PERFORMANCE OF MUTUAL FUND

DURING RECESSION & POST RECESSION

PERIOD (2006-2010)

In partial fulfillment of the requirements for the award of degree of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED To:

Supervisor: MRS.DEEPIKA DHAL

SUBMITTED By: GROUP-5

REHAN QADIR RT 1901 A 06 10901714

DEPARTMENT OF MANAGEMENT (LIM)

LOVELY PROFESSIONAL UNIVERSITY

PHAGWARA

(Year 2011-2012)

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TO WHOMSOEVER IT MAY CONCERN

This is to certify that the project report titled “Performance of Mutual Fund

during Recession & Post Recession Period (2006-2010)” carried out by Rehan

Qadir , has been accomplished under my guidance & supervision as a duly

registered MBA student of the Lovely Professional University, Phagwara. This

project is being submitted by her in the partial fulfillment of the requirements for

the award of the Master of Business Administration from Lovely Professional

University. Her dissertation represents her original work and is worthy of

consideration for the award of the degree of Master of Business Administration.

___________________________________

(Name & Signature of the Faculty Advisor)

Date:

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DECLARATION

I Rehan Qadir s/o Mr. Abdul Qadir hereby declare that the work presented herein

is genuine work done originally by me and has not been published or submitted

elsewhere for the requirement of a degree programme. Any literature, data or

works done by others and cited within this dissertation has been given due

acknowledgement and listed in the reference section.

_______________________

(Student's name & Signature)

_______________________

(Registration No.)

Date: __________________

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ACKNOWLEDGEMENT

I would like to express my gratitude for the helpful comment and Suggestions by

my teacher.

Most importantly I would like to thank my lecturer MS. DEEPIKA DHALL

for her days of supervision. Her critical commentary on work has played a major

role in both the content and presentation of our discussion and arguments and I

would thank my friends for their help in making of this term paper

I have extended my appreciation to the several sources which provided various

kinds of knowledge base support for me this period.

Rehan Qadir

(Signature)

INTRODUCTION Of MUTUAL FUNDS

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Mutual Funds over the years have gained immensely in their popularity. Apart from the many

advantages that investing in mutual funds provide like diversification, professional management,

the ease of investment process has proved to be a major enabling factor. However, with the

introduction of innovative products, the world of mutual funds nowadays has a lot to offer

to its investors. With the introduction of diverse options, investors needs to choose a mutual fund

that meets his risk acceptance and his risk capacity levels and has similar investment objectives

as the investor. With the plethora of schemes available in the Indian markets, an investors needs

to evaluate and consider various factors before making an investment decision. Since not

everyone has the time or inclination to invest and do the analysis himself, the job is best left to a

professional.

Since Indian economy is no more a closed market, and has started integrating with the world

markets, external factors which are complex in nature affect us too. Factors such as an increase

in short-term US interest rates, the hike in crude prices, or any major happening in Asian market

have a deep impact on the Indian stock market. Although it is not possible for an individual

investor to understand Indian companies and investing in such an environment, the process can

become fairly time consuming.

Mutual funds (whose fund managers are paid to understand these issues and whose Asset

Management Company invests in research) provide an option of investing without getting lost in

the complexities. Most importantly, mutual funds provide risk diversification of a portfolio is

amongst the primary tenets of portfolio structuring, and a necessary one to reduce the level of

risk assumed by the portfolio holder. Most of the investors are not necessarily well qualified to

apply the theories of portfolio structuring to their holdings and hence would be better off leaving

that to a professional. Mutual funds represent one such option.

Definition- 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 other securities. The income earned through these investments

and the capital Appreciation realized are shared by its unit holders in proportion to the number of

units owned by 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 has been in India for a long time. This came into existence in 1963

with the establishment of Unit Trust of India, a joint effort by the Government of India and the

Reserve Bank of India. The next two decades from 1986 to 1993 can be termed as the period of

public sector funds with entry of new public sector players into the mutual fund industry namely,

Life Insurance Corporation of India and General Insurance Corporation of India.

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The year of 1993 marked the beginning of a new era in the Indian mutual fund industry with the

entry of private players like Morgan Stanley, J.P Morgan, and Capital International1. This was

the first time when the mutual fund regulations came into existence. SEBI (Security Exchange

Board of India) was established under which all the mutual funds in India were required to be

registered. SEBI was set up as a governing body to protect the interest of investor. By the end of

2008, the number of players in the industry grew enormously with 462 fund houses functioning

in the country.

With the rise of the mutual fund industry, establishing a mutual fund association became a

prerequisite. This is when AMFI (Association of Mutual Funds India) was set up in 1995 as a

nonprofit organization. Today AMFI ensures mutual funds function in a professional and healthy

manner thereby protecting the interest of the mutual funds as well as its investors.

The mutual fund industry is considered as one of the most dominant players in the world

economy and is an important constituent of the financial sector and India is no exception. The

industry has witnessed startling growth in terms of the products and services offered, returns

churned, volumes generated and the international players who have contributed to this growth.

Today the industry offers different schemes ranging from equity and debt to fixed income and

money market.

The market has graduated from offering plain vanilla and equity debt products to an array of

diverse products such as gold funds, exchange traded funds (ETF’s), and capital protection

oriented funds and even thematic funds. In addition investments in overseas markets have also

been a significant step. Due credit for this evolution can be given to the regulators for building an

appropriate framework and to the fund houses for launching such different products. All these

reasons have encouraged the traditional conservative investor, from parking fund in fixed

deposits and government schemes to investing in other products giving higher returns.

It is interesting to note that the major benefits of investing in a mutual funds is to capitalize on

the opportunity of a professionally managed fund by a set of fund managers who apply their

expertise in investment. This is beneficial to the investors who may not have the relevant

knowledge and skill in investing. Besides investors have an opportunity to invest in a diversified

basket of stocks at a relatively low price. Each investor owns a portion of the fund and hence

shares the rise and fall in the value of the fund. A mutual fund may invest in stocks, cash, bonds

or a combination of these.

Mutual funds are considered as one of the best available investment options as compare to others

alternatives. They are very cost efficient and also easy to invest in. The biggest advantage of

mutual funds is they provide diversification, by reducing risk & maximizing returns.

India is ranked one of the fastest growing economies in the world. Despite this huge progression

in the industry, there still lies huge potential and room for growth. India has a saving rate of more

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than 35% of GDP, with 80% of the population who save3. These savings could be channelized in

the mutual funds sector as it offers a wide investment option. In addition, focusing on the

rapidly growing tier II and tier III cities within India will provide a huge scope for this sector.

Further tapping rural markets in India will benefit mutual fund companies from the growth in

agriculture and allied sectors. With subsequent easing of regulations, it is estimated that the

mutual fund industry will grow at a rate of 30% - 35% in the next 3 to 5 years and reach US 300

billion by 2015.As it can be noted, there is huge growth and potential in the mutual fund

industry. The development of this sector so far has been commendable and with the above

positive factors we are looking at a more evolved industry.

Significance of the Study

Over the last couple of years mutual funds have given impressive returns, especially equity

funds. The growth period first started during early 2005 with markets appreciating significantly.

With 2006 approaching more towards 2007, markets rallied like never before. The financial year

2007-08 was a year of reckoning for the mutual fund industry in many ways. Most stocks were

trading in green. All fund houses boasted of giving phenomenal returns. Many funds

outperformed markets. Equity markets were in the limelight. Investors who were not exposed to

equity stocks suddenly infused funds.

Growth funds which aim at giving capital appreciation invest in growth stocks of the fastest

growing companies. Since these funds are more risky providing above average earnings,

investors pay a premium for the same. These funds have grown to become extensively popular in

India. All the leading fund houses offer several schemes under the growth funds today.

The remarkable performance of this industry has attracted many researchers to study and

examine the growth, the performance of funds, the players in the market and the regulators. It is

interesting to learn the growth phase of these funds over this period.

OBJECTIVE OF STUDY:OBJECTIVE OF STUDY:

To compare the performance of mutual funds during recession and the post

recession period.

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SCOPE OF THE STUDYSCOPE OF THE STUDY

The scope of the study is to provide an insight into the current situation of

recession in our Indian economy and how it is affecting the mutual funds in India.

