You are on page 1of 115

STUDY ON RELATIONSHIP BETWEEN RISK AND RETURN OF

SELECTED EQUITY LINKED SAVING SCHEMES OF MUTUAL


FUNDS MARKETED AT KARVY PRIVATE WEALTH

CORPORATE INTERNSHIP PROGRAM PROJECT REPORT


SUBMITTED IN PARTIAL FULFILMENT OF PGDM PROGRAM 2015-17

Submitted By
Name: BHARAT NARULA
Roll No: 72
Company Mentor
Mentor

Faculty

Name:
Mr. Rakshit Kumar
Prof. Arun Sangwan
Designation: Associate Vice President
Company: Karvy Private Wealth

Name:
Designation:

Delhi

Certificate from Company

This is to certify that________________________-, a student


of PGDM Programme, (2015-17) Batch of Fortune Institute of
International Business, Delhi has undertaken the Corporate
Internship
Training
at
__________________________during_________to
___________under my supervision & guidance. He / She has
conducted a study & completed the Project on
____________________________________
During Training his/her work was ___________________

Seal of Organization
Mentor

Signature of Company

Date:
Mentor

Name of Company
Designation of Company

Mentor

Certificate from Faculty Mentor


This is to certify that the Project Report titled
___________________________________________________
____
is a bonafide work carried out by
____________________________
of PGDM (2015-17) Batch of Fortune Institute of International
Business, Delhi as a fulfillment of PGDM Programme.
He/ She has worked under my guidance and satisfactorily
completed his/her project work.

Date:

Name and Signature of Faculty Mentor

Declaration by the Student

I, hereby, declare that the work presented in this report, entitled _Study on
relationship between risk and return of selected EQUITY LINKED
SAVING SCHEMES of MUTUAL FUNDS marketed at KARVY PRIVATE
WEALTH__ in fulfillment of the requirements for PGDM Programme, submitted to
Fortune Institute of International Business, Delhi is an authentic record of my own
work and is free from any type of plagiarism, carried out under the supervision of Mr
Rakshit kumar
I also declare that the work embodied in the present report
(i) is my original work and has not been copied from any source, and
(ii) Has not been submitted for any other Degree or Diploma of any
university/Institution.

Name and Signature of Student BHARAT NARULA


Roll No.72

Acknowledgement

____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
________________________________________

Name of student

Executive Summary

As the number of HNI individuals will increase in India so as the demand of


financial assets. This gives an tremendous opportunities to wealth management
companies to fulfill the needs of these individuals and make fortunes out of it . Tax
Saving Mutual fund schemes come into the mind of investors who are not ready to
bear the entire risk or cannot actively involve into the stock market but willing to
share market related risk and return along with the tax protection. Risk and return are
bound with all the investments. It can be measured by using relevant tools. But, the
actual risk and return associated with an investment is reflected by the opinion of the
investors. Thus, the present study made an attempt to measure the risk and return of
Tax saving mutual fund schemes in India and investors behavior towards risk and
return of the tax saving mutual fund schemes.
To the study on the Mutual fund schemes, 10 growth oriented Tax saving mutual
fund schemes and Diversified Mutual schemes were selected to measure the actual
risk and return and descriptive research design was carried out to analyse the
Investors behaviour towards risk and return of tax saving mutual fund schemes.
The secondary data required for the study was collected from the reports of the
Association of Mutual Funds in India (AMFI), Yahoo Finance, Nse. Government
security (10 GOI Bond) return was used as the proxy for the risk-free rate of return
and BSE Sensex 200 has been used as the benchmark for the stock market. The
primary data required for the study have been collected from the unit holders of tax
saving mutual fund schemes through questionnaire schedule. Respondents were
chosen from the karvy database that does investment in mutual funds. In total 44
responses were collected and study is carried out

The selected Tax saving mutual fund schemes were analyzed by using various
suitable tools such as Rate of return, Standard Deviation, Beta, , risk adjusted
measures like Sharpe, Treynor, Jensons Alpha and regression. The primary data was
analysed by using Percentage analysis, Chi-square test, (ANOVA), Correlation,
Factor analysis
6

Table of Contents
S.N
o
1.
2.

Chapter No.

Contents

Title Page
Company Certificate

3.
4.
5.
6.
7.

8.

Chapter-1

9.

Chapter-2

Faculty Mentor Certificate


Declaration
Acknowledgement
Executive Summary
Table of Contents / List of
Illustrations
Introduction to the Sector/
Company
Review of Literature

10

Chapter-3

Project Objectives

11

Chapter-4

Project Methodology Adopted

12

Chapter-5

Data Analysis & Interpretation /


7

Page No.
From - To
.
..
..
.
..
In Roman Numbers
In Roman Numbers

13

Chapter-6

Description of the Work Performed


Findings

14

Chapter-7

Recommendations

15

References

16

..

Annexures

List of Illustrations
Figures
S.No Title of the Figure/Photograph

Page No

Tables
S.N
o

Title of the Table

Page No

Chapter-1

Introduction to the Sector/ Company

Chapter 1
Introduction to the Sector/ Company

Economic development of the country mainly depends upon the financial system and
capital formation which constitute the backbone of the nation. This can be achieved
by mobilizing savings and adopting a new investment pattern. Various financial
institutions act as mediators between money savers and borrowers in order to run the
cycle. Financial planning is very important both at macro and micro levels to fulfill
the future needs and dreams of an individual or a nation. As for an individual a
perfect investment plan reduces his/her future worries. In fact, savings is the first step
of investment.
Investment is mainly defined as the employment of funds for future profits and
returns. It is the commitment of money to get profitable returns in the forms such as
Interest, Dividend and Appreciation of money. Other than the returns, investor
expects multiple benefits on it such as Convenience, Pride, Tax benefit, Security,
Low cost and Transparency.

10

The rate of return, amount of time the money to be invested and the amount of
money invested also play a vital role while choosing the investment scheme. All
these factors influence the investors perception towards the risk and their aversion of
risk. The investor is facing a challenge in choosing the best investment strategies that
can make their money grow without a risk.
1. INDUSTRY PROFILE:
The financial services industry plays a vital intermediary role in the world economy,
moving funds from entities with excess funds to those with a need for funds.
It includes firms that are engaged in activities such as investing, lending, insurance,
securities trading and securities issuance. Its clients are individuals, businesses,
nonprofit organizations and agencies of government.
India has a very enlarge and diversified financial sector having rapid expansion and
growth in existing financial services firms and new entities entering the market. This
sector is very diversified comprising of many entities like commercial banks, mutual
funds, insurance companies, co-operatives, and other entities as well. The financial
sector in India is generally the banking sector having commercial banks which is
having more than 90% of the total assets which is held by financial system. This
Sector is very important as it is contributed around 6% share in 2014-2015 to our
country gross domestic product. Indias gross domestic savings (GDS) as a
percentage of Gross Domestic Product (GDP) has remained above 30 per cent since
2004.It is projected that national savings in India will reach US$ 1,272 billion by
2019. Over 95 per cent of household savings in India are invested in bank deposits
and only 5 per cent in other financial asset classes.
The Indian government has also introduced many reforms for liberalizing,
synchronize, manage and enhance this sector which is very important to our country.
Many measures are also taken by RBI for financing micro, small and medium
Enterprises which is backbone of our country. These measures are helping these
micro, small and medium enterprises through launching of credit guarantee fund
scheme, issuing guidelines to banks regarding collateral requirements and setting up
11

micro units development and refinance agency. India is one of the most worlds
largest and vibrant capital markets with a combined push by government as well as
private sector.

1.2 MARKET SIZE OF THIS SECTOR


India is the fifteen largest insurance markets in the world in terms of premium
volume and is expected to grow over the years. The banking Assets of India has
reached about US$ 1.46 trillion as on November 2015 and is expected that it will
touch around US $ 28.5 trillion by 2025.Banks total credit stood at US$ 1.02 trillion
as on November 2015. The Association of Mutual Funds in India (AMFI) data show
that assets of the mutual fund industry have reached a size of Rs 12.95 trillion (US$
194 billion) as of November 2015. During April 2015 to September 2015 period, the
life insurance industry recorded a new premium income of Rs 562.86 billion (US$
8.4 billion), indicating a growth rate of 14.45 per cent. The general insurance
industry recorded a 12.6 per cent growth in Gross Direct Premium underwritten in
FY2016 up to the month of October 2015 at Rs 550 billion (US$ 8.23 billion). A fast
growing economy, rising income levels and improving life expectancy rates are some
of the many favorable factors that are likely to boost growth in the sector in the
coming years.

INDIAN MUTUAL FUND INDUSTRY


The Indian mutual fund (MF) industry witnessed an addition of around 2.2 million
new investors during 2014-15. The total number of investors stood at 4.17 crore at
12

the end of the 12-month period in March 2015 as compared to 3.95 crore at the end
of March 2014 registering a growth of 5.54 per cent. The growth in the number of
investors in the Rs 12 trillion (US$ 187.17 billion) sector is largely concentrated
around the top five asset management companies (AMCs) HDFC Mutual Fund,
ICICI Prudential, Birla Sun Life, Reliance MF and UTI MF.
With close to a total of 44 fund houses in the country, the top five companies account
for close to 80 per cent of the sector's assets under management (AUM). ICICI
Prudential registered the fastest growth of 25 per cent with the total investor base at
33.59 lakh followed by Birla Sun Life with growth of 20 per cent to 24.26 lakh from
20.19 lakh investors. HDFC MF, the country's largest fund house with an AUM of Rs
1.61 trillion (US$ 2.5 billion), saw growth of 15 per cent in its customer base to 52.1
lakh, adding a little more than 7 lakh new investors.
According to another recent report, Reliance MF led the growth of retail equity AUM
at 119 per cent during the previous fiscal, followed by ICICI Prudential at 76 per cent
and Birla Sun Life at 72 per cent. HDFC MF grew its retail equity AUM by 45 per
cent and UTI by 39 per cent during the period.
The large growth witnessed during the previous fiscal signal towards the upbeat
domestic investor sentiment in the country. On the other hand, with the large investor
base concentrating with the top five companies, it is evident that Indian consumers
are only willing to take market risks with companies that have a strong brand equity
and a positive past track record.
The asset base of the mutual fund industry in the country is expected to grow faster
at 18.6 percent per annum to cross Rs 20 trillion(US$ 325 billion) by 2018 with an
investor base of 10 crore accounts. With the total investor base still at a low level of 2
per cent out of the total domestic population, there are ample growth opportunities
available in the domestic mutual fund industry.

