Performance Evaluation of UTI Mutual Funds
(On Selected Diversified Equity Schemes)
Mahabub Basha S,
Accounting Analyst,
Neovia Logistics Services India Pvt Ltd.,
Bangalore, India
Abstract— Indian investors prefer to invest in safe
securities. Among the various avenues Mutual funds
will have less risk and more returns to the investors.
According to the Mutual fund industry is having
safest image, Investors are increasing day-by-day in
this industry. In this paper, an attempt has been made
to study performance of selected equity diversified
schemes of mutual funds based on risk – return
relationship models and various measures. The
analysis has been made on the basis of Rate of Return,
Standard Deviation, Beta, and Sharpe Ratio.
Keywords- Risk, Return, Investors, Mutual Funds.
1. Introduction
A Mutual fund is a professionally managed firm of
collective investments that pools money from many
investors and invest in stocks, bonds, and short –term
securities. Mutual fund is an investment vehicle preferred
by small investors as it offers an opportunity to invest in
in a diversified, professionally managed portfolio at a
relative low cost. These investors buy units of a
particular mutual funds scheme that has an own objective
and strategy. The money thus collected is then invested
by the fund manager in different type of securities. The
value of mutual fund is depicted by NAV (Net asset
value).
Mutual funds have started in India in 1964. The first
scheme was Unit scheme 1964. UTI has the monopoly
over the mutual fund industry up to 1987. In 1987
government institutes were allowed to start mutual funds
operations. In 1993 it has opened for private sector. The
regulations on mutual funds came in the year 1996.
Mutual funds offers open ended and closed ended
schemes. Closed ended schemes have some stipulated
time period that is normally between 3 to 15 years. Open
ended schemes are available for subscription during all
the time period.
So this paper is an attempt to study the performance of
mutual funds in the frame work of risk and return during
the period 1st January 2010 to 31 December 2014.
2. Review of Literature
A large number of studies have been done on the growth
and performance evaluation of mutual funds.
Sharpe (1966) explains in a modern portfolio theory
context that the expected return on an efficient portfolio
and its associated risk and linearly related. By
incorporating various concepts he developed a Sharpe
index. In this paper he attempted to rate the performance
on the basis of optimal portfolio with the risky portfolio
and a risk – free asset is one of the greatest reward to
variability.
Shome (1994) based on growth schemes examined the
performance of the mutual fund industry between April
1993 to March 1994 with BSE Sensex as market
surrogate. The study revealed that, In the case of 10
schemes, the average rate of return on mutual funds was
marginally lower than market return.
Raghunathan and Verma (1991) evaluate the
performance of master share during the period 1987 to
1991 using Sharpe, Jensen and Treynor measures. They
conclude that the fund performed better than the market,
but not so well as compared to the Capital Market Line.
Kothari and Smythe (2004) analysed the Finnish mutual
fund industry from 1993 to 2000, and focused on market
segmentation and mutual fund expenses. As per their
industry, Finnish mutual funds have performed neutrally
with the exception of equity funds under performing.
Acharya and Sidana (2007) attempted to classify hundred
mutual funds employing cluster analysis and using a host
of criteria like the 1 year total return, 2 year annualized
return, 3 year annualized return, 5 year annualized return,
alpha, beta, R-squared, Sharpe’s ratio, mean and Stand
deviation etc. The data is obtained from value research
online. They do find evidences of inconsistences between
the investment style/objective classification and the
return obtained by the fund.
3. Objectives of the Study
•
•
•
To examine performance of selected equity
diversified mutual funds.
To measure the risk – return relationship and
market volatility of the selected UTI mutual
funds.
To examine the fund performance with regard
to risk – adjustment model by Sharpe Ratio.
4. Research Methodology
This study is based on secondary data which is collected
from various sources like published journals books,
magazines, newspapers and online material. It covers the
information on selected schemes of UTI mutual funds.
This study examines 17 diversified equity schemes
launched by UTI. These schemes have been selected on
the basis of regular data availability during the period of
January 2010 to December 2014. Daily NAV (net asset
value) has been used for data analysis. For this study,
BSE national index has been used a proxy for market
index. Risk free rate of return refers to that minimum
return on investment that has no risk of losing the
investment over which it is earned. It has been marked as
8%. Different statistical tools are used evaluate the
performance of these mutual fund schemes under present
study. These tools include average return, standard
deviation, beta and Sharpe ratio.
