Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
Evaluating the Performance of Indian Mutual Funds
Schemes: Macroeconomic Factors as Performance
Indicators
1
Noor Basha Abdul and 2K.Sarvani
Like any purchase decision, the selection of a mutual fund scheme should be
based on the expectations of the investors and the funds' ability to fulfill these
goals. Just like common stocks, the performance of equity mutual funds is
affected by the macroeconomic factors as well as investor sentiment. The present
study investigates the effect of macroeconomic variables on mutual fund
schemes, in terms of returns and volatility of returns. Correlation technique is
applied in order to find the correlation between select mutual funds annualized
returns and macro economic factors like inflation rates, interest rates, GDP annual
growth rate and Government 10 year Bond. The data used in the study was the
yearly rates of different selected macroeconomic variables over the period
October '04 - October '14. The yearly annualized returns of sample mutual fund
schemes over the same period are considered for the analysis. Sharpe and
Treynor ratios are applied to evaluate the benchmark characterisitics of a
fund. This research would enable investors to understand the specific risk factors
affecting their investments, so that they can take more informed investment
decisions pertaining to mutual funds. The outcome of the research is that The
outcome of the research is that the annualized returns of select mutual fund
schemes are influenced by macro economic factors. The researchers found that
there is both positive and negative correlation between the macro economic
variables and annualized returns of select mutual fund schemes. We can conclude
saying that by using Sharpe and Treynor ratios, it is found that many companies
are able to minimize diversifiable and market risks.
Key words: Macroeconomic variables, Performance Evaluation, Diversifiable risk,
Market Risk.
Introduction
Mutual fund is a trust that pools the money of the investors and invests it in the
marketable securities. The capital appreciation, thus generated is distributed among
the unit holders in proportion of the units held by them. Through mutual funds,
investors get the benefit of diversification, professional management of their money,
convenient administration, low cost and many more. Like any purchase decision, the
selection of a mutual fund scheme should be based on the expectations of the
investors and the funds' ability to fulfill these goals. It is important to be clear about
the investor’s investment objective before taking a buying decision. There are certain
criteria on the basis of which the performance of a mutual fund can be assessed
such as NAV, portfolio turnover, risk and return as well as various expense ratios
like Sharpe ratio, Beta Ratio, etc.
__________________________________________
1
Dr. Noor Basha Abdul, Professor of Commerce, Acharya Nagarjuna University, Guntur, India
K.Sarvani, Asst. Professor of Commerce, Maris Stella College, Vijayawada, India
2
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
Performance of the mutual fund is measured by the Net Asset Value. Since
market value of securities changes every day, NAV of a scheme also varies on day
to day basis. The NAV per unit is the market value of securities of a scheme divided
by the total number of units of the scheme on any particular date. Unlike stocks,
where prices are moved by the supply and demand forces of the marketplace, fund
prices are determined by the value of the underlying securities in the fund. It is also
evident that, like common stocks, the performance of mutual funds is affected by the
macroeconomic factors as well as investor sentiment. Since mutual funds are
portfolios of stocks, they can minimize individual stock risk. This makes mutual
funds very attractive to investors that do not have enough money to create their own
portfolio of stocks.
The performances of Mutual funds are influenced by the performance of the
stock market as well as the economy as a whole. Equity Funds are influenced to a
large extent by the stock market. The stock market in turn is influenced by the
performance of the companies as well as the economy as a whole. The performance
of the sector funds depends to a large extent on the companies within that sector. In
fact, bond-funds are influenced by interest rates and credit quality. As interest rates
rise, bond prices fall, and vice versa. Similarly, bond funds with higher credit ratings
are less influenced by changes in the economy .All external and internal factors
influences any day’s NAV. For a say, corporate actions get reflected in that day's
NAV. So, the dividend from a company whose stock is in the portfolio gets factored
in the NAV. Similarly, the change in daily price may be due to periodic dividend,
bonus, rights, splits or the impact of a merger or a demerger which is reflected in
the NAV the very day it gets into effect or is actualized. External factors like interest
rates, inflation, GDP Annual growth rates, Government 10 year Bond, CNX nifty
index, unemployment rate etc, influences the movements of daily NAV’S.
Capital market theory provides a reasonable basis for measuring the
performance of any investment organization. The performance of mutual funds may
be evaluated by comparing the performance of funds vis-à-vis a benchmark
portfolio. These measures provide methods of comparing the risk adjusted returns
of a portfolio or with benchmarks (indices). In finance, standard deviation is applied
to the annual rate of return of an investment to measure the investment's volatility.
2. OBJECTIVES OF STUDY
On the basis of rationale of the study and literature review, objectives of present study are:
1. To study about the macro economic factors influencing the movements of select
equity mutual fund schemes in India.
2. To investigate the most influencing macroeconomic factor affecting the
performance of select equity mutual funds in India.
3. To appraise the performance of mutual funds with regard to risk-return
adjustment, the model suggested by Sharpe and Treynor.
4. To identify whether the mutual funds are able to provide reward to variability and
volatility and to rank the performance based on variability and volatility.
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
3. REVIEW OF LITERATURE:
 Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance
(Jensen’s alpha) that estimates how much a manager’s forecasting ability contributes to
fund’s returns.
 Sharpe (1966) suggested a measure for the evaluation of portfolio performance. Drawing
on results obtained in the field of portfolio analysis. Economist Jack L Treynor suggested
a new predictor of mutual fund performance, one that differs from virtually all those used
previously by incorporating the volatility of a funds return in a simple yet meaningful
manner. Jensen (1967) derived a risk adjusted measure of portfolio performance (Jensen
alpha) that estimates how much a manager’s forecasting ability contributes to a fund’s
returns.
 Fama (1981, 1982) and many other research studies like Fama and Schwert (1977),
Gallagher and Taylor (2002), Geske and Roll (1983) empirically found that stock returns
are negatively affected by both expected and unexpected inflation. The changes in macro
environment factors including a stronger rupee, shrinking current account deficit and a
constructive view on Consumer Price Index (CPI) inflation will also promote the fund’s
performance.
 Campbell (1987), French et al (1987) Fama and French (1989), Balvers et al(1990),Been,
Glosten and Jaganthan (1990) have showed empirical evidence that macro economic
variables can predict the market returns. With both pulls and pressures on rates, markets
are expected to be volatile. The objective of the researcher is to evaluate the effects of
various economic factors influencing NAVs of Indian Mutual Funds.
 Burmeister et al (1986-88) used a set of multi index models based on a priori
hypothesized set of macroeconomic variables .They found that five variables were
sufficient to describe the return on securities. Along with the growth of GDP, if inflation
also increases, then the real rate of growth of economy would be very little. The demand
in the consumer product industry is significantly affected.
 Marshall (1992) also finds that negative effect of inflation on stock return is generated by
real economic fluctuations, by monetary fluctuations or changes in both real and
monetary variables
 Mohinder N. Kaura and Jayadev.M (1995), in their paper entitled, “Performance of
Growth Oriented Mutual Funds: An Evaluation”, have empirically examined the
performance of five growth oriented Mutual Funds during the accounting period 1993 to
1994. This paper used the methodology which was derived by Jensen, Treynor, Sharpe
and Fama. The paper concluded that growth oriented Mutual Funds possibly
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
outperformed the market with respect to systematic risk and exceptionally demonstrate
the superior performance in terms of total risk.
 Michael C. Jensen (2005) conducted a study on the performance of mutual funds. The
study that estimates how much a manager's forecasting ability contributes to the fund's
returns. The study is based on the theory of the pricing of capital assets by Sharpe, Linter
and Treynor. The studies consist of 115 mutual funds as a sample.
Ippolito (1989) finds that there is no significant relationship between performance, after
expenses turnover and investment fees.
 Soumya Guha Deb Icfai University Press 2008 Vol.14 No.8 “performance of Indian
equity Mutual funds Vis-a-Vis their style benchmarks” has suggested that in her
evaluation of fund managers performance found that Indian equity fund managers have
not been able to beat their style benchmarks (William Sharpe ratio) on the average and
pointed out the weaknesses of fund managers.
 As per the recent study, Dash and Dinesh Kumar (2008) examined the impact of
macroeconomic variables such as exchange rate, inflation rate, oil price, interest rate and
market return by observing high volatility in Indian financial markets, the results
indicated that return and variance of some of the funds return is affected by
macroeconomic variables, and also 35.29% of the desired funds were not sensitive to any
of the macroeconomic variables.
 The macroeconomic factors like unemployment factor also considered for evaluating the
performance of mutual funds. Singh et al. (2011) in their study found that the
unemployment rate, inflation and money supply have a negative relationship with stock
return for all six portfolios of large and medium companies, and on the other hand, GDP
and exchange rate have a positive relationship with stock return. The macro economic
variables impact on performance of mutual funds varies as per the investment objective
of the schemes. An equity mutual fund scheme is more influenced by economic factors
like inflation rate, GDP, and exchange rates. Whereas macro economic factors like
interest rates and money supply influences the performance of the debt mutual funds
schemes.
 Sachchidanand Shukla (2011) has found a few macro economic variables to be more
important than others. Expectedly, for Gilt, Liquid and Money market funds, money
supply and interest rates have an important bearing on the result. Thus for Balanced
growth funds the macro economic variables that are most important are Money supply,
