JBMCR-DEC-13-04

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Vol‐II,No.‐6,December‐2013 (ISSN 2319‐250X)

A COMPARATIVE STUDY OF MUTUAL FUND SCHEMES OF STATE BANK OF

INDIA AND UNIT TRUST OF INDIA By

TOM JACOB, Assistant Professor, Dept. of Commerce, Christ College, Irinjalakuda.

ANILA SHELVI B.Com Student, Dept. of Commerce, Christ College, Irinjalakuda.

& ATHIRA. A. R.

B.Com Student, Dept. of Commerce, Christ College, Irinjalakuda

ABSTRACT

Mutual fund industry has experienced a drastic growth in the past two decades. Increase in the number of schemes with increased mobilization of funds in the past few years shows the importance of Indian mutual funds industry. Proper assessment of various fund performance and their comparison with other funds helps retail investors for making investment decisions. Among various financial products, mutual fund ensures the minimum risks and maximum returns to the investors, Growth and developments of various mutual funds products in the Indian capital market have proved as one of the most catalytic instruments in generating momentous investment growth in the capital market. In this context, close monitoring and evaluation of mutual funds have become essential. Therefore, choosing profitable mutual funds for investment is a very important issue. The main objectives of this research work are to analysis financial performance of selected mutual fund schemes through the statistical parameters such as (alpha, beta, standard deviation, r‐squared, Sharpe ratio). The findings of this research study will be helpful to investors for their future investment decisions. KEYWORDS: Mutual Fund, NAV, Beta, Sharpe Ratio, Standard Deviation INTRODUCTION

Presently mutual funds have become hot favorite of millions of people all over the world. A mutual fund is an investment vehicle for investors who pool their savings for investing in diversified portfolio of securities with the aim of attractive yield and appreciation in value. The driving force of mutual fund is the ‘safety of the principal’ guaranteed plus the added advantage of capital appreciation with the income earned in the form of collective investment. It is formed by the coming together of a number of investors who transfer their surplus funds to a professionally qualified organization to manage it. It has emerged as a popular vehicle of creation of wealth due to high return, lower cost of wealth and diversified risk. One can own a string of blue chips like ITC, TISCO, and Reliance etc. Thus mutual fund acts as a gateway to enter into big companies hitherto inaccessible to an ordinary investor with his small investment.

Mutual funds provide professional management, diversification, convenience and liquidity. That does not mean investments are risk free. This is because the money that is pooled is not

Journal of Business Management, Commerce & Research A comparative study of Mutual Fund Schemes of Vol.‐II, No.‐6, December‐2013 (ISSN 2319‐250X) State Bank of India and Unit Trust of India

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invested only in debt securities which are less risky, but also in stock markets which involves higher risk.

In a few years mutual funds has emerged as a tool for ensuring one’s financial well being. Mutual Funds have not only contributed to the country’s growth story but have also helped families tap into the success of Indian Industry. The main reason the number of investors remain small is that nine in ten people with incomes in India do not know that mutual funds exist. But once people are aware of mutual fund investment opportunities, the number who decide to invest in mutual funds increases to as many as one in five people. With emphasis on increase in domestic savings and improvement in deployment of investment through markets, the need and scope for mutual fund operations has increased tremendously. Thus the involvement in mutual funds in the transformation of Indian economy has made it urgent to view their services not only as a financial intermediary but also as a pacesetter as they are playing a significant role in spreading equity culture. Operational definition

According to SEBI (Mutual Funds) (Amendment) Regulation, 2008”Mutual fund means a fund established in the form of a trust to raise monies through the sale of units to public or a section of the public under one or more schemes for investing in securities including money market instruments or gold or gold related investments or real assets” Statement of the problem

Mutual fund is an emerging investment area. But common people have a lot of confusions in selecting the best mutual fund for investment. The study aims at measurement of performance of mutual fund schemes on the basis of risk and return and selecting the most beneficial one on the basis of risk and return It helps the investors to select the best mutual fund scheme to invest their money. Scope and significance of the study

Today in India there are a lot of mutual fund schemes available for investment. However investing in mutual fund is a little difficult process for a layman. They select those mutual funds that heavily advertise and sell aggressively without paying attention to their performance.

