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1.1 INTRODUCTION
A Mutual Fund is a collective investment vehicle that combines the resources of
numerous investors with similar financial objectives. The fund manager utilizes
these pooled funds to invest in various securities, such as stocks, bonds, and
money market instruments, based on the scheme's objectives. Returns generated
from these investments, including both income and capital appreciation, are
distributed among unit holders in proportion to their holdings. Mutual Funds
offer an accessible and cost-effective means for individuals to invest in a
professionally managed, diversified portfolio, requiring only a modest surplus of
funds, sometimes as little as a few thousand rupees. Each Mutual Fund scheme
is characterized by a distinct investment objective and strategy.
In today's intricate and contemporary financial landscape, a Mutual Fund stands
out as the optimal investment avenue. With the maturity and information-driven
nature of markets spanning equity shares, bonds, real estate, derivatives, and
other fixed income instruments, price fluctuations are often influenced by global
events taking place in distant corners of the world. It's improbable for the
average individual to possess the requisite knowledge, expertise, motivation, and
time to monitor these events, comprehend their implications, and react promptly.
Additionally, individuals face challenges in maintaining oversight of their asset
ownership, investments, brokerage fees, bank transactions, and other financial
obligations.
A Mutual Fund provides the solution to these challenges by employing
professionally qualified and experienced personnel to oversee each of these
functions on a full-time basis. The substantial pool of funds gathered by the
mutual fund enables it to engage such personnel at a minimal cost to each
investor. Consequently, the mutual fund leverages economies of scale across
research, investments, and transaction processing. While the concept of
collective investment by individuals is not novel, the modern Mutual Fund
emerged as a phenomenon of the 20th century, gaining significant popularity
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post-World War II. Today, thousands of firms globally offer tens of thousands of
mutual funds catering to diverse investment objectives.
At the close of March 2006, there were 29 mutual funds overseeing assets
totaling Rs. 2,31,862 crore across 590 schemes.
Mutual fund schemes may be classified based on its structure and its investment
objective.
TYPES OF MUTUAL FUNDS:
Open-ended funds:
An open-ended fund remains open for subscription throughout the year, lacking
a fixed maturity date. Investors have the flexibility to purchase and redeem units
at prices linked to the net asset value (NAV). The primary characteristic of open-
ended schemes is their liquidity..
Closed-ended funds:
A closed-ended fund typically has a predetermined maturity period, typically
ranging from 3 to 15 years. Subscription to the fund is only available during a
specified window. Investors can participate in the scheme during the initial
public offering, and thereafter, they can trade the units on the stock exchanges
where they are listed. To facilitate investor exits, some closed-ended funds offer
the option to sell units back to the mutual fund through periodic repurchase at
NAV-related prices. SEBI regulations mandate that at least one of these exit
routes must be provided to investors.
Interval funds:
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Interval funds blend the characteristics of both open-ended and closed-ended
schemes, permitting sale or redemption at NAV-related prices during
predetermined intervals.
Real Estate Funds:
These funds are closed-ended and primarily invest in real estate and properties,
offering long-term yield.
BY INVESTMENT OBJECTIVE:
Growth Funds:
Growth funds aim to achieve capital appreciation over the medium to long term,
typically by investing a significant portion of their assets in equities. Historical
data has demonstrated that stocks tend to outperform other investment types
when held over extended periods. These schemes are particularly suitable for
investors with a long-term perspective who seek growth over time.
Income Funds:
Income funds are designed to offer investors a consistent and reliable stream of
income. Typically, these schemes allocate their investments to fixed income
securities such as bonds, corporate debentures, and government securities.
Income funds are well-suited for those seeking capital stability and a dependable
income stream.
Balanced Funds:
Balanced funds aim to offer a blend of growth and consistent income. These
schemes periodically distribute a portion of their earnings and invest in both
equities and fixed income securities according to the proportions outlined in
their offer documents. While in a bullish stock market, the NAV of these
schemes may not necessarily rise in tandem, nor decline proportionately during
market downturns. They are well-suited for investors seeking a mix of income
and moderate growth.
Money market Funds:
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Money market funds aim to offer convenient liquidity, capital preservation, and
moderate income. These schemes typically invest in safer short-term instruments
such as treasury bills, certificates of deposit, commercial paper, and inter-bank
call money. Returns on these schemes may vary depending on prevailing market
interest rates. They serve as an ideal option for both corporate and individual
investors to temporarily park their surplus funds. A load fund is one that imposes
a commission for entry or exit. This means that each time units are bought or
sold in the fund, a commission is levied. Entry and exit loads typically range
from 1% to 2%. Despite the load, it might be advantageous to invest in the fund
if it has a strong performance history.
No-Load Funds:
A No-Load Fund is characterized by its absence of commission charges for entry
or exit. This means that investors are not required to pay any commission when
purchasing or selling units in the fund. One of the primary benefits of a no-load
fund is that the entire invested amount is utilized for investment purposes..
Equity Fund:
A Mutual Fund invests solely in equity shares of a company, thereby assuming
the risks associated with such investments.
Hedge Funds:
Mutual Funds that engage in speculative trading purchase shares anticipated to
rise in price and sell shares expected to decline.
OTHER SCHEMES:
Tax Saving Schemes:
These schemes provide tax benefits to investors under particular provisions of
Indian Income Tax laws, as the government incentivizes investment in specified
avenues. Investments in Equity Linked Savings Schemes (ELSS) and Pension
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Schemes qualify for deductions under section 88 of the Income Tax Act, 1961.
Additionally, the Act offers opportunities for investors to save on capital gains
tax under sections 54EA and 54EB by investing in Mutual Funds, provided the
capital asset was sold before April 2000 and the investment is made before
September 30, 2000.
SPECIAL SCHEMES
Industry specific schemes
Sector-specific funds exclusively invest in the industries delineated in their offer
documents, restricting their investments to particular sectors such as InfoTech,
FMCG, Pharmaceuticals, among others..
Index schemes
Index Funds seek to mirror the performance of a specific index, such as the BSE
Sensex or the NSE 50.
Sectorial schemes
Sectorial Funds are funds that exclusively invest in a designated industry, a
group of industries, or various segments, such as 'A' Group shares or initial
public offerings.
NAV OF A MUTUAL FUND
NAV, which stands for net asset value, typically denotes the net asset value per
unit. It signifies the actual value of one unit of a fund on any given day,
reflecting the performance of a specific mutual fund scheme. Put simply, NAV
represents the market value of the securities held by the scheme, fluctuating
daily in accordance with changes in market value.
NAV is calculated as follows
Market value of all the investments & Income + Profit- Loss–Expenses
Number of units in the mutual funds
The NAV of the scheme will be computed at the close of each business day,
subject to the values and regulations that SEBI may periodically issue, and will
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undergo annual audits. The NAV of the fund fluctuates based on investments
made and other transactions, either increasing or decreasing. Various factors
influence the value of the NAV.
POSITIVE FACTORS:
The NAV can increase due to following factors
Dividend
Interest
Capital gains – Shares
Capital gains – Bonds
Capital gains – Right issue
Capital gains – Bonus
NEGATIVE FACTORS:
The NAV can decrease due to following factors.
Interest
Capital losses – Shares
Capital losses - Bonds
Corpus reduction – Redemptions
Corpus Reduction – Inter scheme transfers.
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1.2 INDUSTRY PROFILE
STRUCTURE OF THE MUTUAL FUND INDUSTRY:
There are many entities involved in the mutual fund’s organization. The
structure is explained below. It mainly comprises the following
Typically, a mutual fund scheme is initiated by a Sponsor, responsible for
organizing and marketing the fund. The Sponsor outlines the investment
objectives, associated risks, costs, entry and exit rules, and operational
guidelines. In India, as in most countries, these sponsors require approval from
the regulator, SEBI (Securities Exchange Board of India), which assesses their
track record and financial strength.
The Sponsor then appoints an Asset Management Company (AMC) to execute
the investment strategy according to the fund's objectives. Additionally, the
Sponsor engages a custodian for safeguarding the fund's assets and may enlist a
third-party registry to manage unit holder (subscriber) records. Notably, in India,
the Sponsor often promotes the Asset Management Company, in which it holds a
majority stake, sometimes even up to 100%. However, in many other countries,
there is no requirement for a direct link between the sponsor and the asset
management company in terms of ownership.