In future it will help the general people who read this report as to how are mutual

funds has improved and to let them know whether it is safe to keep the money with

funds in future. It will help investors to know the performance of various mutual

funds during and after recession period. As a result it will give an overall scenario

and performance of mutual funds during and after recession. It can be very

beneficial for the students doing their project based on this topic, for other

research. It may also help different financial institution and insurance sector on to

make them prepare for such type of uncertainties.

REVIEW OF LITERATURE

A number of researchers have examined mutual fund performance persistence, but the results

are. Grinblatt and Titman (1992) find that there is positive persistence in mutual fund

performance. They find that part of the persistence is due to differences in fees and transaction

costs across funds. They conclude that past performance does provide useful information for

investors. Fama & French (1993) proposed a three-factor model for mutual funds which takes

into account the fund size and book-to-market in addition to the market factor. They indicate that

this model can be used for various purposes including portfolio selection, evaluating

performance, measuring abnormal returns and estimating the cost of capital. Argue that this

model by Fama & French is better than CAPM based portfolio analysis procedures and

"advocates a simple and straightforward way" of carrying out any analysis. Sharpe, William F.

(1966) suggested a measure for the evaluation of portfolio performance. Drawing on results

obtained in the field of portfolio analysis, economist Jack L. Trey nor has suggested a new

predictor of mutual fund performance, one that differs from virtually all those used previously by

incorporating the volatility of a fund's return in a simple yet meaningful manner .by. He argued

mutual funds underperform the market by the amount of expenses they charge the investors.

There are various factors that affect the performance of mutual funds. have attempted to research

on the factors, especially on the cost sides, that affect the performance of mutual funds. These

two researches came up with several cost side factors with load fees, sales charges, redemption

fees, transaction costs, expense ratio. Mishra, et al., (2002) measured mutual fund performance

using lower partial moment. In this paper, measures of evaluating portfolio performance based

on lower partial moment are developed. Risk from the lower partial moment is measured by

taking into account only those states in which return is below a pre-specified “target rate” like

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risk-free rate. Asebedo & Grable (2004) identified as an important factor influencing mutual

funds' performance. He argues that fund managers control all sorts of decision making related to

investment by the fund, therefore their style influences the fund to a great deal. Fund managers

also control the diversification and turnover of fund's assets which again influence fund

performance (Malhotra & Mcleod, 1997 and Fredman, 1999). Athanasios G Noulas, John A

Papanastasiou, John Lazaridis (2005) current paper evaluates the performance of Greek equity

funds during the period 1997-2000. The evaluation is based on the analysis of risk and return.

The risk is measured through the coefficient of variation and the systematic risk. The results

indicate that there is a positive relation between risk and return for the whole period, while the

betas for all funds are smaller than one. Bruce A Costa, Keith Jakob, Gary E Porter(2006)

Mutual fund performance studies that examine returns over several years typically show that

fund managers significantly underperform on a risk-adjusted basis. Using a four-factor risk-

adjustment model, the authors of this article observe similar results during the bull market of the

1990s. However, they report that when they run their model using a moving 36-month window,

they show that managers, on average, do not underperform on a risk-adjusted basis during the

two bear markets that occurred within the full sample period 1990-2001. In fact, for some

manager experience levels, they report significant positive risk-adjusted performance, on

average, during the latest bear market. Contrary to some prior studies and popular belief, the

level of risk-adjusted performance they find is not positively related to manager experience. The

article's conclusions indicate that market trends rather than manager experience more clearly

influence the level of risk-adjusted returns generated by fund managers, and thus investors

should not pick mutual funds based solely on the tenure of the funds' managers. Timo

Kuosmanen. (Oct 2007) propose a method for mutual fund performance measurement and best-

practice benchmarking, which endogenously identifies a dominating benchmark portfolio for

each evaluated mutual fund. Dominating benchmarks provide information about efficiency

improvement potential as well as portfolio strategies for achieving them. Portfolio diversification

possibilities are accounts for by using Data Envelopment Analysis (DEA). Portfolio risk is

accounted for in terms of the full return distribution by utilizing Stochastic Dominance (SD)

criteria. John A Haslem, H Kent Baker, David M Smith (2007) apply a simple statistical

method to identify domestic equity mutual funds with high management fees and expense ratios.

The identified funds with management fees and expense ratios in the two highest standard

deviation classes each represent 1.5% of Morningstar's total sample of 6,179 funds. We also

examine the association of management fees and expense ratios to descriptive performance

measures by Morningstar categories and overall across each of four standard deviation classes.

We find a negative association between each performance measure and fund expense ratios in

the Morningstar category overall but mixed results for management fees. Marcin Kacperczyk,

Clemens Sialm, Lu Zheng (2007) study the relation between the industry concentration and the

performance of actively managed U.S. mutual funds from 1984 to 2003. Our results indicate that

the most concentrated funds perform better after controlling for risk and style differences using

factor-based performance measures. This finding suggests that investment ability is more evident

among managers who hold portfolios concentrated in a few industries. Rongli Yuan, Jason

Zezhong Xiao, Hong Zou (Aug 2008. ) study tests empirically the impact of mutual funds'

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ownership on firm performance in China, using a large sample for the period of 2001-2005. We

find that equity ownership by mutual funds has a positive effect on firm performance. The result

is robust to several measures of firm performance and various estimations. Our finding supports

recent regulatory efforts in China to promote mutual funds as a corporate governance mechanism

and suggests that pooling diffuse minority interests of individual shareholders who are prone to

free-rider problems via mutual funds is beneficial. Aymen Karoui, Iwan Meier (2009) study the

performance and portfolio characteristics of 828 newly launched US equity mutual funds over

the period 1991-2005. These fund starts initially earn, on average, higher excess returns and

higher abnormal returns. Their risk-adjusted performance is also superior to existing funds.

Furthermore, we provide evidence for short-term persistence among top-performing fund starts,

however, a substantial fraction of funds drop from the top to the bottom decile over two

subsequent periods. Analyzing portfolio characteristics, we find that returns of fund starts exhibit

higher ratios of unsystematic to total risk. Portfolios of new funds are typically also less

diversified in terms of number of stocks and industry concentration and are invested in smaller

and less liquid stocks. William J Bertin, Laurie Prather.( Dec 2009) study reports on FOFs'

characteristics and performance relative to traditional equity mutual funds and finds that FOFs

compare favorably. FOFs with identified managers outperform their unidentified counterparts,

and FOFs that invest in-family outperform both traditional equity funds and those FOFs

investing out-of-family. Finally, replicating FOFs' holdings can be prohibitively expensive since

they commonly hold funds with high minimum initial investments, closed funds and/ or funds

that are restricted to a particular investor type. Ranjini Jha, Bob Korkie, Harry J Turtle: (Oct

2009) develop conditional alpha performance measures that are consistent with conditional

mean-variance analysis and the magnitude and sign of the implied true conditional time-varying

alphas. The sequence of conditional alphas and betas is estimable from surprisingly simple

unconditional regressions. Other common performance measures are derivable from the

conditional investment opportunity set based on its conditional asset return moments. Our

bootstrap analysis of Morningstar mutual fund returns data demonstrates that the differences

between existing conditional alpha measures and our proposed alpha are substantive for typical

parameterizations.Yong Chen, Wayne Ferson, Helen Peters. ( 2010 ) paper evaluates the

ability of bond funds to "market time" nine common factors related to bond markets. Timing

ability generates nonlinearity in fund returns as a function of common factors, but there are

several non-timing-related sources of nonlinearity. Controlling for the non-timing-related

nonlinearity is important. Funds' returns are more concave than benchmark returns, and this

would appear as poor timing ability in naive models. With controls, the timing coefficients

appear neutral to weakly positive. Adjusting for nonlinearity, the performance of many bond

funds is significantly negative on an after-cost basis, but significantly positive on a before-cost

basis. Diana P Budiono, Martin Martens (2010 ) the popular investment strategy in the

literature is to use only past performance to select mutual funds. We investigate whether an

investor can select superior funds by additionally using fund characteristics. After considering

the fund fees, we find that combining information on past performance, turnover ratio, and

ability produces a yearly excess net return of 8.0%, whereas an investment strategy that uses

only past performance generates 7.1%. Adjusting for systematic risks and then using fund

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characteristics, increases yearly alpha significantly from 0.8% to 1.7%. The strategy that also

uses fund characteristics requires fewer turnovers. Akmal, Bashir Ahmed Khilji, Irfan Ahmed,

Nisar Ali Asghar, Javed Ali.( Aug 2010) Mutual funds are considered as vehicle for investment

in stock market. These not only reduce the risk but also reduce the transaction cost. Mutual

performance is a common topic in all country to be studied. This paper evaluates the mutual

funds in Pakistan; provide information to different stake holder regarding current and future

developments. Simple descriptive tools employed to intemperate data. Result shows that on

overall basis, funds industry outperform the market. The future of industry depends on the

performance of funds industry and the role of regulatory bodies. Martin Eling, Roger Faust.:(

Aug 2010). findings of this study is Use of short selling and derivatives is limited in most

emerging markets because such instruments are not as readily available as they are in developed

capital markets. These limitations raise questions about the value added provided by hedge

funds, especially compared to traditional mutual funds active in these markets. We use five

existing performance measurement models plus a new asset-style factor model to identify the

return sources and the alpha generated by both types of funds. We analyze subperiods, different

market environments, and structural breaks. Our results indicate that some hedge funds generate

significant positive alpha, whereas most mutual funds do not outperform traditional benchmarks.

