Chapter 5 Collection of Secondary Data 116
CHAPTER 5 COLLECTION OF SECONDARY DATA In the Research Methodology, the initial stage of the researcher was to collect the secondary data of various open-ended equity schemes from the published data of various Fund Houses or preferably from Association of Mutual Funds of India. As the research is confined to only open-ended equity schemes, the NAV of only the open-ended equity schemes were collected for data analysis. As per the research proposal, the number of schemes was subjected to the availability of the data for the period of three years. Subject to the availability of three years of the data, the sample size was of minimum of 30 schemes with 3 years data. There were approximately 750 daily NAV of each scheme. The secondary data was a purposive sample. The schemes were spread across various types of Fund house viz Public Sector, Private Sector and Multinationals. The secondary data collection was a purposive sample. The amount of data on Mutual Funds is available considering the fact of disclosure regulations and the fact that the tasks and performance are measurable. 117
Accordingly, the Researcher had approached The Association of Mutual Funds of India (AMFI) for the required research data. AMFI was very cooperative and had given the required data that is the NAV of all the schemes upto 30 th September, 2006. AMFI had provided the data vide its receipt no 37 dated 10 th November, 2006 of all the schemes irrespective whether it was an income, balanced, index or any other schemes. AMFI had provided all the NAV data for all the Mutual Funds available on their public domain. AMFI had provided 17,78,729 records for the NAV details for the period pertaining to 1 st October, 2003 to 30 th September, 2006. There was a considerable delay of more than six months for the Research and therefore, it was felt necessary that the data for the extended period be taken from AMFI. However, due to the delay in the Research Analysis, the additional data for the delayed period was taken from AMFI. It was felt necessary too request AMFI for the additional data for the extended period 1 st October, 2006 to 30 th June, 2007. The Researcher approached AMFI for the additional data for a further period of 9 months viz 1 st October, 2006 to 30 th June, 2007. AMFI then vide its receipt no 28 dated 27 th July, 2007 provided the data for the extended period of 9 months viz 1 st October, 2006 to 30 th June, 2007. This time too, AMFI provided 54,294 records of all the schemes available with AMFI on the public domain. 118
In all AMFI had provided 18,33,023 records for the period 1 st October, 2003 to 30 th June, 2007 containing the data of all the Mutual Funds and all the schemes NAV available with AMFI on the public domain. However, there were some codes, which could not be interpreted like the Mutual Fund Code, Scheme Code etc. The other data was provided by AMFI like the Mutual Fund Master and the Scheme Master, which was available with AMFI for the research. Thus the collection of secondary data was done from AMFI, with a continuous follow-up with AMFI, the required secondary data was procured from AMFI. AMFI without any reluctance provided the data for the purpose of the research. The secondary data viz the NAV of the various Mutual Fund schemes for the period 1 st October, 2003 to 30 th June, 2007 was available for the research. It was proposed in the research proposal that the research is focussed only on the performance of Open-ended Equity schemes. From the total data provided by AMFI for the research only the required data viz the NAV of Open Ended Equity Schemes was required for the research analysis. A list of existing Open Ended Equity Schemes was downloaded from the AMFI site as on 3 rd August, 2007. The exhaustive list of AMFI contained all the list of the schemes and the NAV of Open Ended Equity Schemes of all Mutual Funds. 119
The list was thoroughly checked for the required data and only the required scheme and the option were weeded out of the AMFI list. The following schemes/options were excluded from the research sample for the reasons mentioned thereof: - Exchange Traded Funds Basically exchange traded funds are open-ended Mutual Funds that are listed and traded on Stock Exchanges. There are very few Exchange Traded Funds in India, the most recent being the Gold Exchange Traded funds of the UTI Mutual Fund. The concept is very new to the Indian markets and there are not much pleasing response to these schemes. The schemes excluded are :- 120
