CHAPTER - IV PERFORMANCE EVALUATION OF MUTUAL FUNDS

Transcription

1 CHAPTER - IV PERFORMANCE EVALUATION OF MUTUAL FUNDS

2 Chapter - IV PERFORMANCE EVALUATION OF MUTUAL FUNDS Mutual Fund is one of the most preferred investment alternatives for the small investors as it offers an opportunity to invest in a diversified and professionally managed portfolio at a relatively low cost. The largest category of mutual funds is the private sector and then the joint ventures with foreign asset management companies (like ICICI Prudential and BSL). Growth and developments of various mutual funds products in the Indian capital market has proved to be one of the most catalytic instruments in generating momentous investment growth in the capital market. In this context, close monitoring and evaluation of mutual funds has become essential. With emphasis on increase in domestic savings and improvement in deployment of investment through markets, the need and scope for mutual fund operation has increased tremendously. Thus, the involvement of mutual funds in the transformation of Indian economy has made it urgent to view their services not only as a financial intermediary but also as a pacesetter as they are playing a significant role in spreading equity culture. In this context, it becomes pertinent to study the performance of the Indian mutual fund industry and in particular the performance of the selected mutual fund schemes. The relation between risk and return determines the performance of a mutual fund scheme. As risk is commensurate with the return, providing maximum return on the investment made within the acceptable associated risk level helps in demarcating the better performers from the laggards. Past performance of mutual funds is one of the key influencing factors for investment decisions. Majority of the AMCs try to offer consistent/ 85

3 growth in returns to encourage investments in their company. Hence, thorough analysis of performance of mutual funds is essential which reflects the past performance and is helpful in picking the right type of fund under the various available schemes. This chapter includes 3 parts: Part 1 Performance appraisal of selected schemes. Part 2 - The performance evaluation selected equity growth funds Part 3 - Comparative analysis of equity and debt funds. Because of not having uniformity in the available data and launching of various schemes, the analysis of current study is carried out as following: Performance appraisal of selected schemes for the period (3 years) is presented in Chapter IV part 1. In Chapter IV part 2, the performance evaluation of selected equity growth funds for the period of 5 years ( ) of various categories (public sector, private sector, joint venture predominantly Indian and Joint venture predominantly foreign funds) is carried out for 16 funds offered by different AMCs. Under chapter IV Part 3, comparative analysis of equity and debt schemes for the period (10 years) is undertaken. The annualized returns from the year 2002 to 2012 are considered for carrying out analysis. As per SEBI report of March 2012, there are 1309 schemes under operation offered by different AMCs in India. These schemes include open ended, close ended and interval schemes. Out of these schemes308 schemes were launched after the year Hence these are excluded from the study. The remaining 1001 schemes were the total population of the study, out of which 41 per cent sample (406 schemes) is taken for the purpose of collection of the necessary data. 86

4 Chapter-IV PART - 1 PERFORMANCE APPRAISAL OF SELECTED SCHEMES This part covers performance appraisal of 18 selected schemes. The appraisal is done through analyzing the beta, CAGR, Sharpe, Treynor and Jensen values. The hypothesis high risk gives high returns is assumed and all the selected schemes in the sample and are analysed to find out the relationship between risk and return. In this connection, the null hypothesis high risk gives high returns is formulated.the acceptance or rejection of the null hypothesis is based on the CAGR and the beta values. The following types of schemes were selected for the study. 1. Balanced scheme 2. Equity scheme 3. Floating rate income scheme 4. Gilt long term scheme 5. Gilt short term scheme 6. Banking and financial services 7. Income scheme 8. Index scheme 9. Liquid scheme 10. MIP 11. Sector funds FMCG 12. Sector funds Infotech 13. Sector funds- Infrastructure 14. Sector funds-pharma 15. Sector funds - Power 16. Short term income scheme 17. Tax saving scheme 18. Ultra short term income scheme 87

