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A Summer Project Report

On

“SECTORAL PERFORMANCE EVALUATION OF MUTUAL FUNDS”

Submitted in partial fulfillment of the requirement for theMaster of Business Administration course in

Visvesvaraya Technological University

SRI BHAGAWAN MAHAVEER JAIN COLLEGE OF ENGINEERING DEPARTMENT OF MANAGEMENT STUDIES

Jakkasandra post, Kanakapura Taluk, Bangalore-562 112APRIL -2008



TABLE OF CONTENTS

Chapter Title Page No.

Executive Summary

1 General Introduction

1.1 Industry profile

1.2 Theoretical concept of study

2 Research Methodology

2.1 Statement of the problem

2.2 Objective of the study

2.3 Scope of the study

2.4 Research methodology

2.5 Limitations of the study

2.6 Research Parameters

3 Data Analysis & Interpretation of results

4Summary of Findings & Conclusion

4.1 Summary of Findings

4.2 Conclusion

5 Suggestions

Bibliography

Annexure



LIST OF TABLES

Table No. Title Page No.

1

Table Showing the Absolute Returns of the

FMCG Funds

2Table showing the General Characteristics of the

FMCG Funds

3Table Showing the Vital Statistics of the FMCG

Funds

4Table Showing the Absolute Returns of

Pharmaceutical Funds

5Table showing the General Characteristics of the


6Table Showing the Vital Statistics of


7Table Showing the Absolute Returns of

Technology Funds

8 Table showing the General Characteristics of Technology Funds

9Table Showing the Vital Statistics of Technology

funds

10Table Showing the Absolute Returns of ELSS

Schemes

11 Table showing the General Characteristics of ELSS Schemes

12Table Showing the Vital Statistics of ELSS

Schemes

13Table showing the various sectoral schemes and

its Benchmark Index

14Table showing the ranking of FMCG Funds based

on Sharpe & Treynor measure



15Table showing the ranking of PharmaceuticalFunds based on Sharpe & Treynor measure

16Table showing the ranking of Technology Funds

based on Sharpe & Treynor measure

17Table showing the ranking of Technology Funds

based on Sharpe & Treynor measure

LIST OF GRAPHS



Graph No. Title Page No.

1 Chart Showing the Absolute Returns of FMCGFunds

2 Chart showing the AUM, Expense Ratio, P\ERatio & Turnover Ratio of FMCG Funds

3 Chart showing the S.D of FMCG Funds

4 Chart showing the Beta, Alpha & R ² of FMCGFunds

5 Chart showing the Sharpe & Treynor Measureof FMCG Funds

6 Chart showing the Absolute Returns of PharmaFunds

7 Chart showing the AUM, Expense Ratio, P\ERatio & Turnover Ratio of Pharma Funds

8 Chart showing the S.D of Pharma Funds

9 Chart showing the Beta, Alpha & R ² of Pharma Funds

10 Chart showing the Sharpe & Treynor Measureof Pharma Funds

11 Chart showing the Absolute Returns of TechnologyFunds

12 Chart showing the AUM, Expense Ratio, P\ERatio & Turnover Ratio of Technolo Funds

13 Chart showing the S.D of Technology Funds

14 Chart showing the Beta, Alpha & R ² of Technology Funds

15 Chart showing the Sharpe & Treynor Measureof Technolo Funds

16 Chart showing the Absolute Returns of ELSS Schemes



Graph

No.Title Page No.

17 Chart showing the AUM of ELSS Schemes

18 Chart showing the Expense Ratio, P\E Ratio& Turnover Ratio of ELSS Schemes

19 Chart showing the S.D of ELSS Schemes

20 Chart showing the Beta, Alpha & R² of ELSS Schemes

21 Chart showing the Sharpe & Treynor

Measure of ELSS Schemes



EXECUTIVE SUMMARY

Financial system in a country plays a dominant role in assets formation and

intermediation, and contributes substantially in macroeconomic development. In this process

of development mutual funds have emerged as strong financial intermediaries and are playing

a very important role in bringing stability to the financial system and efficiency to resource

allocation.

Mutual funds play a crucial role in an economy by mobilizing savings and investing

them in the capital market, thus establishing a link between savings and the capital market.

The activities of mutual funds have both short-and long-term impact on the savings and

capital markets, and the national economy.

The project is titled Sectoral performance evaluation of Mutual Funds. In this report

the comparison is carried out in order to evaluate the performance of different sectors such as

FMCG, Pharmaceuticals, Information Technology and Equity Linked Savings Schemes on

the basis of Absolute Annual returns, Standard Deviation, R 2, AUM, Alpha, Beta, Sharpe and

Treynor ratios. For this purpose of comparison top ten asset management companies funds

were taken into consideration. Comparison is done by taking the different benchmarks like

Sensex, S&P CNX Nifty, BSE 100, BSE 200, BSE FMCG, BSE TECk, BSE IT, S&P CNX

IT Software.

For the purpose of evaluation monthly NAV’s from January, 2005 to February, 2008

were taken into consideration along with along with respective benchmark indices.

The ranking of the funds is done based on Sharpe and Treynor ratios. The study

reveals that by and large it has been seen that sector specific have not found investors interestover a period of time as their AUM are very low when compared to ELSS and also other

diversified schemes. This is mainly due to the high risk involved by investing in a particular

sector. Investors tend to prefer diversified sectoral investment as the risks are reduced.



CHAPTER I

INTRODUCTION



1.1 INDUSTRY PROFILE

Mutual funds play a crucial role in an economy by mobilizing savings and investing

them in the capital market, thus establishing a link between savings and the capital market.The activities of mutual funds have both short-and long-term impact on the savings and

capital markets, and the national economy.

The Indian Mutual fund Industry has witnessed a structural transformation during the

past few years. The fund industry has grown phenomenally over the past couple of years,

and as on 29th February 2008, it had debt and equity assets of Rs.5,32,864 crore. Its equity

corpus of Rs.2,20,263 lakh crore accounts for over 3 percent of the total marketcapitalization of BSE, at Rs.58 lakh crore. Its holding in Indian companies ranges between 1

percent and almost 29 percent making them an influential shareholder.

In India most mutual funds have an expense ratio of 2.5 percent, a ceiling fixed by the

market regulator, SEBI .The management cost is 1.75 percent. On an average equity funds in

India charge expense ratios of over 2 percent per annum more than double the global average

of sub 1 percent. Bond funds charge around 0.6 percent, which is lower than global average

of 0.9 percent. Expense ratio comprises of management fees and operating expenses.

Mutual funds that invest more than half their corpus in shares of companies

accounting for the top 70 percent of the total market capitalization are categorized as large

cap funds. Funds predominantly investing in mid cap companies are those that account for

another 20 percent of the overall market cap. Mutual fund houses have restricted their

investment universe to barely 768 companies as on 31st January 2008.A chunk of mutual fund

money has gone into companies that are a part of two indices, Sensex and Nifty. The mutualfund investment in companies ranges between 1 percent and 29 percent of their paid up

capital.

In India only 3 percent of the household savings is invested in the mutual funds.

According to CRISIL 30 fund houses in India are together tapping only about 4 percent of the

incremental household savings market annually. The top 5 asset management companies in

India account for 52 percent of the Indian mutual funds market. And the Indian mutual fundindustry forms only 0.37 percent of the globally managed funds in the industry which are



pegged at $23 trillion (Rs.92 lakh crore).The main reason for this lopsided development is the

lack of geographical penetration: a substantial portion of the asset under management comes

from larger cities.

Mutual Funds over the years have gained immensely in their popularity. With the

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

its investors. 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. Mutual funds

provide an option of investing without getting lost in the complexities. India's mutual fund

industry, buoyed by a phenomenal rise in stock market indices and a spurt in foreign

institutional investments, has been rewarding investors handsomely. India's mutual funds

sector has never had it so good. Retail investors have been pouring billions of dollars into

funds, and have been reaping handsome rewards.

With emerging markets (including India, China and Brazil) being the flavor of the

season, international funds have been furiously earmarking a large portion of their allocationsto developing countries. Not surprising, considering the phenomenal returns that markets like

India have fetched them. With the Indian stock markets providing attractive returns, foreign

institutional investors (FIIs) have been making a beeline to the country. India's robust capital

market has resulted in a flowering of its mutual fund sector. Investors who had been

disenchanted with mutual funds have returned in a big way.

Mutual funds in India are also looking at increasing their exposure to the

infrastructure sector in the country. About $10 billion would be invested to build new roads,highways, ports, airports and other infrastructure in India over the next three years. Funds

like Tata Mutual Fund, DSP Merrill Lynch and Prudential ICICI have launched infrastructure

funds, and others are also expected to follow suit.



1.1.1 HISTORY OF MUTUAL FUND IN INDIA

The history of mutual funds in India can be broadly divided into 5 important phases.

First Phase: 1963-87 Initial Development phase (Unit Trust of India)

In 1963, UTI was established by an Act of Parliament and given a monopoly. The

impetus for establishing a formal institution came from the desire to increase the propensity

of the middle and lower groups to save and to invest. The first and still one of the largest

schemes, launched by UTI was Unit Scheme 1964. UTI created a number of products such as

monthly income plans, children’s plans, equity-oriented schemes and offshore funds during

this period. The total asset under management for the year 1987-88 was 6,700 crores.

