Performance Evaluation of Debt Mutual Funds of HDFC AMC

Abstract

In terms of both the investment and the savings rate, the Indian economy has been facing the impacts of a slowdown. But it is also true that the reversing process of the investment slowdown, which is still in the process or underway is more critical and difficult at this juncture. (Minsky, 2017-18) The investors in India are risk-averse and therefore they prefer investing in the securities that are safe and give them decent returns. Among the plethora of options for investments, Mutual Fund Industry has the safest image in terms of investments. Mutual Fund Industry is becoming popular day-by-day. This brings in need of a performance analysis of mutual funds for both the investors and the fund houses. In this research paper, an attempt has been made to study the performance of the Top 5 Debt Schemes of HDFC AMC namely HDFC Corporate Bond Fund, HDFC Short Term Debt Fund, HDFC Credit Risk Debt Fund, HDFC Gilt Fund, and HDFC Dynamic Debt Fund (based on their AUMs) based on risk-return relationship models and various measures. The study and the analysis have been made on the basis of their Standard Deviation measure, Beta risk measure, Sharpe ratio measure, Treynor ratio measure, and Jensen Alpha measure. Conventionally, risk-return ratios like Standard Deviation, Beta, Sharpe ratio, Treynor ratio, and Jensen Alpha are calculated only for equity mutual funds and not for debt mutual funds but the new generation empirical studies have proved that these ratios are equivalently beneficial for debt mutual funds also because they give the accurate dimension of the risk the investor takes for particular debt scheme. This existing research gap has motivated me to take this forward and make an attempt to give a better picture of the performance of the debt mutual funds of HDFC AMC. If these calculations are implemented by the industry experts to the debt mutual funds, this would bring great benefits to the investors because they will clearly know how much return they will get viz-a-viz the risk they are taking. An initiative has been taken by ICICI Prudential Mutual Fund house to incorporate a few of the stated ratios in their debt mutual funds’ factsheets and an attempt has been made in this study to calculate these ratios for HDFC AMC. The study entails the literature review, research methodology, results and discussion, summary of findings, and conclusion of the study. Objectives: 1. To evaluate the performance of the selected mutual fund debt schemes of HDFC AMC on the basis of their risk and returns parameters and compare them with their respective benchmark indices. 2. To appraise the performance of selected mutual fund debt schemes of HDFC AMC with risk-adjusted measures such as Sharpe Ratio, Treynor’s Ratio, and Jensen’s Alpha Ratio.