A PROJECT REPORT

ON
MUTUAL FUND IN INDIA
FROM
PRUDENT CORPORATE ADVISORY

SUBMITTED TO

MASTER OF BUSINESS ADMINISTRATION

NEHRU GRAM BHARTI UNIVERSITY

UNDER THE SUPERVISION OF

MOHD. VALIULLAH
SUBMITED BY SUBMIT TO
ANKIT KUMAR PANDEY
(MBA-SEMESTER 3)

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TABLE OF CONTENTS

Serial Particulars Page

No. No
Acknowledgement 1
Preface 2

ACKNOWLEDGEMENT

It would not have been possible for me to prepare and shape this report without the

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kind of cooperation and help of person who guided me in a proper direction and
providing essential information regarding report. It is great occasion for me to
thanks and express my deepest sense of gratitude to all those who have guided,
advised and supported me during my summer internship project report.

I wish to thank to Department of business & industrial management NEHRU

GRAM BHARTI DEEMED UNIVERSITY PRAYAGRAJ,
for providing me an opportunity to do project work on this topic as a part of MBA
curriculum.

As an institute side , it is my great pleasure to have this opportunities to express my

sense of gratitude to my guide DR.INDAL KUMAR(Assistant professor NGBDU)
for her assistance and encouragement , motivation and valuable advice from time
to time that guided me towards fulfilment of my project report successfully.

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 PREFACE

In the present scenario or fast moving globalize economy , only theoretical

knowledge is not sufficient foe an individual to perform efficiently to bridge the
gap between theory and practical.

The students required to undergo 6 weeks training in any organization in subjects

like marketing,finance, human resource,information technology,etc.

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 INTRODUCTION
MUTUAL FUND
People in India usually like to save money. People save their money in five ways.
1. Saving a/c 2. Fixed deposit 3. Gold and jewellery 4. Real Estate 5. Stock
Market.
In every investment there are 3 things Return, Risk, time.
Return means how much profit you can earn though investment (they are usually in
%) supposeif your inflation is 4% then profit should be more than 4%.
Risk means how risky is to invest, what is the chance of losing
all our money in that investmentAnd time means for how long you are investing. If
you want more return on investment then youhave to take more risk and have to
invest for longer period.
1.1 WHAT IS MUTUAL FUND
Mutual fund is a special kind of investment through which you can invest on
different typestogether (means you can do a diversifies investment by investing at
one place) though mutualfunds we can invest in gold, real estate, share market,
debt funds. In simple words, people givetheir money to asset management
company (AMC are the companies who manage the funds) andthat company invest
all money collectively at different places. Asset management companies
also appoint expert.

For every mutual scheme fund manager are appointed.To

manage the fundsof investors asset management company charge some fees which
is known as expense ratio e.g.ICICI prudential, SBI mutual funds, Nippon mutual
fund etc are some of the asset managementcompanies. SBI mutual funds have
more than 70+ mutual fund scheme such as magnumbalanced fund, SBI blue chip
fund, SBI regular saving fund etc.

In mutual fund money are invested mainly in two classes Debt and EquityDebt
mutual funds- like government security, Treasury bill, debenture etc and In Equity
Moneysare invested in stock market for every mutual scheme fund manger are
appointed and if it isequity mutual fund then when to buy, when to sell, all this
Decision are taken by fund manager.

There are two ways to invest in mutual funds 1. Lump –sum 2. SIP

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Lump sum means investing all the money at once where as SIP means investing
money monthlyor quarterly.

As company have shares mutual funds have units. The value of 1 share is Know
through its shareprice in the same way the value of 1 units is know through Net
asset value(NAV)PARTIES INVOLVED IN MUTUAL FUND
SEBI It is the Governing authority of stock market.
Mutual fund legal framework is regulated bySEBI guidelines.

INVESTOR
Investor is Neither a speculator (who takes onhigh risks for high rewards) but one
whoseprimary objectives are to safeguard theprincipalinvestment,a steady income
andcapital appreciation.

TRUSTEES
The mutual fund has been formed as a public trust and trustees manage the trust.
They areprimarily accountable for protecting theinterest of mutual fund investors.