This study is aiming at analyzing the performance of mutual funds scheme and selecting the best one by considering the aspects of risk and return. This study covers the 15 selected schemes of State Bank of India Mutual Fund and Unit Trust of India Mutual Fund OBJECTIVES OF THE STUDY The following are the main objectives of “A Comparative Study of Mutual Fund Schemes of State Bank of India and Unit Trust of India”

1. To compare various mutual fund schemes of State Bank of India Mutual Fund and Unit Trust of India Mutual Fund.

2. To measure and evaluate the performance of mutual funds in terms of Return. 3. To know the potential risk involved in each mutual fund scheme. 4. To find out the best mutual fund scheme in terms of risk and return

METHODOLOGY Data collection This study is based on secondary data. It covers the information related to the selected schemes of State Bank of India Mutual Fund and Unit Trust of India Mutual Fund. Data is collected from The Handbook of Statistics of Indian Economy, Handbook of SEBI, Indian Securities market etc. Data analysis The Net Asset Value Returns of various schemes of Reliance Mutual Fund and Unit Trust of India Mutual Fund are analyzed .For measuring the risk various statistical tools like beta, standard


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deviation etc. are used. To know the mutual fund having the highest return at each unit of risk, Sharpe ratio is used. Limitations of the study Secondary data is used for this study. Sector wise classification of mutual fund analysis is not possible. As the scope of this study is limited to the selected schemes, the investors cannot fully depend on its results. DATA ANALYSIS

SBI Mutual Fund Table 1: showing the average return of SBI Mutual Fund Schemes

No Schemes Annual Return Average Return

2009 2010 2011 2012 2013 1 SBI Blue chip Fund 87.9 11.89 ‐24.23 38.23 7.58 24.2742 SBI Contra Fund 90.55 9.59 ‐28.24 34.19 ‐1.75 20.868

3 SBI Dynamic Bond Fund 1.8 7.58 11.58 10.97 3.77 7.14

4 SBI Emerging Business Fund 108.96 33.08 ‐10.58 56.31 ‐7.87 35.98

5 SBI FMCG Fund 66.37 48.08 6.18 55.3 9.29 37.044

6 SBI IT Fund 126.32 24.95 ‐14.52 5.68 54.5 39.386

7 SBI Magnum Children's Benefit Plan 13.67 10.79 0.21 19 ‐0.07 8.72

8 SBI magnum Equity Fund 87.94 18.32 ‐19.71 29.89 5.54 24.396

9 SBI Magnum Gilt Fund‐Short Term Plan ‐3.17 5.18 8.36 9.19 8.75 5.662

10 SBI Magnum Global Fund 119.56 18.1 ‐14.21 35.98 9.71 33.828

11 SBI Magnum Income Fund ‐2.43 4.88 8.59 12.55 3.93 5.504

12 SBI Magnum Mid‐cap Fund 104.11 14.7 ‐25.79 47.98 13.57 30.914

13 SBI Magnum Multicap Fund 80.82 9.76 ‐30.69 38.35 5.2 20.688

14 SBI Magnum Multiplier Plus Fund 1993 87.53 19.3 ‐25.79 47.98 13.57 28.518

15 SBI Nifty Index Fund 74.74 17.99 ‐24.61 28.36 6.19 20.534

Source: www.valueresearchonline.com

Interpretation The above table shows the NAV Returns over 5 years of SBI Mutual Fund.SBI IT Fund provides the highest return among the schemes shown in the table i.e.39.386%.So on the basis of returns, SBI IT Fund is the best. Interpretation The above table shows the NAV Returns of various Mutual Fund Schemes of UTI Mutual Fund for 5 years and their average.UTI Transportation and Logistics Fund has the highest average return of 40.364%.Therefore it is the best scheme in terms of return.


