Performance Evaluation of Selected Category of Public Sector Mutual Fund Schemes in India

Transcription

1 Performance Evaluation of Selected Category of Public Sector Mutual Scemes in India Dr. R. Karrupasamy Director, Department of Management Studies Neru College of Tecnology, Coimbatore, Sout India. Mrs. V. Vanaja Associate Professor, Department of Management Studies Sri Ramakrisna Engineering College, Coimbatore. Sout India. Abstract Mutual funds are considered as one of te best available investments compared to oters as tey are very cost efficient and also easy to invest in, tus by pooling money togeter in a mutual fund, investors can purcase stocks or bonds wit muc lower trading costs tan if tey tried to do it on teir own. Toug Mutual fund is te idyllic investment veicle, presence of many fund companies and number of scemes introduced by tem confuse te investors in coosing te fund category and scemes. An attempt is made to evaluate te performance of selected category of public sector mutual fund scemes. Te study reveals tat majority of te public sector scemes selected for te study outperformed te category average and also bencmark indices and majority of te diversified scemes performed well on te basis of Sarpe, Treynor and Jensen s measure of performance. Keywords: Mutual funds, scemes. FII, AUM, Performance Evaluation, Public sector 1. Introduction Retail Investors are no longer satisfied wit te yield tey derive out of traditional investment avenues like post office savings and bank deposits. Toug te interest rates ave increased compared to te last decade, te increase is disproportionate wit te inflation. Fluctuations in te equity market wic is dominated by institutions, FIIs and very few large scale operators also makes te ordinary investor to remain out of te market or forced to go for very minimum investment. Expensive wealt management services are also not affordable for te retail investors. Mutual funds is te only option available for individual investors particularly for middle class section of te economy. A mutual fund is just te connecting bridge or a financial intermediary tat allows a group of investors to pool teir money togeter wit a predetermined investment objective. Te mutual fund will ave a fund manager wo is responsible for investing te gatered money into specific securities (stocks or bonds). An investor wile investing in mutual funds, buys units or portions of te mutual fund and tus on investing becomes a sareolder or unit older of te fund. Mutual funds are considered as one of te best available investments compared to oters as tey are very cost efficient and also easy to invest in, tus by pooling money togeter in a mutual fund, investors can purcase stocks or bonds wit muc lower trading costs tan if tey tried to do it on teir own. But te biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. lobal Wisdom Researc Publications All Rigts Reserved. 1

2 2. Review of Literature Nalini Prava Tripaty (2004) evaluated te Performance of Tax Planning Scemes in India using six different performance measures. Te study revealed tat majority of te scemes ad not outperformed te market. Malik N.S and Sures Kumar Mittal (2007) analysed te performance of 74 equity funds from 1986 to 2006 indicated tat te actively managed funds outperformed te market bencmark.. In private sector category (26), percent funds ad outperformed and in public sector funds (48), only percent funds ad outperformed te bencmark. Sowmya ua Deb, Asok Banerjee and B.B. Cakrabarti (2007) analysed 96 scemes, te results revealed tat Indian mutual fund managers lacked market timing skill but tey exibited stock selection ability. Madumita Cakraborty, P.K. Jain and Vinay Kallianpur (2009) conducted te performance evaluation of some select growt funds and revealed tat te performance of funds were satisfactory and te fund managers possessed indefinable performing capabilities. 3. Significance of te study People are no longer satisfied wit te returns tey get out of traditional investment avenues like post office savings and bank deposits. Even toug te interest rates ave increased compared to te last decade, te increase is disproportionate wit te inflation. Fluctuations in te equity market wic is dominated by institutions, FIIs and very few large scale operators also makes te ordinary investor to stay out of te market or forced to go for very minimum investment. Mutual funds is te only option available for individual investors particularly for middle class section of te economy. Toug Mutual fund is te idyllic investment veicle, presence of many fund companies and number of scemes introduced by tem confuse te investors in coosing te fund category and scemes. Performance evaluation would elp te investors to coose te best scemes available and will also elp te AUM s in better portfolio construction and can rectify te problems of underperforming scemes. 4. Objectives of te study 1. To evaluate te performance of selected category of public sector scemes on te basis of returns. 2. To appraise te performance of selected category of public sector mutual fund scemes using risk adjusted measures as suggested by Sarpe, Treynor and Jensen. 5. Researc Metodology 5.1 Sample selection : Mutual fund scemes wic are in operation for more tan a period of five years and performing during te period of study ( ) were selected for te present study. Te mutual fund category selected for te study are Balanced category public sector scemes. lobal Wisdom Researc Publications All Rigts Reserved. 2