ASSET MANAGEMENT COMPANY

SEBI approved Asset management company(AMC) manage the funds by making
investment in various types of securities. It manages the investment portfolios of
the scheme and handles various other routine activities incidental to the mutual
fund business. Its income comes from the management fees it charges for the
schemes it manages.

DISTRIBUTORS
They earn commission for bringing in
investors into the scheme of a mutual fund.
This commission is an expense for the scheme.

1.2 HISTORY OF MUTUAL FUND

A strong financial market with broad participation is essential for a development
economy. With this broad objective India’s first mutual fund was established in
1963, that was UTI at the initiative of the government of India and reserve bank of
India ‘ with a view to encouraging saving and investment and participation in the

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income , profit and gains accruing to the corporation from the acquisition ,
holding , management and disposal of securities’ In the last few years the MF
industry has grown significantly.

The history of mutual fund in India can be broadly divided into 5 phases as follow

FIRST PHASE 1964- 1987

Unit trust of India (UTI) was established in 1963 by an act of parliament. It was set
up by the reserve bank of India and functioned under the regulatory and
administrative control of the reserve bank of India. In 1978 UTI was delinked from
the RBI and the industrial development bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme launched
by UTI was unit scheme 1964. At the end of 1988 UTI had Rs.6700 crores
of Assets under management.

SECOND PHASE 1987-1993(Entry of public sector mutual fund)

1987 marked the entry of non UTI, public sector mutual fund set up by public
sector bank and life insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI mutual fund was the first non UTI mutual fund
established in June 1987 followed by Can bank Mutual fund, Punjab National
Bank Mutual fund, Indian Bank Mutual fund, Bank of India, Bank of Baroda
mutual fund. LIC established its mutual fund in June 1989 while GIC had set up its
mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under
management of Rs47,004 crores.

THIRD PHASE 1993-2003(Entry of private sector mutual fund)

With the entry of private sector fund in 1993, 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 was the first private sector mutual fund registered in July
1993.
The 1993 SEBI regulation was substituted by a more comprehensive and
revised mutual fund regulation in 1996. The industry now functions under the
SEBI regulation 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.

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 As at the end of January 2003, there were 33 mutual fund with the
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 February 2003 to 2014

UTI was bifurcated into 2 separate entities. The specified undertaking of the Unit
trust of India, representing the assets of US64 schemes, assured returns and certain
others and the UTI mutual fund, sponsored by SBI, PNB,BOB and LIC . The
industry also witnessed several mergers and acquisition of schemes of alliance
mutual fund by Birla sun life, Sun F&C mutual fund and PNB mutual fund by
Principal mutual fund.

FIFTH PHASE SINCE MAY 2014

Since May 2014, the industry has witness a steady inflow and increased in AUM as
well as no of investor accounts. The industry AUM crossed a mile stone of Rs10
trillion for the every first time as on may 2014 and in a short span of about three
years the AUM size had increased more than two folds and crossed Rs 20 Trillion
for the first time in august 2017. The AUM size crossed Rs 30 trillion for the every
first time in November 2020. The overall size of Indian mutual fund industry has
been grown Rs7.31 trillion as on 31may 2011 to Rs33.06 trillion as on 31May
2021, more than 4 and1/2 Fold increase in a span of 10 years.The no of investors
folios has gone up from 4.84 crore folios as on 31 may 2016 to 10.04 crore
as on 31 may 2021 more than 2 fold increase in span of 5 years.
On an average 8.66 lakh new folios are added every month in the last 5 years since
may 2016.
The growth size of the industry has been possible because of the twin effect of the
regulatorymeasures taken by SEBI in re-energising the MF industry and the
support from mutual fund distributors is expanding the retail base.
MF distributors have also had a major role in popularising systematic investment
plan (SIP) over the years 2016 the no of SIP account has crossed 1 crore mark and
as on 31may 2021 the no of SIP account are 3.88 crore.

