Professional Documents
Culture Documents
Submitted By
Name: BHARAT NARULA
Roll No: 72
Company Mentor
Mentor
Faculty
Name:
Mr. Rakshit Kumar
Prof. Arun Sangwan
Designation: Associate Vice President
Company: Karvy Private Wealth
Name:
Designation:
Delhi
Seal of Organization
Mentor
Signature of Company
Date:
Mentor
Name of Company
Designation of Company
Mentor
Date:
I, hereby, declare that the work presented in this report, entitled _Study on
relationship between risk and return of selected EQUITY LINKED
SAVING SCHEMES of MUTUAL FUNDS marketed at KARVY PRIVATE
WEALTH__ in fulfillment of the requirements for PGDM Programme, submitted to
Fortune Institute of International Business, Delhi is an authentic record of my own
work and is free from any type of plagiarism, carried out under the supervision of Mr
Rakshit kumar
I also declare that the work embodied in the present report
(i) is my original work and has not been copied from any source, and
(ii) Has not been submitted for any other Degree or Diploma of any
university/Institution.
Acknowledgement
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
________________________________________
Name of student
Executive Summary
Table of Contents
6
S.N
o
1.
2.
Chapter No.
Contents
Title Page
Company Certificate
3.
4.
5.
6.
7.
Page No.
From - To
.
..
8.
Chapter-1
9.
Chapter-2
10
Chapter-3
Project Objectives
11
Chapter-4
12
Chapter-5
13
Chapter-6
14
Chapter-7
Recommendations
15
References
16
..
Annexures
List of Illustrations
Figures
S.No Title of the Figure/Photograph
Page No
Tables
S.N
o
Page No
..
.
..
In Roman Numbers
In Roman Numbers
Chapter-1
Chapter 1
Introduction to the Sector/ Company
Economic development of the country mainly depends upon the financial system and
capital formation which constitute the backbone of the nation. This can be achieved
9
life insurance industry recorded a new premium income of Rs 562.86 billion (US$
8.4 billion), indicating a growth rate of 14.45 per cent. The general insurance
industry recorded a 12.6 per cent growth in Gross Direct Premium underwritten in
FY2016 up to the month of October 2015 at Rs 550 billion (US$ 8.23 billion). A fast
growing economy, rising income levels and improving life expectancy rates are some
of the many favorable factors that are likely to boost growth in the sector in the
coming years.
12
The large growth witnessed during the previous fiscal signal towards the upbeat
domestic investor sentiment in the country. On the other hand, with the large investor
base concentrating with the top five companies, it is evident that Indian consumers
are only willing to take market risks with companies that have a strong brand equity
and a positive past track record.
The asset base of the mutual fund industry in the country is expected to grow faster
at 18.6 percent per annum to cross Rs 20 trillion(US$ 325 billion) by 2018 with an
investor base of 10 crore accounts. With the total investor base still at a low level of 2
per cent out of the total domestic population, there are ample growth opportunities
available in the domestic mutual fund industry.
13
215.4
200
179.6
150
100
125.4
72.3
90.4
50
1
0
FY07
FY08
FY09
FY10
FY13
FY14
FY15
FY16
FY11
FY12
(Sources: Report on financial services sector in India by India brand equity foundation
2016)
The industry of asset management is the fastest growing industry in India. The above
figure is showing the trends of mutual fund AUMs from 2007 till 2016 which is
showing that it growing faster and AUMs are more than doubled since financial year
2007. The lowest CAGR is in the year 2007 and highest is in 2016 which is 215.4
US$ billion. The total AUM of mutual fund industry clocked around 12.8% over the
years from financial year 2007 to 2016.
region became the worlds second wealthiest region with USD 47 trillion. Private
wealth in India and China showed a significant Market Gains, mainly as a result of
investments and growth in the local equities.
2019
2014
2013
2012
(Sources: Report by Karvy Private Wealth on growth in HNI Net Worth in India, 2015)
The global private financial wealth is growing at a fastest pace. The number of high
net worth individuals grew in both number and wealth to 14.6 million and USD 56.4
trillion respectively. Global financial wealth is expected to grow at 7.7% over the
next coming years.
15
AUM of world-wide mutual funds and exchange-traded funds [ETF] stood at $33.4
trillion at year-end 2014, with more than 80% of the assets held across USA and
Europe.
11%
29%
6%
54%
USA
Europe
Asia & Africa
Others
(Sources: Report by Karvy Private Wealth on growth in HNI Net Worth in India, 2015)
Mature markets of USA and Europe have demonstrated lower CAGR for the 5-year
period starting from the beginning of this decade. Higher growth in India represents
the latent potential of the Indian market which can be tapped to improve the
penetration of the mutual fund industry in India
While the average AUM to GDP ratio stands at 7% for India and is considerably
lower than the global figure, there is a wide variation across the different districts of
India. A SEBI study (2013) reveals that key districts with high volume of fund
collection have a figure of around 30%, comparable to the global estimate.
16
Retail investors hold 89% of mutual fund assets in USA, and they rely on these
funds to meet their long-term financial objectives especially building their retirement
corpus and education savings. 94% of such households hold mutual fund shares
inside employer-sponsored retirement accounts, Individual Retirement Accounts and
other tax deferred accounts.90 mn retail investors have holdings in mutual funds,
which imply that 43% of all US households owned mutual funds in 2014.68% of US
retail investors hold more than half of their financial assets in mutual funds, with
$103,000 being the median value of mutual fund assets (source: ICF 2015).
