Introduction To Mutual Fund

Chapter I
Introduction
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INTRODUCTION TO MUTUAL FUND
Investment can be defined as an item of value purchased for income or capital

appreciation. Investments are made to achieve a specific objective and savings are made to
meet an unforeseen event. There are various avenues of investments in accordance with
individual preferences. Investments are made in different asset classes depending on an
individual‟s risk and return characteristics investment choices are physical assets and
financial assets.
Gold and Real estates are examples of physical assets, which have a physical form
to them. There is a strong preference for these assets, as these assets can be purchased
with cash and held for a long term. The obvious disadvantages with physical assets are
the risks of loss and theft, lower levels of return, illiquid secondary markets, and ado
valuations and transactions.
Financial assets are securities, which are certificates embodying a financial

contract between parties. Bonds, Equity shares, Deposits and Insurance policies are some
of the examples of financial assets. In financial assets investors only hold the proof of
their investment in the form of a certificate or account. These products are usually liquid,
transferable and in most cases, stored electronically with high degree of safety. But a
minimum amount of cash is always kept in hand for transactions and contingencies. To
face the contingencies and unexpected events the insurance came into existence.
Another avenue of investment is mutual funds. It is created when investors put
their money together. It is therefore a pool of the investor‟s funds. The most important
characteristics of a mutual fund are that the contributors and the beneficiaries of the fund
are the same class of people, namely the investors. The term mutual means that investors
contribute to the pool, and also benefit from the pool. There are no other claimants to the
funds. The pool of funds held mutually by investors is the mutual fund.
A mutual fund pools the money of people with similar investment goals. The
money in turn is invested in various securities depending on the objectives of the mutual
fund scheme, and the profits (or loss) are shared among investors in proportion to their
investments.
Mutual fund schemes are usually open-ended (perpetually open for investments
and redemptions) or closed-end (with a fixed term). A mutual fund scheme issue units
that are normally priced at Rs. 10 during the initial offer. Thus, the number of units you
own as
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Against the total number of units issued by the mutual fund scheme determines your
share in the profits or loss of a scheme.
In the case of open-end schemes, units can be purchased from or sold back to the fund at
a Net Asset Value (NAV) based price on all business days. The NAV is the actual value
of a unit of the fund on a given day.
Thus, when you invest in a mutual fund scheme, you normally get an account
statement mentioning the number of units that have been allotted to you and the NAV
based price at which the units have been allotted. The account statement is similar to your
bank statement.
Mutual funds invest basically in three types of asset classes:
Stocks: Stocks represent ownership in equity in a company, popularly known as shares.
Bonds: These represent debt from companies, financial institutions or Government
agencies.
Money market instruments: These include short-term debt instruments such as

treasurybills, certificate of deposits and inter-bank call money.
A mutual fund‟s business is to invest the funds thus collected, according to the wishes
ofthe investors who created the pool. In many markets these wishes are articulated as
investment mandates.
Analysis of the performance of selected mutual fund will be done in the project from
April 2016 to March 2017. The selected Mutual funds to study are as follows:
a) UTI Mutual Fund
b) HDFC Mutual Fund
c) ICICI Mutual Fund
d) RELIENCE Mutual Fund
e) SBI Mutual Fund
STATEMENT OF PROBLEM
The performance of the mutual fund become more complex in context of accommodating
both return and risk measurements while giving due importance to investment objectives.
Proper planning and advisory services play an important role in facilitating an investor in
investing process. Performance evaluation helps an investor to make a proper decision
regarding the investment. Thus the study focus on the performance evaluation of the
mutual fund so investor make good investment decision.
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OBJECTIVES OF THE STUDY
To understand the Mutual fund Industry in India.
To understand and analyse the Risk-Return aspects of Mutual funds.
To compare the performance of the selected funds vies-a-vies the benchmark

index, BSE.
To ascertain whether the returns generated by the funds are purely attributable to
market movement or individual performance.
To rank the Mutual funds on the basis of their performance using Sharpe Measure
and Treynor Measure and Jensen Alpha Measure.
METHODOLOGY OF THE STUDY
Secondary data are used for the performance evaluation of the selected mutual funds.
Line chart will be used as technical tools for the study.
Different sources of data are:
a) Magazines and journal
b) Text books
c) News paper
d) Official website of company, etc.
LIMITATION OF THE STUDY
The use of secondary data to evaluate the performance creates bias for the futuristic
growth and development.
The study is limited to few numbers of mutual funds.
The evaluation of performance is limited to two main approaches viz. Sharpe Measure
approach and Treynor Measure approach.
The time constraint is one of the major problems.
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CHAPTER –II
LITERATURE REVIEW
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LITERTURE REVIEW
CONCEPT OF MUTUAL FUNDS
Mutual fund is a trust that pools money from a group of investors (sharing common
financial goals) and invest the money thus collected into asset classes that match the
stated investment objectives of the scheme. Since the stated investment objectives of a
mutual fund scheme generally form the basis for an investor's decision to contribute
money to the pool, a mutual fund can not deviate from its stated objectives at any point of
time.
Every Mutual Fund is managed by a fund manager, who using his investment
management skills and necessary research works ensures much better return than what an
investor can manage on his own. The capital appreciation and other incomes earned from
these investments are passed on to the investors (also known as unit holders) in
proportion of the number of units they own.
When an investor subscribes for the units of a mutual fund, he becomes part owner of the
assets of the fund in the same proportion as his contribution amount put up with the
corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual
fund shareholder or a unit holder. Any change in the value of the investments made into
capital market instruments (such as shares, debentures etc) is reflected in the Net Asset
Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund
scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the
market value of scheme's assets by the total number of units issued to the investors.
MEANING AND DEFINITION:

Meaning:
“A mutual fund is a financial instrument that pools the money of many investors-its
shareholders-to invest in a variety of different securities.”
Mutual fund is an investment tool that allows small investors access to a well-diversified
portfolio of equities, bonds, and other securities. Each shareholder participates in the gain
or loss of the fund. Units are issued can be redeemed as needed.
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Definition:
The SEBI Regulations, 1993 defines mutual fund as “A fund established in the form of a
trust by a sponsor to raise money by the trustees through the sale of units to the public
under one or more schemes for investing in securities in accordance with these
regulations.
Investment is the allocation of monetary resources to assets that are expected to yield
some gain or positive return over a given period of time. These assets range from safe
investments to risky investments. Investments in this form are also called „Financial
Investments‟.
HISTORY OF MUTUAL FUNDS IN INDIA
The formation of Unit Trust of India marked the evolution of the mutual fund industry in
the year 1963. The primary objective at that time was to attract the small investors and it
was made possible through the collective efforts of the Government of India and the
Reserve Bank of India. The history of mutual fund industry in India can be better
understood divided into following phases:
Phase I: Establishment and Growth of UTI-1964-87:

It was established in the year 1963 by an act of Parliament.
UTI was set up by the RBI and it continued to operate under the regulatory control
of the RBI until the two were de-linked in 1978 and the entire control was
transferred in the hands of Industrial Development Bank of India (IDBI).
UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which
attracted the largest number of investors in any single investment scheme over the
years.
UTI launched more innovative schemes in 1970s and 80s to suit the needs of
different investors.
It launched ULIP in 1971 and six more schemes between 1981-84
Children‟s Gift Growth Fund and India Fund in 1968
Master share in 1987
Monthly Income Schemes during 1990s.
By the end of 1987, UTI‟s assets under management grew ten times to Rs 6700
crores.
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Phase II: Entry of Public Sector Funds-1987-1993
The India mutual fund industry witnessed a number of public sector players entering
the market in the year 1987.
In November 1987, SBI Mutual Fund from the State Bank of India became the first
non-UTI mutual fund in India.
SBI mutual fund was later followed by, Canrabank Mutual Fund, LIC Mutual Fund,
Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund, PNB
Mutual Fund
By 1993, the assets under management of the industry increased seven times to
Rs. 47004 crores. However, UTI remained to be the leader with about 80% market
share.
Phase III. Emergence of Private Sector Funds – 1993-96:
The permission given to private sector funds including foreign fund management
companies (most of them entering through joint ventures with Indian promoters) to
enter the mutual fund industry in 1993
Provided a wide range of choice to investors and more competition in the industry.
Private funds introduced innovative products, investment techniques and investor-

servicing technology.
By 1994-95, about 11 private sector funds had launched their schemes.
Phase IV. Growth and SEBI Regulation – 1996-2004