1.3 TYPES OF MUTUAL FUND

Mutual fund has 3 board categories

1. On the basis of Flexibility: 1. Open ended 2. Closed ended 3. Interval fund

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2. On the basis of Dividend: 1. Growth Funds 2. Dividend funds
3. On the basis of principle Investment: 1. Equity 2. Debt 3. Hybrid 4. Solution
oriented scheme 5. Other scheme

1. ON THE BASIS OF FLEXIBILITY:

OPEN- ENDED SCHEME
An open ended fund or scheme is one that is available for subscription and can be

repurchase on a continuous basis. These schemes do not have a fixed maturity

period. Investors can conveniently buy and sell units of NAV (net Asset Value)
related prices which are declared on a daily basis. The key feature of open end
schemes is liquidity.
CLOSE –ENDED SCHEME
A close ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The
fund is open for subscription only during a specific period at the time of launch of
the scheme. Investors can invest in the scheme at the time of the initial public issue
and there after they can buy or sell the units of the scheme on the stock exchange
where units are listed.
In order to provide an exit route to the investors, some close ended funds give an
option of selling back the units to the mutual fund through periodic repurchase at
NAV related prices.
SEBI regulations stipulate that at least one of the two exists route is provided to the
investors i.e. either repurchase facility or though listing on stock exchanges. These
mutual fund schemes
disclose NAV generally on weekly basis.
INTERVAL FUND:
It operates as a combination of open ended and closed ended scheme; it
allows investor to trade units at predefined intervals. They may be traded on the
stock exchange or they may even be open for sale or redemption during pre
determined intervals at NAV related prices. When it comes to selecting a scheme
and invest in one should look for right combination of growth, Risk, stability and
income.
2. ON THE BASIS OF DIVIDEND:
GROWTH FUND:
A growth fund is a mutual fund that invests mostly in companies with above
Average growth, with the goal being capital appreciation rather than yield income
and dividend payouts.
DIVIDEND FUND:

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Dividend mutual fund are mutual fund that invest in stock that pay
dividends. Investors in this fund can reinvest the dividend into more shares of the
funds or use the dividend as an income stream.
3. ON THE BASIS OF PRINCIPLE INVESTMENT
EQUITY SCHEME
1. Large cap fund
2. mid cap fund
3. Small cap fund
4. Multi cap fund
5. Sector fund
6. Diversified equity fund
7. Dividend yield schemes
8. ELSS
9. Thematic fund
According to market capitalization companies are divided into 3 category
1. Large cap 2. Midcap 3. Small cap 4. Multicap.
Though market capitalization we get to know whether it is small, medium, large
company.
Large Cap Company has very strong market present. Large cap companies have
capital to survive in bad times, that’s why in large cap risk is low and whereas in
mid cap and small cap risk is high. Example of large cap company like reliance,
Tcs, L&T etc.
Large Cap Company is already very well stable and the growth opportunities are
limited, whereas in small cap growth & failure rate both are more. If fund manager
invest the money in large cap then it is known as large cap fund. If funds are
invested in midcap they are known as midcap fund.
Multicap fund: An equity mutual fund investing across large cap, mid cap, small
cap stocks
5. Sector fund: Sector funds means funds are invested in specific sector companies
only For example reliance media and entertainment funds are a sector which
invests the money in entertainment sector. SBI pharma fund – invest only in
pharma sector.
6. Diversified equity fund- it means investing the money in different types of
sector and different types of market capitalization
7. Dividend yield fund: Small parts of profit are shared by the company to their
shareholders in the form of dividend. To give dividend or not this decision are
taken by boards of director. In dividend yield fund, fund manager invest the money
in those companies which are stable, safe, consistent, low volatile and also give
regular dividend.

