Performance of the Indian Mutual Funds: A Study with Special Reference to Growth Schemes. - Asia-Pacific Business Review

Performance of the Indian Mutual Funds: A Study with Special Reference to Growth Schemes.

By Asia-Pacific Business Review

  • Release Date - Published: 2008-07-01
  • Book Genre: Business & Personal Finance
  • Author: Asia-Pacific Business Review
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Performance of the Indian Mutual Funds: A Study with Special Reference to Growth Schemes. Asia-Pacific Business Review read online review & book description:

Introduction Globalization, economic liberalization and financial sector reforms generated and augmented the interest of Indian investors in equity. With the growing institutionalization, retail investors have started to keep out of the primary and secondary market, and are looking forward to mutual funds for their investments. Mutual funds have become the most favored investment route for small and medium investors to reap the benefits of diversification even with a meager amount of investment in the capital market in an indirect route. Out of the 32 crore employed Indians, only 2.5% are investors. Many investors, particularly youth, having dispensable income opt for mutual funds to enter into the securities market indirectly. Hence, potential investors in mutual funds need evaluation not only by financial institutions but also by academicians so that they can make a right choice in their investment decisions. To meet the needs of the potential investors, many studies have been carried out. The following are the noteworthy studies carried out by academicians contributing towards the all round development of the mutual fund industry. The research work by Friend, et al., (1962), Sharpe (1966), Treynor and Mazuy (1966), Jensen (1968), and Tito (1969) and Fama (1972) contributed for the development of the theoretical modeling and in framing the methodology for the quantitative evaluation of mutual funds with risk-return as parameters. Based on the methodology developed by the above authors, Friend, Blume and Crockett (1970) identified the relationship between performance and turnover. Carlson's (1970) analysis brought out relationship between cash inflows into funds and consistency between risk and return. Williamson (1972) & Klemosky (1977) identified correlation and consistency between the rankings of adjacent two periods. Klemosky (1973) introduced mean absolute deviation and semi-standard deviation as risk surrogates compared to the composite measures derived from the CAPM to remove bias in Sharpe, Treynor, and Jensen's measures. John and McDonald (1974) identified that more aggressive funds experience better results due to the relationship between objective and risk-adjusted performance. Gupta (1974) found out that, return per unit of risk varied with the level of volatility assumed, and funds with higher volatility exhibited superior performance. Meyer's (1977) findings based on stochastic dominance model, revalidated Sharpe's findings. Rich Fortin, Stuart Michelson (1995) identified that lower expense ratio existed in no-load funds and suggested their suitability for six year holding while load funds were suitable for fifteen year holding. Wilfred L Dellva and Gerard T Olson (1998) observed that, informational competence of funds increased the efficiency in operation, reduced expenses besides providing higher risk-adjusted returns. Vidhyashankar S (1990) & Bansal L K (1991) opined that Indian mutual funds would become one of the predominant instruments of investment due to the benefits of liquidity, safety, reasonable appreciation, better control and accountability ensured through a set of guidelines by Association of Mutual Funds of India(AMFI), Securities and Exchange Bureau of India(SEBI) and Government of India. Sarkar A K (1991) pointed out that Sharpe and Treynor performance measures ranked mutual funds alike even with different risk levels and suggested the usage of Treynor measure to compare individual assets with portfolios.

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