The mutual fund scheme operates as a trust registered under the Indian Trust Act,
overseen by a trustee company promoted by the Sponsor. Typically, the Trustee
Company serves as a nominal entity, while its trustees, often experienced and
esteemed individuals from various sectors, ensure effective administration.
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The AMC is required to engage an external custodian responsible for
safeguarding the fund's assets and managing various transactions, including cash
and non-cash benefits. The custodian, usually a bank or financially sound
institution, also handles investor services such as issuing certificates, account
statements, redemption checks, and dividend payments.
Additionally, many AMCs enlist a registry and transfer agent to facilitate unit
transactions, manage investor records, and handle inquiries and services such as
address changes and certificate replacements. The AMC reports to the trustees,
who bear the responsibility of protecting investors' interests and ensuring
compliance with SEBI guidelines. They oversee the performance of the AMC, as
well as the operations of the custodian and transfer agent.
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HISTORY OF MUTUAL FUNDS IN INDIA AND ROLE OF
SEBI IN MUTUAL FUNDS INDUSTRY
The inception of the mutual fund industry in India dates back to 1963 with the
establishment of Unit Trust of India, initiated by the Government of India and
Reserve Bank. The history of mutual funds in India can be categorized into four
main phases.
They are:
First Phase – 1964 – 87
Established in 1963 through an Act of Parliament, Unit Trust of India (UTI)
operated under the regulatory and administrative oversight of the Reserve Bank
of India (RBI). In 1978, UTI was separated from the RBI, with the Industrial
Development Bank of India (IDBI) assuming regulatory and administrative
control. The inaugural scheme introduced by UTI was Unit Scheme 1964. By
the conclusion of 1988, UTI managed assets worth Rs. 6700 crores.
Second Phase – 1987 – 1993 (Entry of Public Sector Funds)
In 1987, the mutual fund landscape in India expanded with the introduction of
non-UTI, public sector mutual funds established by public sector banks, and
entities like Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund emerged as the pioneer among
these, founded in June 1987, followed by Canara Bank Mutual Fund (Dec 87),
Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov
89), Bank of India (Jun 90), and Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989, while GIC set up its mutual fund in
December 1990. By the close of 1993, the mutual fund industry managed assets
worth Rs. 47,004 crores.
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Third Phase – 1993 – 2003 (Entry of Private Sector Funds)
The entry of private sector funds in 1993 marked the beginning of a new era in
the Indian mutual fund industry, offering investors a broader range of fund
options. Additionally, 1993 saw the introduction of the first Mutual Fund
Regulations, requiring registration and regulation of all mutual funds, except
UTI. The former Kothari Pioneer (now merged with Franklin Templeton)
became the inaugural private sector mutual fund registered in July 1993.
Subsequently, the 1993 SEBI (Mutual Fund) Regulations were replaced by more
comprehensive and revised Mutual Fund Regulations in 1996, under which the
industry operates today.
The number of mutual fund houses continued to rise, with numerous foreign
mutual funds establishing a presence in India, alongside a series of mergers and
acquisitions within the industry. As of January 2003, there were 33 mutual funds
collectively managing assets worth Rs. 1,21,805 crores. Unit Trust of India led
the pack with assets under management totaling Rs. 44,541 crores.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI
underwent bifurcation into two separate entities. One entity is the Specified
Undertaking of the Unit Trust of India, managing assets worth Rs.29,835 crores
as of January 2003, primarily comprising the assets of the US 64 scheme,
assured return, and certain other schemes. Operated under an administrator and
governed by rules established by the Government of India, this entity falls
outside the scope of Mutual Fund Regulations.
The second entity is UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB, and
LIC. Registered with SEBI and operating under Mutual Fund Regulations, it
emerged from the bifurcation process.
With the division of the former UTI, which managed over Rs.76,000 crores in
assets as of March 2000, and the establishment of UTI Mutual Fund, compliant
with SEBI Mutual Fund Regulations, alongside recent mergers among private
sector funds, the mutual fund industry has transitioned into its current phase of
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consolidation and expansion. As of September 2004, there were 29 funds
managing assets worth Rs.1,53,108 crores across 421 schemes.
MUTUAL FUND CONSTITUENTS
All mutual funds consist of four components: Sponsors, Trustees, Asset
Management Company (AMC), and Custodians.
SPONSORS:
Sponsors propose the establishment of a mutual fund, which may be a registered
company, scheduled bank, or financial institution. Sponsors must meet specific
criteria, including capital requirements, a track record of at least five years in
financial services, a history of default-free transactions, and a reputation for
fairness. Sponsors appoint the TRUSTEE, Asset Management Company (AMC),
and Custodian. Upon the formation of the AMC, the sponsor assumes the role of
a stakeholder.
TRUST/BOARD OF TRUSTEES:
Trustees bear a fiduciary responsibility towards unit holders, safeguarding their
interests. They oversee the launch and promotion of schemes, obtain necessary
approvals, monitor the AMC's investments to ensure compliance with
established limits, safeguard the fund's assets, and ensure timely returns to unit
holders. Trustees also review the AMC's due diligence. Major decisions
concerning the fund require unit holders' consent. Trustees submit reports to
SEBI every six months, while investors receive an annual report. Trustees are
remunerated annually, receiving 0.5% of the weekly net asset value from the
fund's assets.
FUND MANAGERS/AMC:
The Asset Management Company (AMC) is responsible for managing investors'
funds. It makes investment decisions, distributes dividends, maintains accurate
accounting records for unit pricing, calculates the NAV, and provides
information on listed schemes. The AMC also conducts due diligence on
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investments and submits quarterly reports to the trustees. An AMC is restricted
from acting for any other fund or engaging in other business activities aside from
asset management. Its net worth must not dip below Rs. 10 crores, and its fee
should not exceed 1.25% for collections below Rs. 100 crores and 1% for
collections above Rs. 100 crores. SEBI can take action against an AMC if it
deviates from its designated role.
CUSTODIAN:
Independent organizations often serve as custodians, responsible for
safeguarding the securities and other assets of mutual funds. Their duties
encompass receiving and delivering securities, collecting income, distributing
dividends, securely holding units, and segregating assets and settlements
between schemes. Custodians typically charge fees ranging from 0.15% to 0.2%
of the net value of the holdings. It is common for custodians to provide services
to multiple funds.
TAX ASPECTS OF MUTUAL FUNDS
INCOME RECEIVED FROM MUTUAL FUNDS:
Dividends received from all mutual funds are tax free in the hands of investors,
irrespective of the kind of scheme they have invested in. However, Mutual funds
have to pay distribution tax of 10% (plus surcharges @ 5% of the applicable tax
rate) in debt and income schemes. Equity oriented schemes, i.e. schemes, which
have more than 50% invested in domestic equities, are however exempt from
paying the distribution tax.
CAPITAL GAINS TAX:
Capital gain refers to the variance between the sale consideration and the cost of
acquisition of an asset. If an investor sells their units and realizes capital gains,
they are subject to capital gains tax. Capital gains can be categorized into two
types: short-term and long-term capital gains.
SHORT TERM CAPITAL GAINS:
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Units held for less than one year are considered short-term capital gains, and the
investor will be taxed based on their applicable income tax rate.
LONG TERM CAPITAL GAINS:
Units held for over 12 months are classified as long-term capital assets. Investors
are subject to long-term capital gains tax on units held for more than 12 months.
In this case the investor will
1: Tax is levied at a fixed rate of 10% (plus a 20% surcharge on the applicable
tax rate) on capital gains without indexation.
2: Alternatively, investors can opt for cost indexation on capital gains and pay a
20% tax rate (plus a 5% surcharge on the applicable tax rate), choosing the lower
amount between the two options.
TDS ON REDEMPTION:
Mutual funds are not subject to TDS deduction on capital gains realized upon
redemption.
SECTION 88 OF INCOME TAX ACT:
Investors can deduct 20% of the invested amount (up to a maximum of
Rs.10,000) in specified Mutual funds, known as Equity Linked Savings Schemes
(ELSS), from their tax liability in a given year, with a maximum tax saving of
Rs.2,000 per investor. However, investors must remain invested for a lock-in
period of three years.
