Chapter-1

Introduction

DEBT MUTUAL FUND INDUSTRY

In few years Mutual Fund has emerged as a tool for ensuring ones financial well being.
Mutual Funds have not only contributed to the India growth story but have also helped
families tap into the success of Indian Industry. As information and awareness is rising more
and more people are enjoying the benefits of investing in mutual funds. The main reason the
number of retail mutual fund investors remains small is that nine in ten people with incomes
in India do not know that mutual funds exist. But once people are aware of mutual fund
investment opportunities, the number of people who decide to invest in mutual funds will
increase to as many as one in five people. The trick for converting a person with no
knowledge of mutual funds to a new Mutual Fund customer is to understand which of the
potential investors are more likely to buy mutual funds and to use the right arguments in the
sales process that customers will accept as important and relevant to their decision.
This Project gave me a great learning experience and at the same time it gave me enough
scope to implement my analytical ability. The analysis and advice presented in this Project
Report is based on market research on the study of Debt and Equity Funds in India. This
Report will help to know about the investors preferences in Mutual Fund means, Do they
prefer any particular Asset Management Company (AMC), Which type of Product they
prefer, Which Option (Growth or Dividend) they prefer or Which Investment Strategy they
follow (Systematic Investment Plan or One time Plan). This Project as a whole can be divided
into two parts.

The first part gives an insight about Debt and Equity Funds and its various aspects, the major
mutual fund players in India, Objectives of the study, Research Methodology. One can have a
brief knowledge about Debt and Equity Fund and its basics through the Project.
The second part of the Project consists of data and its analysis collected through survey done
on 100 people and some financial analysis done on the basis of NAV (Monthly Data). For the
collection of Primary data I made a questionnaire and surveyed of 100 people. I also took
interview of many People those who are the customers of various banks. I visited other
AMCs to get some knowledge related to my topic. I studied about the products and strategies
of other AMCs to know why people prefer to invest in those AMCs. This Project covers the
topic Debt mutual Funds in India. The data collected has been well organized and
presented. I hope the research findings and conclusion will be of use.
DEBT FUNDS
Funds that invest in medium to long-term debt instruments issued by private companies,
banks, financial institutions, governments and other entities belonging to various sectors (like
infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk
profile funds that seek to generate fixed current income (and not capital appreciation) to
investors. In order to ensure regular income to investors, debt (or income) funds distribute
large fraction of their surplus to investors. Although debt securities are generally less risky
than equities, they are subject to credit risk (risk of default) by the issuer at the time of
interest or principal payment. To minimize the risk of default, debt funds usually invest in
securities from issuers who are rated by credit rating agencies and are considered to be of
"Investment Grade". Debt funds that target high returns are more risky. Based on different
investment objectives, there can be following types of debt funds:

1) Diversified Debt Funds: Debt funds that invest in all securities issued by entities
belonging to all sectors of the market are known as diversified debt funds. The best feature of
diversified debt funds is that investments are properly diversified into all sectors, which
results in risk reduction.
2) High Yield Debt Funds: As we now understand that risk of default is present in all debt
funds, and therefore, debt funds generally try to minimize the risk of default by investing in
securities issued by only those borrowers who are considered to be of "investment grade".
But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those
issuers who are considered to be of "below investment grade". The motive behind adopting
this sort of risky strategy is to earn higher interest returns from these issuers. These funds are
more volatile and bear higher default risk, although they may earn at times higher returns for
investors.
3) Assured Return Funds Although it is not necessary that a fund will meet its objectives or
provide assured returns to investors, but there can be funds that come with a lock-in period
and offer assurance of annual returns to investors during the lock-in period. Any shortfall in
returns is suffered by the sponsors or the Asset Management Companies (AMCs). These
funds are generally debt funds and provide investors with a low-risk investment opportunity.
However, the security of investments depends upon the net worth of the guarantor (whose
name is specified in advance on the offer document). To safeguard the interests of investors,
SEBI permits only those funds to offer assured return schemes whose sponsors have adequate
net-worth to guarantee returns in the future. In the past, UTI had offered assured return
schemes (i.e. Monthly Income Plans of UTI) that assured specified returns to investors in the
future. UTI was not able to fulfill its promises and faced large shortfalls in returns.

Eventually, government had to intervene and took over UTI's payment obligations on itself.
Currently, no AMC in India offers assured return schemes to investors, though possible.
4) Fixed Term Plan Series: Fixed Term Plan Series usually are closed-end schemes having
short-term maturity period (of less than one year) that offer a series of plans and issue units to
investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the
exchanges. Fixed term plan series usually invest in debt / income schemes and target shortterm investors. The objective of fixed term plan schemes is to gratify investors by generating
some expected returns in a short period.
INVESTMENT STRATEGIES
1. Systematic Investment Plan: Under this a fixed sum is invested each month on a
fixed date of a month. Payment is made through post dated cheques or direct debit
facilities. The investor gets fewer units when the NAV is high and more units when
the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA).
2. Systematic Transfer Plan: Under this an investor invest in debt oriented fund and
give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the
same mutual fund.
3. Systematic Withdrawal Plan: If someone wishes to withdraw from a mutual fund
then he can withdraw a fixed amount each month.

ANALYSIS OF DEBT MUTUAL FUND

Debt Funds

1) They must be repaid or refinanced.

2) Requires regular interest payments. Company must generate cash flow to pay.
3) Collateral assets must usually be available.
4) Debt providers are conservative. They cannot share any upside or profits. Therefore,
they want to eliminate all possible loss or downside risks.
5) Interest payments are tax deductible.
6) Debt has little or no impact on control of the company.
7) Debt allows leverage of company profits.

Why debt funds are attractive?

The recent stock markets gyrations would have left a lot of investors dazed. At this juncture,
many would be looking at decent returns as well as safety of capital.
The answer lies in fixed income instruments, particularly debt schemes of mutual funds, since
they provide higher post-tax returns than traditional debt instruments as well as a chance for
capital appreciation. Let us look at some of these options and why they seem so attractive at
present:
Simply put, interest rates have an inverse relationship with bond prices. If RBI cuts interest
rates, this will lead to bond prices rallying, giving the investor both, income flows from the
bond coupon, as well as capital gains.

This has already been happening over the last few months, where bond yields have fallen and
investors have been getting quite decent returns in bond funds, especially longer duration
funds.
This is because bonds of longer maturity periods are more sensitive to interest rate changes
than shorter maturity bonds. This leads to higher capital gains due to greater increase in their
market prices when bond yields fall.
For example, let us take two bonds of Rs 100 each, one of three-year duration and another of
10-year duration. The first bond yields 7.75 per cent and the latter returns 8 per cent. Now let
us suppose bond yields fell by 50 basis points.
The price of both bonds would go up, to neutralize the effect of the interest rate fall, since
they are currently giving higher interest than the market interest rate.