Table 1 : Exchange Traded Funds not included in the Research Study Banking Index Benchmark Exchange Traded Scheme (Bank BeES) Gold Benchmark Exchange Traded Scheme (Gold BeES) Nifty Benchmark Exchange Traded Scheme (Nifty BeES) Nifty Junior Benchmark Exchange Traded Scheme (Junior BeES) Sensex ICICI Prudential Exchange Traded Fund Kotak Gold ETF UTI - Gold Exchange Traded Fund UTI Sunder Income Options Most of the Open Ended Equity schemes had the growth option or the income option. In the Income options there are regular payouts in the form of dividends. To the extend of the dividend payout, the NAV of the schemes fall down on the Ex-date. Thus if the NAV from the first date to the last date is taken for the analysis, the returns will fall down to the extend of the dividend payout. Moreover, if we consider the dividend payout, we have to accordingly fiddle with the data, which was not found appropriate by the Researcher. Moreover, most of the schemes were having the growth option, which was found to be very suitable for the research. 121
Index Funds This research is confined to the actively manage open-ended equity funds. The index funds are passively managed funds and therefore the Index Funds have not been considered for this Research Analysis. Index Funds are those schemes, which invest in the proportion to the benchmark like the Sensex, Nifty etc. Thus there is no performance on the part of the Fund Manager. The Fund Manager has to invest his funds only in the proportion of the Sensex to which the Index Fund is linked. The Marginal difference between the portfolio of the Index Fund and the Index is known as the tracking error. In case, the Index fund is linked to the Nifty Sensex then the holding in the fund will be in the proportion of the shares of the Nifty Sensex. 122
Table 2 : Index Funds not considered in the Research Study Birla Index Fund HDFC Index Fund - Nifty Plan HDFC Index Fund - SENSEX Plus HDFC Index Fund Sensex Plan TATA Index Fund - Nifty A TATA Index Fund - Nifty B TATA Index Fund - SENSEX A TATA Index Fund - SENSEX B Franklin India Index Fund - BSE Plan Franklin India Index Fund - Nifty Plan ING Nifty Plus Fund - Growth Option LICMF Index Fund - Nifty LICMF Index Fund - Sensex Advantage LICMF Index Fund - Sensex Principal Index Fund Reliance Index Fund - Nifty Plan Reliance Index Fund - Sensex Plan SBI Magnum Index Fund UTI Master Index Fund UTI Nifty Index Fund 123
Institutional Options Most of the Mutual Funds have introduced the Institutional Option in many of their schemes. Apart from the Regular Growth option and Regular Income option, these institutional options have been introduced for the Institutional Investors. The expenses charged to these Institutional Option investors are comparatively less as compared to the Regular Investor. Wherever, Regular and Institutional options were available in the scheme, the Regular option was taken for the analysis of the Secondary Data. Apart form the above Schemes / options, the following schemes were excluded from the list, as these schemes did not have any options and it was very difficult to trace the history of the NAV of the past three years. Table 3 : Schemes with no Option not considered in the Research Study BOB Diversified Fund CAN D MAT CANFORTUNE 94 CANGROWTH PLUS DSP Merrill Lynch Technology.com Fund Franklin India Growth Fund ICICI Technology Fund 124
Kotak MNC Kotak Tech LICMF Growth Fund SBI Magnum Children Benefit Plan - Holding Held for <= 1 Year SBI MSFU FMCG SBI MSFU IT Bonanza Exclusive Growth Scheme Taurus Discovery Fund Taurus Star Share TATA Select Equity Fund The following schemes even though defined as a growth scheme, were subsequently not taken for the research, as the Investment objective of the scheme was not in par with the research. Table 4 : Schemes not at par with the Investment objective of the Research, not considered for the Research Study DWS Fixed Term Fund Series 28 - GR Fidelity International Opportunities Fund ICICI Prudential Equity & Derivatives Fund - Income Optimiser Plan On application of all the above filters for the secondary data, finally 192 schemes were short-listed for the collection of the NAV data. This was further 125
subjected for the NAV data for the period of three years viz 1 st July, 2004 to 30 th June, 2007. On further analysis on one to one basis, it was observed that for more than 50% of the schemes the relevant data was not available for a period of three years. The main reason was most of these schemes were launched after 1 st July, 2004 and did not have the NAV data for a period of more than three years. There were other schemes which were either terminated like the Principal Equity Fund (No Data after August, 2006) or the scheme was merged into other schemes to form a new scheme like the UTI Large Cap Fund and others, which were also excluded from the shortlisted secondary data. The following five schemes where taken over by Birla Sun Life Mutual Fund from Alliance Capital Mutual Fund during September, 2005. Table 5 : Schemes taken over by Birla Sun Life from Alliance Capital Mutual Fund Birla Sun Life Buy India Fund-Plan B(Growth) Birla Sun Life Basic Industries Fund-Plan B(Growth) Birla Sun Life Equity Fund-Plan B(Growth) Birla Sun Life Frontline Equity Fund-Plan B(Growth) Birla Sun Life New Millennium Fund-Plan B(Growth) 126