Institutional clients share of AUM in the European mutual fund market rose from
69% in 2007 to 74% in 2013. Institutional clients comprise primarily insurance
companies (39% of AUM) and pension funds (33% of AUM), and they rely on the
expertise of the fund managers to manage the contributions collected from their
members. Households are also engaging in higher purchase of mutual funds from
2013 onwards, and these purchases are made either from third-party distributors or
through the internet (source: EFAMA 2015).
More than 50% of US mutual fund assets are in equity funds and this is congruent
with the long-term investment perspective for the retail investors. The picture is
different in the European market where bond assets comprise the single largest
holding at 43% of AUM.
United States
Dec-14
Europe
Dec-13
17
India
Sep-15
Equity
52%
Bond
Bond
22%
Equity
Money Market
Hybrid
17%
9%
Others
Money Market
43
%
33
%
16
%
8%
Income
46%
Equity
33%
Money Market
Others
15%
6%
The ability of US and European funds to have a strong retail customer base presents
the Indian industry with pointers on increasing their reach in the retail market.
The Indian mutual fund market has witnessed varying trends in fund inflow during
the last decade. The aftermath of the global credit crisis had led to continuous
outflows for the next four-five years. The situation reversed in the last fiscal with net
positive inflow, which while lower than the 2008 levels is a welcome sign for the
industry, especially the growth in equity schemes.
An analysis of the investor behaviour over the last five years reveals the significant
increase in participation by HNI along with their exposure to equity schemes.
18
60%
47%
50% 48%
40%
% of AUM
29%
30%
24%
22%
20%
16%
11%
10%
2%
0%
Corporates Banks
Sep-09
1% 1%
FII's
HNI
Retail
Sep-15
While equity investment in Indian capital markets by FIIs has gone up from Rs 850
billion in FY14 to Rs 1100 billion in FY15, their level of participation in Indian
mutual funds has remained largely unchanged. With access to increasing investible
surplus, the HNI segment has significantly increased its participation in the Indian
mutual funds, especially in the equity schemes. There has been a 61% jump in their
folio count from 1 mn in September 2013 to 1.6 mn in September 2015. The increase
is more significant in the equity segment where their folio count has more than doubled
over 24 months. As their average ticket size is Rs 2 mn, this customer category has had a
significant impact on the growth of equity schemes.
Assets managed by the Indian mutual fund industry have grown from Rs. 12.26
trillion in May 2015 to Rs. 14.46 trillion in May 2016. That represents a 18% growth
in assets over May 2015.
19
14.5
13.86
14
13.5
13.19
13.33
13.29
12.94
13
12.65
12.5 12.26
12
11.5
11
42156
42217
42278
42339
42401
42461
42125
42186
42248
42309
42370
42430
42491
20
21.80%
21.90%
21.90%
22.80%
22.90%
23.10%
23.60%
23.70%
24.10%
24.30%
24.50%
24.60%
24.70%
32.10%
32.30%
32.70%
32.00%
31.30%
32.50%
31.70%
31.10%
31.20%
30.10%
30.90%
30.80%
31.70%
44.80%
44.60%
44.10%
44.00%
43.70%
43.70%
43.50%
43.40%
43.30%
43.20%
43.10%
43.10%
42.50%
42125 42156 42186 42217 42248 42278 42309 42339 42370 42401 42430 42461 42491
21
Individual; 39%
Institutional; 61%
22
85%
Institutional; 77%
23
92%
GROWTH IN ASSETS
The value of assets held by individual investors in mutual funds increased from Rs.
5.64 lakh crore in May 2015 to Rs. 6.58 lakh crore in May 2016, an absolute increase
of 16.68%.
The growth in Institutional assets from Rs. 6.63 lakh crore to Rs. 7.88 lakh crore, an
absolute growth of 18.96%.
24
KEY TRENDS
The total wealth held by individual in India is grown faster by 8.9%. The individual
wealth in financial assets grew by 19% while individual wealth in physical assets
reduced by 2.3%.
The investments made by the individuals in financial assets is expected to get
doubled in the coming years from the present which is Rs 160 lakh Crore.
It also expected that alternative assets and mutual funds are growing faster and to
grow faster in the coming years.
Direct Equity has been the flavor of 2015 becoming the largest asset class of
investments overtaking fixed deposits.
For the new additional money is being invested by the individuals in financial year
2015 which had seen a reversal trends with around 54% of the new money is being
invested in financial assets.
INDIVIDUALS
Individual
657,597
563,606
42125
42491
25
Instituitions
788,411
662,746
Grand Total
1,446,008
1,226,352
26
COMPANY PROFILE
Karvy Group
Over three decades, the Karvy Group has established itself as one the leading and
most trusted integrated financial services companies in the country. With more than
400 offices, and a franchisee network of nearly 500, Karvys pan-India footprint is
unmatched. We also have satellite offices overseas with offices in North America, the
Far East and the UAE.
Through its various businesses such as Registry Services, Stock Broking, Investment
Banking, and Non-Banking Financial Services (NBFC), The Karvy group serves 70
million customers and 1000 biggest corporations in India.
In order to ride new opportunities presented by the changing business scenario,
Karvy has diversified into two new businesses viz. data analytics and market
research.