While the price of the three-year bond should rise to Rs 101.33, the price of the 10-year bond
would have risen to Rs 104.75.
Even if we are approaching a softer interest rate scenario, investors would do well o put their
money into longer duration bond and gilt funds or actively managed bond funds, where the
fund manager tries to generate superior bond returns by playing the yield curve.
Debt schemes of mutual funds also offer greater tax-efficiency. While investors have to pay
income tax at the rate of 33.9 per cent on their interest income from conventional investments
like post office schemes and bank fixed deposits, in case they are in the highest tax slab,
mutual fund investors get to pay much less.
In case the investor takes the dividend option, an individual or an HUF has to face deduction
of dividend distribution tax (DDT) from their fund's NAV at the rate of 14.16 per cent, while
others like corporate has to bear a DDT of 22.66 per cent, both of which are much lower than
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the highest marginal tax rate and the corporate tax rate. The income in the hands of investors
after this dividend distribution tax is completely tax-free.
For those investors who do not want the risk of changing bond yields and prices, the
preferred investment avenue could be fixed maturity plans (FMP) of mutual funds.
They are available in various durations, from 3 months to 3 years. At this time of the year, 14
month fixed maturity plans are very popular, since they provide high returns to the investor
with minimal taxes due to double indexation benefits. Here is how they work.
Suppose you invest Rs 1 lakh in a FMP of 14 months at an indicative yield of 9 per cent a
year. Your total returns would be Rs 10,500. Now suppose the cost inflation index for this and
the next financial year is 4 and 4.5 respectively.
This would enable you to get indexation benefits for gains equaling Rs 9,917. That is, only
Rs 583 are deducted as tax. This too would get taxed at the rate of 20.6 per cent, since you
would pay long-term capital gains tax on your income from investments of more than a year.
Thus we see that debt schemes of mutual funds offer a viable investment option, providing
both regular income as well as chance of capital gains to investors.

Different kind of risk associated with Debt Fund

Debt Funds hold major investments in bonds of different categories. Bond funds invest in
bonds and like any investment are affected by some risks. The risks associated with bonds
are:
Interest-rate risk

Unlike stock market where an upward movement of market leads to upward movement in
stock prices, it is a fall in the market yield that pushes up the prices of debt securities. This
happens because there exists an inverse relationship between the yield and the price of a
bond. So, if there is an upward movement of interest rates after one has invested in a bond
fund, the prices of bonds will go down leading to a corresponding fall in the NAVs of the
bond funds. Let us take an example:
Suppose a person buys a bond for Rs. 100 with a coupon rate of 10 percent. In other terms the
person should get Rs. 110 at the end of the year. If the RBI announces a hike in the bank rate
and the market yield for the duration of the bond increased, say to 11 percent, the prices of
the bond will fall around to Rs. 90.91 in order to adjust to the market yield.
An investor stands to benefit in the opposite scenario, when the interest rates are cut as then
the prices go up leading to better returns from the fund. If the interest rate in the above
example falls to 9 percent, a person still gets Rs. 10 in interest but in order to align the
amount received to the prevailing market yield, the price of the bond adjusts to Rs. 111.11. In
this case, the investor is better off by selling it at Rs. 111.11 than holding it to its maturity, as
then he will only get Rs. 110.
This risk is also dependent upon the maturity and duration of the bond and generally, the
longer a fund's duration or average maturity, the higher its interest-rate risk, or the more
sensitive the NAV of the fund will be to changes in interest rates. One can reduce the interest
rate risk by choosing a bond fund with a shorter duration or average maturity.

Credit risk

Just like shares where the performance of the company has some bearing on the stock prices,
credibility of the issuer is of importance in debt instruments. The risk of the issuer not being
able to make payments on his liabilities (debt instrument) is termed as default risk or credit
risk. This is of special concern to the investor if the fund is investing into junk bonds or lower
quality bonds. Bond funds offer professional management and a range of quality ratings to
help lower this risk and so investors stand to benefit by the expertise of fund to pick good
papers only.

Delay Risk

Cash flows are estimated on the basis of the pattern of income distribution. For example, a
bond can pay interest half yearly, on fixed dates and so if there is any delay in receiving
payments from the issuer, there is bound to be a mismatch between the cash flows. This can
be termed as the delay risk. Mutual funds too can miss out on the interest due on an
investment and have to show it as accrued but not received. This also affects the time value of
the money due. A continuation of this trend may lead to a re-rating of the paper and add to the
non-performing assets of the fund.

Balancing Risk vs. Reward

As with any investment in any category, there is always a trade-off between the risks taken
and returns generated. The greater the risk of a bond fund (dependent on the quality and
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duration of papers), the higher is the potential reward, or return. With a bond fund, the risk
that prices may fluctuate and the value of your investment may increase or decrease is not
eliminated and so one must choose funds based on his risk tolerance.

Debt funds invest in instruments that carry a fixed rate of interest or are guaranteed, in many
cases, by the issuer. As a result, debt funds are often perceived by the investor as being
completely risk-free. However, the reality is different. Debt funds may be less risky than
equity funds, but they certainly aren't risk-free. Debt fund NAVs can change with interest
rates, changes in the portfolio's ratings or tenure.
1.1.

Profile of organization

Major Mutual Fund Player in market

SBI MUTUAL FUND
SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the country with an
investor base of over 4.6 million and over 20 years of rich experience in fund management
consistently delivering value to its investors. SBI Funds Management Pvt. Ltd. is a joint
venture between 'The State Bank of India' one of India's largest banking enterprises, and
Socit Gnrale Asset Management (France), one of the world's leading fund management
companies that manages over US$ 500 Billion worldwide.
Today the fund house manages over Rs 28500 crores of assets and has a diverse profile of
investors actively parking their investments across 36 active schemes. In 20 years of
operation, the fund has launched 38 schemes and successfully redeemed 15 of them, and in
the process, has rewarded our investors with consistent returns. Schemes of the Mutual Fund

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have time after time outperformed benchmark indices, honored us with 15 awards of
performance and have emerged as the preferred investment for millions of investors. The
trust reposed on us by over 4.6 million investors is a genuine tribute to our expertise in fund
management.
SBI Funds Management Pvt. Ltd. serves its vast family of investors through a network of
over 130 points of acceptance, 28 Investor Service Centers, 46 Investor Service Desks and 56
District Organizers.SBI Mutual is the first bank-sponsored fund to launch an offshore fund
Resurgent India Opportunities Fund.
Growth through innovation and stable investment policies is the SBI MF credo.
PRODUCTS OF SBI MUTUAL FUND
Debt schemes
Debt Funds invest only in debt instruments such as Corporate Bonds, Government Securities
and Money Market instruments either completely avoiding any investments in the stock
markets as in Income Funds or Gilt Funds or having a small exposure to equities as in
Monthly Income Plans or Children's Plan. Hence they are safer than equity funds. At the
same time the expected returns from debt funds would be lower. Such investments are
advisable for the risk-averse investor and as a part of the investment portfolio for other
investors.
Magnum Childrens benefit Plan
Magnum Gilt Fund
Magnum Income Fund
Magnum Insta Cash Fund

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 Magnum Income Fund- Floating Rate Plan

Magnum Income Plus Fund
Magnum Insta Cash Fund -Liquid Floater Plan
Magnum Monthly Income Plan
Magnum Monthly Income Plan- Floater
Magnum NRI Investment Fund
SBI Premier Liquid Fund
Balanced Schemes
Magnum Balanced Fund invests in a mix of equity and debt investments. Hence they are less
risky than equity funds, but at the same time provide commensurately lower returns. They
provide a good investment opportunity to investors who do not wish to be completely
exposed to equity markets, but is looking for higher returns than those provided by debt
funds.
Magnum Balanced Fund
ICICI Mutual Fund
ICICI Prudential Asset Management Company Ltd. is a joint venture between ICICI Bank,
Indias second largest commercial bank & a well-known and trusted name in the financial
services in India, & Prudential Plc, one of the United Kingdoms largest players in the
financial services sectors.
In a span of just over 12 years, the company has forged a position of preeminence as one of
the largest Asset Management Companys in the country, contributing significantly towards
the growth of the Indian mutual fund industry.