We find that hedge funds are more active in shifting their asset allocation. The higher degree of

freedom that hedge funds enjoy in their investment style might thus be one explanation for the

differences in performance. Javier ( 2010.) purpose of this paper is to examine the performance

of a sample of socially responsible mutual funds (SRMFs) and a matched sample of conventional

funds during the 1997-2005 time periods. On the basis of the raw returns, socially responsible

funds performed better than some market indexes but this evidence of outperformance disappears

once risk is incorporated into the analysis. Consistent with previous studies, no evidence was

found of out performance by socially responsible funds. Also, the difference between the

performance of SRMFs and conventional mutual funds is not statistically significant. This result

is robust to the use of two additional measures of risk-adjusted performance. Yee Cheng Loon

(Feb 2011) Model uncertainty makes it difficult to draw clear inference about mutual fund

performance persistence. I propose a new performance measure, Bayesian model averaged

(BMA) alpha, which explicitly accounts for model uncertainty. Using BMA alphas, I find

evidence of performance persistence in a large sample of US funds. There is a positive and

asymmetric relation between flows and past BMA alphas, suggesting that fund investors respond

to the information in BMA alphas. My findings are robust to various sensitivity analyses,

including alternative measures of post-ranking performance, flows and total net assets, and

alternative econometric model specifications. Diana P Budiono, Martin Martens Feb.(2011)

popular investment strategy in the literature is to use only past performance to select mutual

funds. We investigate whether an investor can select superior funds by additionally using fund

characteristics. After considering the fund fees, we find that combining information on past

performance, turnover ratio, and ability produces a yearly excess net return of 8.0%, whereas an

investment strategy that uses only past performance generates 7.1%. Adjusting for systematic

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risks, and then using fund characteristics, increases yearly alpha significantly from 0.8% to 1.7%.

The strategy that also uses fund characteristics requires fewer turnovers.

RESEARCH METHODOLOGYResearch Methodology is a way to systematically solve the research problem. The Research

Methodology includes the various methods and techniques for conducting a Research.

“Marketing Research is the systematic design, collection, analysis and reporting of data and

finding relevant solution to a specific marketing situation or problem”. D. Slesinger and

M.Stephenson in the encyclopedia of Social Sciences define Research as “the manipulation of

things, concepts or symbols for the purpose of generalizing to extend, correct or verify

knowledge, whether that knowledge aids in construction of theory or in the practice of an

art”.

Research is, thus, an original contribution to the existing stock of knowledge making for its

advancement. The purpose of Research is to discover answers to the Questions through the

application of scientific procedures. Our project has a specified framework for collecting data in

an effective manner.

A successful completion of any project and getting genuine results from that depends upon the

method used by the researcher. The plan or the methodology for this study is laid upon

the following basis:

Research design

Sources of data collection

Research instruments

Sampling plan

Research Design

A number of facts could be explored by means of this research in regards to the

performance of mutual funds during and post recession in India. The research is

causal in nature because all the data is known.

.Sources of Data Collection

Data Collection

Information will be collected from only secondary data.

Secondary sources- Secondary data are those which have already been collected

by someone else which already had been passed through the statistical process.

Secondary data will be collected through books, Journals and websites.

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Population: - All the mutual funds in 2006-2010 of India are our population.

Sample size: - Different 15 mutual funds are our sample size. Which have NAV

more than 8%.

Sample element- Individual mutual fund is the sample element.

Sampling Technique- - In this research judge mental sampling is done purely on

the basis of researcher’s judgments. On the basic of NAV we select the mutual

fund.

Statistical Tools:-

Tools of presentation: In the current study, data will be presented through figures,

charts graphs and tables.

Limitations

• time constraint was one of the major problem.

•The study is limited to selected mutual fund.

• The lack of information sources for the analysis part.

HYPOTHESIS

Null hypothesis (Ho)

There is no impact of recession on the performance of mutual fund.

Alternate hypothesis (H1):

There is impact of recession on the performance of mutual fund.

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DATA ANALYSIS AND INTERPRETATION:

For the purpose of this study, there are many mutual funds available in India. We

are selecting 15 mutual funds for our study. All the funds were selected by

judgmental sampling. All the funds selected for the study are open-ended equity

funds under the growth option. The Net Asset Values (NAV) returns, for all

the15funds are from 2006 to 2010, which is the period of this study. We take all

these mutual funds:-

ICICI Pru Discovery Fund (G)

DSP-BR Micro Cap Fund - RP (G)

Birla Sun Life Dividend Yield Plus (G)

Templeton India Equity Income Fund (G)

Reliance Equity Opportunities Fund - Retail Plan (G)

HDFC Equity Fund (G)

Tata Dividend Yield Fund (G)

SBI Magnum Emerging Businesses Fund (G)

HDFC Equity Fund (G)

UTI Dividend Yield Fund (G)

Principal Emerging Blue-chip Fund (G)

Franklin Asian Equity Fund (G)

HDFC Core & Satellite Fund (G)

UTI Master Value Fund (G)

Returns:

Returns are the yield that an asset generates over a period of time. It is the percentage increase or

decrease in the value of the investment over a period of time.

In this study the fund returns have been calculated for each of the period.

There are 15funds with a 5 year data, which effectively gives average returns for the period. The

main purpose of this exercises the fund returns and analysis the fund’s performance.

The fund returns for each of the period were calculated as follows:

Current NAV – Previous NAV x 100

Previous NAV

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The BSE Sensex returns were calculated as follows:

Current Closing – Previous Closing x 100

Previous Closing

NAV OF MUTUAL FUND

NAV is calculated by most funds after the close of the exchanges each day by taking the closing

market value of all securities owned plus all other assets such as cash, subtracting all liabilities,

then dividing the result (total net assets) by the total number of shares outstanding. The number

of shares outstanding can vary each day depending on the number of purchases and redemptions.

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mutual fund 2006 to 2010 21.83

BIRLA SUNLIFE 39.23

TEMPLETON INDIA 9.52

RELIANCE 15.335

HDFC EQUITY 112.438

TATA DIVIDEND 15.299

SBI MAGNUM 24.49

UTI DIVINDEND 13.58

PRINCIPAL EMARGING 9.88

FRAKLIN ASIAN 9.568

HDFC CORE 20.746

UTI MASTER VALUE 28.09

BIRLA SUNLIFE 9.968

HSBC EMARGING 11.515

RELIANCE REGULAR 10.153

LIC MF BOND 19.016

CANARA ROBECO 10.68

TATA FLOATER 10.213

6%

BIRLA SUNLIFE10%

TEMPLETON INDIA

2%RELIANCE

4%

HDFC EQUITY29%

TATA DIVIDEND4%SBI MAGNUM

6%

UTI DIVINDEND3%

PRINCIPAL EMARGING

3%

FRAKLIN ASIAN2%

HDFC CORE5%

UTI MASTER VALUE

7%

BIRLA SUNLIFE3%

HSBC EMARG-ING3%

RELIANCE REGULAR

3%

LIC MF BOND5%

CANARA ROBECO3%

TATA FLOATER3%

2006 to 2010

ANALYSIS:-

When we analysis the NAV of all these mutual fund we find the value of particular mutual fund

and we find in that HDFC EQUITY FUND has higher NET ASSETS value is very high. HDFC

has 112.43 NAV in 2006 to 2010.

