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PERFORMANCE ANALYSIS OF MUTUAL FUND: A COMPARATIVE STUDY OF

THE SELECTED DEBT MUTUAL FUND SCHEME IN INDIA

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 GAP iNTERDISCIPLINARITIES
A Global Journal of Interdisciplinary Studies
( ISSN – 2581-5628 )
Impact Factor: SJIF - 5.047, IIFS - 4.875

PERFORMANCE ANALYSIS OF MUTUAL FUND:

A COMPARATIVE STUDY OF THE SELECTED DEBT
MUTUAL FUND SCHEME IN INDIA
Komal B. Sharma
Researcher
Ahmedabad, Gujarat.
sharma.komal0096@gmail.com

Abstract
Mutual funds playing a key role in the development of India’s debt market and have emerged as a key source of
funding. Mutual funds considered as one of the best investment options as compared to other alternatives, as low
cost is the common feature of the mutual fund. Mutual fund schemes also provide diversified portfolio
management and reducing risk and maximizing returns. Mutual fund scheme is the most ideal investment for the
common man as it provides a professionally managed stock market and low risk with maximum returns. The basic
need and objectives of this study are to evaluate the performance of selected debt mutual fund schemes in India
and to examine the risk and return component among these mutual funds. The present study is based on secondary
data of five debt mutual funds launched by the different private sector companies between the period of January
2017 to December 2019. The study used NAV and the total return of these selected funs along with different tools
of study like alpha, beta, Sharpe ratio, and Jenson’s ratio. The study finds out that three mutual funds have
performed well and two funds had not performed well during the study period of study and the same as three
mutual fund schemes have performed well in the high volatile market expect Axis corporate debt and HSBC fund.
Investors are advised to consider the statistical parameter to ensure the consistent performance of the mutual
fund. This study is providing some insight into the performance of mutual fund which will help them taking
rational investment decisions and allocating their resources in the right mutual fund schemes.

Keywords: Mutual fund performance, Debt mutual fund schemes, return, risk.

INTRODUCTION

A mutual fund is a company that brings money from many people and invests it in stocks, bonds or other
assets. The combined holdings of stocks, bonds or assets the funds own known as it’s a portfolio. Each investor
in the funds owns a share, which represents a part of these holdings. India boasts of a total of 44 mutual funds
as of today. With permission from the RBI, the fund house has opened up and investors can now invest in
foreign markets like the United States. And with such positive development, the asset classes today have also
moved on from just equity and debt to gold funds, inflation and more innovative funds like arbitrage funds.
The mutual fund industry in India began in 1963 with the formation of the Unit Trust of India as an initiative of
the Government of India and Reserve Bank of India under the Act of Parliament. Later, in 1987 SBI mutual fund
became the first non- UTI mutual fund in India. Subsequently, the year 1993 heralded a new era in the mutual
fund industry. This was marked by the entry of private companies in the sector after the Securities Exchange
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Board of India Act was passed in 1992. The SEBI mutual fund regulations came into beginning in 1996. Since
then continued to grow exponentially with foreign institutions setting shop in India, through joint ventures and
acquisitions.
As the industry expanded, a non-profit organization, the association of mutual fund in India ( AMFI) was
established in 1995. Its objective is to promote healthy and ethical marketing practices in the Indian mutual
fund industry. SEBI has made AMFI certification mandatory for all those engaged in selling or marketing
Mutual Fund products. In 2003, the UTI Act of 1963 was replaced and was divided into two separate entities-
the UTI mutual fund, which is sponsored by PNB, SBI, LIC, and BOB, which are registered and compiles. The
second entity is the specified undertaking of the Unit Trust of India. The bifurcation was effective from 2003.
After the global economic recession of 2009, the Indian mutual fund industry struggled to recover from these
hardships and remodel itself over the next two years. Recognizing the lack of penetration of mutual fund India,
SEBI launched numerous progression measures in September 2012 to bring more transparency and security
for the interest of the stakeholders.
Since May 2014 the Indian mutual fund industry has experienced consistent inflow and rise in overall AUM as
well as a total number of investor account (portfolio). It is estimated that Indians save approximately 20-30
lakh crores annually. Over the years this industry has evolved from being UTI dominated one to one where
there is balanced participation or both public and private sector.

