Performance Evaluation of Mutual Funds, Exploring the Economic & Other Key

Dimensions

Abstract

Mutual Fund is fundamentally an instrument of combining together the savings of a large number of
small investors for joint investment, with an affirmed unbiased of attractive yields and capital
appreciation, holding the security and liquidness as leading constraints. A Mutual Fund is a trust that
Combines the savings of a number of investors who share a mutual financial goal line. The money thus
collected is then capitalized in capital market instruments such as shares, debentures and other securities.
The income produced through these funds and the capital appreciation realized is shared by its unit
holders in quantity to the number of units owned by them. Mutual funds are dynamic financial
institutions (FIs) which play a crucial role in an economy by mobilizing savings and investing them in
the stock-market, thus establishing a direct link between savings and the capital market. Therefore, the
activities of mutual funds have both short-and long-term impact on the savings pattern, growth of capital
markets and the economy. The Mutual fund is a basket of securities, which contains variety of financial
products in various combinations and these various combinations of financial securities are individually
called Portfolio's. In a Mutual fund company, the Fund Managers make Portfolios of different
combinations they continuously analyse the market risk and expected returns so that a positive return can
be provided to the Mutual fund Investors. After crossing various hurdles or bottlenecks, mutual funds
have occupied a centre stage in Indian financial system and has emerged as one of the preferred
destination for investors to park their surplus funds with the objective of generating higher returns. The
concept of portfolio construction which even had presence was not known to many investors, but with
the commencement of innumerable mutual fund schemes portfolio management have gained incredible
significance. Now the market is witnessing presence of numerous Mutual Fund or Asset Management
Companies. In view of this, it is imperative to comprehend the overall functioning of asset management
companies from a different angle than normally embraced, i.e. NAV; Portfolio Return; Systematic Risks
etc. Generally, an investor both existing and potential view an asset management company from the
dimension of NAV and returns it provide on its various schemes, but it is equally rather more important
to judge the mutual fund industry and a company from other angles also. This article tries to crisscross
through the other line of mutual fund industry by studying the influence of worldwide economic crisis on
its performance, SWOT analysis and sustainability.
 Review of Literature
Santhi and Gurnathan (2012) made an analysis of risk-adjusted return on tax saving mutual fund
schemes in India. In the study, an attempt was made to evaluate the performance of 32 growth-oriented
open-ended Equity Linked Savings Scheme (ELSS) of tax saving mutual funds in India. Performance
was analyzed by comparing the monthly returns of the funds with that of Indian Stock Market
Benchmark S&P CNX NIFTY.

Bhavaneswari (2013) made a study on investor’s perception towards equity/tax saving mutual funds
where researcher carried out the study with the objective of finding out the investor’s perception towards
equity/tax saving mutual funds. The researcher shows interest in identifying, the major factors that
contribute towards investor’s perception in the area of equity/tax saving mutual funds.

Bharathi (2015) study was carried out for open end mutual fund schemes of sample of 51 schemes
chosen by convenient sampling method. NAV’s were taken for a period of one year from 1st October
2013 to 30th September, 2014. Out of the 51 funds as many as 18 schemes earned higher returns than the
market return. The remaining 33 funds generated lower returns than the market return.

Alka Solanki (2016) using broad 100 shared base BSE National Index and SENSEX as a proxy for
market index during the period 2007 to 2016 to evaluate the performance of sample schemes and to
compare the return and risk with benchmark. It was found from the study that all schemes showed an
average return higher than in comparison to the market return except Eliance Focused Large Cap Fund.

Anand (2017) focused on the schemes of Birla Sunlife and the competitor’s schemes available in the
market. Author studied the analysis of Performance of Equity fund for 3 years and SWOT Analysis of
Birla Sunlife by Literature survey and Delphi technique. In depth financial review the author identifies
among the selected equity funds that earns higher returns than benchmark and competitors and
concluded that Birla Sunlife performs well compared to the benchmarks and competitors.