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1.3 COMPANY PROFILE
Housing Development Finance Corporation Limited (HDFC)
Incorporated in 1977, HDFC was the first specialized Mortgage Company in
India, primarily focused on providing financial assistance for residential housing
purchase or construction to individuals, corporates, and developers. While
offering property-related services such as property identification, sales, and
valuation, as well as training and consultancy, housing finance remains its core
activity. As of June 30, 2006, HDFC boasted a client base of approximately
1,000,000 borrowers, around 830,000 depositors, 93,900 shareholders, and
50,000 deposit agents. HDFC has successfully raised funds from various
international agencies including the World Bank, IFC (Washington), USAID,
DEG, ADB, and KFW, along with international syndicated loans, domestic term
loans from banks and insurance companies, bonds, and deposits. Notably, HDFC
has maintained the highest rating for its bonds and deposits program for twelve
consecutive years. Additionally, HDFC Standard Life Insurance Company
Limited, promoted by HDFC, made history as the first private sector life
insurance company to receive a Certificate of Registration from the Insurance
Regulatory and Development Authority on October 23, 2000, allowing it to
conduct life insurance business in India.
HDFC Trustee Company Limited:
A company formed under the Companies Act, 1956 serves as the Trustee for the
Mutual Fund, as outlined in the Trust deed dated June 8, 2000, and amended
periodically. HDFC Trustee Company Limited operates as a wholly owned
subsidiary of HDFC Limited.
HDFC Asset Management Company Limited (AMC):
Established under the Companies Act, 1956, on December 10, 1999, HDFC
Asset Management Company Ltd (AMC) obtained approval to function as an
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Asset Management Company for the HDFC Mutual Fund from SEBI, as
confirmed by its letter dated June 30, 2000. The registered office of the AMC is
located at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Back Bay
Reclamation, Churchgate, Mumbai - 400 020. Per the Investment Management
Agreement, the Trustee has enlisted the AMC to oversee the operations of the
Mutual Fund. The AMC has a paid-up capital of Rs.25.161 crores.
According to the terms of the Investment Management Agreement, the AMC
will manage the operations of the Mutual Fund and oversee the assets of the
schemes, including those launched periodically.
The present shareholding pattern of the AMC is as follows:
Particulars % of the paid-up capital
Housing Development Finance Corporation
Limited 60
Standard Life Investments Limited 40
Following a strategic review, Zurich Insurance Company (ZIC), the Sponsor of
Zurich India Mutual Fund, opted to divest its Asset Management business in
India. Subsequently, the AMC entered into an agreement with ZIC to acquire the
aforementioned business, pending requisite regulatory approvals. Upon securing
the necessary regulatory clearances, the following Schemes of Zurich India
Mutual Fund transitioned to HDFC Mutual Fund on June 19, 2003, and have
since been rebranded as follows:
Former Name New Name
Zurich India Equity Fund HDFC Equity Fund
Zurich India Prudence Fund HDFC Prudence Fund
Zurich India Capital Builder Fund HDFC Capital Builder Fund
Zurich India Tax Saver Fund HDFC Tax Saver
Zurich India Top 200 Fund HDFC Top 200 Fund
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Zurich India High Interest Fund HDFC High Interest Fund
Zurich India Liquidity Fund HDFC Cash Management Fund
Zurich India Sovereign Gilt Fund HDFC Sovereign Gilt Fund
The AMC manages three closed-ended schemes, namely HDFC Fixed
Investment Plan, HDFC Long Term Equity Fund, and HDFC Fixed Maturity
Plans, along with 22 open-ended schemes of the Mutual Fund, including HDFC
Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF),
HDFC Liquid Fund (HLF), HDFC Long Term Advantage Fund (formerly
HDFC Tax Plan 2000)(HTP), HDFC Children's Gift Fund (HDFC CGF), HDFC
Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund, HDFC
Floating Rate Income Fund (HFRIF), HDFC Equity Fund (HEF), HDFC Top
200 Fund (HT200), HDFC Capital Builder Fund (HHIF), HDFC Cash
Management Fund (HCMF), HDFC MF Monthly Income Plan (HMIP), HDFC
Core & Satellite Fund (HCSF), HDFC Multiple Yield Fund (HMYF), HDFC
Premier Multi-Cap Fund (HPM), and HDFC Multiple Yield Fund - Plan 2005
(HMY2005).
Additionally, the AMC offers portfolio management and advisory services,
which are not conflicting with the activities of the Mutual Fund. The AMC's
registration from SEBI, under Registration No. - PM / INP000000506, to act as a
Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993, has
been renewed. The Certificate of Registration is valid from January 1, 2010, to
December 31, 2011.
Board of directors
As per SEBI Regulations, at least two-thirds of the directors on the board of
trustee company or board of trustees must be independent, meaning they should
have no association with the sponsors. Furthermore, 50% of the directors on the
board of the Asset Management Company (AMC) must also be independent.
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The Board of Directors of HDFC Asset Management Limited
(AMC) consists of the following eminent persons.
Mr. Deepak S. Parekh
Mr. N. Keith Skeoch
Mr. Keki M. Mistry
Mr. James Aird
Mr. P. M. Thampi
Mr. Humayun Dhanrajgir
Dr. Deepak B. Phatak
Mr. Hoshang S. Billimoria
Mr. Rajeshwar Raj Bajaj
Mr. Vijay Merchant
Ms. Renu S. Karnad
Mr. Milind Barve
CHAPTER-II
RESEARCH METHODOLOGY
2.1 NEED FOR THE STUDY
The main purpose of doing this project was to study about selected mutual
fund schemes and its functioning.
This helps to know the details about mutual fund industry right from its
inception stage, growth and feature prospects.
It also helps in understanding different schemes of selected mutual funds.
2.2 PROBLEM DEFINITON
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A Study on mutual funds at HDFC BANK Pvt. Ltd., Andhra Pradesh.
To optimize the selection and management of mutual funds for clients at HDFC
Bank, taking into account their risk appetite, investment goals, and market
conditions. This includes designing robust investment strategies, conducting
thorough research on various mutual fund options, monitoring performance
regularly, and providing tailored recommendations to clients to help them
achieve their financial objectives efficiently. Additionally, the problem involves
ensuring compliance with regulatory requirements and offering transparent
communication to clients regarding the features, benefits, and risks associated
with mutual fund investments.
1.3 OBJECTIVES OF THE STUDY
The present study aims with following objectives:
To have comparison between investments in bank and mutual fund.
To critically analyze the behavioral attitude of mutual funds investors.
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1.4 SCOPE OF THE STUDY
Mutual fund is the pool of the money, based on the trust who invests the savings
of a number of investors who shares a common financial goal, like the capital
appreciation and dividend earning. Investors invest money and get the units as
per the unit value which we called as NAV (net assets value). Mutual fund is the
most suitable investment.
The present study primarily deals with equity mutual funds Last 5 years data has
been taken for the purpose of the Sharpe measure and Treynor measure have
been used for the purpose of the analysis. This study confines as how mutual
fund is good investment for investors. The study considers performance
evaluation of selected equity mutual funds
2.5 RESEARCH DESIGN
Based on the objectives of the study descriptive research has been adopted
descriptive is one, which largely used to drawn interfaces about the possible
relationship between variables. It is the simplest type of research. It is the
simplest type of research. It is designed to gather descriptive information and
provide information for formulating more sophisticated studies.
2.6 DATA SOURCE
Sources of data are only from secondary data
Secondary data:
Collecting data entirely from primary sources is challenging and costly.
Secondary data, gathered from past records, magazines, newspapers, and the
internet, encompasses information previously collected for other purposes.
Interaction with the executives & distributors of HDFC mutual fund
origination also helped in assessing information.
We conducted a sample survey to determine the level of awareness and
investment in mutual funds, as well as savings patterns among participants.
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For a survey to yield meaningful results, clear objectives are essential.
Initially, setting objectives provided a clear direction for the survey.
Data for the study was obtained by browsing from the internet, industry
related journals and company publications.
The collected data was analyzed using graph-based and relative rating
methods.
2.7 TOOLS FOR ANALYSIS
1. Standard Deviation:
The following steps are involved in calculating variance or standard deviation of
returns of assets or securities using historical returns.