Second Phase: 1987-93 (Entry of Public Sector Funds)

Second phase witnessed the entry of mutual funds sponsored by state owned banks

and financial institutions. With the opening up of the economy, many public sector and

financial institutions were allowed to establish mutual funds. In November 1987 the State

Bank of India established the first non-UTI mutual fund-SBI Mutual Fund. This was

followed by Canbank Mutual Fund (launched in December, 1987), LIC Mutual Fund (1989),and Indian Bank Mutual Fund (1990) followed by Bank of India Mutual Fund, GIC Mutual

Fund and PNB Mutual Fund. The fund industry expanded nearly seven times in terms of

Assets under Management. The total asset under management considering both UTI and

Public Sector was 47,004.

Third Phase: 1993-2003 (Entry of Private Sector Funds)

A new era started in the Indian mutual fund industry, giving the Indian investors a

wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund

Regulations came into being, under which all mutual funds, except UTI were to be registered

and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the

first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund)

Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations

in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The

number of mutual fund houses went on increasing, with many foreign mutual funds setting up

funds in India and also the industry has witnessed several mergers and acquisitions. As at the



end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The

Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of

other mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. Conforming to the SEBI Mutual Fund Regulations, and

with recent mergers taking place among different private sector funds, the mutual fund

industry has entered its current phase of consolidation and growth. As at the end of February

29, 2008, there were 40 funds, which manage assets of Rs.5,32,864 crores.

1.1.2 ROLE OF MUTUAL FUND IN FINANCIAL MARKET

Indian financial institutions have played a dominant role in assets formation and

intermediation, and contributed substantially in macroeconomic development. In this process

of development Indian mutual funds have emerged as strong financial intermediaries and are

playing a very important role in bringing stability to the financial system and efficiency to

resource allocation. Mutual funds play a crucial role in an economy by mobilizing savings and

investing them in the capital market, thus establishing a link between savings and the capital

market. The activities of mutual funds have both short-and long-term impact on the savings

and capital markets, and the national economy. Mutual funds, thus, assist the process of

financial deepening and intermediation. They mobilize funds in the savings market and act

as complementary to banking; at the same time they also compete with banks and other

financial institutions. In the process stock market activities are also significantly influenced

by mutual funds.

There is thus hardly any segment of the financial market, which is not (directly or indirectly) influenced by the existence and operation of mutual funds. However, the scope

and efficiency of mutual funds are influenced by overall economic fundamentals: the

interrelationship between the financial and real sector, the nature of development of the

savings and capital markets, market structure, institutional arrangements and overall policy

regime.



1.1.3 Composition of Indian Mutual Fund Industry:

Asset Under Management for all Mutual Fund houses, as on 31, March, 2008 is as follows

Amount in Rs. Crores

Sl.

No.Mutual Fund Name No. of Schemes

Asset Under

Management

1 Reliance Mutual Fund 335 77,210

2 ICICI Prudential Mutual Fund 419 64,045

3 UTI Mutual Fund 315 52,465

4 HDFC Mutual Fund 351 43,763

5 Birla SunLife Mutual Fund 330 36,391

6 Franklin Templeton Investments 225 29,604

7 SBI Mutual Fund 171 27,582

8 Tata Mutual Fund 389 19,423

9 Kotak Mahindra Mutual Fund 178 19,368

10 DSP Merrill Lynch Mutual Fund 207 19,136

11 HSBC Mutual Fund 213 15,530

12 Deutsche Mutual Fund 181 14,405

13 Standard Chartered Mutual Fund 255 13,763

14 LIC Mutual Fund 112 13,387

15 PRINCIPAL Mutual Fund 151 13,319

16 Sundaram Mutual Fund 203 13,285

17 JM Financial Mutual Fund 171 12,560

18 Lotus India Mutual Fund 212 10,057

19 ING Mutual Fund 255 9,845

20 Fidelity Mutual Fund 39 9,487

21 ABN AMRO Mutual Fund 325 6,814

22 Benchmark Mutual Fund 12 5,611

23 Morgan Stanley Mutual Fund 3 3,670



24AIG Global Investment Group MutualFund

54 3,303

25 Canara Robeco Mutual Fund 54 3,147

26 DBS Chola Mutual Fund 80 2,95327 JPMorgan Mutual Fund 9 2,517

28 Taurus Mutual Fund 14 360

29 Sahara Mutual Fund 43 211

30 Escorts Mutual Fund 26 176

31 BOB Mutual Fund 22 80

32 Quantum Mutual Fund 6 65

1.1.4 INDIA’S TOP MUTUAL FUND HOUSES

1. Reliance Capital Asset Management Ltd.

Reliance Capital Asset Management Ltd., the investment Manager of Reliance

Capital Mutual Fund (RCMF). RCAM is a 100% subsidiary of Reliance Capital Limited.Reliance Capital Limited is a member of Reliance Group and has been promoted by Anil

Dhirubhai Ambani Group, one of India’s largest private sector enterprise. Setting a fast pace

of growth, RCL in a short span of time has established its presence in the finance sector by

rapidly expanding its operations into Leasing, Bill discounting, Merchant Banking,

investment Banking and a member of OTCEI.

2. ICICI Prudential Asset Management Company Ltd.

It is a 55:45 joint venture between Prudential Corporation plc, UK, and ICICI

Ltd., India. The mutual fund of ICICI is a joint venture with Prudential Plc. Of America, one

of the largest life insurance companies in the USA. Prudential ICICI Mutual Fund was setup

on 13th of October 1993 with two sponsors, Prudential Plc. and ICICI Ltd.

3. UTI Asset Management Company Ltd.

UTI Mutual Fund is managed by UTI Asset Management Company Private

Limited (Est.: Jan 14, 2003) who has been appointed by the UTI Trustee Company Private



Limited for managing the schemes of UTI Mutual Fund and the schemes transferred /

migrated from UTI Mutual Fund.

4. HDFC Asset Management Company Limited

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely

Housing Development Finance Corporation Limited and Standard Life Investments Limited,

one of the leading Insurance companies in the United Kingdom, having vast experience in

management of funds.

5. Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun

Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being

represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from

India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment.

6. Franklin Templeton Asset Management (India) Pvt. Ltd.

It is a part of the Franklin Templeton Group. The sponsor of the Fund Templeton

International Inc., is a wholly owned subsidiary of Templeton Worldwide Inc., which in turn

is a wholly owned subsidiary of Franklin Resources Inc. The Franklin Templeton Group isone of the world s largest Investment Management Companies. It has over 50 years of

experience in International Investment Management with 34 offices in over 23 countries,

which service over 10 million unit holders. Templeton started operations in Mumbai, India in

January 1996.

1.1.5 FUTURE SCENARIO

The asset base will continue to grow at an annual rate of about 30 to 35 % over thenext few years as investor’s shift their assets from banks and other traditional avenues. Some



of the older public and private sector players will either close shop or be taken over. Out of

ten public sector players five will sell out, close down or merge with stronger players in three

to four years. In the private sector this trend has already started with two mergers and one

takeover. Here too some of them will down their shutters in the near future to come. But this

does not mean there is no room for other players. The market will witness a flurry of new

players entering the arena. There will be a large number of offers from various asset

management companies in the time to come. Some big names like Fidelity, Principal, Old

Mutual etc. are looking at Indian market seriously. One important reason for it is that most

major players already have presence here and hence these big names would hardly like to get

left behind. The mutual fund industry is awaiting the introduction of derivatives in India as

this would enable it to hedge its risk and this in turn would be reflected in its Net Asset Value

(NAV). SEBI is working out the norms for enabling the existing mutual fund schemes to

trade in derivatives. Importantly, many market players have called on the Regulator to initiate

the process immediately, so that the mutual funds can implement the changes that are

required to trade in Derivatives. May the Net Asset Values grow!!

1.2 THEORITICAL CONCEPT

MUTUAL FUND BASICS



As you probably know, mutual funds have become pretty popular over the last few

years. What was once just another obscure financial instrument is now a part of our lives and

here to stay. According to sources, more than 80 million people, or one half of the households

in America, invest in mutual funds. That means that, in the United States alone, trillions of

dollars are invested in mutual funds.

Its common knowledge that investing in mutual funds is (or at least should be) better

than simply letting your cash waste away in a savings account, but, for most people, that's

where the understanding of funds ends.

Originally mutual funds were meant to allow the common man to get a piece of the

market considering that the common man would be less knowledgeable about financialmarkets and would have smaller investments to transact with. Instead of spending all your

free time buried in the financial pages of the Economic Times, all you have to do is buy a

mutual fund and you'd be set on your way to financial freedom. As you might have guessed,

it's not that easy. Not all mutual funds are the same, and investing in mutual funds isn't as

easy as throwing your money at the first salesperson who attracts your attention.

Mutual Fund- Meaning

A Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. It is essentially a diversified portfolio of financial instruments - these

could be equities, debentures / bonds or money market instruments. The corpus of the fund is

then deployed in investment alternatives that help to meet predefined investment objectives.

Investors of mutual funds are known as unit holders. The income earned through these

investments and the capital appreciation realised are shared by its unit holders in proportion

to the number of units owned by them. Thus a Mutual Fund is a 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 investors, in proportion to their investments, share the profits or losses. The

mutual funds normally come out with a number of schemes with different investment

objectives, which are launched from time to time. A mutual fund is required to be registered

with Securities and Exchange Board of India (SEBI), which regulates securities markets

before it can collect funds from the public.



An investor could make money from a mutual fund in three ways:

Income is earned from dividends declared by mutual fund schemes from time to time.

If the fund sells securities that have increased in price, the fund has a capital gain.

This is reflected in the price of each unit. When investors sell these units at prices

higher than their purchase price, they stand to make a gain.

