PERFORMANCE EVALUATION OF SELECTED
MUTUAL FUNDS IN INDIA
A 7+(6,6 SUBMITTED FOR
THE DEGREE OF
Doctor of Philosophy
IN
COMMERCE
(FACULTY OF COMMERCE)
TO
GUJARAT UNIVERSITY
BY
GURAV SWATI MUKUNDBHAI
(REGISTRATION NO.: 8304, DATE: 30th August 2018)
UNDER THE GUIDANCE OF
DR. PRASHANT M. JOSHI
ASSOCIATE PROFESSOR
DEPT. OF COMMERCE/ACCOUNTANCY
M. B. PATEL RASHTRABHASHA ARTS & COMMERCE COLLEGE
AHMEDABAD – 380006
GUJARAT UNIVERSITY
AHMEDABAD – 380009
GUJARAT, INDIA
AUGUST 2024
CHAPTER5 - FINDINGS,
SUGGESTIONS, CONCLUSION
AND SCOPE FOR THE
FUTURE STUDY
138
Sr. No. Particulars Page No.
5.1 Findings 140
5.2 Suggestions 143
5.3 Conclusion 149
5.4 Scope of the Future Study 152
139
5.1 FINDINGS:
Equity funds, such as the Axis Bluechip Fund, Canara Robeco Blue Chip Equity
Fund, and Invesco India Midcap Fund, exhibit a range of return profiles and volatility
levels. The Axis Bluechip Fund and Canara Robeco Blue Chip Equity Fund show
moderate returns with lower volatility, making them suitable for investors seeking
stability and consistent performance. Conversely, the Invesco India Midcap Fund
delivers higher returns but with greater volatility, which may appeal to investors
willing to take on more risk for potentially higher rewards. Funds such as the Kotak
Emerging Equity Scheme, SBI Small Cap Fund, and HDFC Small Cap Fund target
small-cap stocks with varying degrees of risk and return. The SBI Small Cap Fund
and HDFC Small Cap Fund offer higher average returns with considerable volatility,
reflecting their aggressive growth focus. In contrast, the Kotak Emerging Equity
Scheme provides a somewhat more balanced approach, although it still presents
substantial risk relative to large-cap funds.
Hybrid funds, including the LIC MF Aggressive Hybrid Fund, Principal Hybrid
Equity Fund, and Edelweiss Arbitrage Fund, blend equity and debt components to
balance risk and return. The Principal Hybrid Equity Fund stands out with relatively
high returns and volatility, indicating a growth-oriented approach within the hybrid
category. The LIC MF Aggressive Hybrid Fund offers a moderate return with
significant risk, while the Edelweiss Arbitrage Fund provides lower returns with
minimal volatility, suitable for investors seeking stability with a lower return. The
Quant Liquid Fund, Tata Liquid Fund, and ICICI Prudential Short Term Fund focus
on lower-risk, fixed-income investments. These funds provide stability and moderate
returns with low volatility, making them suitable for conservative investors or those
seeking to preserve capital while earning modest returns. The Tata Liquid Fund and
Quant Liquid Fund offer slightly lower returns compared to the ICICI Prudential
Short Term Fund, reflecting their lower risk profiles.
Funds like the Pgim India Dynamic Bond Fund, Quantum Dynamic Bond Fund, and
Nippon India Gilt Securities Fund invest in bonds with varying degrees of duration
and interest rate sensitivity. The Nippon India Gilt Securities Fund and DSP Gilt Fund
show higher returns with greater volatility, suitable for investors willing to accept
interest rate risks for potentially higher yields. The Pgim India Dynamic Bond Fund
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and Quantum Dynamic Bond Fund offer moderate returns with somewhat lower risk
compared to gilt funds. Funds such as the ICICI Prudential Regular Savings Fund,
Baroda Conservative Hybrid Fund, and HDFC Equity Savings Fund cater to those
seeking a balance between equity and fixed income. The HDFC Equity Savings Fund
and ICICI Prudential Regular Savings Fund provide higher returns but with varying
degrees of risk. The Baroda Conservative Hybrid Fund offers lower returns with
moderate risk, appealing to investors with a more conservative approach.