IN 2008 all mutual funds give not higher return because the NAV all these mutual funds is

decline and investors not invest in the mutual funds.

SHARPE’S PERFORMANCE INDEX

The Sharpe Index is a measure with which you may measure the performance of your portfolio

over a given period of time. The important aspect of the Sharpe Index is that this performance

indicator takes into consideration the risk of the portfolio.

In order to use the Sharpe Index, you must know three things; the portfolio return, the risk-free

rate of return, and the Standard Deviation of the portfolio. For the risk-free rate of return, you

may use the average return (over the period of time) of some government bond or note. The

Standard Deviation of the portfolio is a measure of the systematic risk of the portfolio. Using the

Standard Deviation, rather than the beta (as in the Treynor Index), you are assuming that the

portfolio is NOT a diversified portfolio. If you are looking at the return of a mutual fund, this

figure is typically available from the fund company itself (this and other measures are also

available from the American Association of Individual Investors' Guide to Mutual Funds). The

Sharpe ratio has as its principal advantage that it is directly computable from any observed series

of returns without need for additional information surrounding the source of profitability. Other

ratios such as the bias ratio have recently been introduced into the literature to handle cases

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where the observed volatility may be an especially poor proxy for the risk inherent in a time-

series of observed returns.

The returns measured can be of any frequency (i.e. daily, weekly, monthly or annually), as long

as they are normally distributed, as the returns can always be annualized. Herein lies the

underlying weakness of the ratio - not all asset returns are normally distributed. Abnormalities

like kurtosis, fatter tails and higher peaks, or skewness on the distribution can be a problematic

for the ratio, as standard deviation doesn't have the same effectiveness when these problems

exist. Sometimes it can be downright dangerous to use this formula when returns are not

normally distributed.

For those of you who want to know the formula for the index:-

Sharpe = (Portfolio Return - Risk-Free Return) / Standard

Deviation

DATA OF MUTUAL FUND

2010 2009 2008 2007 2006

ICICI PRU 0.42234 1.479506 -0.94315 0.56515

BIRLA SUNLIFE 0.44865 1.62838 -1.23501

0.99946

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TEMPLETON

INDIA 0.297707 1.679286 -1.04643 0.87707 0.21748

RELIANCE 0.418 0.41807 1.68955 -1.07109 0.7791

HDFC EQUITY 0.40928 1.74858 -1.02322 0.8331 0.54083

TATA DIVIDEND 0.44438 1.43431 -1.07483

1.23199

3 0.1409

SBI MAGNUM 0.398238 1.553156 -1.11758

0.88305

1 0.344

UTI DIVINDEND 0.34664 1.528 -1.01205 0.83318 0.54083

PRINCIPAL

EMARGING 0.166158 1.837196 0.04998

FRAKLIN ASIAN 0.03625 0.949098 -0.8062

HDFC CORE 0.38912 1.68073 -1.10892

0.64854

2 0.5645

UTI MASTER

VALUE 0.3105 1.68769 -1.02846 0.83513 0.07289

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BIRLA SUNLIFE -0.004351 0.8529 -1.56226 -0.19147

HSBC

EMARGING 0.10172 1.10998 -1.01277

RELIANCE

REGULAR 0.382039 1.6138 -1.03346 1.05795 0.183672

LIC MF BOND -0.06633 -0.53068 1.99005 0.46434 -0.24322

CANARA

ROBECO -0.10123 0.0828 2.199493 0.0368 -0.12884

TATA FLOATER -0.1837 -0.1837 2.081936

1.34713

5 0.3674

ICICI PRU9% BIRLA SUNLIFE

9%TEMPLETON

INDIA6%

RELIANCE8%

HDFC EQUITY8%

TATA DIVIDEND9%

SBI MAGNUM8%

UTI DIVINDEND7%

PRINCIPAL EMARGING

3%

FRAKLIN ASIAN1%

HDFC CORE8%

UTI MASTER VALUE

6%

BIRLA SUNLIFE0%

HSBC EMARGING2%

RELIANCE REG-ULAR8%

LIC MF BOND1%

CANARA ROBECO2%

TATA FLOATER4%

2010

ANALYSIS:- when we analysis the data of above mutual fund we find these results,

which is as follow:-

According to Sharpe performance index we find the result that if any mutual fund has

higher st (index) that means it has a better ranked and it performance is very better than the

Others mutual funds.

And if a mutual fund has not very well higher st that means it is a great risk to earn the

18

higher return and its adjusted return was not the most desirable.

In this analysis we can say that TATA DIVIDEND has highly returned because it has higher

index in the recession.

Other mutual fund like SBI, HDFC CORE, RELIANCE, HDFCEQUITY, and

RELIANCE REGULAR all has 8% of index in term of percentage.

LIC FM, TATA FLOATER, CANARAMUTUAL has index in negative it means that the

mutual fund not provide any type of return which outcome in negative.

2010 2009 2008 2007 2006

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5ICICI PRUBIRLA SUNLIFETEMPLETON INDIARELIANCEHDFC EQUITYTATA DIVIDENDSBI MAGNUMUTI DIVINDENDPRINCIPAL EMARGINGFRAKLIN ASIANHDFC COREUTI MASTER VALUEBIRLA SUNLIFEHSBC EMARGING RELIANCE REGULARLIC MF BONDCANARA ROBECOTATA FLOATER

ANALYSIS:-

When we analysis these data we find that in 2006 HDFC EQUITY AND RELIANCE not best

risk-adjusted average rate of return. These fund give performance in negative that means it not

have better index and return of mutual fund is not efficient to satisfy the diversification.

In 2007 RELIANCE FUND again give negative returns and UTI MASTER, HDFC EQUITY,

FRAKLIN ASIAN the higher index value and give highly return that fund most desirable.

In 2008 only RELIANCE FUND give highly index performance all others fund not performed

very well, all these fund give the negative return and they are not provide risk-adjusted rate of

19

return.

In 2009 all mutual fund give highly index performance and the return of all these fund is high

that means all these fund in 2009 all these funds give better performance.

In 2010 all the mutual fund return is very less and the performance of all these funds is not

strong index and they are not very desirable.

So our null hypothesis is rejected that the recession has no impact on the mutual fund

performance. And our alternative hypothesis is accepted.

Findings:

Finding of this study is When we analysis the data of 2006 to 2010 of 15 mutual funds in

India during and after recession and find that there is effect on mutual fund industry. In

2006 to 2010 there is fluctuation in the market so that market prices, returns, performance

index very rapidly change during and after recession.

So our null hypothesis is rejected that the recession has no impact on the mutual fund

performance. And our alternative hypothesis is accepted. In during recession mutual fund

NAV and performance is decline. There are decline in NAV the (prices in the market is

decline) and returns of mutual fund is negative in during recession. In the 2009- 2010

there is better performance of mutual fund and market condition improve rather than in

2006 to 2008.

We find that the following points which are as follows:-

1. We found Net asset value of all the 15 mutual funds and we found that HDFC EQUITY

fund has higher Net asset value which is 29% and TEMPLETON INDIA and FRANKLIN

ASIAN have lower net asset value which is only 2%.

2. According to Sharpe performance index we found that if any mutual fund has higher

Sharpe Performance (index) that means it has a better ranked.

3. We found that TATA DIVIDEND has highly returned because it has higher index in the

recession and other mutual fund like SBI, HDFC CORE, RELIANCE, HDFCEQUITY,

and RELIANCE REGULAR all has 8% of index in term of percentage.

4. We also found that LIC FM, TATA FLOATER, CANARAMUTUAL has index in

negative. We found that in 2006 HDFC EQUITY AND RELIANCE not best risk-adjusted

average rate of return. These funds give performance in negative. We found that in 2007

RELIANCE FUND again give negative returns and UTI MASTER, HDFC EQUITY,

20

FRAKLIN ASIAN the higher index value and give highly return that fund most desirable.

We found that in 2008 only RELIANCE FUND give highly index performance all others

fund not performed very well, all these fund give the negative return and they are not

provide risk-adjusted rate of return.

5. We find that in 2009 all mutual fund give highly index performance and the return of

these entire fund is high. We found that in 2010 all the mutual fund return is very less and

the performance of all these funds is not strong index and they are not very desirable.

Suggestion & recommendation

Money is tight in every recession and you may wonder how to survive. It is more a matter of

planning before the recession hits because there are always good and bad times. It is a good idea

to take the necessary precautions to survive a recession. With some creativity and insight where

to cut down expenses, and picking the best investment instruments, you can boost your savings.

