Prof. Jeevitha. R Mr.
Assistant Professor Post
Institute of Management Ramaiah
Institute of Management
Bangalore 560054 Bangalore
broadly divided in to three categories, they are aggressive investors, moderate
investors and conservative investors. This moderate investors will always looks
into investment area where there is moderate risk and moderate returns. Exactly
mutual funds are collective investment schemes, they specializes in investing a
pool of money from the investors and investing in securities such as bonds,
stocks and money market instruments. It is managed by the experts called as
fund managers. Mutual funds are the most popular method of indirect investing
around the globe. Mutual funds play an important role in the economy of the
county. In this study an attempt is made to evaluate the performance of 10
growth mutual funds on the basis of monthly returns compared with benchmark
returns. For this purpose, risk adjusted performance measures suggested by
Sharpe, Treynor and Jensen’s are widely known as Sharpe ratio, Treynor ratio,
utual funds, Sharpe ratio, Treynor ratio, Jensen’s alpha.
attempted to study the performance of mutual fund of all schemes, some are
especially in growth schemes and some are attempted to study the mutual fund
performance of public and private sector comparisons.
Alka (2016) this
study attempted to evaluate the performance of Reliance open-ended growth
schemes focused on large cap funds in Sensex. Reliance Focused
Large Cap Fund in Sensex has performed better than the other schemes in
comparison of risk and return which Indicates that investors who invested in
these schemes to form well diversified portfolio did receive adequate return
per unit of total risk & systematic risk undertaking.
Dr. Susheel Kumar Mehta (2010) this research attempted
to study a comparison of performance of mutual funds schemes of UTI & SBI
and analyzed their performance. The study concluded that preference of UTI
& SBI mutual funds has been better in 2007 – 08.
Lakshmi N (2010)
this study is about performance of the Indian MF industry with a special
reference to growth schemes and it found out that MF serve those individuals
including to invest but lack the newline technical investment expertise. Funds
mobilized by the industry had grown new here by 57 percent and AUM by 14
percent during 1997-2006. Analysis of performance of newline seven schemes
should that, all the sample schemes outperformed the newline market in terms of
absolute returns without adequate returns to over total newline risk.
D.N. Rao (2006)
this study is on 4 step model to evaluate performance of mutual funds in
Saudi Arabia. It studied 4 step model for selecting the right equity fund and
illustrated the same in the context of equity mutual funds in Saudi Arabia. The
study revealed that most of the funds invested in Arab stocks had been in
existence for less than a year and the volatility of the GCC stock markets
contributed to the relatively poor performance of these funds and the
turnaround of these funds could take place only with the rallying of GCC and
other Arab markets.
Sharad Panwar and R. Madhumathi(2006) this study is on characteristics and
performance evaluation of selected mutual funds in India. This paper resulted
that public sector sponsored funds also not differ significantly from private
sector sponsored funds in term of mean returns percent however they said there
is a significant difference between public sector sponsored MFs. & private
sector sponsored MFs in terms of average standard deviation, average variance
and average co-efficient of variation.
Of The Study
The objectives of
this study are
To evaluate the trends of growth mutual
To evaluate and compare the performance of
growth mutual funds using evaluation techniques.
To compare the selected growth mutual
funds and rank with their performance.
Scope of The Study.
This study focuses
on the relationship between performance of growth mutual fund and nifty returns
using evaluation tools such as sharpe’s ratio, treynor, jensen’s alpha. By
observing all these we can conclude that the fund which has highest with less
risk shows better performance. By looking at the
performance indicators it is easier to investor to find the right growth mutual
funds. Thereby help in increase profit for the investors. From this study, it
may also enable the researcher to find the better performing mutual fund.
hypothesis have been made.
testing is carried out with a significance level of 0.05
H0:- There is no difference in
performance between growth mutual funds and Nifty Index
HA: – There is difference in performance
between growth mutual funds and Nifty Index
The return of the funds can be estimated by
the average return of the select funds and the risk can be calculated by using
standard deviation and beta. The risk adjusted return can be measured with the
functional tools like Sharpe, Treynor’s methods. By observing all these we can
conclude that the fund which has highest with less risk shows better
Return (Ri) = P1-P0/P0
= Return of fund during period over 12 months
= Value of the Fund at the end of period 1
= Value of the Fund at the start of period
Standard Deviation Definition:
Standard deviation (SD) measures the volatility the fund’s
returns in relation to its average. It tells you how much the fund’s return can
deviate from the historical mean return of the scheme.