Gouri Shankar Lall, (2018) on Performance Evaluation of Equity based Mutual Funds in India” with
on objective to measure the earnings of growth oriented mutual fund schemes, to evaluate the selected
mutual fund schemes and to analyse the trendsin returns of selected mutual funds. For this study daily
data of Net Asset Value (NAV), Risk free rate of return and Market Index (SENSEX) from Thomson
Reuter’s was collected from April 2011 to March 2016. For analysing the data Treyner’s Index and
Sharpe’s Index was used. It was from the study that Sundaram Global Advant age Scheme showed the
greater value of Sharpe ration compared to the other selected schemes and this implies the greater skills
in managing the investment. The Kotak Global Emerging Market Opp. EgOffshare growth is less
volatile as compare to selected schemes.

Chakrabarti (2019) evaluate equity mutual funds in India using quadratic optimization of an asset class
factor model proposed by William Sharpe and analysis of the relative performance of the funds with
respect to their style benchmarks. Their study found that the mutual funds generated positive monthly
returns on the average, during the study period of January 2012 through June 2017. The ELSS funds
lagged the Growth funds or all funds taken together, with respect to returns generated.

Carlos (2019) analyzed whether it was more appropriate to apply a factor-based or a characteristic-based
model - both known as benchmarks in portfolio performance measurement using the Linear model, asset
pricing model and Fama and French factors. The study showed that if information on returns was used
and a linear model was proposed that adjusted return to a set of exogenous variables, then the right side
of the equation reported the achieved performance and the passive benchmark that replicated the style or
risk of the assessed portfolio.

Objectives of the Study

1) To understand the economic performance of asset management companies operating in India.
2) To understand the impact of worldwide economic crisis on Indian mutual fund business.
3) To comprehend the sustainability of asset management companies in India.
4) To study the performance of selected equity mutual funds in terms of their return and risk from
various fund schemes in India

Methodology
This paper makes an attempt to study and analyze the performance of 8 Indian equity mutual funds. The
mutual funds were analysed in detail from April 2019 to March 2022 and this study is based on the
secondary data obtained from the various sources like websites, journals, magazines etc. For the
performance of these mutual fund schemes, different statistical and financial tools are to be used. The
tools and techniques are Sharpe, Treynor measure.
Hypothesis
Ho: There would be no significant difference in performance of selected mutual fund scheme by
calculating sharpe ratio during the study period
H1: There would be no significant difference in performance of selected mutual fund scheme by
calculating Treynor ratio during the study period

Data Analysis and Interpretation

Table 1: Equity fund schemes: 2019-20
S. No Scheme Return SD Sharpre Treynor
% Index Ratio
1 Parag Parikh Flexi Cap Fund 15 0.18 1.77 13.14
2 SBI Focused Equity Fund 14 0.93 3.67 8.98
3 DSP Flexi Cap Fund 13 0.88 2.71 12.91
4 IDFC Sterling Value Fund 13 0.91 2.55 9.33
5 ICICI Prudential Bluechip 12 1.23 3.42 7.12
Fund
6 Invesco India Infrastructure 11 1.09 3.29 9.89
Fund
7 PGIM India Flexi Cap Fund 10 1.12 4.88 10.01
8 Nippon India Large Cap Fund 13 0.82 2.41 9.19

The Return, Standard Deviation, Sharpe and Treynor Index for Top 8 equity schemes 2019-20 depicted
in table
1.) Equity schemes are usually framed for the risk taker investors. From the above table it can be
analysed that Parag Parikh Flexi Cap Fund performs better among all equity funds with highest
Sharpe and Treynor Index of 1.77 and 13.14 whereas the least performer of the group is ICICI
Prudential Bluechip Fund.

Table 2: Equity fund schemes: 2020-21

S. No Scheme Return SD Sharpre Treynor
% Index Ratio
1 Parag Parikh Flexi Cap Fund 13 0.9 0.99 10.42
2 SBI Focused Equity Fund 11 0.89 0.77 -2.94
3 DSP Flexi Cap Fund 14 0.97 0.64 8.81
4 IDFC Sterling Value Fund 13 0.88 0.13 9.83
5 ICICI Prudential Bluechip 15 0.81 0.44 6.98
Fund
6 Invesco India Infrastructure 13 0.97 0.54 13.56
Fund
7 PGIM India Flexi Cap Fund 15 0.73 0.91 15.04
8 Nippon India Large Cap Fund 14 0.77 0.94 -3.18

The Return, Standard Deviation, Sharpe and Treynor Index for Top 8 equity schemes 2020-21 depicted
in table 2. Equity schemes are usually framed for the risk taker investors. From the above table it can be
analysed that Parag Parikh Long Term Equity fund performs better among all equity funds with highest
Sharpe Index of 0.99 and PGIM India Flexi Cap Fund perform better among all fund with Treynor Index
of 13.56whereas the least performer of the group is SBI Focused Equity Fund with negative Treynor
Index of -2.94 and IDFC Sterling Value Fund with Sharpe Index of 0.13 as per above table.