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 GAP iNTERDISCIPLINARITIES
A Global Journal of Interdisciplinary Studies
( ISSN – 2581-5628 )
Impact Factor: SJIF - 5.047, IIFS - 4.875
REVIEW OF LITERATURE

Here an attempt has been made to briefly review the work already undertaken and methodology employed. A
brief review of selected studies has been presented below:-
S.M. Adhav and P Chauhan (2015) assessed the performance of mutual fund schemes of selected Indian
companies in terms of risk-return relationship to compare the performance of mutual fund schemes of selected
Indian companies based on benchmark index and concluded that during the last 5 year the performance of
mutual fund of selected Indian companies is superior.
S. Sharma et al. (2014) compared the performance of various mutual fund schemes based on benchmark
index to bring out the scheme is outperforming or underperforming the benchmark and concluded that as India
has a developing economy, almost every sector is likely to within a huge growth going forward.
R. Kaur (2014) examined that the risk and return component among these mutual fund schemes and the
relationship between NAV and market portfolio return with the help of various measures like standard
deviation, beta, R-square, Sharpe, Treynor, Fama's measure and find that open-ended debt mutual fund not
performed better than the benchmark indicator.
M. Jayalakshmi and V. Palanichamy (2020) evaluated the performance of selected HDFC mutual fund
undergrowth scheme and compare the schemes return and risk with benchmark index within o the help of
various measures like Sharpe, Treynor, and Jenson’s investment portfolio and concluded that the Sharpe and
Treynor give a positive response to the decision-making process whereas Jenson’s measure gives the negative
response to the same.
M. Jayadev(1996) examined the growth-oriented mutual fund are earning higher returns than the benchmark
index or not with the help of Sharpe, Treynor and Jenson’s portfolio investment measure and find out that
growth-oriented mutual fund has not performed better than their benchmark indicator.
P Dhume and B. Ramesh(2011) evaluated the performance of the sector mutual fund in relation with the
market and performance using different approaches of performance measure and study the risk-return
analysis of the sector fund a concluded that all the sector funds have outperformed the market according to
Sharpe and Treynor, excluded infrastructure sector.

RESEARCH GAP

Numerous studies have been conducted on various aspects performance analysis of mutual fund schemes like
the comparative study of mutual fund selected Indian companies like HDFC reliance etc., Mutual fund
performance evaluation based on a benchmark index, performance analysis of debt and equity mutual fund
schemes, performance analysis of monthly returns. The literature review conducted for the current study
makes it clear that there is further scope for studying the many more issues relating to the mutual fund
schemes performance analysis. Hence it is decided to research a comparative study of the selected Debt mutual
fund schemes in India.

NEED OF THE STUDY

The study of performance analysis of selected Debt mutual fund schemes in India is quite desirable as it gives a
deep understanding of performance analysis of debt mutual fund schemes, as investors except for consistent
return on their investment. These investors are generally confused about pick the best scheme out. This study
will provide some insight into the performance of mutual fund which will help them taking rational investment
decisions and allocating their resources in the right mutual fund scheme.
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RESEARCH METHODOLOGY

Objective of the study

• To evaluate the performance of selected debt mutual fund schemes in India.
• To examine the risk and return component among these mutual funds.

Sources of data
The study is based on secondary data collected from historical NAV and Factsheets by Asset Management
Company (AMC).

Scope of study
The present study comprises of 5 debt mutual fund schemes launched by the different Asset Management
Company. The period of this research work is from January 2017 to December 2019. The NAV of the selected
scheme has been compared for three years with an annual return.

