RESEARCH ORIENTATION

TOPIC –A STUDY ON PERFORMANCE OF MUTUAL

FUND IN INDIA

FACULTY GUIDE (MENTOR) SUBMITTED BY:

SIGN -
Dr. Tarun Kushwaha Class – MBA M.M. Semester- I Sem. Section-‘A’

Name & Scholar No.1 Mayank Panwar (1121612732)

Name & Scholar No.2 Mayank Tanwani (1121612891)
Name & Scholar No.3 Minal Khatri (1121613335)
Name & Scholar No.4 Mohit Rahadwani (1121612738)

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 DECLARATION

I Mayank Panwar, Mayank Tanwani, Minal Khatri, Mohit Rahadwani {Master of Business

Administration (Marketing Management)} hereby declare that Research Orientation Report

Entitled “A Study on Performance of Mutual Funds in India”, submitted by us to PRESTIGE

INSTITUTE OF MANAGEMENT AND RESEARCH, INDORE represents our own work,

expect for the guidance and suggestion received which have been suitably acknowledged.

We further state that this work does not form the part of our or any other report submitted to this

or any other college for the award of degree or diploma.

NAME OF STUDENTS – Mayank Panwar

Mayank Tanwani

Minal Khatri

Mohit Rahadwani

CLASS – MBA MM - A

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 CERTIFICATE OF FACULTY GUIDE

This is to certify that Mayank Panwar, Mayank Tanwani, Minal Khatri, Mohit
Rahadwani{Master of Business Administration (Marketing Management)} have successfully
under gone the project entitled “Topic – A Study on Performance of Mutual Funds in India”.
They have carried on their project with full sincerity and dedication.

FACULTY NAME – Dr. Tarun Kushwaha

PIMR (INDORE)

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 ACKNOWLEDGEMENT

It is privilege to express gratitude and sincere thanks to PRESTIGE INSTITUTE OF

MANAGEMENT AND RESEARCH, Indore for giving us the opportunity to carry out this
MINOR RESEARCH PROJECT on topic “A Study on Performance of Mutual Funds in India”.

I am very thankful to Dr. Yogeshwari Phatak, Director of Prestige Institute of Management and
Research, for her moral support and Dr. Tarun Kushwaha (Faculty Guide), for her valuable
guidance and support throughout report presentation.

I would also like to thank to all people, who directly or indirectly helped us to complete the
project report.

NAME OF STUDENTS – Mayank Panwar

Mayank Tanwani

Minal Khatri

Mohit Rahadwani

CLASS – MBA MM-A

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 INDEX

S.NO. HEADERS PAGE NO.

CHAPTER 1. INTRODUCTION 6-10

CHAPTER 2. RESEARCH PROBLEM 11
CHAPTER 3. LITERATURE REVIEW 12-16
REFERENCES 17-18

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 CHAPTER 1: INTRODUCTION

Investment means to park the surplus fund by an individual for the purpose of earning additional
revenue or capital appreciation or both. It is the sacrifice of the certain present value for some
uncertain future reward. In other words, an investment can be defined as commitment of funds to
one or more assets that will be held over some future time period. Broadly, as investment
decision is a tradeoff between risk and return. An investor has to take into consideration various
factors while taking an investment decision. These are: risk associated with the investment, tax
benefits, liquidity and marketability etc. Mutual funds are one of the investment options
available with the investors through which they can invest in an asset class of their choice such
as equity, debt, gold or real estate etc. The primary role is to assist investors in earning an
income or building their wealth by investing in various available schemes and securities. Mutual
funds are a way through which investors can indirectly invest in securities. Also, mutual funds
provide flexibility to liquidate investment position at any time.

Mutual Fund means money pooled in by a large number of investors that is, mobilize savings
from large number investors and invest these funds in share and other securities. Basically, it is
the type of organization which takes money from investors (like you and me), create pool of
funds and invest it in different investment avenues. In other words, a mutual fund is a
professionally controlled type of collective funding scheme that pools cash from many traders
and invests in shares, bonds, short term money market instrument and other securities.
Mutual Funds schemes are of different types in which one can invest. They can be classified on
different basis.

On the basis of structure:

a. Open-Ended Funds: Open ended funds are available throughout the year to invest.
They do not have fixed maturity period. These fund allow investor to keep invest as long
as they want to. They are actively managed funds and suitable for those who want
investment along with liquidity as they are not bound to any specific period.
b. Close-Ended Funds: Close-Ended Funds are funds in which units can be purchased
only during the initial offer period. There is a fixed maturity period. To provide liquidity

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 these schemes are often listed on stock exchange as they cannot be sold back to mutual
funds like open ended funds.
c. Interval Funds: Interval Fund has featured of both open as well as close ended funds.
They are opened for repurchase of shares at different intervals during their fund tenure.
The fund management company offers to repurchase units from existing unit holders
during these intervals. If unit holders wish to they can offload shares in favor of the
fund.