For these schemes the data for the broken period was taken from Alliance Capital Mutual Fund from the data provided by AMFI. The same way the following three schemes which were taken over by UTI Mutual Fund from IL&FS Mutual Fund during the month of July 2004. The data for these schemes where taken from IL&FS Mutual Fund for analysis. Table 6 : Schemes taken over by UTI Mutual Fund from IL&FS Mutual Fund UTI - DYNAMIC EQUITY FUND-GROWTH UTI - GROWTH & VALUE FUND-GROWTH UTI - INDIA ADVANTAGE EQUITY FUND-GROWTH The data for the period 1 st July, 2004 to 30 th June, 2007, that is the NAV for 3 years was taken for the research as proposed in the initial research proposal. However, AMFI had given the NAV data for all the schemes in the Mutual Fund Industry. The researcher had to extract only the relevant data viz the NAV of open-ended equity schemes for the period 1 st July, 2004 to 30 th June, 2007 for the research. As regards to the UTI Mutual Fund schemes, the data was available from 1 st August, 2005 onwards. On further scrutiny, it was observed that UTI Mutual Fund schemes did not have any options in many of their equity schemes. 127
They had introduced the Growth option in their equity schemes from 1 st August, 2005 onwards. For the data for the period 1 st July, 2004 to 31 st July, 2005, the data was taken from the earlier schemes, where there was no option in the schemes. Out of the 18 such schemes of UTI Mutual Fund, 14 schemes had declared dividend in the intervening period viz 1 st July, 2004 to 31 st July, 2005. These dividends in the 14 schemes have been factored in the NAV to ensure that the returns of the schemes are calculated correctly for the purpose of this research. Initially, the list of the Open Ended Equity Schemes was short-listed from the Scheme master provided by AMFI. There were ultimately 78 schemes considered for the research. The corresponding NAV data for 78 schemes was extracted for the period 1 st July, 2004 to 29 th June, 2007 for the purpose of our research. As 30 th June, 2007 being Saturday there was no data available for the said day. Extensive efforts have been made to synchronize the data available in the public domain to ensure that the research gives a correct output for further analysis. As mentioned above, in the final data extraction only 58,304 records were taken for the further analysis of the Secondary Data. This secondary data was put to various analyses for the research. 128
In the research, Bombay Stock Exchange (BSE) SENSEX has been taken as the benchmark index for categorizing the scheme into a high performing schemes or low performing schemes. The main idea for taking BSE SENSEX as the benchmark was that it has a long history and secondly it is the most recognized and well known index for an investor. Even Nifty is the index of National Stock Exchange, however the BSE SENSEX is the more prevalent index in the capital market. Moreover, the BSE is the oldest stock exchange in ASIA established in the year 1875. The BSE has a nation wide reach with its presence in 417 cities and towns in India. The BSE provides an efficient and transparent market for trading in equity and derivatives. The BSE systems and processes are designed to safeguard market integrity and enhance transparency in operations. The return of the schemes was calculated for the three-year period. Based on the returns on the schemes, the schemes were grouped into two groups' viz high performer and low performer with the returns of the BSE Sensex as the benchmark. 129
Table 7 : List of 78 Open Ended Equity Schemes considered for the Research Study (Period 01.07.2004 to 29.06.2007) 130
Figure 6 : List of High Performer and Low Performer (Open-Ended Equity Scheme vis-à-vis the Benchmark) RETURNS OF 3 YEARS PERIOD 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 15.14 18.26 27.60 27.25 26.35 23.66 23.66 65.63 65.26 63.72 62.59 60.93 58.43 56.37 55.46 53.92 52.94 52.42 52.34 52.00 51.87 50.96 50.82 49.87 49.82 48.99 48.97 48.96 48.88 48.75 48.71 48.67 48.65 48.33 48.07 47.88 47.86 47.73 47.60 46.77 46.62 45.82 45.52 45.49 45.47 45.02 44.90 44.69 44.42 44.27 44.16 44.07 44.04 44.00 43.45 43.01 42.91 42.75 42.66 42.50 42.43 42.07 41.16 40.67 40.19 39.33 39.17 38.83 38.63 38.31 37.22 37.17 37.08 37.00 36.61 36.34 35.64 32.70 32.63 131