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8. ELSS (Equity linked saving scheme) which is a tax saver mutual fund. If money
which is invested in this is locked for 3 yrs. In ELSS we can’t invest less than 3
yrs. It also helps to save Income tax. That’s why they are also known as Tax-
saving funds.
9. Thematic fund: They invest in Predetermined Theme like India rural theme, e-
commerce theme etc. Thematic investing allows investors to pursue market
exposure to specific ideas. Example – HDFC housing opportunity fund is a
thematic fund, these funds buy stock related to housing.
10. Focused Fund: A Focused fund is a mutual fund that holds only relative small
variety of stocks or bonds that are similar along some dimension. A Focused
Mutual fund focuses on a limited number of sectors. Rather than holding a broad or
diversified mix of positions.
2. DEBT FUND – With the help of debt instrument government and companies
borrow money and return with interest. Debt instrument like debenture, bond,
certificate of deposit etc. In debt fund risk and return are
less than equity.
There are about 16 types and are as follows:
1. Overnight funds: Invest in overnight securities having maturity of 1 day.
2. Liquid fund: Investment in debt and money market securities with maturity up to
91 days only.
3. Ultra short duration fund: An ultra short duration fund scheme invests in
instrument with Macaulay duration between 3 month and 6 months.
4. Low duration fund: A low duration debt scheme investing in instruments with
Macaulay duration between 6 months and 12 month.
5. Money market funds: A debt scheme investing in money market instruments.
Investment in Money Market instruments having maturity up to 1 year.
6. Short duration Fund: A short term debt scheme investing in instruments with
Macaulay duration between 1 year and 3 years.
7. Medium duration fund: A medium term debt scheme investing in instruments
with Macaulay duration between 3 years and 4 years.
8. Medium to Long term duration fund: A medium term debt scheme investing in
instruments with Macaulay duration between 4 years and 7 years.
9. Long duration fund: A debt scheme investing in instruments with Macaulay
duration greater than 7 years.
10. Dynamic Bond: which invest in Debt Instrument of Varying Maturities based
on the interest rate regime.
11. Corporate Bond fund: A debt scheme predominantly investing in highest rated
corporate bonds.
12. Banking and PSU fund: A debt scheme predominantly investing in Debt
instruments of banks, Public Sector Undertakings, Public Financial Institutions.

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13. Credit Risk fund: A debt scheme investing in below highest rated corporate
bonds
14. Gilt fund: which invests a minimum of 80% of its investible corpus in
Government securities across varying maturities.
15. Floater Fund: A debt scheme predominantly investing in floating rate
instruments
16. Gilt Fund with 10 year constant duration: A debt scheme investing in
government securities having a constant maturity of 10 years
3. HYBRID FUND: Hybrid fund means those funds which are invested in both
debt and equity.
1. MONTHLY INCOME PLAN: About 60 to 90 % funds are invested in debt
instrument and the rest are invested in equity. MIP is safe because large proportion
of money is invested in debt instrument that’s why MIP is safer than equity mutual
funds. But it doesn’t mean that MIP is risk free and fixed return scheme.
2. BALANCED FUND: 65 to 85% of fund are invested in equity and rest are
invested in debt instrument
3. ARBITRAGE FUND: in arbitrage fund more than 65% of fund is invested in
stock market.
4. CONSERVATIVE HYBRID FUND: Investment in equity & equity related
instruments – between 10% and 25% of total assets; Investment in Debt
instruments – between 75% and 90% of total assets.
5. AGGRESSIVE HYBRID FUND: Equity & Equity related instruments –
between 65% and 80% of total assets; Debt instruments – between 20% – 35% of
total assets. Most of the balanced funds will fall into this category.
6. EQUITY SAVING: Minimum investment in equity & equity related instruments
– 65% of total assets and minimum investment in debt – 10% of total assets.
4. SOLUTION ORIENTED SCHEMES:
1. Retirement Fund: A retirement solution oriented scheme having a lock in of 5
years or till retirement age.
2. Children’s Fund: A fund for investment for children having a lock in for at least
5 years or till the child attains age of majority.
5. OTHER SCHEMES
1. Index fund / ETFs: Minimum investment in securities of a particular index
(which is being replicated ) 95% of total assets.
2. FOF’S: Minimum investment in the underlying fund 95% of total assets.