If fund holdings increase in price but are not sold by the fund manager, the fund's unit

price increases. You can then sell your mutual fund units for a profit. This is

tantamount to a valuation gain.

DEFINITIONS:

The SEBI, 1993 defines a Mutual Fund as .a fund established in the form of a trust by

a sponsor, to raise monies by the trustees through the sale of units to the public, under one or

more schemes, for investing in securities in accordance with these regulations.



1.2.1 OPERATION OF THE FUND

A mutual fund invites the prospective investors to join the fund by offering various

schemes so as to suit to the requirements of categories of investors. The resources of

individual investors are pooled together and the investors are issued units/shares for the

money invested. The amount so collected is invested in capital market instruments like

treasury bills, commercial papers, etc.

For managing the fund, a mutual fund gets an annual fee of 1.25% of funds managed

at the maximum as fixed by SEBI (MF) regulations, 1993 and if the funds exceed Rs. 100

cores, the fee is only 1%. The fee cannot exceed 1%. Of course, regular expenses like

custodial fee, cost of dividend warrants, fee for registration, the asset management fee etc are

debited to the respective schemes. These expenses cannot exceed 3% of the assets in the

respective schemes. These expenses cannot exceed 3% of the assets in the respective schemes

each year. The remaining amount is given back to the investors in full.

The flow chart below describes broadly the working of a mutual fund:

Fig: Mutual Fund Operation Flow Chart



1.2.2 ORGANIZATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organizational

set up of a mutual fund:

Organisation of a Mutual Fund

MUTUAL FUND SET UP

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset

Management Company (AMC) and custodian. The trust is established by a sponsor or more

than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its

property for the benefit of the unit holders. Asset Management Company approved by SEBI

manages the funds by making investments in various types of securities. Custodian, who is

registered with SEBI, holds the securities of various schemes of the fund in its custody. The

trustees are vested with the general power of superintendence and direction over AMC. Theymonitor the performance and compliance of SEBI Regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directors of trustee

company or board of trustees must be independent i.e. they should not be associated with the

sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are

required to be registered with SEBI before they launch any scheme. However, Unit Trust of

India (UTI) is not registered with SEBI (as on January 15, 2002).



The formation and operations of Mutual Funds in India is solely guided by SEBI (Mutual

Funds) Regulations, 1993, which came into force on 20th January, 1996, through a

notification on 9th December, 1996. these Regulations make it mandatory for Mutual Funds

to have a three-tier structure of :

1. A Sponsor Institution to promote the Fund.

2. A team of Trustees to oversee the operations and to provide checks for the efficient,

profitable and transparent operations of the fund and

3. An Asset Management Company (AMC) to actually deal with the funds.

Sponsoring Institution:

The Company, which sets up the mutual fund, is called the Sponsor. SEBI has laid

down certain criteria to be met by the sponsor. The criterion mainly deals with adequate

experience, good past track record, net worth etc.

• Sponsor appoints the Trustees, Custodian and the AMC with the prior approval of

SEBI, and in accordance with SEBI Regulations.

• Sponsor must have at least 5-year track record of business interest in the Financial

Markets.

Trustees:

Trustees are the people with long experience and good integrity in the respective

fields carry the crucial responsibility in safeguarding the interests of the investors. For this

purpose, they monitor the operations of the different schemes. They have wide ranging

powers and they can even dismiss AMC with the approval of SEBI. The Indian Trust Act

governs them.

Asset Management Company:

The AMC actually manages the funds of the various schemes. The AMC employs a

large number of professionals to make investments, carry out research &to do agent and

investor servicing. In fact, the success of any Mutual Fund depends upon the efficiency of

this AMC. The AMC submits a quarterly report on the functioning of the mutual fund to the

trustees who will guide and control the AMC.



The AMC is usually a private limited company, in which the sponsors and their

associations or joint venture partners are shareholders. The AMC has to be registered by

SEBI and should have a minimum Net worth of Rs.10 cores all times. The role of the AMC is

to act as the Investment Manager of the Trust along with the following functions:

• It manages the funds by making investments in accordance with the provision of the

Trust Deed and Regulations

• The AMC shall disclose the basis of calculation of NAV and Repurchase price of the

schemes and disclose the same to the investors.

• Funds shall be invested as per Trust Deed and Regulations.

Registrars and Transfer Agents:

The Registrars and Transfer Agents are responsible for the investor servicing

functions, as they maintain the records of investors in the mutual funds. They process

investor applications , record details provided by the investors on application forms, send out

periodical information on the performance of the mutual fund; process dividend pay-out to

the investors; incorporate changes in information as communicated by investors; and keep

the investor record up to date, by recording new investors and removing investors who have

withdrawn their funds.

Custodian:

Custodians are responsible for the securities held in the mutual funds portfolio. They

discharge an important back-office function, by ensuring that securities that are bought are

delivered and transferred to the books of mutual funds, and that funds are paid-out when

mutual fund buys securities. They keep the investment account of the mutual fund, and also

collect the dividends and interest payments due on the mutual fund investments. Custodians

also track corporate actions like bonus, issues, right offers, offer for sale, buy back and open

offers for acquisition.



1.2.3 BENEFITS OF INVESTING IN A MUTUAL FUND

The benefits of investing in mutual funds are as follows -

Access to professional money managers - Experienced fund managers using advanced

quantitative and mathematical techniques manage your money.

Diversification - Mutual funds aim to reduce the volatility of returns through

diversification by investing in a number of companies across a broad section of industries

and sectors. It prevents an investor from putting "all eggs in one basket". This inherently

minimizes risk. Thus with a small investible surplus an investor can achieve

diversification which would have otherwise not been possible.

Liquidity - Open-ended mutual funds are priced daily and are always willing to buy back

units from investors. This mean that investors can sell their holdings in mutual fund

investments anytime without worrying about finding a buyer at the right price. In the case

of other investment avenues such as stocks and bonds, buyers are not necessarilyavailable and therefore these investment avenues are less liquid compared to open-ended

schemes of mutual funds.

Tax Efficiency - Mutual fund offers a variety of tax benefits. Please visit the tax corner

section or consult your tax advisor for details.

Low transaction costs - Since mutual funds are a pool of money of many investors, the

amount of investment made in securities is large. This therefore results in paying lower

brokerage due to economies of scale.



Transparency - Prices of open ended mutual funds are declared daily. Regular updates

on the value of your investment are available. The portfolio is also disclosed regularly

with the fund manager's investment strategy and outlook.

Well-regulated industry - All the mutual funds are registered with SEBI and they

function under strict regulations designed to protect the interests of investors.

Convenience of small investments - Under normal circumstances, an individual investor

would not be able to diversify his investments (and thus minimize risk) across a wide

array of securities due to the small size of his investments and inherently higher

transaction costs. A mutual fund on the other hand allows even individual investors to

hold a diversified array of securities due to the fact that it invests in a portfolio of stocks.

A mutual fund therefore permits risk diversification without an investor having to invest

large amounts of money.

Tax benefits on Investment in Mutual Funds -

1) 100% Income Tax exemption on all Mutual Fund dividends.

2) Capital Gains Tax to be lower of -

10% on the capital gains without factoring indexation benefit and

20% on the capital gains after factoring indexation benefit.

3) Open-end funds with equity exposure of more than 65% (Revised from 50% to 65%

in Budget 2006) are exempt from the payment of dividend tax for a period of 3 yearsfrom 1999-2000.

1.2.4 DISADVANTAGES OF INVESTING MUTUAL FUNDS

Professional Management - Some funds doesn’t perform in neither the market, as their

management is not dynamic enough to explore the available opportunity in the market,

thus many investors debate over whether or not the so-called professionals are any better than mutual fund or investor himself, for picking up stocks.



Costs – The biggest source of AMC income, is generally from the entry & exit load

which they charge from an investors, at the time of purchase. The mutual fund industries

are thus charging extra cost under layers of jargon.

Dilution - Because funds have small holdings across different companies, high returns

from a few investments often don't make much difference on the overall return. Dilution

is also the result of a successful fund getting too big. When money pours into funds that

have had strong success, the manager often has trouble finding a good investment for all

the new money.

Taxes - when making decisions about your money, fund managers don't consider your

personal tax situation. For example, when a fund manager sells a security, a capital-gain

tax is triggered, which affects how profitable the individual is from the sale. It might have

been more advantageous for the individual to defer the capital gains liability.

1.2.5 Risks of investment in Mutual Funds:

Mutual funds are not free from risks as the funds so collected are invested in stock

markets, which are volatile in nature and are not risk free. The following risks are generally

involved in mutual funds

1. Market risks: In general, there are many kinds of risks associated with every kind of investment on shares. They are called market risks. These market risks can be reduced,

but not completely eliminated even by a good investment management. The prices of

shares are subject to wide price fluctuations depending upon market conditions over

which nobody has control. The various phases of business cycle such as Boom,

Recession, Slump and Recovery affects the market conditions to a larger extent.

2. Scheme risks: There are certain risks inherent in the scheme itself. For instance, in a pure

growth scheme, risks are greater. It is obvious because if one expects more returns as in

the case of a growth scheme, one has to take more risks.

3. Investment risk: Whether the mutual fund makes money in shares or loses depends upon

the investment expertise of the Asset Management Company (AMC). If the investment



advice goes wrong, the fund has to suffer a lot. The investment expertises of various

funds are different and it is reflected on the returns, which they offer to the investors.

4. Business Risk: The corpus of a mutual fund might have been invested in a companies

shares. If the business of that company suffers any set back, it cannot declare any

dividend. It may even go to the extent of winding up its business. Though the mutual

funds can withstand such a risk, its income paying capacity is affected.