On the basis of our findings we conclude that whole Indian economy has effected by recession.

In mutual fund stocks there is impact on stock market. Prices of mutual funds, returns,

performance index all things fluctuated by recession. In this time market goes down and

investors don’t want to invest their money in mutual fund because the performance and returns

are rapidly changed. The performance of mutual fund is change during and after recession.

NAV of different mutual fund is going down, after 2008 there is better in mutual fund in

comparison on 2006, 07, 08. So last we can say that recession impact on whole market of

mutual fund. The key for making profit with stocks is to buy low and sell high. A recession is

the perfect moment to buy stocks because most stocks are undervalued and you can best

compare the indices which might help you to evaluate stocks of different companies or sectors

with best chances to increase faster after recession is over.

So we suggest to the investor for following points.

Investors should use the diversification in the mutual fund which minimizes their risk.

They identify which mutual fund gives the better performance according to that select the

mutual fund Portfolio.

Analysis the NAV of all mutual funds after that we can find the performance of

mutual funds.

Use which mutual fund which is not so flexible, in which less fluctuation.

A far better strategy is to build a diversified mutual fund portfolio. A properly

21

constructed portfolio, including a mix of both stock and bonds funds, provides

an opportunity to participate in stock market growth and cushions your portfolio

when the stock market is in decline. Such a portfolio can be constructed by

purchasing individual funds in proportions.

Costs are the biggest problem with mutual funds. These costs eat into your

return, and they are the main reason why the majority of funds end up with sub-

par performance.

Being well-diversified financial instruments, they are less risky than if you were to invest

in individual stocks. You can reap investment opportunities from all over the world, as

they are invested globally and into different financial instruments. They are managed by

professional fund managers who aim to obtain higher returns for your money. You do not

need to monitor equity markets closely for fluctuations. There is a wide selection of

mutual funds available to meet the different investment objectives of investors. Staying

invested over time, these returns can compound to very attractive amounts, unlike savings

deposits.

References:

Grinblatt and Titman (1992) Forbes. Vol. 155, Iss. 5; pg. 150, 1 pgs

French &Fama (1993) Measuring mutual fund performance,” Portfolio

Organizer ICFAI University Press, pp 30-34.

Sharpe, William (1966). “Mutual Fund Performance”, Journal of Business, Vol.

39 pp. 119-138.

Mishra, et al., (2002) “The Growth of Index Funds and the Pricing of Equity

Securities”. Journal of Portfolio Management 26:2, 9-21.

Grable & Asebedo (2004) “Determinants of Persistence in Performance of

Mutual Funds”, the Journal of Financial Research, pp. 30-52.

Noulas G s Athanasios, Papanastasiou A John, Lazaridis John (2005). Vol. 31,

Iss. 2; pg. 101, 12 pgs

22

Bruce A Costa, Keith Jakob, Gary E Porter(. Summer 2006) “Journal of

Investing. New York”, Vol. 15, Iss. 2; pg. 79, 10 pgs.

Kuosmanen Timo. (Oct 2007). “The Journal of Financial Research” Vol. 33, Iss.

3; pg. 249

John A Haslem, H Kent Baker, David M Smith (2007 ) “Journal of Investing”.

Vol. 16, Iss. 2; pg. 32, 21 pgs

Marcin Kacperczyk, Clemens Sialm, Lu Zheng (2007). “ Journal of Investment

Management” pg. 3

Yuan Rongli, Xiao Zezhong Jason, Zou Hong ( Aug 2008) “Journal of Banking

& Finance”. Vol. 32, Iss. 8; pg. 1552

Aymen Karoui, Iwan Meier ( Jul 2009) “The European Journal of Finance”. Vol.

15, Iss. 5/6; pg. 487

Bertin J William, Prathe Laurier. (Dec 2009)“Journal of Business Research”.

Vol. 62, Iss. 12; pg. 1364

Jha Ranjini, Korkie Bob, Turtle J Harry (Oct 2009). “Journal of Banking &

Finance”. Vol. 33, Iss. 10; pg. 1851

Chen Yong, Ferson Wayne, Peters Helen. ( 2010 ) “Journal of Financial

Economics”, Vol. 98, Iss. 1; pg. 72

Budiono P Diana, Martens Martin ( 2010 )” The Journal of Financial Research”.

Vol. 33, Iss. 3; pg. 249

Shahzad Akmal, Khilji Ahmed Bashir , Ahmed Irfan , Asghar Ali Nisar , Ali

Javed .( Aug 2010) Interdisciplinary Journal of Contemporary Research In

23

Business’s. Vol. 2, Iss. 4; pg. 347, 13 pg.

Eling Martin, Faust Roger ( Aug 2010) “Review of Quantitative Finance and

Accounting”. Vol. 36, Iss. 2; pg. 153

Diana P Budiono, Martin Martens (2010). “The Journal of Financial Research”.

Vol. 33, Iss. 3; pg. 249

Javier Rodriguez (2010). “Review of Accounting & Finance”. Vol. 9, Iss. 2; pg.

180

Yee Cheng Loon (Feb 2011). “Review of Quantitative Finance and Accounting”.

Vol. 36, Iss. 2; pg. 153

CAPSTONE PROJECT REVIEW

“PERFORMANCE OF MUTUAL FUNDS DURING & AFTER RECESSION IN

INDIA”

Abstract

The purpose of this paper is to provide an insight into the current situation of recession in our

Indian economy and how it is affecting the mutual funds in India. In this study we take 15 mutual

funds in India which have NAV above the 9%. And after that we measured the performance of

mutual fund during and after recession. So we take the time period 2006 to 2010. In we analysis

on the basic of NAV, returns, market value, and performance index. And find the impact of

recession. For analysis we use Sharpe index model and we take the portfolio return , NAV.

Finding of this study is When we analysis the data of 2006 to 2010 of 15 mutual funds in India

during and after recession and find that there is effect on mutual fund industry. In 2006 to 2010

there is fluctuation in the market so that market prices, returns, performance index very rapidly

change during and after recession. So our null hypothesis is rejected that the recession has no

24

impact on the mutual fund performance. And our alternative hypothesis is accepted.

The remarkable performance of this industry has attracted many researchers to study and

examine the growth, the performance of funds, the players in the market and the regulators. It is

interesting to learn the growth phase of these funds over this period.

The mutual fund industry has been in India for a long time. This came into existence in 1963

with the establishment of Unit Trust of India, a joint effort by the Government of India and the

Reserve Bank of India. The next two decades from 1986 to 1993 can be termed as the period of

public sector funds with entry of new public sector players into the mutual fund industry namely,

Life Insurance Corporation of India and General Insurance Corporation of India.

Significance of the Study

Over the last couple of years mutual funds have given impressive returns, especially equity

funds. The growth period first started during early 2005 with markets appreciating significantly.

With 2006 approaching more towards 2007, markets rallied like never before. The financial year

2007-08 was a year of reckoning for the mutual fund industry in many ways. Most stocks were

trading in green. All fund houses boasted of giving phenomenal returns. Many funds

outperformed markets. Equity markets were in the limelight. Investors who were not exposed to

equity stocks suddenly infused funds.

Growth funds which aim at giving capital appreciation invest in growth stocks of the fastest

growing companies. Since these funds are more risky providing above average earnings,

investors pay a premium for the same. These funds have grown to become extensively popular in

India. All the leading fund houses offer several schemes under the growth funds today.The

remarkable performance of this industry has attracted many researchers to study and examine the

growth, the performance of funds, the players in the market and the regulators. It is interesting to

learn the growth phase of these funds over this period.

OBJECTIVE OF STUDY:

To compare the performance of mutual funds during recession and the post recession

25

period.

SCOPE OF THE STUDYSCOPE OF THE STUDY

The scope of the study is to provide the current situation of recession in our Indian economy and how it is

affecting the mutual funds in India. In future it will help the general people who read this report as to how are

mutual funds has improved and to let them know whether it is safe to keep the money with funds in future. It will

help investors to know the performance of various mutual funds during and after recession period. As a result it

will give an overall scenario and performance of mutual funds during and after recession. It can be very

beneficial for the students doing their project based on this topic, for other research. It may also help different

financial institution and insurance sector on to make them prepare for such type of uncertainties.