13

GROWTH IN ASSETS OF AUM

MUTUAL FUND AUM (IN US$ BILLION)


250

215.4

200

179.6

150
100

129.5 129.8 125.3 129.2 136.9

125.4
72.3

90.4

50
1

0
FY07

FY08

FY09

FY10

FY13

FY14

FY15

FY16

FY11

FY12

Figure 1: Assets under Management of Mutual fund industry

14

(Sources: Report on financial services sector in India by India brand equity foundation
2016)

The industry of asset management is the fastest growing industry in India. The above
figure is showing the trends of mutual fund AUMs from 2007 till 2016 which is
showing that it growing faster and AUMs are more than doubled since financial year
2007. The lowest CAGR is in the year 2007 and highest is in 2016 which is 215.4
US$ billion. The total AUM of mutual fund industry clocked around 12.8% over the
years from financial year 2007 to 2016.

GLOBAL INDIVIDUAL WEALTH


With USD 51 trillion in private wealth, North America retained the position of being
the wealthiest region in 2014. Overtaking Europe, Asia Pacific (Excluding Japan)
region became the worlds second wealthiest region with USD 47 trillion. Private
wealth in India and China showed a significant Market Gains, mainly as a result of
investments and growth in the local equities.

15

2019

2014
2013
2012

Figure 2: Global Private wealth

(Sources: Report by Karvy Private Wealth on growth in HNI Net Worth in India, 2015)

The global private financial wealth is growing at a fastest pace. The number of high
net worth individuals grew in both number and wealth to 14.6 million and USD 56.4
trillion respectively. Global financial wealth is expected to grow at 7.7% over the
next coming years.

Growth in global AUM


AUM of world-wide mutual funds and exchange-traded funds [ETF] stood at $33.4
trillion at year-end 2014, with more than 80% of the assets held across USA and
Europe.

16

%Global Mutual fund assets (Dec-14)

11%

29%

6%

54%

USA
Europe
Asia & Africa
Others

Figure 3: Growth in Global Assets under Management

(Sources: Report by Karvy Private Wealth on growth in HNI Net Worth in India, 2015)

Mature markets of USA and Europe have demonstrated lower CAGR for the 5-year
period starting from the beginning of this decade. Higher growth in India represents
the latent potential of the Indian market which can be tapped to improve the
penetration of the mutual fund industry in India
While the average AUM to GDP ratio stands at 7% for India and is considerably
lower than the global figure, there is a wide variation across the different districts of
India. A SEBI study (2013) reveals that key districts with high volume of fund
collection have a figure of around 30%, comparable to the global estimate.

DEMAND DRIVERS IN GLOBAL MARKETS

17

Retail investors hold 89% of mutual fund assets in USA, and they rely on these
funds to meet their long-term financial objectives especially building their retirement
corpus and education savings. 94% of such households hold mutual fund shares
inside employer-sponsored retirement accounts, Individual Retirement Accounts and
other tax deferred accounts.90 mn retail investors have holdings in mutual funds,
which imply that 43% of all US households owned mutual funds in 2014.68% of US
retail investors hold more than half of their financial assets in mutual funds, with
$103,000 being the median value of mutual fund assets (source: ICF 2015).
Institutional clients share of AUM in the European mutual fund market rose from
69% in 2007 to 74% in 2013. Institutional clients comprise primarily insurance
companies (39% of AUM) and pension funds (33% of AUM), and they rely on the
expertise of the fund managers to manage the contributions collected from their
members. Households are also engaging in higher purchase of mutual funds from
2013 onwards, and these purchases are made either from third-party distributors or
through the internet (source: EFAMA 2015).
More than 50% of US mutual fund assets are in equity funds and this is congruent
with the long-term investment perspective for the retail investors. The picture is
different in the European market where bond assets comprise the single largest
holding at 43% of AUM.

Assets Allocation (% of regional AUM)

United States
Dec-14

Europe
Dec-13

Equity

52%

Bond

Bond

22%

Equity
18

India
Sep-15
43
%
33
%

Income

46%

Equity

33%

Money Market
Hybrid

17%
9%

Others
Money Market

16
%
8%

Money Market
Others

15%
6%

The ability of US and European funds to have a strong retail customer base presents
the Indian industry with pointers on increasing their reach in the retail market.

KEY TRENDS IN THE DOMESTIC MARKET

The Indian mutual fund market has witnessed varying trends in fund inflow during
the last decade. The aftermath of the global credit crisis had led to continuous
outflows for the next four-five years. The situation reversed in the last fiscal with net
positive inflow, which while lower than the 2008 levels is a welcome sign for the
industry, especially the growth in equity schemes.
An analysis of the investor behaviour over the last five years reveals the significant
increase in participation by HNI along with their exposure to equity schemes.

19

60%
47%
50% 48%
40%

% of AUM

29%

30%

24%
22%

20%

16%
11%

10%
2%
0%
Corporates Banks
Sep-09

1% 1%
FII's

HNI

Retail

Sep-15

Figure 4: Investment done by various stakeholders

(Source: Report by AMFI on Industry trend on Mutual fund Scheme, 2016)

While equity investment in Indian capital markets by FIIs has gone up from Rs 850
billion in FY14 to Rs 1100 billion in FY15, their level of participation in Indian
mutual funds has remained largely unchanged. With access to increasing investible
surplus, the HNI segment has significantly increased its participation in the Indian
mutual funds, especially in the equity schemes. There has been a 61% jump in their
folio count from 1 mn in September 2013 to 1.6 mn in September 2015. The increase
is more significant in the equity segment where their folio count has more than doubled
over 24 months. As their average ticket size is Rs 2 mn, this customer category has had a
significant impact on the growth of equity schemes.

Assets managed by the Indian mutual fund industry have grown from Rs. 12.26
trillion in May 2015 to Rs. 14.46 trillion in May 2016. That represents a 18% growth
in assets over May 2015.

20

Total assets( Rs. Trillion)


15
14.46

14.5
13.86

14
13.5

13.19

13.33

13.29

13.54 13.48 13.55


13.43 13.49

12.94

13

12.65

12.5 12.26
12
11.5
11
42156
42217
42278
42339
42401
42461
42125
42186
42248
42309
42370
42430
42491

Figure 5 : Total AUM in Mutual Funds

(Sources: Report by AMFI, India on Industry trend May 2016)

The proportionate share of equity-oriented schemes is now 30.8% of the industrys


assets in May 2016, down from 31.2% in May 2015.
The proportionate share of debt-oriented schemes is 43.1% of industry assets in May
2016, down from 43.4% in May 2015

21

Scheme wise Composition of Assets


Debt oriented schemes
ETF & Fof's

Equity oriented schemes


Liquid & Money market

21.80%
21.90%
21.90%
22.80%
22.90%
23.10%
23.60%
23.70%
24.10%
24.30%
24.50%
24.60%
24.70%

32.10%
32.30%
32.70%
32.00%
31.30%
32.50%
31.70%
31.10%
31.20%
30.10%
30.90%
30.80%
31.70%

44.80%
44.60%
44.10%
44.00%
43.70%
43.70%
43.50%
43.40%
43.30%
43.20%
43.10%
43.10%
42.50%

42125 42156 42186 42217 42248 42278 42309 42339 42370 42401 42430 42461 42491

Figure 6 : Scheme wise Composition of Assets

(Sources: Report by AMFI, India on Industry trend May 2016)

COMPOSITION OF INVESTORS HOLDINGS

22

Individual investors primarily hold equity-oriented schemes while institutions hold


liquid and debt oriented schemes.
57% of individual investor assets are held in equity oriented schemes.
89% of institutions assets are held in liquid / money market schemes and
debt-oriented schemes.

Debt oriented schemes

Individual; 39%
Institutional; 61%

Figure 7 Investor Categories across Debt oriented schemes

(Sources: Report by AMFI, India on Industry trend May 2016)

23

Equity oriented schemes


15%
Individual
Institutional

85%

Figure 8 : Investor Categories across Equity

(Sources: Report by AMFI, India on Industry trend May 2016)

Liquid & Money market


Individual; 23%

Institutional; 77%

Figure 9 : Investor Categories across Money Market

(Sources: Report by AMFI, India on Industry trend May 2016)

24

ETF & Fof's


8%
Individual
Institutional

92%

Figure 10 : Investor Categories across ETF

(Sources: Report by AMFI, India on Industry trend May 2016)

Individual investors primarily hold equity-oriented schemes while institutions


hold liquid and debt oriented schemes.
57% of individual investor assets are held in equity oriented schemes.
89% of institutions assets are held in liquid / money market schemes and
debt-oriented schemes.

KEY TRENDS
The total wealth held by individual in India is grown faster by 8.9%. The individual
wealth in financial assets grew by 19% while individual wealth in physical assets
reduced by 2.3%.

25

The investments made by the individuals in financial assets is expected to get


doubled in the coming years from the present which is Rs 160 lakh Crore.
It also expected that alternative assets and mutual funds are growing faster and to
grow faster in the coming years.
Direct Equity has been the flavor of 2015 becoming the largest asset class of
investments overtaking fixed deposits.
For the new additional money is being invested by the individuals in financial year
2015 which had seen a reversal trends with around 54% of the new money is being
invested in financial assets.

GROWTH IN ASSETS
-

INDIVIDUALS
Individual
657,597

563,606

42125

42491

Figure 11 : Growth in Assets

(Sources: Report by AMFI, India on Industry trend May 2016)

26

Instituitions
Instituitions
788,411
662,746

42125

42491

Figure 12: Growth in Assets of Institutions

(Sources: Report by AMFI, India on Industry trend May 2016)

Grand Total
Grand Total
1,446,008

1,226,352

42125

42491

Figure 13 : Growth in Assets total

(Sources: Report by AMFI, India on Industry trend May 2016)

The value of assets held by individual investors in mutual funds increased from Rs.
5.64 lakh crore in May 2015 to Rs. 6.58 lakh crore in May 2016, an absolute increase
of 16.68%.
The growth in Institutional assets from Rs. 6.63 lakh crore to Rs. 7.88 lakh crore, an
absolute growth of 18.96%.