5. Political risks: Every government brings new economic ideologies and policies. It is

often said that many economic decisions are politically motivated. Change of government brings in the risk of uncertainty, which every player in the finance service industry has to

face.

1.2.6 DIFFERENT TYPES OF MUTUAL FUNDS

TYPES OF MUTUAL FUND SCHEMES

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position,

risk tolerance and return expectations etc. The table below gives an overview into the existing

types of schemes in the Industry.

BYSTRUCTURE

• Open - Ended Schemes• Close - Ended Schemes• Interval Schemes

BY INVESTMENT OBJECTIVE

• Growth Schemes• Income Schemes• Balanced Schemes• Money Market Schemes

OTHER SCHEMES



• Tax Saving Schemes• Special Schemes• Index Schemes• Sector Specific Schemes

Mutual fund schemes may be classified on the basis of their structure and their investmentobjective.

By Structure

Open-ended Funds

An Open-ended Fund is one that is available for subscription all through the year. These

do not have a fixed maturity. Investors can conveniently buy and sell units at Net AssetValue (NAV) related prices.

Close-ended Funds

A Close-ended Fund has a stipulated maturity period, which generally ranges from 3 to

15 years. The fund is open for subscription only during a specified period. Investors can

invest in the scheme at the time of the initial public issue and thereafter they can buy or

sell the units of the scheme on the Stock Exchanges, if they are listed. The market price at

the stock exchange could vary from the scheme's NAV on account of demand and supply

situation, unit holders' expectations and other market factors.

By Investment Objective

Growth/Equity Oriented Funds

The aim of growth funds is to provide capital appreciation over the medium to longterm. Such schemes normally invest a majority of their corpus in equities. Growth

schemes are ideal for investors who have a long-term outlook and are seeking growth

over a period of time.

Income/Debt Oriented Funds



The aim of Income Funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate debentures

and Government securities.

Income Funds are ideal for capital stability and regular income. Capital appreciation in

such funds may be limited, though risks are typically lower than that in a growth fund.

Balanced Funds

The aim of Balanced Funds is to provide both growth and regular income. Such

schemes periodically distribute a part of their earning and invest both in equities and fixed

income securities in the proportion indicated in their offer documents. This proportion

affects the risks and the returns associated with the balanced fund - in case equities are

allocated a higher proportion, investors would be exposed to risks similar to that of the

equity market.

Balanced funds with equal allocation to equities and fixed income securities are ideal

for investors looking for a combination of income and moderate growth.

Money Market Funds

The aim of Money Market Funds is to provide easy liquidity, preservation of capital

and moderate income. These schemes generally invest in safer short-term instruments

such as Treasury Bills, Certificates of Deposit, Commercial Paper and Inter-Bank Call

Money. Returns on these schemes may fluctuate depending upon the interest rates

prevailing in the market.

Load Funds

A Load Fund is one that charges a commission for entry or exit. That is, each time

you buy or sell units in the fund, a commission will be payable. Typically entry and exit

loads range from 1% to 2%. It could be worth paying the load, if the fund has a good

performance history.

No-Load Funds



Sectoral Schemes

Sectoral Funds are those which invest exclusively in specified sector(s) such asFMCG, Information Technology, Pharmaceuticals, etc. These schemes carry higher risk

as compared to general equity schemes as the portfolio is less diversified, i.e. restricted to

specific sector(s) / industry (ies).

1.2.7 SNAPSHOT OF MUTUAL FUND SCHEMES

Mutual

Fund

Type

Objective Risk Investment

Portfolio

Who should

invest

Investment

horizon



Money

Market

Liquidity +ModerateIncome +

Reservation of Capital

Negligible

Treasury Bills,Certificate of

Deposits,Commercial Papers,

Call Money

Those who park their funds in

current accountsor short-term

bank deposits

2 days - 3weeks

Short-

term

Funds

(Floating -

short-

term)

Liquidity +ModerateIncome

LittleInterest Rate

Call Money,Commercial Papers,Treasury Bills, CDs,

Short-termGovernmentsecurities.

Those withsurplus

short-term funds

3 weeks -3 months

Bond

Funds

(Floating -

Long-

term)

Regular IncomeCredit Risk & InterestRate Risk

Predominantly

Debentures,Government

securities, CorporateBonds

Salaried &conservative

investors

More than 9 -12 months

Gilt FundsSecurity &

IncomeInterest Rate

Risk Government

securities

Salaried &conservative

investors

12 months &more

Equity

Funds

Long-termCapital

AppreciationHigh Risk Stocks

Aggressiveinvestors with

long term outlook.

3 years plus

Index

Funds

To generatereturns that arecommensuratewith returns of

respectiveindices

NAV varieswith index

performance

Portfolio indices likeBSE, NIFTY etc

Aggressiveinvestors.

3 years plus

BalancedFunds

Growth &Regular Income

Capital

Market Risk and InterestRate Risk

Balanced ratio of equity and debtfunds to ensurehigher returns at

lower risk

Moderate &Aggressive

2 years plus

Selecting the right Scheme

Investment

ObjectiveInvestment horizon Ideal Instruments



Short-termInvestment

1- 6 months Liquid/Short-term plans

CapitalAppreciation

Over 3 yearsDiversified Equity/ Balanced

Funds

Regular Income FlexibleMonthly Income Plans / Income

Funds

Tax Saving 3 yrs lock-inEquity-Linked Saving Schemes

(ELSS)

1.2.8 DIFFERENT PLANS THAT MUTUAL FUNDS OFFER

To cater to different investment needs, Mutual Funds offer various investmentoptions. Some of the important investment options include:

Growth Option: Dividend is not paid-out under a Growth Option and the investor

realizes only the capital appreciation on the investment (by an increase in NAV).

Dividend Payout Option: Dividends are paid-out to investors under the Dividend Payout

Option. However, the NAV of the mutual fund scheme falls to the extent of the dividend

payout.

Dividend Re-investment Option: Here the dividend accrued on mutual funds is

automatically re-invested in purchasing additional units in open-ended funds. In most

cases mutual funds offer the investor an option of collecting dividends or re-investing the

same.

Retirement Pension Option: Some schemes are linked with retirement pension.

Individuals participate in these options for themselves, and corporate’s participate for

their employees.

Insurance Option: Certain Mutual Funds offer schemes that provide insurance cover to

investors as an added benefit.

Systematic Investment Plan (SIP): Here the investor is given the option of preparing a

pre-determined number of post-dated cheques in favour of the fund. The investor is

allotted units on a predetermined date specified in the offer document at the applicable

NAV.

Systematic Encashment Plan (SEP): As opposed to the Systematic Investment Plan, the

Systematic Encashment Plan allows the investor the facility to withdraw a pre-determined



amount / units from his fund at a pre-determined interval. The investor's units will be

redeemed at the applicable NAV as on that day.

1.2.9 ROLE OF MUTUAL FUND IN FINANCIAL MARKET

Indian financial institutions have played a dominant role in assets formation and

intermediation, and contributed substantially in macroeconomic development. In this process

of development Indian mutual funds have emerged as strong financial intermediaries and are

playing a very important role in bringing stability to the financial system and efficiency to

resource allocation. Mutual funds play a crucial role in an economy by mobilizing savings and

investing them in the capital market, thus establishing a link between savings and the capital

market. The activities of mutual funds have both short-and long-term impact on the savings

and capital markets, and the national economy. Mutual funds, thus, assist the process of

financial deepening and intermediation. They mobilize funds in the savings market and act

as complementary to banking; at the same time they also compete with banks and other

financial institutions. In the process stock market activities are also significantly influenced

by mutual funds.

There is thus hardly any segment of the financial market, which is not (directly or

indirectly) influenced by the existence and operation of mutual funds. However, the scope

and efficiency of mutual funds are influenced by overall economic fundamentals: the

interrelationship between the financial and real sector, the nature of development of the

savings and capital markets, market structure, institutional arrangements and overall policy

regime.



CHAPTER II

RESEARCH

METHODOLOGY

RESEARCH METHODOLOGY



2.1 Statement of problem

In India not much work has been done in order to analyze the risk and returns of

mutual funds. The analysis which is available is right from the time of inception of the funds

and may not be relevant if the period is very long. Therefore an analysis of the funds for the

past three years would be very relevant from the view point of making an investment as the

market conditions keeps on changing.

Also there are very few sector specific schemes available for investment and most of

them are diversified schemes. Therefore an analysis of three sectors along with Equity linked

savings schemes would help us understand this trend. Also this would help an investor to

make an investment decision in sector specific schemes.

Therefore this research is based on:

“SECTORAL PERFORMANCE EVALUATION OF MUTUAL FUNDS”

2.2 Objectives

The following are the objectives of the study conducted:

To understand the concept of Mutual Funds.

To evaluate the performance of sector specific mutual funds like FMCG (Fast Moving

Consumer Goods), Pharmaceutical, Technology and ELSS (Equity Linked Savings

Scheme) in terms of risk and returns.

To study the absolute annual returns of the various sectoral mutual funds.

To analyze the fund risk factor as against the various benchmarks like Sensex, S&P

CNX Nifty, BSE 100, BSE 200, BSE FMCG, BSE TECk, BSE IT, S&P CNX IT

Software.

To examine the funds sensitivity to the market fluctuations in terms of beta, standard

deviation and R-squared.

To appraise and rank the performance of mutual funds according to the Sharpe and

Treynor measure.