5 4.1.1 Analysis of Balanced Fund This scheme seeks to generate capital appreciation with current income from a combined portfolio of equity and debt instruments. Under normal circumstances the scheme would take 60 per cent exposure to equity instruments while the balance would be allocated to debt instruments. The sample included 21 randomly selected growth funds offered by various AMCs operating in India. The table reveals the performance of the growth funds under the balanced scheme. The peer group CAGR for one year period was -2.40, whereas the average of two year period was 1.97 and three year period was This reveals that the performance of the funds for the period left the investors unhappy due to negative returns. The two year returns were positive but the AMCs could deliver only nominal returns. It is observed that the three year returns were satisfactory as the returns were above the benchmark rate of interest offered by risk free investments. Table indicated that the highest NAV Rs. 296 was recorded by BSL 95 Gr fund and its fund size was Rs crores whereas the highest fund size was recorded by HDFC prudence fund Gr fund with Rs crores. This indicates that the fund size alone does not influence the NAV; there are also other influencing factors for the Growth/decline of NAV. Negative returns for the year were recorded by 16 out of 21 Growth funds offered by different AMCs included in this particular scheme. The top performers for the one year period were ICICI, HDFC and Escorts funds when the annualized returns are observed. ICICI prudential balanced fund Gr has returned the highest CAGR of 4.41 per cent followed by HDFC with 3.83 per cent and the lowest per cent was recorded by principal retail equity funds savings fund for one year 88

6 period. The highest two year return was delivered by HDFC fund with 9.61 per cent CAGR followed by ICICI with 8.41 and HDFC Funds have returned 6.21 per cent CAGR. It is also noticed that for the two year period ( ),8 funds have shown negative returns whereas for the three year period the same funds have delivered positive returns. HDFC, TATA balanced and CANARA ROBECCO funds were the top performers for a three year period. It is shown from the data that a high of per cent was delivered by HDFC, by another HDFC fund and by Tata balanced fund. It is evident from the analysis that 11 schemes have shown high risk whose beta was greater than one. The highest beta was recorded by Escorts balanced fund growth with followed by Sundaram and Baroda mutual funds. The remaining 8 other funds have also shown beta greater than one. The risk and the return of some of the balanced scheme funds were moderate when compared with other schemes. There were also some funds which have shown high beta values and could only generate inconsistent moderate returns. The public sector mutual funds under this scheme performed at par with private sector funds when the returns were considered. The statistics as per the table reveals the risk adjusted return through Sharpe, Treynor and Jensen Values. The values recorded were negative for the funds which indicated that the funds have not provided risk adjusted returns. This shows that the funds if managed professionally with perfect market timing could have generated moderate returns. High risk gives high returns is not justified as the funds with high risk have not given high returns when compared to funds in the same scheme and also negative returns were recorded by some schemes which had high beta values. 89

7 Scheme Name NAV Table 4.1.1: Performance of Balanced Funds Fund Size (Rs.Cr) % Returns (CAGR) Std.dev R- Squared Beta Sharpe Treynor Jenson BSL 95 Gr Baroda Pioneer Balance Fund Gr DSPBRBalanced Fund Gr Escorts Opportunities Fund Gr Escorts Balanced Fund Gr CanaraRobeco Balance Gr HDFC Balanced Fund Gr Principal Retail Equity Savings Fund ING Balanced Fund Gr JM Balanced Gr Kotak Balance Gr FT India Balanced Fund Gr LIC Nomura Balanced - Plan C (Gr) ICICI Prudential Balanced Gr Reliance RSF - Balanced Gr SBI Magnum Balanced Fund Gr PRINCIPAL Balanced Fund Gr Sundaram Balanced Fund Gr Tata Balanced Fund Gr UTI Balanced Fund Gr HDFC Prudence Fund Gr , Peer Group Average Source: mutualfundsindia ICRA reports June

8 Table 4.1.2: Performance of Equity Funds Scheme Name NAV Fund % Returns (CAGR) Standard R- Beta Sharpe Treynor Jenson Size (Rs.Cr) Deviation Squared BNP Paribas Equity Fund G BNP Paribas Mid Cap Fund G AIG India Equity Fund - Reg G Axis Midcap Fund G N.A N.A IDFC Premier Equity Fund - Plan A G , IDFC Sterling Equity Fund - G , IDFC India GDP G Fund - G BSL India GenNext Fund G BSL Small & Midcap Fund G CanaraRobeco Equity Diversified G CanaraRobeco Emerging Equities G CanaraRobeco Large Cap+ Fund G N.A N.A DSPBRTop 100 Equity Fund G , DSPBRMicro Cap Fund - Reg G Edelweiss D.G.E Top 100 Fund - Plan A G N.A Edelweiss D.G.E Top 100 Fund - Plan B G N.A Edelweiss D.G.E Top 100 Fund - Plan C G N.A Continued 91