27

1.3 COMPANY PROFILE

Karvy Group
Over three decades, the Karvy Group has established itself as one the leading and
most trusted integrated financial services companies in the country. With more than
400 offices, and a franchisee network of nearly 500, Karvys pan-India footprint is
unmatched. We also have satellite offices overseas with offices in North America, the
Far East and the UAE.
Through its various businesses such as Registry Services, Stock Broking, Investment
Banking, and Non-Banking Financial Services (NBFC), The Karvy group serves 70
million customers and 1000 biggest corporations in India.
In order to ride new opportunities presented by the changing business scenario,
Karvy has diversified into two new businesses viz. data analytics and market
research.

1.4 KARVY PRIVATE WEALTH


Karvy Private Wealth is the wealth management arm of the Karvy Group. Over the
years, Karvy Private Wealth has gathered unrivalled expertise in providing top notch
service delivery along with cutting edge investment planning.
Based out of Mumbai, Karvy Private Wealth has branch offices in New Delhi,
Bengaluru, Chennai, Hyderabad, Kolkata, Chandigarh, Gurgaon and Pune. We are
one of the most sought after Wealth Managers for High Net worth Individuals in

28

India, because of our demonstrated ability to create paradigm-changing long term


value for our clients.

1.5 KARVY PRIVATE WEALTH APPROACH

Our approach in building an optimum portfolio involves s four pillars:


Risk Evaluation: Through a consultative process, we understand the financial goals
of the investor, his appetite for risk and the life cycle profile to ascertain whether a
conservative, moderate or an aggressive investment strategy ought to be deployed.
Asset Allocation: Our Wealth Managers then develop a unique asset -allocation
strategy . They formulate a tactical approach for both the long term and the short
term.
Restructuring of existing portfolio: Here, we review your existing portfolio based
on asset allocation, and the mutually identified financial goals. Our portfolio
managers are well equipped to create unique and personalized investor portfolios. We
then suggest unique combination of products across asset classes.
Execution: We ensure careful execution of all the transactions through our teams of
personal Wealth Managers.
Reviews and recommendations: Our investment counselors constantly scrutinize
and recommend new investment options depending on market fluctuations.
29

1.6 MISSION STATEMENT OF KARVY

An organization exists to accomplish something or achieve something. The mission


statement indicates what an organization wants to achieve. The mission statement
may be changed periodically to take advantage of new opportunities or respond to
new market conditions.
Karvys mission statement is To Bring Industry, Finance and People together.
Karvy is work as intermediary between industry and people. Karvy work as
investment advisor and helps people to invest their money same way Karvy helps
industry in achieving finance from people by issuing shares, debentures, bonds,
mutual funds, fixed deposits etc.
Companys mission statement is clear and thoughtful which guide geographically
dispersed employees to work independently yet collectively towards achieving the
organizations goals.

1.7 VISION OF KARVY


Companys vision is crystal clear and mind frame very directed. To be pioneering
financial services company. And continue to grow at a healthy pace, year after
year, decade after decade. Companys foray into IT-enabled services and internet
business has provided an opportunity to explore new frontiers and business solutions.
To build a corporate that sets benchmarks for others to follow.

30

1.8 MANAGEMENT TEAM

1) ABHIJIT BHAVE CEO

Abhijit is responsible for building and growing the business, across both the Indian and
Overseas markets.

An MBA from IIM Lucknow and a BE in Mechanical from VJTI, Mumbai. He has
20 years of experience in the areas of Wealth Management/Financial Services
Industry in India & overseas, he has also worked in other areas like asset
management, cash management, corporate banking & retail banking. He has also
headed the Private Banking business in the past. Abhijit brings to the table rich senior
management experience building organisations of scale and exhaustive knowledge of
direct marketing and sales. Prior to that, he has worked with Deutsche Bank, HSBC
and ICICI Bank.

2) Deepak Vazirani Head Sales

Deepak heads the sales at Karvy Private Wealth.

An MBA from Welingkar Institute of Management with a rich experience of over 20


years in capacity of various senior roles across the Financial services Industry. Prior
to joining Karvy Private Wealth Deepak headed the wealth management business for
Religare Macquarie as a Senior Vice President, heading the Mumbai business. At
Standard Chartered he was heading various branch banking verticals in capacity of a
Vice President. Deepak has also worked with various other banking conglomerates
such as ICICI, HDFC and IDBI in the past.

31

3) SRINIVASAN Head Operations


Srinivasan is responsible for the entire operations, process setting and implementation.

An MBA (Finance) from Pune University & has a rich experience of 15 years in
Capital Markets and NBFC, with a focus on various aspects of Operations and
Process implementation. Prior to joining Karvy Private Wealth he worked with JM
Financial for 10 years.

4) SHANTANU AWASTHI Head Karvy Family Office


Shantanu is responsible for managing Karvy Family Office and proposition for Ultra High
Net worth Families.

He is Masters in Economics from Jawaharlal Nehru University with work experience


of more than 15 years across Private Banks in India and abroad. Prior to joining
Karvy Private Wealth he was working with Morgan Stanley as a Vice President. He
has also worked with HSBC - Overseas, Kotak Wealth & Standard Chartered Bank.

5) VARUN SAXENA Head Marketing & Alternate Channels


Varun is responsible for managing the Karvy Private Wealth brand, acquisition support as
well as developing non-linear streams of revenue from Karvy Private Wealth.

A Mechanical Engineer from Pune University and an MBA in Marketing from


Symbiosis Centre for Management & Human Resource Development (SCMHRD),
32

Pune. He has 15 years multi-industry and multi-functional experience across the


Financial Services, Retail and industrial products Industries. Prior to joining Karvy,
Varun has worked across Marketing, Sales and Product functions at corporates such
as Citigroup, Godrej & Future Capital.

6) S D DEVAIAH Head Human Resources


Devaiah heads the HR function for both the India as well as the Overseas Business.
Having been a part of Karvy Private Wealth for over 6 years, he is one of the earliest
employees to have joined.
Devaiah is responsible for talent acquisition, talent management, performance
management,

employee

engagement,

learning

&

development.

An MBA from Institute of Chartered Financial Analysts of India & has a rich
experience of over 11 years across the Financial services Industry. Prior to joining
Karvy Private Wealth he has worked with Citibank & Kotak Securities in the NRI
and Wealth Management divisions.

7) TARAL REVAR Head Real Estate Business


Taral is responsible for the real estate business comprising of primary and secondary market
both in commercial & residential space.

An MBA from Mumbai University and has a rich experience of nearly 18 years in
Banking and Investment industry. Prior to joining Karvy, he was associated with M/s
Reliance Private Wealth Ltd, heading the Real Estate and alternate asset desk and
was responsible for sourcing deals from developers and secondary market for HNI
clients based across India, Middle East and South East Asia.

33

1.9 ORGANIZATION STRUCTURE


CEO
(ABHIJIT BHAVE)

National sales Head

Satinder

Vimal ojha

34

G.Rajan

Gaurav Verma
(Multi TL1)

Mukesh Kumar
(Multi TL2)

Siddharth
Arora
(Multi TL3)

Pardeep Pillai
(Multi TL4)

Amit Anurag
(Delhi region TL)
Rakshit Kumar
(Delhi region TL)
Amrinder Dhillon
(Senior Wealth

Akhil Sharma
(Senior Wealth

Karvy Private Wealth offers you access to the widest possible range of scope of
investment options across various asset classes -- all under one roof, something no
private wealth management firm can claim. We are asset class agnostic. Our
investment approach treats every financial product as a flexible building block that
makes up your portfolio. When it comes to investing in equity, debt, international
funds, structured products, real estate, commodities or insurance, Karvy Private
Wealth has plenty of products best suited for your investments.
We offer a wide array of investment & wealth management products including:

CUSTOMERS OF KARVY PRIVATE WEALTH

Business owners
Corporate professionals
NRI
Self-employed professionals
Retiree
35

PRODUCTS OFFERED BY KARVY PRIVATE WEALTH

Equity products- It includes direct equity investments, Equity portfolio

management services and Equity Mutual funds.


Debt Products It includes Corporate FDs, Bonds, Debt Funds, Fixed
Maturity

Plans

(FMPs),

Debentures,

Income

funds,

Debt

mutual

funds( Liquid fund and gilt fund)


Portfolio Management Services
Structured Products- Karvy private wealth advises some structured products
which are structures with fixed returns payoff and structures with

participation in the participation of the underlying as the payoff.


Commodities including gold and gold funds
Real Estate- It includes Real Estate Funds and Direct property purchase
International Investments Products- It includes international equity and
mutual funds, International real estate, Managed Futures, Commodity

broking, Hedge funds and Debt Investments options.


Private Equity- It includes Venture Capital Funds, Mezzanine Funds, Growth
Funds, Buyout Funds and Sector Focused Funds.

SERVICES PROVIDED BY KARVY PRIVATE WEALTH

Comprehensive Financial Planning- It helps in planning the individuals

savings and investments to meet their short, medium and long term goals.
Wealth Review and investment strategy- It helps in reviewing your wealth

based on one investment objective, future expectations and risk profile.


Goal driven investments- It helps in suggesting different investments
portfolios for meeting different goals like higher education for children,

Children planning etc.


Retirement planning
Wealth planning for retired individuals- This service utilizes dual benefits of
portfolio diversification to help one get both safety and value retention from

ones investment even after retirement.


Tax planning
36

Risk management and insurance planning- It helps in managing the risks

analyzing it and identifying, quantifying the same.


Advising on property purchase- It also offer support in obtaining a loan for

purchasing of property.
Financing and re-financing- It helps in providing end to end assistance in

financing as well as re-financing.


ESOP advisory- It helps in providing the advice on best diversification

strategies.
Family office services- This service helps in protecting the capital and growth
of the ultra-high net worth individuals and familys financial assets and its

heritage.
Tax filling

ACHIEVEMENTS

Among the top 5 stock brokers in India (4% of NSE Volumes)

First ISO - 9002 Certified Registrar in India

India's No. 1 Registrar & Securities Transfer Agents

Handled over 500 Public issues as Registrars

Among the top 3 Depository Participants

Largest Network of Branches & Business Associates

Among top 10 Investment bankers.

Largest Distributor of Financial Products.

37

Adjudged as one of the top 50 IT uses in India by MIS Asia

Full Fledged IT driven operation.

Handling the Reliance Account which accounts for nearly 10 million account
holders.