• The mobilization of funds and the number of players operating in the industry reached
new heights as investors started showing more interest in mutual funds. Inventors‟
interests were safeguarded by SEBI and the Government offered tax benefits to the
investors in order to encourage them.
• SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform
standards for all mutual funds in India.
• Various Investor Awareness Programs were launched during this phase, both by SEBI
and AMFIThe Union Budget in 1999 exempted all dividend incomes in the hands of
investors from income tax.
• In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal
status as a trust formed by an Act of Parliament.
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• The primary objective behind this was to bring all mutual fund players on the same
level.
• UTI was re-organized into two parts:

1. The Specified Undertaking,
2. The UTI Mutual Fund Presently Unit Trust of India operates under the name of
UTI Mutual Fund and its past schemes (like US-64, Assured Return Schemes) are
being gradually wound up.
Figure no.1 Growth in Asset Under Management
Source:www.appuonline.com
Phase V. Growth and Consolidation – 2004 Onwards:

The industry has also witnessed several mergers and acquisitions recently, examples of
which are acquisition of schemes of:
Sun F&C Mutual Fund
PNB Mutual Fund by Principal Mutual Fund.
Simultaneously, more international mutual fund players have entered India like:
Fidelity
Franklin Templeton Mutual Fund etc.
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WORK FLOW OF MUTUAL FUND INDUSTRY
The working of mutual funds can be briefly started in the form of the point below;
Figure no.2 Work Flow of Mutual Fund Industry
ORGANIZATION OF A MUTUAL FUND
In accordance with the provisions of the Indian Trust Act, 1882 every mutual fund
shall be constituted in the form of a trust. SEBI Guidelines, 1992 spell out in clear terms
the establishment norms for mutual funds. It contemplated a three tier system for
managing the affairs of mutual funds. The three constituents are the sponsoring company,
the trustees and the assets management company (AMC). These three constituents were
incorporated in SEBI Regulations, 1996 for the management of mutual funds. Apart from
these three, Custodians and transfer agents are two more important constituents of mutual
funds. These are presented in the figure 2.2.
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There are many entities involved and the diagram below illustrates the organizational
set up of a mutual fund.
Figure no.3 Organization of a Mutual Fund
All mutual funds comprise of four constituents

1. Sponsors
2. Trust /Board of trustees
3. Asset management company or fund managers
4. Custodian
I. SPONSOR
Sponsor of a mutual fund is akin to the promoter of a company as he gets the fund
registered with SEBI. Under SEBI regulations, sponsor is defined as any person who
acting alone or in combination with another body corporate establishes the mutual fund.
Sponsor can 13 be Indian companies, banks or financial institutions, foreign entities or a
joint venture between two entities. As Reliance mutual fund has been sponsored fully by
an Indian entity.
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Whereas, funds like Fidelity mutual fund and J P Morgan mutual fund are
sponsored fully by foreign entities. ICICI Prudential mutual fund has been set up as a
joint venture between ICICI Bank and Prudential plc. Both sponsors have contributed to
the capital of the Asset Management Company of ICICI Prudential.
SEBI has laid down the eligibility criteria for sponsor as it should have a sound
track record and at least five years‟ experience in the financial services industry. SEBI
ensures that sponsor should have professional competence, financial soundness and
general reputation of fairness and integrity in business transactions. At least 40 percent of
the capital of AMC has to be contributed by the sponsor. Also, they identify and appoint
the trustees and Asset
Management Company. Sponsors are also free to get incorporated an AMC as

well as to appoint a board of trustees. They, either directly or acting through trustees, will
appoint a custodian to hold the fund assets. To submit trust deed and draft of
memorandum and articles of association of AMC to SEBI is also a duty of sponsor. After
the mutual fund is registered, sponsors technically take a backseat.
II. TRUSTEES
Under the Indian trust act 1882, a sponsor creates mutual fund trust, which is the
main body in creation of mutual funds. Trustees may be appointed as an individual or as a
trustee company with the prior approval of SEBI. As defined under the SEBI regulations,
1996, trustees mean board of trustees or Trustee Company who hold the property of
mutual fund for the benefit of the unit holders. A Trustee acts as the protectors of the unit
holders‟ interests and is the primary guardians of the unit holders‟ funds and assets.
Sponsor executes and registers a trust deed in favours of trustees. There must be at least 4
members in the board of trustees and least two third of them need to be independent. For
example, HDFC Trustee
Company Limited is the Trustee of HDFC Mutual Fund vide the Trust deed dated June 8,
2000. It has five board members, of whom three are independent.
To ensure fair dealings, mutual fund regulations require that trustee of one mutual
fund cannot be a trustee of another one, unless he is an independent trustee in both the
cases, and has approval of both the boards. AMC, its directors or employees shall not act
as trustees of any mutual fund. Trustees must be the person with experience in financial
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services. Every trustee should be a person of integrity, ability and standing. SEBI has also
defined the rights and obligations of trustees. Under their rights, trustees appoint AMC
with the prior approval of SEBI. They approve each of the schemes floated by AMC in
consultation with the sponsors. They have the right to obtain from the AMC, such
information as they consider necessary to fulfil their obligations.
Trustees can even dismiss AMC with the approval of the SEBI and in accordance
with the regulations. Under their obligations, trustees must ensure that the transactions of
mutual funds are in accordance with the trust deed and its activities are in compliance
with SEBI regulations. They must ensure that AMC has all the procedures and systems in
place, and that all the fund constituents are appointed. Also, they must ensure due
diligence on the part of AMC in the appointment of business associates and constituents.
Trustees must furnish to SEBI, on half-yearly basis a report on the activities of the AMC.
III. ASSET MANAGEMENT COMPANY (AMC)
Asset Management Company is the body engaged to run the show of a mutual
fund. The sponsor or trustees appoint AMC to manage the affairs of the mutual fund to
ensure efficient management. SEBI desires that AMC must have a sound track record in
terms of net worth, dividend paying capacity, profitability, general reputation and fairness
in transactions.
AMC is involved in basically three activities as portfolio management, investment

