Académique Documents
Professionnel Documents
Culture Documents
Chapter
Particulars
No.
Page
No.
EXECUTIVE SUMMARY
1
INTRODUCTION
1.1
1-1
1.2
2-2
1.3
2
2-2
3
2.1
3-3
2.2
3-14
2.3
Methodology adopted
14-14
2.4
Literature Review
15-19
2.5
19-19
3.1
INDUSTRY PROFILE
20-23
3.2
COMPANY PROFILE
23-34
3.2.1
23-24
3.2.2
25-29
3.2.3
29-30
3.2.4
30-35
3.2.5
35-35
3.2.6
Competitors Information
35-36
3.2.7
Mc Kinseys model
37-42
3.2.8
43-45
3.2.9
45-45
3.2.10
Financial Statement
46-49
50-74
75-76
Annexure
LIST OF TABLES
20
Table No.
Table 4.1
Table 4.2
Table 4.3
Table 4.4
Table 4.5
Table 4.6
Table 4.7
Table 4.8
Table 4.9
Table 4.10
Particulars
Table showing analysis of Return of Birla Sunlife equity fund (G)
in India
Table showing analysis of Return of CanaraRobeco equity
diversified (G) in India
Table showing analysis of Return of Franklin India Bluechip
fund (G)in India
Table showing analysis of Return of Tata ethical fund (G)in India
Table showing analysis of Return of HSBC Unique Opportunities
fund(G) in India
Tableshowing analysis of return and variability in return of
selected equity mutual funds
Tableshowing analysis of beta of selected equity mutual funds
Tableshowing performance evaluation of Top 5 equity mutual
funds on the basis of Sharpes Performance Index
Tableshowing performance evaluation of Top 5 equity mutual
funds on the basis of Treynors Performance Index
Tableshowing performance evaluation of Top 5 equity mutual
funds on the basis of Jensens Performance Index
Page
No.
50
51
52
53
54
55
56
57
58
59
Table 4.11
60
Table 4.12
61
Table 4.13
62
Table 4.14
63
Table 4.15
Table 4.16
Table 4.17
64
65
66
Table 4.18
Table 4.19
Table 4.20
Table 4.21
67
68
69
70
Table 4.22
71
Table 4.23
72
Table 4.24
Table 4.25
73
74
Graph 4.2
Graph 4.3
Graph 4.4
Particulars
Graph showing analysis of Return of Birla sunlife equity
fund (G) in India
Graph showing analysis of Return Canara Robeco equity
diversified (G) in India
Graph showing analysis of Return of Franklin India
Bluechip fund (G) in India
Graph showing analysis of Return of Tata ethical fund (G)
in India
Page No.
50
51
52
53
Graph 4.5
Graph 4.6
Graph 4.7
Graph 4.8
Graph 4.9
Graph 4.10
Graph 4.11
Graph 4.12
Graph 4.13
Graph 4.14
54
60
61
62
63
64
65
71
73
74
EXECUTIVE SUMMARY
In the current economic scenario interest rates are falling and fluctuation in the share
market has put investors in confusion. One finds it difficult to take decision on investment.
This is primarily, because of investments that are risky in nature and investors have to
consider various factors before investing in investment avenues.
These factors include risk, return, volatility of shares and liquidity. The main objective
of investment in Equity mutual fund schemes and ETFs is to analyze the performance
evaluation of these funds with their benchmark by using risk, return, beta and alpha as a
parameter.
Historical data were taken for calculating risk, return and beta. Performance of these
funds is also been evaluated using different performance indexes which is used to rank the
different funds used in the study.It also uses Spearmans rank correlation.Compare to ETF,
Equity mutual funds have high risk with high returns as they give the investor a diversified
portfolio. Those who have well knowledge in ETFs, they can go for ETF investments rather
than investing in Equity mutual funds as it has less risk.
ETFs have certain advantages over mutual funds. The units can be purchased easily. It
can be traded in real-time basis. ETF and equity mutual funds offer diversification in the
portfolio.
The study will guide the new investor who wants to invest in Equity mutual fund
schemes and ETFs by providing knowledge about how to measure the risk and return of
particular scrip or mutual fund scheme. The study recommends new investors to go for equity
mutual funds rather than ETFs, as it involves high return.
It was found that ETFs as an investment avenue is less popular and investment
through SIP is gaining popularity in the volatile market.
CHAPTER1
INTRODUCTION
1.1TOPIC: COMPARATIVE ANALYSIS OF EQUITY MUTUAL FUNDS
AND ETFS
Like most developed and developing countries the mutual fund cult has been catching on in
India. There are various reasons for this. Mutual funds make it easy and less costly for
investors to satisfy their need for capital growth, income and/or income preservation.
And in addition to this a mutual fund brings the benefits of diversification and money
management to the individual investor, providing an opportunity for financial success that
was once available only to a select few.
It's important to understand that each mutual fund has different risks and rewards. In general,
the higher the potential return, the higher the risk of loss. Although some funds are less risky
than others, all funds have some level of risk. Its never possible to diversifyaway all risk.
Equity mutual funds invest in shares of companies that are listed on the stock exchanges.
ETF is defined as a security that tracks an index, a commodity or a basket of assets like an
index fund but trades like a stock on an exchange and experiences price changes throughout
the day as it is bought and sold. ETF were first launched in 1993 in United States. Their
popularity as a structured product has grown immensely because of the benefits it provides to
investors and traders. The issuance of ETF is just like a primary market IPO or a mutual fund
NFO. Shares are issued by the fund manager and listed on the exchanges. Investors can buy
and sell these shares from the secondary market through their brokers. ETF are often called as
index shares, are a hybrid of index mutual funds and stocks.
ETFs by nature track a certain index (e.g. Nifty). Hence, the returns one can expect from
ETFs will be equal to the rise in the index.The ETFs trading value is based on the net asset
value of the underlying stocks in the target index. Think of it as a Mutual Fund that you can
buy and sell in real time at a price which changes throughout the day.
CHAPTER2
REVIEW OF LITERATURE AND RESEARCH DESIGN
2.1 Scope of the Study:
The present study includes 5 years average returns of the Equity mutual funds and
ETFs, based on which future of the risks and returns are analyzed to help potential
investors.
The study involves 5 different schemes of equity mutual funds and 5 different
schemes of ETFs.
To evaluate the performance of these schemes. Three performance indexes are used
that is Sharpes, Treynors and Jensens measure.
For the individual investor, mutual funds provide the benefit of having someone else manage
your investments and diversify your money over many different securities that may not be
available or affordable to you otherwise. Today, minimum investment requirements on many
funds are low enough that even the smallest investor can get started in mutual funds. Mutual
funds make it easy and less costly for investors to satisfy their need for capital growth,
income and/or income preservation.
Bond/Income Funds:
Income funds are named appropriately: their purpose is to provide current income on a steady
basis. When referring to mutual funds, the terms "fixed-income," "bond," and "income" are
synonymous. These terms denote funds that invest primarily in government and corporate
debt. While fund holdings may appreciate in value, the primary objective of these funds is to
provide a steady cash flow to investors. As such, the audience for these funds consists of
conservative investors and retirees.
Bond funds are likely to pay higher returns than certificates of deposit and money market
investments, but bond funds aren't without risk. Because there are many different types of
bonds, bond funds can vary dramatically depending on where they invest. For example, a
fund specializing in high yield junk bonds is much more risky than a fund that invests in
government securities. Furthermore, nearly all bond funds are subject to interest rate risk,
which
means
that
if
rates
go
up
the
value
of
the
fund
goes
down.
