A PROJECT REPORT ON

COMPARISON BETWEEN INVESTMENT IN EQUITY AND MUTUAL FUND

BY

MR. DEVRAJ SINGH CHOUDHARY

REG.NO. 201819303

Post Graduate Diploma in Business Administration

Finance

SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)

PUNE – 411016, MAHARASHTRA, INDIA

Academic Year: 2018-2020

Declaration by the Learner

This is to declare that I have carried out this project work myself in part fulfillment of the
Post Graduate Diploma in Business Administration-Finance, Program of SCDL. The work
is original, has not been copied from anywhere else and has not been submitted to any
other University/Institute for an award of any degree / diploma.

Date: 16/05/2021 Signature:

Place: Khargone Name: Mr. Devraj Singh Choudhary

ABSTRACT
In today’s developing environment, there are various investment avenues available to the
investors. The risk and return from these investment avenues are completely different from
one another. The investors always expect more returns with relatively less risks.

Among various investment options, mutual fund is the best option to the common man
since it provides diversified and professionally managed portfolio at low cost. Markets for
equity shares, bonds and other fixed income instruments, real estate, derivatives and other
assets have become mature and information driven. Price changes in these assets are driven
by global events occurring in faraway places.

A typical individual is unlikely to have the knowledge, skills, inclination and time to keep
track of events, understand their implications and act speedily. An individual also finds it
difficult to keep track of ownership of his assets, investments, brokerage dues and bank
transactions etc.

This study also makes an attempt to suggest the investors to choose the right investment
avenue for their savings according to their preference. The study depends majorly on the
secondary data to collect information with respect to investment avenues and awareness.
INDEX

S. No. Chapter Page No.

1. Introduction

2. Objectives and Scope

3. Theoretical Perspective

4. Methodology and Procedure of Work

5. Analysis of Data

6. Limitations

7. Findings, Inferences and Recommendations

8. Conclusion and your suggestions for improvement in the

organisation
9. Summary of the Project Report

10. ANNEXURES (if any)

11. I) References, if any

II) List of Figures, Charts, Diagrams, if any
III) List of Tables, if any

CHAPTER 1

INTRODUCTION
In this modernistic era, money plays an important role in everyone’s life. In order to
overcome the problems in future they have to invest their money. Investment cultivates the
habit of saving in one’s life. Investment goals vary from person to person depending upon
their requirements. Investing the hard-earned money is an indispensable activity of every
human being. Investment is the commitment of funds which is saved from current
consumption with the hope that some benefits will be received in future. Savings of the
people are invested in various assets depending on their preferred risk and return, safety of
money, liquidity, the available avenues for investment, etc.

Investment is nothing but buying a financial product with an expectation of favorable

future returns. Investing is a serious subject that can have a major impact on investor’s
future well-being. Investors have a lot of investment avenues to park their savings. The risk
and returns available from each of these investment avenues are completely different. In
India, many investment avenues are available where some are marketable and liquid while
others are non-marketable and some of them are highly risky while others are almost
riskless. The investor has to properly choose the investment avenues depending upon his
specific need, risk preference, and returns expected.

The Investors should always focus only on the safe investment avenues. Common people
should cultivate the habit of saving a part of their income at the early stage of their life in
order to get a better and safe future. The investors also should have full knowledge of the
investment options in order to avoid loss in future. The main objective of comparing
investment in equity shares with mutual fund schemes is to analyze the performance of
mutual fund with their benchmark and comparing them with equities by using risk, return,
beta and alpha as a parameter.

CHAPTER 2

OBJECTIVES AND SCOPE

OBJECTIVES OF THE STUDY

The study has been geared to achieve the following objectives;

 The research was conducted for creating awareness in the mind of investor in term
of risk, return, liquidity & marketability of their investments.
 To compare Equity and Mutual Fund Schemes in respect of their risk & return
 To compare and analyze the equity fund schemes in respect of bare risk and return
 To compare and analyze the mutual fund schemes in respect of bare risk and return
 To study the average risk and average return of selected companies of Mutual
Funds
 To study the average risk and average return of selected companies of Equity
Shares
 To study the relationship between the risk and return of Equity Shares and Mutual
Fund

SCOPE OF THE STUDY

 The study is primarily dealing with equity and mutual fund investments. The study
aims at studying difference between investing in shares and mutual funds. The
scope of the study of mutual funds and equities is very large but my study is limited
to 10 companies.