Based on the detailed analysis of equity, debt, and hybrid mutual fund rankings from
2016 to 2023, several key conclusions emerge regarding the performance and stability
of these funds over the observed period.
Equity Mutual Funds:
The Kotak Emerging Equity Scheme and the Mirae Asset ELSS Tax Saver Fund
consistently emerged as top performers among equity mutual funds. Both funds
demonstrated strong performance across most years, with average rankings of 4.625,
tying for first place in the final rankings. This reflects their robust investment
strategies and effective management. The Invesco India Midcap Fund, while
maintaining a competitive edge, showed variability in its performance, ultimately
securing the third position with an average rank of 4.750. The SBI Small Cap Fund
and the HDFC Small Cap Fund, each with an average rank of 4.875, highlighted their
strong yet somewhat fluctuating performances over the years. The performance of
these funds underscores the influence of market conditions, sector-specific factors,
and management decisions on equity fund rankings.
Debt Mutual Funds:
In the debt mutual fund category, the SBI Magnum Medium Duration Fund emerged
as the top performer with an average rank of 3.500, reflecting its consistent and strong
performance across the years. The ICICI Prudential Short Term Fund followed
closely with an average rank of 4.125, showcasing its effectiveness in short-term
investments. The DSP Gilt Fund, with an average rank of 4.250, and the Nippon India
Gilt Securities Fund, with an average rank of 4.750, also demonstrated strong
performance, although with some variability. These rankings illustrate the debt funds'
responses to interest rate changes, economic conditions, and fund management
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strategies, highlighting the importance of strategic allocation in achieving consistent
returns.
Hybrid Mutual Funds:
In the hybrid mutual fund segment, the Principal Hybrid Equity Fund consistently
performed well, securing the top position with an average rank of 3.625. This fund’s
performance underscores its effective strategy in balancing equity and debt
components. The ICICI Prudential Regular Savings Fund, with an average rank of
4.375, and the HDFC Equity Savings Fund, with an average rank of 4.500, also
showed strong performance, reflecting their successful management of hybrid
investment strategies. The Axis Children's Gift Fund and the LIC MF Aggressive
Hybrid Fund, with average ranks of 4.750 and 5.375, respectively, demonstrated
competitive performance with some variability, emphasizing the role of strategic
adjustments in hybrid fund management.
The comparative analysis of equity, debt, and hybrid mutual funds reveals the
dynamic nature of fund performance across different market conditions and
investment strategies. The top-performing funds in each category—Kotak Emerging
Equity Scheme, SBI Magnum Medium Duration Fund, and Principal Hybrid Equity
Fund—exhibit strong and consistent performance, reflecting effective management
and strategic adaptation to market changes. Conversely, funds with higher variability
in rankings highlight the importance of market conditions and strategic adjustments in
maintaining competitive performance. The findings underscore the critical role of
fund management strategies, market conditions, and investment approaches in
determining mutual fund performance. Investors should consider these factors when
evaluating mutual funds to align their investment goals with fund performance and
stability. This comprehensive analysis provides valuable insights into the performance
trends and management effectiveness of mutual funds, aiding in informed investment
decisions.
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5.2 SUGGESTIONS:
SUGGESTIONS TO INVESTORS
Based on the performance analysis of equity, debt, and hybrid mutual funds from
2016 to 2023, investors can make informed decisions by considering the following
suggestions:
1. Prioritize Consistent Performers:
Investors should prioritize mutual funds with a consistent performance track record.
For instance, the Kotak Emerging Equity Scheme and the Principal Hybrid Equity
Fund demonstrated strong and consistent performance over the years. Such funds
typically reflect effective management and a robust investment strategy, making them
favorable choices for investors seeking reliability and stability.
2. Diversify Across Fund Types:
Diversification is key to managing risk and optimizing returns. While equity mutual
funds like the Mirae Asset ELSS Tax Saver Fund showed exceptional performance in
equity markets, debt funds such as the SBI Magnum Medium Duration Fund offer
stability and lower risk. Hybrid funds, such as the Principal Hybrid Equity Fund,
provide a balanced approach by combining equity and debt, catering to investors who
seek moderate risk and return. A diversified portfolio across these fund types can help
mitigate risks and enhance overall portfolio performance.