27
28
4. MANAGEMENT TEAM
29
Abhijit is responsible for building and growing the business, across both the Indian and
Overseas markets.
An MBA from IIM Lucknow and a BE in Mechanical from VJTI, Mumbai. He has
20 years of experience in the areas of Wealth Management/Financial Services
Industry in India & overseas, he has also worked in other areas like asset
management, cash management, corporate banking & retail banking. He has also
headed the Private Banking business in the past. Abhijit brings to the table rich senior
management experience building organisations of scale and exhaustive knowledge of
direct marketing and sales. Prior to that, he has worked with Deutsche Bank, HSBC
and ICICI Bank.
An MBA (Finance) from Pune University & has a rich experience of 15 years in
Capital Markets and NBFC, with a focus on various aspects of Operations and
30
31
employee
engagement,
learning
&
development.
An MBA from Institute of Chartered Financial Analysts of India & has a rich
experience of over 11 years across the Financial services Industry. Prior to joining
Karvy Private Wealth he has worked with Citibank & Kotak Securities in the NRI
and Wealth Management divisions.
An MBA from Mumbai University and has a rich experience of nearly 18 years in
Banking and Investment industry. Prior to joining Karvy, he was associated with M/s
Reliance Private Wealth Ltd, heading the Real Estate and alternate asset desk and
was responsible for sourcing deals from developers and secondary market for HNI
clients based across India, Middle East and South East Asia.
32
ORGANIZATION STRUCTURE
CEO
(ABHINJIT
BHAVE)
Satinder
Vimal ojha
G.Rajan
(Dubai)
(North Head)
33
(West
Region)
Gaurav Verma
(Multi TL1)
Siddharth
Arora
(Multi TL3)
Mukesh Kumar
(Multi TL2)
Pardeep Pillai
(Multi TL4)
Amit Anurag
(Delhi region TL)
Rakshit Kumar
(Delhi region TL)
Amrinder Dhillon
(Senior Wealth
Akhil Sharma
(Senior Wealth
Karvy Private Wealth offers you access to the widest possible range of scope of
investment options across various asset classes -- all under one roof, something no
private wealth management firm can claim. We are asset class agnostic. Our
investment approach treats every financial product as a flexible building block that
makes up your portfolio. When it comes to investing in equity, debt, international
funds, structured products, real estate, commodities or insurance, Karvy Private
Wealth has plenty of products best suited for your investments.
We offer a wide array of investment & wealth management products including:
34
Business owners
Corporate professionals
NRI
Self-employed professionals
Retiree
Plans
(FMPs),
Debentures,
Income
funds,
Debt
mutual
savings and investments to meet their short, medium and long term goals.
Wealth Review and investment strategy- It helps in reviewing your wealth
purchasing of property.
Financing and re-financing- It helps in providing end to end assistance in
strategies.
Family office services- This service helps in protecting the capital and growth
of the ultra-high net worth individuals and familys financial assets and its
heritage.
Tax filling
36
ACHIEVEMENTS
Handling the Reliance Account which accounts for nearly 10 million account
holders.
37
38
Chapter-2
Review of Literature
39
Chapter 2
Review of Literature
4. ELSS: Equity Linked Savings Schemes (ELSS) is equity schemes, where investors
get tax benefit up to Rs. 1 Lakh under section 80Cof the Income Tax Act. These are
open ended schemes but have a lock in period of 3 years. These schemes serve the
dual purpose of equity investing as well as tax planning for the investor; however it
must be noted that investors cannot, under any circumstances, get their money back
before 3 years are over from the date of investment.
5. Income funds: These types of mutual funds are focused on increased capital gains
and steady income. Less volatile than Aggressive Growth funds.
6. Equity Funds: These funds allow an investor to own a portion of the company that
they have invested in, its like having shares of a certain company. Stocks that have
proven historically to be the best investment. Also which have already outperformed
all other types of investments in long term, but the risk is high. These funds produce
a greater level of current income by investing in equity securities of companies with
solid reputation and have a good record of paying dividends.
7. Balanced Funds: Balanced mutual funds have a portfolio mix of bonds, preferred
stocks and common stocks. Balanced mutual funds aim to conserve investors initial
investment, to pay an income and to aid in the long-term growth of both the principle
and the income.
8. Fixed-Income: Funds Fixed-income mutual funds are safer than equity funds, but
as always, do not yield as high returns as the latter do. These types of mutual funds
are geared towards the investor who is approaching old age and doesnt have many
earning years left. Many investors hope to draw a steady income from these types of
mutual funds. Bond funds fall into the category of fixed-income funds.
9. Money-Market Funds: These are generally the safest and most secure of mutual
fund investments. They invest in the largest, most stable securities, including
Treasury bills. The chances of your capital being eroded are very minimal. Moneymarket funds are risk-free. If you invest a thousand rupees, you will get that money
41
back. It is simply a matter of when you get it back. When investing in a moneymarket fund, you should pay attention to the interest rate that is being offered, along
with the rules regarding check-writing. Money-markets have allowed investors to
reap high yields on their deposits, and have made the entire investment process more
accessible to people. The interest rates on money-market funds are changing nearly
day to day. In times of inflation, these funds have had high yields.