CHAPTER 3
THEORETICAL PERSPECTIVE

CHAPTER 4
 RESEARCH METHODOLOGY AND PROCEDURE OF WORK

This paper analyzes the mutual funds open-ended equity-oriented dividend funds in India.
This study aims to analyze the average return and the risk involved in investing in the
mutual funds. BETA value is calculated for all 10 companies to know whether investment
in that company is risky or not. In this study, risk adjusted methods of Sharpe Ratio and
alpha measure the performance evaluation of schemes of equity funds and ANOVA is used
to measure the statistical technique that assesses potential differences in a scale-level
dependent variable by a nominal-level variable having 2 or more categories. The required
data of 5 samples each of equities and mutual funds are collected and compiled from
official website of selected Indian companies.

BSE being the premier exchange of India was chosen for selecting stocks. It is widely
accepted that BSE 500 is the one of the most reliable Index of the stock exchange that
reflects present day market condition. Since it is not possible to compare all the 500 scripts
in the Index with all Mutual Fund and equity Schemes due to time and resource
constraints, sampling techniques were considered. Randomly selected samples will
facilitate inference of the population, in our case BSE 500 of mutual fund and equity
industry in India.

a) Research Design

Descriptive research - A descriptive research study is used for collecting

information without manipulating the original source of data. It is used to generate
information Considering the present condition of the phenomena to describe what
exists with respect to conditions of the situation.

b) Data Type

Secondary data related to market portfolio collected through the value research, and
BSE website. And the secondary data is also collected from company website and
various another financial website also.
 c) Data Collection

The entire data of the study is collected from secondary source. World Wide Web
is a main source for collecting the data for the study. The data are collected from
the company websites, financial journals and fact sheets from the mutual fund
schemes.

d) Sampling Technique

The quality of the research output and the validity of its finding depends upon
appropriateness of the sample design selected of the study. It was needed to apply
inferential statistical analysis; hence Probability sampling was chosen to be
essential.

e) Sample Size

Total Ten companies selected where 5 companies of equities are listed in BSE 500
benchmark and rest other 5 mutual fund Companies who were also listed in BSE
500 Benchmark.

RESEARCH METHOD AND MEASUREMENT TECHNIQUES

Research method:

The data is analyzed by using various statistical methods and MS Excel. The BSE return
series is calculated as a log of first difference of Monthly closing price, which is as
follows:

rt = log (Pt / Pt−1)

Where rt is the logarithmic monthly return on BSE index for time t, Pt is the closing price
at time t, and Pt−1 is the corresponding price in the period at time t −1.
Following techniques are:

(i) Rate of return

(ii) Risk
(iii) Standard Deviation is used to measure the risk of a stock.
(iv) Beta is calculated to know whether investment in the companies is risky or not
(v) Alpha is used to measure the performance of all the funds. Alpha is a measure
of an investment's performance on a risk-adjusted basis.
(vi) Standard Deviation- The total risk is measured by the standard deviation of
the monthly returns.
(vii) Sharpe technique - Sharpe devised an index of portfolio performance measure,
referred to as reward o variability ratio. The Sharpe ratio provides the reward to
volatility trade-off. It is the ratio of the fund portfolio’s average excess return
divided by the standard deviation of the return and giving the rank.
(viii) ANOVA test- An ANOVA test is a way to find out if survey or experiment
results are significant. In other words, they help you to figure out if you need to
reject the null hypothesis or accept the alternate hypothesis. Basically, you're
testing groups to see if there's a difference between them.
 CHAPTER 5

ANALYSIS OF DATA

The study is based on secondary data which is collected from the BSE official website and
Finance Yahoo.com. In research study the Monthly return of 3 years from 1st Jan 2017 to
31st Dec 2019 of companies are taken. This section covers the statistical analysis on data
collected. The analysis of data is carried out using MS Excel to calculate the Return, total
risk, Standard Deviation, Beta and Alpha, Sharpe’s ratio and ANOVA test. Five companies
from each sector of equities and mutual funds are selected for data that is their indices and
for Benchmark BSE 500 has been taken as a sample.