5. Limitation of the Study
Secondary data is used for this study. Sector wise
classification of mutual fund analysis is not possible. The
scope of this study is limited to the selected schemes.
6. Statistical Tools
Rate of Return: The rate of return on an investment,
expressed as a percentage of total amounts invested.
R = (P1-P0)/P0
Whereas P1 is the present year and P0 is the previous
year.
Standard Deviation (SD): Measures likely
deviation from the expected return. In other words the
standard deviation tells us how much the return on a fund
is deviating from expected returns based on historical
performance. A higher SD indicates that NAV of the
mutual fund is more volatile.
Beta: Beta measures the volatility of a particular fund
in comparison to the market as a whole. It is measures
volatility of a particular stock in relation to the market.
Beta higher than 1 indicates risky stock and lower than 1
indicates a stock safer as compare to the market.
Sharpe Ratio (SR): SR is the best known risk –
adjusted performance. It’s evaluates the return that a fund
has generated relative to the risk taken. Risk here
measured by SD. A mutual fund with a higher SR is
better because it is implies that it has generated higher
returns for every unit of risk that was taken.
SR: (Rp-Rf)/σ
Rp is the return from the scheme, Rf is the risk free
return and SD measures the total risk.
7. Data Analysis & Interpretation
Table: 1Showing rate of return of UTI Mutual fund
schemes
Schemes
UTI Equity Fund
UTI Master Share Unit Scheme
UTI Top 100 Fund
UTI Dividend Yield Fund
UTI India Life Style Fund
UTI Infrastructure Fund
UTI Leadership Equity Fund
UTI Midcap Fund
UTI MNC Fund
UTI Opportunities Fund
UTI Banking Sector Fund
UTI Energy Fund
UTI Pharma & Healthcare Fund
UTI Transportation & Logistics
Fund
UTI Equity Tax Savings Plan
UTI Master Equity Plan Unit
Scheme
UTI Nifty Index Fund
Average
Return
(%)
17
14
13
16
16
11
13
27
25
16
22
3
24
34
13
13
12
The above table exhibits the NAV returns of over 5
years. UTI Transportation & Logistics Fund growth
has yielded highest returns (34%) of all selected
mutual funds and UTI MNC equity diversified fund
growth rate has earned next highest returns,
followed by UTI Pharma & Healthcare fund. UTI
Energy fund delivered lowest returns (3%) among
the all funds
Table: 2 Showing Standard Deviation of UTI Mutual
fund schemes
Schemes
UTI Equity Fund
UTI Master Share Unit Scheme
UTI Top 100 Fund
UTI Dividend Yield Fund
UTI India Life Style Fund
UTI Infrastructure Fund
UTI Leadership Equity Fund
UTI Midcap Fund
UTI MNC Fund
UTI Opportunities Fund
UTI Banking Sector Fund
UTI Energy Fund
UTI Pharma & Healthcare Fund
UTI Transportation & Logistics
Fund
UTI Equity Tax Savings Plan
UTI Master Equity Plan Unit
Scheme
UTI Nifty Index Fund
Standard
Deviation
13.98
14.31
14.36
13.73
13.94
18.6
15.48
14.76
11.01
14.04
23.77
16.47
12.47
15.91
14.09
15.11
16.78
Higher Standard deviation means higher volatility.
UTI MNC fund has less standard deviation (11.01)
which means it is comparatively less risky than the
other funds. It is the fund best one to choose.
Similarly UTI Pharma & Healthcare fund (12.47)
next lowest standard deviation fund in the above
table and followed by UTI Dividend Yield fund
(13.73).
Table: 3 Showing Beta of UTI Mutual fund schemes
Schemes
UTI Equity Fund
UTI Master Share Unit Scheme
UTI Top 100 Fund
UTI Dividend Yield Fund
UTI India Life Style Fund
UTI Infrastructure Fund
UTI Leadership Equity Fund
UTI Midcap Fund
UTI MNC Fund
UTI Opportunities Fund
Beta
0.55
0.49
0.41
0.45
0.43
0.82
-0.94
0.58
0.38
0.54
UTI Banking Sector Fund
UTI Energy Fund
UTI Pharma & Healthcare Fund
UTI Transportation & Logistics
Fund
UTI Equity Tax Savings Plan
UTI Master Equity Plan Unit
Scheme
0.91
0.65
-0.57
UTI Nifty Index Fund
0.52
0.62
0.43
0.51
Beta measures the volatility of a particular fund in
comparison to the market as a whole. The above table
explains the UTI Pharma & Healthcare fund has lowest
Beta (-0.57). This fund is less risky to compare with
other funds. Since Beta value is less than 1 means the
funds reacts less than the market reaction.