3 5.2 Data Collection : Te data was collected from Newspapers, Books, Journals, Fact seets of Mutual funds, websites of AMFI, SEBI, value researc online, moneycontrol.com etc., 5.3 Tools and Tecniques used : Sarpe, Treynor, Jensen measure were used for analysis. Correlation tecnique is also used to find out te relationsip between te market return and te fund return. 6. Analysis and Interpretation Tis section deals wit te analysis and interpretation of te of te selected category of public sector funds. S. No Table No. 6.1 Baroda Pioneer Asset Management Company Limited s Risk/ Public Balance Category Risk Sarpe Treynor Jensen Baroda Pioneer Infrastructure Plan A Dividend Baroda Pioneer Liquid - Regular Daily Dividend Baroda Pioneer Liquid - Regular Dividend Payout Baroda Pioneer Liquid Plan A - Daily Dividend Baroda Pioneer Treasury Advantage Plan A - Daily Dividend Te returns of Baroda Pioneer Asset Management Company Limited ranges from 4.5 to 6.3; risk ranges from 2.94 to 21.39; Sarpe Ratio ranges from 0.93 to 2.36; Treynor Ratio ranges from 3.5 to and Jensen measure ranges from 4.32 to Table No. 6.2 Canara Robeco Asset Management Company Limited S.No Public Balance Category s Risk Risk/ Sarpe Treynor Jensen Max Life Smart Step Max Life Smart Step Balance Max Life Smart Step Conservative lobal Wisdom Researc Publications All Rigts Reserved. 3

4 4 5 Max Life Smart Step Secure Max Life Smart Step Super Te returns of Canara Robeco Asset Management Company Limited ranges from 7.9 to 9.8; risk ranges from to 75.13; Sarpe Ratio ranges from 0.92 to 1.97; Treynor Ratio ranges from 9.87 to and Jensen measure ranges from 2.61 to S.No 1 Table No. 6.3 LIC Mutual Asset Management Company Limited Public Balance Category s Risk/ Risk Sarpe Treynor Jensen India First Education Plan 2 India First Future Plan India First Money Back Helt Plan India First Money Balance Plan India First Saving Plan Te returns of LIC Mutual Asset Management Company Limited ranges from 4.9 to 7.4; risk ranges from 0.58 to 15.79; Sarpe Ratio ranges from 1.16 to 4.17; Treynor Ratio ranges from to and Jensen measure ranges from 1.54 to S.No 1 2 Public Balance Category SBI Blue Cip - Regular Plan Dividend SBI Emerging Businesses Table No. 6.4 SBI s Management Private Limited s Risk Risk/ Sarpe Treynor Jensen SBI Infrastructure SBI Magnum Comma SBI One India Te returns of SBI s Management Private Limited ranges from 5.07 to 15.56; risk ranges from 2.21 to 48.00; Sarpe Ratio ranges from 0.86 to 2.21; Treynor Ratio ranges from to and Jensen measure ranges from 1.76 to lobal Wisdom Researc Publications All Rigts Reserved. 4

5 S.No Public Balance Category Table No. 6.5 UTI Asset Management Company Ltd s Risk Risk/ Sarpe Treynor Jensen 1 India Lifestyle UTI - Energy UTI Infrastructure UTI - Parma & Healtcare UTI - Services Industries Te returns of UTI Asset Management Company Ltd ranges from 4.17 to11.4; risk ranges from 4.17 to ;Sarpe Ratio ranges from 0.94 to 1.62;Treynor Ratio ranges from to and Jensen measure ranges from 1.68 to Mutual s/year BAROD A CANAR A Table No. 6.6 Yearly Average NAV of te Scemes LIC SBI UTI Average returns Te above table sows te yearly average of te NAV of te public sector - scemes. Te returns sow a fluctuating trend. On analysis it is found tat te yearly average annual returns of te public sector scemes are better. lobal Wisdom Researc Publications All Rigts Reserved. 5

6 Table No. 6.7 Total since April 2008 to April 2013 Scemes Total return Rank Baroda Canara LIC SBI UTI Average s Te above table sows te comparative total in percentage since April 01, 2008 to Marc 31, Te average return of te public sector funds is Tree firms ave earned returns more tan te average. Te overall performance is terefore satisfactory. Table No. 6.8 Standard Deviations of fund returns Scemes Standard deviation Baroda 0.21 Canara 0.34 LIC 0.25 SBI 0.46 UTI 0.20 Te igest standard deviation is of SBI Balanced at 0.46 wic is exceptionally ig as compared to all its competitors. lobal Wisdom Researc Publications All Rigts Reserved. 6