analysis and financial administration. Therefore, the directors of AMC should be expert
in these fields.
SEBI‟s regulation for AMC requires that it should have a net worth of at least
Rs. 10 crore at all times and that a company can act as an AMC of one mutual fund only.
Also, at least 50 per cent of the members of the board of an AMC have to be independent
and these can be the director of another AMC also. Its chairman should be an independent
person.
AMCs cannot engage in any business other than that of financial advisory and
investment management. Its memorandum and articles of association have to be approved
by the SEBI. Statutory disclosures regarding AMCs operations should be periodically
submitted to SEBI. Prior approval of the trustees is required, before a person is appointed
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as a director on the board of AMC. An AMC cannot invest in its own schemes until it is
disclosed in the offer document. Moreover in such investments, AMC will not be eligible
for fees also. The appointment of an AMC can be terminated by the majority of trustees
or by 75 per cent of unit holders. Example: HDFC Asset Management Company Ltd. was
approved by SEBI vide its letter dated June 30, 2000 to act as an Asset Management
Company of the HDFC mutual fund. In terms of investment management agreement, the
trustee appointed this AMC. HDFC Holds 60 per cent of the capital and Standard Life
Investments holds remaining 40 per cent of the capital of the AMC. Its board has 12
members of whom 6 are independent.
Apart from three constituents discussed above, Custodians and transfer agents are another
two important constituents of mutual funds. These have been discussed below.
IV. CUSTODIAN
SEBI requires that each mutual fund shall have a custodian who is independent
and registered with it. SEBI regulations provide for the appointment of a custodian by
trustees of the mutual fund who are responsible for carrying on the activities of safe
keeping of securities and participating in any clearing system on behalf of mutual fund.
Custodian is not permitted to act as a custodian of more than one mutual fund without the
prior approval of SEBI. They should be independent of the sponsors. As for example,
ICICI Bank is a sponsor of ICICI Prudential Mutual fund. It is also a custodian bank. But
it cannot offer its services to ICICI Prudential Mutual fund, because it is a sponsor of this
fund.
The appointment of any agency as custodian depends upon its track record,
quality of services, experience, transparency, computerization and other infrastructure
facilities. Custodians primarily perform securities settlement functions. However, some
also offer fund accounting and valuation services. The responsibilities of custodian
include delivering and accepting securities and cash, to complete transactions made in the
investment portfolio of mutual funds. Custodians also track and keep pay outs and
corporate actions such as bonus, rights, offer for sale, buy back offers, dividends, interest
and redemption on the securities held by the fund. They also look after that the
discrepancies and failure must be timely resolved.
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Types of mutual funds
There are many different types of mutual funds categorized based on structure,
asset class and investment objectives. Choosing the right type of fund for your investment
needs will depend on your investment goal.
Types of Mutual Funds based on structure
Open-Ended Funds: These are funds in which units are open for purchase or
redemptionthrough the year. All purchases/redemption of these fund units are done at
prevailing NAVs. Basically these funds will allow investors to keep invest as long as they
want. There are no limits on how much can be invested in the fund. They also tend to be
actively managed which means that there is a fund manager who picks the places where
investments will be made. These funds also charge a fee which can be higher than
passively managed funds because of the active management. They are an ideal investment
for those who want investment along with liquidity because they are not bound to any
specific maturity periods. Which means that investors can withdraw their funds at any
time they want thus giving them the liquidity they need.
Close-Ended Funds: These are funds in which units can be purchased only during
theinitial offer period. Units can be redeemed at a specified maturity date. To provide for
liquidity, these schemes are often listed for trade on a stock exchange. Unlike open ended
mutual funds, once the units or stocks are bought, they cannot be sold back to the mutual
fund, instead they need to be sold through the stock market at the prevailing price of the
shares.
Interval Funds: These are funds that have the features of open-ended and close-
endedfunds in that they are opened for repurchase of shares at different intervals during
the fund tenure. The fund management company offers to repurchase units from existing
unit holders during these intervals. If unit holders wish to they can offload shares in
favour of the fund.
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Types of Mutual Funds based on asset class
Equity Funds: These are funds that invest in equity stocks/shares of companies.
Theseare considered high-risk funds but also tend to provide high returns. Equity funds
can include specialty funds like infrastructure, fast moving consumer goods and banking
to name a few.
Debt Funds: These are funds that invest in debt instruments e.g. company
debentures,government bonds and other fixed income assets. They are considered safe
investments and provide fixed returns. These funds do not deduct tax at source so if the
earning from the investment is more than Rs.10,000 then the investor is liable to pay the
tax on it himself.
Money Market Funds: These are funds that invest in liquid instruments e.g. T-Bills,
CPsetc. They are considered safe investments for those looking to park surplus funds for
immediate but moderate returns. Money markets are also referred to as cash markets and
come with risks in terms of interest risk, reinvestment risk and credit risks.
Balanced or Hybrid Funds: These are funds that invest in a mix of asset classes. Insome
cases, the proportion of equity is higher than debt while in others it is the other way
round. Risk and returns are balanced out this way. An example of a hybrid fund would be
Franklin India Balanced Fund-DP (G) because in this fund, 65% to 80% of the investment
is made in equities and the remaining 20% to 35% is invested in the debt market. This is
so because the debt markets offer a lower risk than the equity market.
Types of Mutual Funds based on investment objective
Growth funds: Under these schemes, money is invested primarily in equity stocks
withthe purpose of providing capital appreciation. They are considered to be risky funds
ideal for investors with a long-term investment timeline. Since they are risky funds they
are also ideal for those who are looking for higher returns on their investments.
Income funds: Under these schemes, money is invested primarily in fixed-

incomeinstruments e.g. bonds, debentures etc. with the purpose of providing capital
protection and regular income to investors.
Liquid funds: Under these schemes, money is invested primarily in short-term or

veryshort-term instruments e.g. T-Bills, CPs etc. with the purpose of providing liquidity.
They
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are considered to be low on risk with moderate returns and are ideal for investors with
short-term investment timelines.
Tax-Saving Funds (ELSS): These are funds that invest primarily in equity
shares.Investments made in these funds qualify for deductions under the Income Tax Act.
They are considered high on risk but also offer high returns if the fund performs well.
Capital Protection Funds: These are funds where funds are are split between
investmentin fixed income instruments and equity markets. This is done to ensure
protection of the principal that has been invested.
Fixed Maturity Funds: Fixed maturity funds are those in which the assets are invested
indebt and money market instruments where the maturity date is either the same as that of
the fund or earlier than it.
Pension Funds: Pension funds are mutual funds that are invested in with a really
longterm goal in mind. They are primarily meant to provide regular returns around the
time that the investor is ready to retire. The investments in such a fund may be split
between equities and debt markets where equities act as the risky part of the investment
providing higher return and debt markets balance the risk and provide lower but steady
returns. The returns from these funds can be taken in lump sums, as a pension or a
combination of the two.
Types of Mutual Funds based on specialty
Sector Funds: These are funds that invest in a particular sector of the market
e.g.Infrastructure funds invest only in those instruments or companies that relate to the
infrastructure sector. Returns are tied to the performance of the chosen sector. The risk
involved in these schemes depends on the nature of the sector.
Index Funds: These are funds that invest in instruments that represent a particular
indexon an exchange so as to mirror the movement and returns of the index e.g. buying
shares representative of the BSE Sensex.
Fund of funds: These are funds that invest in other mutual funds and returns depend
onthe performance of the target fund. These funds can also be referred to as multi
manager funds. These investments can be considered relatively safe because the funds
that investors invest in actually hold other funds under them thereby adjusting for risk
from any one fund.
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Emerging market funds: These are funds where investments are made in
developingcountries that show good prospects for the future. They do come with higher
risks as a result of the dynamic political and economic situations prevailing in the
country.
International funds: These are also known as foreign funds and offer investments
incompanies located in other parts of the world. These companies could also be located in
emerging economies. The only companies that won‟t be invested in will be those located
in the investor‟s own country.
Global funds: These are funds where the investment made by the fund can be in
acompany in any part of the world. They are different from international/foreign funds
because in global funds, investments can be made even the investor's own country.
Real estate funds: These are the funds that invest in companies that operate in the
realestate sectors. These funds can invest in realtors, builders, property management
companies and even in companies providing loans. The investment in the real estate can
be made at any stage, including projects that are in the planning phase, partially
completed and are actually completed.
Commodity focused stock funds: These funds don‟t invest directly in the commodities.
They invest in companies that are working in the commodities market, such as mining
companies or producers of commodities. These funds can, at times, perform the same
way the commodity is as a result of their association with their production.
Market neutral funds: The reason that these funds are called market neutral is that
theydon‟t invest in the markets directly. They invest in treasury bills, ETFs and securities
andtry to target a fixed and steady growth.
Inverse/leveraged funds: These are funds that operate unlike traditional mutual
funds.The earnings from these funds happen when the markets fall and when markets do
well these funds tend to go into loss. These are generally meant only for those who are
willing to incur massive losses but at the same time can provide huge returns as well, as a
result of the higher risk they carry.
Asset allocation funds: The asset allocation fund comes in two variants, the target
datefund and the target allocation funds. In these funds, the portfolio managers can adjust
the allocated assets to achieve results. These funds split the invested amounts and invest it
in various instruments like bonds and equity.
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Gift Funds: Gift funds are mutual funds where the funds are invested in
governmentsecurities for a long term. Since they are invested in government securities, they
are virtually risk free and can be the ideal investment to those who don‟t want to take risks.
Exchange traded funds: These are funds that are a mix of both open and close
endedmutual funds and are traded on the stock markets. These funds are not actively
managed, they are managed passively and can offer a lot of liquidity. As a result of their
being managed passively, they tend to have lower service charges (entry/exit load)
associated with them.
Types of Mutual Funds based on risk
Low risk: These are the mutual funds where the investments made are by those who
donot want to take a risk with their money. The investments in such cases are made in
places like the debt market and tend to be long term investments. As a result of them
being low risk, the returns on these investments are also low. One example of a low risk
fund would be gift funds where investments are made in government securities.
Medium risk: These are the investments that come with a medium amount of risk to
theinvestor. They are ideal for those who are willing to take some risk with the
investment and tend to offer higher returns. These funds can be used as an investment to
build wealth over a longer period of time.
High risk: These are those mutual funds that are ideal for those who are willing to
takehigher risks with their money and are looking to build their wealth. One example of
high risk funds would be inverse mutual funds. Even though the risks are high with these
funds, they also offer higher returns.
Advantages of mutual funds
If mutual funds are emerging as favourite investment vehicle, it is because of the many
advantages they have order over forms and the avenues of investing, particularly for the
investor who has limited resources available in terms of capital and the ability to carry out
detailed research and market monitoring. The following are the major advantages offered
by mutual funds to all investors:
Portfolio Diversification
Each investor in the fund is a part owner of all the fund‟s assets, thus enabling him to hold a diversified
investment portfolio even with a small amount of investment that
would otherwise require big capital.
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Professional management
Even if the investors have a big amount of capital available to them, they get the
benefits from the professional management skills brought in by the fund in the
management of the investor‟s portfolio. The investment management skills, along
with the needed research into available investment options, ensure a much better
return than what an investor can manage their own. Few investors have the skills and
resources of their own to succeed in today‟s fast moving, global and sophisticated
markets.
Reduction / Diversification of Risk