38

Chapter-2

Review of Literature
39

Chapter 2
Review of Literature

2. WHAT IS A MUTUAL FUND?


Mutual fund is the pool of the money, based on the trust who invests the savings of a
number of investors who shares a common financial goal, like the capital
appreciation and dividend earning. The money thus collect is then invested in capital
market instruments such as shares, debenture, and foreign market. Investors invest
money and get the units as per the unit value which we called as NAV (net assets
value). Mutual fund is the most suitable investment for the common man as it offers
an opportunity to invest in diversified portfolio management, good research team,
professionally managed Indian stock as well as the foreign market, the main aim of
the fund manager is to taking the scrip that have under value and future will rising,
then fund manager sell out the stock. Fund manager concentration on risk return
trade off, where minimize the risk and maximize the return through diversification of
the portfolio. The most common features of the mutual fund unit are low cost. The
below I mention the how the transactions will done or working with mutual fund
1.1 Types of Mutual Funds in India

40

1. Growth Funds: These type funds are those which invest in the stocks of wellestablished, blue chip companies. Dividends and steady income are not only goal of
these types of funds. But, they are focused on increasing in capital gains.
2. Equity Diversified: All non-theme and non-sector funds can be classified as equity
diversified funds.
3. Mid Cap: These funds invest in companies from different sectors. However they
put a restriction in terms of the market capitalization of a company i.e. they invest
largely in BSE Mid Cap Stocks.
4. ELSS: Equity Linked Savings Schemes (ELSS) is equity schemes, where investors
get tax benefit up to Rs. 1 Lakh under section 80Cof the Income Tax Act. These are
open ended schemes but have a lock in period of 3 years. These schemes serve the
dual purpose of equity investing as well as tax planning for the investor; however it
must be noted that investors cannot, under any circumstances, get their money back
before 3 years are over from the date of investment.

5. Income funds: These types of mutual funds are focused on increased capital gains
and steady income. Less volatile than Aggressive Growth funds.
6. Equity Funds: These funds allow an investor to own a portion of the company that
they have invested in, its like having shares of a certain company. Stocks that have
proven historically to be the best investment. Also which have already outperformed
all other types of investments in long term, but the risk is high. These funds produce
a greater level of current income by investing in equity securities of companies with
solid reputation and have a good record of paying dividends.
7. Balanced Funds: Balanced mutual funds have a portfolio mix of bonds, preferred
stocks and common stocks. Balanced mutual funds aim to conserve investors initial
investment, to pay an income and to aid in the long-term growth of both the principle
and the income.

41

8. Fixed-Income: Funds Fixed-income mutual funds are safer than equity funds, but
as always, do not yield as high returns as the latter do. These types of mutual funds
are geared towards the investor who is approaching old age and doesnt have many
earning years left. Many investors hope to draw a steady income from these types of
mutual funds. Bond funds fall into the category of fixed-income funds.
9. Money-Market Funds: These are generally the safest and most secure of mutual
fund investments. They invest in the largest, most stable securities, including
Treasury bills. The chances of your capital being eroded are very minimal. Moneymarket funds are risk-free. If you invest a thousand rupees, you will get that money
back. It is simply a matter of when you get it back. When investing in a moneymarket fund, you should pay attention to the interest rate that is being offered, along
with the rules regarding check-writing. Money-markets have allowed investors to
reap high yields on their deposits, and have made the entire investment process more
accessible to people. The interest rates on money-market funds are changing nearly
day to day. In times of inflation, these funds have had high yields.
10. Index Funds: They invest in the portfolio of an index such as BSE Sensitive
index (SENSEX), S&P NSE 50 index (Nifty), etc. The investment is done in the
securities in the same weightage comprising of an index. You can see that the NAVs
of such schemes would rise or fall in accordance with the rise or fall in the index. It
may not be exactly by the same percentage due to tracking errors.
11. Gilt Funds: These are those funds which invest only in securities issued by the
Government. This can be the Central Govt. or even State Govts. Gilt funds are safe
to the extent that they do not carry any Credit Risk. However, it must be noted that
even if one invests in Government Securities, interest rate risk always remains.
12. Monthly Income Plans: MIPs are suitable for conservative investors who along
with an exposure to debt do not mind a small exposure to equities. These funds aim
to provide consistency in returns by investing a major part of their portfolio in debt
market instruments with a small exposure to equities. Thus an MIP would be suitable
for conservative investors who along with protection of capital seek some capital
42

appreciation as MIPs have an exposure to equities. However the monthly income is


not assured

Mutual Funds diversify their activities in the following areas:

Portfolio management services

Management of offshore funds

Providing advice to offshore funds

Management of pension or provident funds

Management of venture capital funds

Management of money market funds

Management of real estate funds

2.1 Equity Linked Savings Scheme

Equity Mutual Funds are one of the important means of pooling risk capital from
small investors. In order to encourage such investment culture, the Govt. of India in
the year 1992 introduced the Equity Linked Savings Scheme (ELSS) mutual funds.
Investments into the scheme qualify for tax benefit. The tax benefit comes with
certain regulatory provisions. These regulatory provisions make the ELSS funds
distinct from Diversified Equity Funds. The regulatory provisions of ELSS funds
43

apparently tend to increase the element of investment risk of these funds as compared
to regular Diversified Equity Funds. People usually invest their money in the safe
investment alternatives and further continue to search for new safer avenues. They
always try to save their money in a manner that it provides tax shield as well as some
capital appreciation without blocking it for long period of time. They try to maximize
their returns while selecting the different investment avenues. To maximize the
return, it depends on the risk tolerance capacity. So risk and return are the motivating
force and the principal factor in the investment decision.

Krishna Kumar Kadambat, Raghavendra T S and B M Singh (2015) this paper


tries to analyse the investment performance of the population of ELSS Funds for 13 a
year period starting from 2000-01 to 2012-13 and comparing its performance with 12
top Diversified Equity Funds and 7 Benchmark Indexes. This study with the data set
considered, shows that ELSS funds, overall has underperformed both against sample
Diversified Equity Funds and Benchmark Indexes on a risk adjusted basis. The study
also shows that there is inconsistency in performance of ELSS funds over time.

Ajay Mittal and Dr. V. K. Agarwal (2015) the main purpose of the study is to
compare the ELSS scheme of public sector and private sector and analyse the market
timing abilities of fund managers of ELSS. The tax saving mutual fund industry grew
at a rate of annual 67% during 2006 to 2015 while mutual fund industry grew at a
rate of 50% annually. Here various tools are used for analysis of performance of tax
saving scheme of mutual fund. Its included Price Earnings Ratio, Book Price Ratio,
Return and Net Asset value and Assets under Management. Further take to
considering the performance index model. Sharpe performance evaluation model,
model represents return on security with risk free return on investment and then take
into considering the variance on security. The return on overall basis of every year

44

though seems to be higher in case of private sector ELSS mutual funds taken
together.
Dr. Brajaballav Pal (2014) In this paper, an attempt has been made to study the
performance of selected schemes of mutual funds based on risk-return relationship.
14 equity-based mutual fund schemes have been studied for twelve quarters from 3rd
January, 2011 to 1st October, 2013. The analysis has been made on the basis of
average return, risk, beta, Sharpe ratio, Treynor ratio and Jensen Alpha. The overall
analysis finds ICICI Pru Exp & Other Services Fund being the best performer and
Kotak Nifty ETF and ICICI Pru Infrastructure mutual funds showing poor
performances when measured against the risk-return relationship. The performance
evaluation of funds using performance ratios enables the investors to recognize and
select the benchmarking companies. The risk-return relationship. The performance
evaluation of funds using performance ratios enables the investors to recognize and
select the benchmarking companies.

Sumana B.K and Prof B.Shivaraj (2014) This paper focuses on performance
evaluation of actively managed mutual funds. With the importance of risk and return
for any investment, this paper analyses risk adjusted returns of mutual funds and also
absolute returns. The study focuses on finding the performance of selected actively
managed mutual funds using different performance measures like Sharpe`s, Jensen`s
Alpha and Information ratio.. The sample selected for the study is ten Large
Capitalization Mutual funds in India. The period of study is three years (2010-13).
The analysis was on the basis of quarterly, half yearly, yearly returns for each mutual
fund. The results revealed that the returns varied with the frequency of measurement.
This shows the time is an important dimension in the performance of the fund. The
study also revealed that the type of measure selected has a bearing on the
performance of asset managers.

45

Dr. Sandeep Malu and Dr. Rahul Deo (2014) This paper is an attempt to look in to
the vital tax saver segment, a boon for tax saving as well wealth creation. The sample
for the study consists of five mutual funds belonging to Equity Tax Saving category
funds selected on the basis of last 5 year performance amongst the category. The
performance of selected funds is evaluated using average rate of return of fund,
standard deviation, Risk/Return, Sharpe Ratio, Treynor ratio and Jensen ratio. NIFTY
50 is taken as benchmark for comparing performance of tax saver scheme. As such
all the schemes outperformed the benchmark in considered time frame so the
comparison criteria remains inter scheme comparison for all time formats.

Namita Srivastava (2014) analysed empirically the performance indicators of


Equity linked saving schemes in India. The factors affecting the performance of
ELSS funds are also evaluated. It is concluded in the study that during the period of
study, sample ELSS funds provided better return as compared to returns provided by
risk free securities. But in terms of average return the ELSS funds are unable to
outperform the benchmark portfolio.

Kansal, Payal (2012) in her research study conducted in Meerut to from 2001 to
2010 to know the role of brokers and investor preference in mutual funds and the
capital mobilisation through mutual fund in Meerut and concluded that the growth in
Meerut city of mutual fund is not very fast and investor should be oriented regarding
mutual funds. Private sector has taken more initiative in the providing knowledge
and good return for the growth of mutual funds.

Rupeet Kaur (2012) did a comparative analysis of growth & dividend tax oriented
mutual fund schemes in India with a sample of 18 schemes selected on the basis of
monthly returns. The performance on the basis of return analysis of growth schemes
46

are found better than the dividend schemes when compared to benchmark. The
dividend schemes are found to be more volatile than the growth schemes.

Sondhi and Jain (2010) examined the market risk and investment performance of
equity mutual funds in India. The study used a sample of 36 equity fund for a period
of 3 years. The study examined whether high beta of funds have actually produced
high returns over the study period. The study also examined that open-ended or close
ended categories, size of fund and the ownership pattern significantly affect riskadjusted investment performance of equity fund. The results of the study confirmed
with the empirical evidence produced by fama (1992) that high beta funds (market
risks) may not necessarily produced high returns. The study revealed that the
category, size and ownership have been significantly contributing towards the
performance of mutual funds during the study period.