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1.4 ADVANTAGE OF MUTUAL FUND
. Diversification: Mutual fund has their share of risk as their performance is based
on the market movement. Hence, the fund manager always invests in more than
one asset class to spread the risk. It is called diversification. This way, when one
asset class doesn’t perform, other can compensate with higher returns to avoid the
loss for investors.
. Cost effective: we have the option to pick zero load mutual funds with fewer
expense ratios. We can check the expense ratio of different mutual fund and
choose the one that fits in our budget and financial goals. Expense ratio is the fee
for managing your fund.
. Professional management: The most important advantage of mutual fund is that
they are managed by experienced fund managers known as an asset manager which
is appointed by the fund houses. These managers research companies based on
Micro and Macro economics factors.
.Economies of scale: The pooling of large sum of money from so many investors
makes it possible for the mutual fund to engage professional managers to manage
the investment. Individual investors with small amount to invest can’t , by
themselves , afford to engage such professional management
.Tax deferral: Mutual fund is not liable to pay tax on the income they earn. If the
same income were to be earned by the investor directly, then tax may have to be
paid in the same financial year. Mutual fund offer options, whereby the investors
can let the money grow in the scheme for several years. By selecting such options,
it is possible for the investors to defer the tax liability. This helps investors to
legally build their wealth faster than would have been the case, if they were to pay
tax on the income each year.
.Tax benefits: Specific schemes of mutual fund give investors the benefit of
deduction of the amount invested, from their income that is liable to tax. This
reduces their taxable income, and therefore the tax liability.
. Convenient options: the options offered under a scheme allow investors to
structure their investment in line with their liquidity preference and tax position.
. Investment comfort: once an investment is made with a mutual fund, they make it
convenient for the investors to make further purchase with very little
documentation. This simplifies subsequent investment activity.

. Regulatory comfort: the regulator, securities &exchange board of India has

mandated strict checks and balances in the structure of mutual funds and their
activities. Mutual fund investor’s benefits from such protection.

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1.5. DISADVANTAGE OF MUTUAL FUND
. No insurance: Mutual fund, although regulated by the government, are not
insured against losses. FDIC (Federal deposit Insurance Corporation) only insures
against certain losses at banks, credit unions, and saving and loans, not mutual
fund. That means that despite the risk reducing diversification benefits provided by
mutual fund, losses can occur, and it is possible that you could even lose your
entire investment.
. Fees and Expenses: Most mutual fund charge management and operating fees that
pay for the funds management expenses (usually around 1.0% to 1.5% per year). In
addition, some mutual fund charge high sales commission, 12b-1 fees, and
redemption fees. And some fund buy and trade shares so often that the transaction
cost add up significantly.
Some of this expense is charged on an ongoing basis, unlike stock investment, for
which a commission is paid only when you buy and sell.
. Loss of control: The managers of mutual fund make all of the decision about
which securities to buy and sell and when to do so. This can make it difficult for
you when trying to manage portfolio.
. Trading limitations: Although mutual fund are highly liquid in general, most
mutual fund (called open ended fund) cannot be bought or sold in the middle of the
trading day. You can buy and sell them at the end of the day, after they have
calculated the current value of their holding
.Inefficiency of cash reserve: Mutual fund usually maintain large cash reserve as
protection against a large number of simultaneous withdrawals. Although this
provides investors with liquidity, it means that some of the fund money is invested
in cash instead of assets, which trends to lower the investor’s potential return.

CHAPTER 2: THEORETICAL FRAMEWORK

2.1 PERFORMANCE EVALUATION OF MUTUAL FUND

Investors and investment managers need timely and accurate information on the
performance of their investment portfolios. Performance evaluation provides such

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information. Without it, investors and investment managers would find it
increasingly difficult to meet stakeholders’ current and future needs in a very
competitive investment management industry. In the investment management
industry, performance evaluation broadly refers to the measurement,
analysis, interpretation, assessment, and presentation of investment results. In
particular, performance evaluation provides information about the return and risk
of investment portfolios over specified periods. Selection of investment managers
is a closely related topic.
By providing accurate data and analysis on investment
decisions and their consequences, performance evaluation allows investment
managers (and the portfolio managers they employ) to take corrective measures to
improve investment decision-making and management processes.
Performance evaluation information helps in understanding and controlling
investment risk and should, therefore, lead to improved risk management. For asset
owners and prospective clients, performance evaluation communicates portfolio
managers’ results. Broadly, it permits asset owners and prospective clients to make
better decisions (including selection, continuance, and dismissal) about investment
managers by providing relevant information on performance and its
drivers. Accurate performance presentations are especially important for asset
owners and prospective clients in facilitating accurate analysis. Performance
evaluation in its feedback role may have a large impact on investment managers,
asset owners, and other stakeholders. An effective performance evaluation process
facilitates the following outcomes:
For investment managers:
.Prompt attention to potential performance issues and unintended business or
investment risks.
.Effective monitoring of risk and return in relation to the investor’s objectives and
the designated benchmark.
.An effective internal management information system.
.Effective internal monitoring and oversight management/mechanisms.
For both investment managers and asset owners:
. Clear understanding of the different activities and decisions within the investment
management process, as well as their performance contributions.
.Reduction in non- fact- based discussions by using more objective and less
subjective investment performance information during the performance assessment
process.
.Dialogue among stakeholders that may lead to innovation, change in practices,
strengthened brand and reputation, and new attractive investment products for
investors. For asset owners:
.Finding evidence of skill (or lack thereof) Because of different perspectives held
by participants in the investment management process, performance evaluation

