Journal Press India®

Performance of Mutual Funds in Indian Context: Evaluation Market Timing Ability and Stock Selection Skills of the Fund Manager

Vol 20 , Issue 2 , July - December 2019 | Pages: 67-78 | Research Paper  

https://doi.org/10.51768/dbr.v20i2.202201907


Author Details ( * ) denotes Corresponding author

1. Srinivas Bandi, Professor, Finance, ISBR, Bangluru, India
2. * Purnima Gupta, Assistant Professor, XIME, India (guptapurnima123@yahoo.com)

Purpose: Mutual funds are the investment vehicles that provide a platform for the investors who would want to invest in the equity or debt market but do not have the financial expertise or time to analyze and select the securities. Mutual funds pool money from the investors and invest the corpus in different securities according to the objectives of the respective mutual funds. The advantages that investors get by putting their money in the mutual funds range from professional management of their funds, low costs, liquidity, low start up investment, choice of schemes, flexibility, and diversification.  Evaluation of the performance of mutual funds and the fund manager’s ability to time the market have been a subject of discussion ever since the inception of mutual funds. This paper attempts to evaluate the performance of selected mutual funds of three private asset management companies in India. The funds have been analyzed in terms of their risks and return per unit of risk. Also, the fund manager’s ability to time the market has been analyzed using the Treynor-Mazuy and Fama Selectivity model.

Design/Methodology/Approach: The study is descriptive in nature. The data used for the study is secondary, taken from various national and international sources relevant to the study.

Findings: From the present study, we have come to the conclusion that “HDFC FMP 793D February 2014 (1) - Direct Option-Flexi Option”, “HDFC FMP 793D February 2014 (1) - Direct Option-Growth Option”, and “HDFC FMP 1175D January 2014 (1) - Regular Option-Growth Option” have performed better in terms of their excess returns per unit of total risk and Jensen’s alpha. Also, the fund managers of these three funds have displayed superior security selection skills as indicated by their Fama Index. The market timing skills of the fund managers is reflected in “Axis Hybrid Fund - Series 5 (1346 Days) - Direct Plan – Growth” and “Axis Hybrid Fund - Series 7 (1305 Days) - Regular Plan – Growth”

Research Limitations: The data taken is past data of 10 closed ended funds, hence, generalization for all other funds or to the future is not applicable.

Practical Implications: The study attempts to evaluate the market timing and security selection abilities of the fund managers based on the past data.

Originality/Value: This paper is based on an independent analysis of mutual funds by the researcher. The findings are the researchers’ own evaluations.

Keywords

Mutual Funds, Market Timing, Security Selection, Performance Evaluation.

  1. AMFI. (2019). Closed ended mutual funds. Retrieved from https://www.amfiindia.com/nav-history-download, Accessed on December 10, 2019.
  2. Chander, R. (2002). An evaluation of portfolio components across fund characteristics. Finance India, 26(4), 1377-1391.
  3. Fama, E. F. (1972). Components of investment performance. Journal of Finance, 27(3), 551-567. 
  4. Gupta, A. (2000). Investment performance of Indian mutual funds: An empirical study. Finance India, XIV(3), 833-866.
  5. Hasan, M. B., & Ahsan, A. F. M. M. (2016). Can mutual funds outguess the market? Evidence from Bangladesh. Journal of Finance and Accounting, 4(1), 11-19. 
  6. Jensen, M. C. (1967). The performance of mutual funds in the period 1945-1964. The Journal of Finance, 23(2), 389-416.
  7. Masiperiyannan, S., & Mohanamani, P. (2016). Performance evaluation of selected open-ended mutual funds in India. IJBMI, 5(11), 136-142.
  8. Prasad, R. S., & Srinivas, B. (2012). Market timing abilities of equity fund managers. Zenith International Journal of Business Economics and Management Research, 2(1), 161-170.
  9. Rao, K. V., & Venkateshwarlu, K. (2000). Market timing abilities of fund managers- A Case study of Unit trust of India in UTI Institute of Capital Market and Tata Mc Graw Hill published Indian Capital Markets- trends and Dimension, 55-66.
  10. Sharpe, W. F. (1966). Mutual fund performance. The Journal of Business, 39(1), 119-138.
  11. Treynor, J. L. (1965). How to rate management of investment funds. Harvard Business Review, 43(1), 63-75.
  12. Treynor, J. L., & Mazuy, K. K. (1966.) Can mutual funds outguess the market. Harvard Business Review, 44(4), 131-136.
  13. Tripathy, N. (2006). Market timing abilities and mutual fund performance - An empirical investigation into equity linked saving schemes. Vilakshan -XIMB Journal of Management, 3(2), 127-138.
  14. Zaheeruddin, M., Sivakumar, P., & Reddy, K. S. (2013). Performance evaluation of mutual funds in India with special reference to selected financial intermediaries. IOSR Journal of Business and Management, 7(2), 34-40.
Abstract Views: 51
PDF Views: 397

Advanced Search

News/Events

Indira School of Bus...

Indira School of Mangement Studies PGDM, Pune Organizing Internatio...

Indira Institute of ...

Indira Institute of Management, Pune Organizing International Confe...

D. Y. Patil Internat...

D. Y. Patil International University, Akurdi-Pune Organizing Nation...

ISBM College of Engi...

ISBM College of Engineering, Pune Organizing International Conferen...

Periyar Maniammai In...

Department of Commerce Periyar Maniammai Institute of Science &...

Institute of Managem...

Vivekanand Education Society's Institute of Management Studies ...

Institute of Managem...

Deccan Education Society Institute of Management Development and Re...

S.B. Patil Institute...

Pimpri Chinchwad Education Trust's S.B. Patil Institute of Mana...

D. Y. Patil IMCAM, A...

D. Y. Patil Institute of Master of Computer Applications & Managem...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management International Conference on ...

By continuing to use this website, you consent to the use of cookies in accordance with our Cookie Policy.