Review of literature

A number of researchers have examined mutual fund performance persistence, but the results are.

Grinblatt and Titman (1992) find that there is positive persistence in mutual fund performance.

They find that part of the persistence is due to differences in fees and transaction costs across

funds. They conclude that past performance does provide useful information for investors. Fama

& French (1993) proposed a three-factor model for mutual funds which takes into account the

fund size and book-to-market in addition to the market factor They indicate that this model can

be used for various purposes including portfolio selection, evaluating performance, measuring

abnormal returns and estimating the cost of capital. argue that this model by Fama & French is

better than CAPM based portfolio analysis procedures and "advocates a simple and

straightforward way" of carrying out any analysis. Sharpe, William F. (1966) suggested a

measure for the evaluation of portfolio performance. Drawing on results obtained in the field of

portfolio analysis, economist Jack L. Trey nor has suggested a new predictor of mutual fund

performance, one that differs from virtually all those used previously by incorporating the

volatility of a fund's return in a simple yet meaningful manner .by. He argued mutual funds

underperform the market by the amount of expenses they charge the investors. There are various

factors that affect the performance of mutual funds. Have attempted to research on the factors,

especially on the cost sides, that affect the performance of mutual funds. These two researches

came up with several cost side factors with load fees, sales charges, redemption fees, transaction

costs, expense ratio. Mishra, et al., (2002) measured mutual fund performance using lower

partial moment. In this paper, measures of evaluating portfolio performance based on lower

partial moment are developed. Risk from the lower partial moment is measured by taking into

26

account only those states in which return is below a pre-specified “target rate” like risk-free rate.

Asebedo & Grable (2004) identified as an important factor influencing mutual funds'

performance. He argues that fund managers control all sorts of decision making related to

investment by the fund, therefore their style influences the fund to a great deal. Fund managers

also control the diversification and turnover of fund's assets which again influence fund

performance (Malhotra & Mcleod, 1997 and Fredman, 1999).Timo Kuosmanen. (Oct 2007)

propose a method for mutual fund performance measurement and best-practice benchmarking,

which endogenously identifies a dominating benchmark portfolio for each evaluated mutual

fund. Dominating benchmarks provide information about efficiency improvement potential as

well as portfolio strategies for achieving them. Portfolio diversification possibilities are accounts

for by using Data Envelopment Analysis (DEA). Portfolio risk is accounted for in terms of the

full return distribution by utilizing Stochastic Dominance (SD) criteria. Rongli Yuan, Jason

Zezhong Xiao, Hong Zou(.: Aug 2008. ) study tests empirically the impact of mutual funds'

ownership on firm performance in China, using a large sample for the period of 2001-2005. We

find that equity ownership by mutual funds has a positive effect on firm performance. The result

is robust to several measures of firm performance and various estimations. Our finding supports

recent regulatory efforts in China to promote mutual funds as a corporate governance mechanism

and suggests that pooling diffuse minority interests of individual shareholders who are prone to

free-rider problems via mutual funds is beneficial. William J Bertin, Laurie Prather.(: Dec

2009) study reports on FOFs' characteristics and performance relative to traditional equity mutual

funds and finds that FOFs compare favorably. FOFs with identified managers outperform their

unidentified counterparts, and FOFs that invest in-family outperform both traditional equity

funds and those FOFs investing out-of-family. Finally, replicating FOFs' holdings can be

prohibitively expensive since they commonly hold funds with high minimum initial investments,

closed funds and/ or funds that are restricted to a particular investor type.Ranjini Jha, Bob

Korkie, Harry J Turtle: (Oct 2009) develop conditional alpha performance measures that are

consistent with conditional mean-variance analysis and the magnitude and sign of the implied

true conditional time-varying alphas. The sequence of conditional alphas and betas is estimable

from surprisingly simple unconditional regressions. Other common performance measures are

derivable from the conditional investment opportunity set based on its conditional asset return

moments. Our bootstrap analysis of Morningstar mutual fund returns data demonstrates that the

differences between existing conditional alpha measures and our proposed alpha are substantive

for typical parameterizations.Yong Chen, Wayne Ferson, Helen Peters. ( 2010 ) evaluates the

ability of bond funds to "market time" nine common factors related to bond markets. Timing

ability generates nonlinearity in fund returns as a function of common factors, but there are

27

several non-timing-related sources of nonlinearity. Controlling for the non-timing-related

nonlinearity is important. Funds' returns are more concave than benchmark returns, and this

would appear as poor timing ability in naive models. With controls, the timing coefficients

appear neutral to weakly positive. Adjusting for nonlinearity, the performance of many bond

funds is significantly negative on an after-cost basis, but significantly positive on a before-cost

basis. Diana P Budiono, Martin Martens.( 2010 )The popular investment strategy in the

literature is to use only past performance to select mutual funds. We investigate whether an

investor can select superior funds by additionally using fund characteristics. After considering

the fund fees, we find that combining information on past performance, turnover ratio, and ability

produces a yearly excess net return of 8.0%, whereas an investment strategy that uses only past

performance generates 7.1%. Adjusting for systematic risks, and then using fund characteristics,

increases yearly alpha significantly from 0.8% to 1.7%. The strategy that also uses fund

characteristics requires less turnover. Akmal, Bashir Ahmed Khilji, Irfan Ahmed, Nisar Ali

Asghar, Javed Ali.( Aug 2010) Mutual funds are considered as vehicle for investment in stock

market. These not only reduce the risk but also reduce the transaction cost. Mutual performance

is a common topic in all country to be studied. This paper evaluates the mutual funds in Pakistan;

provide information to different stake holder regarding current and future developments. Simple

descriptive tools employed to intemperate data. Result shows that on overall basis, funds industry

outperform the market. The future of industry depends on the performance of funds industry and

the role of regulatory bodies. Martin Eling, Roger Faust.:( Aug 2010). findings of this study is

Use of short selling and derivatives is limited in most emerging markets because such

instruments are not as readily available as they are in developed capital markets. These

limitations raise questions about the value added provided by hedge funds, especially compared

to traditional mutual funds active in these markets. We use five existing performance

measurement models plus a new asset-style factor model to identify the return sources and the

alpha generated by both types of funds. We analyze subperiods, different market environments,

and structural breaks. Our results indicate that some hedge funds generate significant positive

alpha, whereas most mutual funds do not outperform traditional benchmarks. We find that hedge

funds are more active in shifting their asset allocation. The higher degree of freedom that hedge

funds enjoy in their investment style might thus be one explanation for the differences in

performance. Javier.:( 2010.) purpose of this paper is to examine the performance of a sample of

socially responsible mutual funds (SRMFs) and a matched sample of conventional funds during

the 1997-2005 time period. On the basis of the raw returns, socially responsible funds performed

better than some market indexes but this evidence of outperformance disappears once risk is

incorporated into the analysis. Consistent with previous studies, no evidence was found of out

28

performance by socially responsible funds. Also, the difference between the performance of

SRMFs and conventional mutual funds is not statistically significant. This result is robust to the

use of two additional measures of risk-adjusted performance.

III. Methodology and Data

Research design

Sources of data collection

Research instruments

Sampling plan

Research Design

A number of facts could be explored by means of this research in regards to the

performance of mutual funds during and post recession in India. The research is causal in

nature because all the data is known. Our research is descriptive in nature.

.Sources of Data Collection

Data Collection

Information will be collected from only secondary data.

Secondary sources- Secondary data are those which have already been collected by

someone else which already had been passed through the statistical process. Secondary

data will be collected through books, Journals and websites.

Population:-All the mutual funds in 2006-2010 of India are our population.

Sample size:-Different 15 mutual funds are our sample size. Which have NAV more than 8%.

Sample element- Individual mutual fund is the sample element.

Sampling Technique- In this research judge mental sampling is done purely on the basis of

researcher’s judgments. On the basic of NAV we select the mutual fund.

Statistical Tools:-

Tools of presentation: In the current study, data will be presented through figures, charts

graphs and tables.

HYPOTHESIS

29

Null hypothesis (Ho)

There is no impact of recession on the performance of mutual fund.

Alternate hypothesis (H1):

There is an impact of recession on the performance of mutual fund.

Limitations

• time constraint was one of the major problems.

The study is limited to selected mutual fund schemes

• The lack of information sources for the analysis part.