9 Edelweiss Absolute Return Fund G N.A Sahara Super 20 Fund G N.A HDFC Mid-Cap Opportunities Fund G , Tata Equity Opportunities Fund G Kotak Contra Fund G Kotak Emerging Equity Scheme G Franklin India Prima Fund G Religare Mid Cap Fund G Religare AGILE Fund - G Religare Mid N Small Cap Fund - G Mirae Asset Emerging Bluechip Fund G N.A N.A ICICI Prudential Top 100 Fund G ICICI Prudential Discovery Fund G , Quantum Long-Term Equity Fund G Reliance Equity Opportunities Fund G , SBI Magnum Global Fund 94 G SBI Magnum Sector Funds Umbrella - Emerg Buss Fund G Tata Dividend Yield Fund G Peer Group Average Source: mutualfundsindia.com 92

10 4.1.2 Analysis of Equity funds Table reveals the performance of selected equity funds. The aim of equity funds is to provide capital appreciation over the medium to longterm periods. Such schemes normally invest a major part of their corpus in equities which have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. The sample included growth funds under equity scheme which is presented in table The above referred table shows the performance of 35 funds under the equity scheme. The highest NAV was recorded by Goldman Sachs derivative fund G at Rs followed by Franklin prima fund G during the period of study. The highest fund size was Rs crores which has been recorded by Reliance Equity opportunities fund G followed by DSPBR fund. SBI mutual funds has given the highest annualized returns of per cent followed by BSL with 4.59 per cent and HDFC funds with 4.82 per cent CAGR for one year ( ) period. For the two year period the highest return was offered by SBI, BSL and HDFC mutual funds with 13.19, 9.41 and 9.14 per cent CAGR respectively. For the three year period the highest CAGR per cent was offered by SBI Magnum sector funds umbrella scheme growth followed by 93

11 DSPBR microcap fund growth with and Religare with per cent CAGR. The lowest returns were recorded by IDFC and Religare agile fund Gr. DSP, Reliance and quantum mutual funds under this scheme have recorded the highest beta but still less than one. It is noticed that the lowest return and highest standard deviation was recorded by IDFC fund. The standard deviation was high for all the funds. The highest correlation was recorded by Edelweiss fund. The Sharpe and Jensen values were recorded negative for this fund. It has been observed that out of 54 funds, 34 funds have shown negative Sharpe values. Except two funds which have shown negative Treynor values, all other funds have shown positive values. The Jensen values disclosed by the scheme were positive and hence indicate that the funds timely investments generated positive returns. The correlation was 0.85 recorded by the peer group average and the standard deviation was This indicated high risk. The returns of this scheme are not high when compared to tax schemes. The highest return by tax scheme was 24 per cent CAGR, whereas it is 37 per cent return is recorded by the equity scheme. High risk gives high returns is not justified as all the funds have shown beta less than one also offered only moderate returns for a three year period. 94

12 Scheme Name Table 4.1.3: Performance of Floating Rate Income Schemes NAV Fund Size (Rs.Cr) % Returns (CAGR) Std Deviation R- Squared Beta Sharpe Treynor Jenson BSL Floating Rate Fund - STP - G , BSL FRF- LTP - G BSL FRF- STP - IP - G , BSL FRF- LTP - IP - G L&T FRF Cum Canara Robeco FRF - G DSPBR Income Oppor Fund - Reg - G DSP BR Inc Oppor Fund - IP - G 1, HDFC FRIF - LTF G HSBC FRFLTP Regular Plan G HSBC FRF - LTP - IP - G JM Floater Fund - S T P - G LIC Nomura MF FRF- ST - G ICICI Prud Corp BF - Plan ICICI Pru Corp BF Plan B-G Reliance FRF - ST - G SBI Income Fund FRP - Savings Plus Bond G SBI Magnum Income FRP - LT - G Tata FRF - LT - G Templeton FRIF- G Templeton FRIF - IP - G Templeton FRIF - Super IP - G UTI FRF STP - G , UTI FRF STP - IP - G 1, , N.A Peer Group Average Source: mutualfundsindia.com 95