Balanced Funds:
The objective is to provide a balanced mixture of safety, income and capital appreciation.The
strategy of balanced funds is to invest in a combination of fixed income and equities. A
typical balanced fund might have a weighting of 60% equity and 40% fixed income. The
weighting might also be restricted to a specified maximum or minimum for each asset class.
Equity Funds:
Funds that invest in stocks represent the largest category of mutual funds. Generally, the
investment objective of this class of funds is long-term capital growth with some income.
There are, however, many different types of equity funds because there are many different
types of equities. A great way to understand the universe of equity funds is to use a style box,
an example of which is below.
ETFs have not enjoyed the kind of popularity that the conventional mutual funds enjoy.
Reasons being,
The lack of understanding of the concept of ETF amongst the general investor.
ETFs by nature track a certain index (e.g. Nifty or the Bankex). Hence, the returns
one can expect from ETFs will be equal to the rise in the index. Whereas, India is a
growing market and hence offers huge opportunities in the non-index shares too.
Therefore, it is not difficult for an active fund manager to beat the index and offer
better returns. As such ETFs (and index-funds too, by that logic) have comparatively
negligible AUMs.
One, is that as market valuations become fairly or over-valued, it will become more &
more difficult to beat the index. Then index-based funds (both conventional MFs &
ETFs) may become a better option than actively-managed funds
However, as and when there is more demand, these authorized participants deposit more
shares with the AMC and get more creation units to satisfy the demand. Or if there is more
redemption, then they give back these creation units to the AMC, take back their shares, sell
them in the market and pay the investor.
All this may seem to be a bit complicated and time-consuming. But, in effect, it is all system
driven and hence happens on real-time basis with minimal effort & cost.
ETF Creation
The creation and redemption process for ETF shares is almost the exact opposite of that of
mutual fund shares. When investing in mutual funds, investors send cash to the fund
company, which then uses that cash to purchase securities and in turn issue additional shares
of the fund. When investors wish to redeem their mutual fund shares, the shares are returned
to the mutual fund company in exchange for cash. The creation of an ETF, however, does not
involve cash.
The process begins when a prospective ETF manager (known as a sponsor) files a plan with
the SEC to create an ETF. Once the plan is approved, the sponsor forms an agreement with an
authorized participant, generally a market maker, specialist or large institutional investor,
who is empowered to create or redeem ETF shares. (In some cases, the authorized participant
and the sponsor are the same).
The authorized participant borrows shares of stock, often from a pension fund, and places
those shares in a trust, and uses them to form creation units of the ETF. Creation units are
bundles of stock varying from 10,000 to 600,000 shares, but 50,000 shares is what's
commonly designated as one creation unit of a given ETF. Then, the trust provides shares of
the ETF - which are legal claims on the shares held in the trust (the ETFs represent tiny
slivers of the creation units) - to the authorized participant. Because this transaction is an inkind trade - that is, securities are traded for securities (the authorized participant provides
shares of stock to the trust and the trust in turn provides ETF shares to the authorized
participant) and no cash changes hands - there are no tax implications. Once the
authorizedparticipant receives the ETF shares, the shares are then sold to the public on the
open market just like shares of stock.
When ETF shares are bought and sold on the open market, the underlying securities that were
borrowed to form the creation units remain in the trust account. The trust generally has little
activity beyond paying dividends from the stock held in the trust to the ETF owners and
providing administrative oversight because the creation units are not impacted by the
transactions that take place on the market when ETF shares are bought and sold.
Redemptions
When investors want to sell their ETF holdings, they can do so by one of two methods. The
first is to sell the shares on the open market. This is generally the option chosen by most
individual investors. The second option is to gather enough shares of the ETF to form a
creation unit and then exchange the creation unit for the underlying securities. This option is
generally only available to institutional investors due to the large number of shares required
to form a creation unit. When these investors redeem, the creation unit is destroyed and the
securities are turned over to the redeemer. The beauty of this option is in its tax implications
for the portfolio.
We can see these tax implications best by comparing the ETF redemption to that of mutual
fund redemption. When mutual fund investors redeem shares from a fund, all shareholders in
the fund are affected by tax burden because to redeem the shares, the mutual fund may have
to sell the securities it holds, realizing the capital gain, which is subject to tax. Also, all
mutual funds are required to pay out all dividends and capital gains on a yearly basis. So even
if the portfolio has lost value that is unrealized, there is still a tax liability on the capital gains
that had to be realized because of the requirement to pay out dividends and capital gains.
ETFs minimize this scenario by paying large redemptions with shares of stock. When such
redemptions are made, the shares with the lowest cost basis in the trust are given to the
redeemer. This increases the cost basis of the ETF's overall holdings, minimizing capital
gains for the ETF. It doesn't matter to the redeemer that the shares it receives have the lowest
cost basis because the redeemer's tax liability is based on the purchase price it paid for the
ETF shares, not the fund's cost basis. When the redeemer sells the shares of stock on the open
market, any gain or loss incurred has no impact on the ETF. In this manner, investors with
smaller portfolios are protected from the tax implications of trades made by investors with
large portfolios.
Advantages of ETF
The net asset value is the actual value of a unit on any business day NAV is the
and expenses.
Per unit NAV is the net asset value of the scheme divided by the number of the units
outstanding on the valuation date.
Return:
Return on a typical investment consists of two components. The basic is the periodic cash
receipts (or income) on the investment, either in the form of interest or dividends. The second
component is the change in the price of the assets-commonly called the capital gain or loss.
This element of return is the difference between the purchase price and the price at which the
assets can be or is sold; therefore, it can be a gain or a loss.
Portfolio return:
Where,Rit is the difference between Net Asset Values for two consecutive days dividend by
the NAV of the preceding day.
Market return:
Where,Rmt is the difference between market indices of two consecutive days dividend by the
market index for the preceding day
Beta
The extent to which the fund returns are impacted by the market returns is measured by the
beta co-efficient. A fund with higher beta is more risky than one with lower beta. It measures
the systematic risk and shows how prices of securities respond to the market forces. It is
calculated by relating the return on a security with return for the market. The beta relates the
volatility of a single security to the volatility of the market as a whole.
If that is greater than 1 means that the fund is more volatile than the benchmark index,
while a of less than 1 means that the fund is less volatile than the market index. A fund with
a very close to 1 means the funds performance closely matches the index. If is zero then
the risk is almost nil. A fund with a negative moves in the direction opposite to that of the
market.
= Covar / m2
Where, Covariance (covar) is the average of the products of deviations for each data point
pair. And, covar is calculated as:
m2 = Market Variance
Standard Deviation
Standard deviation is one of the commonly used statistical parameter to measure total
risk. It is used to measure the variability of return i.e. the variation between the actual and
expected return. Since the markets are volatile, the returns fluctuate every day. High S.D
implies high volatility and a low S.D implies low volatility for a fund. It is calculated using
the formula.
Sharpes Index
Sharpe index is a measure of the risk premium of the portfolio relative to the total
amount of risk in the portfolio. Higher Sharpe ratio of a fund means that these returns have
been generated taking lesser risk. In other words, the fund is less volatile and yet generating
good returns.
Where,
Treynors Index
The Treynor ratio also called reward-to-volatility ratio relates the excess return over
the risk-free rate to the additional risk taken.However the systematic risk is usedinstead of the
total risk. Positive and high Treynor's Index shows a superior risk-adjusted performance of a
fund, a Negative and low Treynor's Index indicates an unfavorable performance.
Where,
= Treynor ratio
= the average portfolio return
Where,
2.3Methodology Adopted:
Descriptive research also known as statistical research, describes data and
characteristics about the population or phenomenon being studied. It is a fact finding
investigation. In descriptive research, definite conclusions can be arrived at, but it does not
establish a cause effect relationship. This research is used for this project as the study is based
on past data taken from NSE website.