2.3 Scope



The monthly benchmark indices are collected from moneycontrol and BSE (Bombay

Stock Exchange) and NSE (National Stock Exchange) website.

91 days T-Bill risk free rate of return from Reserve bank of India.

There was a use of primary data in case of investment patterns of investors and

discussions held with portfolio managers.

2.6 Limitations

The study is mainly limited to equity sector funds and ELSS schemes for a period of

three years starting from January-2005 to Fecbruary-2008

The funds under study are growth schemes.

The risk free return is temporary and may change over a period of time.

There were limitations because the funds available for comparison in this project were

very few. Limited numbers of companies were available having sector specific

schemes.

The study is confined to only to top ten asset management companies.

The ranks are assigned on the basis of only two measures & data is considered for

three years only.

2.7 Research Parameters

The data was collected based on the following important qualitative and quantitative

factors related to mutual funds. They are:

1. Quantitative Measures

Assets under management (AUM)

Annual Returns

Expense Ratio

PE multiple/ratio Turnover Ratio



2. Risk Measures

Standard Deviation

Beta

Alpha R-Squared

Sharpe Ratio

Treynor Ratio

3. Qualitative Measures

Benchmark

1. Quantitative Measures

a) Assets under Management (AUM)

This denotes the size of the fund or the scheme. Larger funds have higher AUM and vice

versa.

b) Annual Return

A return is a measurement of how much an investment has increased or decreased in

value over any given time period. In particular, an annual return is the percentage by which it

increased or decreased over any twelve-month period.

Return = ((End_price + Start_price) / Start_price)*100

Eg:

c) Expense Ratio

Mutual funds too charge a fee for managing your money. This involves the fund

management fee, agent commissions, registrar fees, and selling and promoting expenses. All

this falls under a single basket called expense ratio or annual recurring expenses that isdisclosed every March and September and is expressed as a percentage of the fund's average

Date NAV Returns

January, 2005 18.12 - January, 2006 30.07 65.95 %

January, 2007 34.91 16.10 % January, 2008 42.95 23.03 %



weekly net assets. Expense ratio states how much you pay a fund in percentage term every

year to manage your money.

d) Price Earnings Ratio

A company’s PE is the ratio of the share price of a company to its earnings per share

(EPS). If EPS is one, the PE ratio will reflect the price that an investor will pay for this one

rupee of the company's profits.

An equity fund is a collection of shares. Therefore, a fund's PE is the average of the

PEs of all stocks, in proportion to their presence in the portfolio. Because fund portfolios

change, the PE will also change and this will not reflect the growth prospects of the

underlying assets. A fund's PE is the weighted average PE of its stocks.

A fund's PE ratio can tell us whether the fund has more growth stocks or value stocks

compared to another fund.

e) Turnover Ratio

The turnover ratio represents the percentage of a fund's holdings that change every year.

To put it simply, a turnover rate of 100 per cent implies that the fund manager has replaced

his entire portfolio during the period given.

2. Risk Measures

a) Standard Deviation

The Standard Deviation of an average is the amount by which the numbers that go

into an average deviate from that average. It tells us how closely an average represents the

underlying numbers.

Risk! A recipe for figuring out the risk level of a fund takes shape:

Calculate a fund's monthly performance over a long period of time.

Calculate the average for all these monthly performances.

If the individual monthly performances are very different from the average, then that

fund is risky, delivering high returns in some months and poor returns in others. If



they are mostly similar, then the fund is a low risk one, with about the same returns

month after month.

We just calculate exactly how much each month's performance is different from the

average and then calculate the average of these differences. This is Standard Deviation.

b) Beta

Betas are widely used to measure the volatility of a stock fund's price relative to the

general market. The beta relates the volatility of a single security to the volatility of the

market as a whole.

An issue with a beta of 1.5 for example, tends to move 50% more than the total market, in

the same direction. An issue with a beta of 0.5 tends to move 50% less. If a stock or stock

fund moved exactly as the market moved, it would have a beta of 1.0. Thus, high beta is

typical of a volatile stock. Low beta is typical of a stock that moves less than the market as a

whole. A stock with a negative beta moves in the direction opposite to that of the market.

With a beta of -1.0 a stock has the same volatility as the market, but tends to rise when themarket falls, and vice versa.

Example: Calculation of Beta

BENCHMARK (X) NAV

(Y)

XReturns of Benchmark

(%)

YReturnsof Fund

(%)X

2

Y2

X*Y

1059 18.2

1122 18.7 5.95 2.75 35.39 7.55 16.34

1065 19.3 -5.08 3.21 25.81 10.29 -16.30

1053 19.6 -1.13 1.55 1.27 2.42 -1.75

1112 19.7 5.60 0.51 31.39 0.26 2.86

1189 21.6 6.92 9.64 47.95 93.02 66.78



∑X=12.27 ∑Y=17.67 ∑X2=141.81 ∑Y2=113.54 ∑XY=67.93

= 0.23

c) Alpha

Alpha is part of what is called modern portfolio theory, a set of techniques that

analyze investing in a somewhat academic manner. Alpha is used along with beta. Beta is

therefore a measure of volatility.

Alpha tells you whether that fund has produced returns justifying the risks it is taking

by comparing its actual return to the one 'predicted' by the beta. Say, a fund can be expected

to earn—based on its beta—a return of 15 per cent in a given year. However, it actually

fetches you 18 per cent. Then the alpha of the fund is simply 18-15 = 3, that is, 3.

Alpha can be seen as a measure of a fund manager's performance. A positive alpha

implies that a fund has performed better than expected, given its level of risk. So higher the

alpha better are returns.

E.g.: From the above example

X = ∑X = 12.27 = 2.45 Y = ∑Y = 17.67 = 3.53

N 5 N 5

Alpha = { 3.53 – ( 0.23 * 2.45 )} = 2.97

d) R-Squared

R-squared measures how much of the fund’s return can be explained by the market

movements. It does this by measuring how closely the fund’s performance tracks that of the

benchmark index. The R-squared of an index fund, investing in same securities and in the

same weightage as the index, will be one. If a fund has a high R-squared, it makes the beta a

valid measure. A figure of 0.8 or higher for the R-squared is considered adequate to give

credence to the beta. The lower the R-squared the less reliable is the beta.



f) Treynor Ratio

The Treynor ratio is a measurement of the returns earned in excess of that which could have

been earned on a riskless investment.

The Treynor ratio (sometimes called reward-to-volatility ratio) relates excess return

over the risk-free rate to the additional risk taken; however systematic risk instead of total

risk is used. The higher the Treynor ratio, the better the performance under analysis.

Where, Ti = Treynor

R i = the average portfolio return

R f = the average risk free rate

βi = the slope of the characteristic

line during the time period

For e.g.: Let R i = 29.40%, R f = 7.44%, βi = 0.23

Then Tt = 0.2940 – 0.0744 = 0.95

0.23

3) Qualitative Measures

a) Benchmark Index

It is generally an index like the BSE TECk, Bankex etc. This is used for judging the

performance of the fund by comparing the returns of the funds with their respective

benchmark index. There are some funds which beat the index and gives higher returns to the

investors.

i

f i

i

R RT

β

−

=

http://en.wikipedia.org/wiki/Investment

http://en.wikipedia.org/wiki/Investment



CHAPTER III

DATA ANALYSIS&

INTERPRETATION



(CADM), System Integration, IT Consulting, Application Management, Infrastructure

Management Services, Software testing, Service-oriented architecture and Web services.

Even in the event of a falling dollar and a strengthened rupee, India is the undisputed

leader in offshore services, accounting for 65-70 per cent of the global off shoring pie. It tops

the list of 30 countries on criteria such as language, Government support, labour pool,

infrastructure, educational system, cost, political and economic environment, cultural

compatibility, global and legal maturity, and data and intellectual property security and

privacy, says Gartner.

In 2006-07, software and services exports grew by 33 per cent to register revenue of US$

31.4 billion, whereas the domestic segment grew by 23 per cent to US$ 8.2 billion. Withinexports, IT services touched US$ 18 billion, a growth of 35.5 per cent. The country's IT

exports have, in fact, come quite far, starting from a few million dollars in the early 90s. The

Government expects the exports turnover to touch US$ 80 billion by 2011, growing at an

annual rate of 30 pc per annum.

Equity Linked Savings Scheme (ELSS)

These schemes offer tax rebates to the investors under specific provisions of the Income Tax

Act, 1961 as the Government offers tax incentives for investment in specified avenues. E.g.

Equity Linked Savings Schemes (ELSS). These schemes are growth oriented and invest pre-

dominantly in equities. Their growth opportunities and risks associated are like any equity-

oriented scheme. ELSS invests predominantly in equity, and offer tax deduction to investors

under section 80 C of the Income Tax Act. Currently rebate u/s 80C can be availed up to a

maximum investment of Rs 1, 00,000. A lock-in of 3 years is mandatory.

FMCG

Franklin FMCG Fund (G)

SBI Magnum Sector Umbrella – FMCG (G)

ICICI Prudential FMCG (G)

Birla SunLife Buy India Fund (G)



Interpretation: From the above table & chart it is seen that ICICI Pru FMCG fund has given

the highest returns of 191% since 2005. It was followed by Birla Buy India fund with 124%

returns. Over the three years ICICI FMCG fund was able to give the highest returns followed

by Birla Sunlife Buy India Fund. In the market meltdown in 2008 the magnum FMCG and

Birla Buy India fund each has taken hit by around 18%. This shows that the fund

management of ICICI FMCG is proactive as it has been able to produce better returns when

compared to its peers. The Magnum FMCG fund was a terrible performer with only 11%

returns over three years.