13 4.1.3 Analysis of floating Rate Income Schemes The objective of this scheme is to generate regular income through investment in a portfolio comprising substantially of floating rate debt / money market instruments, fixed rate debt / money market instruments swapped for floating rate returns, and fixed rate debt securities and money market instruments. The table reveals the performance of Floating rate income schemes. UTI FRF STP G fund has shown the highest NAV of Rs The fund size was Rs crores which has been registered by UTI FRF STP. Amongst the private sector sponsored mutual funds DSPBR Income opportunities fund G has recorded the highest NAV of Rs The highest one year return ( ) was given by HDFC FRIF LTF G having NAV of Rs The highest return for the one year period was observed by HDFC, SBI and Templeton mutual funds. The highest return was offered by HDFC fund with per cent return CAGR whereas the two other funds have returned almost the same per cent with only nominal difference in return offerings. The highest two returns were offered by Canara, BSL and SBI mutual funds. The three years top performers were BSL, HDFC and Templeton floating rate schemes. The highest three year CAGR was offered by BSL, HDFC and Templeton funds. High risk is observed by HDFC, Tata and SBI funds. The risk was also high for this fund. SBI and LIC funds have shown negative Jensen values which represent poor timing ability of the fund managers. All the funds under this scheme have shown returns varying from nine per cent to eleven per cent. The returns were good when 96

14 compared to other schemes with similar beta. The standard deviation of the peer group average is 0.03 where as the fund with high return has shown standard deviation The public sector mutual funds under this scheme have performed well when compared to other schemes. This shows that debt funds have performed well in this category. The Sharpe values of this scheme were high when compared to other schemes. This indicated that these funds gave good risk adjusted returns. Treynor values were also positive. Out of the total funds, 7 funds under this scheme have shown Jensen measure less than zero which projected investment timing ability of managers of these funds to be poor. The statement high risk gives high returns could not be approved depending upon the beta analysis. The funds having the highest beta were unable to offer high returns when compared to the beta of the remaining funds in the same scheme Analysis of Gilt Long Term Funds The gilt long term scheme aims to generate income by investing in a portfolio of government securities. The corpus will be invested in sovereign securities issued by Central and State governments. The analysis has included 35 funds in this particular category. The top performers for one year period were Baroda, IDFC and Kotak funds. The top performers for the two year period was recorded by BARODA, Religare and IDFC funds whereas the three years high returns were offered by Baroda, BSL and IDFC, Religare funds. The funds with high risk identified were Tata, Kotak and HDFC funds. Table shows the data pertaining to the Gilt long term scheme. The highest NAV Rs was recorded under this scheme by Kotak Gilt 97

15 Investment PF & Trust plan G fund. The fund size was Rs crores. The highest asset size was recorded by BSL G Sec Fund LT G with Rs crores. The highest return for one year, two year and three year period was given by Baroda Pioneer GF G. All the funds under this scheme have provided positive returns for all the three periods. BSL and HSBC funds performed well giving high returns for the three year period. SBI offers many funds under this scheme but could not compete either with the public sector or with private sector funds. SBI and LIC were the poor performers when three years return was considered. Amongst all the funds under this scheme the highest beta 0.55 was recorded by Tata Gilt Securities fund. It is notable that the beta for all the funds under this scheme was less than one which indicates low risk. The returns were at par with other schemes which were showing low risk. The Sharpe, Treynor and Jensen measures were also positive except for two funds. Hence it is understood that these funds with less risk have given good risk adjusted returns which were managed intelligently. The peer group average standard deviation was 0.46 and the highest beta was There was no significant difference in the funds deviation from that of the peer group average deviation. The correlation peer group average of the scheme was High risk gives high returns statement is accepted as the funds under this scheme performed well with less risk as the highest risk recorded under this particular scheme was and the return was