Standard Deviation (SD) = Square root of Variance
(V) Variance = (Sum of squared difference between each
monthly return and its mean / number of monthly return data – 1).
Average Return (Rp) = Sum of
the returns during the periods/No. of years
Calculation of beta for mutual fund
Beta is measure of Systematic Risk or
non-diversifiable risk. It measures the sensitivity of the stock with reference
to a broad based market index.
Beta = Covariance
X = Fund Return
Y = Benchmark Return
PERFORMANCE EVAULATION OF MUTUAL FUNDS:-
ratio is an index of portfolio performance measure, helps to find the hidden
the performance of mutual funds. If the fund is having ratio of greater than
one the fund is considered to be good to invest.
returns over a period j
= Risk-free return over a period
? = Total risk, standard
deviation of portfolio return j
Jack Treynor is an index portfolio measure
calculated based on systematic risk. It indicates the risk premium per unit of
systematic ratio. It considers beta i.e market risk for calculations.
Rj = Portfolio returns
over a period j
Rf= Risk-free return
? = Market-risk, beta
Jensen’s Alpha is
used to measure the risk-adjusted performance of a security or portfolio in relation to the expected
market return (which is based on the capital asset pricing model (CAPM). The
higher the alpha, the more a portfolio has earned above the level predicted.
Jensen Alpha = Rj – Rf + ? *(Rm – Rf)
= Portfolio return over a period
= risk free rate
= Returns of market
Results And Discussions
Interpretation Sharpe’s & Treynor’s ratio
and Jensen’s Alpha
power sector funds
SBI FMCG Fund
Infrastructure Advantage fund
BOI AXA Manufacturing
& Infrastructure Fund
Aditya Birla SunLife
Invesco India Banking
Aditya Birla Sunlife
Banking and Financial Fund
Banking and Financial Fund
Interpretation Sharpe’s & Treynor’s ratio and
Generally sharpe ratio
having greater than one value is preffered. From the above table and analysis
we can see that Aditya Birla banking and finance fund is greater the greater
value (0.84) followed by SBI FMCG fund (0.65), L&T Infrastructure fund.
Reliance diversified power sector funds is having the least value (0.35).
Treynor’s ratio looking at
the ratios Aditya Birla Banking and Finance fund (12.09) followed by L
Infrastructure fund (9.36) and sundaram Infrastructure Advantage fund (9.16).
Reliance diversified power sector funds is having the least value (5.57).
Looking at the figure of
Jensen’s Alpha ratios Aditya Birla Banking and Finance fund (11.04) followed by
L&T Infrastructure fund (8.15) and ICICI Prudential Banking and Financial Fund
(7.04). Reliance diversified power sector funds is having
the least value (0.29).
Anova: Two-Factor Without Replication
Source of Variation
By using ANOVA test it is found that f value (2.456)
is more than the significant value (0.05). So, we are rejecting null
hypothesis. Therefore the performance of selected mutual fund based on Return
and risk is independent with that of the market, which shows that the mutual
funds are performing better than market, and this could be due to the fund
manager’s efficiency in managing the fund.
Mutual funds have emerged as the best in
terms of variety, flexibility, diversification, liquidity as well as tax
benefits especially growth mutual funds. Mutual funds have the capability to
provide solutions to most investors’ needs, however, the key is to do proper
selection and have a process for monitoring and controlling. From the above
analysis, it is found that most of the mutual funds have performed better than
the market returns but still their market risk (beta) is high. In the sample,
funds are highly diversified except for a few mutual funds and because of their
high diversification they have reduced market risk of the fund. Still equity (growth)
funds are more risk in the market.
Further the fund managers of the
mutual funds are found to be proactive in terms of their ability of market
timing and selectivity. Through the research conducted with the growth mutual
funds, it is concluded that the performance of the mutual funds are only not
based on the market returns, it would depends on the fund manager’s efficiency
in managing the fund.
beta, diversification, mutual funds, market returns
Prasanna Chandra(2017) “Investment analysis and
Portfolio management” (fourth edition).