10 year G-Sec and FII flows.
 Ravi Vyas and Suresh Chandra Moonat (2012) Indian Journal of Finance, Vol. 6 No. 8,
“Perception and behavior of Mutual Funds Investors in Madhya Pradesh” concluded that
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
the highly volatile funds are risky and therefore the fund manager should collect all
possible information before making an investment. A careful and reasonable
diversification of investment in mutual funds should be done on the investor’s part to
balance the risk involved in investment. And suggested that investors should inculcate the
habit of saving regularly so, that the little savings will grow into a big returns.
 Prajapati & Patel (2012) studied on performance evaluation of mutual fund schemes of
Indian companies is carried out through relative performance index, risk-return analysis,
Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's measure, and Fama's measure..
The study found that that most of the mutual fund have given positive return during 2007
to 2011.
 Poonam M Lohana (2013) studied on performance evaluation of selected mutual funds of
india based on risk-return relationship models and measures: Treynor ratio, Sharpe ratio,
Jensen's alpha. The study found that Returns of all funds are more than market index
returns, but not high.
 Therefore it is clear that analyzing the macro economic factors is essential to understand
the behavior of the mutual fund unit prices. The economic variables like GDP, inflation
,interest rates, and Government 10 Year Bond rates were chosen by the researchers for
the study to evaluate the performance of mutual funds using NAV’s and the macro
economic factors. To evaluate the performance of mutual funds Sharpe Ratio and
Treynor ratios are applied to find the reward to the volatility and risk to the mutual funds
schemes.
4. RESEARCH METHODOLOGY:
In India, there are 398 equity mutual funds listed in a stock exchange which includes
diversified, sectoral and thematic funds. Out of these funds, randomly 24 fund schemes were
chosen randomly for research using simplified random sampling .The fund category of the
sample funds are open ended equity: Large cap, Large & Mid Cap, Mid & Small Cap and
Tax Planning. The mutual fund schemes listed for the past 10 years i.e. from 2005 to 2014
were chosen for research. Sharpe and Treynor ratios were applied to find the relationship of
select annualized returns of mutual fund schemes in terms of variability and volatility of
returns. The macro economic variables selected for the research are inflation rates, interest
rates, GDP annual growth rate and Government 10 year Bond. The annualized returns data of
select mutual funds was collected from value research online website .The data relating to
inflation rates, interest rates, GDP annual growth rate and Government 10 year Bond was
collected from trading economics website. Karl Pearson’s correlation technique was applied
to find out whether there is a correlation between macro economic factors and annualized
returns of select mutual fund schemes. The relation between the variables was explained
using the range as follows:
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
-1.0 to -0.8
-0.8 to -0.5
-0.5 to 0.0
0.0 to 0.5
0.5 to 0.8
0.8 to 1.0
:
:
:
:
:
:
Strong Negative Correlation
Moderate Negative Correlation
Weak Negative Correlation
Weak Positive Correlations
Moderate Positive Correlation
Strong Positive Correlation
ANALYSIS AND RESULTS:
Table no : 1 :
Macroeconomic factors affecting the performance of select Equity Mutual Funds in India.
Correlation of
Interest Rate
Vs Returns
Correlation of
GDP Annual
Growth Vs
Returns
Correlation of
Govt. Bond 10
Yrs Vs Returns
Name of the Fund
Category
Correlation of
Inflation Vs
Returns
UTI Mastershare Fund
Large Cap
-0.108
-0.332
0.383
0.384
-0.128
-0.348
0.379
0.388
-0.060
-0.427
0.310
0.348
HDFC Long Term
Advantage Fund
Tax
Planning
Tax
Planning
BNP Paribas Equity Fund
Large Cap
-0.306
-0.185
0.478
0.402
HDFC Index Fund Sensex Plus Plan
Large Cap
-0.148
-0.394
0.427
0.329
UTI Equity Fund
Large Cap
-0.055
-0.401
0.330
0.355
Large Cap
-0.182
-0.366
0.481
0.328
Large Cap
-0.122
-0.415
0.419
0.329
SBI Magnum Equity Fund
Large Cap
-0.184
-0.348
0.481
0.342
Franklin India Prima Fund
M&S
Cap
-0.083
-0.355
0.298
0.378
Large Cap
-0.187
-0.340
0.435
0.357
L&M
Cap
-0.072
-0.391
0.331
0.358
Tata Tax Saving Fund
Tata Pure Equity Fund Plan A
Franklin India Bluechip
Fund
ICICI Prudential Top 100
Fund - Regular Plan
HDFC Capital Builder
Fund
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
Franklin India Taxshield
Fund
Franklin India Prima Plus
Fund
Birla Sun Life Frontline
Equity Fund
ICICI Prudential Tax Plan Regular Plan
M&S
Cap
Tax
Planning
L&M
Cap
L&M
Cap
Tax
Planning
HDFC Top 200 Fund
Large Cap
SBI Emerging Businesses
Fund
Canara Robeco Equity Tax
Saver Fund - Regular Plan
SBI Magnum Multiplier
Plus Scheme
ICICI Prudential Dynamic
Fund - Regular Plan
M&S
Cap
Tax
Planning
L&M
Cap
L&M
Cap
M&S
Cap
UTI Mid Cap Fund
SBI Magnum Global Fund
ICICI Prudential Value
Discovery Fund - Regular
Plan
M&S
Cap
-0.076
-0.333
0.201
0.382
-0.151
-0.338
0.360
0.377
-0.246
-0.298
0.435
0.358
-0.141
-0.381
0.440
0.324
-0.076
-0.453
0.321
0.309
-0.143
-0.454
0.391
0.269
-0.150
-0.354
0.464
0.327
-0.133
-0.411
0.415
0.316
-0.266
-0.368
0.486
0.294
-0.214
-0.383
0.454
0.310
-0.194
-0.394
0.423
0.337
-0.013
-0.467
0.237
0.304
6. DISCUSSION OF THE ANALYSIS:
(a) Macroeconomic factors influencing the performance of select equity mutual funds in
India.
 Out of 24 mutual fund schemes selected, correlation analysis is applied to examine
the characteristics of observed phenomenon and to explore possible correlations
among the phenomenon.