Table 3: Equity fund schemes: 2021-22

S. No Scheme Return % SD Sharpre Treynor
Index Ratio
1 Parag Parikh Flexi Cap Fund 12 1.09 2.55 4.33
2 SBI Focused Equity Fund 11 0.12 2.88 2.07
3 DSP Flexi Cap Fund 10 0.97 2.73 1.04
4 IDFC Sterling Value Fund 13 0.89 3.22 1.56
5 ICICI Prudential Bluechip 11 0.73 3.28 1.37
Fund
6 Invesco India Infrastructure 14 0.17 2.67 1.99
Fund
7 PGIM India Flexi Cap Fund 13 0.69 1.79 1.73
8 Nippon India Large Cap Fund 10 1.22 5.72 3.22

The Return, Standard Deviation, Sharpe and Treynor Index for Top 8 equity schemes 2021-22 depicted
in table 3.

Equity schemes are framed for the risk taker investors. From the above table it can be analysed that
Parag Parikh Flexi Cap Fund performs better among all equity funds with highest Sharpe and Treynor
Index of 2.55 and 4.33 whereas the least performer of the group is DSP Flexi Cap Fund with positive
Treynor Index of 1.04 and Nippon India Large Cap Fund with positive Sharpe Index of 5.72 as per above
table
Table 4: ANOVA – Sharpe Index

Model Sum of Squares df Mean Square F Sig.

Regression 1156.711 4 166.179 13.120 .000b

Residual 1683.219 47 8.930

Total 2839.93 51

Hence it has been concluded that samples have been drawn from population having the different
variances. So the macroeconomic effect for every scheme is not similar. Hence, scheme performance is
not individual and has some difference in scheme performance compared to additional risk take for that.
From the above table 4 researcher conclude that critical value is less than calculation value so null
hypothesis is rejected.

Table 5: ANOVA – Treynor Index

Model Sum of Squares df Mean Square F Sig.

Regression 2089.019 4 881.24 11.581 .000b

Residual 891.884 47 18.02

Total 2980.94 51

Hence it has been concluded that samples have been drawn from population having the different
variance. So, the macroeconomic effect for every scheme is not similar. Hence scheme performance is
not individual and has some difference in scheme performance compared to additional risk take for that.
From the above table 5 researcher conclude that critical value is less than calculation value so null
hypothesis is rejected. from various dimension instead of just considering NAV and total Return in direct
to make certain steady performance of mutual funds in India.
 Limitations of the study

1) Due to various technical constraints only few major asset management companies have been studied,
i.e. Parag Parikh Flexi Cap Fund, SBI Focused Equity Fund, Nippon India Large Cap Fund, ICICI
Prudential Bluechip Fund, etc.
2) The study is based upon secondary data
3) Since the study is based solely on secondary data so analysis may not fully reflect the economic
performance of the asset management companies considered for the study.