Calculate the average rate of return using equation
Average Rate of Return (R) =∑ R
n
Calculate the squared deviation of each individual rate of return from the
average rate of return. (R-R) 2
Calculate the sum of the squares of the deviations as determined in the
preceding step and divide it by the number of periods (observations) less one to
obtain variance
Calculate the square root of the variance to determine the standard
deviation
Standard Deviation (S.D) =√ ∑( R - R )2
N
2. Calculation of Beta:
A commonly advocated measure of risk is beta. The beta of a portfolio is
computed similarly to the beta of an individual security. To calculate the beta of
a portfolio, regress the rate of return of the portfolio against the rate of return of
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a market index. The slope of this regression line represents the portfolio beta,
reflecting the systematic risk of the portfolio.
Beta (β) = n∑ xy - ∑ x ∑ y
n∑ x2 -(∑ x )2
3. Performance measure:
To effectively assess portfolio performance, it's essential to account for both risk
and return. Three commonly used measures for evaluating portfolio performance
include the Treynor measure and the Sharpe measure.
a. Treynor measure:
Jack Treynor suggests that systematic risk, also known as beta, is the suitable
gauge of risk, as proposed by the Capital Asset Pricing Model (CAPM). The
Treynor measure of a portfolio relates the excess return of the portfolio to its
beta.
Treynor Ratio =
AverageReturnonportfolio - AverageReturnofreturnonriskfreeinvestment
Beta Coefficient of Portfolio
Treynor Ratio = R p - Rf
β p
The Treynor measure's numerator represents the portfolio's risk premium, while
its denominator signifies the systematic risk (beta). Therefore, the Treynor
measure indicates the excess return achieved per unit of risk. By considering
systematic risk as the primary risk measure, the Treynor measure tacitly assumes
the portfolio's diversification adequacy.
b. Sharpe ratio:
The Sharpe measure resembles the Treynor measure but utilizes standard
deviation, rather than beta, as the risk measure.
Sharpe Ratio
= AverageReturnonPortfolio - AverageReturnofreturnonriskfreeinvestment
StandardDeviationofPortfolio
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= R p - Rf
σ p
Therefore, the Sharpe ratio measures the excess return gained from a portfolio
relative to its total risk, represented by standard deviation per unit.
2.8 LIMITATIONS OF THE STUDY
People are unwilling to allocate their time to respond to the
questionnaire.
People will not have clear idea about the concept of mutual funds.
Unsatisfied investors are not willing to talk about the mutual funds.
The schemes have only been compared based on two performance
parameters..
The comparison of various schemes has been done on the basis of
theoretical data the opinion of the employers in HDFC mutual funds have
not been taken into consideration
The study of deals with only selected equity schemes of sample fund
houses operating in India.
To evaluate the performance of the selected schemes of selected MFs but
not their inception.
2.9 CHAPTERIZATION
Chapter-1: - It deals with introduction, industry profile, company profile
Chapter-2: - It deals with research methodology, objectives of the study
Chapter-3: - It deals with data analysis and interpretation
Chapter-4: - It deals with findings, suggestions, conclusion
APPENDIX: - Bibliography &Annual reports
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CHAPTER-III
DATA ANALYSIS &INTERPRETATION
BSE MARKET INDEX:
TABLE NO 3.1: Calculation of Rate of Return of BSE market:
Year Sensex
opening
Sensex
closing
Rate of return R
2018-2019 17426.96 18835.77 18835.77 - 17426.96
17426.96 ×100 8.08
2019-2020 18890.81 22386.27 22386.27 - 18890.81
18890.81 ×100 18.50
2020-2021 22455.23 27957.49 27957.49 - 22455.23
22455.23 ×100 24.50
2021-2022 27954.86 25341.86 25341.86 - 27954.86
27954.86 ×100 -9.35
2022-2023 25301.7 29620.5 29620.5 - 25301.7
25301.7 ×100 17.06
= 58.79
The average rate of return per year over a five-year period is.
R = ∑ R
n = 58.79
5 = 11.75
INTERPRETATION:
The average rate of return per year for the BSE Market Index over the specified
5-year period is approximately 11.75%. This indicates the average annual growth
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or decline in the BSE Market Index over the period, reflecting the overall
performance of the stock market during that time.
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BSLI EQUITY FUND
Table No: 3.2. Calculation of Rate of Return of BSLI Equity Fund:
Year NAV opening NAV Closing Rate of return
2018-2019 240.32 252.69 5.14
2019-2020 254.71 319.89 25.58
2020-2021 320.62 487.03 51.90
2021-2022 491.3 463.93 -5.57
2022-2023 463.81 626.32 35.03
∑R=112.08
Rate of return = closing price - opening price
opening price ×100
The average annual rate of return over five years is
R = ∑ R
n = 112.08
5 = 22.4
INTERPRETATION:
The average rate of return per year for the investment over the specified 5-year
period is approximately 22.42%. This indicates the average annual growth or
decline in the investment's value over the period, reflecting the overall
performance of the investment during that time.
27
Table No: 3.3. Calculation of standard deviation of BSLI Equity Fund:
year Fund
Return (R)
Average
Return (R)
(R-R) (R-R)2
2018-2019 5.14 22.41 -17.27 298.25
2019-2020 25.58 22.41 3.17 10.04
2020-2021 51.90 22.41 29.49 869.66
2021-2022 -5.57 22.41 -27.98 782.88
2022-2023 35.03 22.41 12.62 159.26
∑(R-R)2 = 2110.05
STANDARD DEVIATION = √ ∑( R - R )2
N
= √ 1053.24
5 = √210.64
=14.51
INTERPRETATION:
The standard deviation of approximately 14.51 indicates the average deviation of
returns from the mean return. In other words, it represents the volatility or risk
associated with the investment's returns.
28
29
Table No: 3.4: Beta calculation for BSLI Equity Fund:
Beta (β) = n∑ xy - ∑ x ∑ y
n∑ x2 -(∑ x )2 = 5 ( 2435.99 ) -(58.79 )(112.08 )
5 (1386.24 ) -(58.79 )2
= 5590.77
3474.94
= 1.60
Interpretation:
The Beta of BSLI Equity Fund is greater than the Bench Mark i.e., 1.60 > 1.
Risk Adjustment Return:
Risk Adjustment return= Rate of Return
Standard Deviation = R
σ
=112.08/20.54
Year Market
Returns (x)
Fund
Returns (y)
x2 XY
2019-
2020
8.08 5.14 65.28 41.53
2020-
2021
18.50 25.58 342.25 473.23
2021-
2022
24.50 51.90 600.25 1271.55
2022-
2023
-9.35 -5.57 87.42 52.07
2023-
2024
17.06 35.03 291.04 597.61
∑X= 58.79 ∑Y=112.08 ∑X2 =1386.24 ∑XY=2435.99
30
=5.45
Interpretation:
BSLI Equity Fund earned a risk premium of 5.45 for each unit of risk.
Treynor Ratio Calculation For BSLI:
Treynor Ratio = R p - Rf
β p
FUND BETA VALUE β p = 1.60
FUND AVERAGE RETURN R p = 22.41
RISK FREE RATEOF INVESTMENT Rf = 7.25
Treynor Ratio = 22.41 - 7.25
1.60 = 9.47
Sharpe Ratio Calculation For BSLI:
Sharpe Ratio = R p - Rf
σ p
STANDARD DEVIATION σ p= 20.54
FUND AVERAGE RETURN R p= 22.41
RISK FREE RATE OF INVESTMENT Rf = 7.25
SHARPE RATIO = 22.41 - 7.25
20.54 = 0.73
Interpretation:
The Treynor ratio and Sharpe ratio, of BSLI Equity Fund is 9.47 and 0.73
31
32
HDFC EQUITY FUND
Table No:3.5: Calculation of Rate of Return of HDFC Equity Fund:
Rate of return = closing price - opening price
opening price ×100
The average yearly rate of return over a five-year period is
R = ∑ R
n = 87.60
5 = 17.52
Year NAV Opening NAV Closing Rate Of Return (R)
2019-2020 255.33 271.10 6.17
2020-2021 272.42 331.98 21.86
2021-2022 332.27 469.72 41.36
2022-2023 474.44 416.70 -12.17
2023-2024 417.04 543.76 30.38
∑ R = 87.60
33
Table No:3.6: Calculation of Standard deviation of HDFC Equity Fund:
STANDARD DEVIATION = √ ∑( R - R )2
N
= √ 1762.85
5 = √352.27
= 18.77
Interpretation:
Average Return of HDFC Equity Fund is 17.52 and Standard Deviation is 18.77
for 5 years.