Inflation measures the sustained increase in the general price level of goods and
services. When inflation as a macroeconomic variable correlated with MF annualized
returns of select schemes, there is weak positive correlation. The range of correlation
is between -0.62907 to -0.82395.Hence it is proved, that there is negative correlation
between inflation and MF annualized returns. The weak negative correlation
established because of deficit monsoon due to which there is fillip to inflationary
expectations and the optimistic expectations turned out to be unrealistic.

Interest rates steadily increased from 6% in 2004 to 8% in 2014 .With both pulls and
pressures on rates, funds annualized returns are expected to be volatile. The
correlation between NAV and interest rate is within the range – 0.18 to -0.46. We can
say there is weak correlation between the funds annualized returns of select funds and
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
interest rates. This satisfies the theoretical application that, there will be fall in
NAV’S for every increase in the interest rates declared by RBI.

GDP annual growth rate provides insight into the general direction and magnitude of
growth for the overall economy. When GDP growth rate increases, there will be
increase in occupancy rate and the savings & investment of the investors in turn
reflects positively the stock market. The correlation between GDP growth rate and
funds annualized returns is from the range 0.486 to 0.2.out of 24 schemes, 21 mutual
funds correlation values are above.0.4. This signifies that in India, the GDP annual
growth rate is positively correlated with mutual funds annualized returns.

Govt. 10 year bond interest rate increased from 6.71% in 2004 to 8.45% in 2014. i.e.
there is hike in risk free rate of interest. When Government 10 year bond is correlated
with NAVs of select schemes, the r-value is in between 0.26 to 0.402. We can say
there is moderate positive correlation between Govt. 10 year bond and of select MFs
funds annualized returns.

