04-09-2014, 09:51 AM
A COMPARATIVE ANALYSIS OF RETURNS OF MUTUAL
FUND SCHEMES RANKED 1 BY CRISIL
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Abstract:
Mutual fund industry has experienced a drastic growth in the past two decades.
Increase in the number of schemes with increased mobilization of funds in the past few
years notes the importance of Indian mutual funds industry. To fulfill the expectations of
millions of retail investors, the mutual funds are required to function as successful
institutional investors. Proper assessment of various fund performance and their
comparison with other funds helps retail investors for making investment decisions.
The main aim of this paper is to evaluate the performance of mutual fund
schemes ranked 1 by CRISILand compare these returns with SBI domestic term deposit
rates. Considering the interest of retail investors simple statistical techniques like
averages and rate of returns are used.
The results obtained from the study clearly depicts that, in most of the cases the
mutual fund schemes have failed even to provide the return of SBI domestic term
deposits
INTRODUCTION
BACKGROUND OFTHE STUDY
Mutual fund is a trust that acts as an investment vehicle, pools the savings of numerous investors to
invest in various financial instruments like stocks, bonds, debentures, etc enabling investors to achieve
their financial goals. SEBI (Mutual Funds) Regulation 1993, defines Mutual Fund as “Mutual Fund means
a fund established in the form of a trust by a sponsor to raise money by the trustee through the sale of units to
the public under one or more schemes for investing in securities in accordance with these regulations”.
Mutual funds are the new financial instruments of savings and investments. The active involvement of
mutual funds in economic development can be witnessed from dominant presence of mutual funds in
financial markets across the globe.
Investors of Mutual Funds need not worry much about the return as mutual funds are managed
professionally by well trained and experienced Managers. The investments in mutual funds are well
diversified and so the investors generally do not run the risk of keeping all the eggs in one basket. The other
advantages of investment in mutual fund are portfolio diversification, low risk, low transaction cost,
liquidity, and choice of schemes, transparency and safety.
Mutual funds are now tailor made to suit the specific needs of the investors. Mutual fund industry
has already entered into the world of exciting innovations where Asset Management Companies (AMCs)
are coming up with new financial products.
Proper assessment of various funds performance and their comparison with other funds helps
FINDINGS OFTHE STUDY
The present study reflects that, in most of the cases mean return on equity mutual fund schemes is
more than the mean return on other mutual fund schemes and SBI domestic term deposit rates. Further
equity mutual fund schemes have shown a remarkable return for the period of 1 year and 5 year.
Hybrid mutual fund schemes provide both income and capital appreciation while avoiding
excessive risk. The mean return on hybrid mutual fund schemes has shown volatility during the study
period, and served the purpose of hybrid funds only during the period of 6 months, 1 year and 5 year.
The mean return on debt mutual fund schemes were less than the SBI domestic term deposit rates for the
period of less than 1 year and more than the SBI domestic term deposit rates for the period of more than 1
year. Further the mean return on money market mutual fund schemes were consistently positive and were
very close to SBI domestic term deposit rates.
CONCLUSION
This paper was an attempt to evaluate the performance of mutual fund schemes ranked 1 by
CRISILand compare the mean returns with the SBI domestic term deposit rates. The performance of all the
schemes seemed volatile during the study period, as such it was quite difficult to earmark one particular
scheme that out performed consistently well during the period of study.
The mutual fund schemes ranked 1 by CRISILwere considered for the study. The results obtained
from the study clearly depicts that, in most of the cases the mutual fund schemes have failed even to provide
the return of SBI domestic term deposits. It can also be concluded that equity mutual fund schemes have the
potential to provide greater returns in long term. The investments in mutual funds is subject to market risk
and the investment decision should be taken carefully, as there is no guarantee of return and the past
performance may or may not be occurred in future