TABLE 2: Table showing the General Characteristics of the FMCG Funds

Source: Value Research, March 2008

FundAUM

(Cr)

Expense ratio

(%)PE Ratio

Turnover

Ratio (%)

Franklin FMCG Fund 25.19 2.50 33.55 8.17

SBI Magnum FMCG Fund 7.65 2.50 38.43 31

ICICI Pru FMCG Fund 69.69 2.50 42.45 99

Birla SunLife Buy IndiaFund 58.33 2.44 35.72 14



Interpretation: From the above table & chart it is seen that ICICI and Birla have a higher

AUM when compared to Magnum and Franklin. This is in correlation to the returns

generated by the funds. As magnum has given very less returns it has faced large redemptions

and as a result its AUM has declined and now stands at just 7.65Cr.

The expense ratio is the amount which the investor pays manage the fund in

percentage terms is more or less same for all the funds and it comes upto 2.5%.

The PE ratio is high for ICICI which is 42.45 and it is followed by Magnum, Birla

and Franklin. All the funds have a high PE ratio and this shows that these funds have more of

growth stocks in their portfolio.

The turnover ratio for ICICI is very high at 99%. This shows that ICICI fund has

churned its entire portfolio in a year. Whereas the other funds have a comparatively lesser turnover ratios.

TABLE 3: Table Showing the Vital Statistics of the FMCG Funds

FundSD

(%)

Annualised

S.DBeta Alpha R 2 Sharpe Treynor

FranklinFMCG Fund

6.27 21.71 0.58 0.80 0.68 0.83 0.31

SBI MagnumFMCG Fund

7.59 26.30 0.43 -0.38 0.16 0.00 0.00

ICICI PruFMCG Fund

6.98 24.19 0.62 1.66 0.48 1.22 0.48

Birla SunLifeBuy IndiaFund

6.47 22.42 0.73 0.38 0.69 0.92 0.28



Interpretation: The overall risk of Magnum fund is higher when compared to FMCG funds.

Also Magnum provides the least returns comparatively. On the other hand ICICI has a S.D of

6.98 but it provides the highest returns. All the funds have a relatively same S.D.

Interpretation: All the funds are less volatile than their respective benchmark indices as the

beta values are less than one. Magnum FMCG fund has underperformed as it has a negative

alpha. ICICI Pru FMCG fund has performed better than expectations as it has a very high

Alpha. The beta of a fund has to be seen in conjunction with the R-squared for understanding

the risk of the fund. As the Franklin and Birla have a high R 2 it makes the beta a valid

measure.



Interpretation: Sharpe Ratio defines the relation between return and volatility of the funds.

It shows the Risk adjusted return. Comparatively ICICI fund is more reliable and SBI has the

least ratio. Treynor ratio of ICICI is high and this shows that it has been able to earn higher

excess return over the risk free rate when compared to other schemes. SBI has a Treynor ratio

of zero and is the undesirable choice for investment.

PHARMA FUNDS:

Franklin Pharma

JM Healthcare Sector 1

Magnum Pharma

Reliance Pharma

UTI Pharma & Healthcare

TABLE 4: Table Showing the Absolute Returns of Pharmaceutical Funds

Scheme 2008 2007 2006 2005 Since 2005

Franklin Pharma -12.41 5.75 13.86 17.36 36.95

JM HealthcareSector -11.26 11.24 16.10 16.49 44.44

MagnumPharma -14.94 6.74 12.63 44.41 54.09

Reliance Pharma -21.54 49.80 16.73 29.40 88.34

UTI Pharma &Healthcare

-12.15 12.08 8.25 16.02 34.73

1 JM Healthcare Sector fund is not a top ten AMC.



Interpretation: From the above table & chart it can be seen that Reliance Pharma is the best

performing fund followed by Magnum Pharma, JM Healthcare, Franklin and UTI Pharma.

Reliance was able to give a very high overall return when compared to other funds in this

category because of the 50% returns given by it in the year 2007. Also in the year 2008 the

reliance fund has taken a worst hit when compared to others by 21.54%. The worst reforming

funds in this sector were Franklin Pharma and UTI Pharma. This is mainly because of thePharmaceutical sector as a whole has been underperforming over a period time.

TABLE 5: Table showing the General Characteristics of the Pharmaceutical Funds

Fund AUM(cr)Expense Ratio

(%)PE Ratio

Turnover

Ratio (%)

Franklin Pharma43.58 2.50 20.24 42.90

JM Healthcare Sector 5.47 2.50 22.21 34.25

Magnum Pharma33.95 2.50 23.37 17.00

Reliance Pharma136.23 2.19 18.77 36.00

UTI Pharma &Healthcare

55.54 2.50 22.50 98.30




Interpretation: From the above table & chart it is seen that the AUM of Reliance Pharma is

highest when compared to other funds in the same category. Invariably funds having higher

returns will attract more investors and this leads to an increase in its AUM.

The expense ratio for all the funds stands at 2.5% except for Reliance Pharma which

is at 2.19%. This shows that the fund management of Reliance is efficient as its annual

recurring expenses are lesser when compared to its competitors. This is mainly due to larger

asset under management.

The PE ratio for all the funds is around 20 to 23 times. Whereas the PE ratio of

Reliance Pharma is just 18.77 times. In spite of a lower PE ratio it is able to give higher

returns to its investors.

The turnover ratio represents the percentage of a fund’s holding that change every

year. UTI Pharma has been able to churn 98% of its portfolio and the turnover of Magnum is

the least at 17%.

TABLE 6: Table Showing the Vital Statistics of Pharmaceutical Funds

Fund SD (%)Annualised


Franklin

Pharma

7.04 24.38 0.62 0.17 0.59 0.07 0.03



JMHealthcareSector

7.32 25.36 0.70 0.33 0.62 0.18 0.07

MagnumPharma

7.45 25.81 0.61 0.70 0.43 0.31 0.13

ReliancePharma

8.27 28.65 0.82 1.13 0.53 0.54 0.19

UTI Pharma&Healthcare

7.36 25.51 0.70 0.13 0.61 0.09 0.03

Interpretation: The Reliance Pharma fund has a high S.D of 8.27. S.D measures the risks

associated with the fund. Also Reliance fund justifies this risk as it gives the highest returns

when compared to other funds.



Interpretation: All the Pharma funds has fairly same beta around 0.7 and therefore they will

fluctuate slightly less than their indices. The Reliance fund has an Alpha greater than one as a

result it has performed better than all other funds. The alpha of UTI Pharma is 0.13 andtherefore it has not met its expectations. The R 2 comparatively of all the funds are between

0.43 to 0.61. This shows that all the funds correlate with the performance of their benchmark

index.

Interpretation: Based on Sharpe ratio Reliance is a much better choice as it has a higher

returns per unit of risk. It is followed by Magnum and JM. Based on Treynor measure

Franklin, JM and UTI are least preferred fund as the give lesser returns then the other two

funds. Hence based on both the measures Reliance is the first choice of investment.

TECHNOLOGY FUNDS

Birla Sun Life New Millennium

ICICI Prudential Technology

Kotak Tech

SBI Magnum IT

UTI Software

TABLE 7: Table Showing the Absolute Returns of Technology Funds

Scheme 2008 2007 2006 2005 Since 2005



Birla Sun Life New Millennium -17.12 20.77 46.01 52.86 114.98

ICICI Prudential Technology -12.73 10.92 51.64 53.34 125.76

Kotak Tech -20.08 0.20 36.68 22.54 53.54

Magnum IT -15.34 6.41 51.17 65.40 100.20

UTI Software -18.32 -10.09 47.37 45.81 62.23

Interpretation: From the above table & chart it is seen that the technology funds have given

very good returns in the year 2005 and 2006. But the returns were very meager in the year

2007 and it was negative in the year 2008. Over the three years’ time period three funds have

doubled in value with over 100% returns. The best performing fund was ICICI Pru

Technology followed by Birla Sunlife and Magnum IT. The technology sector has showed a

negative return in the last 14 months mainly due the U.S Dollar depreciation. The worst

performing fund was Kotak Tech.

TABLE 8: Table showing the General Characteristics of Technology Funds




Fund AUM (Cr)Expense

ratio (%)PE

Ratio

Turnover

Ratio(%)

Birla Sun Life NewMillennium

92.93 2.45 45.98 45

ICICI Prudential Technology 129.55 2.40 25.96 92.00

Kotak Tech 27.20 2.25 38.25 81.83

SBI Magnum IT 69.99 2.48 23.94 10.00

UTI Software 79.60 2.38 24.40 25.35



Interpretation: From the above table & chart it is seen that the ICICI Pru Technology fund

is the largest fund and the Kotak Tech is the smallest fund in this sector. This shows that the

marketing activities of ICICI was aggressive than its competitors and also the returns

generated are higher and therefore it has a very high AUM.

The Expense ratio is relatively same for all the funds ranging from 2.25% to 2.45%. It

is high for Magnum IT fund and it was least for Kotak Tech.

The PE ratio was very high for Birla and Kotak Tech. Whereas for other funds it was

relatively same ranging from 24% to 26%. This shows that Birla and Kotak had aggressive

growth stocks in its portfolio.

The turnover ratio was very high for ICICI and Kotak. This shows that the volume of

trading carried out by them was very high. On the other hand the volume of trading for Magnum was very least at 10%.