7 Table No. 6.9 and Risk Parameters S.No Type of fund Risk Coefficient 1 Public sector Te above table presents te returns and risk of public sector mutual funds. s of Public category i s Risk is low in case of public sector funds wit From te above analysis it can be concluded tat public sector funds ave produced ig return wit low risk. Table No Correlation between Market and Index S.No, s CORRELATION 1 SBI Infrastructure India First Money Back Healt Plan SBI Blue Cip - Regular Plan Dividend India First Education Plan India Lifestyle Baroda Pioneer Liquid - Regular Daily Dividend SBI Emerging Businesses UTI - Services Industries Max Life Smart Step Balance UTI - Parma & Healtcare Max Life Smart Step Super UTI - Energy India First Saving Plan Baroda Pioneer Liquid - Regular Dividend Payout India First Future Plan Baroda Pioneer Treasury Advantage Plan A - Daily Dividend Max Life Smart Step Secure SBI Magnum Comma SBI One India UTI Infrastructure Max Life Smart Step Conservative Max Life Smart Step Baroda Pioneer Liquid Plan A - Daily Dividend India First Money Balance Plan Baroda Pioneer Infrastructure Plan A Dividend lobal Wisdom Researc Publications All Rigts Reserved. 7

8 Te above table reveals te correlation between market returns and fund returns. It is understood tat tere is positive correlation in case of 13 public sector funds. Negative correlation is found in case of 12 public sector funds. 7. Findings & Recommendations 7.1 Findings 1. Public Equity category as te igest returns of Risk is low in case of public sector funds wit From te analysis it can be concluded tat public sector funds ave produced ig return wit low risk. 2. Te correlation between market returns and fund returns reveals tat tere is positive correlation in case of 13 public sector funds and negative correlation is found in case of 12 public sector funds.. 3. Te range of excess returns over risk-free return per unit of total risk is wide for public funds ranging from to It is evident tat public sector mutual funds ave performed well. 4. All te funds selected for te study ave a positive Treynor ratio. Te range of excess returns over risk-free return per unit of systematic risk is wide for public funds ranging 3.44 to It is evident tat public sector mutual funds ave performed well. 5. All te funds selected for te study as positive Jensen s alpa indicating superior performance. To conclude public sector mutual funds ave performed well during te period of study. 7.2 Recommendations 1. As te public sector funds ave performed well and so te investors can invest in public sector funds. 2. Te fund managers of private sector funds can follow te investment pattern of public sector funds for better performance. References Books 1. Punitavaty Pandian (2007), Security Analysis and Portfolio Management, Vikas Publising House Pvt Ltd., New Deli. 2. V. K. Balla, Investment Management, S. Cand, 2008, New Deli. Journals [1] Agarwal V. P, Financial Market Operations, Saitya Bawan Publications; Ed 2005, pp [2] Deepa Catterjee (2000), of Mutual s in India, Researc Paper presented in IIM, Bombay. [3] Douglas. J. Cumming and Jeffrey.. Macintos, (2007) Mutual s tat invest in Private Equity An Analysis of Labour Sponsored Investment s Cambridge Joournal of Economics, 31 (3) 2007, pp lobal Wisdom Researc Publications All Rigts Reserved. 8

9 [4] upta, Amitab, (2002) Investment Performance of Indian Mutual s: An Empirical Study, Finance India, Vol.XIV No.3, Sept. 2002, pp [5] Lawrence Swinkels and Liam Tjong- A- Tjoe, Can Mutual s Time Investment Styles?, Journal of Asset Management, Vol , pp [6] Micael C. Jensen(1967) Te Performance of Mutual s in te period , Journal of Finance, Vol. 23, No. 2, pp [7] Nalini Prava Tripaty (2004), Empirical Analysis on Performance Evaluation of Mutual s in India A Study on Equity Linked Saving Scemes, Te ICFAI Journal of Applied Finance, July PP [8] Pilpot and James (2000), Performance Persistence and Management Skill in Non Conventional Bond Mutual s, Financial Services Review, Vol. 9, Issue 3, p [9] Sanjay Kant Kare, Soutern Economist, January 15, 2007, pp [10] Sarma V.V.S, Management Accountant, April, 2005, Vol. 40; No. 4; pp [11] Sowmya ua Deb, Asok Banerjee and B.B. Cakrabarti (2007), Market Timing and Stock Selection Ability of Mutual s in India: An Empirical Investigation, Vikalpa, Volume 32 No. 2, Te Financial Review 33 (2), [12] William F. Sarpe, (1966) Mutual Performance, Journal of Business, 39, No.1, Jan, pp lobal Wisdom Researc Publications All Rigts Reserved. 9