From the studies, it is clear that value of funds annualized returns have effect to the
change in macroeconomic variables in the study. There is close positive relation
between Govt. 10 year bond and GDP growth rate in India. Inflation and interest rates
had weak negative correlation with of select annualized returns mutual fund schemes
in the research.
GRAPHS:
Correlation of Inflation Vs Returns
Correlation of Interest Rate Vs Returns
0.000
-0.050
0.000
0
10
20
30
-0.100
0
10
20
30
-0.100
-0.200
-0.150
-0.200
-0.250
-0.300
-0.300
-0.400
-0.500
-0.350
Correlation of GDP Annual Growth Rate
Vs Returns
Correlation of Govt. 10 Yrs Bond
Vs Returns
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
0.600
0.450
0.400
0.350
0.300
0.250
0.200
0.150
0.100
0.050
0.000
0.500
0.400
0.300
0.200
0.100
0.000
0
10
20
0
30
10
20
30
(b) Evaluating the performance of select mutual funds with special reference to Sharpe ratio
and Treynor Ratio.
Table No : 2 - Open-ended and Equity: Large Cap
Name of the
Fund
Rp
Rf
σ
β
Sharpe
Ratio
Rank
Treynor
Ratio
Rank
UTI Mastershare
Fund
33.40
8.45
15.61
0.90
32.86
5
24.01
5
39.94
8.45
15.01
0.82
39.38
1
29.64
2
31.38
8.45
16.11
0.94
30.86
7
22.39
7
UTI Equity Fund
37.50
8.45
15.71
0.90
36.96
3
28.11
3
Tata Pure Equity
Fund - Plan A
27.67
8.45
13.67
0.79
27.05
9
16.97
9
Franklin India
Bluechip Fund
30.60
8.45
15.99
0.92
30.07
8
21.42
8
32.49
8.45
15.91
0.92
31.96
6
23.31
6
34.51
8.45
16.84
0.95
34.01
4
25.62
4
38.96
8.45
20.61
1.17
38.55
2
31.74
1
BNP Paribas
Equity Fund
HDFC Index
Fund - Sensex
Plus Plan
SBI Magnum
Equity Fund
ICICI Prudential
Top 100 Fund Regular Plan
HDFC Top 200
Fund
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
Table No : 3 : Open-ended and Equity: Large & Mid Cap
Name of the Fund
HDFC Capital
Builder Fund
Franklin India
Prima Plus Fund
Birla Sun Life
Frontline Equity
Fund
SBI Magnum
Multiplier Plus
Scheme
ICICI Prudential
Dynamic Fund Regular Plan
Name of the Fund
Franklin India Prima
Fund
Rp
Rf
σ
β
Sharpe Ratio
Rank
Treynor Ratio
Rank
41.48
8.45
16.01
0.89
40.95
2
31.99
2
42.97
8.45
15.67
0.88
42.43
1
33.37
1
35.23
8.45
16.79
0.97
34.73
4
26.52
4
37.51
8.45
15.79
0.88
36.97
3
27.91
3
32.54
8.45
15.56
0.85
32.00
5
22.60
5
Treynor Ratio
Rank
Rp
Table No : 4 Open-ended and Equity: Mid & Small Cap
Rf
σ
β
Sharpe Ratio Rank
56.34
8.45
17.42
0.88
55.85
3
46.74
3
UTI Mid Cap Fund
72.55
8.45
20.90
1.01
72.15
1
64.18
1
SBI Emerging
Businesses Fund
42.54
8.45
17.05
0.79
42.04
5
31.84
5
48.73
8.45
15.48
0.74
48.18
4
37.31
4
60.79
8.45
19.13
0.98
60.35
2
52.17
2
SBI Magnum Global
Fund
ICICI Prudential
Value Discovery Fund
- Regular Plan
Table no: 4 Open-ended and Equity: Tax Planning
Name of the Fund
Rp
Rf
σ
β
Sharpe Ratio
Rank
Treynor Ratio
Rank
Tata Tax Saving Fund
36.63
8.45
14.34
0.80
36.04
4
26.07
4
HDFC Long Term
Advantage Fund
37.72
8.45
16.94
0.94
37.22
3
28.73
3
Franklin India
Taxshield Fund
43.62
8.45
15.14
0.85
43.06
2
33.68
2
ICICI Prudential Tax
Plan - Regular Plan
44.61
8.45
17.98
0.97
44.14
1
35.90
1
Canara Robeco Equity
Tax Saver Fund Regular Plan
35.78
8.45
15.27
0.86
35.23
5
25.95
5
DISCUSSION OF THE ANALYSIS:

Out of 24 Schemes selected, Sharpe and Treynor ratio is applied to investigate the
reward to variability and reward to volatility and to rank the funds as per their fund
characteristics.
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9

The performance evaluation of select mutual funds was done by using the data of
annualized returns (Rp), standard return (σ), Government 10 Year Bond return (Rf)
and the systematic risk (β).