10. Index Funds: They invest in the portfolio of an index such as BSE Sensitive
index (SENSEX), S&P NSE 50 index (Nifty), etc. The investment is done in the
securities in the same weightage comprising of an index. You can see that the NAVs
of such schemes would rise or fall in accordance with the rise or fall in the index. It
may not be exactly by the same percentage due to tracking errors.
11. Gilt Funds: These are those funds which invest only in securities issued by the
Government. This can be the Central Govt. or even State Govts. Gilt funds are safe
to the extent that they do not carry any Credit Risk. However, it must be noted that
even if one invests in Government Securities, interest rate risk always remains.
12. Monthly Income Plans: MIPs are suitable for conservative investors who along
with an exposure to debt do not mind a small exposure to equities. These funds aim
to provide consistency in returns by investing a major part of their portfolio in debt
market instruments with a small exposure to equities. Thus an MIP would be suitable
for conservative investors who along with protection of capital seek some capital
appreciation as MIPs have an exposure to equities. However the monthly income is
not assured
Equity Mutual Funds are one of the important means of pooling risk capital from
small investors. In order to encourage such investment culture, the Govt. of India in
the year 1992 introduced the Equity Linked Savings Scheme (ELSS) mutual funds.
Investments into the scheme qualify for tax benefit. The tax benefit comes with
certain regulatory provisions. These regulatory provisions make the ELSS funds
distinct from Diversified Equity Funds. The regulatory provisions of ELSS funds
apparently tend to increase the element of investment risk of these funds as compared
to regular Diversified Equity Funds. People usually invest their money in the safe
investment alternatives and further continue to search for new safer avenues. They
always try to save their money in a manner that it provides tax shield as well as some
capital appreciation without blocking it for long period of time. They try to maximize
their returns while selecting the different investment avenues. To maximize the
return, it depends on the risk tolerance capacity. So risk and return are the motivating
force and the principal factor in the investment decision.
43
Ajay Mittal and Dr. V. K. Agarwal (2015) the main purpose of the study is to
compare the ELSS scheme of public sector and private sector and analyse the market
timing abilities of fund managers of ELSS. The tax saving mutual fund industry grew
at a rate of annual 67% during 2006 to 2015 while mutual fund industry grew at a
rate of 50% annually. Here various tools are used for analysis of performance of tax
saving scheme of mutual fund. Its included Price Earnings Ratio, Book Price Ratio,
Return and Net Asset value and Assets under Management. Further take to
considering the performance index model. Sharpe performance evaluation model,
model represents return on security with risk free return on investment and then take
into considering the variance on security. The return on overall basis of every year
though seems to be higher in case of private sector ELSS mutual funds taken
together.
Dr. Brajaballav Pal (2014) In this paper, an attempt has been made to study the
performance of selected schemes of mutual funds based on risk-return relationship.
14 equity-based mutual fund schemes have been studied for twelve quarters from 3rd
January, 2011 to 1st October, 2013. The analysis has been made on the basis of
average return, risk, beta, Sharpe ratio, Treynor ratio and Jensen Alpha. The overall
analysis finds ICICI Pru Exp & Other Services Fund being the best performer and
Kotak Nifty ETF and ICICI Pru Infrastructure mutual funds showing poor
performances when measured against the risk-return relationship. The performance
44
evaluation of funds using performance ratios enables the investors to recognize and
select the benchmarking companies. The risk-return relationship. The performance
evaluation of funds using performance ratios enables the investors to recognize and
select the benchmarking companies.
Sumana B.K and Prof B.Shivaraj (2014) This paper focuses on performance
evaluation of actively managed mutual funds. With the importance of risk and return
for any investment, this paper analyses risk adjusted returns of mutual funds and also
absolute returns. The study focuses on finding the performance of selected actively
managed mutual funds using different performance measures like Sharpe`s, Jensen`s
Alpha and Information ratio.. The sample selected for the study is ten Large
Capitalization Mutual funds in India. The period of study is three years (2010-13).
The analysis was on the basis of quarterly, half yearly, yearly returns for each mutual
fund. The results revealed that the returns varied with the frequency of measurement.
This shows the time is an important dimension in the performance of the fund. The
study also revealed that the type of measure selected has a bearing on the
performance of asset managers.
Dr. Sandeep Malu and Dr. Rahul Deo (2014) This paper is an attempt to look in to
the vital tax saver segment, a boon for tax saving as well wealth creation. The sample
for the study consists of five mutual funds belonging to Equity Tax Saving category
funds selected on the basis of last 5 year performance amongst the category. The
performance of selected funds is evaluated using average rate of return of fund,
standard deviation, Risk/Return, Sharpe Ratio, Treynor ratio and Jensen ratio. NIFTY
50 is taken as benchmark for comparing performance of tax saver scheme. As such
all the schemes outperformed the benchmark in considered time frame so the
comparison criteria remains inter scheme comparison for all time formats.
45
Kansal, Payal (2012) in her research study conducted in Meerut to from 2001 to
2010 to know the role of brokers and investor preference in mutual funds and the
capital mobilisation through mutual fund in Meerut and concluded that the growth in
Meerut city of mutual fund is not very fast and investor should be oriented regarding
mutual funds. Private sector has taken more initiative in the providing knowledge
and good return for the growth of mutual funds.
Rupeet Kaur (2012) did a comparative analysis of growth & dividend tax oriented
mutual fund schemes in India with a sample of 18 schemes selected on the basis of
monthly returns. The performance on the basis of return analysis of growth schemes
are found better than the dividend schemes when compared to benchmark. The
dividend schemes are found to be more volatile than the growth schemes.