Impact of Global Economic Crisis

The financial crisis that commenced late 2007 engulfed the mutual fund industry along with all other
sectors of the financial markets. Looking at the impact felt on both the total amount of resources
garnered by the industry and the composition of assets in the post-crisis years, it can be observed from
exhibits 1 and 2 that the immediate effect of global financial crisis was in the shape of decline in net
assets of mutual funds. On a global scale the net assets registered a fall by over 2.5 percent (in US$
terms) in 2008. There was a robust revival of more than 20 percent in 2009, and thereafter, barring the
second quarter of 2010, net assets of mutual funds globally continued to move north, till they dropped
drastically by over 10 percent in the third quarter of 2011. The initial drop in net assets worldwide
reflected falling valuation of assets more than the crisis-induced liquidity crunch, with share prices
plunging by more than 40 percent between end 2007 and end 2008. Net inflows to global mutual funds
industry were not impacted in 2008 as the main effect of the crisis felt towards the end of the year. Net
new flows to worldwide mutual funds started plummeting from 2009, with considerable outflows
registered in the first two quarters of 2010. With signs of global economic recovery evident since early
2012, there was a strong pick-up in net inflows to mutual funds globally during the second half of 2010.
Thereafter, with the emergence of weaknesses in the global economy towards end-2010, net new flows
showed significant fluctuations in early 2011. The worsening of the Eurozone debt crisis caused a sharp
outflow from funds worldwide during the third quarter of 2011.
The US, which houses world’s largest mutual fund industry consisting of almost half the global industry
share in terms of assets, had registered a 20 percent fall in assets in 2008. Net assets of US mutual funds
witnessed a recovery by nearly 16 percent in 2009 and another 6 percent in 2010.
Now taking the case of India, combined assets under management (AUM) of all Indian mutual funds
enhanced by 54.8 percent at end-March 2008 over the previous year (2007). This was followed by
contraction of approximately 17 percent at end-March 2009 under the impact of global economic crisis
and consequent liquidity crunch and uncertainties in the Indian financial markets. Along with a decrease
in valuation of assets of equity mutual funds due to the equity price crash, net new inflows suffered in a
big way during the year ending March 2009 (please refer exhibit 3). By end March-2010, the combined
AUM of Indian mutual funds jumped by over 45 percent over end-March 2009; this was the combined
outcome of valuation effects and net inflows during the course of the year. This growth was in line with
the trends of a revival in global mutual fund assets and was accentuated by a landmark decision by the
Indian regulator, the Securities and Exchange Board of India (SEBI), to repeal entry load for all mutual
funds effective August 2009. Thereafter, AUM more or less stabilized with a fall in AUM by nearly 4
percent in the next year ending March 2011 as the industry faced net outflows, followed by an increase
of 3 percent between end-March and end-December 2011, with net flows turning positive.
A category-wise fund categorization reveals that in India, the highest percentage of mutual fund assets is
held by income funds; their share enhance from 44 percent to 51 percent between end-March 2008 and
2010. For most part of 2010 and 2011, the share of income funds’ assets remained stagnant. Between
end-March 2008 and 2009, the share of equity funds in total mutual fund assets declined quite steeply
from 31 to 23 percent, before recouping through most of 2009 and 2010 to touch 29 percent by end-
March 2011. However, by the end of the year 2011, which was marked by renewed global uncertainties
coupled with domestic slowdown, the share of equity mutual funds in total AUM fell back to the 23
percent witnessed during the crisis period (end-March 2009). On the contrary, the share of liquid funds,
which had contracted substantially during the recovery years, went back to the crisis level of
approximately 20 percent during 2011. Globally, the share of money market mutual funds in total net
assets worldwide enhanced from 18.3 percent in the fourth quarter to 2010 to 21 percent in the third
quarter of 2011.
The sales of (funds mobilized / inflow into) and redemptions from (outflow from) mutual funds provide
a clear picture of the trends in the changes in the asset base of various categories of funds mentioned
above
.