On the basis of asset class:

a. Equity Funds:

• Large-Cap Mutual Funds- Large cap funds are those funds which invest a larger
proportion of their corpus in companies with large market capitalization.
Trustworthy, reputable and strong are three adjectives that are often used to
describe a large-cap company. Mutual funds that invest a majority of their
investible corpus in these companies are labeled as large-cap funds.
• Mid-Cap Mutual Funds-Mid-caps are those that they lie between large-caps and
small-caps in terms of company size. During a bull phase, mid-cap stocks may
outperform their large-cap counterparts, as these companies seek to expand by
looking out for suitable growth opportunities.
• Small-Cap Mutual Funds-Small-cap stocks typically have the highest growth
potential, since the underlying companies are young, and seek to expand
aggressively.

b. Debt Funds: A debt fund is a Mutual Fund scheme that invests in fixed income
instruments, such as Corporate and Government Bonds, corporate debt securities, and
money market instruments etc. that offer capital appreciation.
c. Money Market Funds: As the name suggests, these funds invest in money market
instruments like T-Bills, Commercial Papers, Gilt-edge securities etc. These funds are
suitable for those who are looking for immediate but moderate return as return is fixed.

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 d. Balanced or Hybrid Funds: These are funds that invest in a mix of asset classes. These
invest in both Equities and Fixed Income, thus offering the best of both, Growth.
Potential as well as Income Generation. This fund balances the risk and return of the
investment.

On the basis of Investment objective:

a. Growth Funds: Under growth fund, money/fund is predominantly invested in equity

stocks with the purpose of capital appreciation. They have a high risk and are ideal for
investors with a long-term. They are suitable for those investors who are looking for
higher returns.
b. Income Funds: Under these schemes, money is primarily invested in fixed-income
instruments. Like bonds, debentures etc. with the aim of providing capital protection and
regular incomes to investors.
c. Liquid funds: Under these schemes, money is invested primarily in short-term or very
short-term instruments e.g. T-Bills, CPs etc. with the purpose of providing liquidity.
d. Tax-Saving Funds (ELSS): These are funds that invest primarily in equity shares.
Investments made in these funds qualify for deductions under the Income Tax Act. They
are considered high on risk but also offer high returns if the fund performs well.

The money is managed by Fund Managers, who invest in numerous investment securities. It is
like a process: first, Mutual Fund schemes announce their investment objective and seek
investments from investor. Depending upon the type of scheme and how the scheme is
structured, it may be open to accept money from investors, either during a limited time period
only or at any point of time. The investment then translated into number of units in the scheme.
Thus, an investor in the scheme is issues units of the scheme. The rise in the value of the
investments along with profits is distributed among the investors after charging expenses, loads
and taxes. By investing, mutual fund earns profit and distributes it to the investors after cutting
their management expense ratio i.e. 1-3%. Like other investments mutual funds also have risk.

The growth of Mutual Funds industry has been seen in over past years. With the increasing
emphasis in domestic savings and their mobilization and allocation towards profitable
investments, the need and scope of mutual fund operations has increased. The mutual funds is