Sources of data
For the purpose of project, the data required is collected purely from secondary data sources.
Secondary data sources are found to be most suitable as they are more reliable and accurate
and would also provide all the information necessary for the analysis.
All the data has been collected through secondary sources only
1. Web site = moneycontrol.com, nseindia.com, googlefinance.com
2. Various books and papers.
study also found those hedges funds are more active in shifting their asset allocation and has
high degree of freedom in their investment style are the difference in performance.
M. Jayadev (1996) carried out a research on Mutual fund performance with respect to
growth oriented funds for the period of 21 months from June 1992 to March 1994 in terms of
diversification, market timing and selectivity, it is found to be highly diversified fund with
high diversification, reduced total risk of the portfolio. The study showed that the growth
oriented fund does not outperform the benchmark index. Jayadev indicated that the fund
managers of growth funds are found to be poor in terms of their ability of market timing and
selectivity and suggested fund managers can earn better returns by adopting market timing
strategy and selecting the underpriced securities. The study concluded that, the growth
oriented funds have not performed better in terms of total risk and the funds are not offering
advantages of diversification and professionalism to the investors.
SharadPanwar and Dr. R. Madhumathi (2006) carried out a study on public sector and
private sector sponsored mutual funds to investigate the difference in characteristics of assets
held, and portfolio diversification for the period of May, 2002 to May, 2005. The study found
that public-sector sponsored funds do not differ significantly from private sector sponsored
funds in terms of average returns. However, the study showed that there is a statistical
difference between three classes of public sector sponsored; private sector Indian sponsored
and private sector foreign sponsored mutual funds in terms of average standard deviation,
average variance and average co-efficient of variation. The result of this study revealed that
private sector Indian sponsored mutual funds outperformed both public-sector sponsored and
private sector foreign sponsored mutual funds.
Dr. Zakri Y. Bello (2009) investigated the performance of U.S. domestic equity mutual funds
during recessions of 1990 and 2001 and during the 12 months following each recession. He
found that common stocks with small capitalization in the ensuing 12 months from the end of
a recession of 1990, but produced disappointment results after the recession of 2001. The
study pointed out that the rate of return on common stocks, and hence on stock mutual funds,
during the two recessions was completely different. With regard to the recession of 1990,
stock mutual fund performance was higher in the post-recession period. The result of this
study showed the funds that held small capitalization stocks earned higher returns than the
other categories during the 12 months after the recession period.
C. Edward Chang, H. Doug Witte (2010) examined the performance of socially responsible
funds in the U.S. mutual fund industry for the fifteen years. This paper empirically compared
operating characteristics and performance measures of SRFs relative to category averages in
the U.S. mutual fund industry. The operating characteristics were examined by expense ratio,
annual turnover rates and tax cost ratio. The performance measures include conventional risk,
return and risk adjusted return measures such as Multi factor model and CAPM model. The
result of this study revealed that SRFs have had a relative advantage in terms of lower
expense ratios, lower annual turnover rates, lower tax cost ratios and lower risk, SRFs also
exhibited lower return and two risk- adjusted return measures indicate SRFs have inferior
reward to risk performance. This study also proved that domestic stock SRFs has not
generated competitive returns relative to conventional funds in the same categories over the
past 10-15 years. SRFs in balanced fund and fixed income categories especially during 20072010, have performed better than the category averages with lower risk, higher returns and
high risk adjusted returns. Hence this study suggested that the costs of socially responsible
investing are not homogenous.
Manish Saboo (2008) studied the performance of 22 mutual funds based on data pertaining
to the period 2000-2007. Funds were evaluated by using measures like Sharpe ratio, Treynor
ratio, Jensen Alpha, information ratio, expense ratio etc. The results revealed that out of 22
funds only 7 portfolios performed worse and the remaining are performing better than the
market portfolio. Systematic risk for each of the funds (beta) was found to be very low. A
positive alpha for most of the funds indicated that the manager generated a return more than
what was expected given the portfolios risk level. Based on the risk-adjusted measure most of
the funds outperformed the market portfolio. These measures used in this study lead to
similar results with high rank correlation between the measures.
Patrick (2011) found that in Hong Kong the magnitude of tracking errors is negatively
related to the size but positively related to the expense ratio of the ETFs. He further
commented that replicating the performance of underlying securities involves more risk,
since they have a higher tracking error than in the US and Australia.
Selection of the schemes for the study is also a very difficult task because of the wide
variety of schemes.
Various schemes of the funds being used in the project are limited.
CHAPTER 3
INDUSTRY AND COMPANY PROFILE
3.1INDUSTRY PROFILE
Stock market is a place where trading of company stocks, other securities and derivatives
takes place. Stock exchanges are corporations or mutual organizations, which are specialized
in trading stocks and securities.
A stock market is a public market for the trading of company stock and derivatives at an
agreed price; these are securities listed on a stock exchange as well as those only traded
privately. The stock market is one of the most important sources for companies to raise
money. This allows businesses to be publicly traded, or raise additional capital for expansion
by selling shares of ownership of the company in a public market.
First stock exchange Mumbai (Bombay) stock exchange is India. Found in 1875 with more
than 6,000 stocks being listed. In India there are total 23 stock exchanges operating across the
country. The national stock exchange (NSE) situated in Mumbai the small and medium sized
companies can list their stocks in over the counter exchange of India (OCTEI).
The securities and exchange board of India (SEBI) regulates the functioning of capital market
and protects the interests of investor. It is located in Mumbai some functions of SEBI are as
follows:
mutual funds
Inhibition of fallacious and unfair business practices in the securities markets.
Controlling accomplishment of shares and takeover of companies
Stock exchange means anybody of individuals, whether incorporated or not, constitutes for
the purpose of regulating or controlling the business of buying selling or dealing in securities.
These securities include:
Shares, scrip, stocks, bonds, debentures stock or other marketable securities of a like
The Indian retail brokerage industry consists of companies that primarily act as agents for the
buying and selling of securities (e.g. stocks, shares, and similar financial instruments) on a
commission or transaction fee or Brokerage basis.
An agent that charges a fee or commission for executing buys and sells orders submitted by
an investor. The firm that acts as an agent for a customer, charge the customer the
commission for its service. Roles similar to that of a stockbroker include investment advisor,
financial advisor and probably many others. A stockbroker may or may not be also an
investment advisor.A stockbroker is a regulated professional broker who buys and sells shares
and other securities through market makers or Agency Only Firms on behalf of investors.
Typically, a broker who receives an order from a customer will communicate with a company
employee located at a particular exchange, who will execute the order at the exchange and
report details of the transaction to the broker. Customers typically keep their securities in an
account with the broker. Brokers charge customers commissions for conducting transactions
and fees for maintaining their accounts.
Some of the main characteristics of the brokerage industry include growth in e-broking,
decline in brokerage fees and growing derivative market and many more. There are several
national as well as local players in stock trading services which are providing various services
to their customers like online trading, portfolio management system, stock broking etc.
New forms of trading including T+2 settlement system, dematerialization etc. are
strengthening the retail brokerage market and attracting foreign companies to enter the Indian
industry various alternative forms of investment including fixed deposits with banks and post
offices etc. act as substitutes to retail broking products and services.