When an investor invest directly, all the risk of potential loss is his own, whether he
places a deposit with a bank or a company, or investor buys a share or debenture on
his own or in any other form. While investing in the pool of funds with investors, the
potential losses are also shared with other investors. The risk reduction is one of the
most important benefits of a collective investment vehicle like the mutual funds.
Reduction of Transaction Costs
What is true of risk as also true of transaction costs, the investor bears all the costs of
investing such as brokerage or custody of securities. When going through a fund,
investor has the benefit of economics of scale; the funds pay lesser costs because of
large volumes, a benefit passed on to its investors.
Liquidity
Often, investors hold shares or bonds they cannot directly, easily and quickly sell.
When they invest in the units of fund, they can generally cash their investments any
time, by selling their units to the fund if open-ended or selling them in the market if
the find is close-ended. Liquidity of investment is clearly a big benefit.
Convenience and Flexibility

Mutual fund management companies offer many investor services that a direct market
investor cannot get. Investors can easily transfer their holding from one scheme to the
other; get updated market information and so on.
Tax benefits
Any income distributed after March 31, 2002 will be subject to tax in the assessment of
all unit holders. However, as a measure of concession to unit holders of open-ended
equity-oriented funds, income distribution for the year ending March 31, 2003, will be
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taxed at a concessional rate of 10.5%. In case of individuals and Hindu Undivided
Families a deduction up to Rs. 9,000 from the Total Income will be admissible in
respect of income from investments specified in Section 80L, including income from
units of the mutual fund. Units of the schemes are not subject to Wealth – Tax and
Gift – Tax.
Choice of Schemes
Mutual funds offer a family of schemes to suit investors varying needs over a lifetime.
Well Regulated
All mutual funds are registered with SEBI and they function within the provisions of
strict regulations designed to protect the interests of investors. The operations of
mutual funds are regularly monitored by SEBI.
Transparency
Investor get regular information on the value of their investment in addition to disclosure
on the specific investments made by their scheme, the proportion invested in each class of
assets and the fund manager‟s investment strategy and outlook.
Disadvantages of investing through mutual funds
No Control over Costs

An investor in a mutual fund has no control of the overall costs of investing. The
investor pays investment management fees as long as he remains with the fund, albeit
in return for the professional management and research. Fees are payable even if the
value of his investment is declining. A mutual fund investor also pays fund
distribution costs, which he would not incur in direct investing. However, this
shortcoming only means that there is a cost to obtain the mutual fund services.
No Tailor – Made Portfolio

Investors who invest on their own can built their own portfolios of shares and bonds
and other securities. Investing through fund means investor delegates this decision to
the fund manager. They very-high-net-worth individuals or large corporate investors
may find this to be a constraint in achieving their objectives. However, most mutual
21
fund managers help investors overcome this constraint by offering families of funds –
a large number of different schemes – within their own management company. An
investor can choose from different investment plans and constructs a portfolio to his
choice.
Managing a Portfolio of Funds

Availability of a large number of funds can actually mean too much choice for the
investor. They may again need advice on how to select a fund to achieve his
objectives, quite similar to the situation when investor has individual shares or bonds
to select.
The Wisdom of Professional Management

That‟s right, this is not an advantage. The average mutual fund manager is no better at
picking stocks than the average nonprofessional, but charge fees.
No control
Unlike picking investors own individual stocks, a mutual fund puts them in the
passenger seat of somebody else‟s car.
Dilution
Mutual funds generally have such small holdings of so many different stocks that
insanely great performance by a fund‟s top holding still doesn‟t make much
adifference in a mutual fund‟s total performance.
Buried Costs
Many mutual funds specialize in burying their costs and in hiring salesmen who do
not make those costs clear to their clients.
22
PERFORMANCE MEASURES OF MUTUAL FUNDS
In order to determine the risk adjusted returns of investing portfolio, several eminent
authors have worked since 1960‟s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolio within a particular risk class. The most
important and widely used measures of performance of Mutual Funds are:
1 The Treynor‟s Measure
2 The Sharpe‟s Measure
3 The Jenson‟s Model
THE TREYNOR’s MEASURE:
It was developed by Jack Treynor. Treynor‟s Index is a ratio of return

generatedby the fund over and above risk free return (i.e. Government securities,
Treasury bills), during the given period of time and systematic risk associated with beta.
Rp- Rf
Treynor‟s Measure =
p
Where: Rp = represent the return of fund
Rf =represents the risk free rate
p = represent beta of funds
All risk-averse investors would like to maximize this value. While a high and positive
treynor‟s index shows a superior risk adjusted performance of fund, a low and negative
treynor‟s index is an indication of unfavourable performances.
THE SHARPE’s MEASURE:
In this model, performance of fund is evaluated on the basis of Sharpe ratio, which is
ratio of returns generated by the fund over and above risk free return and the total risk
associated with it. According to Sharpe it is the total disk of the fund that the investors are
concerned about. So, this model evaluates funds on the basis of reward per unit of total
risk
Portfolio average return – Risk free rate of return

Sharpe Measure =
Standard deviation of the portfolio return
23
Symbolically, it can be written as:
SM = RP - Rf
σp
Where:
Sp = Sharpe index
Rp = Portfolio average return
Rf = Risk free rate of return
σp = Standard deviation of the portfolio return
While a high and positive Sharpe ratio shows a superior risk adjusted performance of a
fund, a low and negative Sharpe ratio is an indication of unfavourable performance.
JENSEN’s MEASURE:
Jansen‟s model proposes another risk adjusted performance measure. Michael
Jenson developed this measure and is something referred as the differential return
method. This measure involves evaluation of returns that the fund has generated Vs. the
return actually out of the fund given at that level of systematic risk. The surplus between
the two returns in called Alpha, which measures the performance of a fund compared
with the actual returns over the period.
Required rate of return on fund at a given level of Beta can be calculated as:
JM=Rp-[Rf+ (Rm-Rf)
Where:
JM=Jensen Measure
Rp=average return of portfolio P
Rf=average return on a risk free investment
Rm= average market return during the given period.
24
RETURN:
Return on a typical investment consists of two components. The basic is the
periodic cash receipts (or income) on the investment, either in the form of interest or
dividends. The second component is the change in the price of the assets-commonly
called the capital gain or loss. This element of return is the difference between the
purchase price and the price at which the assets can be or is sold; therefore, it can be again
or a loss.
The return has been calculated as under:

Return (Rp):
R= C+ (PE-PB)
PB
Where,
R= Total return over the period
C=cash payment received during the period
PE =Ending price of the investment

PB =Beginning price
Market Index.t – Market Index.t-1

Market return: Rmt =
Market Index.t-1
Where Rmt is the difference between market indices of two consecutive month dividend
by the market index for the preceding month
BETA:
Beta measures the systematic risk and shows how prices of securities respond to
the market forces. It is calculated by relating the return on a security with return for the
market. By convention, market will have beta 1.0.Mutual fund is said to be volatile, more
volatile or less volatile. If beta is greater than 1 the stock is said to be riskier than market.
If beta is less than 1, the indication is that stock is less risky in comparison to market. If
beta is zero then the
25
Risk is the same as that of the market. Negative beta is rare.
βi= σiM/ M
Where,
βi = beta of the i stock
σiM = co-variance between the return on stock I and the return on the market
portfolio.M = variance of the return on market portfolio.
Beta describes the relationship between the stock‟s return and the index returns.
Itdescribes the risk in the portfolio with comparing market risk as 1.
If beta =1
One per cent changes in market index return causes exactly one per cent change in the
stock returns. it indicates that the stock moves in tandem with the market .
If Beta <1 (Then the stock is less volatile compared to the market.)
If Beta >1 (Then the stock is more volatile compared to the market. The stock
value) With more than 1 beta value is considered to be risky.
IfBeta –ve: negative Beta indicates that the stock returns moves in the opposite direction
to the market return.
STANDARD DEVIATION:
It is used to measure the variation in individual returns from the average expected
returns over a certain period. Standard deviation is used in the concept of risk of a
portfolio of investments. Higher standard deviation means a greater fluctuation in
expected return.
Standard deviation (σ) =√
Where σ2 = variance
𝜎2 = √∑(𝑥 − 𝑋)2 /𝑛
26
CHAPTER-III
ANALYSIS OF DATA
2
7
ANALYSIS AND INTERPRETATION OF DATA
The lists of sample schemes selected for the study are as follows:
Name of the mutual

Gold ETF Debt Income
fund company
UTI Gold Exchange UTI Banking & PSU

Traded Fund Debt Fund - Direct Plan
UTI
(G)
HDFC High Interest

HDFC Gold Exchange
HDFC Fund - Dynamic Plan -
Traded Fund
Direct Plan (G)
ICICI Prudential Gold ICICI Prudential

