International Journal

Journal Review..

International Journal of Applied Engineering Research

ISSN 0973-4562 Vol.7 No.11 (2012)

Impact of Sharpe Ratio & Treynor,s  Ratio on Selected Mutual Fund Schemes

Dr. Sandeep Bansal, Deepak Garg and Sanjeev K Saini 

Asstt Prof (IGNC, Ladwa, KUK), profsandeepbansal@gmail.com

Asstt Prof. (GIMT, Kanipla), deepakgarg22677@gmail.com

Asstt Prof. (SRM Global, Ambala), sanjeev_shivalik@yahoo.com

INTRODUCTION

            Mutual  funds  are  mobilizing  savings,  particularly  from  the small  and  household  investors,  for  investments  in  stock  and money  market.  Basically,  these  institutions have  professional fund managers, capable of managing funds very prudently and profitably  of  individuals  and  institutions  that  may  not  have such high degree of  expertise or may not have adequate time to cope with the complexities of different investment avenues, legal provisions  associated  therewith  and  vagaries  and vicissitudes of capital markets. Mutual funds raise funds by selling their own shares also known as units.

            Thus,  mutual  funds  are investment  intermediaries,  which  pool  investors’  funds, acquiring  individual  investments,  and  pass  on  the  returns thereof  to  the  investors, Besides  Investment  business,  mutual funds may also undertake, if permitted, underwriting and other merchant banking activities.

            In India, Mutual Fund concept took roots  only in sixties, after  a  century  old  history  elsewhere  in  the  world.  Realizing the needs for a more active mobilization of household savings to  provide  investible  resources  to  industry,  the  idea  of  first mutual fund in India was born out of the far sighted vision of Sri T. Krishnamachari the then Finance Minister. He wrote to the  then  Prime  Minister  Pandit  Jawahar  Lal  Nehru outlining the need for an institution which would serve as a conduit for these  resources  to  the  Indian  Capital  market,  and  RBI  was entrusted  to  create  this  special  Institution.

The  report predicts  that  the  mutual  fund  industry  is  expected  to  jump sharply from  its  present  share  of  6%  in  GDP  to  40%  in  the coming years, provided the country’s growth rate consistently exceeds 6% per annum. The report says that by 2014, the size of Indian Mutual Fund Industry is estimated to go up to  over Rs.  165000  cr.  It suggests  that  India  is  going  to  follow  the pattern  seen  in  the  developed  markets  such  as  the  US  where the  size of  the  industry  is  70%  of  the  GDP.  The  worldwide size of the industry is about 37% of GDP.

OBJECTIVES OF THE STUDY

The  present  study  focuses  on  the  performance  evaluation  of growth fund schemes of various mutual funds operating in the country. The specific objectives of the study are as follows:

·         To evaluate the performance of mutual funds with special reference to Sharpe model and Treynor’s model.

·         To compare the performance of mutual funds on the basis of  benchmark  index  and  bring  out  which  scheme  is outperforming  or  underperforming  with  in  specified schemes.

SEARCH METHODOLOGY

            The  scope  of  the  study  is  kept limited  to  the  time  period  of  4  years  (April  2001  to  May 2005). The sample consists of 6 mutual fund schemes, which are  chosen  at  random  basis.  It  is  important  to  point  out  that NAVs have been taken on monthly  basis.

NET ASSET VALUE 

NAV has been obtained from the different sources such as:

·         SEBI annual reports

·         Economic Survey

·         Economic Times

·         Companies Annual Reports

·         AMFIINDIA

            The portfolio return calculated on the basis of NAV does not consider any change in the market price but considers the change in the net asset value of mutual funds units during the period.

ANALYSIS AND CONCLUSION

            The  table  1.3  shows  the  average  value  was  found  to  be -0.0183. The result shows Sharpe value and Treynor’s value of U  T  I  Money  Market  Fund  (Dividend), Franklin  India  Blue-chip  Fund  (Dividend)  were  having  positive  value  that indicates  the  superior  performance  among  the  diversified funds  than  the  market,  while  one  mutual fund  scheme had negative  value  in  the  analysis  that  indicates  the  inferior performance in comparison to the market.

Among  the  various  schemes  the U  T  I  Money  Market Fund  (Dividend),  which  is  followed  by  the  Birla  Advantage, which  obtained  the  second  rank,  obtains  first  rank  and  the Franklin  India  Blue-chip  Fund  (Dividend) scheme  obtains third  rank.  On  the  other,  hand  as  stated  earlier,  F  T  India Monthly Income Plan(Growth) had a negative value so gotten the  6th rank,  the Reliance  Growth  Fund  (Dividend) 5th rank.

On the basis of the study it can be safely concluded that most of the mutual fund  schemes  are  performing  very  well  and  going  to  play  a very crucial and decisive role in the capital market in the times to come.