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Our Average Assets under Management (AAUM) as on Dec 2010 month-end in Mutual Fund
Schemes stood at Rs. 65876.5 Crores. This is in addition to our Portfolio Management
Services, inclusive of EPFO*, and International Advisory Mandates for clients across
international markets in asset classes like Debt, Equity and Real Estate with primary focus on
As an Asset Management Company, we have over 15 years of experience and are currently
managing a comprehensive range of schemes of more than 46 Mutual funds and a wide range
of PMS Products for our investors, spread across the country. We service this investor base
with our own branch network of over 160 branches and a distribution12 reach of over 42,000
channel partners.
Products of ICICI Mutual Fund
Debt Schemes

ICICI Prudential Liquid Plan

ICICI Prudential Flexible Income Plan

ICICI Prudential Ultra Short Term Plan

ICICI Prudential Floating Rate Plan

ICICI Prudential Short Term Plan

ICICI Prudential Income Plan

ICICI Prudential Gilt Fund-Investment Plan-PF

ICICI Prudential Gilt Fund-Treasury Plan-PF

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 ICICI Prudential MIP 25

ICICI Prudential Long Term Plan

ICICI Prudential Gilt-Treasury

ICICI Prudential Gilt-Investment

ICICI Prudential Long Term Floating Rate Plan

ICICI Prudential Monthly Income Plan

ICICI Prudential Income Opportunities Fund

ICICI Prudential Medium Term Plan

ICICI Prudential Banking & PSU Debt Fund

ICICI Prudential Regular Savings Fund

HDFC Mutual Fund

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act,
1956, on December 10, 1999, and was approved to act as an Asset Management Company for
the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg,
169, Backbay Reclamation, Churchgate, Mumbai - 400 020.

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In terms of the Investment Management Agreement, the Trustee has appointed the HDFC
Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the
AMC is Rs. 25.161 crore.
The AMC is managing 28 open-ended schemes of the Mutual Fund viz. HDFC Growth Fund,
HDFC Equity Fund, HDFC Top 200 Fund, HDFC Capital Builder Fund, HDFC Core &
Satellite Fund, HDFC Premier Multi-Cap Fund, HDFC Index Fund, HDFC Long Term
Advantage Fund, HDFC TaxSaver, HDFC Arbitrage Fund, HDFC Mid-Cap Opportunities
Fund, HDFC Balanced Fund, HDFC Prudence Fund, HDFC Childrens Gift Fund, HDFC
Gold Exchange Traded Fund, HDFC MF Monthly Income Plan, HDFC Multiple Yield Fund,
HDFC Multiple Yield Fund- Plan 2005, HDFC Income Fund, HDFC High Interest Fund,
HDFC Short Term Plan, HDFC Short Term Opportunities Fund, HDFC Medium Term
Opportunities Fund, HDFC Gilt Fund and HDFC Floating Rate Income Fund , HDFC Liquid
Fund, HDFC Cash Management Fund and HDFC Quarterly Interval Fund.
The AMC is also managing 7 closed ended Schemes of the HDFC Mutual Fund viz. HDFC
Long Term Equity Fund, HDFC Infrastructure Fund, HDFC Fixed Maturity Plans - Series XI,
HDFC Fixed Maturity Plans - Series XII, HDFC Fixed Maturity Plans - Series XIV, HDFC
Fixed Maturity Plans - Series XV and HDFC Fixed Maturity Plans - Series XVII.
The AMC is also providing portfolio management / advisory services and such activities are
not in conflict with the activities of the Mutual Fund. The AMC has renewed its registration
from SEBI vide Registration No. - PM / INP000000506 dated December 21, 2009 to act as a
Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of
Registration is valid from January 1, 2010 to December 31, 2012.

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Products of HDFC Mutual Fund

Debt Schemes

HDFC Mid-Cap Opportunities Fund

HDFC Prudence Fund

HDFC Index Fund - Nifty Plan

HDFC Capital Builder Fund

HDFC Infrastructure Fund

HDFC Long Term Advantage Fund (ELSS)

HDFC Index Fund - Sensex Plus Plan

HDFC Core and Satellite Fund

HDFC Growth Fund

HDFC TaxSaver (ELSS)

HDFC Arbitrage Fund

HDFC Premier Multi-Cap Fund

HDFC Equity Fund

HDFC Long Term Equity Fund

HDFC Balanced Fund

HDFC Index Fund - Sensex Plan

HDFC Top 200 Fund

1.2 Objective of study

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The objectives of the study is to analyses, in detail the growth pattern of debt mutual fund
industry in India and to evaluate performance of different schemes floated by most preferred
debt mutual funds in public fund in public and private sector.
The main objectives of this project are:

To find out the relationship between debt and equity funds.

How risk affects the performance of the funds.

Do the risk and return affects the investment decision of investors.

To study about the Debt mutual Funds in India

To study the various Debt mutual Funds schemes in India.

To study about the risk factors involved in the Debt mutual Funds and How to analyze
it?

To study the performance indices that can be used for debt mutual fund comparison.

To compare debt mutual funds of selected five companies on the basis of their return
and Sharpe Index.

To study the people in which age and income group prefer debt mutual funds over
other investment options.

1.3 Scope of study

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The present study comprises of 23 mutual fund schemes launched by different public sector,
private sector, financial institutions and banks and Unit Trust of India. The time period for the
research work is from 1st July 2011 to 30th June 2016. The weekly returns are compiled on
the basis of NAV. Then these schemes are compared with Bombay Stock Exchange Sensitive
Index to evaluate the performance of these schemes. An attempt has been made to draw a
conclusion which reflects the clear picture of the mutual fund industry in the current scenario.

1.4 Methodology
1.4.1 RESEARCH METHODOLOGY
Research is an organized enquiry designed and carried out to provide information for solving
a problem.
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically.
1.4.2 DATA COLLECTION
The task of data collection begins after a research problem has been defined. While deciding
about the method of data collection to be used for the study, the researcher should keep in
mind two types of data viz, primary and secondary.
1.4.3 NAV and corresponding returns of 5 Debt mutual Funds Schemes:
In this study, we have selected the 5 debt mutual fund companies. Following is the NAV and
corresponding return of last 1 year starting from 20th Feb, 2016 to 29th Feb, 2016.The funds
are chosen randomly from the available means.

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Primary data may be described as those data that have been observed and recorded by the
researchers for the first time to their knowledge. Primary data can be classified into two
types:

Data classified by their nature

.Data classified according to function.

Primary

data

can

be

collected

through

several

methods.

