An empirical and analytical study of the fund performance and stock selection abilities of selected mutual funds in India

Abstract

In view of recent global and domestic events like Brexit, global terrorists attacks in Europe, Syrian crisis, Economic Protectionist policy calls in USA, slow growth in the Chinese economy, Demonetization of currencies in India among others, volatility in the Indian markets has increased in last one year, 2015–16. This has impacted the fund returns in the short run, even in different categories of funds. Hence, the present study aim to evaluate the fund performance using Sharpe ratio, Treynor Ratio, Jensen's alpha and Fama's net selectivity models using daily Net Asset Values (NAV) for 50 schemes, 10 each from 5 categories namely Large cap funds, Small and mid-cap funds, ELSS funds, Index funds and Balanced funds, the sample being selected from the CRISIL Mutual Fund Ranking List: Quarterly Ended September 2016. The paper aims to look whether there has been the existence of differences between fund returns and market returns, whether funds have met investor expectations under the CAPM model and the stock selection abilities of fund managers in these volatile marketscenarios. The findings indicate that there was no significant difference between fund returns and market returns. Further among the categories of funds, Index funds were under performers as compared to other categories. Additionally, as per Fama net selectivity model, a majority of the fund managers were found to have positive stock selection abilities.