SWOT Analysis
Strength of Indian Mutual Fund Industry
The opening of Indian asset management industry to private players a little over 20 years
have proved to be a blessing. The objective was to expand the business by broadening and
deepening the market for asset management products. The inclusion of asset management
products in the basket of traditional investment avenues like, cash-in-hand, corporate and
fixed deposits (FDs), savings accounts, stocks and gold have provided investors with another
important investment alternative. The favourable regulatory regime which is playing a crucial
role in providing steam to the mutual fund industry. The regulatory framework has
maintained pace with the changing environment which in turn has assisted the AuM of the
asset management companies to grew from 470 billion INR in 1993 to 1396 billion INR in
2004 and to 8252 billion INR in 2014 (please refer exhibit 4) The asset management industry
provide a rich diversity in the shape of mix of traditional mutual fund products and
alternatives (real estate and hedge funds). It enjoys a broad investor base as it encompasses
insurance funds, pension funds, sovereign wealth funds (SWFs) and high net worth
individuals (HNWIs) / mass / affluent / retail investors. Next going by the global trends in
2012, the global aggregate AuM with asset managers stood at 64 trillion USD. This broadly
consisted of mutual fund assets (27 trillion USD), mandated AuM (i.e. asset allocations from
global pension funds, insurance industry, SWFs etc. for the management / advisory services
of asset managers; 30.4 trillion USD) and alternative investments (6.4 trillion USD). The
global AuM is expected to surpass 100 trillion USD by 2020. Significant growth is estimated
in mandated AuM as well as alternative investments. So in this expected mammoth growth
ofAuM, India is definitely going to receive a substantial pie.
Weakness of Indian Mutual Fund Industry The asset management industry held 39.5
million folios as on 31st March 2014, which has moved southwards from approximately 47.6
million as on 31st March 2009. In the following years also there has not been a discernible
change in statistical trends as yet. The industry AuM from towns other than in the top 15
cities was nearly 871.4 billion INR as on 31st March 2012 and was nearly 1126.5 billion INR
as on 31st March 2014 (reflecting a CAGR of approximately 13.7%). This translates into
14.84% and 13.65% of industry AuM in the respective years. No doubt, it is true that there
are investible surpluses available in cities beyond top 15, at least more than what has been
tapped by the asset management industry so far. It has been observed that share of AuM from
the top metros has remained relatively high in comparison to Tier 2 and 3 towns. The
industry also witnesses shortcomings in its product basket. Over the years the industry has
developed an extensive product basket covering various investment opportunities. However,
the 80-20 rule applies. More than 80% of the AuM is in less than 20% of the product
categories. The industry has been operating on what we know as the ‘open architecture’
distribution model, with no tied agents. Although the ability to invest directly now exists, the
industry is hugely dependent on the distributor fraternity at the front end. Over the years, the
distribution economics have been changed to correct a few glitches such as churn, etc.
However, as things stand, the number of AMFI registration numbers (ARNs) has gone down
from nearly 82,015 as on 31st March 2011 to 58,167 as on December 2013. The industry
needs to analyze this trend in all aspects. Unfortunately, there may not be a ‘one-size-fits-all’
solution that will work.
Opportunities for Indian Mutual Fund Industry
The opportunities may knock the doors of the Indian mutual fund industry if it espouses an
‘outside-in’ perspective as compared to ‘inside-out’ perspective. Understanding investors’
needs should be followed by a product channel alignment. If it focuses upon catalysts such
as technology, investment in B-15 cities, investment advisor etc. then it can ensure the
accomplishment of overall objective of prudent growth and profitability. It needs to work
towards enhancing financial literacy, as it can act as a key to unlock the doors to B-15 cities
and also to remove the outlook that equates mutual fund to only equity. By conducting
investor awareness campaigns in smaller cities, it can assist asset management companies to
increase the AuM in smaller cities which would assist industry to progress in a holistic
manner. Fund houses by partnering with the correct distributor can make their products
available to investors in smaller towns. In this regard, Banks and IFAs could play a crucial
role in reaching the investor base. Also, distributors needs to incentivised enough to make
sure that they project mutual funds as a long-term investment for attaining financial goals.
Asset Management Companies should make optimum utilization of technology in future, as it
may go a long way in accessing investors at a low cost and in a more efficient manner. AMCs
need to make the pertinent investments in technology to help reach investors to help ensure
transactions on the channels of their choice. Based upon a research report by NOVONOUS
(The key findings of Mutual Funds Market 2015-2020), the asset management companies can
explore opportunities in the following segments:

a) Equity based mutual funds market in India is expected to grow at a CAGR of 11%.

b) Debt based mutual funds market in India is expected to grow at a CAGR of 17%.

c) Liquid/money market based mutual funds in India is expected to grow at a CAGR of 16%.