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UTI Mutual Fund Table 2: Showing the Average Return of UTI Mutual Fund

No Schemes Annual Return Average

Return 2009 2010 2011 2012 2013

1 UTI Balanced Fund 62.41 16.36 ‐19.23 27.96 6.82 18.8642 UTI Banking Sector Fund(Reg) 77.75 36.48 ‐32.58 58.69 ‐13.51 25.3663 UTI Bond Fund ‐5.01 5.24 11.17 10.51 3.96 5.1744 UTI Dividend Yield Fund 85.78 24.27 ‐17.54 22.37 0.2 23.016

5 UTI Floating Rate Fund ST(Reg) 5.95 5.42 8.23 9 9.75 7.67

6 UTI Gilt Advantage Fund Long Term ‐11.36 4.65 7.79 10.29 3.98 3.077 UTI India Lifestyle Fund 63.16 22.98 ‐13.93 33.14 5.83 22.2368 UTI Infrastructure Fund 65.92 0.87 ‐36.49 32.15 ‐11.46 10.198 9 UTI Master Share Fund 74.16 18.47 ‐19.72 25.07 5.9 20.776 10 UTI Mastervalue Fund 117.3 27.16 ‐25.16 30.39 9.73 31.894 11 UTI Mid‐cap Fund 110.6 18.94 ‐23.92 41.55 9.69 31.3912 UTI Mis‐Advantage Plan 21.57 7.18 ‐0.64 15.13 6.54 9.95613 UTI MNC Fund 82.03 26.17 ‐6.04 31.26 10.63 28.8114 UTI Monthly Income Scheme 17.9 7.29 2.24 11.8 6.07 9.06

15 UTI Transportation and Logistics Fund 132.1 26.56 ‐19.28 37.72 24.69 40.364

Source: www.valueresearchonline.com SBI Mutual Fund

Table 3: showing Beta of Reliance mutual fund schemes No Scheme Beta 1 SBI Bluechip Fund 0.88 2 SBI Contra Fund 0.91 3 SBI Dynamic Bond Fund 1.36 4 SBI Emerging Business Fund 0.75 5 SBI FMCG Fund 0.94 6 SBI IT Fund 0.88 7 SBI Magnum Children's Benefit Plan 1.36 8 SBI magnum Equity Fund 0.87 9 SBI Magnum Gilt Fund‐Short Term Plan ‐0.01 10 SBI Magnum Global Fund 0.68 11 SBI Magnum Income Fund 1.32 12 SBI Magnum Mid‐cap Fund 0.87 13 SBI Magnum Multicap Fund 0.96 14 SBI Magnum Multiplier Plus Fund 1993 0.88 15 SBI Nifty Index Fund 1

Source: www.valueresearchonline.com Interpretation The above table shows that SBI Magnum Gilt Fund Short Term Plan has the lowest beta (‐0.01).Therefore that scheme is less risky. It means that even though the market is down, this scheme will be safe. It has the lowest systematic risk


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UTI Mutual Fund Table 4: showing Beta of UTI Mutual Fund schemes

No Scheme Beta1 UTI Balanced Fund 0.922 UTI Banking Sector Fund(Reg) 1.033 UTI Bond Fund 1.014 UTI Dividend Yield Fund 0.815 UTI Floating Rate Fund ST(Reg) 0.086 UTI Gilt Advantage Fund Long Term 0.657 UTI India Lifestyle Fund 0.788 UTI Infrastructure Fund 1.29 UTI Master Share Fund 0.8510 UTI Mastervalue Fund 0.9511 UTI Mid‐cap Fund 0.912 UTI Mis‐Advantage Plan 1.0313 UTI MNC Fund 0.5714 UTI Monthly Income Scheme 0.7915 UTI Transportation and Logistics Fund 1.01Source: www.valueresearchonline.com

Interpretation Scheme having least beta is UTI Floating Rate Fund ST (Reg) i.e. 0.08.Therefore that scheme is suitable for investment It means that even though the market is down, this scheme will be safe. It has the lowest systematic risk SBI Mutual Fund