Some

of

the

important ones are:

Observation method
Interview method

Secondary data are collected from various websites as well as books, newspapers, research
papers.
1.4.4 TOOLS USED IN THIS STUDY
In this study, we have used various statistics tools like descriptive statistics, percentage,
indices available, etc. for analyzing, interpreting and comparison of different debt mutual
fund schemes. The Sharpe Index Model is also used to analyze the performance evaluation
and ranking for the difference debt mutual funds schemes in India

1.5 Hypothesis
1. H0 : Change in the return of one fund affects the change in the return of other fund
H1: Changes are not related
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2. H0 : Risk and return affects the investment decision of investors

H1: Risk and return do not affect the investors decision

Chapter 2
LITERATURE REVIEW

Chapter Overview
Review of literature provides information to the researchers regarding the previous work
done in their area of research and thereby helps them in identifying the theoretical framework
and methodological issues relevant to the study. It provides the researchers a proper direction
to carry out their research work and enables them to arrive at meaningful results.
2.1 Literature review
Friend, et al., (2015) made an extensive and systematic study of 152 debt mutual funds found
that debt mutual fund schemes earned an average annual return of 12.4 percent, while their
composite benchmark earned a return of 12.6 percent. Their alpha was negative with 20 basis
points. Overall results did not suggest widespread inefficiency in the industry. Comparison of
fund returns with turnover and expense categories did not reveal a strong relationship.
Irwin, Brown, FE (2015) analyzed issues relating to investment policy, portfolio turnover
rate, performance of debt mutual funds and its impact on the stock markets. They identified
that debt mutual funds had a significant impact on the price movement in the stock market.
They concluded that, on an average, funds did not perform better than the composite markets
and there was no persistent relationship between portfolio turnover and fund performance.
Treynor (2014) used characteristic line for relating expected rate of return of a fund to the
rate of return of a suitable market average. He coined a fund performance measure taking

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investment risk into account. Further, to deal with a portfolio, portfolio-possibility line was
used to relate expected return to the portfolio owners risk preference.
Sharpe, William F (2014) developed a composite measure of return and risk. He evaluated 34
open-end debt mutual funds for the period 1944-63. Reward to variability ratio for each
scheme was significantly less than DJIA (Dow Jones Industrial Average) and ranged from
0.43 to 0.78. Expense ratio was inversely related with the fund performance, as correlation
coefficient was 0.0505. The results depicted that good performance was associated with low
expense ratio and not with the size. Sample schemes showed consistency in risk measure.
Treynor and Mazuy (2013) evaluated the performance of 57 fund managers in terms of their
market timing abilities and found that, fund managers had not successfully outguessed the
market. The results suggested that, investors were completely dependent on fluctuations in
the market. Improvement in the rates of return was due to the fund managers ability to
identify under-priced industries and companies. The study adopted Treynors (2013)
methodology for reviewing the performance of debt mutual funds.
Jensen (2013) developed a composite portfolio evaluation technique concerning risk-adjusted
returns. He evaluated the ability of 115 fund managers in selecting securities during the
period 2012-13. Analysis of net returns indicated that, 39 funds had above average returns,
while 76 funds yielded abnormally poor returns. Using gross returns, 48 funds showed above
average results and 67 funds below average results. Jensen concluded that, there was very
little evidence that funds were able to perform significantly better than expected as fund
managers were not able to forecast securities price movements.
Fama (2013) developed methods to distinguish observed return due to the ability to pick up
the best securities at a given level of risk from that of predictions of price movements in the
market. He introduced a multiperiod model allowing evaluation on a period-by-period and on
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a cumulative basis. He concluded that, return on a portfolio constitutes of return for security
selection and return for bearing risk. His contributions combined the concepts from modern
theories of portfolio selection and capital market equilibrium with more traditional concepts
of good portfolio management.
Williamson (2012) compared ranks of 180 funds between 2010-11. There was no correlation
between the rankings of the two periods. The investment abilities of most of the fund
managers were identical. He highlighted the growing prominence of volatility in the
measurement of investment risk.
Klemosky (2012) analyzed investment performance of 40 funds based on quarterly returns
during the period 2010-11. He acknowledged that, biases in Sharpe, Treynor, and Jensens
measures, could be removed by using mean absolute deviation and semi-standard deviation
as risk surrogates compared to the composite measures derived from the CAPM (Capital
Asset Pricing Modal).
McDonald and John (2012) examined 123 debt mutual funds and identified the existence of
positive relationship between objectives and risk. The study identified the existence of
positive relationship between return and risk. The relationship between objective and riskadjusted performance indicated that, more aggressive funds experienced better results.
Gupta (2012) evaluated the performance of debt mutual fund industry for the period 2010-11
using Sharpe, Treynor, and Jensen models. All the funds covered under the study
outperformed the market irrespective of the choice of market index. The results indicated that
all the three models provided identical results. Return per unit of risk varied with the level of
volatility assumed and he concluded that, funds with higher volatility exhibited superior
performance.

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Klemosky (2011) examined performance consistency of 158 fund managers for the period
1968-75. The ranking of performance showed better consistency between four-year periods
and relatively lower consistency between adjacent two-year periods.
Ippolitos (2011) results and conclusions were relevant and consistent with the theory of
efficiency of informed investors. He estimated that risk-adjusted return for the debt mutual
fund industry was greater than zero and attributed positive alpha before load charges and
identified that fund performance was not related to expenses and turnover as predicted by
efficiency arguments.
Gupta Ramesh (2010) evaluated fund performance in India comparing the returns earned by
schemes of similar risk and similar constraints. An explicit risk-return relationship was
developed to make comparison across funds with different risk levels. His study decomposed
total return into return from investors risk, return from managers risk and target risk.
Baruan Varuan (2009) made an attempt to evaluate the master share scheme of UTI using the
data from 2008-2009. Their conclusion was that the Master Share Scheme outperformed the
market in terms of net assets value (NAV) and the master share scheme (MSS) benefited large
investors rather than small investors.
Theoretical Description
Mutual fund is a mechanism for pooling the resources by issuing units to the investors
and investing funds in securities in accordance with objectives as disclosed in offer
document. Investments in securities are spread across a wide cross-section of industries
and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks
may not move in the same direction in the same proportion at the same time. The aim of
Equity Funds is to provide capital appreciation over the medium to long- term. Such

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schemes normally invest a major part of their corpus in equities. Such funds have
comparatively high risks. These schemes provide different options to the investors like
dividend option, capital appreciation, etc. and the investors may choose an option
depending on their preferences. The investors must indicate the option in the application
form. The mutual funds also allow the investors to change the options at a later date.
Growth schemes are good for investors having a long-term outlook seeking appreciation
over a period of time. Equity investing can provide you with a lot of potential as an
investor. This potential has enticed many investors to get involved exclusively in the
equity market. Here are a few things to consider about whether you should deal only with
equities. The aim of Debt Funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such funds are less
risky compared to equity schemes. These funds are not affected because of fluctuations in
equity markets. However, opportunities of capital appreciation are also limited in such
funds. The NAVs of such funds are affected because of change in interest rates in the
country. If the interest rates fall, NAVs of such funds are likely to increase in the short run
and vice versa. However, long term investors may not bother about these fluctuations. For
investors in debt mutual funds, these are interesting times. They need to realize that their
returns will be adversely impacted if rates go up. No wonder, experts are quite clear in
their view - avoid medium and long-term funds. Also, gilt funds are a strict no-no. This is
because they are the first to be impacted in case of a rate rise. While there are various
options for investors, they need to select the category that suits their risk-taking ability
and time horizon. Debt funds offer you benefits, which pure debt investments (like bonds
and deposits) don't. If there were to be a further decline in interest rates, and you have
directly invested in debt instruments, it would not mean much to you. You would hardly