TABLE 9: Table Showing the Vital Statistics of Technology funds

Fund SD (%)Annualised


Birla SunLife NewMillennium

6.45 22.35 0.90 0.53 0.86 0.89 0.22

ICICIPrudentialTechnology

7.17 24.85 0.84 1.39 0.54 0.88 0.26

Kotak Tech 6.67 23.10 0.94 0.16 0.86 0.37 0.09

Magnum IT 7.20 24.94 0.90 0.95 0.61 0.70 0.19

UTISoftware

6.86 23.75 0.98 0.45 0.94 0.42 0.10



Interpretation: The S.D of ICICI and Magnum IT fund is higher. This is justified by its high

returns. Whereas Birla fund has a low risk but it yields a very high returns. So Birla fund is

better in terms of risk return parameters.

Interpretation: All the funds have a fairly same beta –slightly less than one and therefore

will fluctuate slightly less than their respective indices. ICICI fund has an alpha higher than

one and it is the best performer. Whereas the Kotak Tech fund has a very low alpha and

therefore it has given a return which slightly higher than its benchmark. As the R 2 of UTI,

Kotak and Birla is high and close to one we can say that its performance correlates with the

performance of the benchmark and it makes the beta a valid measure.



Interpretation: By Sharpe measure both Birla and ICICI is better than the other three as it

has a higher ratio. By Treynor’s measure also the same conclusion is arrived. Between the

two ICICI is a better choice as it has a higher Treynor measure. Here the Kotak fund is least

preferred as is has lest Sharpe and Treynor measure.

ELSS:

These schemes offer tax rebates to the investors under specific provisions of the

Income Tax Act, 1961 as the Government offers tax incentives for investment in specified

avenues. E.g. Equity Linked Savings Schemes (ELSS) .These schemes are growth oriented

and invest pre-dominantly in equities. Their growth opportunities and risks associated are like

any equity-oriented scheme. ELSS invests predominantly in equity, and offer tax deduction to

investors under section 80 C of the Income Tax Act. Currently rebate u/s 80C can be availed

up to a maximum investment of Rs 1,00,000. A lock-in of 3 years is mandatory.

Large Schemes (AUM >500 crores)

1. Birla Tax Plan 98 (G)

2. Franklin India Tax Shield (G)

3. HDFC Long Term Advantage (G)

4. ICICI Pru Tax Plan (G)

5. SBI Magnum Tax Gain (G)

TABLE 10: Table Showing the Absolute Returns of ELSS Schemes

http://messageboard.moneycontrol.com/india/mutualfunds/mfinfo/12/37/mfcodesearch/MAC011

http://messageboard.moneycontrol.com/india/mutualfunds/mfinfo/12/37/mfcodesearch/MKP007

http://messageboard.moneycontrol.com/india/mutualfunds/mfinfo/12/37/mfcodesearch/MHD009

http://messageboard.moneycontrol.com/india/mutualfunds/mfinfo/12/37/mfcodesearch/MPI007







Schemes 2008 2007 2006 2005Since

2005

Birla Tax Plan 98 -18.94 51.73 31.88 57.34 155.21

Franklin India Tax Shield -15.75 56.02 27.17 48.93 148.95

HDFC Long Term Advantage -14.29 40.62 23 55.63 130.73

ICICI Pru Tax Plan -19.47 40.95 26.15 68.8 141.71

SBI Magnum Tax Gain -13.40 18.65 2.73 52.98 73.79

Interpretation: It is seen that overall the ELSS schemes have been performing exceptionally

well with overall returns of around 140% over three years. The best performing fund was

Birla Tax plan followed by Franklin Tax Shield, ICICI Pru Tax Plan and HDFC LT

Advantage fund. The worst performer in this category was the Magnum Tax Gain which wasable to produce only half of the returns which its peer could manage. This shows that fund

management of magnum Tax gain was ineffective.

TABLE 11: Table showing the General Characteristics of ELSS Schemes

Scheme Name AUM (cr)Expense

Ratio (%)P/E Ratio

Turnover

ratio (%)

Birla Tax Plan 98 651.82 2.30 44.96 23.00





Franklin India TaxShield

553.24 2.28 38.43 66.70

HDFC Long TermAdvantage

855.25 2.16 32.56 31.84

ICICI Pru Tax Plan 834.00 2.17 29.32 187.00SBI Magnum TaxGain

3,263.51 1.89 32.56 7.00


Interpretation: From the above table & chart it is seen that Magnum Tax gain has a very

high AUM when compared to other funds. Its AUM is nearly four times to its nearest

competitors. This shows that magnum fund has a very large investor base. Also other funds

have a healthy AUM ranging from 550 Crs to 830 Crs. The AUM is generally high for ELSS

schemes mainly due to the tax benefit provided by investing in these schemes.









Interpretation: The Expense ratio is relatively same for all the funds except Magnum Tax

gain which is at 1.89%. The expense of this fund is lower when compared to its competitors

mainly due to the very large AUM base.

The PE ratio of all the funds are well above 29 times, this is mainly because the

investment objective of these funds is investing mainly in equities and a very minimal portion

is invested in debt.

The Turnover ratio for ICICI for very high at 187% which shows a very high trading

volume. Whereas for the other funds it was relatively lesser and ranged from 7% to 66%

mainly due to the lock in period associated with these funds. The fund managers can invest in

stocks for a long period of time in order to generate higher returns.

TABLE 12: Table Showing the Vital Statistics of ELSS Schemes

FundSD

(%)

Annualised

S.DBeta Alpha R² Sharpe Treynor

Birla Tax Relief 96 6.52 22.59 0.85 0.32 0.74 1.11 0.30

Franklin IndiaTax Shield

6.68 23.15 0.90 0.30 0.93 1.05 0.27

HDFC LongTermAdvantage

6.05 20.96 0.71 0.38 0.72 1.01 0.30

ICICI Pru TaxPlan

7.22 24.99 0.86 0.33 0.64 0.97 0.28

SBI MagnumTax gain

7.79 26.98 0.68 -0.04 0.31 0.55 0.22





















Interpretation: The S.D of all the funds is relatively same around 6.5 for all the funds except

ICICI and Magnum which has a high S.D. Also Magnum has a very high S.D but it yields a

very low return. In terms of risk HDFC has the least risk with high returns.

Interpretation: The beta is highest of Franklin fund and least for the Magnum fund. All the

funds have a beta less than one and hence they are less volatile than their benchmark indices.

The alpha of all the funds is relatively same for all the funds except for Magnum Tax

fund it is negative. This means that magnum fund has under performed its benchmark index.

As the Franklin fund has a R 2 of 0.93, this shows it correlates perfectly with the

benchmark and as a result it has given the same returns as generated by its benchmark. Also

as Magnum has a low R 2, therefore beta of Magnum is not a valid measure.



Interpretation: From the above table and chart it is seen that comparatively all the funds

except Magnum fund have a high Sharpe ratio around one. By Treynor’s measure the best

funds are Birla and HDFC fund. Based on both the measures the best ranked fund is Birla and

the least ranked fund is Magnum fund.

TABLE 13: Table showing the various sectoral schemes and its Benchmark Index.



Source: www.mutualfundsofindia.com

QUALITATIVE DATA

SCHEME BENCHMARK

FMCG

Franklin FMCG Fund ET BrandexSBI Magnum FMCG Fund BSE FMCG

ICICI Pru FMCG Fund S&P CNX FMCG

Birla SunLife Buy India Fund BSE200

TECHNOLOGY

Birla Sun Life New Millennium BSE TECk

ICICI Prudential Technology BSE IT

Kotak Tech BSE ITSBI Magnum IT BSE IT

UTI Software S&P CNX Software

PHARMA

Franklin Pharma ET Lifex

JM Healthcare Sector BSE HC

Magnum Pharma BSE HC

Reliance Pharma BSE HC

UTI Pharma & Healthcare S&P CNX Pharma

ELSS

Birla Tax Plan 98 SENSEX

Franklin India Tax Shield S&P CNX 500

HDFC Long Term Advantage Sensex

ICICI Prudential Tax Plan S&P CNX Nifty

SBI Magnum Tax Gain BSE 100



FMCG

ICICI Pru FMCG fund has given the highest returns of 191% since 2005. It was

followed by Birla Buy India fund with 124% returns. The Magnum FMCG fund was a

terrible performer with only 11% returns over three years.

ICICI FMCG and Birla have a higher AUM when compared to Magnum and

Franklin. This is in correlation to the returns generated by the funds. As magnum has

given very less returns it has faced large redemptions.

The expense ratio is more or less same for all the funds at 2.5%.

The PE ratio is high for ICICI which is 42.45 and it is followed by Magnum, Birla

and Franklin.

The overall risk of Magnum fund is higher when compared to other FMCG funds.

Also Magnum provides the least returns comparatively. On the other hand ICICI has a

S.D of 6.98 but it provides the highest returns.

All the funds are less volatile than their respective benchmark indices as the beta

values are less than one. Magnum FMCG fund has underperformed as it has a negative

alpha. ICICI Pru FMCG fund has performed better than expectations as it has a very high

Alpha. As the Franklin and Birla have a high R 2 it makes the beta a valid measure.

Sharpe Ratio defines the relation between return and volatility of the funds. It shows

the Risk adjusted return. Comparatively ICICI fund is more reliable and SBI has the least

ratio. Treynor ratio of ICICI is high and this shows that it has been able to earn higher

excess return over the risk free rate when compared to other schemes. SBI has a Treynor

ratio of zero and is the undesirable choice for investment.

