Abstract
Since the last decade, ethical investment has gained significant development in the Indian financial market. With the increasing focus on social responsibility and the importance of ethical funds, investors pay more attention to the activities of these funds and their impact on society. Whether ethical fund investment affects portfolios’ return performance is still questionable. To address this question, this paper investigated the performance of various ethical mutual fund schemes and compared them with benchmark index (NIFTY 500 Shariah Index) using data from 2014-15 to 2019-20. The performance of the sample schemes was measured based on the risk-return profile and Sharpe’s ratio, Treynor’s ratio and Jensen’s alpha measures. The results indicated that nine out of ten ethical schemes outperformed the benchmark index during the study period. This implies that ethical funds generated positive returns with lower risk. As a policy implication, investment funds and financial institutions should develop fund schemes and stocks that incorporate ethical considerations in an investment.
Highlights
The mutual fund industry provides a significant source of investment to both government and corporate entities
From 1998 to 2003, the Indian mutual fund sector saw its net assets under management (AUM) grow by 60.28 % (Mohanan, 2006)
Considering the preceding explanation and the significance of study, the researchers formulate vital research questions such as (i) Does ethical screening in investing improve return performance? (ii) Is there any differential return between ethical investment and conventional investment? (iii) Is this alternate investment strategy secure, less risky, and capable of generating higher returns compared to conventional investment? To address these questions, this study aims to empirically investigate the performance of ethical mutual fund schemes in India and compare them to the Nifty 500 Shariah index
Summary
The mutual fund industry provides a significant source of investment to both government and corporate entities. The gross fund raised by the Indian mutual fund industry has been expanded, from INR 68,196.79 billion in 2011-12 to INR 188,134.58 billion in 2019-20 (SEBI, 2020). This industry’s rise resulted from mutual funds’ ability to enable small investors to invest their small surplus in securities. The mutual fund sector provides them with an investing vehicle Today, this industry offers many theme-based products, such as gold funds, exchange-traded funds, ethical funds, and others
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