Table 5: showing Standard Deviation of SBI Mutual Fund Schemes No Scheme Standard Deviation 1 SBI Bluechip Fund 17.2 2 SBI Contra Fund 18.04 3 SBI Dynamic Bond Fund 5.55 4 SBI Emerging Business Fund 18.43 5 SBI FMCG Fund 16.11 6 SBI IT Fund 22.19 7 SBI Magnum Children's Benefit Plan 8.27 8 SBI magnum Equity Fund 16.77 9 SBI Magnum Gilt Fund‐Short Term Plan 2.07 10 SBI Magnum Global Fund 16.1 11 SBI Magnum Income Fund 5.31 12 SBI Magnum Mid‐cap Fund 19.95 13 SBI Magnum Multicap Fund 18.88 14 SBI Magnum Multiplier Plus Fund 1993 17.84 15 SBI Nifty Index Fund 18.88 Source: www.valueresearchonline.com


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Interpretation SBI Magnum Gilt Fund Short term plan has the lowest Standard Deviation of 2.07.So it is the best one to choose. It means that this scheme is safe both in terms of systematic as well as unsystematic risk. UTI Mutual Fund

Table 6: showing Standard Deviation of UTI Mutual Fund Schemes No Scheme Standard Deviation 1 UTI Balanced Fund 13.632 UTI Banking Sector Fund(Reg) 31.723 UTI Bond Fund 4.464 UTI Dividend Yield Fund 16.055 UTI Floating Rate Fund ST(Reg) 0.436 UTI Gilt Advantage Fund Long Term 6.117 UTI India Lifestyle Fund 15.58 UTI Infrastructure Fund 24.69 UTI Master Share Fund 16.6710 UTI Mastervalue Fund 19.5811 UTI Mid‐cap Fund 20.0112 UTI Mis‐Advantage Plan 5.3713 UTI MNC Fund 14.1514 UTI Monthly Income Scheme 4.115 UTI Transportation and Logistics Fund 22.51Source: www.valueresearchonline.com

Interpretation UTI Floating Rate Fund ST (Reg) has the lowest Standard Deviation of 0.43. So this scheme is the best to invest. It means that this scheme is safe both in terms of systematic as well as unsystematic risk. SBI Mutual Fund Table 7: showing Sharpe Ratio of SBI Mutual Fund Schemes.

No Schemes Sharpe Ratio

1 SBI Bluechip Fund ‐0.06 2 SBI Contra Fund ‐0.37 3 SBI Dynamic Bond Fund ‐0.08 4 SBI Emerging Business Fund 0.2 5 SBI FMCG Fund 0.9 6 SBI IT Fund 0.32 7 SBI Magnum Children's Benefit Plan ‐0.04 8 SBI magnum Equity Fund ‐0.12 9 SBI Magnum Gilt Fund‐Short Term Plan 0.86 10 SBI Magnum GlobalFund 0.19 11 SBI Magnum Income Fund 0.02 12 SBI Magnum Mid‐cap Fund 0.14 13 SBI Magnum Multicap Fund ‐0.24 14 SBI Magnum Multiplier Plus Fund 1993 ‐0.12 15 SBI Nifty Index Fund ‐0.21

Source: www.valueresearchonline.com


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Interpretation SBI FMCG Fund has the highest Sharpe Ratio (9).Therefore SBI FMCG Fund is the best one in terms of risk and return. This scheme provides the highest return for a given unit of risk taken. UTI Mutual Fund

Table 8: showing Sharpe Ratio of UTI Mutual Fund Schemes No Scheme Sharpe Ratio 1 UTI Balanced Fund ‐0.17 2 UTI Banking Sector Fund(Reg) ‐0.14 3 UTI Bond Fund ‐0.11 4 UTI Dividend Yield Fund ‐0.3 5 UTI Floating Rate Fund ST(Reg) 5.59 6 UTI Gilt Advantage Fund Long Term ‐0.21 7 UTI India Lifestyle Fund 0.07 8 UTI Infrastructure Fund ‐0.55 9 UTI Master Share Fund ‐0.19 10 UTI Mastervalue Fund ‐0.12 11 UTI Mid‐cap Fund 0.05 12 UTI Mis‐Advantage Plan 0.05 13 UTI MNC Fund 0.34 14 UTI Monthly Income Scheme 0.01 15 UTI Transportation and Logistics Fund 0.31

Source: www.valueresearchonline.com Interpretation Here UTI Floating Rate Fund ST (Reg) has the highest Sharpe Ratio i.e. 5.59. Therefore that scheme is the best one on the =basis of risk and return. This scheme provides the highest return for a given unit of risk taken. FINDIGS, SUGGESTIONS AND CONCLUSIONS Findings The study was undertaken to compare the performance of SBI Mutual Fund and UTI Mutual Fund. The major findings are the following.

