential Balanced Fund and SBI Balanced
Fund is performing better and showing positive values than UTI Balanced Fund and HDFC Balanced
Fund.
Sharpe’s Index for Tax Saving Fund (2018-19)
sharpe's
S.NO NAME OF THE SCHEME RP RF σp
index
UTI - Long Term Equity Fund (Tax
1 Saving) - Direct Plan - Growth 0.4680 0.292 0.0429 4.1015
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Option
Table 5.7
From the above Table 5.7 it clearly shows the calculation of Sharpe’s Index. It is clearly
understood from the above table that in the year 2018-19, the performance of funds where very good
because the Sharpe’s Index shows all the positive results of the selected schemes. By observing all the
above schemes we can easily understood that ICICI Prudential Tax Saving and HDFC Tax Saving
Fund is showing good positive results than UTI Tax Saving Fund and SBI Tax Saving Fund.
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International Journal of Advanced Science and Technology
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Table 5.9
From the above Table 5.9 it clearly shows the calculation of Jenson’s Alpha. It is clearly
understood from the above table that in the year 2018-19, the performance of funds where very good
because the Jenson’s Alpha shows all the positive results of the selected schemes. By observing all
the above schemes we can easily understood that HDFC Equity Fund, SBI Equity, UTI Equity Fund
and ICICI Prudential Equity Fund are performing better and their fund managers are doing better
work to keep Investors funds want to give better output to them.
Jenson’s Alpha for Balanced Fund (2018-19)
RP- Beta(RP- Jenson's
S.No Name of the Scheme RP RF RM Beta
RF RF) Alpha
UTI - Balanced Fund-
1 0.2512 0.292 -0.041 0.8743 0.3739 0.2177 -0.2586
Growth
SBI equity hybrid fund
2 direct plan(balanced 0.7131 0.292 0.4211 0.8743 0.3768 0.2194 0.2017
fund)
ICICI Prudential
3 Balanced Fund - Direct 0.6753 0.292 0.3833 0.8743 0.3230 0.1881 0.1952
Plan - Growth
HDFC Balanced Fund-
4 -0.6817 0.292 -0.974 0.8743 0.4154 0.2419 -1.2156
Growth
Table 5.10
From the above Table 5.10 it clearly shows the calculation of Jenson’s Alpha. It is clearly
understood from the above table that in the year 2018-19, the performance of all funds were not good
because the Jenson’s Alpha shows all the mixed results of the selected schemes. By observing all the
above schemes we can easily understood that ICICI Prudential Balanced Fund and SBI Balanced
Fund is performing better and showing positive values than UTI Balanced Fund and HDFC Balanced
Fund their fund will also concentrate more to safeguard the investors interest towards their funds.
Jenson’s Alpha for Tax Saving Fund (2018-19)
RP- Beta(RP- Jenson's
S.No Name of the Scheme RP RF RM Beta
RF RF) Alpha
UTI - Long Term
Equity Fund (Tax
1 0.4680 0.292 0.1760 0.8743 0.5234 0.3048 -0.1288
Saving) - Direct Plan -
Growth Option
2 SBI magnum tax gain 0.3369 0.292 0.0449 0.8743 0.5326 0.3101 -0.2652
scheme
ICICI Prudential Long
Term Equity Fund
3 0.6500 0.292 0.3580 0.8743 0.4880 0.2841 0.0739
(Tax Saving) - Direct
Plan - Growth
4 0.5265 0.292 0.2345 0.8743 0.4621 0.2691 -0.0346
HDFC TaxSaver
Table 5.11
From the above Table 5.11 it clearly shows the calculation of Jenson’s Alpha. It is clearly
understood from the above table that in the year 2018-19, the performance of funds were not good
because the Jenson’s Alpha shows only one positive results of the selected schemes. By observing all
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Copyright ⓒ 2020 SERSC
International Journal of Advanced Science and Technology
Vol. 29, No. 6s, (2020), pp. 2214-2222
the above schemes we can easily understood that ICICI Prudential Tax Saving is giving profit to the
investors and their fund manager is doing better work to their investments apart from that all the three
remaining funds are not showing any positive value to their investors.
Jenson’s Alpha for Index Fund (2018-19)
Beta(RP- Jenson's
S.No Name of the Scheme RP RF RP-RF RM Beta
RF) Alpha
UTI - Nifty Index
1 1.1358 0.292 0.8438 0.8743 0.5426 0.3160 0.5279
Fund-Growth Option
2 SBI nifty index fund 1.1298 0.292 0.8378 0.8743 0.5443 0.3169 0.5209
ICICI Prudential
3 Nifty Next 50 Index -0.1908 0.292 -0.4828 0.8743 0.6269 0.3650 -0.8479
Fund - Growth
HDFC Index Fund
4 1.1439 0.292 0.8519 0.8743 0.5432 0.3163 0.5356
Nifty Dirct Plan
Table 5.12
From the above Table 5.12 it clearly shows the calculation of Jenson’s Alpha. It is clearly
understood from the above table that in the year 2018-19, the performance of funds where very good
because the Jenson’s Alpha is shows all the positive results of the selected schemes except ICICI
Prudential Index Fund. By observing all the above schemes we can easily understood that HDFC
Index Fund, UTI Index Fund and SBI Index Fund is showing good positive results and their fund
managers are doing best results to their investments.
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HDFC TaxSaver 11 11 11
6. CONCLUSION
The present best sector for investments for future savings is mutual funds, because of that most of the
urban investors and semi urban investors are interested in mutual funds that to they are concentrating
on growth funds particularly for their future investments. By observing above analysis every investors
can easily understood that HDFC Index Fund NIFTY Direct Plan is giving highest ranking of top one
for growth fund investments apart from that the second place should be of UTI - NIFTY Index Fund-
Growth Option is sharing. Every investor want to know that if he want to invest in growth funds at
present he want to concentrate on index funds particularly because that funds are giving better results
for long term investments in mutual funds. mutual funds are one of the better investment avenues
because it gives more returns than risk free rate of return for long term investments.
References
1. Bhagaban das, Sangeeta mohanty & Nikhil chandra shil. 2008. Mutual Fund vs Life
Insurance: Behavioural Analysis of Retail Investors. International Journal of Business and
Management. 3(10), pp. 89-103.
2. Zoran ivkovic & Scott weisbenner. (2009). Individual Investor Mutual Fund Flows. Journal
of Financial Economics, 3(5), pp. 223-237.
3. Udhaysankar, R & Maran, K. (2018). Mutual Fund Investors Perception in India - a Study.
International Journal of Engineering & Technology, 7(1), pp. 60-63.
4. http://www.mutualfundsindia.com
5. http://www.amfiindia.com
6. http://www.nseindia.com
7. http://www.bseindia.com
8. Bhalla, V.K. (2001),- Investment Management: Security Analysis & Portfolio Management,
S.Chand, Delhi
9. Khan, The Indian Financial System, Tata McGraw Hill Education, 2006
10. Khan, J.A., Research Methodology, APH Publishing Corporation, New Delhi, 2008
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