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sometimes involves emotional discussions among the concerned stakeholders.
Such discussions often hinder achieving appropriate solutions and may lead to
unintended consequences. To minimize the chance of such discussions,
performance evaluation should follow appropriate guiding principles. Such
principles include the following:
.The intended user and the expected use of the performance information are taken
into account in deciding what types of performance evaluation analysis to conduct
and what methodologies to use.
.The performance evaluation considers and provides information on changes in
investment strategy, investment style, or investment restrictions.
.The performance evaluation is an accurate and unbiased representation of the
investments made, results achieved, risks taken, and taxes and fees incurred.
.The performance evaluation is relevant and appropriate for the presented asset
classes, investment strategies, investment styles, and investment products.
.The performance evaluation takes into account both risk and return.
.The performance evaluation provides information on past (ex post) and expected
(exante) investment risks and compares ex post realized risk with the ex ante
forecast of risk (risk efficiency).
.The performance evaluation analyses taxes and their effect on investment portfolio
performance, where such analysis is feasible and relevant.
.The performance evaluation analyses fees and associated remuneration (e.g.,
commissions and referral fees) received for management or administration of the

investment portfolio, as well as transaction costs and trading expenses incurred in

the portfolio.
.The performance evaluation provides comparatives, such as an appropriate
benchmark, to enable assessment of the investment portfolio’s relative
performance. Besides attention to these principles, other factors promoting
effective performance evaluation include commitment by senior management,
well- educated and experienced staff, and an appropriate budget for necessary
information technology projects. It is also very important that the performance
evaluation process itself be well defined and structured.

2. WHAT IS PAST PERFORMANCE

Performance measurement answers the first question, the calculation of risk and
return of the portfolio. Performance may either address a past time period (ex post
performance) or look forward to a future time period (ex-ante performance). “Ex
post” and “ex ante” are Latin words that mean, respectively, “after the fact” and
“before the fact.” “Return” may be defined as the percentage gain or loss in wealth

16
resulting from holding an investment over a specified period. Risk means different
things to different stakeholders at different times. The Oxford English Dictionary
provides a good definition of risk: “the potential impact of an event determined by
combining the likelihood of the event occurring with the impact should it occur.”
Risk is the combination of exposure and uncertainty. Risk within asset
management may be broadly categorized into
 compliance risk,
 operational risk,
 liquidity risk,
 counterparty risk, and
 Portfolio risk.
Performance measurement is concerned with portfolio risk. Are the risks of the
portfolio of assets—for example, market risk, interest rate risk, credit risk, and
currency risks—managed to the client’s expectations? Both return and risk can be
viewed from ex post or ex ante perspectives. Ex post, or historical, risk is the
analysis of risk after the event; it answers the question, How risky was the portfolio
in the past?
Ex ante, or prospective, risk is forward looking, based on a snapshot of the current
securities and instruments in the portfolio and their historical relationship with
each other. It is an estimate or forecast of the future risk of the portfolio.