HISTORY OF STOCK MARKET IN INDIA
There are 23 recognized stock exchanges in India Bombay Stock Exchange, National Stock
Exchange, Ahmadabad Stock Exchange, Bangalore Stock Exchange, Bhubaneswar Stock
Exchange, Calcutta Stock Exchange, Delhi Stock Exchange, Guwahati Stock Exchange,
Hyderabad Stock Exchange, Jaipur Stock Exchange, Ludhiana Stock Exchange, Cochin
Stock Exchange, Coimbatore Stock Exchange, Madhya Pradesh Stock Exchange, Magadh
Stock Exchange, Madras Stock Exchange, Mangalore Stock Exchange Meerut Stock
Exchange OTC Exchange Of India,
Exchange, Uttar Pradesh Stock Exchange, Vodadara Stock Exchange.BSE and NSE represent
themselves as synonyms of Indian stock market.
Bombay Stock Exchange:
The Bombay Stock Exchange Limited is the oldest stock exchange not only in the country,
But also in Asia with a rich heritage of over 133 years of existence. It traces its history to the
1850s, when stockbrokers would gather under banyan trees in front of Mumbai's Town Hall.
The location of these meetings changed many times, as the number of brokers constantly
increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an
official organization known as 'The Native Share & Stock Brokers Association'.It was
established in the year 1875 and became the first stock exchange in the country to be
recognised by the government. In 1956, BSE obtained a permanent recognition from the
Government of India under the Securities Contracts (Regulation) Act, 1956.The history of
Indian stock trading starts with 318 persons taking membership in native share and stock
brokers association, know called as Bombay stock exchange or BSE in short.BSE stands first
to National stock exchange in terms of popularity.
The National Stock Exchange of India was promoted by leading financial institutions at the
behest of the Government of India, and was incorporated in November 1992 as a tax-paying
company. In April 1993, it was recognized as a stock exchange under the Securities Contracts
(Regulation) Act, 1956.NSE commenced operations in the Wholesale Debt Market (WDM)
segment in June 1994. The Capital Market (Equities) segment of the NSE commenced
operations in November 1994, while operations in the Derivatives segment commenced in
June 2000.
Capital market reforms in India and the launch of the Securities and Exchange Board of India
(SEBI) accelerated the incorporation of the second Indian stock exchange called the National
Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has become the
largest stock exchange in India.
locations across India with international presence in Dubai, Hong Kong & New York,
founded by Mr. AnandRathi and Mr. Pradeep Gupta, the group today employs over 3,500
professionals throughout India and its international offices.
The firms philosophy is entirely client centric, with a clear focus on providing long term
value addition to clients, while maintaining the highest standards of excellence, ethics and
professionalism. The entire firm activities are divided across distinct client groups:
Individuals, Private Clients, Corporate and Institutions. AnandRathi has been named The Best
Domestic Private Bank in India by Asiamoney in their Fifth Annual Private Banking Poll
2009. The firm has emerged a winner across all key segments in Asiamoneys largest survey
of high net worth individuals in India. In year 2007 Citigroup Venture Capital International
joined the group as a financial partner.
AnandRathi has been voted #1 by money polls for 2 consecutive years:
Our client base is a strong testimony to our experience in managing wealth large
families and institutions.
Easy and quick access to capital through our existing client relationships which
includes promoters of family owned business, top management of leading companies,
Professionals, Corporate treasuries and trusts.
Credited with developing and selling some of the most innovative products in the
market.
AnandRathis retail footprint extends across over 700 locations across India.
Manage more than 3.5 lakhs client accounts across the country, with a daily turnover
of around INR 20 billion.
Leading distributor of IPO, insurance, mutual funds and third party products.
We have been ranked 8th amongst all brokers for amount procured in IPOs in India
during January to June 2010 by prime data base. The firms philosophy is entirely client
centric, with a clear focus on providing long term value addition to clients, while
marinating the highest standards of excellence, ethics and professionalism.
Top Management
Board of Directors
Mr.AnandRathi
Mr.
Amit Rathi
Vice Chairman
Group Chairman
Managing Director
Managing director V. Vaidyanathan was previously MD & CEO of ICICI prudential life
insurance and executive director on the ICICI bank board. He was part of the core team that
set up ICICI banks retail business between 2000 and 2009. Also chairman of ICICI home
Finance and served on the board of ICICI Lombard General Insurance and CIBIL, Indias
first credit bureau. Heading the consumer business, ApulNayyar has been with FCH since
October 10. Prior to this, he was ED & CEO of India info line investment services and India
info line housing finance. Overall, he has 14 years experience in financial services head of
wholesale credit, ShaileshShirali joined FCH in Jul08. Prior to this, he was MD global
structured finance and investments at DSPML capital, India. Overall, Shailesh has postqualification experience of over 17 years in financial services. Chief financial officer
AshokShinkar was earlier on the board of Wanbury, a Pharma company. He was also
associated with SSKI corporate finance as vice-president and handled corporate finance
advisory. Chief risk officer Pankaj Sanklecha has 15 years experience in retail and SME
banking, having held leadership positions across risk and business. Prior to FCH, he was with
standard Chartered bank for seven years where he was head of credit for retail lending,
managing a portfolio of $2.5bn.
Nature of Business
AnandRathi share and stock brokers LTD (AnandRathi) is a Mumbai-based stock broking
firm which was established in 1994. The company was earlier known asnavratan capital &
securities Pvt. Ltd. AnandRathi is a member of BSE and NSE and pirates in the cash as well
as derivative segment in both of these exchanges. It also provides depository services and is
registered member of NSDL and CDSL. The various other products and services offered by
the company include investment banking, margin funding distribution of mutual funds, WMS
and research, the company catered largely to retail clients. Who contributed approximately
81% to the companys trading volume during CY09. AnandRathi is also a member of DGCX
and affiliated with London metal exchange (LME) and securities and futures commission
(SFC).
3.2.3 PROMOTERS, FEATURES, BENEFITS, MISSION, VISION, QUALITY
POLICY:
Promoters:
Promoter is offered to promoters of the companies against their shareholding in their
respective company. With the help of this facility the promoter can increase the shareholding
or use in expansion and diversification of the business.
Features:
Margin 50% - 75% (depending on the risk profile of the business and the stock)
Tenor 1 to 3 years
Simple Documentation
Benefits:
Increase promoters holding in the business with the use of existing stake
Mission:
To be Indias first domestic company providing complete financial services solution across
globe
Vision:
To be a shining example as a leader in innovation and the first choice for clients and
employees
Quality policy:
Improving asset quality is the key behind decent performance of bank
turn, could channel both household and corporate savings to bank term deposits.
2.2.4
AWARDS
AND
RECOGNITION,
PRODUCTS/SERVICES,
AREA
OF
OPERATION
Awards and recognition:
Best Branch Overall Brokerage - Bellary Branch
Rest Of Karnataka
Andhra Pradesh
Punjab
Kashmir
Rajasthan
First Place
Best Branch Equity - Pan India - Vijaynagar Branch
Bangalore
&
Jammu
Second Place
Best Branch Equity - Pan India - Jammu Bahu Plaza Branch
Punjab
Third Place
Best Branch Commodity - Pan Warangal Branch
Kashmir
Andhra Pradesh
Rest Of Karnataka
Andhra Pradesh
Punjab
- First Place
Best Branch Currency - Pan India Nasik MG Road Branch
Kashmir
Rest of Maharashtra
- Second Place
Best Branch Currency - Pan India Howrah Branch
East India
- Third Place
Best Branch Cross Sell - Pan Goa Branch
Rest Of Karnataka
Rest Of Karnataka
UP &Uttranchal
Rest of Maharashtra
Punjab
Kashmir
Rajasthan
&
&
&
Mumbai
Central India
Central India
Jammu
Jammu
Jammu
Rest Of Karnataka
Bangalore
Delhi
Gujarat
Gujarat
ROM
India
- First Place
Best Branch Cross Sell - Pan Tumkur Branch
Rest Of Karnataka
Hyderabad
PRODUCTS/SERVICES PROFILE
Mutual Funds
Equities
Derivatives
Commodities, Bonds
Insurance
Gold E Lock
SERVICE PROVIDED:
1.