3. Consider Investment Horizon and Risk Appetite:
Investors should align their mutual fund choices with their investment horizon and
risk appetite. Equity funds, known for their potential for higher returns, may suit
investors with a long-term horizon and higher risk tolerance. Debt funds are generally
more suitable for those seeking stable returns with lower risk, particularly in uncertain
economic conditions. Hybrid funds offer a middle ground, appealing to investors who
desire a balanced approach with moderate risk.
4. Monitor Fund Performance Regularly:
While historical performance provides valuable insights, it is crucial to regularly
monitor mutual fund performance and management changes. Funds like the ICICI
Prudential Regular Savings Fund and the SBI Magnum Medium Duration Fund,
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which showed variability in rankings, underscore the need for ongoing evaluation.
Keeping track of performance ensures that investments remain aligned with financial
goals and market conditions.
5. Evaluate Management Strategies:
The performance of funds such as the DSP Gilt Fund and the Axis Children’s Gift
Fund highlights the importance of fund management strategies. Investors should
assess the fund manager's expertise, investment approach, and how well the fund
adapts to market changes. Strong management can significantly impact a fund’s
performance and long-term success.
6. Stay Informed About Market Conditions:
Understanding broader market trends and economic conditions is crucial for making
informed investment decisions. Factors such as interest rates, economic growth, and
market volatility influence mutual fund performance. Investors should stay informed
about these factors and adjust their investment strategies accordingly.
7. Align with Investment Goals:
Ensure that the selected mutual funds align with your overall investment goals,
whether they are capital growth, income generation, or capital preservation. For
instance, equity funds may be more suitable for long-term growth goals, while debt
funds may better serve short-term income needs or risk-averse investors.
8. Seek Professional Advice:
For tailored investment strategies, consider seeking advice from a financial advisor.
Professional guidance can help in selecting funds that best match your financial goals,
risk tolerance, and investment horizon, and provide insights into how to optimize your
mutual fund portfolio.
9. Review Fund Fees and Expenses:
Investors should carefully review the fees and expenses associated with each mutual
fund. High management fees and expense ratios can erode returns over time. Opt for
funds with reasonable fees that align with their performance and management quality.
Lower-cost funds that maintain strong performance may provide better net returns.
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10. Understand Fund Objectives and Strategies:
Ensure that the mutual fund’s investment objectives and strategies align with your
personal investment goals. Equity funds might focus on growth, debt funds on income
and stability, while hybrid funds may offer a combination of both. Understanding
these aspects can help in selecting funds that match your financial needs and
expectations.
11. Assess Fund Liquidity:
Consider the liquidity of the mutual funds you invest in. Funds that have high
liquidity are easier to buy and sell without significantly impacting their price. This is
particularly important if you anticipate needing access to your funds in the near
future. Review the fund's liquidity profile and redemption policies.
12. Evaluate Historical Risk and Volatility:
Alongside performance, evaluate the risk and volatility associated with each mutual
fund. Funds with lower volatility and risk may be more suitable for conservative
investors, while those with higher risk might offer potential for higher returns.
Understanding a fund’s risk profile can help you make choices that are consistent with
your risk tolerance.
13. Review Fund Manager Track Record:
Investigate the track record of the fund manager. A fund manager with a history of
successful performance and experience in managing similar funds can be a significant
factor in a fund’s future success. Look for funds with experienced managers who have
demonstrated consistent results.
14. Consider Tax Implications:
Different mutual funds can have varying tax implications. For instance, equity funds
and hybrid funds might generate capital gains that are subject to tax, whereas some
debt funds may offer tax advantages. Be aware of how the returns from these funds
will impact your tax situation and plan accordingly.
15. Monitor Economic and Market Trends:
Stay informed about economic and market trends that can affect mutual fund
performance. For example, changes in interest rates, inflation, and economic growth
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can impact debt and equity markets differently. Understanding these trends can help
in anticipating how they might influence fund performance and make necessary
adjustments to your portfolio.