BSE 500 Benchmark

Calculation of Return and Risk of BSE 500

BSE 500
Date Adj Close Return Risk Free rate Excess Return
1/1/2017 11659.94 2.24
2/1/2017 12176.95 0.04 2.24 -2.20
3/1/2017 12631.9 0.04 2.24 -2.20
4/1/2017 12979.24 0.03 2.24 -2.21
5/1/2017 13199.15 0.02 2.24 -2.22
6/1/2017 13178.45 0.00 2.24 -2.24
7/1/2017 13897.23 0.05 2.24 -2.19
8/1/2017 13762.13 -0.01 2.24 -2.25
9/1/2017 13610.7 -0.01 2.24 -2.25
10/1/2017 14485.57 0.06 2.24 -2.18
11/1/2017 14493.58 0.00 2.24 -2.24
12/1/2017 15002.73 0.03 2.24 -2.21
1/1/2018 15347.19 0.02 2.24 -2.22
2/1/2018 14670.49 -0.05 2.24 -2.29
3/1/2018 14125.53 -0.04 2.24 -2.28
4/1/2018 15047.73 0.06 2.24 -2.18
5/1/2018 14765.69 -0.02 2.24 -2.26
6/1/2018 14528.54 -0.02 2.24 -2.26
7/1/2018 15314.81 0.05 2.24 -2.19
8/1/2018 15846.2 0.03 2.24 -2.21
9/1/2018 14445.89 -0.09 2.24 -2.33
10/1/2018 13881.71 -0.04 2.24 -2.28
11/1/2018 14429 0.04 2.24 -2.20
12/1/2018 14540.39 0.01 2.24 -2.23
1/1/2019 14285.11 -0.02 2.24 -2.26
2/1/2019 14196.8 -0.01 2.24 -2.25
3/1/2019 15304.57 0.08 2.24 -2.16
4/1/2019 15293.75 0.00 2.24 -2.24
5/1/2019 15517.9 0.01 2.24 -2.23
6/1/2019 15291.7 -0.01 2.24 -2.25
7/1/2019 14324.12 -0.07 2.24 -2.31
8/1/2019 14234.07 -0.01 2.24 -2.25
9/1/2019 14810.02 0.04 2.24 -2.20
10/1/2019 15387.13 0.04 2.24 -2.20
11/1/2019 15567.67 0.01 2.24 -2.23
12/1/2019 15667.44 0.01 2.24 -2.23
Standard Deviation 0.037597
R1 0.10%
Benchmark 0.04
mean of Excess return -2.23
SD of excess return 0.037597
Sharpe ratio -59.355
Table No 1.1: Calculation of Return and Standard Deviation of BSE 500

SAMPLE DESCRIPTION

EQUITIES BENCHMARK
ACC Limited BSE 500
BHEL Limited BSE 500
ICICI Bank limited BSE 500
Infosys limited BSE 500
Cipla limited BSE 500

MUTUAL FUNDS BENCHMARK

ICICI Prudential Mutual Fund BSE 500
Kotak Mahindra Mutual Fund BSE 500
 SBI mutual funds BSE 500
Axis Mutual Fund BSE 500
Aditya Birla Sun Life Mutual Fund BSE 500

Table No 1.2: Sample Description of Equity and mutual fund-based Company

I. EQUITIES:

A. ACC Limited : Risk and Return of ACC limited

Risk Return Beta Alpha

0.07 0.22 1.35 0.47

Table No 1.3: Risk and Return of ACC limited

 Risk return of ACC Limited
1.6

1.4 1.35

1.2

0.8

0.6
0.47
0.4
0.22
0.2
0.07
0
Risk Return Beta Alpha

Figure No 1.1: Graph of Risk and Return of ACC limited

Interpretation:

Beta of ACC Ltd is 1.35 which is higher than 1 indicates that the security's price tends to
be more volatile than the market. Risk of share is 0.07% and the rate of return is 0.22%.
This is higher than risk. Alpha is positive which indicates the fund has performed better
than its beta would predict and Sharpe ratio is negative which means the investment return
is lower than the risk-free rate.