Mutual Funds:
AnandRathi is one of Indias top mutual fund distribution houses. Their success lies in their
philosophy of providing consistently superior, independent and unbiased advice to their
clients backed by in-depth research. They firmly believe in the importance of selecting
appropriate asset allocations based on the clients risk profile.
AR have a dedicated mutual fund research cell for mutual funds that consistently churns out
superior investment ideas, picking best performing funds across asset classes and providing
insights into performances of select funds.
3.
Depository Services:
AR depository services provides with a secure and convenient way for holding your
securities on both CDSL and NSDL.AR depository services include settlement, clearing and
custody of securities, registration of shares and dematerialization. Also offer daily updated
internet access to holding statement and transaction summary.
4.
Commodities:
AR commodities broking services include online futures trading through NCDEX and MCX
and depository services through CDSL. Commodities broking is supported by a dedicated
research cell that provides both technical as well as fundamental research. Our research
covers a broad range of traded commodities including precious and base metals, oils and
oilseeds, agriculture commodities such as wheat, chana, guar and sugar, jeera and cotton.In
addition to transaction execution, we provide our clients customized advice on hedging
strategies, investment ideas and arbitrage opportunities.
5.
Insurance Broking:
Risk Management
AREAS OF OPERATION
AnandRathi financial services offers and provides services not only to regional, national but
also to international countries it has a strong and wide distribution network. We can find
offices of AnandRathi in 197 cities and 28 states and has several branches in Dubai, Bangkok
etc.
3.2.5 OWNERSHIP PATTERN, INFRASTRUCTURAL FACILITIES
Ownership pattern:
AnandRathi has an autocratic management system all strategic decisions and actions are
taken by owner of organization. New plans, services, branch opening decisions taken by top
management in entire AnandRathi service firm.
But in branch level they have democratic management system. It means all vital decisions
taken by branch management.
Infrastructural facilities:
Dealing desk
Sales talent
Company Name
Total
Sub
No.
Termina
Broker
Employe
Branch
ls
A S Stock Broking & Management 15
s
NA
es
25
Mumbai
Private Limited
Action Financial Services (India) 18
25
31
10
Mumbai
Limited
Alankit Assignments Limited
60
700
20
New
964
2408
10
1183
1800
40
139
66
30
Delhi
Mumbai
Mumbai
Chennai
650
of No. of City
Limited
Arcadia Share & Stock Brokers 191
121
150
60
Mumbai
Private Limited
Arch Finance Limited
NA
45
10
New
16
Ray
Equities
Limited
SKI Capital Services Limited
31
(India)
NA
50
15
Delhi
New
18
300
50
250
Delhi
Mumbai
88
NA
60
18
New
536
150
NA
NA
1200
575
3858
8922
380
35
540
475
Delhi
Delhi
Mumbai
Mumbai
New
536
NA
1200
1600
380
288
Delhi
Delhi
Mumbai
Limited
ICICI Securities Limited
587
1833
270
Mumbai
2177
270
970
2700
1051
Structure
Structure
Strategy
Strategy
System
System
Shared
Shared
Value
Value
Skills
Skills
Style
Style
Staff
Staff
STRATEGY:
Set out the vision, mission, objective and major action plans and policies of the organization.
These set out the picture of the organization in the future typically spelling out the overall
corporate strategy, the Strategic business unit strategy and functional Strategies. It can also be
defined as the choice of direction and action that the company adopts to achieve its objective
in a competitive situation. It is the first step that the company has to take in leading its
organization to ladder of success. The major areas of Strategic Goals of ANANDRATHI are:
Major
Description
Desired share of present and new markets, including areas in
1)
Market Standing
2)
Innovation
3)
Human Resources
4)
Financial Resources
5)
Physical Resources
6)
Productivity
7)
Social Responsibility
of
managers
employee attitudes.
Sources of capital supply and how it will be utilized.
Physical facilities and how they will be utilized in providing
services.
Efficient use of resources relatives to outcomes.
Responsibilities in such area as concern for community and
ethical behavior.
STRUCTURE:
Include policies and procedures that govern the way in which the organization acts within the
organization. It provides the frame work for relationship among different parts of the
organization. It sets out formal reporting relationships, mode of communication, their
respective roles and rules and regulation for carrying out different tasks. If it is not properly
defined it has a detrimental effect on the effective and efficient working because motivation
and morale is low, decision are delayed and are of poor quality the expenses rises, orders are
lost due to competition, lack of confidence etc.
Structure of any organization has to answer the following questions
HEAD OFFICE
Chairman
Regional Heads
Zonal Heads
Regional Product
Heads
Sr. Regional Head
Branch Manager
Relationship
Back Office
Dealers
Sales Team
SYSTEMS:
Systems in their frame work stands for the rules and regulations, procedures and practices
that must be allowed to carry out the tasks in the organization. A good system adds to the
efficient and effective working of the entrepreneur. At AnandRathi in Vijaynagar the
procedure followed is clear, transparent and not complicated.
The information systems at the various branches of AnandRathi are followed by submission
of MIS reports at end of their day to day activities. The activities of the front end operation
include:
Processing of various application forms of DEMAT account IPOs and forwarding the
The Total Quality Control System of AnandRathi has created principles about its quality
philosophy
Create constancy of purpose and improve services for long range needs rather than short
term profitability.
Search continually problems in the system and improve processes.
Encourage effective two way communication and other means to drive fear throughout
the organization and help people to work more productively.
The Electronic Data Processing (EDP) department of AnandRathi takes care of both offline
and online transactions. In the online transactions, online trading takes place using NEAT
software. It is connected to NSDL, CDSL, NSE and BSE and helps stock brokers to trade
online. The offline is mainly connected for the purpose of conversion of physical form of
shares to electronic form.
STYLE:
Style includes Leadership style of top management and overall operating style of the
organization. Style impacts the norms people follow and they work and interact with each
other and with customers.
How does the top management make decisions Participatory Vs Top Down?
How do managers spend their time in informal meetings, informal conversations, etc.?
At AnandRathi, they follow a very in effable style of functioning.
Managers, staff etc. are approachable (a perfect blend of formal and informal approaches)
Personal attention to the project trainees helps in creating a good image in the eyes of the
public.
Staff has very good informal conversations that develop a sense of loyalist, motivation,
ICWAs, CAs and CFAs, great opportunity for freshers and post graduates.
They are involved in all the required meetings and activities.
The Staff are given freedom to use their innovation and creative skills.
Get together are held for staff members to socialize.
Staff grievances are given a listening in a year.
SKILLS:
Include distinctive competencies that reside in the organization. These can be distinctive
competencies people, management practices, systems and technology. What new capabilities
the organization needs to develop, which one does it need to unlearn to compete in future.
This can be learnt through a SWOT Analysis.
The competent skills of the people include good communication and presentation skills,
strong academic record, consistent in the performance levels etc.
SHARED VALUES:
It refers to core or fundamental values that are widely shared in the organization and serve as
guiding principles that are important. These values have great meaning because they focus
attention and provide a broader sense and purpose. They also give a strong basis for stabilities
to the organization, in a rapidly changing environment by providing a basic meaning to
people working in the organization.
SWOT ANALYSIS
A SWOT analysis is a tool, used in management and strategy formulation. It can help to
identify
the
Strengths,
Weaknesses,
Opportunities
and
Threats
of
particular
company.Strengths and weaknesses are internal factors that create value or destroy value.
