: sharpe’s ratio calculated for different funds
DESCRIPTION
project report on mutual fundsTRANSCRIPT
Chapter -3Data Presentation and Analysis
Table 1: Returns on selected schemes of selected companies Return on selected schemes20092010201120122013
Canara Robeco Mutual Fund
0.0500283650.014652-0.021060.0215970.00616
HDFC Mutual Fund
0.016657
0.00778
-0.41701
0.009391
0.005453
IDFC Mutual Fund
0.003119
0.004939
0.006748
0.007878
0.007513
Deutsche Mutual Fund
0.004432
0.004523
0.761828
0.007753
0.007287
PRINCIPAL Mutual Fund
0.007677
0.004317
0.007281
0.008141
0.006326
Morgan Stanley Mutual Fund
0.065773
0.013435
-0.02352
0.024019
0.006866
Sundaram Mutual Fund
0.00611
-0.00026
0.004652
0.006965
-0.01697
SBI Mutual Fund
0.003957
0.004454
0.007182
8.323669
0.007378
InterpretationNav return shows the actual return on the investment over a period of time. The past performance will not guarantee the future, still it is important to analyse the past data to forecast the future.
Table 2: Sharpes Ratio Calculated For Different FundsName of the schemesAverage ReturnStandarddeviation(D)Sharpe Ratio
Canara Robeco Mutual Fund
-0.03572
0.025722
-1.38886
HDFC Mutual Fund
-0.12555
0.190932
-0.65755
IDFC Mutual Fund
-0.04396
0.001987
-22.1227
Deutsche Mutual Fund
0.107165
0.338021
0.317036
PRINCIPAL Mutual Fund
-0.04325
0.001514
-28.5614
Morgan Stanley Mutual Fund
-0.03268
0.032345
-1.01052
Sundaram Mutual Fund
-0.0499
0.009946
-5.01744
SBI Mutual Fund
1.619328
3.71989
0.435316
InterpretationHere, 8 Mutual Fund have been taken for the study. The table No. 1 shows the average return on sample debt based schemes and Market return on BSE SENSEX. The market standard deviation (risk) of the schemes are less than one except SD of SBI Mutual Fund and. The result shows that one out of eight selected mutual fund schemes has more standard deviation than market index namely SBI Mutual Fund. It means that these scheme is more risky than market portfolio. While the lowest standard deviation in return indicated less risky than market portfolio. None of mutual fund schemes, out of eight do not shows negative value of Sharpe Index namely. If mutual fund scheme has negative value of Sharpe Index in the analysis that indicates the inferior performance.
Table 3: Treynors Ratio Calculated For Different FundsName of the schemesAverage ReturnBeta ()Treynor Ratio
Canara Robeco Mutual Fund
-0.03572
-0.02677
1.334312
HDFC Mutual Fund
-0.12555
-0.03371
3.724319
IDFC Mutual Fund
-0.04396
0.00067
-65.5949
Deutsche Mutual Fund
0.107165
0.048582
2.205837
PRINCIPAL Mutual Fund
-0.04325
-0.00279
15.48686
Morgan Stanley Mutual Fund
-0.03268
-0.03854
0.848161
Sundaram Mutual Fund
-0.03572
-0.00572
8.723112
SBI Mutual Fund
-0.12555
-1.88195
-0.86045
]InterpretationTreynor is a measurement of the returns earned in excess of that which could have been earned on an investment that has no diversifiable risk per each unit of market risk assumed. Table 3 shows treynor meausre of debt based mutual funds. The higher the treynor ratio, the better the performance under analysis. From analysis it is noted that All the schemes are performed well than the stock market index s&p snx nifty during the entire period of study. Alpha is a risk-adjusted measure return on an investment. It is the return in excess of the compensation for the risk borne. The alpha measure shows the level of risk associated with the return. If alpha(_i ) < 0, the investment has earned too little for its risk (or, was too risky for the return), if alpha(_i ) = 0, the investment has earned a return adequate for the risk taken and if alpha(_i ) > 0, the investment has a return in excess of the reward for the assumed risk. Table 3 shows alpha measures of debt based mutual funds for the year 2009 to 2013. It is noted that the stock market has equivalent return for the risk. Stock market alpha is zero for the entire study period. It can be said that 2009-13 is glorious time for the investor, invariably all the mutual funds are produced better return during this peiod. debt based mutual funds seems to be a good company, it has given highest alpha measure of 15.48686 with the comparision of all other debt based mutual funds during the period of 2009-13.
Table 4: Jensens Alpha Calculated For Different FundsName of the schemesReturnExpected Return
Alpha
Canara Robeco Mutual Fund
-0.03572
0.052295
-0.08802
HDFC Mutual Fund
-0.12555
0.055918
-0.18146
IDFC Mutual Fund
-0.04396
0.049937
-0.0939
Deutsche Mutual Fund
0.107165
0.052777
0.054387
PRINCIPAL Mutual Fund
-0.04325
0.05026
-0.09351
Morgan Stanley Mutual Fund
-0.03268
0.053186
-0.08587
Sundaram Mutual Fund
-0.0499
0.050571
-0.10047
SBI Mutual Fund
1.619328
-2.90339
4.522719
InterpretationTable 4 gives the results of the Jensen Measure. Out of the Eight funds, two funds showed positive alpha values indicating superior performance. Hence these funds have generated returns in excess of equilibrium returns. The equilibrium returns of a fund is the return that it is expected to earn with the given level of systematic risk. We see six scheme the alpha value to be statistically significant at 5% level of significance. Thus this fund has generated above normal returns. Thus, the null hypothesis that the observed value of differential measure (alpha) for the sample can be rejected; as for majority of the funds the alpha is not found to be different from zero except one scheme. In general we can see that majority of the schemes have produced normal and below normal returns, and have not generated excess returns than expected. The superior performance is noticeable only in respect of one scheme.
Chapter-4Summary and conclusion
SummaryThis paper has mainly aimed at examining the performance of Indian Mutual funds in terms of a) Sharpe Ratio b) Treynor Ratio and c) Jensen differential return measure. The study used daily NAV for 8mutual fund schemes for a period of five year from 1st January 2009 to 30th December 2013, and the empirical results reported here indicated a mixed performance of debt schemes during the study period. The Sharpe Ratio indicates that only few schemes show good performance, while in terms of Treynor ratio good performance by majority of the scheme. The Jensens measure, alpha is positive for 87.5% of the funds which shows that the funds are generating good returns. The returns of the funds are positive and hence in general we can say that the performance of the Mutual funds during this period is satisfactory. However we have to note that except one scheme no other scheme has produced excess return in the market and the funds are not adequately diversified. With the positive outlook at the Capital Market, we can hope that the Mutual fund industry would perform better in the days to come.
Conclusion: Debt scheme are suitable for genuine investors as there exists a variety of investors needs depending on objective, expectations and risk taking abilities etc. It is good channel investing and turning it into an investment opportunity as well as for availing tax relief. There is no doubt that the determinant for investing in a mutual fund is the NAV factor. Mutual funds have to focus more on proper pricing, better investor servicing as well as offer handsome returns. Mutual funds have to understand the Psychology of investors.