Analysis:

(i) ACC ltd has a risk Factor of 0.07%

(ii) Its rate of return on a monthly average is 0.22
(iii) Alpha, beta and Sharpe Ratio are 0.47, 1.35, and -30.89 respectively.

B. BHEL limited: Risk and Return of BHEL limited

Risk Return Beta Alpha

 0.11 -0.02 1.60 -1.66

Table No 1.4: Risk and Return of BHEL limited

Risk return of BHEL Limited

2

1.5

0.5
Axis Title

0
Risk Return Beta Alpha
-0.5

-1

-1.5

-2

Figure No 1.2: Graph of Risk and Return of BHEL limited

Interpretation:

Beta of BHEL Ltd is 0.6 which is lower than 1 indicates that the security's price tends to be
less volatile than the market. Risk of share is 0.11 and the rate of return is -0.02. Alpha is a
negative which indicates the security fails to generate returns at the same rate as the
broader sector.

Analysis:

(i) BHEL ltd has a risk Factor of 0.11

(ii) Its rate of return on a monthly average is-0.02
(iii) Alpha and beta are -1.66 and 0.6 respectively.

C. ICICI Bank limited: Risk and Return of ICICI Bank limited

 Risk Return Beta Alpha

0.07 0.02 0.24 -0.63

Table No 1.5: Risk and Return of ICICI bank limited

Risk & Return of ICICI Bank Limited

0.4

0.24
0.2
0.07
0.02
0
Re A

-0.63

Figure No 1.3: Graph of Risk and Return of ICICI Bank limited

Interpretation:

Beta of ICICI Bank Ltd is 0.24 which lower than 1 indicates that the security's price tends
to be less volatile than the market. Risk of share is 0.07 and the rate of return is only
0.02%.

Alpha is a negative which indicates the security fails to generate returns at the same rate as
the broader sector.

Analysis:

(i) ICICI Bank ltd has a risk Factor of 0.07%

(ii) Its rate of return on a monthly average is-0.02
(iii) Alpha and beta are -0.63 and 0.24 respectively.
D. Infosys limited: Risk and Return of Infosys limited

Risk Return Beta Alpha

0.06 0.02 0.13 -1.40

Table No 1.6: Risk and Return of Infosys limited

Risk & Return of Infosys Limited

0.5

0.13
0.06 0.02
0
Re A

-1

-1.4

Figure No 1.4: Graph on Risk and Return of Infosys limited

Interpretation:
Beta of Infosys Ltd is 0.13 which lower than 1 indicates that the security's price tends to be
less volatile than the market. Risk of share is 0.06 and the rate of return is only 0.02. Alpha
is a -1.4, negative which indicates the security fails to generate returns at the same rate as
the broader sector.

Analysis:
(i) Infosys ltd has a risk Factor of 0.06
(ii) Its rate of return on a monthly average is 0.02
(iii) Alpha and beta are –1.4 and 0.13 respectively.

E. Cipla limited: Risk and Return of Cipla limited

Risk Return Beta Alpha

0.07 -0.48 0.02 -2.61
Table No 1.7: Risk and Return of Cipla limited

Risk & Return of Cipla Limited

0.5

0.07 0.02
0
Re A

-0.48

-1

-2

-2.61
-3

Figure No 1.5: Graph of Risk and Return of Cipla limited

Interpretation:
Beta of Cipla Ltd is -0.02 which is less than 1 means it tends to be less volatile than the
market. Risk of share is 0.07 and the rate of return is only -0.48. Alpha is a negative which
indicates the security fails to generate returns at the same rate as the broader sector.

Analysis:
(i) Cipla ltd has a risk Factor of 0.07
(ii) Its rate of return on a monthly average is -0.48
(iii) Alpha and beta are -2.61 and -0.02 respectively.