• In SBI Mutual Fund schemes the scheme showing highest return is SBI IT Fund (39.386%) • In the case of UTI Mutual Fund Schemes UTI Transportation and Logistics Fund has the

highest average return of (40.364 %.) • On the basis of beta SBI Magnum Gilt Fund Short Term Plan shows the lowest beta (0.01). So

it is the scheme having lowest systematic risk. • In the case of UTI Floating Rate Fund ST (Reg) (0.08) shows the lowest beta. So it is the

scheme having lowest systematic risk. • Standard deviation is lower for SBI Magnum Gilt Fund Short term plan (2.07). Therefore it

has lowest systematic as well as unsystematic risk. • Standard deviation is lower for UTI Floating Rate Fund ST (Reg) ( 0.43). Therefore it has

lowest systematic as well as unsystematic risk. • Sharpe Ratio is the highest for SBI FMCG Fund (9). So it generates the highest return for each

unit of risk taken. • Sharpe Ratio is the highest for UTI Floating Rate Fund ST (Reg) (5.59) So it generates the

highest return for each unit of risk taken


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SUGGESTIONS Based on the study, the following suggestions can be made. The suggestions for the better performance of the mutual funds are:

• Most of the investors are unaware of the various schemes of mutual funds. So initiative should be taken to spread awareness about mutual fund.

• The commission charged for offering the service by mutual fund companies should be reduced.

• Increase the ceiling limit of foreign investment in mutual fund (presently US $50 million) • The mutual funds should adopt more investor friendly programmes.

CONCLUSIONS The study was conducted to know the best mutual fund scheme of State Bank of India Mutual Fund and Unit Trust of India Mutual Fund. From the analysis it is clear that in the case of State Bank of India Mutual Fund, SBI FMCG Fund is the best one in terms of risk and return, as it shows the highest Sharpe Ratio, it gives the highest return for a given level of risk. In the case of Unit Trust of India Mutual Fund, UTI Floating Rate Fund ST (Reg) is the best one, as it shows the highest Sharpe Ratio. The investors can invest in these two schemes as they are the best among the selected schemes of State Bank of India Mutual Fund and Unit Trust of India Mutual Fund. REFERENCE JOURNALS:

i). Sathya swaroop debasish; ―Inves ga ng performance of equity based mutual fund schemes in Indian scenario pp.2,3

ii). Dr.B.Nimalathan; Mr.R.Kumar Gandhi; ―Mutual fund financial performance analysis‖ (A Comparative study on equity diversified schemes and equity mid cap schemes ) , excel international journal of multi disciplinary management studies, vol 2 pp 91,96.

iii). Sharpe, W. F. (1966). "Mutual Fund Performance". Journal of Business, Pg‐39 iv). Jayadev, M (1996), ―Mutual Fund Performance: An Analysis of Monthly Returns‖, Finance India, 10(1)

March, pp 73‐84: v). Debasish, Sathya Swaroop (2009). Investigating Performance of Equity‐based Mutual Fund Schemes in

Indian Scenario. KCA Journal of Business Management, 2(2), 1‐15. vi). Garg, Sanjay (2011). A Study on Performance Evaluation of Selected Indian Mutual Funds. International

Journal of Innovation Creativity and Management (IJICM), 1(1), 1‐10. vii). Jayadev, M (1996). Mutual Fund Performance: An Analysis of Monthly Returns. Finance India, 10 (1), 73‐

84. viii). Kundu, Abhijit (2009). Stock Selection Performance of Mutual Funds Managers in India: An Empirical

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India: Some Empirical Evidence. Finance India, XXIV (2), 443‐464. xi). Shanmugham, R and Zabiulla (2011). Stock Selection Strategies of Equity Mutual Fund Schemes in India.

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vii). http://mutualfunds.about.com/od/analyzingamutualfund/a/How‐To‐Analyze‐Mutual‐Fund‐Performance.htm

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