Exchange Traded Fund
ICICI Dynamic Bond - Direct
Ltd.
Plan (G)
Aditya Birla Sun Life Aditya Birla Sun Life

Gold Exchange Traded
Birla Sun Life Dynamic Bond Fund -
Fund
Direct Plan (G)
SBI Dynamic Bond

SBI SBI - ETF Gold
Fund - Direct Plan (G)
GOLD ETF
a. UTI GOLD ETF
Investment Objective
The principal investment objective of the scheme is to invest in physical gold

and endeavour to achieve return equivalent to physical gold price.
Scheme details
28
Fund Type Open-Ended
Investment Plan Dividend
Launch date Mar 12, 2007
Benchmark Price of Gold
Asset Size (Rscr) 367.55 (Dec-31-2017)
Minimum Investment Rs.20,000
b. HDFC GOLD EXCHANGE TRADED FUND
The investment objective of the Scheme is to generate returns that are in line with the
performance of gold, subject to tracking errors.
Scheme details
Launch date Jul 23, 2010
Minimum Investment Rs.1
c. ICICI PRUDENTIAL GOLD IWIN ETF
ICICI Prudential Gold Exchange Traded Fund, is an open-ended Exchange Traded Fund.
The investment objective of the scheme is to provide investment returns that, before
expenses, closely track the performance of domestic prices of Gold
29
Scheme details
Launch date Jul 27, 2010
Asset size (Rscr) 101.00( Dec-31-2017)
Minimum Investment Rs. 5000
Aditya Birla Sun Life Gold Exchange Traded Fund

Generate returns that are in line with the performance of gold, subject to tracking errors.
Scheme details
Launch date May 09, 2011
Asset Size (Rscr)

71.17 (Dec-31-2017)
30
d. SBI - ETF Gold
The investment objective of the fund is to seek to provide returns that closely correspond
to returns provided by price of gold through investment in physical Gold. However the
performance of the scheme may differ from that of the underlying asset due to tracking
error.
Scheme details
Investment Plan Growth
Launch date Apr 28, 2009
31
DEBT FUND
UTI Banking& PSU Debt Fund - Direct Plan (G)
To generate optimal returns while maintaining liquidity through active management of a

portfolio of debt and money market instruments.
Scheme details
Launch date Jan 30, 2014
Benchmark CRISIL Composite Bond Fund
Asset Size (Rscr) 1,020.47 (Dec-31-2017)
HDFC HIGH INTEREST FUND - DYNAMIC PLAN - DIRECT PLAN (G)
To generate income by investing in a range of debt and money market instruments of

various maturity dates with a view to maximise income while maintaining the optimum
balance of yield, safety and liquidity.
32
Scheme details
ICICI PRUDENTIAL DYNAMIC BOND - DIRECT PLAN (G)
To generate optimal returns while maintaining liquidity through active management of a

portfolio of debt.
Scheme details
Benchmark CRISIL Short Term Bond Fund
Asset Size (Rscssr) 419.91 (Dec-31-2017)
33
Aditya Birla Sun Life Dynamic Bond Fund - Direct Plan (G)
Liquidity through active management of the portfolio by investing in high quality debt
and money market An Open-ended income scheme with the objective to generate optimal
returns with high instruments.
Scheme details
a. SBI DYNAMIC BOND FUND - DIRECT PLAN (G)
The investment objective will be to actively manage a portfolio of good quality debt as
well as Money Market Instruments so as to provide reasonable returns and liquidity to the
Unit holders. However there is no guarantee or assurance that the investment objective of
the scheme will be achieved. The scheme does not assure or guarantee any returns.
34
Scheme details
35
MARKET S&PBSE SENSEX
3.1 Table showing calculation of monthly and mean return of S&P BSE SENSEX
Month Open High Low Close Monthly Mean

Return Return
RM RM*
Apr-16 25301.7 26100.54 24523.2 25606.62 1.205136 1.241436
May-16 25565.44 26837.2 25057.93 26667.96 4.312547 1.241436
Jun-16 26684.46 27105.41 25911.33 26999.72 1.181436 1.241436
Jul-16 27064.33 28240.2 27034.14 28051.86 3.648822 1.241436
Aug-16 28083.08 28532.25 27627.97 28452.17 1.314278 1.241436
Sep-16 28459.09 29077.28 27716.78 27865.96 -2.08415 1.241436
Oct-16 27997.29 28477.65 27488.3 27941.51 -0.19923 1.241436
Nov-16 27966.18 28029.8 25717.93 26652.81 -4.69628 1.241436
Dec-16 26756.66 26803.76 25753.74 26626.46 -0.4866 1.241436
Jan-17 26711.15 27980.39 26447.06 27655.96 3.537139 1.241436
Feb-17 27669.08 29065.31 27590.1 28743.32 3.882457 1.241436
Mar-17 28849.04 29824.62 28716.21 29620.5 2.67413 1.241436
Total 14.89723
36
Calculation:
a) Monthly Return, RM= ((A-B)/B)*100
Where,
A=Closing value of the month
B=Opening value of the month
= (25606.62-25301.7)/25301.7 *100
= 14.89723
b) Mean Return, RM*= ∑(RM)/n

= 14.89723/12
= 1.241436
37
3
7
UNDER GOLD ETF
3.2Table showing calculation of standard deviation and beta of UTI Gold Exchange
Traded Fund
Monthly Market
Month/Year Return(X) Return(Y) x=(X-X*) y=(Y-Y*) x2 y2 Xy
3.37 1.21 3.50 0.02 12.26 0.00 0.07

Apr-16
-3.64 4.31 -3.64 4.31 13.22 18.58 -15.67

May-16
8.65 1.18 8.65 1.18 74.86 1.39 10.21

Jun-16
-0.41 3.65 -0.41 3.65 0.17 13.32 -1.48

Jul-16
-2.28 1.31 -2.28 1.31 5.19 1.72 -2.99

Aug-16
1.07 -2.08 1.07 -2.08 1.15 4.33 -2.23

Sep-16
-3.67 -0.2 -3.67 -0.2 13.49 0.04 0.73

Oct-16
-4.91 -4.7 -4.91 -4.7 24.06 22.09 23.05

Nov-16
-1.72 -0.49 -1.72 -0.49 2.95 0.24 0.84

Dec-16
3.20 3.54 3.33 3.54 11.06 12.53 11.77

Jan-17
2.15 3.88 1.57 3.88 2.47 15.05 6.10

Feb-17
-3.38 2.67 -3.89 2.67 15.11 7.13 -10.38

Mar-17
14.28 176.00
-1.56 96.42 20.03
Total
-0.13 1.19
Mean*
38
38
Calculation of Mean Return (Fund)
∑
X* =
= -0.12%
Calculation of Standard Deviation
=√∑( )
=√
=√
= 3.97%
Calculation of Mean Return (Market)

∑
Y* =
= 1.19%
=√∑(( )
=√
=√
=2.98%
39
3
9
Calculation of Beta ( )
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= -0.25
SHARPE’S PERFORMANCE INDEX
= (Assume Rf as 6.75%)
= -1.70145
= -1.865
TREYNOR’S PERFORMANCE INDEX
= 0.2328
40
40
=
= -0.0556
JENSEN’S PERFORMANCE MEASURE
= ( )
= -0.0012 – [0.0675+ (-0.25) (0.0119 - 0.0675)]
= -0.0687
41
4
1
3.3Table showing calculation of Standard Deviation and beta ofHDFC Gold
Exchange Traded Fund
Monthly Market x=(X-

Month/Year Return(X) Return(Y) X*) y=(Y-Y*) x2 y2 xy
3.33 1.21 3.68 0.02 13.55 0 0.07

Apr-16
-3.64 4.31 -3.64 4.31 13.27 18.58 -15.70

May-16
8.58 1.18 8.58 1.18 73.66 1.39 10.13

Jun-16
-0.44 3.65 -0.44 3.65 0.19 13.32 -1.59

Jul-16
-2.02 1.31 -2.02 1.31 4.09 1.72 -2.65

Aug-16
-1.74 -2.08 -1.74 -2.08 3.04 4.33 3.62

Sep-16
-3.66 -0.2 -3.66 -0.2 13.38 0.04 0.73

Oct-16
-4.89 -4.7 -4.89 -4.7 23.88 22.09 22.97

Nov-16
-1.74 -0.49 -1.74 -0.49 3.04 0.24 0.85

Dec-16
3.27 3.54 3.63 3.54 13.15 12.53 12.84

Jan-17
2.11 3.88 2.65 3.88 7.01 15.05 10.28

Feb-17
-3.40 2.67 -2.83 2.67 8.02 7.13 -7.56

Mar-17
176.28 34.00
-4.23 14.28 96.42
Total
-0.35 1.19
Mean*
42
42
∑
X* =
= 0.35%
=√∑( )
=√
=√
= 3.98%