DATA ANALYSIS

For the purpose of this study, there are many mutual funds available in India. We are selecting 15 mutual funds

for our study. All the funds were selected by judgmental sampling. All the funds selected for the study are open-

ended equity funds under the growth option. The Net Asset Values (NAV) returns, for all the15funds are from

2006 to 2010, which is the period of this study. We take all these mutual funds:-

ICICI Pru Discovery Fund (G),DSP-BR Micro Cap Fund - RP (G),Birla Sun Life Dividend Yield Plus

(G),Templeton India Equity Income Fund (G),Reliance Equity Opportunities Fund - Retail Plan (G),HDFC

Equity Fund (G),Tata Dividend Yield Fund (G),SBI Magnum Emerging Businesses Fund (G),HDFC Equity

Fund (G),UTI Dividend Yield Fund (G),Principal Emerging Blue-chip Fund (G),Franklin Asian Equity Fund

(G),HDFC Core & Satellite Fund (G),UTI Master Value Fund (G)

In this study the fund returns have been calculated for each of the period.

NAV ANALYSIS:

There are 15funds with a 5 year data, which effectively gives average returns for the period. The main purpose of

this exercises the fund returns and analysis the fund’s performance. The fund returns for each of the period were

calculated as follows:

Current NAV – Previous NAV x 100

Previous NAV

30

When we analysis the NAV of all these mutual fund we find the value of particular mutual fund and we find in

that HDFC EQUITY FUND has higher NET ASSETS value is very high. HDFC has 112.43 NAV in 2006 to

2010.

IN 2008 all mutual funds give not higher return because the NAV all these mutual funds is decline and investors

not invest in the mutual funds.

SHARPE’S PERFORMANCE INDEX

The Sharpe Index is a measure with which you may measure the performance of your portfolio over a given

period of time. The important aspect of the Sharpe Index is that this performance indicator takes into

consideration the risk of the portfolio.

Sharpe = (Portfolio Return - Risk-Free Return) / Standard Deviation

When we analysis the data of above mutual fund we find these results, which is as follow:-

According to Sharpe performance index we find the result that if any mutual fund has higher st (index)

that means it has a better ranked and it performance is very better than the others mutual funds.

And if a mutual fund has not very well higher st that means it is a great risk to earn the higher return and

its adjusted return was not the most desirable.

In this analysis we can say that TATA DIVIDEND has highly returned because it has higher index in the

recession.

Other mutual fund like SBI, HDFC CORE, RELIANCE, HDFCEQUITY, and RELIANCE REGULAR

all has 8% of index in term of percentage.

LIC FM, TATA FLOATER, CANARAMUTUAL has index in negative it means that the mutual fund not

provide any type of return which outcome in negative.

Findings

Finding of this study is When we analysis the data of 2006 to 2010 of 15 mutual funds in India during

and after recession and find that there is effect on mutual fund industry. In 2006 to 2010 there is

fluctuation in the market so that market prices, returns, performance index very rapidly change during and

after recession.

So our null hypothesis is rejected that the recession has no impact on the mutual fund performance. And

31

our alternative hypothesis is accepted. In during recession mutual fund NAV and performance is decline.

There are decline in NAV the (prices in the market is decline) and returns of mutual fund is negative in

during recession. in the 2009,2010 there is better performance of mutual fund and market condition

improve rather than in 2006 to 2008.

Conclusion

On the basis of our findings we conclude that whole Indian economy has effected by recession. In mutual

fund stocks there is impact on stock market. Prices of mutual funds, returns, performance index all things

fluctuated by recession. In this time market goes down and investors don’t want to invest their money in

mutual fund because the performance and returns are rapidly changed. The performance of mutual fund is

change during and after recession. NAV of different mutual fund is going down, after 2008 there is better

in mutual fund in comparison on 2006, 07, 08. So last we can say that recession impact on whole market

of mutual fund.

References:

Grinblatt and Titman (1992) Forbes. Vol. 155, Iss. 5; pg. 150, 1 pgs

French &Fama (1993) Measuring mutual fund performance,” Portfolio Organizer ICFAI University

Press, pp 30-34

Sharpe, William (1966). “Mutual Fund Performance”, Journal of Business, Vol. 39,

pp. 119-138.

Mishra, et al., (2002) “The Growth of Index Funds and the Pricing of Equity Securities”. Journal of

Portfolio Management 26:2, 9-21.

Grable & Asebedo (2004) “Determinants of Persistence in Performance of Mutual Funds”, the Journal of

Financial Research, pp. 30-52.

Kuosmanen Timo. (Oct 2007). “The Journal of Financial Research”... Vol. 33, Iss. 3; pg. 249

Yuan Rongli, Xiao Zezhong Jason, Zou Hong ( Aug 2008) “Journal of Banking & Finance”. Vol. 32, Iss.

8; pg. 1552

32

Bertin J William, Prathe Laurier. (Dec 2009)“Journal of Business Research”. Vol. 62, Iss. 12; pg. 1364

Jha Ranjini, Korkie Bob, Turtle J Harry (Oct 2009). “Journal of Banking & Finance”. Vol. 33, Iss. 10;

pg. 1851

Chen Yong, Ferson Wayne, Peters Helen. ( 2010 ) “Journal of Financial Economics” ,Vol. 98, Iss. 1; pg.

72

Budiono P Diana, Martens Martin ( 2010 )” The Journal of Financial Research”. Vol. 33, Iss. 3; pg. 249

Shahzad Akmal, Khilji Ahmed Bashir , Ahmed Irfan , Asghar Ali Nisar , Ali Javed .( Aug 2010)

Interdisciplinary Journal of Contemporary Research In Business’s. Vol. 2, Iss. 4;  pg. 347, 13 pgs

Eling Martin, Faust Roger ( Aug 2010) “Review of Quantitative Finance and Accounting”. Vol. 36, Iss. 2;

pg. 153

33

Annexure-1

Sharpe index calculation:

Column1 Column2 Column3 Column4 Column5 Column6 Column7

2010 2009 2008 2007 2006

ICICI PRU 0.42234 1.47950593 -0.9431526 0.56515 0.44865

BIRLA SUNLIFE 0.44865 1.62838 -1.23501 0.9994666 0.297707

TEMPLETON INDIA 0.297707 1.679286 -1.0464344 0.87707 0.21748

RELIANC

E 0.418 0.41807 1.68955 -1.071088 0.7791

HDFC EQUITY 0.40928 1.74858 -1.02322 0.8331 0.54083

TATA DIVIDEND 0.44438 1.43431 -1.07483 1.2319926 0.1409

SBI MAGNUM 0.398238 1.553156 -1.1175826 0.8830505 0.344

UTI DIVINDEND 0.34664 1.528 -1.01205 0.83318 0.54083

PRINCIPAL

EMARGING 0.166158 1.837196 0.04998

FRAKLIN ASIAN 0.03625 0.949098 -0.8062

HDFC

CORE 0.38912 1.6807304 -1.108916 0.648542 0.5645

UTI MASTER VALUE 0.3105 1.68769 -1.02846 0.8351303 0.07289

BIRLA SUNLIFE -0.004351 0.8529 -1.562258 -0.1914745

HSBC EMARGING 0.10172 1.10998 -1.01277

RELIANCE

REGULAR 0.382039 1.6138 -1.03346 1.05795 0.183672

LIC MF BOND -0.06633 -0.53068 1.99005 0.46434 -0.24322

CANARA ROBECO -0.10123 0.0828 2.199493 0.0368 -0.12884

34

TATA FLOATER -0.1837 -0.1837 2.081936 1.347135 0.3674

Annexure-2

Calculation of individual mutual fund performance:

ICICI Pru Discovery Fund (G)

ICICI Pru Discovery Fund (G) Column1 Column2 Column3 Column4 Column5 Column6

Year Annual RF RP-RF DAVIATION ST

2010 38.6 6 32.6 77.18793 0.422345825

2009 120.2 6 114.2 77.18793 1.479505928

2008 -66.8 6 -72.8 77.18793 -0.943152641

2007 50.5 6 44.5 77.18793 0.576515007

STANDARD DAV 77.18792544

Birla Sun Life Dividend Yield Plus (G)

Birla Sun Life Dividend Yield Plus (G) Column1 Column2 Column3 Column4 Column5

Year Annual RF RP-RF DAVIATION ST

2010 28.4 6 22.4 49.92663 0.448658361

2009 87.3 6 81.3 49.92663 1.628389499

2008 -45.1 6 -51.1 49.92663 -1.023501887

2007 55.9 6 49.9 49.92663 0.999466617

2006 9.7 6 3.7 49.92663 0.074108747

49.92662616

35

Templeton India Equity Income Fund (G)