16 Scheme Name Fund Size (Rs.Cr) Table 4.1.4: Performance of Gilt Long Term % Returns (CAGR) Standard Deviation R- Squared Beta Sharpe Treynor Jenson NAV BSL G Sec F- LT G IDFC GSec Fund Invtt P AG IDFC G-Sec Fund IDFC G-Sec Fund IDFC G Sec F Invt. P P Baroda Pioneer Gilt F - G BSL GPPFP - G L&T G Inv G CanaraRobeccoGPGS - G DWS GF R G Escorts Gilt Plan G Sahara GF G HDFC GF L T P G HSBC GF G UTI Gilt Adv fund - LTP UTI G Adv F- LT - PF P G UTI Gilt AdvFLT PF Plan ING Gilt PF Plan - DP G ING GPF P DP G AIPO JM G Sec RegPlan G Kotak Gilt - InvR P G Kotak GiltInv PF &Trust P-G Continued 99

17 LIC Nomura G Sec F G LIC Nomura G Sec F- PF PG Mirae Asset GF I P Reg G Religare GF Long Dur Plan ICICI Prudential GFIP G Reliance G Sec Fund Retail G Reliance G Sec Fund IP G SBI Magnum Gilt LTP G SBI Magnum Gilt LTP PF - Regular G SBI Magnum Gilt LTP PF - Fixed Period G SBI Magnum Gilt LTP PF - Fixed Period - 2 year G SBI Magnum Gilt LTP PF - Fixed Period - 3 year G Tata Gilt Securities Fund G Peer Group Average Source: mutualfundsindia.com 100

18 4.1.5 Analysis of Gilt Short Term Fund (STF) The scheme Gilt STF seeks to generate income and capital appreciation through investments in government securities and T-Bills with short to medium term residual maturities. The peer group average returns of the scheme are as follows. The sample included totally 19 funds under this scheme as shown in table The highest NAV recorded was Rs.1086 by Daiwa Govt Sec Fund ST G. Its fund size was Rs.5.87 crores. ICICI was the second highest fund to record the NAV at Rs The lowest NAV was recorded by Canara Robecco Gilt Advantage fund G. The highest compounded annualized one year return 9.10 per cent was given by SBI magnum Gilt STP G fund and the beta of this fund was The lowest beta was and correlation was 0.00 which were recorded by Canara Robecco gilt fund. Religare GF - Short Duration Plan - Reg G has shown the lowest fund size but could still perform well by providing better return positively for one year, two years and three year period from 2009 onwards. The top performer for the one year return was delivered by SBI, CANARA and KOTAK GFS whereas the highest returns for the two year period were recorded by BSL and DSPBR funds. The highest three years returns were recorded by BSL and SBI funds. The highest beta recorded by Templeton, HDFC and Tata mutual funds. The highest standard deviation was recorded by Templeton GSF treasury plan G. The standard deviation was less when compared to other mutual funds schemes. HDFC STP G has the highest correlation whereas the IDFC growth has revealed zero correlation. 101

19 The highest sharpe value is recorded by BSL funds followed by Religare and Daiwa funds. BSL GPLP G has recorded Sharpe value of which is much above the peer group average and also significantly higher than all other funds under this scheme. This indicates better performance and high risk adjusted returns which are offered by this particular fund followed by BSL G sec fund. Only one fund has shown Sharpe value less than zero which indicated poor performance. Four private sector funds have shown higher Sharpe values which indicated good risk adjusted returns. These returns are above the risk free rate of interest. The highest Jensen values recorded under this scheme was by SBI, Canara and Sahara funds. Only one fund IDFC Fund has shown negative Jensen value which reveals that the expected returns were not generated by this particular fund under this scheme. The highest Treynor values were recorded by IDFC, BSL and DSPBR funds. Four funds have shown negative Treynor values which indicate poor performance due to poor management of funds. Among the four poorly managed funds, the highest negative Treynor value was registered by Canara Robecco fund. High risk gives high returns is accepted as the highest risk recorded was and the return offered was 6.1. Hence, it is inferred that the funds under this scheme have exhibited low risk and low return. 102