24

trade the securities you hold since all you would want to collect is the promised interest at
the end of the term. But a debt fund can post a better return by marking the bonds in its
portfolio to their rising market value, and by actively trading them.
The era of tax concessions is ending. (Too bad, if you didn't notice that). With lower
interest rates already acting as a dampener, small saving schemes appear to be at a
disadvantage compared to debt funds. If you raise your eyes a little and look at the
horizon, you will see that the further the small saving plans are deprived of tax sops, the
more unattractive their returns will become compared to debt funds.
Unlike the case of direct investments in bonds, higher returns in debt funds need not
necessarily mean higher risks. Several debt funds have achieved great returns from a
steady income stream and aggressive duration management (that is managing bonds'
tenure in the portfolio), without their risk going up. In short, exceptional returns in debt
funds need not mean higher risks. In pure debt instruments, higher return is certainly the
result of the issuer taking higher risks.
Unlike retail investors, debt fund managers do not rely only on the rating of credit rating
agencies while evaluating bonds. The market has a way of downgrading a bond even
before the bond is actually downgraded by a rating agency. To give an example, last year,
for months on end, debt fund managers were already acting as if the bond of a top rated
financial institution had already been downgraded, when it had not. The bond was later
downgraded, proving their fears right. If you are directly investing in a bond, it is
impossible to adopt such a cautious approach. In any case, it would not mean much since
you would keep the bond until maturity.
A large number of studies on the growth and financial performance of debt mutual funds
have been carried out during the past, in the developed and developing countries. Brief
reviews of the following research works reveal the wealth of contributions towards the
performance evaluation of debt mutual fund, market timing and stock selection abilities
of fund managers. In India, one of the earliest attempts was made by National Council of

25

Applied Economics Research (NCAER) in 1964 when a survey of households was

undertaken to understand the attitude towards and motivation for savings of individuals.
Another NCAER study in 1996 analyzed the structure of the capital market and presented
the views and attitudes of individual shareholders. SEBI NCAER Survey (2000) was
carried out to estimate the number of households and the population of individual
investors, their economic and demographic profile, portfolio size, and investment
preference for equity as well as other savings instruments. Data was collected from
30,00,000 geographically dispersed rural and urban households. Some of the relevant
findings of the study are : Households preference for instruments match their risk
perception; Bank Deposit has an appeal across all income class; 43% of the non-investor
households equivalent to around 60 million households apparently lack awareness about
stock markets; and, compared with low income groups, the higher income groups have
higher share of investments in Debt mutual Funds signifying that Debt mutual funds have
still not become truly the investment vehicle for small investors.
Since 1986, a number of articles and brief essays have been published in financial dailies,
periodicals, professional and research journals, 20 explaining the basic concept of Debt
mutual Funds and highlighted their importance in the Indian capital market environment.

Chapter-3
Data Presentation & Analysis

26

this chapter is divided into two parts i.e., data presentation and data analysis on different
schemes of different companies which is based on long term, short term and ultra short term
3.1 Data Presentation
In data presentation, there are different schemes like long term, short term and ultra short
term and annual return of mutual fund of each schemes from 2010-2015. for each mutual
schemes , the returns have been calculated tking monthly Net Asset value from April 2010 to
March 2015
Long Term
3.11 ICICI Pru Dynamic Bond RP (G)
The Annual return of ICICI Pru Dynamic Bond RP (G) in percent for five years.
Years
Returns
2010-11
7.5
2011-12
13.3
2012-13
5.6
2013-14
9.4
2014-15
8.3
Table No.3.1: Yearly Returns of ICICI Pru Dynamic Bond

Return
13.3
9.4

8.3

7.5
5.6

2010-11

2011-12

2012-13

2013-14

2014-15

Figure 3.1: Yearly Returns of ICICI Pru Dynamic Bond

27

Interpretation
The Annualized return of ICICI Pru Dynamic Bond RP (G) for period of 5 years (20102015). In 2012 the highest return of (13.3) percent for last 5 years in the scheme.

3.12 Tata Income Fund (G)

The Annual return of Tata Income Fund (G) in percent for five years.

Years
Returns
2010-11
6.7
2011-12
10.2
2012-13
6.8
2013-14
12
2014-15
7
Table No.3.2: Yearly Returns of Tata Income Fund (G)

Returns
Returns
12
10.2

2010-11

6.8

6.7

2011-12

2012-13

2013-14

Figure 3.2: Yearly Returns of Tata Income Fund (G)

Interpretation
28

2014-15

The Annualized return of Tata Income Fund (G) for period of 5 years (2010-2015). In 2014
the highest return of (12) percent for last 5 years in the scheme.
3.13 UTI Dynamic Bond Fund (G)
The Annual return of UTI Dynamic Bond Fund (G) in percent for five years.

Years
Returns
2010-11
8.4
2011-12
10.9
2012-13
7.2
2013-14
14.7
2014-15
6.9
Table No.3.3: Yearly Returns of UTI Dynamic Bond Fund (G)

Returns
Returns
14.7
10.9
8.4

2010-11

7.2

2011-12

2012-13

6.9

2013-14

2014-15

Figure No.3.3: Yearly Returns of UTI Dynamic Bond Fund (G)

Interpretation
The Annualized return of UTI Dynamic Bond Fund (G) for period of 5 years (2010-2015). In
2014 the highest return of (14.7) percent for last 5 years in the scheme
Short term
29

3.14 Birla SL Short Term Fund

The Annual return of Birla SL Short Term Fund in percent for five years.

Years
Returns
2010-11
9.5
2011-12
10.4
2012-13
8.3
2013-14
10.8
2014-15
8.9
Table No.3.4: Yearly Returns of Birla SL Short Term Fund

Returns
Returns

9.5

10.8

10.4

8.9

8.3

2010-11

2011-12

2012-13

2013-14

2014-15

Figure No.3.: Yearly Returns of Birla SL Short Term Fund

Interpretation
The Annualized return of Birla SL Short Term Fund for period of 5 years (2010-2015). In
2013 the highest return of (10.8) percent for last 5 years in the scheme
3.15 ICICI Pru Short Term Plan (G)
The Annual return of ICICI Pru Short Term Plan (G) in percent for five years.

30

Years
Returns
2010-11
8.7
2011-12
9.4
2012-13
7.1
2013-14
11.5
2014-15
8
Table No.3.5: Yearly Returns of ICICI Pru Short Term Plan (G)

Returns
Returns
11.5
8.7

9.4
8

7.1

2010-11

2011-12

2012-13

2013-14

2014-15

Figure 3.5: Yearly Returns of ICICI Pru Short Term Plan (G)
Interpretation
The Annualized return of UTI Dynamic Bond Fund (G) for period of 5 years (2010-2015). In
2014 the highest return of (11.5) percent for last 5 years in the scheme
Ultra short term
3.16 Franklin ultra SPF-SIP (G)
The Annual return of Franklin ultra SPF-SIP (G) in percent for five years.