Zakri y. Bello (2009), examined five factors namely default risk premium, term
premium, monetary conditions, federal fund premium, market risk premium and
confirms that mutual fund returns can be strongly predicted by analyzing these
factors.

47

Chapter-3
48

Project Objectives
Chapter 3
Project Objectives

To study the performance of the selected tax saving schemes


in ELSS Mutual Fund.

To identify the best open ended ELSS scheme offered by


selected Mutual Fund Companies on the basis of risk and
return.

To evaluate the outperformance of ELSS (Growth ) plans with


other Diversified Equity ( Growth ) plans

To understand the investors perception towards their


investment in ELSS Tax savings schemes

3.1 Need of the study


Firstly many studies and research had been conducted on the ELSS mutual fund
schemes, but they had failed to explain their importance regarding tax savings.
49

Secondly, it becomes necessary to know which ELSS mutual fund scheme are the
best for future investment.
Thirdly this study will explain the reason behind investing in ELSS schemes as
compared to other saving schemes with the help of sharp and Treynor models.

3.2 Scope of the study


As the objective of the study is to analyse the risk adjusted return performance of the
funds, only Growth option plans are considered. The performance evaluation is based
on the Net Asset Value ( NAV ) of the fund units and therefore does not consider the
costs if any, incurred by the investor in the form of entry and exit loads and income
tax on the gains.

50

Chapter-4

Project Methodology Adopted

51

Chapter 4
Project Methodology Adopted

4.1 RESEARCH DESIGN


This study is basically descriptive study where we are trying to study the investor
characteristics and performance of ELSS and diversified Mutual fund. To fulfill our
first objective we have tried to study the performance of ELSS mutual fund return.
The second objective is fulfilled by calculating and studying the 10 selected open
ended mutual fund in order to evaluate their risk and return. In the third objective 10
open ended diversified fund has been chosen and compared with ELSS fund. The
fourth objective is fulfilled by analyzing the result of structured questionnaire.

4.2 TYPE OF DATA USED

Primary Primary data is the data which is the actual study that is been
conducted by the researcher. It is the data which is obtained by the direct
52

efforts of the individual who is conducting the study through surveys, direct

observation, interviews, focus group etc.


Secondary . It is the data which is easily available on the websites, books,
newspapers, magazines etc.

4.3 SOURCES OF DATA COLLECTION

Primary data is collected through structured questionnaire.


Secondary data is collected from different sources like Research papers ,
Mutual fund Factsheet, , Websites, Karvy Report, Articles, etc.

4.4 SAMPLING METHODOLOGY


Systematic Random Sampling- It is a method of choosing a random sample from
larger population.

4.5 SAMPLE SIZE


44 Respondents

4.6 SAMPLING UNIT


Delhi NCR

4.7 STATISTICAL TOOLS AND TECHNIQUES USED


53

Excel
SPSS

4.8 HYPOTHESIS USED

Null hypothesis: The age of the investor and risk willingness are independent of each
other.
Null hypothesis: The age of the investor and expected return from the investment are
independent of each other.
Null hypothesis: The age of the investor and knowledge related to mutual funds are
independent of each other.
Null hypothesis: The age and gender of the investor are independent of each other.
Null hypothesis: Income of the individual investor and annual investment in a mutual
fund are independent of each other.

54

Chapter-5

Data Analysis & Interpretation /


Description of the Work Performed

55

Chapter 5
Data Analysis & Interpretation / Description of the
Work Performed

Objective 1
5.1 To study the performance of the selected ELSS Mutual Fund.
Investments in Equity Linked Savings Schemes (ELSS) are the popular mode of
investment for tax planning purposes has increased over the period of years. Here we
are going to study the performance of these mutual funds to know the superior return
alternative to other tax-saving instruments. Instead of opting for the conventional taxsaving instruments like PPF, NSC, RBI bonds, and LIC policies, a better and
remunerative way of investing that hard-earned money is the ELSS.
An ELSS is a tax saving instrument provided by mutual funds. It offers the benefits
of getting equity linked returns and with the additional benefit of tax saving.

56

Tax benefit

Deduction under section 80C


No tax on Capital gain
Dividends are tax free in the hands of investor

Since this is equity linked saving scheme so the earning potential is very as compared
to other tax saving instruments. It has a lock in period of three years which makes it
superior against other tax saving instruments.

Table 1: Selected ELSS Fund schemes


Elss fund

Launch date

1 year

3 year

5 year

Expense

Assets

Axis long term


equity fund
BNP Paribas
Long Term
Equity Fund
Franklin India
Tax shield
Fund
IDFC Tax
Advantage
(ELSS) Fund
Reliance Tax
Saver Fund
Sundaram Tax
saver
Principle tax
saving fund
L&T tax
advantage fund
Kotak tax
saver
HDFC tax
saver fund

Dec-09

1.32

27.81

19.55

1.99

8,888

Jan-06

-1.53

23.19

16.09

2.75

456

Apr-99

3.83

24.41

16

2.42

2,146

Dec-08

-3.16

23.13

15.03

2.5

422

Sep-05

0.61

29.06

17.19

2.1

4,980

May-05

4.59

20.24

12.96

2.51

1,206

Mar-96

2.7

23.4

15.3

2.85

232.09

Feb-06

4.15

21.03

12.62

2.14

1,553

Nov-05

0.1

21.22

11.45

2.47

477

Mar-96

-0.93

21.07

10.56

2.16

4,767

(Sources: www.amfi.com)

57

Here we have selected the 10 ELSS mutual funds from Crisil website in order to
evaluate the performance. As we know we have a lock in period of 3 years in ELSS
mutual fund thus we have compared the return from this fund. Thus we can clearly
see in the above table that the ELSS fund gives superior return in 3 years as
compared to 5 and 1 year. Thus we can say ELSS is the best performing mutual fund
which not only helps in capital appreciation. But provide us with relevant tax
savings.

In the above table Reliance has been the star performer among other with superior
return followed by axis which are giving a higher return after 3 and 5 years
respectively.

Objective 2

5.2 TOOLS APPLIED TO MEASURE RISK AND RETURN

The aim of this study is to estimate risk-return profiles for Tax Saving Mutual Fund
Schemes that have been varied from time to time. For the purpose of study, daily
NAV are used for computing annual returns of Tax Saving Mutual Fund Schemes
(John Sorros, 2004). Mean returns are calculated by averaging the monthly returns
over the relevant time period.
Total risk (volatility) is measured by the standard deviation of returns. Systematic
(market) risk is estimated by Beta. All the Tax Saving Mutual Fund Schemes are
analysed by using Capital Asset Pricing Models such as Sharpe to measure Risk
premium related to the total risk, Treynor to measure Funds performance in relation
to the market performance and Jensens Alpha is used to compare the actual or
realized return of the portfolio with the predicted or calculated return.

58

For the study we have BSE Sensex 200 as our benchmark index. The relationship
between the index and the market return can be analysed by the regression equation.
1. NET ASSETS VALUE:

NAV is the change in the net assets value of mutual

fund over a period of time. It is a better measure for comparing the relative
performance of several funds. Return can be calculated by using the formula:

Current value of the units- Previous value of units


Return

-------------------------------------------------------------------

* 100

Previous value of the unit

2.

STANDARD DEVIATION: The standard deviation is a measure of variability

which is used as the standard measure of the total risk of individual assets and the
residual risk of portfolios of assets. This can be calculated by using the formula

59

3. BETA:

The Beta stock or portfolio is a number describing the volatility of an

asset in relation to the volatility of the market benchmark. An asset has a Beta of zero
if its returns change independently of changes in the market's returns. A positive Beta
indicates that the asset's returns generally follow the market's returns (Punithavathy
Pandian, 2006). A negative Beta indicates that the asset's returns generally move
opposite the market's returns.

Beta is calculated by using the formula given below:

4.

SHARPE RATIO: Sharpe measure was developed by William Sharpe are

referred to as the Sharpe ratio. In this ratio, variability of return or risk is measured
by the standard deviation of return. The index assigns the highest values to assets that
have best risk-adjusted average rate of return (Punithavathy Pandian, 2006). The
formula for calculating Sharpe ratio is given below:

60

5. TREYNOR RATIO:

Treynor Ratio, the performance measure developed by

Jack Treynor is referred as Treynor ratio or reward to volatility ratio. In this ratio,
volatility of return as measured by the portfolio Beta (Punithavathy Pandian, 2006).
The formula for calculating Treynor ratio is given below

5. JENSEN RATIO: Jensen Ratio is another type of risk adjusted performance


measure developed by Michael Jensen and referred to as the Jensen measure or
Alpha ratio. This ratio attempts to measure the differential between the actual return
earned on a portfolio and the return expected from the portfolio given its level of risk
(Punithavathy Pandian, 2006). The formula for calculating Jensen ratio is given
below.

61

RESULTS OF ELSS MUTUAL FUND

Results pertaining to return of ELSS mutual fund scheme, Standard deviation,


Sharpe, Treynor, Alpha and Beta of Ten open-ended Tax Saving Mutual Fund
Schemes have been calculated. The study has used government 10 year bond rate as
the risk free rate and BSE Sensex 200 as market benchmark for the study carried out.
RESULTS OF AVERAGE RETURNS

Table 2 :ELSS fund Market return


ELSS FUND
Axis long term equity fund
BNP Paribas Long Term Equity
Fund
Franklin India Tax shield Fund
IDFC Tax Advantage (ELSS) Fund
Reliance Tax Saver Fund
Sundaram Tax saver
Principle tax saving fund
L&T tax advantage fund
Kotak tax saver
HDFC tax saver fund
62

1 year

3
year

5
year

1.32
-1.53

27.81
23.19

19.55
16.09

3.83
-3.16
0.61
4.59
2.7
4.15
0.1
-0.93

24.41
23.13
29.06
20.24
23.4
21.03
21.22
21.07

16
15.03
17.19
12.96
15.3
12.62
11.45
10.56

(Sources: Secondary Data)

Interpretation:
The above table presents the average return of the selected mutual fund schemes.
When it comes to 1 year return Sundaram and L&T are way ahead the others. But as
ELSS has 3 year lock in period we can clearly see Reliance is the best performing
fund with 29.06 % return followed by axis and BNP Paribas. Axis has clearly
outperformed all in terms of return when we talk about long term investment.