II. MUTUAL FUNDS

A. ICICI Prudential Mutual Fund: Risk and Return of ICICI Prudential Mutual
Fund

Risk Return Beta Alpha

0.03 T a -0.066
b l e 0.45 N -1.37
o 1 . 8
Prudential Mutual Fund

Risk & Return of ICICI Prudential Mutual Fund

0.5

0.07 0.02
0
Re A

-0.48

-1

-2

-2.61
-3

Figure No 1.6: Graph of Risk and Return of ICICI Bank limited

Interpretation:

Beta of ICICI Prudential Mutual Fund Ltd is 0.45 which is less than 1 means
it tends to be less volatile than the market. Risk of MF is 0.03 and the rate of
return is only -0.066%. Alpha is a negative which indicates the security fails
to generate returns at the same rate as the broader sector.

Analysis:
 (i) ICICI Prudential Mutual Fund Ltd has a risk Factor of 0.03%
(ii) Its rate of return on a monthly average is -0.066
(iii) Alpha and beta are -1.37 and 0.45 respectively

B. Kotak Mahindra Mutual Fund: Risk and Return of Kotak Mahindra Mutual
Fund

Risk Return Beta Alpha

0.04 0.01 0.93 0.01
Table No 1.9: Risk and Return of Kotak Mahindra Mutual Fund

Risk & Return of Kotak Mahindra Mutual Fund

1
0.93
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1 0.04
0.01 0.01
0
Risk Return Beta Alpha

Figure No 1.7: Graph of Risk and Return of Kotak Mahindra Mutual Fund

Interpretation

Beta of Kotak Mahindra Mutual Fund is 0.93 which is less than 1 means it
tends to be less volatile than the market. Risk of MF is 0.04 and the rate of
return is only 0.01. Alpha is positive which indicates the fund has performed
better than its beta would predict.

Analysis
 (i) Kotak Mahindra Mutual Fund ltd has a risk Factor of 0.04%
(ii) Its rate of return on a monthly average is -0.01%
(iii) Alpha and beta are 0.01 and 0.93 respectively

C. SBI Mutual Fund: Risk and Return of SBI mutual funds

Risk Return Beta Alpha

0.04 0.01 -0.23 -2.37
Table No 1.10: Risk and Return of SBI mutual funds

Risk & Return of SBI Mutual Fund

0.5

0.04 0.01
0
Risk Return Beta Alpha
-0.23
-0.5

-1

-1.5

-2

-2.5 -2.37

Figure No 1.8: Graph of Risk and Return of SBI mutual funds

Interpretation

Beta of SBI mutual funds is -0.23 which is negative beta simply means that the stock is
inversely correlated with the market. A negative beta occurs even when both the
benchmark index and the stock under consideration have positive returns. Risk of MF is
and the rate of return is only 0.01%. Alpha is a negative which indicates the security fails
to generate returns at the same rate as the broader sector.
Analysis
(i) SBI mutual funds ltd has a risk Factor of 0.04
(ii) Its rate of return on a monthly average is 0.01
(iii) Alpha and beta are -2.37 and -0.23 respectively

D. Axis Mutual Fund: Risk and Return of Axis mutual funds

Risk Return Beta Alpha
0.04 0.01 0.69 -0.71
Table No 1.11: Risk and Return of Axis Mutual Fund

Risk & Return of Axis Mutual Fund

0.8
0.69
0.6

0.4

0.2
0.04 0.01
0
Risk Return Beta Alpha
-0.2

-0.4

-0.6

-0.8 -0.71

Figure No 1.9: Graph of Risk and Return of Axis Mutual Fund

Interpretation:

Beta of Axis Mutual Fund is 0.69 which is less than 1 means it tends to be less
volatile than the market but positive beta value indicates that stocks generally
move in the same direction with that of the market and the vice versa. Risk of
MF is 0.04 and the rate of return is only 0.01. Alpha is a negative which
indicates the security fails to generate returns at the same rate as the broader
sector.
Analysis:

(i) Axis Mutual Fund ltd has a risk Factor of 0.04

(ii) Its rate of return on a monthly average is 0.01.
(iii) Alpha and beta are -0.71 and 0.69 respectively.