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one of the important classes of financial intermediaries which enables millions of small and large
savers spread across the country as well as internationally to participate in and derive the benefits
of the capital market growth. It is an alternative vehicle of intermediation between the suppliers
and users of investable financial resources which is becoming increasingly popular in India and
aboard due to higher investor return and relativity low risk and cost. Thus the involvement of
mutual funds in the transformation of Indian economy has made it urgent to view their services
not only as financial intermediary but also as pace settlers as they are playing role in mobilizing
and efficient allocation of investable funds through markets. The fact is that the mutual funds
have a lot of potential to grow but to capitalize the potential fully, it would need to create and
market innovative products and frame distinct marketing strategies. Moreover, the equity culture
has not yet developed fully in the country as such, investor education would be equally important
for greater penetration of mutual funds. The history of mutual funds dates back to 19th century
with its origin to Great Britain. Robert Fleming set-up in 1868 the first investment trust under
the title ‘Foreign and Colonial Investment Trust’ to manage the finances of moneyed classes
of Scotland by spreading the investment and other investment trusts which were subsequently
set-up in Britain and the US, resembled today’s close-ended mutual fund schemes. The
first mutual fund in the US namely, Massachusetts Investors’ Trusts, was set up in 1924. In
India, the mutual fund industry started in 1963.The mutual fund industry in India commenced
with setting up of the Unit Trust of India (UTI) in 1964 through the government of India. In 1987
public sector Banks and two insurance companies (LIC and GIC) were allowed to release mutual
fund. In the course of the last few years many remarkable and sharp changes had been visible
within the mutual fund industry. Therefore, due to the changed surroundings it turns into
important to research the mutual fund overall performance. The present paper investigates the
performance of open-ended, growth-oriented equity schemes. Mutual funds in India are
regulated by means of the Securities and Exchange Board of India (SEBI). Indian mutual funds
are concern to stringent requirements .about who is eligible to begin a fund, how the fund is
controlled and administrated and what kind of capital a fund must have on hand. The SEBI
regulations include minimal startup capital requirement of Rs. 500 million for open-ended debt
funds and Rs. 200 million for closed ended funds. Similarly, Indian mutual funds are only
allowed to borrow up to 20% in their value for a time period no longer to exceed six months to
fulfill short term period liquidity requirements. Also, a non-benefit association, The Association

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of Mutual Funds in India was set up in1995 with goal of advance sound and moral marketing
practices in Indian mutual funds Industry. The AUM of mutual funds also raised in 2016 in short
term debts and saw certain retrenchment in gilt and long term funds.

With this growth in MF Industry, Indian market was crowded with over two thousand MF
schemes, each promising higher returns which makes investor confuse in which to invest in. MF
work differently in different market conditions as they do not guarantee future performance also
comes with risk involved. In research we focus on measuring the performance of mutual funds
scheme. The paper further followed with literature review, research gap/ rationale, objectives,
research methodology, data analysis, findings and suggestions, conclusion, implications and
limitations of the study, references and index.

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CHAPTER 2: RESEARCH PROBLEM

• The purpose of this study is to evaluate the mutual funds on the basis of different
performance measures and benchmark index using secondary data.
• To have a knowledge of mutual fund schemes and their performance

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 CHAPTER 3: LITERATURE REVIEW

The present study deals with the review of literature on “Performance of Mutual Fund in India”.
A number of studies on evaluating the performance of mutual fund in India have been conducted
in India and foreign countries. Review of some of the studies is present in the following
discussion.

Akroju Sanjay, K.Bhavana Raj (2019) evaluated the performance and persistence of Indian
Mutual Fund Industry and compare it with World Mutual Fund Industry. And also compare the
performance of equity mutual fund with benchmark index. Secondary data has been used for this
research. The main sources of data have been extracted from the following websites: AMFI,
RBI, CRISIL Research, BSE, and NSE. The study revealed that the scheme-wise growth
increasing but there was a negative correlation growth between debt fund and equity fund.
Investment in equity fund was growing more than equity index (compared CRISIL and AMFI
Equity fund performance and index of S&P BSE SENSEX (TRI), NIFTY 50 (TRI), NIFTY 500
(TRI).) Indian mutual fund industry growth rate is higher than Europe and Asian Pacific regions,
but it is equal with America and has higher growth rate from 2017.

Bilal Ahmad Pandow (2017) has studied the important goals of the mutual fund industry is to
attract and mobilize major portion of the House Hold Savings (HHS) in order to enable the small
savers to benefit from the economic growth by facilitating them to park their savings into the
assets which yield better risk adjusted return. The study has revealed that the mutual fund
industry has recorded significant progress on all fronts yet it has not been able to utilize its
potential fully. On almost on all parameters it is far behind the developed economics and even
most of the emerging economics of the world. The industry is confronted with number of
challenges like low penetration ratio, lack of product differentiation, lack of investor awareness
and ability to communicate value to customers, lack of interest of retail investors towards mutual
funds and evolving nature of the industry. Based on the analysis the study suggests that if the
industry has to utilize its potential fully, it has to address these challenges.

Shivangi Agarwal and Nawazish Mirza (2017) aimed on measuring the performance of mutual
funds scheme with benchmark index and comparing the schemes for which they analyze sample
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of 100 MF schemes (2013-2016) for study. They used different measure for performance
evaluation, which resulted that 90 percent of the schemes have performed better than their
benchmarks. They did detailed study and also suggested which mutual fund scheme to invest in.