∑
Y* =
= 1.19%
=√∑(( )
=√
=√
= 2.96%
43
4
3
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= -0.302
= -1.6899
= -2.2685
= -0.2196
44
4
4
=
= -0.0556
= ( )
= 0.00352 – [0.0675 + (0.302) (0.0119 - 0.0675)]
= -0.0471
45
4
5
3.4 Table showing calculation of Standard Deviation and beta ofICICI Prudential
Gold iWIN ETF
Monthly Market
Month/Year x=(X-X*) y=(Y-Y*) x2 y2 xy
Return(X) Return(Y)
Apr-16 4.76 1.21 12.94 0.02 167.51 0.00 0.26
May-16 -2.18 4.31 -2.18 4.31 4.76 18.58 -9.40
Jun-16 -89.14 1.18 -89.14 1.18 7946.77 1.39 -105.19
Jul-16 -0.42 3.65 -0.42 3.65 0.18 13.32 -1.54
Aug-16 -2.28 1.31 -2.28 1.31 5.20 1.72 -2.99
Sep-16 -0.41 -2.08 -0.41 -2.08 0.17 4.33 0.85
Oct-16 -3.67 -0.2 -3.67 -0.2 13.44 0.04 0.73
Nov-16 -5.07 -4.7 3.12 -4.7 9.73 22.09 -14.66
Dec-16 -1.73 -0.49 -2.52 -0.49 6.33 0.24 1.23
Jan-17 3.17 3.54 2.64 3.54 6.95 12.53 9.33
Feb-17 2.11 3.88 1.27 3.88 1.61 15.05 4.93
Mar-17 -3.37 2.67 -5.29 2.67 27.97 7.13 -14.12
8190.60 -130.57
Total -98.23 14.28 96.42
-8.19 1.19
Mean*
46
46
∑
X* =
= -8.18%
=√∑( )
=√
=√
= 27.29%

∑
Y* =
= 1.19%
=√∑(( )
=√
=√
=2.96%
47
4
7
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= -0.85
= -0.3292
= -2.2685
= 0.1757
48
4
8
=
= -0.0556
= ( )
= -0.08186– [0.0675 + (-0.85) (0.0119 - 0.0675)]
= -0.19662
49
4
9
3.5 Table showing calculation of Standard Deviation and beta ofAditya Birla Gold
ETF
Monthly Market
Return(X) Return(Y)
Apr-16 3.37 1.21 3.5 0.02 12.25 0.00 0.07
May-16 -3.64 4.31 -3.64 4.31 13.22 18.58 -15.67
Jun-16 8.65 1.18 8.65 1.18 74.86 1.39 10.21
Jul-16 -0.41 3.65 -0.41 3.65 0.17 13.32 -1.48
Aug-16 -2.28 1.31 -2.28 1.31 5.19 1.72 -2.99
Sep-16 1.07 -2.08 1.07 -2.08 1.15 4.33 -2.23
Oct-16 -3.67 -0.2 -3.67 -0.2 13.49 0.04 0.73
Nov-16 -4.91 -4.7 -4.91 -4.7 24.06 22.09 23.05
Dec-16 -1.72 -0.49 -1.72 -0.49 2.95 0.24 0.84
Jan-17 3.22 3.54 3.22 3.54 10.39 12.53 11.41
Feb-17 2.15 3.88 2.15 3.88 4.63 15.05 8.35
Mar-17 -3.38 2.67 -3.38 2.67 11.44 7.13 -9.03
14.28 173.8 96.4200

Total -1.53 23.26
-0.13 1.19
Mean*
50
50
∑
X* =
= -0.29%
=√∑( )
=√
=√
= 3.98%

∑
Y* =
= 1.19%
=√∑(( )
=√
=√
= 2.96%
51
5
1
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= 0.279
= -1.623
= -0.0187
= -0.239
52
5
2
=
= -0.0556
= ( )
= 0.0029 – [0.0675 + (0.279) (0.0119 - 0.0675)]
= -0.04909
53
5
3
3.6 Table showing calculation of Standard Deviation and beta ofSBI - ETF Gold
Monthly Market
Return(X) Return(Y)
Apr-16 3.34 1.21 3.62 0.02 13.13 0 0.07
May-16 -3.64 4.31 -3.64 4.31 13.23 18.58 -15.68
Jun-16 8.60 1.18 8.60 1.18 73.92 1.39 10.14
Jul-16 -0.43 3.65 -0.43 3.65 0.18 13.32 -1.57
Aug-16 -2.29 1.31 -2.29 1.31 5.24 1.72 -3.00
Sep-16 -0.41 -2.08 -0.41 -2.08 0.17 4.33 0.86
Oct-16 -3.67 -0.2 -3.39 -0.2 11.47 0.04 0.68
Nov-16 -5.09 -4.7 -5.76 -4.7 33.23 22.09 27.09
Dec-16 -1.75 -0.49 -2.40 -0.49 5.74 0.24 1.17
Jan-17 3.18 3.54 2.55 3.54 6.53 12.53 9.04
Feb-17 2.12 3.88 1.38 3.88 1.91 15.05 5.36
Mar-17 -3.40 2.67 -3.99 2.67 15.92 7.13 -10.65
180.66 96.42
Total -3.44 14.28 23.52
-0.29 1.19
Mean*
54
54
∑
X* =
= 0.93%
=√∑( )
=√
=√
= 5.38%

∑
Y* =
= -0.88%
=√∑(( )
=√
=√
= 4.57%
55
5
5
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= -0.8
= -1.0818
= -1.6696
= 0.0728
56
5
6
=
= -0.0763
= ( )
= 0.0093 – [0.0675 + (-0.8) (-0.0088 - 0.0675)]
= -0.1192
57
5
7
UNDER DEBT FUND
3.7 Table showing calculation of standard deviation and beta of UTIDebt Fund -
Direct Plan (Growth)
Monthly Market
Return(X) Return(Y)
Apr-16 0.58 1.21 -0.19 0.02 0.04 0 0.00
May-16 0.51 4.31 0.51 4.31 0.26 18.58 2.18
Jun-16 0.76 1.18 0.76 1.18 0.58 1.39 0.90
Jul-16 1.61 3.65 1.61 3.65 2.60 13.32 5.89
Aug-16 0.55 1.31 0.55 1.31 0.31 1.72 0.73
Sep-16 1.24 -2.08 1.24 -2.08 1.53 4.33 -2.57
Oct-16 0.52 -0.2 0.52 -0.2 0.27 0.04 -0.10
Nov-16 2.21 -4.7 2.21 -4.7 4.91 22.09 -10.41
Dec-16 -0.06 -0.49 -0.06 -0.49 0.00 0.24 0.03
Jan-17 0.60 3.54 0.60 3.54 0.37 12.53 2.14
Feb-17 0.01 3.88 0.01 3.88 0.00 15.05 0.04
Mar-17 0.69 2.67 0.69 2.67 0.47 7.13 1.83
14.28 11.33 96.42 0.65

Total 9.22
0.77 1.19
Mean*
58
58
∑
X* =
= 0.768%
=√∑( )
=√
=√
= 1.014%

∑
Y* =
= -1.19%
=√∑(( )
=√
=√
= 2.96%
59
5
9
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= 0.006
= -5.899
= -11.24
= -0.5636
60
6
0
=
= -0.0561
= ( )
= 0.00768-[(0.0675)+(0.006)+(0.0114-0.0675)]
= 3.3061
61
6
1
3.8 Table showing calculation of Standard Deviation and beta ofHDFC High
Interest Fund - Dynamic Plan (Growth)
Monthly Market
Return(X) Return(Y)
Apr-16 3.33 1.21 3.68 0.02 13.55 0 0.07
May-16 -3.64 4.31 -3.64 4.31 13.27 18.58 -15.70
Jun-16 8.58 1.18 8.58 1.18 73.66 1.39 10.13
Jul-16 -0.44 3.65 -0.44 3.65 0.19 13.32 -1.59
Aug-16 -2.02 1.31 -2.02 1.31 4.09 1.72 -2.65
Sep-16 -1.74 -2.08 -1.74 -2.08 3.04 4.33 3.62
Oct-16 -3.66 -0.2 -3.66 -0.2 13.38 0.04 0.73
Nov-16 -4.89 -4.7 -4.89 -4.7 23.88 22.09 22.97
Dec-16 -1.74 -0.49 -1.74 -0.49 3.04 0.24 0.85
Jan-17 3.27 3.54 3.63 3.54 13.15 12.53 12.84
Feb-17 2.11 3.88 2.65 3.88 7.01 15.05 10.28
Mar-17 -3.40 2.67 -2.83 2.67 8.02 7.13 -7.56
14.28 176.28 96.42 34.00