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 GAP iNTERDISCIPLINARITIES
A Global Journal of Interdisciplinary Studies
( ISSN – 2581-5628 )
Impact Factor: SJIF - 5.047, IIFS - 4.875
Statistical tools
Alpha: Alpha is the representation of the difference between the mutual fund’s actual return and the expected
return. It is a measure to gauge the level of outperformance, or in simpler terms how good or bad the mutual
fund has performed when compared to a benchmark. A positive alpha implies that a mutual fund has
performed above its yardstick or benchmark index.
Beta:-Beta is also referred to as Beta co-efficient. It is a tool to measure the volatility of a specific security or a
mutual fund by comparing it to the performance of a related benchmark over some time. Beta measures the
relative risk of a mutual fund or portfolio concerning the market portfolio. It reflects the systematic risk
associated with the mutual fund. The market index has a beta of one. Where there is a beta higher than one, it
means that the mutual fund is riskier than the benchmark. Similarly, a beta less than one indicates lesser
volatility than the benchmark.
Standard deviation: A Standard deviation is a tool that measures the deviation or dispersion of the data from
the mean or averages. When see in mutual fund standard deviation tells that how much the return from mutual
fund portfolio is straying from the expected return.
Sharpe ratio: The Sharpe ratio uses the standard deviation to measure mutual fund scheme risk-adjusted
returns. It will tell how well the mutual fund portfolio has performed more than the risk-free return. This
essentially gives an idea if returns are due to smart investment decisions or excessive risk. Higher the Sharpe’s
ratio better the risk-adjusted return of a mutual fund portfolio.

Debt Fund (Table 1)

No. Fund name NAV Return NAV Return NAV Return
for for for for for for
2017(₹) 2017(%) 2018(₹) 2018(%) 2019(₹) 2019(%
)
1 BNP PARIBAS Flexi Debt Fund 29.58 2 30.62 3.5 32.98 11.49
2 Nippon India Income Fund 16.26 1.62 16.92 4.06 15.07 -7.31
3 Axis Corporate Debt Fund 10.17 1.70 10.69 5.11 11.78 15.83
4 HSBC Debt Fund 27.72 2.67 27.88 0.58 31.69 14.32
5 IDFC bond Fund 42.98 2.33 41.12 -4.33 47.33 10.12

Risk Ratio
Ratios calculated on daily returns for the last 3 years
No. Fund name STANDARD BETA SHARPE JENSON'S
DEVIATION RATIO ALPHA
1 BNP PARIBAS Flexi Debt Fund 2.71 0.81 0.56 -0.88
2 Nippon India Income Fund 3.82 1.15 0.73 -0.63
3 Axis Corporate Debt Fund 2.98 1.11 0.63 -0.94
4 HSBC Debt Fund 3.46 1.06 0.37 -1.89
5 IDFC Bond Fund 3.72 1.12 0.62 -1.01

FINDINGS
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Table (1) explains the comparative NAV( Net Asset Value) for the selected mutual fund's schemes.
At the end of the year 2017 NAV & TOTAL RETURN for selected schemes (BNP Paribhas Flexi Debt Fund 29.58
& 2%, Nippon India Income Fund 16.26 & 1.62%, Axis Corporate Debt Fund 10.17 & 1.70%, HSBC Debt Fund
27.72 & 2.67%, IDFC Bond Fund 42.98 & 2.33%). At the end of the year 2018 NAV & TOTAL RETURN for
selected schemes (BNP Paribhas Flexi Debt Fund 30.62 & 3.5%, Nippon India Income Fund 16.92 & 4.06%, Axis
Corporate Debt Fund 10.69 & 5.11%, HSBC Debt Fund 27.88 & 0.58%, IDFC Bond Fund 41.12 & (-4.33%)). At
the end of the year 2019 NAV & TOTAL RETURN for selected schemes (BNP Paribhas Flexi Debt Fund 32.98 &
11.49%, Nippon India Income Fund 15.07 & (-7.31%), Axis Corporate Debt Fund 11.78 & 15.83%, HSBC Debt
Fund 31.69 & 14.32%, IDFC Bond Fund 47.33 & 10.12%).

