A COMPARATIVE ANALYSIS OF SELECTED MUTUAL FUNDS AND ITS IMPACT ON INVESTOR S DECISIONS Mr. SATTAGOUDA PATIL, 1 and Dr SHIVASHANKAR K 2 1 Assistant Professor Dept. of MBA, Visvesvaraya Technological University Belgaum 2 Associate Professor Dept. of MBA, Visvesvaraya Technological University Belgaum Introduction The avenues and scope of investing been increasing as years go by and people are left with more choice for making their investments more fruitful. Mutual funds have been a recent phenomenon for investors due to better performing capital market which has enhanced the returns expected by investor on their investments with lower risk of a downside. Mutual funds offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions. The Security Exchange Board of India (SEBI) Regulations 1993 define a Mutual Fund as a fund established in the form of a trust by a sponsor to raise monies 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under one or more schemes for investing in securities in accordance with these regulations These regulations have since been replaced by the SEBI Regulations, 1996. The structure indicated by the new regulations is indicated as under. A mutual fund comprises four separate entities, namely sponsor, mutual fund trust, AMC and custodian. The sponsor establishes the mutual fund and gets it registered with SEBI. Hence, a mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and others securities. The income earned through this instrument and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by 13 Mr. Sattagouda Patil, Dr Shivashankar K
them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. Need for the Study: The main purpose of conducting research is to understand about the concept and functioning of Mutual Funds. The research also helps in understanding the different schemes of Mutual Funds. Because, the study is focused upon different prominent latest schemes like, equity & balanced etc as well as the returns associated with it which would enable an investor to make appropriate decision. This project also helps to know the asset allocation, sector allocation and top holdings of asset management companies. Objectives of the Study: To understand the functions of the Asset Management Company. To measure and compare the performance of selected mutual fund schemes of different Asset Management Companies. Methodology of sampling procedure This study includes information derived from both primary and secondary data. Primary data: The primary data is collected from the employees of Stock Holding Corporation of India and from customers for survey purpose. Secondary Data: The study undertaken consists of data collected from various investment journals, relevant websites and Literature Review: The present study deals with the review of literature on A Study on Comparative Analysis of Selected Mutual Fund Schemes & It s Impact on Investor s Decisions. A number of studies have 14 Mr. Sattagouda Patil, Dr Shivashankar K
been conducted to measure the performance in India & outside as well. The review of some studies is as follows: Agrawal Deepak & Patidar Deepak (2009) studied the empirically testing on the basis of fund manager performance and analyzing data at the fund-manager and fund-investor levels. The study revealed that the performance is affected by the saving and investment habits of the people and at the second side the confidence and loyalty of the fund Manager and rewards- affects the performance of the MF industry in India. Mehta Sushilkumar (2010) analyze the performance of mutual fund schemes of SBI and UTI and found out that SBI schemes have performed better than the UTI in the year 2007-2008. Selvam et.al (2011) studied the risk and return relationship of Indian mutual fund schemes. The study found out that out of thirty five sample schemes, eleven showed significant t values and all other twenty four sample schemes did not prove significant relationship between the risk and return. According to t-alpha values, majority (thirty two) of the sample schemes' returns were not significantly different from their market returns and very few number of sample schemes' returns were significantly different from their market returns during the study period. Measure of Portfolio Performance Sharper s Model: This model developed (1966) a composite index which is very similar to the Treynor measure, the only difference being the use of standard deviation, instead of beta, to measure the portfolio risk, in other words except it uses the total risk of the portfolio rather than just the systematic risk. Sharper (Si) = Rp Rf) σp Where, Si = Sharper s performance index. σp = Portfolio standard deviation. This formula suggests that, Sharper prefers to compare portfolios to the capital market line (CML) rather than the security market line (SML). Sharpe index, therefore, evaluates funds performance based on both rate of return and diversification (Sharpe 1967). For a completely diversified portfolio Treynors and Sharpe indices would give identical rankings. 15 Mr. Sattagouda Patil, Dr Shivashankar K
COMPARATIVE ANALYSIS AND ITS IMPACT ON INVESTOR s DECISIONS The following diagram shows Average return, Standard Deviation& Return by using Sharper Index model of 5 different Asset Management Companies The above diagram shows that, performance of Average Return Standard Deviation & Return by using Sharper Index has been measured in 3 different phases of 5 different AMC s of 3 different schemes. When we concerned with the first phase i.e Average Return, Reliance Small Cap Fund (G) (scheme B) of Reliance Mutual Fund is performing well as it is having 4.216% of Average Return as compare to other scheme of other AMC s. 16 Mr. Sattagouda Patil, Dr Shivashankar K