Sondhi and Jain (2010) examined the market risk and investment performance of
equity mutual funds in India. The study used a sample of 36 equity fund for a period
of 3 years. The study examined whether high beta of funds have actually produced
high returns over the study period. The study also examined that open-ended or close
ended categories, size of fund and the ownership pattern significantly affect risk46
adjusted investment performance of equity fund. The results of the study confirmed
with the empirical evidence produced by fama (1992) that high beta funds (market
risks) may not necessarily produced high returns. The study revealed that the
category, size and ownership have been significantly contributing towards the
performance of mutual funds during the study period.
Zakri y. Bello (2009), examined five factors namely default risk premium, term
premium, monetary conditions, federal fund premium, market risk premium and
confirms that mutual fund returns can be strongly predicted by analyzing these
factors.
47
Chapter-3
Project Objectives
48
Chapter 3
Project Objectives
50
Chapter-4
51
Chapter 4
Project Methodology Adopted
52
Body of Chapter -4
Chapter-5
53
Chapter 5
Data Analysis & Interpretation / Description of the
Work Performed
Objective 1
To study the performance of the selected ELSS Mutual Fund.
Investments in Equity Linked Savings Schemes (ELSS) are the popular mode of
investment for tax planning purposes has increased over the period of years. Here we
are going to study the performance of these mutual funds to know the superior return
alternative to other tax-saving instruments. Instead of opting for the conventional taxsaving instruments like PPF, NSC, RBI bonds, and LIC policies, a better and
remunerative way of investing that hard-earned money is the ELSS.
An ELSS is a tax saving instrument provided by mutual funds. It offers the benefits
of getting equity linked returns and with the additional benefit of tax saving.
54
Tax benefit
Since this is equity linked saving scheme so the earning potential is very as compared
to other tax saving instruments. It has a lock in period of three years which makes it
superior against other tax saving instruments.
Elss fund
Launch date
1 year
3 year
5 year
Expense
Assets
Dec-09
1.32
27.81
19.55
1.99
8,888
Jan-06
-1.53
23.19
16.09
2.75
456
Apr-99
3.83
24.41
16
2.42
2,146
Dec-08
-3.16
23.13
15.03
2.5
422
Sep-05
0.61
29.06
17.19
2.1
4,980
May-05
4.59
20.24
12.96
2.51
1,206
Mar-96
2.7
23.4
15.3
2.85
232.09
Feb-06
4.15
21.03
12.62
2.14
1,553
Nov-05
0.1
21.22
11.45
2.47
477
Mar-96
-0.93
21.07
10.56
2.16
4,767
Here we have selected the 10 ELSS mutual funds from Crisil website in order to
evaluate the performance. As we know we have a lock in period of 3 years in ELSS
mutual fund thus we have compared the return from this fund. Thus we can clearly
55
see in the above table that the ELSS fund gives superior return in 3 years as
compared to 5 and 1 year. Thus we can say ELSS is the best performing mutual fund
which not only helps in capital appreciation. But provide us with relevant tax
savings.
In the above table Reliance has been the star performer among other with superior
return followed by axis which are giving a higher return after 3 and 5 years
respectively.
Objective 2
analysed by using Capital Asset Pricing Models such as Sharpe to measure Risk
premium related to the total risk, Treynor to measure Funds performance in relation
to the market performance and Jensens Alpha is used to compare the actual or
realized return of the portfolio with the predicted or calculated return.
For the study we have BSE Sensex 200 as our benchmark index. The relationship
between the index and the market return can be analysed by the regression equation.
NAV is the change in the net assets value of mutual fund over a period of time. It is a
better measure for comparing the relative performance of several funds. Return can
be calculated by using the formula:
Current value of the units- Previous value of units
Return
-------------------------------------------------------------------
* 100
57
58
Sharpe measure was developed by William Sharpe are referred to as the Sharpe ratio.
In this ratio, variability of return or risk is measured by the standard deviation of
return. The index assigns the highest values to assets that have best risk-adjusted
average rate of return (Punithavathy Pandian, 2006). The formula for calculating
Sharpe ratio is given below:
59
60
ELSS FUND
Axis long term equity fund
BNP Paribas Long Term Equity
Fund
Franklin India Tax shield Fund
IDFC Tax Advantage (ELSS) Fund
Reliance Tax Saver Fund
Sundaram Tax saver
Principle tax saving fund
L&T tax advantage fund
Kotak tax saver
HDFC tax saver fund
1 year
3
year
5
year
1.32
-1.53
27.81
23.19
19.55
16.09
3.83
-3.16
0.61
4.59
2.7
4.15
0.1
-0.93
24.41
23.13
29.06
20.24
23.4
21.03
21.22
21.07
16
15.03
17.19
12.96
15.3
12.62
11.45
10.56
Interpretation:
The above table presents the average return of the selected mutual fund schemes.
When it comes to 1 year return Sundaram and L&T are way ahead the others. But as
ELSS has 3 year lock in period we can clearly see Reliance is the best performing
fund with 29.06 % return followed by axis and BNP Paribas. Axis has clearly
outperformed all in terms of return when we talk about long term investment.