RESULT OF STANDARD DEVIATION AND R SQUARE

Table 3 :Standard Deviation and R Square


ELSS FUND
Axis long term equity fund
BNP Paribas Long Term
Equity Fund
Franklin India Tax shield Fund
IDFC Tax Advantage (ELSS)
Fund
Reliance Tax Saver Fund
Sundaram Tax saver
Principle tax saving fund
L&T tax advantage fund
Kotak tax saver
HDFC tax saver fund

Standard
Deviation
14.7

R
squar
e
0.88

15.54
14.63

0.861
0.924

16.78
21.97
17.21
18.63
15.57
17.53
18.21

0.882
0.821
0.91
0.072
0.94
0.94
0.882

(Sources: Secondary Data)


Interpretation:

63

In the above table we can clearly see Franklin India Fund is showing the least
deviation as compared to other Funds. This means that it is not deviating as much as
the benchmark index must be. Whereas the reliance tax saver fund is showing the
highest deviation which literally means it is more volatile than others. Here R square
means that this must of factors are explained by this fund and rest variation must be
due to other factors. L&T tax advantage and Kotak tax saver are the one with high R
square.

Standard Deviation
21.97
17.2118.6315.5717.5318.21
16.78
15.54
14.7
14.63

Figure 14 : Standard Deviation of Funds

(Sources: Secondary Data)

RESULTS OF BETA RATIOS

Table 4: Beta of Funds


ELSS FUND
Axis long term equity fund
BNP Paribas Long Term Equity
64

Beta
0.82
0.86

Fund
Franklin India Tax shield Fund
0.84
IDFC Tax Advantage (ELSS)
Fund
0.94
Reliance Tax Saver Fund
1.19
Sundaram Tax saver
0.98
Principle tax saving fund
0.06
L&T tax advantage fund
0.902
Kotak tax saver
1.01
HDFC tax saver fund
1.02
(Sources: Secondary Data)

Interpretation:
In the above table the we are going to assess the systematic risk as we know that beta
greater than 1 is termed as aggressive which means if Sensex moves 1% then the
stock will move more than 1% and vice versa. Thus Kotak, HDFC and reliance are
termed as aggressive as their beta is high. Whereas the funds with beta less than 1 are
termed as conservative.

Beta1.19

0.82 0.86 0.84 0.94

0.9 1.01 1.02

0.98
0.06

Figure 15 :Beta of Mutual funds


65

(Sources: Secondary Data)

RESULTS OF SHARPE RATIO

Table 5 : Sharp Ratio


ELSS FUND
Axis long term equity fund
BNP Paribas Long Term Equity Fund
Franklin India Tax shield Fund
IDFC Tax Advantage (ELSS) Fund
Reliance Tax Saver Fund
Sundaram Tax saver
Principle tax saving fund
L&T tax advantage fund
Kotak tax saver
HDFC tax saver fund
(Sources: Secondary Data)

Sharp
0.78
0.56
0.55
0.4
0.45
0.27
0.34
0.3
0.23
0.19

In the above table a mutual fund with higher sharp value is considered a superior
fund. Thus we can say Axis long term fund is most superior fund among others and
kotak is the worst performer.
66

0.78

Sharp ratio
0.56 0.55

0.4 0.45

0.27 0.34 0.3 0.23 0.19

Figure 16 : Sharp Ratio

(Sources: Secondary Data)

RESULTS OF TREYNOR RATIO

Table 6 : Treynor Ratio


ELSS FUND
Treynor
Axis long term equity fund
0.14
BNP Paribas Long Term Equity
Fund
0.1
Franklin India Tax shield Fund
0.09
IDFC Tax Advantage (ELSS)
Fund
0.07
Reliance Tax Saver Fund
0.084
Sundaram Tax saver
0.04
Principle tax saving fund
0.95
L&T tax advantage fund
0.05
Kotak tax saver
0.04
HDFC tax saver fund
0.03
(Sources: Secondary Data)

67

Unlike Sharp, Treynor uses the beta in its denominator which takes only the
systematic risk. Thus we can say the fund with higher Treynor ratio implies that the
fund has a better risk adjusted return. Thus we Principle tax saving fund has better
Treynor ratio and BNP Paribas has worst Treynor ratio.

Treynor Ratio

0.95

0.14 0.1 0.09 0.07 0.08 0.04

(Sources: Secondary Data)


-

RESULTS OF JENSENS ALPHA RATIO

68

0.05 0.04 0.03

Table 7 : Jensen Alpha


ELSS FUND

Alpha

Axis long term equity


fund
BNP Paribas Long Term
Equity Fund
Franklin India Tax shield
Fund
IDFC Tax Advantage
(ELSS) Fund
Reliance Tax Saver Fund
Sundaram Tax saver
Principle tax saving fund
L&T tax advantage fund
Kotak tax saver
HDFC tax saver fund

0.1
0.07
0.06
0.05
0.081
0.03
0.04
0.03
0.02
0.018

(Sources: Secondary Data)


Jensen alpha gives us the excess return with respect to expected return. Thus in order
to calculate we usually Regress the Excess return of market and benchmark. Then we
get the regression equation which gives us slope and intercept. The intercept give us
the alpha value which is significant if the T value is greater than 2. Thus in the above
table the highlighted numbers are those whose t value is less than 2. We can clearly
see that Axis is the best fund with greater Treynor ratio.

0.1

Alpha
0.07 0.06

0.08
0.05

69

0.03 0.04 0.03 0.02

0.02

(Sources: Secondary Data)

Objective 3
5.3 To evaluate the outperformance of ELSS (Growth) plans
with other Diversified Equity (Growth) plans.
Diversified Equity Funds These funds invest in equity shares and
hold a diversified equity portfolio and characterized as high risk
high return investments as their returns are linked to the
performance of the stock market. It can be categorized as (a)
Large-cap Funds,
(b) Mid-cap Funds
(c) Small-cap Funds.

(a) Large-cap Funds: These are funds that make investments mainly
in the shares of big companies. The investors prefer to make
investments in these funds as the portfolio consists of well
established companies with high trading volumes and market
capitalization of more than Rs.1000 crores. Examples of large-cap
funds are Franklin India Blue Chip, HDFC Top 200, reliance Growth
Fund and Kotak 30.
(b) Mid-cap Funds: These funds invest in equity shares of medium
sized companies that have a market capitalization between Rs. 500
crore and Rs. 1000 crore and a huge potential to become big.
70

Examples of mid-cap funds are Sundaram BNP Paribas Select Mid


Cap Fund, Franklin India Prima Fund, etc.
(c) Small-cap Funds: These funds invest in equity shares of small
companies with a market capitalization of up to Rs. 500 crore.
Examples are DSPBR Small and Mid-Cap Fund and Sundaram BNP
Paribas Select Small Cap Fund.

Table 8 : Diversified Mutual funds


Diversified equity
fund
Birla Sun life
advantage
Birla sun life equity
DSP black rock focus
25
Franklin India flexi
HDFC capital builder
L&T growth India
Tata ethical fund
Axis equity fund
Kotak opportunities
BNP Paribas

Standard
Deviation

Market
return

R square

18.06
18.04

14.39
13.87

0.903
0.92

16.61
16.27
16.51
18.54
12.1
15.15
15.74
15.08

11.26
14.1
13.38
17.55
13.94
4.32
12.94
14.74

0.891
0.93
0.9
0.86
0.08
0.95
0.94
0.877

(Sources: Secondary Data)

Interpretation:
In the above table we can clearly see the market return of the Diversified equity fund
of the 10 selected open ended growth scheme. The average return given by these
funds are 13% which is lower than the ELSS fund. Also R square is more than the
ELSS which shows it is sync with benchmark index. The major difference between

71

ELSS and Diversified equity fund is that it is being diversified in all the sectors as
compared to ELSS fund .

RANKING OF FUNDS

Table 9 : Ranking of Mutual fund


ELSS FUND
Axis long term equity fund
BNP Paribas Long Term Equity
Fund
Franklin India Tax shield Fund
IDFC Tax Advantage (ELSS) Fund
Reliance Tax Saver Fund
Sundaram Tax saver
Principle tax saving fund
L&T tax advantage fund
Kotak tax saver
HDFC tax saver fund
Diversified equity fund
Birla Sun life advantage
Birla sun life equity
DSP BlackRock focus 25
Franklin India flexi
HDFC capital builder
L&T growth India
Tata ethical fund

Beta

Alph
a

Shar
p

Treyn
or

0.82

0.1

0.78

0.14

0.86
0.84
0.94
1.19
0.98
0.06
0.902
1.01
1.02

0.07
0.06
0.05
0.081
0.03
0.04
0.03
0.02
0.018

0.56
0.55
0.4
0.45
0.27
0.34
0.3
0.23
0.19

0.1
0.09
0.07
0.084
0.04
0.95
0.05
0.04
0.03

2nd
3rd
8th
6th
16th
13th
14th
18th
19th

1.02
1.03
0.94
0.94
0.94
1.03
0.05

0.05
0.04
0.02
0.05
0.04
0.084
0.04

0.385
0.35
0.23
0.41
0.36
0.54
0.53

0.06
0.06
0.04
0.07
0.06
0.098
1.39

9th
11th
17th
7th
10th
4th
15th

72

Rank
1st

Axis equity fund


Kotak opportunities
BNP Paribas

0.88
0.91
0.84

0.03
0.039
0.05

-0.2
0.35
0.48

-0.03
0.06
0.08

20th
12th
5th

(Sources: Secondary Data)

Interpretation:
By comparing the various aspects of these 20 funds, it is being concluded that Axis
long term equity fund is the best performing among the all. The 2 nd best is the BNP
Paribas long term equity fund with a good sharp ratio. Followed by Franklin and
L&T fund. The worst performing is Axis equity fund. One of the reason for the ELSS
for to give superior result is due to their lock in period. As we know the 3 year lock
in period. Thus these fund were stated in 2011 -12 at that benchmark index was
down. After 3 years lock in period the Market was up due to change in government.
As a result we have seen from past few years ELSS has outperformed most mutual
fund schemes.
Objective 4
To understand the investors perception towards their investment in ELSS Tax
savings schemes.
PRIMARY DATA ANALYSIS
An analysis on primary data always produces the exact information about any study.
As such, Investors behaviour has been studied with respect to risk and return of Tax
Saving Mutual Fund Schemes. The details of analysis have been given in this
section.