Years
2010-11

Returns
9.3
31

2011-12
10.2
2012-13
10
2013-14
9.9
2014-15
9.7
Table No.3.6: Yearly Returns of Franklin ultra SPF-SIP (G)

Returns
Returns
10.2
10

9.9
9.7

9.3

2010-11

2011-12

2012-13

2013-14

2014-15

Figure 3.6: Yearly Returns of Franklin ultra SPF-SIP (G)

Interpretation
The Annualized return of Franklin ultra SPF-SIP (G) for period of 5 years (2010-2015). In
2011 the highest return of (10.2) percent for last 5 years in the scheme
3.17 Kotak Low Duration- Standard
The Annual return of Kotak Low Duration- Standard in percent for five years.

Years
Returns
2010-11
9.8
2011-12
10.1
2012-13
6.9
2013-14
9.4
2014-15
9.4
Table No.3.7: Yearly Returns of Kotak Low Duration- Standard
32

Returns
Returns

9.8

10.1

9.4

9.4

2013-14

2014-15

6.9

2010-11

2011-12

2012-13

Figure 3.7: Yearly Returns of Kotak Low Duration- Standard

Interpretation
The Annualized return of Kotak Low Duration- Standard for period of 5 years (2010-2015).
In 2011 the highest return of (10.1) percent for last 5 years in the scheme

3.2 Data Analysis

3.21 ICICI Pru Dynamic Bond
(a) Sharpe Measure of ICICI Pru Dynamic Bond
Time Period
2010-11
2011-12
2012-13
2013-14
2014-15

Yearly Return
7.5
13.3
5.6
9.4
8.3

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
7.45
13.25
5.55
9.35
8.25

Average
Standard Deviation

8.77
2.863040

Sharpe Ratio
3.063177
Table No.3.8: Sharpe Measure of ICICI Pru Dynamic Bond
33

Interpretation: - ICICI Pru Dynamic Bond Sharpe ratio is 3.063 which indicates an excess
returns earned over risk-free return per unit of risk i.e. per unit of standard deviation.
(b) Treynor Measure of ICICI Pru Dynamic Bond
Time

Sensex

Period
2006-07
2007-08
2008-09
2009-10
2010-11

Yearly Return
7.5
13.3
5.6
9.4
8.3

Return
-10.6
6.1
10.2
7.8
5.4

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
7.45
13.25
5.25
9.35
8.25

Average
Beta

8.77
0.71486

Treynor Ratio
12.26814
Table No.3.9: Treynor Measure of ICICI Pru Dynamic Bond
Interpretation: - ICICI Pru Dynamic Bond Treynor ratio is 12.26814 which indicates an
excess returns earned over risk-free return per unit of systematic risk i.e. Beta.

(c) Jensen Measure of ICICI Pru Dynamic Bond

Birla Sun Life Return

8.77

Sensex Return

0.616

Risk Free Rate

0.05

Beta

0.71486

Expected Return

0.089475955

Alpha
0.034104995
Table No.3.10: Jensen Measure of ICICI Pru Dynamic Bond

34

Interpretation: - ICICI Pru Dynamic Bond ratio is 0.034 which indicates the regression of
excess returns of the scheme with excess return of the market.

3.21 Tata Income Fund

(a) Sharpe Measure of Tata Income Fund
Time Period
2010-11
2011-12
2012-13
2013-14
2014-15

Yearly Return
7
12
6.8
10.2
6.7

Risk Free Rate

0.05
0.05
0.05
0.05
0.05
Average
Standard Deviation

Excess Return
6.95
11.95
6.75
10.15
6.65
8.49
2.424458

Sharpe Ratio
3.501212
Table No.3.11: Sharpe Measure of Tata Income Fund
Interpretation: - ICICI Pru Dynamic Bond Sharpe ratio is 3.501212which indicates an excess
returns earned over risk-free return per unit of risk i.e. per unit of standard deviation.

(b) Treynor Measure of Tata Income Fund

Time
Period
2006-07
2007-08
2008-09
2009-10
2010-11

Sensex
Yearly Return
7
12
6.8
10.2
6.7

Return
-10.6
6.1
10.2
7.8
5.4

35

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
6.95
11.95
6.75
10.15
6.95

Average

8.77

Beta

0.89809

Treynor Ratio
Table No.3.12: Treynor Measure of Tata Income Fund

9.453371

Interpretation: - ICICI Pru Dynamic Bond Treynor ratio is 9.453371 which indicates an
excess returns earned over risk-free return per unit of systematic risk i.e. Beta.
(c) Jensen Measure of Tata Income Fund

Birla Sun Life Return

8.77

Sensex Return

3.78

Risk Free Rate

0.05

Beta

0.89809

Expected Return

7.629879

Alpha

0.860124
Table No.3.13: Jensen Measure of Tata Income Fund

Interpretation: - ICICI Pru Dynamic Bond ratio is 0.860124 which indicates the regression of
excess returns of the scheme with excess return of the market.
3.23 UTI Dynamic Bond Fund
(a) Sharpe Measure of UTI Dynamic Bond Fund
Time Period
2010-11
2011-12
2012-13
2013-14
2014-15

Yearly Return
8.4
10.9
7.2
14.7
6.9

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
8.35
10.85
7.15
14.65
6.85

Average
Standard Deviation

9.57
3.247614

Sharpe Ratio
2.946778
Table No.3.14: Sharpe Measure of UTI Dynamic Bond Fund

36

Interpretation: - f UTI Dynamic Bond Fund ratio is 2.946778 which indicates an excess
returns earned over risk-free return per unit of risk i.e. per unit of standard deviation.

(b) Treynor Measure of UTI Dynamic Bond Fund

Time

Sensex

Period
2006-07
2007-08
2008-09
2009-10
2010-11

Yearly Return
8.4
10.9
7.2
14.7
6.9

Return
-10.6
6.1
10.2
7.8
5.4

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
8.35
10.85
7.15
14.65
6.85

Average
Beta

9.57
0.61703

Treynor Ratio
15.50976
Table No.3.15: Treynor Measure of f UTI Dynamic Bond Fund
Interpretation: - ICICI Pru Dynamic Bond Treynor ratio is 15.50976 which indicates an
excess returns earned over risk-free return per unit of systematic risk i.e. Beta.
(c) Jensen Measure of UTI Dynamic Bond Fund

Birla Sun Life Return

8.77

Sensex Return

3.78

Risk Free Rate

0.05

Beta

0.61703

Expected Return

805998168

Alpha
0.09701832
Table No.3.16: Jensen Measure of UTI Dynamic Bond Fund

37

Interpretation: - ICICI Pru Dynamic Bond ratio is 0.09701832 which indicates the regression
of excess returns of the scheme with excess return of the market.
3.24 Birla SL Short Term Fund
(a) Sharpe Measure of Birla SL Short Term Fund
Time Period
2010-11
2011-12
2012-13
2013-14
2014-15

Yearly Return
9.5
10.4
8.3
10.8
8.9

Risk Free Rate

0.05
0.05
0.05
0.05
0.05
Average
Standard Deviation

Excess Return
9.45
10.35
8.25
10.75
8.85
9.53
1.032356

Sharpe Ratio
39.225941
Table No.3.17: Sharpe Measure of Birla SL Short Term Fund
Interpretation: - Birla SL Short Term Fund Sharpe ratio is 39.225941 which indicates an
excess returns earned over risk-free return per unit of risk i.e. per unit of standard deviation.
(b) Treynor Measure of Birla SL Short Term Fund
Time
Period
2006-07
2007-08
2008-09
2009-10
2010-11