ELSS FUND
Axis long term equity fund
BNP Paribas Long Term
Equity Fund
Franklin India Tax shield Fund
IDFC Tax Advantage (ELSS)
Fund
Reliance Tax Saver Fund
Sundaram Tax saver
Principle tax saving fund
L&T tax advantage fund
Kotak tax saver
HDFC tax saver fund
Standard
Deviation
14.7
R
squar
e
0.88
15.54
14.63
0.861
0.924
16.78
21.97
17.21
18.63
15.57
17.53
18.21
0.882
0.821
0.91
0.072
0.94
0.94
0.882
Interpretation:
In the above table we can clearly see Franklin India Fund is showing the least
deviation as compared to other Funds. This means that it is not deviating as much as
the benchmark index must be. Whereas the reliance tax saver fund is showing the
highest deviation which literally means it is more volatile than others. Here R square
means that this must of factors are explained by this fund and rest variation must be
due to other factors. L&T tax advantage and Kotak tax saver are the one with high R
square .
ELSS FUND
Axis long term equity fund
BNP Paribas Long Term Equity
Fund
Beta
0.82
0.86
62
0.84
0.94
1.19
0.98
0.06
0.902
1.01
1.02
Interpretation:
In the above table the we are going to assess the systematic risk as we know that beta
greater than 1 is termed as aggressive which means if Sensex moves 1% then the
stock will move more than 1% and vice versa. Thus Kotak, HDFC and reliance are
termed as aggressive as their beta is high. Whereas the funds with beta less than 1 are
termed as conservative.
ELSS FUND
Axis long term equity fund
BNP Paribas Long Term Equity Fund
Sharp
0.78
0.56
63
0.55
0.4
0.45
0.27
0.34
0.3
0.23
0.19
In the above table a mutual fund with higher sharp value is considered a superior
fund. Thus we can say Axis long term fund is most superior fund among others and
kotak is the worst performer.
ELSS FUND
Axis long term equity fund
BNP Paribas Long Term Equity
Fund
Franklin India Tax shield Fund
IDFC Tax Advantage (ELSS)
Fund
Reliance Tax Saver Fund
Sundaram Tax saver
Principle tax saving fund
L&T tax advantage fund
Kotak tax saver
HDFC tax saver fund
Treynor
0.14
0.1
0.09
0.07
0.084
0.04
0.95
0.05
0.04
0.03
Unlike Sharp, Treynor uses the beta in its denominator which takes only the
systematic risk. Thus we can say the fund with higher Treynor ratio implies that the
fund has a better risk adjusted return. Thus we Principle tax saving fund has better
Treynor ratio and BNP Paribas has worst Treynor ratio.
64
ELSS FUND
Alpha
0.1
0.07
0.06
0.05
0.081
0.03
0.04
0.03
0.02
0.018
Jensen alpha gives us the excess return with respect to expected return. Thus in order
to calculate we usually Regress the Excess return of market and benchmark. Then we
get the regression equation which gives us slope and intercept. The intercept give us
the alpha value which is significant if the T value is greater than 2. Thus in the above
table the highlighted numbers are those whose t value is less than 2. We can clearly
see that Axis is the best fund with greater Treynor ratio.
Objective 3
To evaluate the outperformance of ELSS (Growth ) plans with other
Diversified Equity ( Growth ) plans.
65
(a) Large-cap Funds: These are funds that make investments mainly
in the shares of big companies. The investors prefer to make
investments in these funds as the portfolio consists of well
established companies with high trading volumes and market
capitalization of more than Rs.1000 crores. Examples of large-cap
funds are Franklin India Blue Chip, HDFC Top 200, reliance Growth
Fund and Kotak 30.
(b) Mid-cap Funds: These funds invest in equity shares of medium
sized companies that have a market capitalization between Rs. 500
crore and Rs. 1000 crore and a huge potential to become big.
Examples of mid-cap funds are Sundaram BNP Paribas Select Mid
Cap Fund, Franklin India Prima Fund, etc.
(c) Small-cap Funds: These funds invest in equity shares of small
companies with a market capitalization of up to Rs. 500 crore.
Examples are DSPBR Small and Mid Cap Fund and Sundaram BNP
Paribas Select Small Cap Fund.
66
Standard
Deviation
18.06
18.04
16.61
16.27
16.51
18.54
12.1
15.15
15.74
15.08
ELSS FUND
Axis long term equity fund
Market return
14.39
13.87
11.26
14.1
13.38
17.55
13.94
4.32
12.94
14.74
Beta
Alph
a
Shar
p
Treyn
or
0.82
0.1
0.78
0.14
67
R square
0.903
0.92
0.891
0.93
0.9
0.86
0.08
0.95
0.94
0.877
Rank
1st
0.86
0.84
0.94
1.19
0.98
0.06
0.902
1.01
1.02
0.07
0.06
0.05
0.081
0.03
0.04
0.03
0.02
0.018
0.56
0.55
0.4
0.45
0.27
0.34
0.3
0.23
0.19
0.1
0.09
0.07
0.084
0.04
0.95
0.05
0.04
0.03
2nd
3rd
8th
6th
15th
12th
13th
17th
18th
1.02
1.03
0.94
0.94
0.94
1.03
0.05
0.88
0.91
0.84
0.05
0.04
0.02
0.05
0.04
0.084
0.04
0.03
0.039
0.05
0.385
0.35
0.23
0.41
0.36
0.54
0.53
-0.2
0.35
0.48
0.06
0.06
0.04
0.07
0.06
0.098
1.39
-0.03
0.06
0.08
9th
10th
16th
7th
9th
4th
14th
19th
11th
5th
Objective 4
To understand the investors perception towards their investment in ELSS Tax savings
schemes.