Year Fund
Returns(R)
Average
Return (R)
(R-R) (R-R)2
2019-2020 6.17 17.52 -11.35 128.82
2020-2021 21.86 17.52 4.34 18.83
2021-2022 41.36 17.52 23.84 568.34
2022-2023 -12.17 17.52 -29.69 881.49
2023-2024 30.38 17.52 12.86 165.37
∑ R =87.6 ∑ ( R - R )2 =1762.85
34
Table No:3.7: Beta calculation for HDFC Equity Fund:
Beta (β) = n∑ xy - ∑ x ∑ y
n∑ x2 -(∑ x )2 = 5 ( 2099.64 ) -(58.79 )( 87.60 )
5 (1386.24 ) -(58.79 )2
= 5348.2
3474.
= 1.53
Interpretation:
The Beta of HDFC Equity Fund is greater than the Bench Mark i.e., 1.53 > 1.
Risk Adjustment Return:
Risk Adjustment return= Rate of Return
Standard Deviation = R
σ
=87.60/18.77 = 4.66
Year Market
Returns (x)
Fund
Returns (y) x2 XY
2019-2020 8.08 6.17 65.28 49.85
2020-2021 18.50 21.86 342.25 404.41
2021-2022 24.50 41.36 600.25 1013.32
2022-2023 -9.35 -12.17 87.42 113.78
2023-2024 17.06 30.38 291.04 518.28
∑X= 58.79 ∑Y=87.60 ∑X2 = 1386.24 ∑XY= 2099.64
35
Interpretation:
For each unit of risk HDFC Equity Fund earned 4.66 risk premiums.
Treynor Ratio Calculation For HDFC Equity Fund:
Treynor Ratio = R p - Rf
β p
FUND BETA VALUE β p = 1.53
FUND AVERAGE RETURN R p = 17.52
RISK FREE RATEOF INVESTMENT Rf = 7.25
Treynor Ratio = 17.52 - 7.25
1.53 = 6.71
Sharpe Ratio Calculation For HDFC Equity Fund:
Sharpe Ratio = R p - Rf
σ p
STANDARD DEVIATION σ p= 18.77
FUND AVERAGE RETURN R p= 17.52
RISK FREE RATE OF INVESTMENT Rf = 7.25
SHARPE RATIO = 17.52 - 7.25
18.77 = 0.54
Interpretation:
The Treynor ratio and Sharpe ratio of HDFC Equity Fund is 6.71 and 0.54.
36
37
SBI EQUITY FUND
Table No: 3.8: Calculation of Rate of Return:
Rate of return = closing price - opening price
opening price ×100
Average rate of return per year for 5 years is R = ∑ R
n = 76.34
5 = 15.26
Year NAV Opening NAV Closing Rate Of Return (R)
2019-2020 43.34 46.42 7.10
2020-2021 46.56 53.95 15.87
2021-2022 54.05 75.41 39.51
2022-2023 76.17 72.77 -4.46
2023-2024 72.68 86.0 18.32
∑ R = 76.34
38
Table No: 3.9: Calculation of Standard deviation:
STANDARD DEVIATION = √ ∑( R - R )2
N
= √ 1053.24
5 = √210.64
= 14.51
Interpretation:
Average Return of SBI Equity Fund is 15.26 and Standard Deviation is 14.51
for 5 years.
Year Fund
Returns (R)
Average
Return (R)
(R-R) (R-R)2
2019-2020 7.10 15.26 -8.16 66.58
2020-2021 15.87 15.26 0.61 0.37
2021-2022 39.51 15.26 24.25 588.06
2022-2023 -4.46 15.26 -19.72 388.87
2023-2024 18.32 15.26 3.06 9.36
∑ ( R - R )2 = 1053.24
39
Table no 3.10. Beta calculation for SBI equity fund:
year Market
Return (X)
Fund
return(y)
x2 XY
2018-2019 8.08 7.10 65.28 57.36
2019-2020 18.50 15.87 342.25 293.59
2020-2021 24.50 39.51 600.25 968
2021-2022 -9.35 -4.46 87.42 41.70
2022-2023 17.06 18.32 291.04 312.53
∑X=58.59 ∑Y=76.34 ∑x2 = 1386.24 ∑XY=1673.18
Beta (β) = n∑ xy - ∑ x ∑ y
n∑ x2 -(∑ x )2
= 5 (1673.18 )-(58.79 )(76.34 )
5 (1386.24 ) - (58.79 )2
=3877.88/3474.94
=1.121
INTERPRETATION:
A beta of approximately 1.121 suggests that the SBI Equity Fund tends to move
approximately 1.121 times as much as the market. If the market moves up or
down by 1%, we can expect the fund to move up or down by about 1.121%.
Since it's greater than 1, this implies the fund is slightly more volatile than the
market.
40
41
Treynor Ratio calculation for SBI Equity fund:
Treynor ratio = R p - Rf
β p
FUND BETA VALUE β p = 1.11
FUND AVERAGE RETURN R p = 15.26
RISK FREE RATE OF INVESTMENT Rf =7.25
Treynor ratio = 15.26 - 7.25
1.11
=7.21
INTERPRETATION:
The Treynor Ratio of 7.21 indicates that for each unit of systematic risk
(measured by beta), the fund generates a return of approximately 7.21 percentage
points above the risk-free rate.
42
Sharpe Ratio calculation for SBI Equity fund:
Sharpe Ratio = R p - Rf
σ p
STANDARD DEVIATION σ p = 14.51
FUND AVERAGE RETURN R p = 7.25
Sharpe ratio = 15.26 - 7.25
14.51
= 0.55
INTERPRETATION:
The Sharpe Ratio of approximately 0.552 indicates that for each unit of total risk
(measured by standard deviation), the fund generates a return of approximately
0.552 percentage points above the risk-free rate.
43
AXIS EQUITY FUND
TABLE NO 3.11 Calculation of Rate of return Axis Equity Fund:
Year NAV opening NAV closing Rate of Return(R)
2018-2019 10.56 12.12 14.77
2019-2020 12.14 14.52 19.60
2020-2021 14.49 19.5 34.57
2021-2022 19.69 18.24 -7.36
2022-2023 18.18 20.91 15.01
∑R=76.59
Rate of Return = Closing price - Opening price
Opening price ×100
Average Rate of return per year for 5 years is R = ∑ R
n = 76.59
5 =15.31
INTERPRETATION:
The average rate of return per year for the AXIS Equity Fund over the specified
5-year period is approximately 15.31%. This indicates the average annual growth
or decline in the Net Asset Value (NAV) of the fund over the period, reflecting
the overall performance of the fund during that time.
44
TABLE NO:3.12.Calculation of standard deviation of Axis Equity Fund:
year Fund return
(R)
Average
Return (R )
(R-R) (R-R)2
2018-2019 14.67 15.31 -0.54 0.29
2019-2020 19.60 15.31 4.29 18.40
2020-2021 34.57 15.31 19.26 370.94
2021-2022 -7.36 15.31 -22.67 513.92
2022-2023 15.01 15.31 -0.3 0.09
∑(R-R)2 = 903.64
STANDARD DEVIATION = √ ∑( R - R )2
N
= √ 903.64
5 = √180.72 = 13.44
INTERPRETATION: -
The standard deviation of approximately 13.44 indicates the average deviation of
returns from the mean return. In other words, it represents the volatility or risk
associated with the fund's returns.
45
TABLE NO:3.13. Beta calculation for AXIS Equity fund:
year Market
Return(x)
Fund
Return(y)
x2 XY
2018-2019 8.80 14.77 65.28 119.34
2019-2020 18.50 19.60 342.25 362.6
2020-2021 24.50 34.57 600.25 846.96
2021-2022 -9.35 -7.36 87.42 68.81
2022-2023 17.06 15.01 291.04 256.07
∑x=58.79 ∑y=76.59 ∑x2=1386.24 ∑XY=1653.78
Beta (β) = n ∑ xy - ∑ x ∑ y
n ∑ x2 -(∑ x )2
= 3766.18/3474.94
= 1.08
INTERPRETATION:
A beta of 1.085 suggests that the AXIS Equity fund tends to move approximately
1.085 times as much as the market. If the market moves up or down by 1%, we
can expect the fund to move up or down by about 1.085%. Since it's greater than
1, this implies the fund is slightly more volatile than the market.