Table: 4 Showing Sharpe Ratio of UTI Mutual fund
schemes
Schemes
UTI Equity Fund
UTI Master Share Unit Scheme
UTI Top 100 Fund
UTI Dividend Yield Fund
UTI India Life Style Fund
UTI Infrastructure Fund
UTI Leadership Equity Fund
UTI Midcap Fund
UTI MNC Fund
UTI Opportunities Fund
UTI Banking Sector Fund
UTI Energy Fund
UTI Pharma & Healthcare Fund
UTI Transportation & Logistics
Fund
UTI Equity Tax Savings Plan
UTI Master Equity Plan Unit
Scheme
UTI Nifty Index Fund
Sharpe
Ratio
6.65
4.99
4.52
4.96
6.33
0.57
3.72
0.05
15.43
6.34
4.45
-0.65
13.19
15.17
4.43
4.06
3.03
The Sharpe ratio is the best known for risk – adjusted
statistic. In above table UTI MNC fund has the highest
Sharpe ratio (15.43). This scheme provides the highest
return for a given unit of risk taken and similarly, UTI
Transportation & Logistics fund has registered with
(15.17) next highest Share ratio.
Findings
•
•
•
•
The UTI Transportation & Logistics Fund
growth has yielded highest average returns
(34%) for the past 5 years when compared
with selected mutual funds
The UTI MNC fund has less standard deviation
(11.01) which means it is comparatively less
risky than the other funds.
All the selected funds shows beat value is less
than 1. Which means all equity diversified
funds are less volatile than the market
The UTI MNC fund has the highest Sharpe
ratio (15.43). This scheme provides the highest
return for a given unit of risk taken.
Suggestions
Based on the observation made during the study of the
paper below suggestions are submitted for the betterment
of mutual funds.
•
•
•
•
•
•
The AMC’s should adopt more investor
friendly programmes for semi and urban areas.
Lack of information/ financial sophistication of
the investors about mutual funds.
It is very difficult to finding a quality of agents/
distributors.
Female segment is not fully tapped in mutual
investment and even there is low target on
higher income group of people. Hence, Fund
managers should take some steps to tap female
segment to enhance more investment in MF.
Commission charges for offering the services
by mutual fund companies should be reduced.
Most of the investors not aware various
schemes, so initiative should be taken to spread
awareness about mutual funds.
References
[1] Mishra, Banikanta & Mahmud, Rahman (2000),
“Measuring mutual fund performance using lower partial
moment”, Global business trends, Contemporary
Readings, 2001 edition.
[2] Sharpe W., (1966), “Mutual fund performance”, The
journal of business, Vol.39, Issue sl, pp 119-138.
[3] S.Vasantha, Uma Maheshwari and K.Subashini,
“Evaluating the performance of some selected open
ended equity diversified mutual fund in Indian mutual
fund industry”, in International journal of innovation
research in science, engineering and technology, Vol 2,
Issue 9, September 2013.
[4] Tom Jacob, Anila Shelvi and Athira A.R, “A
Comparative study of mutual fund schemes of SBI and
UTI”, in Journal of business management, commerce &
research, Vol 2, Issue 6, December 2013.
[5] M. Jaydev, (1996) “Mutual fund performance: An
analysis of monthly returns, in Finance India, 10(1)
March, pp 73-84.
[6] R. Narayanasamy, & V. Rathanamani, “Performance
evaluation of equity mutual funds” in International
journal of business and management invention, Vol 2,
Issue 4, April 2013.
[7] Russell J Fuller & James L Farrell (1987), “Modern
investment and security analysis”, Tata McGraw – Hill
Publishing, New Delhi, pp 560 – 574.
Author’s Profile
Conclusion
Investors can opt any mutual funds based on their
objectives. Risk is important factor playing very key role
in selection of mutual funds. From the analysis it is clear,
The UTI MNC fund has the highest Sharpe ratio (15.43)
and SD registered with low (11.01) similarly this fund
less (0.38) volatile than the market. This scheme
provides the highest return for a given unit of risk taken.
The investor who needs regular income can invest in UTI
MNC fund.
My self, Mahabub Basha S, I am working as an
Accounting Analyst at Neovia Logistics Services India
Pvt Ltd, Bangalore. I have 5 years of Industry Experience.
I have Completed MBA & MCOM.