Out of 9 Open-ended and Equity related Large Capital funds, the Sharpe ratio ranged
from 39.38% to 27.05%. BNP Paribas Equity Fund scored highest value of 39.38%
and Tata Pure Equity Fund - Plan A scored lowest 27.05%.Where as the Treynor
ratio values ranged from 31.74 % to 16.97%. Higher the Treynor Ratio, the better the
performance under analysis. Therefore the HDFC Top 200 Fund had a better
performance adjusted for market risk. It can help an investor in ascertaining the
returns that can be generated by funds over short term investments.

From the five Open-ended and Equity of Large & Mid Cap funds, Franklin India
Prima Plus Fund performed best with highest reward to variability and reward to
volatility of 42.42%and 33.37% respectively. This survey proves that the Franklin
India Prima plus Fund is able to cope up with the market risk and diversifiable risk.
ICICI Prudential Dynamic Fund - Regular Plan ranked last out of the sample having
32% reward to variability and reward to volatility of 34.73% and 33.37%
respectively.

From the table: 4 , it is found that the Sharpe ratio is between 72.15% to 42.04 %.The
Treynor ratio is in between 64.18% to 31.84%. UTI Mid Cap Fund performed best
in this category with the highest value of Sharpe and Treynor ratios of 72.15 % and
64.18% respectively .It exhibits the fund manager capability in forecasting, investing
and managing the systematic and unsystematic risks in the portfolio. SBI Emerging
Businesses Fund had lowest values of Sharpe ratio and Treynor ratios of 42.04 %
and 31.84 %. A high positive Treynor Ratio shows that the investment has added
value in relation to its (scaled-to-market) risk and vice -versa.

Out of 5 selected Open-ended and Equity Tax Planning mutual fund schemes, it is
found that the Sharpe ratio is between 35.23% to 44.14 %.The Treynor ratio is in
between 25.95% to 35.90%. This survey proves that the ICICI Prudential Tax Plan Regular Plan is able to cope up with the market risk and diversifiable risk. The
Canara Robeco Equity Tax Saver Fund - Regular Plan ranked last out of the sample
having reward to variability and reward to volatility of 35.23% and 25.95%
respectively
7. CONCLUSION:
 When there is stable policy frame work, economy will automatically turn upwards
and that is where an investor expects to find opportunity. And from the research it is
analyzed that GDP annual growth rate had significant influence on the movements of
Proceedings of 11th Asian Business Research Conference
26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9
annualized returns of select mutual fund scheme. Though there is increase in GDP
annual growth rate, investors savings were not attracted towards investment in mutual
funds. Therefore, the AMC’S are advised to concentrate more on promoting the sales
of mutual fund schemes at least in proportion to the hike in the GDP annual growth
rate.
 To the surprise, when overnight hike in interest rates materialized, the fund’s NAV
suffer reversal trend. From the research, it is clear that when there is hike in the
interest, the performances of select mutual funds are negatively influenced. It is
advised to the fund managers to work with Portfolio Duration Strategy to overcome
from interest rate risk. The portfolio duration in recent months ranged from 6 – 7
years.
 A bad monsoon and geo political risk may lead to short term volatility but it is
believed that rates will soften on the back of fiscal consolidation and inflation
modernization over a period of time
 BNP Paribas Equity ranked first and HDFC Top 200 Fund ranked first among the
selected mutual funds scheme using Sharpe and Treynor ratio respectively. Among
Large and Middle Cap funds Franklin India Prima Plus ranked first in terms of Sharpe
and Treynor ratios.UTI Mid Cap fund ranked first among the M&S cap funds.
Among the Tax Planning funds selected, ICICI Prudential Tax Plan –Regular Plan
scored first place for both Sharpe and Treynor ratios. From this analysis, it is clear
that from the selected sample of funds the returns and volatility of the above funds are
able to cope up with variability of returns. Therefore, these funds performed better
than a risk free security on a risk adjusted basis and has added value in relation to its
(scaled-to-market) risk.
 To conclude, NAV of select mutual fund schemes are influenced by macro economic
factors. The researchers found that there is both positive and negative correlation
between the macro economic variables and NAV of select mutual fund schemes.
Therefore, the performances of Mutual funds are influenced by the performance of
the stock market as well as the economy as a whole where equity mutual funds are
influenced to a large extent by the stock market. Using Sharpe and Treynor ratios, it
is found that many companies are able to minimize diversifiable and market risks.
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