When we come to the second phase i.e when we concerned with the Standard Deviation, Birla Sun life Pure Value Fund Direct (G) (scheme C) of Birla Sun life Mutual Fund is more risky as it is having 6.5720 Standard Deviation as compare to other schemes. In third phase return is measured by using Sharper Index. Here, Reliance Small Cap Fund (G) (scheme B) of Reliance Mutual Fund is performing very well as it is having 0.2092% of return as compare to others and one more thing we have to focus that here, some schemes showing negative value. So, it indicates that the ability of fund manager is not good. RESULTS AND FINDINGS It is observed that, 40% of the people will consider safety, 43% of the people will consider high return, 13% of the people will consider liquidity & only 3% of the people will consider risk while they investing in Mutual Funds. It is found that, 53% of the people are Mutual Fund investor & 47% of the people are other than Mutual Fund investor. Out of total Mutual Fund investors 19% of the people have invested in ICICI Prudential Mutual Fund, 25% of the people have invested in Reliance Mutual Fund, 31% of the people have invested in Birla Sun life, 6% of the people have invested in Sahara & 19% of the people have invested in Others & nobody is preferred L & T. 31% of the people have invested for 1 month, 19% of the people have invested for 6 months, 31% of the people have invested for 1 year, 6% of the people have rarely invested & 13% of the people have invested for more than 5 years. 88% of the people have preferred Equity, 6% of the people have preferred Debt & 6% of the people have preferred Hybrid. 50% of the people have invested for diversification & 31%, 6%, 13% of the people have invested for return, low cost, tax benefit. 56% of the people refer past performance of the company, 31% of the people refer Asset Management Company, and 13% of the people ask expert advice. 6% of the people gather information from Magazines & TV Channels, 56% from broker & 38% from internet. 100% of the people expressed their opinion that there is a need for creating awareness among the public of Belgaum about the benefit of investing in Mutual Funds. 17 Mr. Sattagouda Patil, Dr Shivashankar K
29% of the people have not invested because, they feel it s not lucrative investment instrument, 36% because of no knowledge about how to invest,21% because of risky investment instrument & 14% for some other purpose. SUGGESTIONS The suggestions to the AMC s, custodian as well as to the customers are as follows. Recently SEBI raised cash investment limit in Mutual Funds from Rs. 20000 to Rs. 50000. Investors are suggested to use this opportunity. There is need build awareness of the funds among the investors with constantly being in contact with them. Some of the investors have asked for periodical market report about the stock market so that they can get the knowledge properly. AMC s should go for increasing more awareness about different facilities such as SIP & STP among the investors. Sahara & L & T must try to work hard for their good business. The company should advertise their tax savings plane more so that they can gain more customers. Some customer is asking to make it investor s friendly. Unnecessary harassment must be avoided such as charging more fees on bank transactions etc. There is a misconception in investors mind that it is risky instrument. So, investors must be encouraged from such conceptions. CONCLUSIONS: The Mutual Fund investors prefer more of the equity fund as they want more return on their money. They avoid going in the debt fund because, they can get same amount of return on their banks that is also without taking any risk. Usually people preferred to invest in Mutual Fund during New Fund Offered (NFO) rather than seeing the performance of Mutual Fund schemes. Sometimes due to lack of detailed awareness about Mutual Fund schemes the investors seek advice of distributors. Investors feel that the AMC s should go for more promotional activities & should try to come up with new innovative schemes while can easily be understood by the investors. My project shows that Birla Sun life is performing very well as it is having higher return. Conducting the awareness program is necessary to provide the regular information. 18 Mr. Sattagouda Patil, Dr Shivashankar K
It is hopeful that this study creates awareness that the Mutual Funds are worth instrument practice. The various schemes of Mutual Funds provides the investors with a wide range of investment options according to his risk bearing capacities & interest. Besides they also give a handy return to the investors. In India Mutual Funds are playing important role. The Mutual Fund companies pool the savings of small investors & invest those collected huge amount of funds in different sectors of the economy. They are performing like intermediary between small investor & the Indian capital market. In recent years many Mutual Fund companies are established. Through this competition the different companies are introducing different types of Mutual Fund schemes with attractive returns & low risk. So, it is an advantage to the investors. With these I am going to conclude my project report. References 1. Investment Analysis & Portfolio Management Prasanna Chandra, 3/e TMH, 2010. 2. Security Analysis & Portfolio Management Punithavathy Pandian, 2/e Vikas, 2005. 3. Investment Management Bhalla V.K, 17/e, S.Chand, 2011. 19 Mr. Sattagouda Patil, Dr Shivashankar K