Total -4.23
-0.35 1.19
Mean*
62
62
∑
X* =
= -0.5575%
=√∑( )
=√
=√
= 1.002%

∑
Y* =
= 1.19%
=√∑(( )
=√
=√
= 2.96%
63
6
3
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= 0.016
= -7.2859
= -2.268
= -0.073
64
6
4
=
= -0.0556
= ( )
= 0.0055– [0.0675 + (0.016) (-0.0088 - 0.0675)]
= 8.823
65
6
5
3.9 Table showing calculation of Standard Deviation and beta ofICICI Prudential
Dynamic Bond - Direct Plan (Growth)
Monthly Market
Month/Year Return(X) Return(Y) x=(X-X*) y=(Y-Y*) x2 y2 xy
Apr-16 0.79 1.21 -0.01 0.02 0.00 0.00 0.00
May-16 0.54 4.31 0.54 4.31 0.29 18.58 2.31
Jun-16 0.84 1.18 0.84 1.18 0.70 1.39 0.99
Jul-16 1.91 3.65 1.91 3.65 3.67 13.32 6.99
Aug-16 0.91 1.31 0.91 1.31 0.83 1.72 1.19
Sep-16 1.52 -2.08 1.52 -2.08 2.30 4.33 -3.16
Oct-16 0.45 -0.2 0.45 -0.2 0.20 0.04 -0.09
Nov-16 2.85 -4.7 2.85 -4.7 8.10 22.09 -13.38
Dec-16 -0.98 -0.49 -0.98 -0.49 0.95 0.24 0.48
Jan-17 0.49 3.54 0.49 3.54 0.24 12.53 1.75
Feb-17 -0.93 3.88 -0.93 3.88 0.86 15.05 -3.59
Mar-17 1.14 2.67 1.14 2.67 1.29 7.13 3.03

14.28 19.44 96.42 -3.47
Total 9.53
0.79 1.19
Mean*
66
66
∑
X* =
= 0.79%
=√∑( )
=√
=√
= 1.32%

∑
Y* =
= 1.19%
=√∑(( )
=√
=√
= 2.96%
67
6
7
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= -0.035
= -4.515
= -2.268
= -1.7028
68
6
8
=
= -0.0556
= ( )
= 0.0079 – [0.0675 + (0.035) (0.0119 - 0.0675)]
= -2.0056
69
6
9
3.10 Table showing calculation of Standard Deviation and betaof Aditya Birla Sun
Life Dynamic Bond Fund - Direct Plan (Growth)
Monthly Market x=(X- y=(Y-

Month/Year x2 y2 xy
Return(X) Return(Y) X*) Y*)
Apr-16 1.06 1.21 0.26 0.02 0.07 0.00 0.01
May-16 0.35 4.31 0.35 4.31 0.12 18.58 1.51
Jun-16 1.20 1.18 1.20 1.18 1.45 1.39 1.42
Jul-16 3.03 3.65 3.03 3.65 9.17 13.32 11.06
Aug-16 1.23 1.31 1.23 1.31 1.50 1.72 1.61
Sep-16 1.72 -2.08 1.72 -2.08 2.96 4.33 -3.58
Oct-16 0.17 -0.2 0.17 -0.2 0.03 0.04 -0.03
Nov-16 4.77 -4.7 4.77 -4.7 22.73 22.09 -22.41
Dec-16 -2.54 -0.49 -2.54 -0.49 6.43 0.24 1.24
Jan-17 -0.26 3.54 -0.26 3.54 0.07 12.53 -0.93
Feb-17 -3.01 3.88 -3.01 3.88 9.09 15.05 -11.70
Mar-17 1.91 2.67 1.91 2.67 3.64 7.13 5.10
14.28 57.26 96.42 -16.71

Total 9.62
0.80 1.19
Mean*
70
70
∑
X* =
= 0.80%
=√∑( )
=√
=√
= 2.28%

∑
Y* =
= 1.19%
=√∑(( )
=√
=√
= 2.96%
71
7
1
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= 0.593
= -2.6096
= -1.878
= -0.1003
72
7
2
=
= -0.0556
= ( )
= 0.088 – [0.0675 + (0.593) (0.0119 - 0.0675)]
= -0.0039
73
7
3
3.11 Table showing calculation of Standard Deviation and beta ofSBI Dynamic Bond
Fund - DIRECT PLAN – Growth
Monthly Market
Return(X) Return(Y)
Apr-16 0.68 1.21 0.07 0.02 0.00 0 0.00
May-16 0.65 4.31 0.65 4.31 0.42 18.58 2.81
Jun-16 0.63 1.18 0.63 1.18 0.39 1.39 0.74
Jul-16 0.74 3.65 0.74 3.65 0.55 13.32 2.70
Aug-16 0.59 1.31 0.59 1.31 0.34 1.72 0.77
Sep-16 0.64 -2.08 0.64 -2.08 0.41 4.33 -1.34
Oct-16 0.48 -0.2 0.48 -0.2 0.23 0.04 -0.10
Nov-16 0.54 -4.7 0.54 -4.7 0.29 22.09 -2.52
Dec-16 0.51 -0.49 0.51 -0.49 0.26 0.24 -0.25
Jan-17 0.54 3.54 0.54 3.54 0.29 12.53 1.90
Feb-17 0.57 3.88 0.57 3.88 0.32 15.05 2.20
Mar-17 0.78 2.67 0.78 2.67 0.60 2.07
14.28 4.12 96.42 8.97

Total 7.33
0.61 1.19
Mean*
74
74
∑
X* =
= 0.61%
=√∑( )
=√
=√
= 0.61%

∑
Y* =
= -0.1.19%
=√∑(( )
=√
=√
= 2.96%
75
7
5
( )
Beta ( ) =
( )
=
∑( )( )
=
∑( )
= 0.093
= -10.06
= -1.878
= 0.06602
76
7
6
=
= -0.0556
= ( )
= 0.0061 – [0.0675 + (0.093) (0.0119 - 0.0675)]
= 5.1769
77
7
7
3.12 Ranking of Gold Fund based on Sharpe, Treynor and Jensen Measure
Mutual Fund Sharpe

Treynor Jensen
SN Company & Measure Ranking Ranking Ranking
Measure Measure
Market
1. -2.250 2 0.662 2 0.0728 2

UTI
2.
HDFC -2.273 3 0.189 4 0.0872 5
3. -2.919 5 0.830 1 0.0705 1

ICICI
4. -2.667 4 -0.538 5 0.0749 3

Aditya Birla
5. -2.130 1 0.582 3 0.0764 4

SBI
Looking at the above table we can rank the fund as below
Sharpe Measure SBI Mutual fund
Treynor Measure ICICI Mutual fund
Jensen Measure ICICI Mutual fund
78
78
3.13 Ranking of Debt Fund based on Sharpe, Treynor and Jensen Measure
Mutual Fund
Sharpe Treynor Jensen
SN Company & Ranking Ranking Ranking
Measure Measure Measure
Market
1. UTI -7.659 3 -2.717 5 0.0669 3
2. HDFC -2.129 1 0.372 3 0.0077 1
3. ICICI -8.220 4 -2.704 4 0.0640 2
4. Aditya Birla -33.804 5 3.224 1 0.0712 4
5. SBI -5.131 2 0.5395 2 0.0766 5
Looking at the table above we can rank the fund as below
Sharpe Measure HDFC Mutual fund
Treynor Measure Aditya Birla Mutual fund
Jensen Measure HDFC Mutual fund
79
79
3.14 Table showing the best performing mutual fund based on Sharpe, Treynor and
Jensen Measure
BASIS GOLD ETF DEBT FUND
SHARPE SBI HDFC
TREYNOR ICICI Aditya Birla
JENSEN ICICI HDFC
According to Sharpe measure, SBI mutual fund and HDFC mutual fund rank first
position in GOLD ETF and Debt Fund respectively.
According to Treynor measure, ICICI mutual fund and Aditya Birla mutual fund
rank first position in GOLD ETF and Debt Fund respectively.
According to Jensen measure, ICICI mutual fund and HDFC mutual fund rank first
position in GOLD ETF and Debt Fund respectively
80
80
CHAPTER-IV
SUMMARY OF FINDINGS
81
8
1
Summary of the findings
The project is done on five mutual fund companies with two different schemes i.e. Gold
ETF and Debt Income for the period of one year from April 2016 to March 2017.
Following are the summary of the findings
GOLD ETF DEBT FUND