Column1 Column2

Column

3

Column

4 Column5 Column6

Year Annual RF RP-RF DAVIATION ST

2010 22.7 6 16.7 56.09525

0.29770791

6

2009 100.2 6 94.2 56.09525

1.67928657

1

2008 -52.7 6 -58.7 56.09525

-

1.04643441

3

2007 55.2 6 49.2 56.09525 0.87707961

2006 18.2 6 12.2 56.09525 0.21748722

ST

56.0952493

5

Reliance Equity Opportunities Fund - Retail Plan (G)

Reliance Equity Opportunities

Fund - Retail Plan (G) Column1 Column2

Column

3

Column

4 Column5 Column6

Year Annual RF RP-RF

DAVIATIO

N ST

2010 30.2 6 24.2 57.88503

0.41807009

5

2009 103.8 6 97.8 57.88503

1.68955600

4

2008 -56 6 -62 57.88503

-

1.07108867

4

2007 45.3 6 39.3 57.88503

0.67893201

4

2006 51.1 6 45.1 57.88503

0.77913063

2

57.8850326

1

HDFC Equity Fund (G)

HDFC Equity Fund (G) Column1 Column2 Column3 Column4 Column5 Column6

Year Annual RF RP-RF

DAVIATIO

N ST

2010 28.4 6 22.4 54.73005

0.40928155

6

2009 101.7 6 95.7 54.73005 1.74858236

2008 -50 6 -56 54.73005

-

1.02320388

9

36

2007 51.6 6 45.6 54.73005 0.83318031

2006 35.6 6 29.6 54.73005

0.54083634

1

STANDARD DAV

54.7300465

9

Tata Dividend Yield Fund (G)

Tata Dividend Yield Fund (G) Column1 Column2 Column3 Column4 Column5 Column6

Year Annual RF RP-RF

DAVIATIO

N ST

2010 30.6 6 24.6 55.3574747

0.44438443

3

2009 85.4 6 79.4 55.3574747

1.43431398

3

2008 -53.5 6 -59.5 55.3574747

-

1.07483226

7

2007 74.2 6 68.2 55.3574747

1.23199261

5

2006 13.8 6 7.8 55.3574747

0.14090238

1

STANDARD DAV 55.3574747

SBI Magnum Emerging Businesses Fund (G)

Year Annual RF RP-RF DAVIATION ST Column1

2010 31.3 6 25.3 63.5297725 0.398238479

2009 103.3 6 97.3 63.5297725 1.531565377

2008 -68.7 6 -74.7 63.5297725

-

1.175826657

2007 62.1 6 56.1 63.5297725 0.883050541

2006 27.9 6 21.9 63.5297725 0.344720265

63.529772

5

HDFC Equity Fund (G)

37

Year Annual RF RP-RF DAVIATION ST

2010 28.4 6 22.4 54.7300466 0.409281581

2009 101.7 6 95.7 54.7300466 1.748582469

2008 -50 6 -56 54.7300466 -1.023203952

2007 51.6 6 45.6 54.7300466 0.833180361

2006 35.6 6 29.6 54.7300466 0.540836375

54.730046

6

UTI Dividend Yield Fund (G)

Year Annual RF RP-RF DAVIATION ST

2010 23.4 6 17.4 50.1947507 0.346649794

2009 82.7 6 76.7 50.1947507 1.528048231

2008 -44.8 6 -50.8 50.1947507 -1.01205802

2007 69.5 6 63.5 50.1947507 1.265072525

2006 19.9 6 13.9 50.1947507 0.276921387

50.194750

7

Principal Emerging Blue chip Fund (G)

Year Annual RF RP-RF DAVIATION ST

2010 18.3 6 12.3 74.0258288 0.166158221

2009 142 6 136 74.0258288 1.837196587

2008 9.7 6 3.7 74.0258288 0.049982554

2007

2006

74.025828

8

Franklin Asian Equity Fund (G)

Year Annual RF RP-RF DAVIATION ST

2010 7.7 6 1.7 46.8866066 0.036257689

2009 50.5 6 44.5 46.8866066 0.94909833

2008 -31.8 6 -37.8 46.8866066 -0.806200379

38

2007

2006

45.751424

HDFC Core & Satellite Fund (G)

Year Annual RF RP-RF DAVIATION ST

2010 27.3 6 21.3 54.7381037 0.389125647

2009 98 6 92 54.7381037 1.680730493

2008 -54.7 6 -60.7 54.7381037 -1.108916749

2007 41.5 6 35.5 54.7381037 0.648542744

2006 36.9 6 30.9 54.7381037 0.56450622

54.738103

7

UTI Master Value Fund (G)

Year Annual RF RP-RF DAVIATION ST

2010 25.6 6 19.6 63.1039222 0.31059876

2009 112.5 6 106.5 63.1039222 1.687692243

2008 -58.9 6 -64.9 63.1039222 -1.028462221

2007 58.7 6 52.7 63.1039222 0.83513034

2006 10.6 6 4.6 63.1039222 0.072895627

63.103922

2

Birla sun life

Year Annual RF RP-RF DAVIATION ST

2010 5.9 6 -0.1 22.9795561 -0.004351694

2009 25.6 6 19.6 22.9795561 0.852932055

2008 -29.9 6 -35.9 22.9795561 -1.562258202

2007 1.6 6 -4.4 22.9795561 -0.191474543

2006

39

22.979556

1

HSBC Emerging Markets Fund (G)

Year Annual RF RP-RF DAVIATION ST

2010 10.5 6 4.5 44.2350053 0.101729388

2009 55.1 6 49.1 44.2350053 1.109980651

2008 -38.8 6 -44.8 44.2350053 -1.01277257

2007

2006

43.517536

7

Reliance Regular Savings Fund - Balanced Option (G

Year Annual RF RP-RF DAVIATION ST

2010 21.6 6 15.6 40.8335034 0.382039225

2009 71.9 6 65.9 40.8335034 1.613870829

2008 -36.2 6 -42.2 40.8335034 -1.033465083

2007 49.2 6 43.2 40.8335034 1.057954777

2006 13.5 6 7.5 40.8335034 0.183672704

40.833503

4

LIC MF Bond Fund (G)

Year Annual RF RP-RF DAVIATION ST

2010 5.7 6 -0.3 4.52249931 -0.066335002

2009 3.6 6 -2.4 4.52249931 -0.530680015

2008 15 6 9 4.52249931 1.990050055

2007 8.1 6 2.1 4.52249931 0.464345013

2006 4.9 6 -1.1 4.52249931 -0.24322834

4.5224993

1

Canara Robeco Income (G)

Year Annual RF RP-RF DAVIATION ST

40

2010 4.9 6 -1.1 10.8661401 -0.101231899

2009 6.9 6 0.9 10.8661401 0.082826099

2008 29.9 6 23.9 10.8661401 2.199493084

2007 6.4 6 0.4 10.8661401 0.0368116

2006 4.6 6 -1.4 10.8661401 -0.128840599

10.866140

1

Tata Floater Fund (G)

Year Annual RF RP-RF DAVIATION ST

2010 5.7 6 -0.3 1.63309522 -0.18370025

2009 5.7 6 -0.3 1.63309522 -0.18370025

2008 9.4 6 3.4 1.63309522 2.081936165

2007 8.2 6 2.2 1.63309522 1.347135166

2006 6.6 6 0.6 1.63309522 0.3674005

1.6330952

2

Annexure-3

NAV of mutual fund:

mutual fund 2006 to 2010

21.83

41

BIRLA SUNLIFE 39.23

TEMPLETON INDIA 9.52

RELIANCE 15.335

HDFC EQUITY 112.438

TATA DIVIDEND 15.299

SBI MAGNUM 24.49

UTI DIVINDEND 13.58

PRINCIPAL EMARGING 9.88

FRAKLIN ASIAN 9.568

HDFC CORE 20.746

UTI MASTER VALUE 28.09

BIRLA SUNLIFE 9.968

HSBC EMARGING 11.515

RELIANCE REGULAR 10.153

LIC MF BOND 19.016

CANARA ROBECO 10.68

TATA FLOATER 10.213

42