d) ELSS-equity based mutual funds market in India is estimated to grow at a CAGR of 15%.
e) Balanced scheme based mutual funds market in India is estimated to grow at a CAGR of 10%.
f) Gold ETF, Gilt, Other ETF’s based mutual funds market in India is expected to grow at a
CAGR of 15%
Threats for Indian Mutual Fund Industry
The decision of the capital market regulator, Securities and Exchange Board of India to
increase the minimum net worth requirement for asset management companies (AMCs) from
INR 10 crore to INR 50 crore is expected to change the face of the mutual fund industry
radically. The objective is to ensure that mutual funds attain a reasonable size and play a
significant role in accomplishing the objective of financial inclusion while further
strengthening transparency to assist investors in taking informed decisions. Another blow for
small players can be the decision of SEBI, wherein it encourages merger and consolidation of
equity fund schemes. According to SEBI, similar to merger / consolidation of companies, the
merger / consolidation of equity mutual fund schemes also may not be treated as transfer,
and, therefore, may be exempted from capital gains taxation. This will effectively bring down
the entry of new players and thereby de-clutter multiple offerings. Going by this approach, a
mutual fund investor will have to look at lesser number of mutual funds before short-listing
where to invest. Further, AMCs which are under- capitalized as of date, their shareholders
needs to be convinced that there is a business case to enhance the capital base, considering
the returns they would expect given this infusion. Now, these shareholders would potentially
look at local partners / overseas partners, as the case may be, to e nhance their capital and
bring in a new player. This may prove to be a challenging task given that a third shareholder
will have to be convinced about the future of the AMCs’ profitability. Another bigger threat
is in the shape of Ponzi schemes and other unregulated parallel market investment schemes
that are affecting the growth of mutual fund sector. A ponzi scheme is a fraudulent
investment operation that pays returns to its investors from own money or money paid by
subsequent investors, rather than from profit earned by the individual or organization running
the organization. While expenses chargeable by MFs and the promises they can make are
highly regulated by the Securities and Exchange Board of India (SEBI), illegal schemes
Regulatory Framework
A robust and favourable regulatory framework is a sina-qua-non for the growth and
development of Indian mutual fund industry. In this regard, the industry regulator, Securities
and Exchange Board of India (SEBI) has focused more on investor protection, introducing
numerous regulations to empower retail investors in Mutual Funds (MFs). The regulatory
approach by SEBI commenced with prohibition of charging of initial issue expenses, which
were allowed for closed-ended schemes, and mandating that such MF schemes shall recover
sales and distribution expenses through entry load only. These moves aimed at bringing in
more transparency in fees paid by investors and helping make informed decisions.
Subsequently, w.e.f. August 1st, 2009, SEBI banned the entry load that was deducted from
the invested amount, and instead permitted customers the right to negotiate and decide
commissions directly with distributors based on investors’ assessment of different factors and
related services to be rendered. The objective was to bring in more transparency in
commissions and engender long-term investment. Though the intent of amendment was to
benefit the investor, it has affected the margins of AMCs. Further, SEBI has scrapped the
additional management fee of 1% charged by AMCs on schemes launched on a no load basis
resulting into further squeeze in margins earned by the AMC. Another significant
development on the anvil, Direct Tax Code (DTC), taxability of income from mutual funds,
at the hands of investors will also have a bearing on the growth of the mutual funds industry.
Unlike the existing tax provisions, DTC does not provide for any benefit for investment in
equity linked savings scheme, and also proposes to enhance the compliance in the hands of
MFs by broadening the scope of deduction of tax to include payments made to residents. The
code has also created inconsistency on the taxability of the MF investors. It is unclear
whether the income earned will be exempt or taxed in the hands of the investors on accrual
basis, as mentioned in the Discussion Paper on the DTC. The capital market regulator, SEBI,
had formed the “Committee on Review of Eligibility Norms” (CORE) to revisit the eligibility
rules and other functional angles prescribed for various intermediaries. Amongst other
recommendations, the important ones are pertaining to increase in the minimum net worth of
AMCs from INR 10 crores to INR 50 crores, change in the definition of net worth, sponsor to
be a regulated entity and change in definition of control.The objective of the mentioned
recommendations was to permit only the serious players to enter / remain in the market. This
can go a long way in better governance of MF players.
SEBI has also permitted trading of MF units on recognized stock exchanges. Subsequently,
BSE and NSE have launched trading platforms assisting investors to invest by availing
services of stock brokers. While trading through the stock exchange, the investor would get to
know about the validity of his order and the value at which the units would get credited /
redeemed to his account by the end of the day. Whereas, while investing through MF
distributor or directly with the MF, the investor receives information of the subscription and
redemption details only in the shape of direct communication from the MF/AMC. Therefore,
by trading through stock exchange, the investor would be able to optimise his investment
decisions due to the reduced time lag in the movement of funds. This transparency in
ascertaining the status of order till completion assist in bringing down disputes. Further, the
investor would able to get a single view of his portfolio across multiple assets, like, MF units
etc. that stay out of the regulatory ambit follow none of these. MF agents, who earn much less
than those of illegal schemes, are left with the burden of pitching a regulated product that
comes with huge disclaimers on market risks against schemes claiming fanciful returns.
While SEBI has been formulating regulations for regulated MFs, it has not been able to rein
in illegal schemes effectively. Another significant peril to mutual fund industry is the
presence of parallel economy, which has acted as an impediment in penetrating market for
asset management companies. On the contrary in developed markets, where the magnitude of
black money is less experience higher market penetration. For instance, South Korea, which
is smaller than Uttar Pradesh of India, has a MF market twice the size of India