16. Rebalance Your Portfolio Regularly:
Regularly review and rebalance your mutual fund portfolio to ensure it remains
aligned with your investment goals and risk tolerance. As market conditions change
and certain funds outperform or underperform, rebalancing helps maintain your
desired asset allocation and risk profile.
17. Use Systematic Investment Plans (SIPs):
Consider using Systematic Investment Plans (SIPs) to invest in mutual funds. SIPs
allow you to invest a fixed amount regularly, which can help mitigate the impact of
market volatility and build wealth over time. This disciplined approach can be
beneficial for long-term investors.
18. Investigate Fund Performance During Different Market Conditions:
Examine how funds performed during various market conditions, such as market
downturns or bull runs. Funds that have demonstrated resilience and adaptability
during market fluctuations can be more reliable for long-term investment.
19. Assess Fund Size and Scale:
Consider the size of the mutual fund. Extremely large funds might face challenges in
managing assets effectively, while very small funds might lack sufficient
diversification. Find a balance where the fund size aligns with its investment strategy
and goals.
20. Stay Updated with Fund Updates:
Regularly check for updates from the mutual fund company regarding changes in fund
strategy, management, or performance. Staying informed about such updates ensures
that you remain aware of any factors that could impact your investment.
OVERALL SUGGESTIONS TO INVESTORS
For investors entering the mutual fund market, here are some general suggestions to
help guide their investment decisions and enhance their chances of achieving financial
goals:
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1. Set Clear Investment Goals:
Before investing, define your financial objectives, such as saving for retirement,
buying a home, or funding education. Clear goals will help determine the type of
mutual funds that best align with your investment horizon, risk tolerance, and income
needs.
2. Understand Different Types of Mutual Funds:
Familiarize yourself with various mutual fund categories, including equity, debt,
hybrid, and sector-specific funds. Each type serves different purposes and comes with
distinct risk and return profiles. Choose funds that match your investment strategy and
goals.
3. Assess Your Risk Tolerance:
Evaluate your comfort with risk and volatility. Higher-risk funds, such as equity
funds, may offer the potential for higher returns but come with increased volatility.
Lower-risk funds, such as debt funds, typically offer more stability. Select funds that
align with your risk tolerance.
4. Diversify Your Investments:
Diversification is crucial to managing risk. Spread your investments across different
asset classes, sectors, and geographic regions. This strategy helps reduce the impact of
poor performance in any single investment on your overall portfolio.
5. Review Fund Performance and Ratings:
Examine historical performance, fund ratings, and reviews from reputable sources.
While past performance is not a guarantee of future results, it provides insight into a
fund’s track record and management quality. Compare funds based on performance,
expense ratios, and risk.
6. Understand Fees and Expenses:
Be aware of the fees associated with mutual funds, including management fees,
administrative costs, and any applicable sales charges. Lower fees can positively
impact your returns over time, so choose funds with reasonable expense ratios.
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7. Consider Fund Manager Expertise:
The experience and track record of the fund manager are critical to a fund’s success.
Research the fund manager’s history, investment style, and performance to ensure
they have a solid track record and expertise in managing the fund.
8. Stay Informed About Market Trends:
Keep abreast of market trends, economic conditions, and financial news.
Understanding how these factors affect the performance of mutual funds can help you
make informed investment decisions and adjust your portfolio as needed.
9. Review Your Investment Regularly:
Regularly monitor your mutual fund investments to ensure they continue to align with
your financial goals. Periodic reviews can help you make necessary adjustments in
response to changes in market conditions or personal circumstances.
10. Rebalance Your Portfolio:
Rebalancing involves adjusting your portfolio to maintain your desired asset
allocation. Over time, different funds may perform differently, causing shifts in your
portfolio’s balance. Rebalancing helps manage risk and keep your investments
aligned with your goals.
11. Invest for the Long Term:
Mutual fund investments are generally more suitable for long-term goals. Avoid
making impulsive decisions based on short-term market fluctuations. A long-term
perspective can help smooth out market volatility and enhance the potential for
growth.
12. Use Systematic Investment Plans (SIPs):
SIPs allow you to invest a fixed amount regularly, which can help mitigate the impact
of market volatility and build wealth over time. This disciplined approach also
encourages consistent investing habits.