They can include assets, skills, or resources that a company has at its disposal, compared to
its
competitors.
They
can
be
measured
using
internal
assessments
or
external benchmarking.Opportunities and threats are external factors that create value or
destroy value. A company cannot control them. But they emerge from either the competitive
dynamics of the industry/market or from demographic, economic, political, technical, social,
legal or cultural factors.
Breadth
of
Services
In line with its
client-centric
philosophy,
the
of
financial services
ranging
from
brokerage
services in equities and commodities, distribution of mutual funds, IPOs and insurance
products, real estate, investment banking, merger and acquisitions, corporate finance and
corporate advisory.
Clients deal with a relationship manager who leverages and brings together the product
specialists from across the firm to create an optimum solution to the client needs.
In-Depth Research
Our research expertise is at the core of the value proposition that we offer to our clients.
Research teams across the firm continuously track various markets and products. The aim is
however common to go far deeper than others, to deliver incisive insights and ideas and be
accountable for results.
STRENGTHS
WEAKNESSES
Many competitors.
No direct marketing strategy.
Payment services are not good.
No global reach.
Weak brand name.
OPPORTUNITIES
Scope for increasing its branch network especially in the important financial centers as
well as extending its physical presence in other parts of the country.
Up gradation of the latest technology to give better and faster service to its clients
THREATS
The ever increasing and challenging neck-to-neck competition especially with those
established and existing reputed stock broking companies.
Uncertainty of the market and volatility and fluctuations in the stock prices.
(Rs. in Millions)
FY 12
FY 13
FY 14
1815
2915
4078
108.3
60.6
39.9
Non-interest inc
1562
1812
2224
Total income
3377
4727
6302
52.6
40.0
33.3
Op. Expenses
1611
2151
2741
Operating profit
1766
2576
3561
49.0
45.9
38.2
Provisions
268
523
703
PBT
1498
2053
2858
Tax
464
664
924
PAT
1034
1389
1934
110.4
34.4
39.2
FDEPS (Rs./share)
16.0
21.4
29.8
DPS(Rs./share)
1.8
2.3
2.7
(Rs. in Millions)
FY 12
FY 13
FY 14
Share capital
648
648
648
8125
9344
11076
Borrowings
39997
58071
77595
3226
3871
4645
Total liabilities
51995
71933
93964
Advances
47425
66395
86313
Investments
1120
1219
1397
2930
3609
5404
521
710
851
Total assets
51995
71933
93964
65
65
65
52.4
45.2
33.6
66.0
40.0
30.0
Analysis:
Based on the above income statement and Balance sheet of last five years, the company
financial statement analysis can be evaluated by using key ratio.
Key Ratios
Year end: March
FY 12
FY 13
FY 14
NIM (%)
4.8
5.1
5.3
46.2
38.3
35.3
Cost-income(Rs.)
47.7
45.5
43.5
94.4
85.3
85.4
11.3
10.7
9.0
Borrowings-loans (%)
84.3
87.5
89.9
Investment-deposit (%)
0.1
0.4
0.5
0.0
0.1
0.1
Balance Value(Rs.)
135.4
154.2
181.0
Adjustable BV(Rs.)
135.4
153.6
179.9
17.8
14.2
12.7
ROE (%)
12.7
14.8
17.8
ROA (%)
2.3
2.2
2.3
1.4
1.9
2.1
Interpretation
The total income are decreasing year over year from FY 12 to FY 14 at the same time costincome also decreasing year over year.
Dividend payout has been increasing in FY 12 later it has got decreasing drastically,
borrowings loans are increased in FY 12 later it has got decreasing due to managing the risk
and adjusting the profits. Gross Net Present Assent (NPA) has got decreasing;
Net NPA has maintaining consistency every year and adjustable balance value has got
increasing, Due to decrease in the NPA the Current Asset Ratio has got decreasing from
17.8% to 12.7% from FY 10 to FY 14.
Finally, Return on Equity (ROE) has increasing year over year; the investor is getting better
return on their investment. It will intend to invest in Stock Market, but the AnandRathi
Company Return on Asset (ROA) has got decreasing due to lack of maintenance.The
dividend Yield has been increasing year over year and the investors are getting good dividend
on the company profit.
5 Equity Mutual Funds Included In the Study:
1.
2.
3.
4.
5.
CHAPTER 4
RESULTS, ANALYSIS AND DISCUSSIONS
Table 4.1: showing analysis of Return of BirlaSunlife equity fund (G) in India in 2009
Year
Fund return
Index return
2009
88.02
90.13
2010
13.73
13.67
2011
-28.73
-26.14
2012
35.89
30.39
2013
7.76
4.20
Average return
23.33
22.45
Graph 4.1: showing analysis of return of Birla Sunlife equity fund (G) in India in 2009
Interpretation 4.1:
The above table showing the analysis of return of Birla Sunlife equity (G) in India has
outperformed than its index value in the year 2010, 2011 and 2013. The fund has the highest
return of 88.02 in the year 2009 and it also has the lowest and negative return of -28.73 in the
year 2011.
Table 4.2: showing analysis of Return of CanaraRobeco equity diversified (G) in India
Year
Fund return
Index return
2009
92.35
90.13
2010
20.67
13.67
2011
-15.86
-26.14
2012
31.32
30.39
2013
4.3
4.20
Average return
26.56
22.45
Graph 4.2: showing analysis of Return of CanaraRobeco equity diversified (G) in India
Interpretation:
The above table showing the analysis of return of CanaraRobeco equity diversified (G) in
India has outperformed than the index value in all the year. The fund has the highest return of
92.35 in the year 2009 and it also has lowest and negative return of -15.86 in the year 2011.
Table 4.3: showing analysis of Return of franklin India Bluechip fund (G) in India
Year
Fund return
Index return
2009
84.50
79.10
2010
22.17
17.86
2011
-17.72
-24.64
2012
26.57
25.70
2013
4.26
8.98
Average return
23.96
21.4
Graph 4.3: showing analysis of return of Franklin India Bluechip fund (G) in India
Interpretation:
The above table showing the analysis of return of Franklin India Bluechip fund (G) in India
has outperformed than the index value in all the yearexcept in the year 2013. The fund has
highest return of 84.5 in the year 2009 and it has the lowest and negative return of -17.72 in
the year 2011.
Table 4.4: showing analysis of Return of Tata ethical fund (G) in India
Year
Fund return
Index return
2009
111.34
86.49
2010
19.34
14.05
2011
-16.33
-26.45
2012
25.67
31.34
2013
16.37
3.41
Average return
31.28
21.77
Table 4.4: showing analysis of Return of Tata ethical fund (G) in India
Interpretation:
The above table showing the analysis of return of Tata ethical fund (G)in India has
outperformed than the index value in all the yearexcept in the year 2012. The fund has the
highest return of 111.34 in the year 2009 and it has the lowest and negative return of -16.33 in
the year 2011.
Table 4.5: showing analysis of Return of HSBC Unique Opportunities fund (G) in India
Year
Fund return
Index return
2009
71.56
90.13
2010
21.95
13.67
2011
-27.69
-26.14
2012
31.64
30.39
2013
-1.28
4.20
Average return
19.24
22.45
Graph4.5: showing analysis of Return of HSBC Unique Opportunities fund (G) in India
Interpretation:
The above table showing the analysis of return of HSBC Unique Opportunities fund (G)in
India has outperformed than the index value in the year2010 and 2012.
The fund has the highest return of 71.56 in the year 2009 and it also has the lowest and
negative return of -27.69 in the year 2011.