Table (2) reveals the statistical parameters used to analyse the performance of the selected mutual fund
scheme.
In BNP PARIBAS Flexi Debt Fund (Growth) it has a standard deviation of fund is 2.71 and beta value of the fund
is 0.81 which means the fund is highly volatile and where it has Sharpe’s Ratio of the fund is 0.56 and Jenson’s
Alpha of fund is (-0.88) which says that the fund is a better risk-adjusted return to benchmark indices and it
has performed well by providing a better return to the investors. In Nippon India Income Fund (Growth) it has

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 GAP iNTERDISCIPLINARITIES
A Global Journal of Interdisciplinary Studies
( ISSN – 2581-5628 )
Impact Factor: SJIF - 5.047, IIFS - 4.875
a standard deviation of fund is 3.82 and beta value of the fund is 1.15 which means the fund is highly volatile
and where it has Sharpe’s Ratio of the fund is 0.73 and Jenson’s Alpha of fund is (-0.63) which says that the fund
is a better risk-adjusted return to benchmark indices and it has performed well by providing a better return to
the investors. In Axis Corporate Debt Fund (Growth) it has a standard deviation of fund is 2.98 and beta value
of the fund is 1.11 which means the fund is highly volatile and where it has Sharpe’s Ratio of the fund is 0.63
and Jenson’s Alpha of fund is (-0.94) which says that the fund is a poor risk-adjusted return to benchmark
indices and it has not performed well by providing a poor return to the investors. In HSBC Debt Fund (Growth)
it has a standard deviation of fund is 3.46 and beta value of the fund is 1.06 which means the fund is highly
volatile and where it has Sharpe’s Ratio of the fund is 0.37 and Jenson’s Alpha of fund is (-1.89) which says that
the fund is a poor risk-adjusted return to benchmark indices and it has not performed well by providing a poor
return to the investors. In IDFC Bond Fund (Growth) it has a standard deviation of fund is 3.72 and beta value
of the fund is 1.12 which means the fund is highly volatile and where it has Sharpe’s Ratio of the fund is 0.62
and Jenson’s Alpha of fund is (-1.01) which says that the fund is a better risk-adjusted return to benchmark
indices and it has performed well by providing a better return to the investors.

CONCLUSION

From the foregoing performance analysis of the selected five Debt funds, it’s clear that three funds have
performed well and two funds had not performed well during the study period. The sharp fall in the NIFTY
during the year 2019 has impacted the performance of all the selected funds. In the ultimate analysis, it may be
concluded that all the funds have performed well in the high volatile market movement expect Axis Corporate
Debt fund & HSBC Debt Fund. Therefore, investors need to consider statistical parameters like alpha, beta,
standard deviation while investing in mutual funds apart from considering NAV and TOTAL RETURN to ensure
consistent performance of mutual funds.

REFERENCE

[1] Adhav, M. S. M., & Chauhan, P. M. (2015). Comparative Study of Mutual Funds of Selected Indian
Companies. International Journal of Science, Technology and Management, 4(2), 44-51.
[2] Sharma, S., Gaur, A., & Arora, N. Mutual Fund Performance Evaluation: A Benchmark
Comparison. International Journal of Multidisciplinary Consortium
[3] Kaur, R. (2014). Performance evaluation of debt mutual fund schemes in India
[4] Jayalakshmi, M., & Palanichamy, V. (2020). A Study on Performance Evaluation of Hdfc Mutual Funds In
India. Our Heritage, 68(1), 3458-3466.
[5] Jayadev, M. (1996). Mutual fund performance: An analysis of monthly returns. Finance India, 10(1), 73-84.
[6] Dhume, P., & Ramesh, B. (2011). Performance analysis of Indian Mutual Funds with a special reference to
sector funds.

Websites
[1] https://www.sec.gov/investor/tools/mfcc/mutual-fund-help.html
[2] https://m.timesofindia.com/articles/Conceptand-Evolution-of-Mutual-Funds-in-
India/articleshow/22187765.cms
[3] https://www.bankbazaar.com/mutual-fund/mutual-fund-industry-in-india.html
https://www.gapinterdisciplinarities.org/

[4] https://www.orowealth.com/insights/blog/history-of-mutual-funds-in-india/
[5] https://www.fincash.com/l/mutual-funds-history-india

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