E. Aditya Birla Sun Life Mutual Fund: Risk and Return of Aditya Birla
Sun Life Mutual Fund

Risk Return Beta Alpha

0.10 0.01 -0.05 -2.11
Table No 1.12: Risk and Return of Aditya Birla Sun Life Mutual Fund

Risk & Return of Aditya Birla Sun Life Mutual Fund

0.5

0
Risk Return Beta Alpha

-0.5
Axis Title

-1

-1.5

-2

-2.5

Figure No 1.10: Graph of Risk and Return of Aditya Birla Sun Life Mutual
Fund

Interpretation:
 Beta of Aditya Birla Sun Life Mutual Fund is -0.05 which is negative beta simply
means that

the stock is inversely correlated with the market.

A negative beta occurs even when both the benchmark index and the
stock under consideration have positive returns. Risk of MF is 0.10
and the rate of return is only 0.01%. Alpha is a negative which
indicates the security fails to generate returns at the same rate as the
broader sector.

Company ICICI Kotak SBI Axis Aditya Benchmark Total

Prudentia Mahindr mutua Mutua Birla
l Mutual a Mutual l l Fund Sun
Fund Fund funds Life
Mutua
l Fund
Risk 0.03 0.04 0.04 0.04 0.10 0.04 0.29

Table No 1.13: Average Risk of Selected Company of Mutual

Funds

Average
Risk
=0.29/5

5.8%
Figure No 1.11: Graph on Average Risk of Selected Company of Mutual Funds

Interpretation:
Risk is a major factor influence all type of investors. In the above
selected Mutual Funds average risk factor is 5.8 % and the risk factor
of bench mark is 4%, it is showing Mutual Funds are less Risky.

Analysis:

(i) Aditya Birla sun life mutual funds Limited has the
highest risk factor of 10% with beta -0.05 and alpha
-2.11
(ii) ICICI mutual fund Limited has the lowest risk factor of
0.01% with beta 0.17 and alpha -2.79
(iii) Benchmark has the risk factor of 4%

(iv) On the average Mutual Funds has the risk factor of 5.8%

VI AVERAGE RETURN OF SELECTED COMPANY OF MUTUAL FUNDS:

Company ICICI Kotak SBI Axis Aditya Benchmark Total

Prudentia Mahindra mutual Mutual Birla
l Mutual Mutual funds Fund Sun
Fund Fund Life
Mutua
l
Fund
Return -0.07 0.01 0.01 0.01 0.01 0.10 0.07
Table No 1.14: Average Return of Selected Company of Mutual
Funds

Average Risk = 0.07/5 = 1.4%

Figure No 1.12: Graph on Average Return of Selected Company of Mutual Funds

Interpretation

Return is a major factor influence all type of investors. In the above

selected Mutual Funds average Return factor is 1.4 % and the Return
factor of bench mark is 0.10%, selected MF returns are good and it
will attract more and more customer
Analysis

ICICI prudential mutual fund Limited has the lowest return factor of
-0.07% with beta -0.17 and alpha -2.79
Benchmark has the return factor of 0.10%

On the average Mutual Funds has the return factor is 1.4%

AVERAGE RISK OF SELECTED COMPANY EQUITY SHARES:

Company ACC BHEL ICICI Infosy Cipl Benchmark Total

ltd ltd Ban s ltd a ltd
k ltd
Risk 0.07 0.11 0.07 0.06 0.07 0.04 0.42
Table No 1.15: Average Risk of Selected Company Equity Shares

Average Risk = 0.42/5 = 8.4%

Figure No 1.13: Graph on Average Risk of Selected Company Equity Shares

Interpretation

Risk is a major factor influence all type of investors. In the above selected equity shares
average risk factor is 8.4% and the risk factor of bench mark is 4%, it is showing Equity
are more Risky.

Analysis

BHEL Limited has the highest risk factor of 11% with beta 0.60 and alpha -1.66

Infosys Limited has the lowest risk factor of 0.06 with beta 0.13and alpha 1.40.