PRIMARY DATA ANALYSIS
An analysis on primary data always produces the exact information about any study.
As such, Investors behaviour has been studied with respect to risk and return of Tax
68
Saving Mutual Fund Schemes. The details of analysis have been given in this
section.
Interpretation:
The above pie chart shows the distribution of the respondents for the survey. We
can clearly see that 75% of the respondents are between the age of 20 40. Rest
25% is the one above the age of 40. As we can see the maximum investment in a
mutual fund is done by the age group of 31 40.
69
Interpretation:
The above pie chart shows the gender wise classification of respondents who do
investment. The Gender wise Analysis Interprets that 38.6% Female do
investment & remaining 61.4% Male do invest in mutual funds.
70
Interpretation:
The above pie chart shows the region wise distributioon of respondents who do
investments . Clearly 40.9% respondents belongs to west delhi and 45% belong
to other part of the delhi . 13.6% of respondents are those who belongs to NCR
region.
71
Interpretation:
The above pie chart shows the occupation wise distribution of respondents.
44.2% of the corresponds to private employee who make investment. While
25.6% of the respondents belongs to business section. 20.9% are the one who
works in government sector. Only 7% of the respondents are the one who are
retired.
72
Interpretation:
The above figure shows the most preferred investment instrument among the
respondents. Mutual fund is the most preferred investment instrument due to
low cost followed by equity and Fixed deposit. The rest investment done by the
respondents is either in gold, PPF and real estate. Very few respondents do their
investment in bonds and debentures.
73
Interpretation :
The above pie chart shows us the average investment period in a mutual fund
done by the respondents . It is clearly can bee seen that 56.8% respondents
prefer long term investment in order to get their capital appreciated . 25%
respondents are those which invest less than 2 year. While 13.6% are the ones
where the investment period is more than 5 years.
74
Interpretation:The above pie chart shows a particular risk willingness of respondents who
invest in mutual funds. 25.6% respondents are risk takers in investing in the
mutual fund. The other 60.5% respondents are moderate risk takers who invest
in mutual fund. And remaining 14% respondents are low risk takers who invest
in mutual fund.
So by doing the above analysis I found that 25.6% of respondents are ready to
take risks in investing in mutual fund.
Interpretation:- The above pie chart shows expected return from investments of
respondents who invest in mutual funds. We found out that there are 20.5%
Respondents lying between 17%-20%, 15.9% Respondents are expecting return
upto 12% from investment. 61.4% respondents are lying between 13% to 16%.
So I found that 61.4% are expecting 13%-16% return from investment.
75
The above figure shows the important source of knowledge about the mutual
funds for the respondents. Surprisingly 52.3% of respondents have chosen
financial advisors as their primary source of any kind of knowledge about
mutual funds. It shows to growing need of financial advisors in this industry.
27.3% respondents consider bank the most important source of information.
The other option can be advertisements or client references .
76
Interpretation:
The above pie chart shows the different advantages respondents find in
investing in mutual funds. 24.2 % respondents thinks that low cost is one of the
factor which drives people towards mutual funds. 20.2% feels the flexible nature
of the mutual fund is the reason behind Its investment. It is followed by
liquidity and diversification .
77
Interpretation:
When it comes to objectives, 33.9% of the respondents have stated capital
appreciation as one of the reason of choosing mutual fund as their option. 32.2
% has chosen Tax saving as their objective for the investment in ELSS mutual
fund. 22% consider the return as their objective for investment.
78
Null hypothesis: The age of the investor and risk willingness are independent of each
other.
Null hypothesis: The age of the investor and expected return from the investment are
independent of each other.
Null hypothesis: The age of the investor and knowledge related to mutual funds are
independent of each other.
Null hypothesis: The age and gender of the investor are independent of each other.
Null hypothesis: Income of the individual investor and annual investment in a mutual
fund are independent of each other.
Percent
44
Missing
100.0%
Percent
0
Chi-Square Tests
Value
df
79
Total
0.0%
Percent
44
100.0%
Pearson Chi-Square
Likelihood Ratio
Linear-by-Linear Association
12.627a
.049
12.647
.049
5.308
.021
N of Valid Cases
44
Symmetric Measures
Value
Nominal by Nominal
Approx. Sig.
Phi
.536
.049
Cramer's V
.379
.049
N of Valid Cases
44
Interpretation:
Here we are trying to find the association between age and risk willingness of the
respondents. In order to find out this we have used chi square test. In all total 44
respondents responses were carried out. Firstly we can see that our P value is less
than .05. This means we will not accept the null hypothesis which says that both are
independent of each other. Thus we can say age and risk are associated with each
other. Now in order to find out the how strong the association is we have used Phi
and Cramer test. This test gives us the how strong the relationship is between the two
factors. .536 is the value which is telling us the association about the variables.
80
Missing
Percent
Total
Percent
Percent
44
100.0%
0.0%
your investment?
Chi-Square Tests
Value
df
Pearson Chi-Square
.045
17.092
.047
7.137
.008
17.243
Likelihood Ratio
Linear-by-Linear Association
N of Valid Cases
44
Symmetric Measures
Value
Nominal by Nominal
Approx. Sig.