Market and
Mutual Fund
Return% SD% Beta Return% SD% Beta
BSE SENSEX 1.0775 2.71 1 1.0775 2.71 1
UTI 0.311 2.974 -0.094 0.152 0.894 0.025
HDFC 0.360 2.921 0.352 0.346 3.124 -0.180
ICICI 0.420 2.254 -0.079 0.455 0.796 0.024
Aditya Birla -0.317 2.743 0.137 -0.002 0.207 -0.0217
SBI 0.068 3.252 -0.120 0.093 1.346 0.128
GOLD ETF
The beta of the mutual fund is negative which refers that it is going on opposite direction
of the market. Since market is giving positive return, gold mutual funds are able to get
low return than market return. The market return are able to earn the positive returns even
when mutual funds not going good. Market return is able to earn high return 1.0775%
with volatility of the 2.71%. Similarly, SBI has higher volatility of 3.252% with the
return of 0.068%. Also the beta of the gold ETF fund is similar to 1.0775.
82
82
DEBT FUND
The beta of the debt fund is closer to zero which represents the less impact on fund from
market. The return of the debt fund is positive even though the Aditya Birla has negative
return. HDFC has higher return of the 3.124% while it has lower volatility of 2.28%.
Sharpe’s measure evaluates the total risk of the fund. This shows the investors the
reward per units of total risk. Hence, according to Sharpe’s measure SBI mutual fund
ranks first.
Rest of the rankings is as follows:-
UTI Ranks Second

HDFC Ranks Third
Aditya Birla Ranks Fourth
ICICI Ranks Fifth
For debt ETF the rankings is as follows:
HDFC Ranks First

SBI Ranks Second
UTI Ranks Third
ICICI Ranks Fourth
Aditya Birla Ranks Fifth
According to Treynor’s Method, risk averse investors will find investing in ICICI
mutual fund as it has the least risk hence it ranks first under Treynor’s method.
Rest of the ranking is as follows
UTI Ranks Second

SBI Ranks Third
HDFC Ranks Fourth
Aditya Birla Ranks Fifth
Aditya Birla Ranks First

SBI Ranks Second
HDFC Ranks Third
83
ICICI Ranks Fourth
UTI Ranks Fifth
Jensen’s measures is used to find differences between the return the fund as generated vs
the return actually out of the fund given at that level of systematic risk. According to
Jensen’s measures ICICI Rank’s first
Rest of the rankings is as follows
UTI Ranks Second

Aditya Birla Ranks Third
SBI Ranks Fourth
HDFC Ranks Fifth
HDFC Ranks First

ICICI Ranks Second
UTI Birla Ranks Third
Aditya Birla Ranks Fourth
SBI Ranks Fifth
Finally we can summarise the following things:
Market is earning higher positive return whereas the mutual fund is earning
minimal and negative return.
The positive beta shows the mutual fund takes action to make positive earnings.
None of the Mutual fund is aggressive in nature as all are defensive in nature.
Mutual Fund is better investment options than direct investment.
Mutual fund is able to adjust the beta according to the nature.
Various strategies of investment are used for the purpose of positive return.
.
84
84
CHAPTER-V
CONCLUSION AND SUGGESTIONS
85
85
CONCLUSION AND SUGGESTIONS
CONCLUSION
Mutual fund is the tool of indirect investing in the secondary market through use of expert
knowledge and skills to understand the market and beat it. The one can invest in mutual
fund and gain from the investment made.
From the findings it can be concluded that:
In GOLD ETF, the market is beating the mutual funds as all has negative return while
mutual funds was having negative return. So mutual fund is not-able to outperform than
the market. The beta of the fund was negative to outperform the market and defensive in
nature. ICICI has higher return of 0.42% and Aditya Birla has lowest return of -0.317%.
Similarly SBI has highest volatility of 3.252% and ICICI has lowest volatility of 2.254 %.
Most of the beta is near to 0.10 and able to get positive value from the investment. So the
GOLD ETF outperforms the market.
In DEBT FUND, the Mutual funds were earning positive nominal return whereas market
also giving positive outcomes. The beta of the fund is positive near to zero still make
some return. SBI has the higher beta of the 0.128 and Aditya Birla has lowest beta of
-0.0217.ICICI has the higher return of 0.455% and Aditya Birla has lowest return of
- 0.002%. The entire fund outperforms the market.
86
86
Finally we can conclude that Marker outperform the Mutual Fund in this case .
SUGGESTIONS
i. The Companies should widely spread awareness about their mutual spread
awareness about their mutual funds to the investors as the market returns are more
than mutual fund returns
ii. The Companies should give the details to their investors about different types
of mutual funds available.
iii. It properly approached to the investment is gained mutual fund can outperform the
market and can earn the higher returns the market return.
iv. Information regarding the holding period must be clear, because investment will
analyse based on it ,before investment.
v. For higher return investor can invest in diversified funds for tax saving invest
in ELSS equity funds for moderate risk and return invest balance funds, for
assurance in return on investment in debt and liquid funds.
vi. As per one opinion invester should invest around 30% mutual fund.
87
87
BIBLIOGRAPHY
88
8
8
BIBLIOGRAPHY
Books Referred
Financial Market and Services. By Gordon, Natrarajan
Risk Management. By Koteshwar
Economic Times Newspaper
Investment Analysis and Management. By Charles P. Jones
Internet Resources
http://www.bluechipindia.com
http://www.bseindia.com
http://www.moneycontrol.com
http://www.milshanep.com
http://www.moneyguideindia.com
http://www.amfiindia.com
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89
90
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91

Introduction To Mutual Fund

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Introduction To Mutual Fund

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Chapter I

Investment can be defined as an item of value purchased for income or capital

Financial assets are securities, which are certificates embodying a financial

Money market instruments: These include short-term debt instruments such as

To compare the performance of the selected funds vies-a-vies the benchmark

METHODOLOGY OF THE STUDY

LIMITATION OF THE STUDY

The time constraint is one of the major problems.

CONCEPT OF MUTUAL FUNDS

MEANING AND DEFINITION:

HISTORY OF MUTUAL FUNDS IN INDIA

Phase I: Establishment and Growth of UTI-1964-87:

Phase III. Emergence of Private Sector Funds – 1993-96:

Private funds introduced innovative products, investment techniques and investor-

Phase IV. Growth and SEBI Regulation – 1996-2004

• UTI was re-organized into two parts:

Figure no.1 Growth in Asset Under Management

Phase V. Growth and Consolidation – 2004 Onwards:

Figure no.2 Work Flow of Mutual Fund Industry

ORGANIZATION OF A MUTUAL FUND

Figure no.3 Organization of a Mutual Fund

All mutual funds comprise of four constituents

Management Company. Sponsors are also free to get incorporated an AMC as

III. ASSET MANAGEMENT COMPANY (AMC)

AMC is involved in basically three activities as portfolio management, investment

Types of Mutual Funds based on structure

Types of Mutual Funds based on investment objective

Income funds: Under these schemes, money is invested primarily in fixed-

Liquid funds: Under these schemes, money is invested primarily in short-term or

Types of Mutual Funds based on specialty

in the investor‟s own country.

Types of Mutual Funds based on risk

Advantages of mutual funds

investment portfolio even with a small amount of investment that

would otherwise require big capital.

Reduction / Diversification of Risk

Reduction of Transaction Costs

Convenience and Flexibility

Disadvantages of investing through mutual funds

No Control over Costs

No Tailor – Made Portfolio

Managing a Portfolio of Funds

The Wisdom of Professional Management

THE TREYNOR’s MEASURE:

It was developed by Jack Treynor. Treynor‟s Index is a ratio of return

treynor‟s index is an indication of unfavourable performances.

THE SHARPE’s MEASURE:

Portfolio average return – Risk free rate of return

Rp=average return of portfolio P

Rf=average return on a risk free investment

Rm= average market return during the given period.

The return has been calculated as under:

PE =Ending price of the investment

Market Index.t – Market Index.t-1

βi = beta of the i stock

Standard deviation (σ) =√

Name of the mutual

UTI Gold Exchange UTI Banking & PSU

HDFC High Interest

ICICI Prudential Gold ICICI Prudential

Aditya Birla Sun Life Aditya Birla Sun Life

SBI Dynamic Bond

a. UTI GOLD ETF