46
47
Treynor Ratio calculation for AXIS Equity Fund:
Treynor Ratio = R p - Rf
β p
FUND BETA VALUE β p = 1.08
FUND AVERAGE RETURN R p=15.31
Risk free Rate of investment Rf = 7.25
Treynor RATIO = 15.31 - 7.25
1.08
=7.46
INTERPRETATION:
The Treynor Ratio of 7.46 indicates that for each unit of systematic risk
(measured by beta), the fund generates a return of approximately 7.46 percentage
points above the risk-free rate.
48
Sharpe Ratio calculation for AXIS Equity fund:
Sharpe Ratio = R p - Rf
σ p
STANDARD DEVIATION σ p= 13.44
FUND AVERAGE RETURN R p= 15.31
RISK FREE RATE OF INVESTMENT Rf =7.25
SHARPE RATIO = 15.31 - 7.25
13.44
= 0.59
INTERPRETATION:
The Sharpe Ratio of 0.597 indicates that for each unit of total risk (measured by
standard deviation), the fund generates a return of approximately 0.597
percentage points above the risk-free rate.
49
HSBC EQUITY FUND
Table no 3.14 Calculation of Rate of Return of HSBC Equity Fund:
year NAV opening NAV closing Rate of Return (R)
2018-2019 96.80 100.15 3.46
2019-2020 100.64 117.57 16.82
2020-2021 117.94 150.83 27.88
2021-2022 152.05 141.26 -7.09
2023-2023 140.65 176.93 25.79
∑ R= 66.86
Rate of Return = closing price - opening price
opening price ×100
Average Rate of Return for 5 years is R = ∑ R
n = 66.86
5 = 13.37
INTERPRETATION:
The average rate of return per year for the HSBC Equity Fund over the specified
5-year period is approximately 13.37%. This indicates the average annual growth
or decline in the Net Asset Value (NAV) of the fund over the period, reflecting
the overall performance of the fund during that time.
50
TABLE NO:3.15 Calculation for standard deviation of HSBC Equity Fund:
year Fund
Return (R)
Average
Return (R )
( R- R ) (R-R)2
2018-2019 3.46 13.37 -9.91 98.20
2019-2020 16.82 13.37 3.45 11.90
2020-2021 27.88 13.37 14.51 210.54
2021-2022 -7,09 13.37 -20.46 418.61
2022-2023 25.79 13.37 12.42 154.25
∑ ( R - R )2 = 893.5
Standard Deviation = √∑( R - R )2
N
= √ 893.5
5
= √178.7
= 13.36
INTERPRETATION:
The standard deviation of approximately 13.36 indicates the average deviation of
returns from the mean return. In other words, it represents the volatility or risk
associated with the fund's returns.
51
TABLE NO 3.16 Beta calculation for HSBC Equity fund:
year Market
Return (x)
Fund Return
(y)
x2 XY
2018-2019 8.08 3.46 65.28 27.95
2019-2020 18.50 16.82 342.25 311.17
2020-2021 24.50 27.88 600.25 683.06
2021-2022 -9.35 -7.09 87.42 66.29
2022-2023 17.06 25.79 291.04 439.97
∑X=58.79 ∑Y=66.86 ∑X2 =1386.24 ∑XY=1528.44
Beta(β) = n∑ xy - ∑ x ∑ y
n∑ x2 -(∑ x )2
5 (1528.44 ) - (58.79 )( 66.86 )
5 (1386.24 ) -(58.79 )2
= 3711.5/3474.94
= 1.06
INTERPRETATION: -
A beta of approximately 1.073 suggests that the HSBC Equity Fund tends to
move approximately 1.073 times as much as the market. If the market moves up
or down by 1%, we can expect the fund to move up or down by about 1.073%.
Since it's greater than 1, this implies the fund is slightly more volatile than the
market.
52
Treynor Ratio calculation for HSBC Equity Fund:
Treynor Ratio = R p - Rf
β p
FUND BETA VALUE β p = 1.06
FUND AVERAGE RETURN R p= 13.37
RISK FREE RATEOF INVESTMENT Rf = 7.2
Treynor Ratio = 13.37 - 7.2
1.06
= 6.82
INTERPRETATION:
The Treynor Ratio of approximately 5.82 indicates that for each unit of
systematic risk (measured by beta), the fund generates a return of approximately
5.82 percentage points above the risk-free rate. This suggests that the HSBC
Equity Fund has provided a favorable return relative to its level of systematic
risk.
53
Sharpe Ratio calculation for HSBC Equity Fund:
Sharpe Ratio = R p - Rf
σ p
STANDARD DEVIATION σ p=13.36
FUND AVERAGE RETURN R p= 13.37
RISK FREE RATE OF INVESTMENT Rf = 7.25
SHARPE RATIO = 13.37 - 7.25
13.36 = 0.457
INTERPRETATION:
The Sharpe Ratio of approximately 0.457 indicates that for each unit of total risk
(measured by standard deviation), the fund generates a return of approximately
0.457 percentage points above the risk-free rate. This suggests that the HSBC
Equity Fund has provided a positive return relative to the total risk taken.
However, the ratio is relatively low, indicating that the excess return may not
fully compensate for the level of risk taken.
54
TABLE NO 3.17: Showing rank for average rate of return of 5 years:
Source: data collected from company annual reports
Chart no: 3.17 Average Rate of Return chart
BSL Equity Fund HDFC Equity Fund AXIS Equity Fund SBI Equity Fund HSBC Equity Fund
0
5
10
15
20
25
20.54
17.52
15.31 15.26
13.37
AVERAGE RATE OF RETURN
YEARS
RATI0
INTERPRETATION:
BSL Equity Fund earned highest average rate of return and meanwhile HSBC
Equity fund has given the lowest rate of return among all the fund for 5 years.
S.NO Company name Average Rate of Return Rank
1 BSL Equity Fund 20.54 1
2 HDFC Equity Fund 17.52 2
3 AXIS Equity Fund 15.31 3
4 SBI Equity Fund 15.26 4
5 HSBC Equity Fund 13.37 5
55
TABLE NO:3.18 standard deviation:
S.NO Company name Standard deviation
1 BSL Equity fund 20.54
2 HDFC Equity fund 18.77
3 AXIS Equity fund 14.51
4 SBI Equity fund 13.44
5 HSBC Equity fund 13.36
Source: data collected from company annual reports
BSL Equity fund HDFC Equity fund AXIS Equity fund SBI Equity fund HSBC Equity fund
0
5
10
15
20
25
20.54
18.77
14.51 13.44 13.36
Standard deviation
YEARS
RATIO
INTERPRETATION:
Based on the provided data, the HSBC Equity fund exhibits the lowest standard
deviation at 13.36, followed closely by the AXIS Equity fund with a slightly
higher value of 13.44.
56
TABLE NO:3.19 Beta Performance chart:
S.NO Company name Standard deviation
1 BSL Equity fund 1.60
2 HDFC Equity fund 1.53
3 AXIS Equity fund 1.11
4 SBI Equity fund 1.08
5 HSBC Equity fund 1.06
Source: data collected from company annual reports
BSL Equity fund HDFC Equity fund AXIS Equity fund SBI Equity fund HSBC Equity fund
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
1.6 1.53
1.11 1.08 1.06
BETA PERFORMANCE CHART
YEARS
RATIO
INTERPRETATION:
Based on the data provided, it is evident that the HSBC Equity fund possesses the
lowest beta at 1.06, while the AXIS Equity fund has the second lowest beta at
1.08, indicating a relatively higher volatility compared to the HSBC fund in
response-to-market-fluctuations.
57
TABLE NO:3.20 Table showing Risk adjusted Return:
S.NO Company name Risk adjusted return Rank
1 BSL Equity fund 5.45 2
2 HDFC Equity fund 4.66 5
3 SBI Equity fund 5.26 3
4 AXIS Equity fund 5.69 1
5 HSBC Equity fund 5 4
Source: data collected from company annual reports
BSL Equity fund HDFC Equity fund SBI Equity fund AXIS Equity fund HSBC Equity fund
0
1
2
3
4
5
6 5.45
4.66
5.26
5.69
5
Risk adjusted Return
YEAR
RATIO
INTERPRETATION:
The AXIS Equity fund has yielded the highest risk premium at 5.69, while the
Birla Sun Life Equity fund has also performed well in providing a risk premium
per unit of risk at 5.45, positioning it second among the compared funds.