Phi
.626
.045
Cramer's V
.361
.045
N of Valid Cases
44
Interpretation:
81
44
100.0%
Here we are trying to find the association between age and return expected by the
respondents. In order to find out this we have used chi square test. In all total 44
respondents responses were carried out. Firstly we can see that our P value is less
than .05. This means we will not accept the null hypothesis which says that both are
independent of each other. Thus we can say age and return expected by the
respondents are associated with each other. Now in order to find out the how strong
the association is we have used Phi and Cramer test. This test gives us the how strong
the relationship is between the two factors. .626 is the value which is telling us the
association about the variables
3.
Missing
Percent
Total
Percent
Percent
44
100.0%
funds ?
Chi-Square Tests
82
0.0%
44
100.0%
Value
df
Pearson Chi-Square
Likelihood Ratio
Linear-by-Linear Association
N of Valid Cases
.975
4.038
.909
.050
.823
2.706
44
83
Symmetric Measures
Value
Nominal by Nominal
Approx. Sig.
Phi
.248
.975
Cramer's V
.143
.975
N of Valid Cases
44
Interpretation:
Here we are trying to find the association between age and
source of information by the respondents. In order to find
out this we have used chi square test. In all total 44
respondents responses were carried out. Firstly we can see
that our P value is more than .05. This means we will accept
the null hypothesis which says that both are independent of
each other. Thus we can say age and return expected by the
respondents are associated with each other. Now in order to
find out the how strong the association is we have used Phi
and Cramer test. This test gives us the how strong the
relationship is between the two factors. .248 is the value
which is telling us the association about the variables . This
supports our null hypothesis theory.
5.
Missing
Percent
44
100.0%
Percent
0
84
0.0%
Chi-Square Tests
Value
df
3.367a
.338
Likelihood Ratio
3.361
.339
Linear-by-Linear Association
2.051
.152
Pearson Chi-Square
N of Valid Cases
44
Symmetric Measures
Value
Nominal by Nominal
Approx. Sig.
Phi
.277
.338
Cramer's V
.277
.338
N of Valid Cases
44
Interpretation:
Here we are trying to find the association between age and gender of information by
the respondents. In order to find out this we have used chi square test. In all total 44
respondents responses were carried out. Firstly we can see that our P value is more
than .05. This means we will accept the null hypothesis which says that both are
independent of each other. Thus we can say age and return expected by the
respondents are associated with each other. Now in order to find out the how strong
the association is we have used Phi and Cramer test. This test gives us the how strong
the relationship is between the two factors. .338 is the value which is telling us the
association about the variables . This supports our null hypothesis theory.
6.
85
Missing
Percent
Total
Percent
Percent
44
100.0%
0.0%
Chi-Square Tests
Value
df
29.666a
15
.013
Likelihood Ratio
30.184
15
.011
Linear-by-Linear Association
10.054
.002
Pearson Chi-Square
N of Valid Cases
44
Chi-Square Tests
Value
df
29.666a
15
.013
Likelihood Ratio
30.184
15
.011
Linear-by-Linear Association
10.054
.002
Pearson Chi-Square
N of Valid Cases
44
86
44
100.0%
Symmetric Measures
Value
Nominal by Nominal
Approx. Sig.
Phi
.821
.013
Cramer's V
.474
.013
N of Valid Cases
44
Interpretation:
Here we are trying to find the association between age and
return expected by the respondents. In order to find out this
we have used chi square test. In all total 44 respondents
responses were carried out. Firstly we can see that our P
value is less than .05. This means we will not accept the null
hypothesis which says that both are independent of each
other. Thus we can say age and return expected by the
respondents are associated with each other. Now in order to
find out the how strong the association is we have used Phi
and Cramer test. This test gives us the how strong the
relationship is between the two factors. .626 is the value
which is telling us the association about the variables
Factor analysis :
Risk
.888
Dividend Earned
.634
Capital preservation
.764
Tax saving
Expense ratio
.771
.630
Transparency
Liquidity
.639
.806
Performance
.683
88
Chapter-6
Findings
89
Chapter 6
Findings
The findings of the study are divided into two sections. The first section presents the
findings of an analysis of secondary data (10 growth oriented Tax Saving Mutual
Fund Schemes and 10 Diversified equity fund in India). The second section depicts
the findings of the analysis of survey data.
90
The average Sharpe values for 99 percent open-ended Mutual Fund Schemes
were found positive.
The average Treynor values for 99 percent Mutual Fund Schemes were found
positive.
The average Jensens alpha values for 75 percent Mutual Fund Schemes were
found positive.
It is found that, Axis long term equity fund (ELSS) , BNP Paribas Long Term
Equity Fund(ELSS), Franklin India Tax shield Fund(ELSS), L&T growth
India fund and BNP Paribas have performed well with high difference in
expectation and actual return.
Body of Chapter -6
91
Chapter-7
92
Recommendations
Chapter 7
Recommendations
Body of Chapter -7
93
94
References
References
Yang, Z. and Fang, Z. (2004), Online service quality dimensions and their
relationships with satisfaction: a content analysis of customer reviews of
securities brokerage services, The International Journal of Bank
Marketing, 15(3), pp. 302-326
Websites:
95
96
Annexures
Annexure A
97
98