Syed Husain Ashraf and Dhanraj Sharma (2014) focused on measuring the return earned by the
sample mutual funds schemes and compare against the benchmark market returns, examine the
degree of correlation that exists between market returns. To evaluate the performance of MF
schemes based of benchmark index and to find out the advantages of diversification, along with
adequate systematic risk compared to market beta risk. The study aimed at analyzing the open
ended MF. For evaluating they used ratios. For the study they took 60 months data (April 2007
to March 2012). The result showed that benchmark index has significant impact on the changes
in return of MF schemes and the beta was lower in most of the sample schemes. It also indicates
that most of the scheme outperforms the market benchmark.

Dr. S. Vasantha, Uma Maheshwari, K. Subhashini (2013) focus on evaluating and analyzing the
risk performance of selected open ended equity diversified mutual funds scheme in India, to
measure the risk return relationship and market volatility of the selected mutual funds and to
suggest strategies to invest in a profitable mutual fund. Their study was both descriptive and
analytical in nature. They used secondary data collected from 2008-2012 for purpose of study. A
period of 60 months data was considered in their study. Results showed that funds are less
volatile than the market and there is low variation between market index and fund performance.
According their study HDFC top 200 fund is the best performing fund and Birla Sun Life
Frontline has the lowest beta among all other funds.

Sweta Goel (2013) evaluated the performance of mutual fund in India with respect to different
performance attributes and to develop a framework for performance measure of mutual funds in
India. The studies were evaluated on the basis of Risk – adjusted measures - Sharpe Ratio,
Treynor’s ratio and Jensen’s alpha, Rate of Return Measure’s alpha, Fama’s Components of
Investment Performance, Fama – French Three Factor Model, Carhart four – Factor Model,
Stochastic Dominance Efficiency Test, Data Envelopment analysis (DEA). The study revealed
that in spite of such a long experience and huge establishment, most of the mutual fund schemes
have been performing inefficiently. Mutual fund companies, AMFI and governing bodies as

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SEBI should take corrective measures for this. For achieving the efficiency level, all the
inefficient schemes might follow their respective peer efficient schemes in the proportion of their
target values or 24 virtual inputs. Load fee and expense ratio have been found as the major cause
of inefficiency in mutual fund schemes and hence mutual fund companies might focus on
reducing these. Most of the mutual fund companies are not getting benefited in performance
efficiency from their experience. Therefore, older mutual fund schemes must be either wind up
or a thorough review of strategy is needed i.e., these must be restructured. Also, large mutual
fund schemes with high assets are not performing efficiently. Therefore, mutual fund companies
should either improve their management or must occupy limited funds.

Mr. Ashok Bantwa, Mr. Krunal Bhuva (2012) evaluated the performance of selected 20 equity
diversified schemes during the period of June 2007 to May 2012. An attempt has been made to
evaluate the fund’s performance, level of diversification and manager’s ability to pick
undervalued stocks. The historical performance of the selected schemes were evaluated on the
basis of Sharpe Ratio, Treynor’s Measure, Jensen’s Alpha Measure, Fama’s selective Model,
Systematic Risk(Beta). The study revealed that except one all the sampled scheme have
performed better than market. The finding also revealed that majority of the schemes was
adequately diversified. The study also revealed that about 60% of the schemes were able to beat
market with help of better stock selection skill of fund managers.

Dr. Sarita Bahl, Meenakshi Rani (2012) evaluated the performance of 29 open ended, growth-
oriented equity scheme for the period from April 2005 to March 2011 (six years) of transition
economy .The historical performance of the selected schemes were evaluated on the basis of
Sharpe, Treynor, and Jensen’s measure whose results will be useful for investors for taking
better investment decisions. The study revealed that 14 out of 29 sample mutual fund scheme had
outperformed the benchmark return. The results also showed that some of the schemes had
underperformed; these schemes were facing the diversification problem.

Noulas, John and John (2005) evaluation risk adjusted performance of Greek equity funds during
the period of 1997-2000. The study includes 23 equity funds and is based on weekly data for
equity mutual funds. Techniques like Treynor, Sharpe and Jensen. The results were both positive
during the first three years and negative returns for the fourth year. It also indicated that beta for

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all the funds is smaller than 1 for four year fund. The author concluded that investor needs to
know long term behavior of MF for making right investment decision

Plantinga and Groot (2001) examined performance measure. Their study consisted of sharpe
ratio, sharpe’s alpha, the expected return measure, the Sortino ratio and the upside potential ratio.
The results were defined in low, medium and high degree of risk aversion. Therefore, the choice
of suitable performance should be determined by the performance measure of the investor.