20 Scheme Name NAV Table 4.1.5: Performance of Gilt Short-Terms Fund Size (Rs.Cr) % Returns (CAGR) Std Deviation R- Squared Beta Sharpe Treynor Jenson BSL G Sec Fund STD - G IDFC G Sec Fund Short Term - Plan A - G BSL GPLP - G CanaraRobeco Gilt N.A N.A Advantage Fund - G DSP BlackRock Treasury Bill Fund - G HDFC GF S T P - G Kotak Gilt - Savings Plan - G Religare GF Short Duration Plan - Reg - G ICICI Prudential GFTP - G ICICI Prudential GFTP PF Option - G SBI Magnum Gilt STP - G Daiwa Govt Sec Fund ST-G 1, N.A N.A Tata G S S M F - G Templeton India GSF Treasury Plan - G UTI G-Sec Fund - STP - G Peer Group Average Source : mutualfundsindia.com

21 4.1.6 Analysis of Sector funds Banking and Financial services The scheme seeks to provide long term capital appreciation through investment in equities and equities related securities of companies engaged in Banking & Financial Services. Table shows the data relating to sector funds - banking and financial services. This scheme has recorded the highest NAV Rs by Sahara Banking and Financial services fund G with the fund size of Rs crores whereas the highest fund size was Rs crores and the highest CAGR return achieved for three years was 25 per cent recorded by Reliance Banking fund G. It is evident from the table that UTI banking sector fund was the only public sector fund offering banking and financial services funds. The performance of this fund was at par with the private sector funds in terms of risk and also returns. All the funds under this scheme have shown negative returns for the one year period. The average standard deviation was high when compared to other schemes. Only one fund has shown beta greater than one but the returns were not as high as the risk. The Remaining all other funds have shown almost similar risk and return. The funds under this scheme have registered negative Sharpe, Treynor and Jensen values. All the funds under this scheme have shown negative returns for one year period whereas ICICI, Religare and Reliance have shown nominal returns for the two year period. The highest three years returns were offered by Sundaram, Reliance and Sahara funds. The high risk is observed by Sundaram, UTI and Sahara funds. UTI alone has recorded beta greater than one. The null hypothesis is not justified as the returns were too low when compared to the risk of the funds. High risk gives high returns statement is not justified as the returns observed were not compensating the risk exposure of the investors. 104

22 Table 4.1.6: Performance of Sector Funds - Banking and Financial Services Scheme Name NAV Fund Size (Rs.Cr) Sahara Banking and Financial Services Fund - G Religare Banking Fund - Reg - G ICICI Prudential Banking and Financial Services Fund - Retail - Gro % Returns (CAGR) Std R 2 Beta Sharpe Jensen Jenson Deviation Reliance Banking Fund - G , Sundaram Financial Services Opportunities Fund - Ret - G Sundaram Financial Services Opportunities Fund - IP - G N.A UTI Banking Sector Fund - G Peer Group Average Source: Mutualfundsindia.com 105

23 4.1.7 Analysis of Income fund The Income fund seeks to generate regular income through investments in Debt/Money Market Instruments and Government Securities with maturities not exceeding 60 months. Table represents data of 35 funds relating to income schemes. BSL, ICICI, and Reliance AMCs have mobilized highest amount amongst all others under this scheme. BSL offered seven funds under this scheme, ICICI offered four funds and IDFC offered three funds. The highest NAV of Rs was recorded by DSPBR strategic BF Retail G in the income scheme and its fund size registered wasrs crores whereas BSL Dynamic BF ret G has shown the highest fund size worth Rs crores with NAV of Rs only. The highest one year compounded annualized return per cent was given by Canara Robecco fund but did not show any return for the two and three year period. The return of per cent CAGR was given by Escorts Income Plan G.SBI mutual fund has given the highest return for the period and also for the period (three years return). 28 funds were successful in offering returns for all three years. SBI mutual fund and Escorts fund have consistently performed well by taking the first and second positions in the three year period with low standard deviation. The highest correlation was recorded by HSBC Income fund Invtt plan reg G which indicated high risk. The beta of 10 funds was greater than one. The highest beta was recorded by Kotak funds followed by Axis Dynamic BF G. SBI one of the public sector sponsored mutual fund also was under high risk having 106

