SYNOPSIS

A study on

“PERFORMANCE EVALUATION OF MUTUAL FUNDS WITH

REFERENCE TO RISK AND RETURN”

Submitted in partial fulfillment of the requirements for the award of degree of

MASTERS OF BUSINESS ADMINISTRATION

Of
Bangalore University

Submitted by

Prakash .Yedida
Reg No: 09XHCMA029

Under the guidance of

Ms. ARUN MOZHI

MANGALA INSTITUTE OF MANAGEMENT STUDIES

Rajarajeshwari Nagar, Bangalore-560098

( 2009-2011 )
TITLE OF THE STUDY:

“Performance Evaluation of Mutual Funds With Reference To Risk and Return”

Introduction to Mutual Funds

What is a Mutual Fund?

Like most developed and developing countries the mutual fund cult has been
catching on in India. There are various reasons for this. Mutual funds make it easy and
less costly for investors to satisfy their need for capital growth, income and/or income
preservation.

In addition to this a mutual fund brings the benefits of diversification and money
management to the individual investor, providing an opportunity for financial success that
was once available only to a select few.

Understanding Mutual funds is easy as it's such a simple concept: a mutual fund is
a company that pools the money of many investors -- its shareholders -- to invest in a
variety of different securities. Investments may be in stocks, bonds, money market
securities or some combination of these. Those securities are professionally managed on
behalf of the shareholders, and each investor holds a pro rata share of the portfolio --
entitled to any profits when the securities are sold, but subject to any losses in value as
well.

For the individual investor, mutual funds provide the benefit of having someone
else manage your investments and diversify your money over many different securities
that may not be available or affordable to you otherwise. Today, minimum investment
requirements on many funds are low enough that even the smallest investor can get
started in mutual funds.
 A mutual fund, by its very nature, is diversified that is, its assets are invested in
many different securities. Beyond that, there are many different types of mutual funds
with different objectives and levels of growth potential, furthering your chances to
diversify.

STATEMENT OF PROBLEM:

Different investment avenues are available to investors like equities,

Debentures, Bank deposits, Insurance etc. mutual fund also offer good investment
opportunities to the investors like other investments, and they also carry certain risks.
While taking a decision on investing in the mutual funds investors should compare the
risks and expected yield after adjustments of tax on various instruments.

The study is being undertaken to know the awareness of the investors

regarding mutual funds and various associated aspects and the factors influencing the
funds or schemes selection behaviour of retail investors with special reference to risk and
return mutual funds.

PURPOSE OF THE STUDY:

The purpose of the study is to know the returns and the risk associated with the
Mutual Fund’s Equity Diversified schemes and to find out which best scheme to
recommend.

OBJECTIVES OF THE STUDY:

 To know the performance of Mutual Fund of different companies.

 To evaluate the returns and the risk associated with mutual funds.

To evaluate the investment performance of mutual funds with risk adjustment, by using
the theoretical parameters as suggested by William. Sharpe, Treynor and Jensen.]
SCOPE OF THE STUDY:

 The present study includes 4 years average returns of the mutual funds, which
have the total corpus (mass, quantity, amount,) value, of more than 10000 crores.

 For my study I have scanned all the mutual funds companies and have taken only
those schemes which are having the corpus value of more than 400 crores and age
of the fund is more than 3 years.

 This study covers only equity diversified schemes which are subject to more
fluctuating risks and returns.

 Since the number and nature of stocks, the proportion of stocks in the portfolio
and the relative ness of portfolio to the index considered, differs, the portfolios are
averaged at 0.5 for these factors for variance determination.

 To evaluate the performance of the Mutual Fund schemes, Sharpe’s index,

Treynor’s index and Jensen’s Alpha measures are applied.

LIMITATIONS OF THE STUDY:

Not single work is an exception to the limitations every work has got its
limitations. The data collection here in this project is strictly confined to the secondary
sources. No primary data was associated with the project. Collecting historical NAV is
very difficult. Selection of the schemes for the study is also a very difficult task because
of the wide variety of schemes. The results of the study are subjected to inconsistencies
arising out of the assumptions made to make the portfolios comparable viz., sample
selection procedure, portfolio proportion assumption etc.
RESEARCH DESIGN:

Primary Data:

Primary data will be collected from the Questionnaires and Interviews with the
employees of the banks.

Secondary Data:

Secondary data for the ratio analysis & interpretation was collected from journals,
bank’s prospectus, bank’s annual reports, bank’s Balance sheet, profit & loss statements
and the internet.

Tools for Analysis:

1. Fundamental Analysis
• Analysis of company
• Balance sheets

2. Ratio analysis

3. Portfolio performance analysis

• Sharper’s method
• Treynor’s method
• Jensen’s method
CHAPTER SCHEME :

1. INTRODUCTION : The study will equip the readers, who are not well versed
with the area, to understand the report

2. RESEARCH DESIGN: The report we provide a plan of the study that includes
statement of problem, need for the study, review of previous studies, scope of the
study, hypothesis, operational definition of concepts, methodology, and limitations
of the study and overview of the chapter scheme.

3. PROFILE OF THE COMPANY: The report will contain the complete profile of
the industry including history, nature of business, products and services.

4. ANALYSIS AND INTERPRETATION OF DATA: The Chapter will include

analysis and interpretation of the data and the information will provided by the
appropriate means of tables, graphs and charts were ever necessary followed by
the references.

5. SUMMARY OF FINDINGS AND CONCLUSIONS AND

RECOMMENDATIONS: The study will provide a summary of findings that
will complied from the inferences drawn through the analysis of data.

6. BIBLIOGRAPHY: Includes list of books, Journals, website and other sources.

7. ANNEXURE: This includes Questionnaires for the Survey.

Signature of Principal Signature of Student

Signature of Guide