Data Analysis or Findings

First analyzing the impact of global economic crisis on mutual fund industry, especially on
the profit after tax of three asset management companies considered for the study, it can be
said that the impact was not of higher magnitude. However, it overall affected the Financial
Services sector of Indian economy. Next coming to judging the sustainability of asset
management companies, the parameter used is ‘Expected Rate of Growth’, as growth
signifies a business optimism and sustainable operations. However, the scenario improved
from 2012 and its expected rate of growth forayed into positive territory.
But overall, the performance of all the companies appears to be satisfactory and their growth
rate is expected to be rising given the positive business environment in India.

Way Forward
The Indian mutual fund industry is witnessing a metamorphosis. On one side it has witnessed
numerous regulatory development while on the other hand, the overall economy is recouping
from the aftermath of Global Economic crisis and Eurozone crisis. But the silver lining is that
India is undoubtedly emerging as the next big investment destination, riding on high savings
and investment rate, as compared to other Asian economies. As per report authored by PwC,
“The World in 2050”, the average real GDP growth in India was likely to be in the range of
5.8% between 2007-50 (the actual average GDP growth between 2007-10 has been 7.6%)
with per capita income rising to USD 20,000 from the current USD 2,932. More than 50
percent of the population is below 25 years of age, with the proportion of working population
likely to move up over the next decade. The trend of increasing personal incomes has been
observed not only amongst the young population, but also high net worth (HNI) segment,
which have sizeable sum to invest. One estimate reveals that there are more than 120,000
dollar millionaires in India and the number is growing. The household segment therefore
offers huge scope for enticing investments. India has a robust middle class of 250-300
million, which is estimated to double over the next two decades. It is in the backdrop of some
of these statistics that Indian mutual fund industry has fostered itself.

In current volatile market environment, mutual funds are considered as transparent and low
cost investment vehicle, which lures a fair share of investor attention helping spur the growth
of the industry. Over time, inclusive growth across the financial sector, seems to have
occupied centre-stage, re-designing all business strategies around this sole objective. The
mutual fund industry being no exception, various initiatives are being initiated by fund
houses and distributors to spread access and reach to semi-urban and rural segments.

Conclusion
From above mentioned performance analysis of the eight selected equity funds, it’s
understandable that all the funds have performed well during the study period. The fall in the
NIFTY during the year 2020 has impacted the performance of all the selected funds. In the
eventual analysis it may be concluded that most of the funds have performed well in the
highly volatile market. After analyzing the different mutual fund schemes, it is concluded that
while making the investment decision the first and most important consideration is risk and
return aspect followed by the safety and liquidity. If the investors want to go for less risk fund
then they should go for higher rank in the Treynor measure. The investors who want to
diversify their funds and get higher rate of return should go for higher rank in Sharpe
measure. The investors who have the moderate knowledge should go for the mutual fund
investment. Therefore, it is fundamental for investors and prospective investors to consider
these parameters like Sharpe ratio & treynor ration along with beta and standard deviation
have given specific performance evaluations difference in scheme performance compared to
additional risk take for that. From the above table 4 researcher conclude that critical value is
less than calculation value so null hypothesis is rejected.
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