Sahadevan and Thiripalraju (1997) analyzed the performance of private sector funds they
compiled and analyzed the monthly average return and standard deviation of 10 selected private
sector funds. Results showed that in terms of rate of return, 5 funds – Alliance 95, ICICI Power,
Kothari Prima, Kothari Pioneer Blue Chip and Morgan Stanley Growth Fund outperformed the
market. The study also shows that by and large, performance of a fund is not closely associated
with its size.

M, Jaydev (1996) studied mutual fund in India based on growth schemes examined the
performance of the mutual fund industry between April 1993 to March 1994 with BSE SENSEX
as market surrogate. The study revealed that, in the case of 10 schemes, the average rate of return
on mutual funds were marginally lower than the market return while the standard deviation was
higher than the market. The analysis also provided that, performance of a fund was not closely
associated with its size.

Tripathy, Nalini Prava (1996) identified that the Indian capital market expanded tremendously as
a result of economic reforms, globalization and privatization. Household sector accounted for
about 80 percent of country’s savings and only about one-third of such savings were available
for the corporate sector. The study suggested that, mutual funds should build investors
confidence through schemes meeting the diversified needs of investors, speedy disposal of
information, improved transparency in operation, better customer service and assured benefits of
professionalism.

Yadav R A and Mishra, Biswadeep (1996) evaluated 14 close end schemes over the period of
April 1992 to March 1995 with BSE National Index as benchmark. Their analysis indicated that,
57 percent of sample schemes had a mean return higher than that of the market, higher Sharpe

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Index and lower Treynor index. Schemes performed well in terms of diversification and total
variability of returns but failed to provide adequate risk-premium per unit of systematic risk. 57
percent had positive alpha signifying superior performance in terms of timing ability of fund
managers. Fund managers of growth schemes adopted a conservative investment policy and
maintained a low portfolio beta to restrict losses in a rapidly falling stock market.

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REFERENCES

Agrawal, Shivangi and Mirza, Nawazish. (2017). A Study on the Risk Adjusted Performance of
Mutual Funds Industry in India. Review of Innovation and Competitiveness, Volume 3, Issue 1,
Page No. 75-94.

Ashraf, Sayed Husain and Sharma, Dhanraj. (2014). Performance Evaluation of Indian Mutual
Funds against Established Benchmarks Index. International Journal of Accounting Research,
Volume 2, Issue 1, ISSN: 100013.

Bahl, Sarita and Rani, Meenakshi. (2012). A Comparative Analysis of Mutual Fund Schemes in
India. International Journal of Marketing, Financial Services and Management Research,
Volume 1, Issue 7, ISSN: 2277-3622.

Bantwa, Ashok and Bhuva, Krunal. (2012). Performance Evaluating of Selected Indian Equity
Diversified Mutual Fund Schemes: An Empirical Study. Global Journal of Research in
Management, Volume 2, Issue 2.

Goel, Shweta. (2013). Performance of Mutual Funds and Investors’ Behavior.

Jayadev, M. (1996). Mutual Fund Performance: An Analysis of Monthly Returns. Finance India,
Vol. X (1), Page No. 73-84.

Noulas, Athanasios G., Papanastasiou, John A. and Lazaridis, John. (2005). Performance of
Mutual Funds. Managerial Finance, Volume 31, Issue 2, ISSN: 0307-4358.

Pandow, Bilal Ahmad. (2017). Performance of Mutual Funds in India. International Journal of
Research in IT, Management and Engineering, Volume 07, Issue 1, ISSN 2249-1619.

Plantinga, Auke and Groot, Sebastiaan. (2001). Risk-Adjusted Performance Measures and
Implied Risk-Attitudes. Research School Systems, Organization and Management.

R.A., Yadav and Mishra, Biswadeep. (1996). Performance Evaluation of Mutual Funds: An
empirical analysis. MDI Management Journal, Vol. 9(2), Page No. 117-125.

Sahadevan, KG and Thiripalraju, M. (1997). Mutual Funds: Data, Interpretation and Analysis.
PHI Publisher.

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Sanjay, Akroju and Raj, K. Bhavana. (2019). Performance and Persistence of Indian Mutual
Fund Industry. International Journal of Recent Technology and Engineering (IJRTE), Volume-8,
Issue-2, ISSN: 2277-3878.

Tripathy and Prava, Nalini. (1996). Mutual Fund in India: A Financial Service in Capital Market.
Finance India, Volume X (1), Page No. 85-91.

Vasantha, S, Maheshwari, Uma and Subhasini, K. (2013). Evaluating the Performance of some
selected open ended equity diversified Mutual fund in Indian mutual fund Industry. International
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ISSN: 2319-8753.

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