24 beta greater than one. 25 funds under this scheme have shown beta less than one which indicates that the funds are less risky. The peer group average beta was 0.90.The funds with higher beta could not offer relatively high returns when compared to its risk variability. It is observed from the table 4.17 that the highest Sharpe value was recorded by L&T Select Income Fund -Flexi Debt -Ret G followed by ICICI Prudential with and Sahara Income with representing high risk adjusted returns. The lowest Sharpe ratio is recorded by Axis Dynamic fund. The highest Treynor values were recorded by L&T, ICICI and Sahara funds with , and respectively but Canara, Escorts and BSL term plan recorded the highest Jensen values. This proves that the funds have performed moderately. The top three performers for the one year period were Canara, Escorts and SBI funds whereas for the two year period it was Escorts and BSL funds. The three year highest return was offered by Canara, IDFC and ICICI mutual funds. The highest beta recorded was by Kotak, Axis and BSNL funds. The statement High risk gives high returns is not justified as the funds with high beta could not generate high returns or consistent returns for the three year period. 107

25 Table 4.1.7: Performance of Income Funds Scheme Name NAV Fund % Returns (CAGR) Std R 2 Beta Sharpe Treynor Jenson Size (Rs.Cr) Deviati on BSLSTF-G Axis Dynamic BF - G N.A N.A IDFC SSIF - Invt. Plan- G IDFC D B F- Plan A G IDFC SSIF - Invt. Plan F -G N.A N.A Baroda Pioneer Income Fund G BSL Income Plus G BSL Dynamic BF - Ret G , BSL STF DAP BSL Income Plus DAP BSL Medium Term Plan - RetG BSL Dynamic BF - RetDAP , L&T Select Income Fund -Flexi N.A Debt -Ret G Canara Robeco InDiGo Fund G N.A N.A DSPBR Strategic BF - RetailG 1, Escorts Income Plan- G Sahara Income Fund G Sahara Classic Fund G HSBC Income Fund Invtt Plan Reg G HSBC Flexi Debt Fund - RetG PRINCIPAL Income Fund LTP G ICICI Pru Regular Saving Fund G , N.A N.A Continued 108

26 JM Income G Kotak Bond Deposit G Kotak Bond Regular Plan G Templeton India IBA Plan B - G Templeton India IBA Plan A- G LIC Nomura BF - G Religare Active Income Fund - Plan A - G ICICI Prudential LTP Reg - Cumulative ICICI Prudential Medium N.A Term Plan - Reg - G ICICI Prudential Banking & PSU N.A Debt Fund - Prem Plus - G Reliance RSF - Debt - G , SBI Magnum Income - G SBI Dynamic BF - G Peer Group Average Source: mutualfundsindia.com 109

27 4.1.8 Analysis of Index Funds Index fund fundamentally aims to invest 80 to 90 per cent of its assets in the companies that form the Sensex and between 10 to 20per cent of the assets in the companies which are not included in the Sensex. Table reveals the performance of index funds. HDFC Index fund recorded the highest NAV Rs under this scheme and its fund size was Rs crores. All the funds under this scheme have shown negative returns for the one year period. The least negative return was recorded by HDFC Index Fund Sensex plus plan as the market timing ability of the fund was good which is indicated through the Jensen measure. This particular fund has consistently performed well by giving highest returns for all the three years. The lowest return was recorded by Taurus Nifty Index fund G. The two year and three year returns were not recorded by this fund. HDFC Nifty Index plan returned the lowest CAGR of per cent for three year period, whereas the highest was per cent by the same fund house in HDFC Index Fund Sensex Plan. When public sector sponsored mutual funds were considered LIC Nomura MF INDEX FUND Nifty Plan G has performed well for one year and two year periods by giving the highest return amongst all the funds in the category. It is observed that LIC Nomura Mutual Fund Index Fund Sensex Advantage Plan G has given the highest returns for the three year period ( ). All the funds under this scheme have shown negative returns for one year period whereas the nominal return which is the highest in this particular scheme is offered by HDFC followed byidfc and ICICI funds. The three years returns were offered by HDFC, ICICI and Franklin Templeton funds. 110