Sensex
Yearly Return
9.5
10.4
8.3
10.8
8.9

Return
-10.6
6.1
10.2
7.8
5.4

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
9.45
10.35
8.25
10.75
8.85

Average
Beta

9.53
0.40

Treynor Ratio
-23.8047
Table No.3.18: Treynor Measure of Birla SL Short Term Fund
Interpretation: - Birla SL Short Term Fund Treynor ratio is 23.8047 which indicates an excess
returns earned over risk-free return per unit of systematic risk i.e. Beta.
38

(c) Jensen Measure of Birla SL Short Term Fund

Birla Sun Life Return

9.53

Sensex Return

3.78

Risk Free Rate

0.05

Beta

-0.40

Expected Return

3.742

Alpha
13.272
Table No.3.19: Jensen Measure of Birla SL Short Term Fund
Interpretation: - Birla SL Short Term Fund ratio is 13.272 which indicates the regression of
excess returns of the scheme with excess return of the market.
3.25 ICICI Pru Short Term Plan(G)
(a) Sharpe Measure of ICICI Pru Short Term Plan(G)
Time Period
2010-11
2011-12
2012-13
2013-14
2014-15

Yearly Return
8.7
9.4
7.1
11.5
8.

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
8.65
9.35
7.05
11.45
7.95

Average
Standard Deviation

8.89
1.665232

Sharpe Ratio
5.338593
Table No.3.20: Sharpe Measure of ICICI Pru Short Term Plan(G)

Interpretation: - ICICI Pru Short Term Plan(G) Sharpe ratio is 5.338593 which indicates an
excess returns earned over risk-free return per unit of risk i.e. per unit of standard deviation.
(b) Treynor Measure of ICICI Pru Short Term Plan(G)
Time

Yearly Return

Sensex
39

Risk Free Rate

Excess Return

Period
2006-07
2007-08
2008-09
2009-10
2010-11

8.7
9.4
7.1
11.5
8.

Return
-10.6
6.1
10.2
7.8
5.4

0.05
0.05
0.05
0.05
0.05

8.65
9.35
7.05
11.45
7.95

Average
Beta

8.89
0.4333

Treynor Ratio
Table No.3.21: Treynor Measure of ICICI Pru Short Term Plan(G)

20.51877

Interpretation: - ICICI Pru Short Term Plan(G) Treynor ratio is 20.51877 which indicates an
excess returns earned over risk-free return per unit of systematic risk i.e. Beta.
(c) Jensen Measure of ICICI Pru Short Term Plan(G)

Birla Sun Life Return

8.89

Sensex Return

3.78

Risk Free Rate

0.05

Beta

0.4333

Expected Return

3.88.372

Alpha
5.009628
Table No.3.22: Jensen Measure of ICICI Pru Short Term Plan(G)
Interpretation: - ICICI Pru Short Term Plan(G) ratio is 5.009628 which indicates the
regression of excess returns of the scheme with excess return of the market.

3.26 Franklin Ultra SPF-SIP (G)

(a) Sharpe Measure of Franklin Ultra SPF-SIP (G)

40

Time Period
2010-11
2011-12
2012-13
2013-14
2014-15

Yearly Return
9.3
10.2
10
9.9
9.7

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
9.25
10.15
9.95
9.85
9.65

Average
Standard Deviation

9.77
3.42052

Sharpe Ratio
2.85628
Table No.3.23: Sharpe Measure of Franklin Ultra SPF-SIP (G)
Interpretation: - ICICI Pru Dynamic Bond Sharpe ratio is 2.85628 which indicates an excess
returns earned over risk-free return per unit of risk i.e. per unit of standard deviation.
(b) Treynor Measure o Franklin Ultra SPF-SIP (G)
Time
Period
2006-07
2007-08
2008-09
2009-10
2010-11

Sensex
Yearly Return
9.3
10.2
10
9.9
9.7

Return
-10.6
6.1
10.2
7.8
5.4

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
9.25
10.15
9.95
9.85
9.65

Average
Beta

9.77
0.28341

Treynor Ratio
34.47264
Table No.3.24: Treynor Measure of f Franklin Ultra SPF-SIP (G)
Interpretation: - Franklin Ultra SPF-SIP (G)Treynor ratio is 34.47264 which indicates an
excess returns earned over risk-free return per unit of systematic risk i.e. Beta.

(c) Jensen Measure of Franklin Ultra SPF-SIP (G)

41

Birla Sun Life Return

9.77

Sensex Return

3.78

Risk Free Rate

0.05

Beta

0.28341

Expected Return

2.80474

Alpha
6.96525
Table No.3.25: Jensen Measure of f Franklin Ultra SPF-SIP (G)
Interpretation: - f Franklin Ultra SPF-SIP (G) is 6.96525 which indicates the regression of
excess returns of the scheme with excess return of the market.
3.27 Kotak Low Duration- Standard
(a) Sharpe Measure of Kotak Low Duration- Standard
Time Period
2010-11
2011-12
2012-13
2013-14
2014-15

Yearly Return
9.8
10.1
6.9
9.4
9.4

Risk Free Rate

0.05
0.05
0.05
0.05
0.05

Excess Return
9.75
10.05
6.85
9.35
9.35

Average
Standard Deviation

9.07
1.27553

Sharpe Ratio
7.110718
Table No.3.26: Sharpe Measure of Kotak Low Duration- Standard
Interpretation: - Kotak Low Duration- Standard Sharpe ratio is 7.110718 which indicates an
excess returns earned over ri
(b) Treynor Measure of Kotak Low Duration- Standard
Time
Period
2006-07
2007-08
2008-09

Sensex
Yearly Return
9.8
10.1
6.9

Return
-10.6
6.1
10.2
42

Risk Free Rate

0.05
0.05
0.05

Excess Return
9.75
10.05
6.85

2009-10
2010-11

9.4
8.

7.8
5.4

0.05
0.05

9.35
9.35

Average
Beta

9.07
0.4333

Treynor Ratio
-15.2924
Table No.3.27: Treynor Measure of Kotak Low Duration- Standard
Interpretation: - Kotak Low Duration- Standard Treynor ratio is -15.2924 which indicates an
excess returns earned over risk-free return per unit of systematic risk i.e. Beta.
(c) Jensen Measure of Kotak Low Duration- Standard

Birla Sun Life Return

9.07

Sensex Return

3.78

Risk Free Rate

0.05

Beta

0.4333

Expected Return

3.88.372

Alpha
14.36886
Table No.3.28: Jensen Measure of Kotak Low Duration- Standard

Interpretation: - Kotak Low Duration- Standard Plan ratio is 14.36886 which indicates the
regression of excess returns of the scheme with excess return of the market.
3.24 Ranking of schemes on the basis of sharpe ratio
company

Long Term

Schemes

Sharpe ratio

ranks

ICICI Prudynamic

3.0631

3.501212

Bond Fund RP (G)

