Name: Probal Sarkar
Enrollment No.: 10BSPHH010896
Mobile No.: 8017494214
E-mail id:
[email protected]
SUMMER INTERNSHIP PROGRAM Project Proposal I.
Project Proposed:
II.
Description
A
comparative study of debt based mutual funds
of Project in brief:
The
study focuses on the year wise performance of
debt based mutual fund. These funds invests a primary part (65% & above) in long & short term debt funds while a secondary portion in the equity market. So the funds are basically associated will comparatively low risk and return than the equity based mutual funds. The fund managers according to the economic condition of the market decide on the exact amount of fund to be invested in equity ranging from 0-35%. Sometimes often to minimize the risk the fund managers also make investment in call money market also. Generally the annual rate of return in good debt based mutual fun ranges from 10-13%. The
debt based mutual funds can be classified according to lock-in period and
also according to mode of receiving the return of profit.
The
funds wit h a certain lock
±in- period usually 3 years are ca lled closed ended mutual funds and that without any lock-in period are called open ended mutual funds. The funds also have certain options for the investor as growt h option or dividend option which can be again payout or reinvested. In case of growth option the share of profit by t he investor is retained by the fund and used as further investment. It results in increment in t he NAV of the said fund thus results in profit for investor. In case of d ividend payout option the share of profit is paid back to the investor in the form of cash. In case of dividend reinvestment option the share of profit of the investor i.e. dividend is used to purchase addition units of t he same fund as a reinvestment. In the study all types of t he above mentioned debt based mutual fund will be covered so that we can understand whether t here any difference exists due to the
nature or type of the fund. In order to fulfill this intention to cover various types of debt based mutual funds and keeping in mind the limited scope of our study the top 10 funds which is currently being traded in the Indian market will be considered for the purpose. The data in relation to the performance parameter will be collected at a specific time interval of 1 year since incept ion of the said mutual fund. Since the date st
of inception of the said fund every year on 1
April the
NAV will be recorded and
accordingly the rate of return for t he said year will be calculated for each of them. Also
other data directly linked with the performance of the mutual fund for the
said year will be collected and the required performance parameter for calculating the risk associated wit h the fund will be calculated like Standard Deviation, Sharpe ratio, P/E Ratio, P/B Ratio, Portfolio Turnover, R-Squared, Alpha and Expense Ratio. The
following data will then be used to run a regression analysis with NAV as
independent variable and the other parameters as independent variables to develop a linear regression model and develop the interdependence relation between the various parameters related to each of the top 10 debt based mutual funds. So that the exact effect of variance in the NAV of the funds can be explained by the parameters and may well be used for t entative prediction in the future. This
project will be of good value to the organization as they can use the result
obtained from the project for future prediction and accordingly suggest the client whether to invest or not on any particular debt based mutual fund. Also how much to invest, when to invest and which fund to invest according to the prospect of the fund, the risk taking ability of the investor and the expected rate of return in the future. III.
Objective of the Project: Top
The
objective of the report is to give t he performance of
Debt based Mutual Funds traded in India and to analyze various risks and returns
associated with them. This evaluation can be done on the basis of parameters like NAV, AUM, Beta, Standard deviation, Sharpe ratio, P/E Ratio, P/B Ratio, Portfolio Turnover,
R-Squared, Alpha and Expense Ratio. The research also intends to bring in
the new trends in the mutual fund industry and to give a futuristic insight to it along with guidance to investors for better CRM initiative by the organization.
IV.
Methodology: Collecting all the performance related data of top 10 debt based
mutual funds like NAV, AUM, Beta, Standard deviation, Sharpe ratio, P/E Ratio, P/B Ratio, Portfolio Turnover, R-Squared, Alpha ,Expense Ratio etc. Then comparing and analyzing them to find the annual rate of return of those funds since inception along with degree of risk undertaken by the investors. Also using linear multiple regression method in SPSS to find out the individual partial effect of various parameters o n the NAV of each of debt based mutual fund.
IV.
25th March- Selection of top 10 debt based mutual fund
Schedule:
8th April- Collection of data related to performance of the mutual funds th
15
th
29
April-
Interim Project Report Submission.
April-
Performance Analysis of the mutual funds
th
13 May- Development of regression model for the mutual funds th
18 May- Final Project Report Submission V.
Limitations
of the Study: 1) The study is confined only to t he top 10 debt based
mutual funds currently traded in the Indian market. 2) The study will consider the NAV and other parameters only at specific time st
interval of 1 year, i.e. 1
April
every year. So the information regarding any other
changes in between will not reflect through the study. 3) The study will be limited to only parameters considered to be important to the performance of the mutual funds. So the effect of other minor factors is considered to remain same and neglected for measurement purpose. 4) The impact of external factors common to all will be observed through the change in NAV of the funds but will not be considered for measurement purpose.
VI.
References: www.bloomberg.com, www.justtrade.in, www.moneycontrol.com, E
Mridula and Priya Raju book on ³Mutual Fund industry in India ´, ³Investment Styles and Performance of Equity Mutual Funds in India ´ by D N Rao,
³Investment India ´ magazine by Bajaj Capital Publication, Dalal Street Investment Journal volume no- 25 ³Time to go for Mutual Funds ´.
Faculty Guide Name : Surajit Ghosh Dastidar Company Guide Name : Uday Shek har Indu Date:
18.03.11
Probal Sarkar (Signature of the student)