Table 4.6: showing analysis of return and variability in return of selected equity mutual
funds
Fund name
Return
SD
23.33
42.97
26.56
40.87
23.96
38.08
31.28
47.63
19.24
37.16
Interpretation:
Standard deviation is used to measure the variation in individual returns from the average
expected returns over a certain period.
Tata ethical fund (G) has the highest return compared to other equity mutual funds selected,
this fund also have highest SD i.e. variability in return. Higher standard deviation means a
greater fluctuation in expected return.
HSBC Unique Opportunities fund(G)has the lowest risk factor with less return compared to
other equity mutual funds selected which means has a less fluctuation in expected return.
Fund name
Beta
0.99
0.95
1.00
1.11
0.85
Interpretation:
Tata ethical fund (G) has beta value more than one which says that the stock is more volatile
compared to the market. The stock value with more than 1 beta value is considered to be
risky.
Franklin India Bluechip fund (G) has beta value equal to one which indicates that the stock
moves in tandem with the market.
And the other 3 remaining funds have beta value less than one which says that the stock is
less volatile compared to market.
Table 4.8: showing performance evaluation of Top 5 equity mutual funds on the basis of
Sharpes Performance Index
Scheme name
Average
Rf
SD()
return(Rp)
Sharpes
Rank
index
23.33
2.76
42.97
0.48
26.56
2.76
40.87
0.58
23.96
2.76
38.08
0.56
diversified (G)
Franklin India Bluechip fund
(G)
31.28
2.76
47.63
0.60
19.24
2.76
37.16
0.44
fund(G)
Interpretation:
The above table showing the performance evaluation of the selected equity mutual funds
using sharpes index according to this index Tata ethical fund (G) is the best Equity
Diversified Scheme because this scheme has ranked first and is also having the best riskadjusted rate of return followed by Canara Robeco equity diversified (G).
Table 4.9: showing performance evaluation of Top 5 equity mutual funds on the basis of
Treynors Performance Index
Scheme name
Average
Rf
beta
return(Rp)
Treynors
Rank
index
23.33
2.76
0.99
20.78
26.56
2.76
0.95
25.05
23.96
2.76
1.00
21.20
diversified (G)
Franklin India Bluechip fund
(G)
31.28
2.76
1.11
25.70
19.24
2.76
0.85
19.39
fund(G)
Interpretation:
The above table showing the performance evaluation of the selected equity mutual funds
using Treynors index. According to this index Tata ethical fund (G) is the best Equity
Diversified Scheme because this scheme has ranked first and is also having the best riskadjusted rate of return followed by Canara Robeco equity diversified (G).
Table 4.10: showing performance evaluation of Top 5 equity mutual funds on the basis
of Jensen Performance Index
Scheme name
Beta
Alfa
Jensens
Rank
index(/)
0.99
1.08
1.09
0.95
5.09
5.63
1.00
2.56
2.56
diversified (G)
Franklin India Bluechip fund
(G)
1.11
7.42
6.68
0.85
-0.26
-0.31
fund(G)
Interpretation:
The above table showing the performance evaluation of the selected equity mutual funds
using Jensens index. According to this index, Tata ethical Fund (G)ranked as first best Equity
Diversified Scheme followed by Canara Robeco equity diversified (G).
24.87
Average risk
41.34
Average Beta
0.98
Interpretation:
The above table showing the average return, variability in return and beta of the selected
equity mutual funds having average return is 24.87 and beta is 0.98 and the risk involved is
41.34.Return is a major factor influencing factor to all types of investors.
ETFs
Table 4.12: showing analysis of Return of SBI Gold ETF in India
Year
Fund return
Index return
2009
-6.40
14.13
2010
23.15
21.85
2011
27.79
30.39
2012
13.29
11.55
2013
-11.67
-6.64
Average return
9.23
14.26
Interpretation:
The above table showing the analysis of return of SBI Gold ETF in India has outperformed
than its index value in the year 2010 and 2012. The fund has the highest return of 27.79 in the
year 2011 and it also has the lowest and negative return -11.67 in the year 2013.
Fund return
Index return
2009
22.36
24.39
2010
21.72
22.95
2011
30.92
28.93
2012
10.75
12.96
2013
-12.41
-13.91
Average return
14.67
15.06
Interpretation:
The above table showing the analysis of return of UTI Gold ETF in India has outperformed
than its index value in the year 2011 and 2013. The fund has the highest return of 30.92 in the
year 2011 and it also has the lowest and negative return of -12.41 in the year 2013.
Fund return
Index return
2009
82.09
79.10
2010
16.87
17.86
2011
-22.99
-24.64
2012
27.37
25.70
2013
10.58
8.98
Average return
22.78
21.4
Interpretation:
The above table showing the analysis of return of Kotak Sensex ETF in India has
outperformed than its index value in all the year except in the year 2010. The fund has the
highest return of 82.09 in the year 2009 and it also has the lowest and negative return -22.99
in the year 2011.
Fund return
Index return
2009
82.86
77.63
2010
29.34
31.13
2011
-30.25
-32.42
2012
57.47
56.54
2013
-5.59
-8.73
Average return
26.77
24.83
Interpretation:
The above table showing the analysis of return of R* Shares banking ETFin India has
outperformed than its index value in the all year except in the year 2010.
The fund has the highest return of 82.86 in the year 2009 and it also has the lowest and
negative return of -30.25 in the year 2011.
Fund return
Index return
2009
73.38
74.12
2010
18.15
18.25
2011
-23.10
-24.62
2012
26.38
27.70
2013
5.54
6.76
Average return
20.07
20.44
Interpretation:
The above table showing the analysis of return of GS Nifty ETFin India has outperformed
than its index value in the year 2011. The fund has the highest return of 73.38 in the year
2009 and it also has the lowest and negative return of -23.1 in the year 2011.
Table 4.17: showing analysis of return and variability in return of selected ETFs
Fund name
Return
SD
9.23
17.58
14.67
16.75
22.78
38.14
26.77
45.81
GS Nifty ETF
20.07
35.21
Interpretation:
Standard deviation is used to measure the variation in individual returns from the average
expected returns over a certain period.
R* Shares Banking ETF has the highest return compared to other ETFs selected, it also have
highest SD i.e. variability in return. Higher standard deviation means a greater fluctuation in
expected return.
UTI Gold ETF has the lowest risk factor with moderate return compared to other ETFs
selected which means has a less fluctuation in expected return.
Beta
0.58
0.97
1.02
1.00
GS Nifty ETF
0.98
Interpretation:
Kotak Sensex ETF has beta value more than one which says that the stock is more volatile
compared to the market. The stock value with more than 1 beta value is considered to be
risky.
R* Shares Banking ETF has beta value equal to one which indicates that the stock moves in
tandem with the market.
And the other 3 remaining funds have beta value less than one which says that the stock is
less volatile compared to market.
Table 4.19: showing performance evaluation of Top 5 ETFs on the basis of Sharpes
Performance Index
Scheme name
Avg.
Rf
SD()
return(Rp)
Sharpes
Rank
index
9.23
2.76
17.58
0.37
14.67
2.76
16.75
0.71
22.78
2.76
38.14
0.53
26.77
2.76
45.81
0.52
GS Nifty ETF
20.07
2.76
35.21
0.49
Interpretation:
The above table showing the performance evaluation of the selected ETFs using sharpes
index. According to this index, UTI Gold ETF is the best ETF Scheme because this scheme
has ranked first and is also having the best risk-adjusted rate of return followed by Kotak
Sensex ETF.