73

Figure 17 : Age of Respondents


(Sources: Primary Data)

Interpretation:
The above pie chart shows the distribution of the respondents for the survey. We can
clearly see that 75% of the respondents are between the age of 20 40. Rest 25% is
the one above the age of 40. As we can see the maximum investment in a mutual
fund is done by the age group of 31 40.

74

Figure 18 : Gender of Respondents


(Sources: Primary Data)

Interpretation:
The above pie chart shows the gender wise classification of respondents who do
investment. The Gender wise Analysis Interprets that 38.6% Female do investment &
remaining 61.4% Male do invest in mutual funds.

75

Figure 19: Region of Respondents


(Sources: Primary Data)

Interpretation:
The above pie chart shows the region wise distributioon of respondents who do
investments . Clearly 40.9% respondents belongs to west delhi and 45% belong to
other part of the delhi . 13.6% of respondents are those who belongs to NCR region.

76

Figure 20: Occupation of Respondents


(Sources: Primary Data)

Interpretation:
The above pie chart shows the occupation wise distribution of respondents. 44.2% of
the corresponds to private employee who make investment. While 25.6% of the
respondents belongs to business section. 20.9% are the one who works in
government sector. Only 7% of the respondents are the one who are retired.

77

Figure 21: Investment instruments


(Sources: Primary Data)

Interpretation:
The above figure shows the most preferred investment instrument among the
respondents. Mutual fund is the most preferred investment instrument due to low cost
followed by equity and Fixed deposit. The rest investment done by the respondents is
either in gold, PPF and real estate. Very few respondents do their investment in bonds
and debentures.

78

Figure 22: Average Investment Period


(Sources: Primary Data)

Interpretation:
The above pie chart shows us the average investment period in a mutual fund done
by the respondents . It is clearly can be seen that 56.8% respondents prefer long term
investment in order to get their capital appreciated. 25% respondents are those which
invest less than 2 year. While 13.6% are the ones where the investment period is
more than 5 years.

Figure 23: Risk Perception


(Sources: Primary Data)
79

Interpretation:The above pie chart shows a particular risk willingness of respondents who invest in
mutual funds. 25.6% respondents are risk takers in investing in the mutual fund. The
other 60.5% respondents are moderate risk takers who invest in mutual fund. And
remaining 14% respondents are low risk takers who invest in mutual fund.
So by doing the above analysis I found that 25.6% of respondents are ready to take
risks in investing in mutual fund.

Figure 24: Return Expected


(Sources: Primary Data)

Interpretation:The above pie chart shows expected return from investments of respondents who
invest in mutual funds. We found out that there are 20.5% Respondents lying
between 17%-20%, 15.9% Respondents are expecting return upto 12% from
investment. 61.4% respondents are lying between 13% to 16%.
So I found that 61.4% are expecting 13%-16% return from investment.
80

Figure 25: Sources of Information


(Sources: Primary Data)

Interpretation:
The above figure shows the important source of knowledge about the mutual funds
for the respondents.

Surprisingly 52.3% of respondents have chosen financial

advisors as their primary source of any kind of knowledge about mutual funds. It
shows to growing need of financial advisors in this industry. 27.3% respondents
consider bank the most important source of information. The other option can be
advertisements or client references.

81

*
Figure 26: Advantages of Mutual Funds
(Sources: Primary Data)

Interpretation:
The above pie chart shows the different advantages respondents find in investing in
mutual funds. 24.2 % respondents thinks that low cost is one of the factor which
drives people towards mutual funds. 20.2% feels the flexible nature of the mutual
fund is the reason behind its investment. It is followed by liquidity and
diversification.

82

Figure 27: Objectives for Mutual Funds


(Sources: Primary Data)

Interpretation:
When it comes to objectives, 33.9% of the respondents have stated capital
appreciation as one of the reason of choosing mutual fund as their option. 32.2 %
has chosen Tax saving as their objective for the investment in ELSS mutual fund.
22% consider the return as their objective for investment.

83

CHI SQUARE TEST

The chi-square test for independence, also called Pearson's chi-square test or the
chi-square test of association, is used to discover if there is a relationship between
two categorical variables.

1. Null hypothesis: The age of the investor and risk willingness are independent
of each other.
2. Null hypothesis: The age of the investor and expected return from the
investment are independent of each other.
3. Null hypothesis: The age of the investor and knowledge related to mutual
funds are independent of each other.
4. Null hypothesis: The age and gender of the investor are independent of each
other.
5. Null hypothesis: Income of the individual investor and annual investment in a
mutual fund are independent of each other.

84

1. Null hypothesis: The age of the investor and risk willingness are
independent of each other.

Case Processing Summary


Cases
Valid
Missing
N
Percent
N
Percent
1) Age * 14) How
much risk are you
willing to take?

44

100.0%

Total
N
Percent

0.0%

44

100.0%

Table 10 : Case Processing Summary


(Sources: Primary Data)

Chi-Square Tests
Value
Pearson Chi-Square
Likelihood Ratio
Linear-by-Linear
Association
N of Valid Cases

df

Asymp. Sig. (2-sided)

12.627a
12.647

6
6

.049
.049

5.308

.021

44
Table 11 : Chi Square tests
(Sources: Primary Data)

Symmetric Measures
Value
Nominal by
Nominal
N of Valid Cases

Approx. Sig.

Phi

.536

.049

Cramer's V

.379
44

.049

Table 12 : Case Processing Summary


(Sources: Primary Data)

85

Interpretation:
Here we are trying to find the association between age and risk willingness of the
respondents. In order to find out this we have used chi square test. In all total 44
respondents responses were carried out. Firstly we can see that our P value is less
than .05. This means we will not accept the null hypothesis which says that both are
independent of each other. Thus we can say age and risk are associated with each
other. Now in order to find out the how strong the association is we have used Phi
and Cramer test. This test gives us the how strong the relationship is between the two
factors. .536 is the value which is telling us the association about the variables.

2. Null hypothesis: The age of the investor and expected return from the
investment are independent of each other.

Case Processing Summary


Cases
Valid
N

Percent

Missing
N

Percent

Total
N

Percent

100.0%

0.0%

44

100.0%

1) Age * 15)How much


return do you expect from 44
your investment?
Table 13 : Case Processing Summary
(Sources: Primary Data)

Pearson Chi-Square
Likelihood Ratio

Value
17.243a
17.092

df
9
9

Asymp. Sig. (2-sided)


.045
.047

86

Linear-by-Linear

7.137

Association
N of Valid Cases

.008

44
Table 14 : Chi Square test
(Sources: Primary Data)

Symmetric Measures
Nominal by Nominal

N of Valid Cases

Phi
Cramer's V

Value
.626
.361

Approx. Sig.
.045
.045

44

Table 15 : Symmetric Measures


(Sources: Primary Data)

Interpretation:
Here we are trying to find the association between age and return expected by the
respondents. In order to find out this we have used chi square test. In all total 44
respondents responses were carried out. Firstly we can see that our P value is less
than .05. This means we will not accept the null hypothesis which says that both are
independent of each other. Thus we can say age and return expected by the
87

respondents are associated with each other. Now in order to find out the how strong
the association is we have used Phi and Cramer test. This test gives us the how strong
the relationship is between the two factors. .626 is the value which is telling us the
association about the variables

3. Null hypothesis: The age of the investor and knowledge related to mutual
funds are independent of each other.

Case Processing Summary


Cases
Valid

Missing

88

Total

Chi-Square Tests
Value
Pearson Chi-Square
2.706a
Likelihood Ratio
4.038
Linear-by-Linear Association .050
N44
N of Valid Cases
1) Age * 11) What is the 44
source

of

df

Asymp. Sig. (2-

9
9
1
Percent
100.0%

sided)
.975
.909
.823
N
0

information

regarding tax saving mutual


funds ?

Percent
0.0%

Percent

44

100.0%

Table 17 : Chi Square Test


(Sources: Primary Data)

Table 16 : Case
Processing Summary
(Sources: Primary Data)

Symmetric Measures
Value
Nominal by Nominal

Approx. Sig.

Phi

.248

.975

Cramer's V

.143

.975

N of Valid Cases

44

Table 18 : Symmetric Measures


(Sources: Primary Data)
Table 19: Case
Processing Summary

1. Null hypothesis: The age and gender of the investor are independent

of each other
Interpretation:
Here we are trying to find the association between age and
source of information by the Case
respondents.
InSummary
order to find out
Processing
this we have used chi square test. In all total 44 Cases
respondents
responses were carried out. Firstly we can see that our P value
Valid
Missing
Total
is more than .05. This means we will accept the null
N
N
Percent
Percent
hypothesis which says that
bothPercent
are independent
of each
other. N
1) Agewe
* 2)can
Gender
44
100.0% by the 0
0.0%
44
100.0%
Thus
say age and return
expected
respondents
(Sources: Primary Data)
are associated with each other. Now in order to find out the
how strong the association is we have used Phi and Cramer
test. This test gives us the how strong the relationship is
between the two factors. .248 is the value which is telling us
Chi-Square
Tests
the
association
about the variables . This supports our null
Value
Df
Asymp. Sig.
hypothesis theory.
Pearson Chi-Square
Likelihood Ratio
Linear-by-Linear

3.367a
3.361
2.051

(2-sided)
.338
.339
.152

3
3
1

Association
89

N of Valid Cases

44
Table 20: Chi Square Test
(Sources: Primary Data)

Symmetric Measures

Nominal

by Phi

Nominal
N of Valid Cases

Value

Approx.

.277

Sig.
.338

Cramer's V .277
44

.338

Table 21 : Symmetric measures


(Sources: Primary Data)

Interpretation:
Here we are trying to find the association between age and gender of information by
the respondents. In order to find out this we have used chi square test. In all total 44
respondents responses were carried out. Firstly we can see that our P value is more
than .05. This means we will accept the null hypothesis which says that both are
independent of each other.
Thus we can say age and return expected by the respondents are associated with each
other. Now in order to find out the how strong the association is we have used Phi
and Cramer test. This test gives us the how strong the relationship is between the two
factors. .338 is the value which is telling us the association about the variables. This
supports our null hypothesis theory.

4. Null hypothesis: Income of the individual investor and annual investment


in a mutual fund are independent of each other.