13. Seek Professional Advice:
Consider consulting with a financial advisor or investment professional for
personalized guidance. An advisor can help you develop a tailored investment
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strategy, select suitable funds, and provide insights based on your individual financial
situation.
14. Stay Patient and Disciplined:
Investment success often requires patience and discipline. Avoid reacting emotionally
to market fluctuations and stay focused on your long-term goals. Consistent investing
and a disciplined approach can lead to more favourable outcomes.
15. Educate Yourself Continuously:
Investing in mutual funds requires ongoing education. Stay informed about
investment strategies, market trends, and financial concepts to make better-informed
decisions and enhance your investment knowledge.
5.3 CONCLUSION:
The comprehensive analysis of the mutual fund schemes across the equity, debt, and
hybrid categories provides valuable insights into their performance over a period of
several years. In this study, ten mutual fund schemes were selected from each of the
three categories, making a total of 30 schemes analysed. The rankings reveal
significant variations in performance among the different types of schemes, reflecting
the impact of market conditions, fund management strategies, and the inherent risk-
reward profiles of each scheme.
Equity Mutual Funds
Among the equity mutual funds, the Mirae Asset ELSS Tax Saver Fund - Direct Plan
- Growth stands out as the top performer, securing the first rank overall. This fund's
consistent performance across different years underscores its robust management and
ability to deliver returns despite market volatility. The Kotak Emerging Equity
Scheme - Growth - Direct also performed admirably, finishing second overall. This
scheme, categorized under mid-cap equity funds, highlights the potential of mid-cap
companies to provide superior returns when managed effectively.
The 360 One Focused Equity Fund (Formerly Known As IIFL Focused Equity Fund)
- Direct Plan - Growth took the third position, illustrating the benefits of a
concentrated investment strategy in multi-cap equity funds. Similarly, the SBI Small
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Cap Fund - Direct Plan - Growth and Canara Robeco Blue Chip Equity Fund - Direct
Plan - Growth Option also made it to the top five, indicating strong performance in
small-cap and large-cap equity segments, respectively.
Equity funds generally showed a strong correlation between market trends and
performance, with small-cap and mid-cap funds like the HDFC Small Cap Fund -
Growth Option - Direct Plan also ranking within the top ten. This demonstrates the
volatility and potential for high returns in these categories. Conversely, the Axis
Bluechip Fund - Direct Plan - Growth, despite its large-cap orientation, also
performed well, reflecting a balanced approach to risk and reward in a more stable
segment of the market.
Debt Mutual Funds
The debt mutual fund category revealed more conservative performance compared to
equity funds, which is expected given their lower-risk profiles. The SBI Magnum
Medium Duration Fund - Direct Plan - Growth ranked highest among debt funds,
achieving the 14th position overall. This fund's ability to navigate interest rate
fluctuations and maintain steady returns is commendable.
Other notable debt funds include the ICICI Prudential Short Term Fund - Direct Plan -
Growth Option and the DSP Gilt Fund - Direct Plan - Growth, which ranked 16th and
17th, respectively. These funds emphasize short-duration and gilt investment
strategies, showcasing their stability and lower risk, which is particularly appealing in
uncertain economic environments.
However, some debt funds like the Quantum Dynamic Bond Fund - Direct Plan
Growth Option and L&T Resurgent Indiabond Fund - Direct Plan - Growth ranked
lower, indicating that dynamic bond strategies or certain medium-duration
investments may not have performed as well, possibly due to interest rate sensitivity
or credit risk.
Hybrid Mutual Funds
Hybrid mutual funds, which blend equity and debt, showed mixed performance in this
analysis. The top performer in this category was the Principal Hybrid Equity Fund-
Direct Plan - Growth Option, which secured the 8th rank overall. This fund's balanced
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approach, combining aggressive equity investments with more stable debt holdings,
allowed it to achieve competitive returns.
The ICICI Prudential Regular Savings Fund - Direct Plan - Growth and Baroda
Conservative Hybrid Fund - Plan B (Direct) - Growth Option, both conservative
hybrid funds, also performed well, ranking 10th overall. These funds demonstrate the
effectiveness of a conservative approach in volatile markets, offering a good mix of
stability and moderate growth.