28 It is noticed that the high beta values were recorded by the funds BSL, SBI and UTI funds. The table reveal that11 out of 24 funds have shown beta greater than one. The remaining 13 funds have shown beta less than one. The highest return is not provided by the fund which was having highest risk. Most of the funds had beta which were nearing one and could be rated as funds having moderate risk. The beta values of most of the funds were greater than one or nearing one which indicated high risk. The returns are neither too high nor too low. High risk gives high returns statement is not justified as almost all the funds except one fund have given similar returns with varied beta values. 111

29 Table 4.1.8: Performance of Index Funds Scheme Name NAV Fund % Returns (CAGR) Standard R- Beta Sharpe Treynor Jenson Size Deviation Squared (Rs.Cr) IDFC Nifty Fund G N.A Goldman Sachs S&P CNX 500 Fund G BSL Index Fund G CanaraRobeco Nifty Index G HDFC Index Fund Sensex Plan HDFC Index Fund Sensex Plus Plan HDFC Index Fund Nifty Plan PRINCIPAL Index Fund - G IDBI Nifty Index N.A N.A Fund - G IDBI Nifty Junior N.A N.A Index Fund - G LIC Nomura MF Index Fund - Sensex Plan - G LIC Nomura MF Index Fund - Nifty Plan - G Continued 112

30 LIC Nomura MF Index Fund - Sensex Adv Plan - G ICICI Prudential Index Fund ICICI Prudential Nifty N.A N.A Junior Index Fund - G Reliance Index Fund N.A N.A Nifty Plan - G Reliance Index Fund N.A N.A Sensex Plan - G SBI Magnum Index Fund G Tata Index Fund - Nifty Plan - Option A Tata Index Fund - Sensex Plan - Option A Franklin India Index Fund NSE Nifty Plan - G 3 Franklin India Index Fund BSE Sensex Plan - G Taurus Nifty Index Fund - G N.A N.A UTI Nifty Fund G Peer Group Average Source : mutualfundsindia.com 113

31 4.1.9 Analysis of Liquid Funds Liquid fund seeks to provide high liquidity and safety with reasonable returns through investments in debt and money market instruments. Table depicts the performance review of the liquid funds. Templeton India TMA G recorded the highest NAV Rs which was by followed by SBI Magnum Insta Cash cash plan with Rs The highest fund size Rs crores was recorded by ICICI prudential liquid plan G. The highest CAGR return 10.5per cent, 9.5 per cent and 8 per cent were offered for one year, two years and three years respectively by Escorts fund with the beta of which is not the highest amongst the funds in the scheme. The lowest return for one year period was recorded by Principal Retail Money manager fund G which was 8.49 per cent with highest beta greater than one. In the public sector mutual funds, Baroda pioneer liquid fund G has performed well amongst all the funds under this scheme. It has returned a high of 8.29 per cent CAGR for one year which has not been very far from the private sector sponsored mutual funds return. The average beta of the peer group recorded was 0.63 and the fund with highest return has shown beta of It is evident from the above table that all the funds except one fund has shown beta less than one, but there were variations in beta levels of the funds with insignificant variation in terms of return. The Sharpe, Jensen and Treynor values were all positive. This scheme in particular has shown high Sharpe values than other funds which indicate good risk adjusted returns delivered by the AMCs. Escorts liquid 114

32 fund provided the highest risk adjusted return followed by SBI, Reliance retail plan and cash plan. JM and IDFC have also performed well which could deliver high risk adjusted returns. The highest Treynor values recorded under this scheme is by Escorts fund followed by ING fund. It is also observed from the table that Reliance, SBI and ING funds have recorded considerable good Jensen values. It is notable that Reliance is offering 4 funds under this scheme out of which 2 plans are offering high returns. Also it is evident from the analysis that there were only two funds namely Principal and Religare funds which have shown negative Jensen values which indicate their poor performance due to poor timing ability of the funds investment. High risk gives high returns statement is not justified on the following factors. All the funds have shown low beta and standard deviation but provided considerable return for one year, two years and three year period. 115