90

Case Processing Summary


Cases
Valid
N

Missing

Percent

Total

Percent

Percent

6) What is your Annual


Income ? * 10) What was
your investment in tax

44

100.0%

0.0%

44

100.0%

saving Mutual Fund scheme


in the past?

Table 22 : Case Processing Summary


(Sources: Primary Data)

Chi-Square Tests
Value

df

Asymp. Sig. (2sided)

29.666a

15

.013

Likelihood Ratio

30.184

15

.011

Linear-by-Linear Association

10.054

.002

Pearson Chi-Square

N of Valid Cases

44
a. Table 23 : Chi Square Tests

(Sources: Primary Data)

Factor analysis:
Factor analysis attempts to identify underlying variables, or factors, that explain the
pattern of correlations within a set of observed variables. Factor analysis is often
91

used in data reduction to identify a small number of factors that explain most of the
variance observed in a much larger number of manifest variables. Factor analysis
can also be used to generate hypotheses regarding causal mechanisms or to screen
variables for subsequent analysis.
Factors to be examined:

Risk
Dividend Earned
Capital preservation
Tax saving
Expense ratio
Transparency
Liquidity
Performance

KMO and Bartlett's Test


Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
Approx. Chi-Square
Bartlett's Test of Sphericity

df

.498
83.856
45

Sig.

.000

Table 24: KMO and Bartlett's Test

92

(Sources: Primary Data)

Interpretation:
The above KMO test gives us the factor analysis result since the P value is less
than .05 thus we can say it is statistically significant. The value of KMO is .498.

Communalities
Initial

Extraction

Risk

1.000

.792

Dividend Earned

1.000

.573

Capital preservation

1.000

.722

Transparency

1.000

.758

Liquidity

1.000

.739

Reputation of the company

1.000

.916

Lock in period

1.000

.805

Tax saving

1.000

.712

Volatility

1.000

.828

Expense ratio

1.000

.499

Performance

1.000

.571

Table 25: Communalities


(Sources: Primary Data)

Interpretation:
Initial communalities are estimates of the variance in each variable accounted for by
all components or factors. Extraction communalities are estimates of the variance in
each variable accounted for by the factors (or components) in the factor solution.
93

Small values (red) indicate variables that do not fit well with the factor solution, and
should possibly be dropped from the analysis

94

Figure 28 : Variance Explained


(Sources: Primary Data)

Now the above table explain us the Total variance explained by the components
selected. Clearly we can see that we have components which can explain 67.932 %
of the variance cause. Now as stated earlier in communalities we will drop the factors
which are redundant. Thus we have a new result as follows:

KMO and Bartlett's Test


Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
Approx. Chi-Square
Bartlett's Test of Sphericity

.440
25.469

df

10

Sig.

.005

Table 26: KMO and Bartlett's Test


(Sources: Primary Data)

95

Communalities
Initial

Extraction

Risk

1.000

.754

Capital preservation

1.000

.795

Transparency

1.000

.887

Liquidity

1.000

.831

Volatility

1.000

.790

Table 27: Communalities


(Sources: Primary Data)

96

Figure 29 : Variance Explained


(Sources: Primary Data)

Interpretation:
After removing the redundant factors we can see the total variance explained by three
components is equivalent to 81% which is really good .Thus these three components
are which are explaining the reason .

Rotated Component Matrixa


Component
1

Risk

3
.725

Capital preservation

.812

Transparency

.940

Liquidity

.878

Volatility

.881

Table 28: Rotated Matrix


(Sources: Primary Data)

Interpretation:
When trying to interpret the first factor, we can see that all variables that measure
factors associated with mutual fund in one way or another (red) are highly correlated
with this factor.

97

Chapter-6

Findings

98

Chapter 6
Findings

The findings of the study are divided into two sections. The first section presents the
findings of an analysis of secondary data (10 growth oriented Tax Saving Mutual
Fund Schemes and 10 Diversified equity fund in India). The second section depicts
the findings of the analysis of survey data.

Findings based on Secondary Data


We have taken 20 open-ended Tax Saving Mutual Fund Schemes and diversified
mutual fund scheme for a period of 5 years starting from 1st January 2011 to 2015.
Risk and return of all these have been analysed in this study and the findings are
given below.
The ELSS mutual fund has given a superior return during the period of 2011 2015 when it comes to 3 years as compared to other mutual fund scheme.
The average standard deviation of more than 80% of the fund is less than that
of the benchmark index.
99

70% of the mutual funds taken together have a beta value less than 1 which
shows that the funds are conservative.
The average Beta value comes out to be .8601
The average Sharp, Treynor & Alpha value comes out to be .375, .174 and .
047.
The average Sharpe values for 99 percent open-ended Mutual Fund Schemes
were found positive.
The average Treynor values for 99 percent Mutual Fund Schemes were found
positive.
The average Jensens alpha values for 75 percent Mutual Fund Schemes were
found positive.
It is found that, Axis long term equity fund (ELSS) , BNP Paribas Long Term
Equity Fund(ELSS), Franklin India Tax shield Fund(ELSS), L&T growth
India fund and BNP Paribas have performed well with high difference in
expectation and actual return.

Findings based on Primary Data


Investors behavior has been studied on the findings of the primary data analysis are
given below:

It is found that most of the people prefer to invest in mutual funds rather than
stocks, PPF and other investment instruments.
The main reason behind the investment in Mutual funds is due to Low cost
which is the major factor in driving the respondents towards the investment.
The second major factor is Diversification and Tax saving which help the
people to make their investment less risker and provide savings on tax.

100

More than 50% of the respondents have started consulting financial advisors
on their financial needs which is a good sign for the industries.
More than 60%of the respondents expects return from these between 13% 17% showing the healthy sign for the industry in future.
56.8% respondents prefer long term investment in order to get their capital
appreciated as the demand of return is higher

60.5% respondents are moderate risk takers who invest in mutual fund which
is the main reason behind respondents dont invest in stocks.
There is no significant association between Age and gender while making
investment.
There is an significant association between age and the return expected.
There is high correlation between annual income and the amount invested by
the investor.
There is no significant association between Age and knowledge about mutual
fund.

101

Chapter-7

Recommendations

102

Chapter 7
Recommendations

Based on the findings of the study, the following recommendation are made
1. It is found that majority of the schemes have performed very well
immediately by their launch. Hence, it is suggested to the Asset management
companies, to adopt the powerful marketing and better investment strategies
to perform well in all the time.
2. It is found that there is a significant association between investment and
demographic features of respondents such as age, annual income, and
occupation. Thus, it is suggested that the Asset Management companies may
launch the new Tax Saving Mutual Fund Schemes with different benefits to
attract the different category of investors.
3. Investors judge mutual fund schemes on the basis of their characteristics as
structure, size, performance, status and professional expertise. Therefore,
mutual fund companies should emphasize strong points of their schemes
regarding these characteristics.
4. As transparency is one of the major factor which impact Investor while
making investment. Companies should impart proper information of all
investment tools in respect with the features attached to the product. So that
investors who do not have sufficient amount of investible money may also
avail the investment facility .
103

5. The companies should invest heavily in creating awareness about the Elss
fund in order to tackle the other segment also.

References

104

References

Yang, Z. and Fang, Z. (2004), Online service quality dimensions and their
relationships with satisfaction: a content analysis of customer reviews of
securities brokerage services, The International Journal of Bank
Marketing, 15(3), pp. 302-326

Zineldin, M. (2000), "Beyond Relationship Marketing: Technological ship


Marketing, Marketing Intelligence and Planning, 18 (1), pp. 9-23.

Websites:

www.aon.com/india accessed on 10-02-2010

www.bankers.asn.au/Consumers/Financial-LiteracyProgram/Booklets/Smarter-Banking accessed on 18-10-2009

105

Annexures

106

Annexure A

QUESTIONNAIRE
Study on debt instruments

Name
Age

21-30
31-40
41-60
more than 60

107

Gender

Male
Female

Region

West Delhi
South Delhi
East Delhi
North Delhi
NCR

Occupation

Government Service
Private service
Business
Retired

If Service, No. of years of experience

1 year
2-5 year
6-10 year
More than 10 year

What is your annual income?

Less than 2 Lakhs


2-5 Lakhs
108

6-10 Lakhs
More than 10 lakhs

Which investment instrument do you prefer ?

Bonds/ Debentures
Mutual Funds
Equity
PPF
Gold
Real estate
Fixed deposits
Other

You have invested in which type of mutual fund

Equity Fund
Debt Fund
Hybrid Fund

Are you aware of tax saving mutual fund?

Yes
No

If yes have you invested in tax saving mutual fund scheme?

Yes
No

109

If yes, how long you have been investing in Tax Saving Mutual Funds schemes?

Less than 1 year


2 - 4 years
5 - 7 years
More than 7 years

What was your investment in tax saving Mutual Fund scheme in the past?

Less than 50000


50000 100000
100000 150000
150000 200000
200000 300000
More than 300000

What is the source of information regarding tax saving mutual funds?

Financial Advisors
Client references
Advertisements
Banks
Others

How frequently do you invest?

Monthly
110

Quarterly
Half Yearly
Yearly

What is your average investment period In Mutual Fund?

Less than 12 months


12 months 2 year
2 - 5 years
More than 5 years

How much risk are you willing to take?

Low
Moderate
High

How much return do you expect from your investment?

Upto 12%
13% - 16%
17% - 20%
More than 21%

Do you get influenced by the returns given by a mutual fund?

Yes
No

Do you get influenced by the name of company promoting mutual funds?

111

Yes
No

What are the prime objectives of you choosing mutual funds as an investment
option?

capital preservation
Retirement Protection
Secure Income
Tax Savings
Risk covering
High return

What advantages do you find when you invest in Mutual Funds?

Diversification
Low Cost
Professional Management
Liquidity
Transparency
Flexibility
Choice of schemes
Tax savings

Kindly choose the factors that you have considered before making investment in tax
saving Mutual funds.
Please rank them on a scale of 1-5 with 1 representing Highly Satisfied and 5
representing Highly Dissatisfied.

112

Risk

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree
Dividend Earned

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree

Lock in Period

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree
\Capital Preservation

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree
Tax savings

Strongly agree
Agree
Partly agree
113

Disagree
Strongly disagree

Volatility

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree
Expense ratio

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree

Performance

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree
Reputation of Company

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree

114

Transparency

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree
Liquidity

Strongly agree
Agree
Partly agree
Disagree
Strongly disagree

115