PHARMA FUNDS

Reliance Pharma is the best performing fund followed by Magnum Pharma, JM

Healthcare, Franklin and UTI Pharma. Reliance was able to give a very high overall

return when compared to other funds in this category because of the 50% returns given by



it in the year 2007. The worst performing funds in this sector were Franklin Pharma and

UTI Pharma.

Reliance Pharma has a higher AUM when compared to other funds. Invariably funds

having higher returns will attract more investors and this leads to an increase in its AUM.

The expense ratio for all the funds stands at 2.5% except for Reliance Pharma which is at

2.19%. This is mainly due to larger asset under management.

The PE ratio for all Pharma funds is around 20 to 23 times. Whereas the PE ratio of

Reliance Pharma is just 18.77 times. In spite of a lower PE ratio it is able to give higher

returns to its investors.

The turnover ratio represents the percentage of a fund’s holding that change every year.

UTI Pharma has been able to churn 98% of its portfolio and the turnover of Magnum is

the least at 17%.

The Reliance Pharma fund has a high S.D of 8.27. S.D measures the risks associated with

the fund. Also Reliance fund justifies this risk as it gives the highest returns when

compared to other funds.

The Reliance fund has an Alpha greater than one as a result it has performed better than

all other funds. The alpha of UTI Pharma is 0.13 and therefore it has not met its

expectations. The R 2 comparatively of all the funds are between 0.43 to 0.61. This shows

that all the funds correlate with the performance of their benchmark index.

Based on Sharpe ratio Reliance is a much better choice as it has a higher returns per unit

of risk. It is followed by Magnum and JM. Based on Treynor measure Franklin, JM and

UTI are least preferred fund as the give lesser returns then the other two funds. Hence based on both the measures Reliance is the first choice of investment.

TECHNOLOGY FUNDS

Technology funds have given very good returns in the year 2005 and 2006. Over the three

years’ time period three funds have doubled in value with over 100% returns. The best

performing fund was ICICI Pru Technology followed by Birla Sunlife and Magnum IT.



The technology sector has showed a negative returns in the last 14 months mainly due the

U.S Dollar depreciation. The worst performing fund was Kotak Tech.

The ICICI Pru Technology fund is the largest fund and the Kotak Tech is the smallest

fund in this sector.

The Expense ratio is relatively same for all the funds ranging from 2.25% to 2.45%. It is

high for Magnum IT fund and it was least for Kotak Tech.

The PE ratio was very high for Birla and Kotak Tech. Whereas for other funds it was

relatively same ranging from 24% to 26%.

The turnover ratio was very high for ICICI and Kotak. This shows that the volume of

trading carried out by them was very high. On the other hand the volume of trading for

Magnum was very least at 10%.

The S.D of ICICI and Magnum IT fund is higher. This is justified by its high returns.

Whereas Birla fund has a low risk but it yields a very high returns. So Birla fund is better

in terms of risk and return parameters.

All the funds have a fairly same beta –slightly less than one and therefore will fluctuate

slightly less than their respective indices. ICICI fund has an alpha higher than one and is a

better performer. As the R 2 of UTI, Kotak and Birla is high and close to one we can say

that its performance correlates with the performance of the benchmark and it makes the

beta a valid measure.

By Sharpe measure both Birla and ICICI is better than the other three as it has a higher

ratio. By Treynor’s measure also the same conclusion is arrived. Between the two ICICI

is a better choice as it has a higher Treynor measure. Here the Kotak fund is least preferred as is has lest Sharpe and Treynor measure.

EQUITY LINKED SAVINGS SCHEMES

ELSS schemes have been performing exceptionally well with overall returns of around

140% over three years. The best performing fund was Birla Tax plan followed by

Franklin Tax Shield, ICICI Pru Tax Plan and HDFC LT Advantage fund. The worst



performer in this category was the Magnum Tax Gain which was able to produce only

half of the returns which its peer could manage. This shows that fund management of

magnum Tax gain was ineffective.

It is seen that Magnum Tax gain has a very high AUM when compared to other funds. Its

AUM is nearly four times to its nearest competitors. This shows that magnum fund has a

very large investor base. Also other funds have a healthy AUM ranging from 550 Crs to

830 Crs. The AUM is generally high for ELSS schemes mainly due to the tax benefit

provided by investing in these schemes.

The Expense ratio is relatively same for all the funds except Magnum Tax gain which is

at 1.89%. The expense of this fund is lower when compared to its competitors mainly due

to the very large AUM base.

The PE ratio of all the funds are well above 29 times, this is mainly because the

investment objective of these funds is investing mainly in equities and a very minimal

portion is invested in debt.

The Turnover ratio for ICICI is very high at 187% which shows a very high trading

volume. Whereas for the other funds it was relatively lesser and ranged from 7% to 66%

mainly due to the lock in period associated with these funds. The fund managers can

invest in stocks for a long period of time in order to generate higher returns.

The S.D of all the funds is relatively same around 6.5 for all the funds except ICICI and

Magnum which has a high S.D. Also Magnum has a very high S.D but it yields a very

low return. In terms of risk HDFC has the least risk with high returns.

The beta is highest of Franklin fund and least for the Magnum fund. All the funds have a

beta less than one and hence they are less volatile than their benchmark indices.

The alpha of all the funds is relatively same for all the funds except for Magnum Tax

fund it is negative. This means that magnum fund has under performed its benchmark

index.

As the Franklin fund has a R 2 of 0.93, this shows it correlates perfectly with the

benchmark and as a result it has given the same returns as generated by its benchmark.

Also as Magnum has a low R 2, therefore beta of Magnum is not a valid measure.



Comparatively all the funds except Magnum fund have a high Sharpe ratio around one.

By Treynor’s measure the best funds are Birla and HDFC fund. Based on both the

measures the best ranked fund is Birla and the least ranked fund is Magnum fund.

CONCLUSION

This research report was a very good learning experience for me. The project on

mutual fund facilitated me in understanding the theoretical concepts along with the in- depth

study of various important parameters to evaluate mutual fund schemes and has made me self

sufficient in analyzing the wide variety of schemes available in the market and picking up

the right one to invest.

By and large it has been seen that sector specific schemes like FMCG, Pharmaceutical

& Technology have not found investors interest as their AUM are very low when compared

to ELSS and also other diversified schemes. This is mainly due to the high risk involved by

investing in a particular sector. Investors tend to prefer diversified sectoral investment as therisks are reduced.



Ranking of funds maybe done as per Risk Adjusted Returns method. This is the most

precise and comparative way of ranking as it takes the risk and return, both into

consideration. Thus, it has proved to be more accurate and concrete. Also by the means of

Sharpe and Treynor measure all the sector specific schemes were analyzed and ranked. This

provides a ready guide for the investor in making the right investment decision.

It was traced that the funds, which embarked lower risk, did not always validate lower

returns or vice versa. This states that the risks and return need not always be in a beeline or

point-blank relationship.



CHAPTER V

SUGGESTIONS



SUGGESTIONS

The funds which are performing at an average level should increase their turnover ratios. As it has been seen from the study that all the top performing funds have a very

high turnover ratio.

Also in each sector invariably the best returns generator fund has the highest AUM.

Therefore the AMCs should adopt an aggressive marketing strategy to lure in the

investor to increase their fund corpus.

SBI Magnum FMCG fund has produced meager returns and this fund should bewound up.

Reliance Pharma fund can add more growth stocks to its portfolio to further enhance

its returns.

SBI Magnum Tax Gain fund needs to reduce its risk and also improve its returns by

increasing its trading volume and adopting an active fund management style.

TABLE 14: Table showing the ranking of FMCG Funds based on Sharpe & Treynor

measure

Rank Sharpe Ratio Treynor Ratio

1 ICICI Pru FMCG Fund ICICI Pru FMCG Fund2 Birla SunLife Buy India Fund Franklin FMCG Fund3 Franklin FMCG Fund Birla SunLife Buy India Fund4 SBI Magnum FMCG Fund SBI Magnum FMCG Fund

In FMCG sector the top pick for investment is the ICICI Prudential FMCG Fund as it

generates higher returns.

TABLE 15: Table showing the ranking of Pharmaceutical Funds based on Sharpe &

Treynor measure

Rank Sharpe Ratio Treynor Ratio

1 Reliance Pharma Reliance Pharma

2 Magnum Pharma Magnum Pharma3 JM Healthcare Sector JM Healthcare Sector



BIBLIOGRAPHY

Books Referred

• V.A AVADHANI, Securities Analysis and Portfolio Management,

Himalaya Publishing House, 2004

Magazines Referred

• Value Research-Mutual Fund Insight, Volume V, Number 7

• Business World, 3 March 2008

Websites

• www.mutualfundsofindia.com

• www.valueresearch.com

•

www.amfi-india.com• www.sebi.gov.in

• www.rbi.org.in

• www.moneycontrol.com

• www.nse-india.com

• www.bse-india.com

• www.money-zine.com

• www.njfundz.com

http://www.mutualfundsofindia.com/

http://www.valueresearch.com/

http://www.amfi-india.com/

http://www.sebi.gov.in/

http://www.rbi.org.in/

http://www.moneycontrol.com/

http://www.nse-india.com/

http://www.bse-india.com/

http://www.money-zine.com/

http://www.njfundz.com/

http://www.mutualfundsofindia.com/

http://www.valueresearch.com/

http://www.amfi-india.com/

http://www.sebi.gov.in/

http://www.rbi.org.in/

http://www.moneycontrol.com/

http://www.nse-india.com/

http://www.bse-india.com/

http://www.money-zine.com/

http://www.njfundz.com/

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