Table 4.20: showing performance evaluation of Top 5 ETFs on the basis of Treynors
Performance Index
Scheme name
Avg. return(Rp)
Rf
Beta
Treynors
Rank
index
SBI Gold ETF
9.23
2.76
0.58
11.16
14.67
2.76
0.97
12.28
22.78
2.76
1.02
19.63
26.77
2.76
1.00
24.01
GS Nifty ETF
20.07
2.76
0.98
17.66
Interpretation:
The above table shows performance evaluation of the selected ETFs using Treynors index.
According to Treynors performance index, R* Shares Banking ETF is the best ETF because
this scheme has ranked first and is also having the best risk-adjusted rate of return followed
by Kotak Sensex ETF.
Table 4.21: showing performance evaluation of Top 5 ETFs on the basis of Jensen
Performance Index
Scheme name
Beta
Alfa
Jensens
Rank
index(/)
SBI Gold ETF
0.58
-0.2
-0.34
0.97
-0.021
-0.021
1.02
1.01
0.99
1.00
1.94
1.94
GS Nifty ETF
0.98
-0.016
-0.016
Interpretation:
The above table shows the performance evaluation of the selected ETFs using Jensens index.
According to this index, R* Shares Banking ETF ranked as first best ETF followed by Kotak
Sensex ETF.
18.70
Average risk
30.70
Average Beta
0.91
Interpretation:
The above table showing the average return, variability in return and beta of the selected
ETFs having average return is 18.70 and beta is 0.91 and the risk involved is 30.70.Return is
a major factor influencing factor to all types of investors.
Correlation
1*
ETF
0.3*
Interpretation:
The above table shows the hypothesis testing using Spearmans rank correlation to find the
significant relationship between performances of Sharpes and Treynors measure. It is clear
from the table that there is a significant relationship between the performance of Equity
mutual funds using Sharpes and Treynors measure. Hence the alternative hypothesis is
accepted and null hypothesis is rejected.
At the same time, there is no significant relationship between the performance of ETF based
on Sharpes and Treynor measure, hence null hypothesis is accepted. This may be due to
sharpes measure is depend on Standard deviation and Treynors measure depends on Beta.
Table 4.24: showing comparison of selected equity diversified mutual funds and ETFs in
respect to return
Investment avenues
Return
24.70
ETF
18.70
Graph 4.13: showing comparison of selected equity diversified mutual funds and ETFs
in respect to return
Interpretation:
The above table showing the comparison of equity mutual funds and ETFs in respect to
return in which Equity Mutual Funds have an average return of 24.70 which is compared
to ETFs of 18.70 is higher. Those who would like to have a higher return with an ability
of withstanding high risk they can invest in Equity mutual funds.
Table 4.25: showing comparison of selected equity diversified mutual funds and ETFs in
respect to variability in return
Investment avenues
41.51
ETF
30.70
Graph 4.14: showing comparison of selected equity diversified mutual funds and ETFs
in respect to variability in return
Interpretation:
The above table showing the comparison of equity mutual funds and ETFs in respect to
variability in return in whichequity mutual funds have an average risk of 41.51 which is
compared to ETFs risk of 30.70 is higher. Those who would like to take risk can go for equity
mutual funds.
CHAPTER 5
SUMMARY OF FINDINGS, CONCLUSIONS and SUGGESTIONS
FINDINGS:
Tata ethical fund (G) has the highest return in equity mutual funds when compared to
other equity mutual funds selected, this fund also have highest SD i.e. variability in
return.
R* Shares Banking ETF has the highest return compared to other ETFs selected, it
also have highest SD i.e. variability in return.
From the above analysis/statement it has proved higher the risk, higher the return and
lower the risk, lower will be the return.
According to Sharpes performance Index we find that Tata ethical fund (G) is ranked
as 1st in equity mutual funds and UTI Gold ETF in ETFs. The Sharpes index
considers total risk of the Scheme.
According to Treynors Performance Index, Tata ethical fund (G) is ranked as 1st in
equity mutual funds and R* Shares Banking ETF in ETFs. The Treynors index
considers the return premium for systematic risk undertaken.
According to all the three indexes Tata ethical fund(G)is the best equity diversified
scheme because this particular scheme is having the best risk adjusted rate of return.
Investments in both equity mutual funds and ETFs are subjected to market risk.
Now a days investments in Equity mutual funds and ETFs are increasing because of
falling interest rates and awareness of Equity mutual funds and ETFs in the minds of
investors.
Investment in mutual fund schemes and ETFs gives diversified portfolio to investors.
Equity mutual funds have highest return with highest standard deviation when
compared to ETFs
CONCLUSIONS:
It is examined that investment performance of Equity Mutual funds and ETFs in terms
ofPerformance measure, some funds shows conformity with the linear relationship ofreturn
and risk. Some funds do not demonstrate this relationship. Some funds have outperformed
both in terms of Treynor measure and Sharpe measure. However somefunds exhibited
superior performance in terms of systematic risk but did not do so inrespect of total risk.
It becomes increasingly necessary to periodically monitor and evaluate performance
as objectively as can. More importantly, such evaluationshould provide meaningful feedback
for improving the quality of the investmentmanagement process on a continuing basis. In
Investors are recommended to invest in the scrips which have low risk or high risk
depending on the level of the risk the investor is ready to undertake.
Investors are recommended to avoid the stocks which are overpriced and invest in the
underpriced scripts.
Investors who are willing to take less risk can go for ETFs and those with high risk
can go for Equity mutual funds.
One should also use all the three indexes in diversifying equity schemes risk to be
adjusted with rate of return for the investors.
BIBLIOGRAPHY
Books:
Investment analysis and portfolio management Prasanna Chandra Second EditionTMH 2005
Articles:
Ravi Shukla and Sandeep Singh (1997), the performance evaluation of U.S. Global
equity funds: evidence from 1988-95, Global finance Journal, 8(2), 279-293.
Martin Eling, Roger Faust (2009). The performance of Hedge funds and mutual funds
in emerging markets, Journal of banking & Finance, 34(2010), 1993-2009
Dr. Zakri Y Bello(2009), The performance of U.S. domestic equity mutual funds
during recent recessions, Global Journal of Finance and Banking Issues, Vol.3,
3(2009), 1-8.
Webliography:
www.rathi.com
www.rathionline.com
www.nseindia.com
www.moneycontrol.com
www.economictimes.com
www.investopedia.com
www.wikipedia.com
ANNEXURE
Calculation of returns, standard deviation of Birla SunlifeEquity Fund (G) and its
benchmark(S&P BSE 200)
Date
NAV
Returns (Rp)
Closing price of
BSE 200
Dec 2008
133.2
1163.67
Returns (Rm)
Dec2009
250.44
88.02
2212.51
90.13
Dec 2010
284.83
13.73
2514.96
13.67
Dec 2011
203
-28.73
1857.46
-26.14
Dec 2012
275.86
35.89
2421.91
30.39
Dec 2013
297.27
7.76
2523.58
4.20
Total
Average return
Rp = Rp / n
= 116.67/5
=23.33
Rm = Rm / n
= 112.25/5
= 22.45
Standard deviation
= 42.97
Beta
= Covar / m2
116.67
112.25
ETFs
Calculation of returns, standard deviation of SBI Gold ETF and its benchmark
Date
NAV
Returns
Index closing
Returns
price
Dec 2008
1780
1471.48
Dec2009
1666.16
-6.40
1679.45
14.13
Dec 2010
2051.88
23.15
2046.4
21.85
Dec 2011
2622.13
27.79
2668.3
30.39
Dec 2012
2970.56
13.29
2976.55
11.55
Dec 2013
2623.94
-11.67
2778.8
-6.64
Total
Average return
Rp = Rp / n
= 46.16/5
= 9.23
Rm = Rm / n
= 71.28/5
=14.26
Standard deviation
= 17.58
Spearmans rank correlation
46.16
71.28