58
TABLE NO:3.21 Treynor performance Measure: -
S.NO Company name Treynor Ratio Rank
1 BSL Equity fund 9.47 1
2 HDFC Equity fund 6.71 4
3 SBI Equity fund 7.21 3
4 AXIS Equity fund 7.46 2
5 HSBC Equity fund 5.77 5
Source: data collected from company annual reports
BSL Equity fund HDFC Equity fund SBI Equity fund AXIS Equity fund HSBC Equity fund
0
1
2
3
4
5
6
7
8
9
10 9.47
6.71 7.21 7.46
5.77
Treynor Ratio
YEARS
RATIO
INTERPRETATION:
Birla Sun Life Equity fund secured the top position when evaluated using the
Treynor performance measure, while the AXIS Equity fund attained the second-
highest ranking in terms of risk premium according to Treynor's measure.
59
Table 3.22 showing Sharpe’s Ratio:
S.NO Company name Sharpe’s Ratio Rank
1 BSL Equity fund 0.73 1
2 HDFC Equity fund 0.54 4
3 SBI Equity fund 0.55 3
4 AXIS Equity fund 0.59 2
5 HSBC Equity fund 0.45 5
Source: data collected from company annual reports
BSL Equity fund HDFC Equity fund SBI Equity fund AXIS Equity fund HSBC Equity fund
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8 0.73
0.54 0.55 0.59
0.45
Sharpe’s Ratio
YEARS
RATIO
INTERPRETATION:
Birla Sun Life Equity fund achieved the highest rank when assessed by the
Sharpe ratio, with the AXIS Equity fund obtaining the second position..
60
A COMPREHENSIVE SUREVY ANALYSIS
3.23 Do you invest in mutual funds?
Table 3.23 Investing in Mutual Funds
Opinion No of respondents Percentage
Yes 15 33
No 13 29
May be 17 38
Total 45 100
33
29
38
Investing in Mutual Funds
Yes
No
May be
INTERPRETATION:
From the above table it is clear that while 34.1% of respondents are invest in
mutual funds,27.3% of respondents are not investing in mutual funds, 38.6% of
respondents are may be invested in mutual funds.
61
3.24 The age group under you belongs to?
Table 3.24 Representing the Age Group
Age group No of investors Percentage
20-30 18 40
31-40 27 60
Total 45 100
40
60
Age Group
20-30
31-40
INTERPRETATION:
From the above table it is observed that the age group 20-30 there are 45
investors which account for 40% of the total investors. for the age group 31-40,
the number of investors are 60%.
62
3.25.Occupation of the investors?
Table 3.25 Representing Occupation of the investors
Occupation No of investors Percentage
Business 21 47
Professional 15 33
Salaried 9 20
Total 45 100
47
33
20
Occupation of the Investors
Business
Professional
Salaried
INTERPRETATION:
From the above table it is observed that Almost half of the investors, 47% are
involved in Business, with professionals comprising 33%, and salaried
individuals making up 20% of the total investor.
63
3.26 Why do you invest in mutual funds?
Table 3.26 Factor influence to invest in Mutual Funds
Particulars No of Respondents Percentage
Safety 17 38
Good returns 22 49
Capital appreciation 4 9
Risk diversification 2 4
Total 45 100
38
49
9
4
Factor influencing to invest in Mutual Funds
Safety
Good returns
Capital appreciation
Risk diversification
INTERPRETATION:
From the above table it is observed that 38% of respondents invest in mutual
funds for purpose of safety.49% of respondents invest in mutual funds for
purpose of good returns.4% of respondents invest in mutual funds for purpose of
risk diversification
64
3.27 What is your income?
Table 3.27 Representing Income level of respondents
Income level No of Respondents Percentage
1 lakh 31 68
2-4 lakh 10 23
4-5 lakh 3 7
More than 5 lakhs 1 2
Total 45 100
68
23
7 2
Respondents Income Level
1 lakh
2-4 lakh
4-5 lakh
More than 5 lakhs
INTERPRETATION:
Based on the data presented in the table, it can be noted that 68% of investors
have an income below 1 lakh, 23% fall within the income range of 2-4 lakh, 7%
have incomes between 4-5 lakh, and 2% report an income exceeding 5 lakhs.
65
3.28 What is duration of your investment?
Table 3.28 Representing time period of investment
Duration No of investors Percentage
0-1 year 14 31
1-2 year 25 55
2-4 year 3 7
More than 4 years 3 7
Total 45 100
31
55
7
7
Time Period of Investment
0-1 year
1-2 year
2-4 year
More than 4 years
INTERPRETATION:
Based on the data provided in the table, it is evident that 31% of respondents are
inclined to invest for a duration of 0-1 year, 55% express interest in investments
spanning 1-2 years, while 7% are interested in a duration of 2-4 years, and a
further 7% show interest in investments exceeding 5 years.
66
3.29. How much do you invest?
Table 3.29 Representing amount of investment in Mutual funds
Amount of investment No of investors Percentage
10000 30 67
20000 11 24
20000-50000 4 9
Total 45 100
67
24
9
Amount of Investment
10000
20000
20000-50000
INTERPRETATION: -
Based on the data provided in the table, it's evident that 67% of the respondents
prefer investing below Rs. 50,000 in mutual funds, while 24% are interested in
investing between Rs. 50,000 and Rs. 100,000. Additionally, 9% of the
respondents express a willingness to invest amounts exceeding Rs. 100,000.
67
3.30 What type of Scheme do you prefer?
Table 3.30 Representing type of schemes investor invest
Schemes No of Respondents Percentage
Equity 13 29
Debt 4 9
Balanced 15 33
Fixed maturity plan 13 29
Total 45 100
29
9
33
29
Type of Schemes investor invest
Equity
Debt
Balanced
Fixed maturity plan
INTERPRETATION:
Based on the data presented in the table, it is evident that the majority of
investors, comprising 33%, favor balanced schemes. Following closely, 29% of
investors show preference for equity schemes, while an equal percentage opt for
fixed maturity plans. Conversely, the debt scheme attracts the least interest, with
only 9% of investors indicating a preference for it.
68
3.31 From which you came to know about mutual funds?
Table 3.31 Representing the way of knowing about mutual funds
Particulars No of respondents Percentage
Friend suggestion 17 38
Self- decision 20 44
Television 4 9
Agent/brokers 4 9
Total 45 100
38
44
9
9
Way of knowing about Mutual funds
Friend suggestion
Self- decision
Television
Agent/brokers
INTERPRETATION:
Based on the data provided in the table, it is evident that 9% of respondents
acquired knowledge about mutual funds through agents and television, while
44% made self-directed decisions. Additionally, 38% of respondents gained
insight into mutual funds through recommendations from friends.
69
3.32 What is risk performance?
Table 3.32 Representing the risk performance
Risk performance No of respondents Percentage
Innovator 14 31
Moderator 21 47
Risk adverse 10 22
Total 45 100
31
47
22
Risk Performance
Innovator
Moderator
Risk adverse
INTERPRETATION:
Based on the data provided in the table, it is evident that 31% of respondents are
categorized as innovators, demonstrating a willingness to invest substantial
amounts and embrace high levels of risk. Meanwhile, 47% of individuals
thoroughly evaluate various factors before determining their risk tolerance,
opting for moderate risk investments. Conversely, 22% of respondents express a
reluctance to take on any level of risk.
70
3.33 What type of scheme do you prefer?
Table 3.33 Representing the scheme the investor prefers
Scheme type No of respondents Percentage
Open-ended method 31 70
Close-ended method 7 16
Interval method 6 14
Total 44 100
70
16
14
Schemes investor prefers
Open-ended method
Close-ended method
Interval method
INTERPRETATION:
Based on the data provided in the table, it can be seen that 70% of respondents
favor the open-ended method, while 16% prefer close-ended schemes.
Additionally, 14% of respondents indicate a preference for interval schemes.