TATA Income Fund

43

(G)
UTI Dynamic Bond

2.946778

Fund (G)
Short Term

39.225941

Birla SL Short

Term Fund

ICICI Pru Short

5.338593

2.85628

7.110718

Term Plan (G)

Ultra Short Term

Franklin Ultra SPFSIF (G)

Kotak Low

Duration-Standard
Table No.3.29: Ranking of schemes on the basis of sharpe ratio
Interpretation- Sharpe ratio indicates reward to variability ratio. it is an excess return over
risk free return per unit of risk i.e., per unit of standard deviation. It is observed from the table
that Birla SL Short Term Fund (39.225941) have higher Sharpe ratiofollowed by Kotak
Low Duration-Standard (7.110718) and ICICI Pru Short Term Plan (G) (5.338593) . positive
value indicating schemes are favorable option for investment for current and potential
investor (refer to table no.3.29)

3.25 Ranking of schemes on the basis of Treynor ratio

company

Schemes

Treynor ratio
44

ranks

ICICI Prudynamic

12.26814

9.453371

15.509776

-33.8047

20.51877

Franklin Ultra SPF- 34.47264

Bond Fund RP (G)

Long Term
TATA Income Fund
(G)
UTI Dynamic Bond
Fund (G)
Short Term

Birla SL Short
Term Fund
ICICI Pru Short
Term Plan (G)

Ultra Short Term

SIF (G)
Kotak Low

-15.2924

Duration-Standard
Table No.3.30: Ranking of schemes on the basis of treynor ratio
Interpretation- Treynor ratio indicates risk adjusted return i.e., excess return over risk free rate
per unit of systematic risk means beta. it is observed from table that Franklin Ultra SPF-SIF
(G) (34.47264) followed by ICICI Pru Short Term Plan (G) (20.51877) and UTI Dynamic
Bond Fund (G) (15.509776) ). positive value indicating schemes are favorable option for
investment for current and potential investor (refer to table no.3.30)

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3.26 Ranking of schemes on the basis ofJenson ratio

company

Long Term

Schemes

Jenson ratio

ranks

ICICI Prudynamic

0.0341049

0.860124

0.9701832

13.272

5.009628

Bond Fund RP (G)

TATA Income Fund
(G)
UTI Dynamic Bond
Fund (G)
Birla SL Short

Short term

Term Fund

ICICI Pru Short

Term Plan (G)

Ultra Short term

Franklin Ultra SPF- 6.96525

SIF (G)
Kotak Low

14.36868

Duration-Standard
Table No.3.31: Ranking of schemes on the basis of Jenson ratio
Interpretation

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Jensons Alpha measures differential return of securities. it is the regression of excess return of
the scheme with excess return over the market. Higher Jensons Alpha indicates better
performance. Higher alpha found in Kotak Low Duration-Standard (14.36868) followed by
Birla SL Short Term Fund (13.272) and Franklin Ultra SPF-SIF (G) (6.96525) (refer to table
no.3.31)

CHAPTER-4
SUMMARY AND CONCLUSION
This Chapter is divided into three Part .i.e result of the study, scope of the study, limitation of
the study

4.1 Result of the Study

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The present study investigate the performance of three mutual fund schemes which based on
long term debt , short term debt and ultra short term debt from 22010-2015. monthly NAV of
different find schemes. BSE Sensex has been used for market portfolio. The Historical
Performance of the selected schemes were evaluated on the basis of Sharpe, Treynor and
Jensons measure whose result will be useful for investors for taking better investment
decisions.

the results of the study are as follows:

(1) with a Sharpe ratio (39.22591 ) was the top performer followed by (70110728) and
(50338593)
(2) according to Treynor measures with a ratio of (39.47264 ) was amongst the top of all
mutual fund followed by (20.51877) and (15.50976)
(3) jenson measures indicated that (14.36886) was amongst the top of all mutual fund
followed by (13.272) and (6.96525)
(4) In the study the sharpe ratio was positive for all schemes which showed that funds were
providing returns greater than risk free rate.
(5) there is number of mutual fund schemes which have negative ratio indicating bad
performance and lesser returns from investment

4.2 Limitation of the study

limitation of the study are as follows:

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(1) The study was limited to Indian Mutual Fund Industry.

(2) The study was limited to selected Mutual Fund Schemes which affect the result of the
study
(3) Analysis done is limited to the availability of data
(4) Due to shortage oe less availability of time, it may be possible that all realted and
concerned aspects may not be covered in the project.
(5) The data was collected for analysis from 1st april 2010 to 31st march 2015.

4.3 Scope for Further study

The scope the study was limited to investigation of only three companies and each company
has three schemes which is based on long term, short term,and ultra short term. the present
study can be extended to othr mutual fund industries rather than only I ndian mutual fund
industry.

CHAPTER-5
RECOMMENDATION
The present study investigate the performance of three schemes and gave
recommendation to the investors that how to invest in mutual fund and how to
reduce the maximum risk and gain maximum return
49

(1) As it has been found from the above findings that mutual funds are
providing better returns and gaining its important in financing industry.
Therefore, the mutual funds industry in India should make vice decisions while
making investments and provide more benefits to investors.
(2) The charges should be reduce to minimum and also lock in period factor
should be minimized , which will attract more investor from the market.
(3) If the fund regularly trails out the other funds that invest in similar securities
, consider replacing it. The poor performance is more often not a reflection on
the relative expertise of the asset management company.
(4) As many investor gets fooled by some mutual fund companies which give
false promises to investor for investing there money in there mutual fund. So
government should make strict rules for all company to safeguard the
investment of all investors.
(5) Key features of mutual funds should be mentioned in the advertisements.
Features like diversification, systematic investment plans, Tax benefits should
be mentioned in the advertisements. Otherwise, people will see mutual funds as
normal shares in which we invest money.
(6) Mutual fund should use appropriate and simple names for the schemes,
Which match the features of the schemes, So that the investors are not confused
and not feel cheated after investing.
50

(7) Mutual fund is the best investment vehicle for old and widow, As well as to
those who want regular return on there investments.

REFERENCES
Journals
1. M.Vijay Anand (2000), "The Study - Analysis of Performance of Equity funds
(Diversified) Open- end Mutual Fund during 1997-2000", Institute for Financial
Management and Research
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2. R Nithya (2004),"Performance Evaluation of Indian Mutual Funds", Indian Institute

for Technology(IIT)
3. Liete and Cortez (2006) "Condition Performance Evaluation: Evidence From the
Portuguese mutual Fund market", University of Monho
4. Prabhakaran, G and Jayabal , G (2010) Performance Evaluation of Indian Mutual
Funds Schemes in India: An Empirical Stud ", Finance paper 24(7),1347-1363
5. Garg, Sanjay (2011) " A Study on Evaluation of Indian Mutual Funds ", International
Journal of Innovation Creativity and Management(IJICM),1(1),1-10
6. K. P. Prajapati and M. K. Patel (2012)," Comparitive Study of Evaluation of Mutual
Fund Schemes in Indian Companies", Reseachers World: Journals Of Art Science And
Commerce, Vol. 3, No. 3

Websites
7. www. mutualfundindia.com
8. www.bseindia.com
9. www.moneycontrol.com
10. valueresearchesonline.com
11. icicipruamc.com
12. www.hdfcfund.com

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