However, hybrid funds like the LIC MF Aggressive Hybrid Fund - Direct Plan -
Growth and the Axis Children's Gift Fund - Lock In - Direct - Growth ranked lower,
reflecting the challenges faced by more aggressive or niche hybrid strategies in
maintaining consistent performance. These funds may have been impacted by their
exposure to higher-risk assets or specific market segments that underperformed during
the analysed period.
Overall Analysis
The study reveals that equity mutual funds generally outperformed their debt and
hybrid counterparts, with a greater number of equity funds securing top positions in
the overall ranking. This is indicative of the higher risk-reward ratio associated with
equity investments, where well-managed funds in the right segments can generate
significant returns. However, the performance of debt and hybrid funds also
underscores the importance of these categories for investors seeking stability and
diversification in their portfolios.
The top-performing schemes across all categories share common traits, such as strong
fund management, strategic asset allocation, and the ability to adapt to changing
market conditions. In contrast, the lower-ranked schemes may have struggled due to
higher risk exposure, interest rate sensitivity, or sector-specific challenges. This
analysis provides a comprehensive understanding of how different mutual fund
schemes perform over time, offering valuable insights for investors in selecting funds
that align with their financial goals and risk tolerance.
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5.4 SCOPE FOR THE FUTURE STUDY:
The research on the "Performance Evaluation of Selected Mutual Funds in India" has
provided valuable insights into the performance of 30 mutual fund schemes across
equity, debt, and hybrid categories, comparing them with the S&P BSE-200 Index
from 2016 to 2023. However, several areas offer potential for further exploration and
deeper understanding:
1. Expansion of Time Horizon: Future studies could extend the analysis to
cover a longer period, which would help in identifying more comprehensive
trends and the impact of different economic cycles on mutual fund
performance.
2. Inclusion of Other Mutual Fund Categories: Beyond equity, debt, and
hybrid funds, future research could explore other categories such as sectoral
funds, index funds, international funds, and exchange-traded funds (ETFs) to
provide a broader view of mutual fund performance in India.
3. Impact of Macroeconomic Variables: Investigating the influence of
macroeconomic factors such as inflation, interest rates, GDP growth, and
currency fluctuations on mutual fund performance would add a significant
dimension to the understanding of fund dynamics.
4. Risk-Adjusted Performance Measures: Future research could incorporate
additional risk-adjusted performance metrics such as the Sharpe ratio and
Treynor ratio to provide a more nuanced evaluation of mutual funds,
especially in terms of risk-return trade-offs.
5. Investor Behaviour Analysis: A study on investor behaviour and sentiment in
response to mutual fund performance during the selected period could provide
insights into how performance metrics influence investor decisions and fund
flows.
6. Comparison with Global Benchmarks: Extending the comparison to include
global benchmarks like the MSCI World Index or S&P 500 could offer a
perspective on how Indian mutual funds perform relative to international
standards.
7. ESG and Ethical Investing: Given the growing interest in environmental,
social, and governance (ESG) criteria, future research could explore the
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performance of ESG-focused mutual funds and compare them with traditional
mutual funds.
8. Technological Advancements and Fund Performance: With the rise of
algorithmic trading and robo-advisors, future studies could analyse how
technology is influencing mutual fund performance and whether funds that
leverage technology outperform traditional funds.
9. Investor Demographics and Mutual Fund Choices: An analysis of how
different demographic segments (age, income, education, etc.) influence the
choice of mutual fund categories could provide insights into targeted fund
marketing and product development.
10. Impact of Regulatory Changes: The mutual fund industry in India is subject
to evolving regulatory frameworks. Future research could examine the impact
of regulatory changes on mutual fund performance and industry practices.
11. Cross-Sectional Analysis with Other Asset Classes: Comparing mutual fund
performance with other asset classes such as direct equity investments, bonds,
real estate, and commodities could offer investors a holistic view of where
mutual funds stand in terms of risk and return.
By exploring these areas, future research could contribute to a more detailed and
comprehensive understanding of mutual fund performance in India, offering valuable
insights for investors, fund managers, policymakers, and academics.
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