71
3.34 Performance of the fund manager?
Table 3.34 Representing the performance of fund manager
Particulars No of Respondents Percentage
Most important 17 38
Important 16 36
Neutral 9 20
Less important 2 4
Not all important 1 2
Total 45 100
38
36
20
4 2
Performance of the Fund Manager
Most important
Important
Neutral
Less important
Not all important
INTERPRETATION:
Based on the data presented in the table, it is evident that 38% of respondents
consider the performance of the fund manager to be most important, while 36%
rank it as important. Furthermore, 20% of respondents express a neutral stance on
this factor, with no respondents marking it as not at all important.
72
3.35 Attitude toward risk of salaried individuals?
Table 3.35 Representing attitude towards risk of salaried individuals
Particulars No of respondents Percentage
important 17 38
Most important 15 33
Neutral 9 9
Less important 2 2
No at all important 2 2
Total 45 100
38
33
9
2 2
Attitude towards risk of salaried individuals
important
Most important
Neutral
Less important
No at all important
INTERPRETATION:
From the data in the table, it's apparent that 38% of respondents prioritize attitude
towards risk, while 33% consider it important.
73
3.36 Which type of saving do you like?
Table 3.36 Representing the type of savings investors like
Saving type No of respondents Percentage
Gold 16 35
Life insurance 15 34
Bank deposit 9 20
Units of mutual funds 5 11
Total 45 100
35
34
20
11
Type of savings investors like
Gold
Life insurance
Bank deposit
Units of mutual funds
INTERPRETATION:
From the above table it is clear that the respondents, at 35% for both god and life
insurance as their preferred saving types, while bank deposits and units of
mutual funds are chosen by 20% and 11% of respondents, respectively.
74
3.37 Do you intend on investing soon?
Table 3.37 Representing the intent of investors in investing
Particulars No of respondents Percentage
Yes 16 35
No 8 18
May be 21 47
Total 45 100
35
18
47
Intent of Investors on investing
Yes
No
May be
INTERPRETATION:
From the above table it is clear that 35% of respondents answered “Yes’’ while
18% answered “No”, and 47% responded with “May be’’.
75
3.38 In which company’s mutual funds do you have invested in?
Table 3.38 Representing the companies that investors like to invest
Company’s mutual funds No of respondents Percentage
HDFC 17 38
SBI 21 47
ICICI 4 9
AXIS 3 7
Total 45 100
38
47
9
7
Companies that investors like to invest
HDFC
SBI
ICICI
AXIS
INTERPRETATION:
From the above table it is clear that SBI mutual funds are the most favored with
47% of respondents, followed by HDFC with 38%, ICICI and AXIS have
comparatively lower preferences at 9% and 7%, respectively.
76
3.39 Which features of the mutual funds allow you the most?
Table 3.39 Representing the features of mutual funds
Mutual fund features No of respondents Percentage
Diversification 19 42
Better return and safety 26 58
Total 45 100
42
58
Features of mutual funds
Diversification
Better return and safety
INTERPRETATION:
From the above table it is clear that 42% of respondents appreciate mutual funds
for their diversification, while a significant 58% prioritize them for the promise
of better returns and safety.
77
3.40 In which kind of mutual funds you would like to invest ?
Table 3.40 Representing the type of mutual funds the investor like to
invest
Particulars No of respondents Percentage
Public 31 69
private 14 31
Total 45 100
69
31
Type of Mutual funds preferred
Public
Private
INTERPRETATION:
From the above table it is clear that 69% of respondents belongs to public
institutions, while around 31% are affiliated with private entities.
78
3.41 If not invested in mutual fund, then why?
Table 3.41 Representing the reason for not investing in mutual funds
Particulars No of respondents Percentage
High risk 13 29
Not any specific reason 27 60
Not aware of mutual funds 5 11
Total 45 100
29
60
11
Reason for Not Investing
High risk
Not any specific reason
Not aware of mutual funds
INTERPRETATION:
From the above table is clear that the respondents, 29% cited high risk as a
reason for not investing in mutual funds, while an equal percentage of 60% did
not have any specific reason. Additionally, 11% stated they were not aware of
mutual funds.
79
3.42 Which AMC will you prefer to invest?
Table 3.42 Reprsenting which AMC will investors prefer
Particulars No of respondents Percentage
HDFC 18 40
SBI 20 44
ICICI 7 16
Total 45 100
40
44
16
Which AMC would investors prefer
HDFC
SBI
ICICI
INTERPRETATION:
From the above table it is clear that SBI is the most preferred bank among the
respondents with 44%, followed by HDFC with 40% , while ICICI has the least
preference at 16%.
80
4.1 FINDINGS
BSLI EQUITY FUND earned highest average rate of return among all
the funds for 5 years and the next is SBI EQUITY FUND giving the next
highest average rate of return.
From the above data it is found that BSLI EQUITY FUND has the
highest standard deviation i.e.,20.54 and the HDFC EQUITY FUND
Stands second having the next highest standard deviation i.e.,18.77.
From the above data ,it is found that HSBC EQUITY FUND and AXIS
EQUITY FUND got the low beta value.
BSLI EQUITY FUND got highest risk premium for each unit of risk
i.e.,4.09.
The highest the Treynor Ratio value, better the fund is performing BSLI
EQUITY FUND i.e.,9.47 awarded as a first rank by calculation Treynor
performance.
The higher the Sharpe ratio value, better the fund is performing BSLI
EQUITY FUND i.e.,0.73 awarded as first rank by calculating Sharpe
performance measure.
81
4.2 SUGGESTIONS
From the present study, it is suggested that investors may invest their funds in
the optimum portfolio to yield higher returns.
BSLI Equity Fund Performs Best Over 5 Years: BSLI Equity Fund has
consistently delivered the highest average rate of return over a 5-year
period, making it a strong performer in the market.
Standard Deviation Indicates Risk: BSLI Equity Fund also exhibits the
highest standard deviation, suggesting higher volatility or risk compared
to other funds. HDFC Equity Fund follows closely behind in terms of
risk.
HSBC and AXIS Equity Funds Have Low Beta: Both HSBC Equity
Fund and AXIS Equity Fund have low beta values, indicating that they
are less sensitive to market fluctuations compared to other funds.
BSLI Equity Fund Offers High Risk Premium: Despite its higher risk,
BSLI Equity Fund offers the highest risk premium for each unit of risk
taken, implying potentially higher returns for investors willing to tolerate
the increased volatility.
Treynor Ratio and Sharpe Ratio Reflect Performance: BSLI Equity Fund
outperforms others in terms of Treynor Ratio and Sharpe Ratio,
indicating that it provides better returns relative to the risk taken, making
it a top choice for investors seeking optimal risk-adjusted returns.
4.3 CONCLUSION
82
Based on the comprehensive analysis of various equity funds, it's evident that
each fund demonstrates unique performance characteristics over the five-year
period. Birla Sun Life Equity Fund emerges as a standout performer, showcasing
the highest average rate of return and excelling in risk-adjusted metrics such as
the Treynor and Sharpe ratios. This indicates that not only has the fund delivered
strong returns but it has also managed risk effectively relative to the benchmark.
Following closely behind, AXIS Equity Fund demonstrates consistent
performance across multiple measures, particularly standing out with its high
risk-adjusted return and strong rankings in both Treynor and Sharpe ratios. On
the other hand, HSBC Equity Fund, while displaying relatively lower volatility
and risk, falls short in terms of both average return and risk-adjusted
performance compared to its peers. Despite its lower volatility, it hasn't
generated returns as robust as Birla Sun Life and AXIS Equity Funds. Therefore,
investors seeking higher returns may find Birla Sun Life and AXIS Equity Funds
more appealing options, while those prioritizing lower risk may opt for HSBC
Equity Fund. Ultimately, investors should carefully assess their risk tolerance,
investment objectives, and time horizon when selecting mutual funds to ensure
alignment with their financial goals and preferences. This analysis provides
valuable insights into the performance and risk profiles of the analyzed equity
funds, empowering investors to make well-informed investment decisions.
Understanding investor behavior, preferences, and barriers is crucial for mutual
fund companies and financial institutions to tailor their offerings and educational
initiatives effectively. Addressing concerns related to risk and enhancing
awareness could potentially encourage more individuals to participate in mutual
fund investments. Additionally, focusing on providing attractive returns and
safety features can help attract and retain investors in a competitive
market landscape.