2.2 PERFORMANCE EVALUATION DIFFERENT

METHODS
Performance evaluation of mutual fund is one of the preferred areas of research
where a good amount of study has been carried out.
Ratio used to measure performance Are:
SHARPE MEASURE
A ratio developed by Nobel Laureate William F. Sharpe to measure risk- adjusted
performance. It is calculated by subtracting the risk free rate from the rate of return
for a portfolio and dividing the result by the standard deviation. Sharpe ratio tells
us how much extra return one will receive on holding a risky asset. Sharpe ratio is
based on standard deviation which is a measure of total
risk. The greater a portfolio’s Sharpe ratio, the better its risk adjusted performance
has been. A fund with higher Sharpe ratio in relation to another is preferable as it
indicates that the fund has higher risk premium for every unit of standard deviation
risk.
SR = RP- RF
SD
Where,

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SR- stands for Sharpe ratio of the mutual fund schemes
Rp- stands for average return of the portfolio
Rf -stands for average risk free rate of return
Standard Deviation measures the dispersion of data from its mean. With mutual
funds, the standard deviation tells us how much the return on the fund is deviating
from the expected return based on its historical price.
SHARPE RATIO RISK RATE VERDICT
Less than 1.00 Very low Poor
1.00-1.99 High Good
2.00-2.99 High Great
3.00 or above High Excellent
TREYNOR MEASURE
Treynor(1965) was the first researcher developing a composite measure of
portfolio performance. Treynor ratio measure the relationship between fund’s
additional return over risk free return and market risk is measured by beta. The
larger the value of treynor ratio, the better the portfolio has performed. Generally if
the treynor ratio is greater than benchmark comparison, the portfolio has
outperformed the market and indicating superior risk adjusted performance.
Formula
TR = RP- RF
B
Where,
Rp= average return of the portfolio
Rf= average risk free rate of return
β= beta (systematic risk)
JENSEN MEASURE
Jensen's Measure definition implies a type of performance measure that is risk-
adjusted. The given measure helps in representing the average returns on the given
investment or portfolio – above or below the predicted value by the CAPM
(Capital Asset Pricing Model). The only condition here is that the Beta of the
portfolio or the investment along with the average market return should be
provided. The given metric is also commonly known as Alpha.
For accurately analyzing the overall performance of the investment manager, the
respective investor should not just look into the portfolio’s return. At the same
time, the investor should also consider the risk of the given portfolio for observing
whether or not the return of the investment would compensate for the risk being
undertaken.
For instance, if there are two Mutual Funds having a 12 percent return, a wise
investor should aim at going for the option of the fund that is less risky. Jensen's
Measure serves to be one of the effective ways when it comes to determining
whether or not a particular portfolio is earning the right returns for the given level

18
of risk. If the given value turns out to be positive, then the particular portfolio is
earning excess returns. Therefore, it can be said that the positive value for Jensen’s
Alpha would imply that the fund manager is capable of “beating the market” with
the respective stock-picking skills.
Jensen’s alpha is the difference between the actual return of the portfolio and the
expected risk
adjusted
Formula,
Jensen’s alpha= RP+[Rf +β(RM- RF)
Where,
RP= Expected portfolio return
Rf= Risk free rate
β = Beta of the portfolio
Rm= Expected market return

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CHAPTER 3 RESEARCH METHODOLOGY
STATEMENT OF PROBLEM:
To study the performance evaluation of selected mutual fund Scheme.
RESEARCH OBJECTIVES:
1. To study the performance evaluation of selected (open ended) large cap mutual fund scheme
before and during covid19 pandemic
2. To examine the performance of selected schemes by using portfolio evaluation model (Sharpe
and treynor )
3. To understand the market return & Fund return
4. To know, which scheme has given highest return within before & during Covid-19 outbreak.
HYPOTHESES:
Index Return and fund return are not significantly related.
VARIABLES:
Variables of the study are Risk, Returns, Sharpe ratio, Treynor ratio, Jensen Alpha
SIGNIFICANCE OF THE STUDY
The present study attempts to provide an idea about the performance of selected mutual fund
schemes prior and during the COVID19 outbreak. The study has concentrated on open ended
schemes & direct growth Plan.
PURPOSE OF THE STUDY
This study will help the investor to understand the performance of various schemes prior and
during the Covid 19 pandemic.
DATA COLLECTION PLAN
All the data required for this study have been obtained mainly from Secondary Source.
Secondary Data are been collected from the various websites like BSE, NSE, Association of
mutual fund etc

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