Benchmark has the risk factor of 4%

On the average equity share has the risk factor of 8.4%

AVERAGE RETURN OF SELECTED COMPANY EQUITY SHARES:

 Company ACC BHEL ICICI Infosy Cipl Benchmark Total
ltd ltd Ban s ltd a ltd
k ltd
Risk 0.22 -0.02 0.02 0.02 -0.48 0.10 0.86
Table No 1.16: Average Return of Selected Company Equity Shares

Average Risk= 0.86/5

=17.2%

Graph of Average Return of Selected Company Equity Shares

Interpretation

Return is a major factor influencing factor to all type of investors. In the

above selected equity shares average Return factor is 17.2% compare to
benchmark return of 0.10% selected equity share returns are good and it will
attract more and more customer.

Analysis

ACC Limited has the highest return of 0.22%.

Cipla Limited has the lowest giving return of -0.48%.

Benchmark Return factor is 0.10%

On the average equity share have got return of 17.2%

DESCRIPTIVE STATISTICS
Descriptive Statistics of Equity Shares Company

ACC ltd BHEL ICICI Infosy Cipla

 Ltd Bank Ltd s Ltd Limite
d
Mean 0.22 -0.02 0.02 0.02 -0.48
Standard Deviation 0.07 0.11 0.07 0.06 0.07
Beta 1.35 0.60 0.24 0.13 -0.02
Alpha 0.47 -1.66 -0.63 -1.40 -2.61
Sharpe Ratio -30.89 -20.47 -31.00 -35.66 -32.51
Table No 1.17: Descriptive statistics for Equity Shares Company

The above table no. 1.17 Represent the summary statistic of all
the equity limited company. The statistics consists of mean
which shows the Average return of each company, standard
deviation which analyse the risk factor related to each company
share, and Beta is a measure of a stock's volatility in relation to
the overall market, Alpha the active return on an investment and
the performance of an investment against a market index
orbenchmark that is considered to represent the market's
movement as a whole and Sharpe ratio is the most important
tools to measure the performance of any fund or investment.
Sharpe ratio helps in getting the right analysis of the funds and
enhancing the returns on investment.

From the above comparative analysis it is observed that, the

highest rate of return is recorded for company ACC Ltd is 0.22
among the selected funds, then Infosys and ICICI bank 0.02 ,
Cipla -0.48 and BHEL Ltd -0.02 respectively.

Standard deviation measures the absolute variability of a

distribution. Lower the standard deviation show the lowest risk.
So, Infosys ltd reflects the lowest standard deviation that is
0.06 then comes ACC ltd is 0.07, ICICI and Cipla is 0.07 and BHEL is 0.11.
 Beta is a measure of a stock's volatility in relation to the overall
market. So High-beta stocks are supposed to be riskier but
provide higher return potential; low-beta stocks pose less risk
but also lower returns. So ACC ltd reflects the highest beta
potential which is 1.35 then BHEL ltd is 0.60, ICICI is 0.24,
Infosys is 0.13 and Cipla is -0.02 which is less risky than other
shares but also give lesser return.

Alpha, often considered the active return on an investment, a

positive alpha indicates the fund has performed better than its
beta would predict. In contrast, a negative alpha means the fund
performed worse than expected given its beta. So, Acc ltd
reflects the active return on an investment which is 0.47 where
as other companies are performed worse than expected given its
beta which is ICICI ltd is -0.63 then Infosys ltd which is -1.40,
BHEL ltd is -1.66 and Cipla is -2.61.

Sharpe and is used to help investors understand the return of an

investment compared to its risk, negative Sharpe ratio, means the
risk-free rate is greater than its return. So, Infosys ltd is
giving the poor return is -35.66 afterward Cipla ltd which is
-32.51 , ICICI ltd is -31.00 , ACC ltd is -30.89 and BHEL ltd is
-20.47 respectively.

Descriptive Statistics of Mutual Funds Company

ICICI Kotak SBI Axis Aditya

mutua Mahindr mutua Mutua Birla
l fund a Mutual l fund l Fund Sun life
Fund MF
Mean -0.07 0.01 0.01 0.01 0.01
 Standard Deviation 0.03 0.04 0.04 0.04 0.10
Beta 0.17 0.93 -0.23 0.69 -0.05
Alpha -2.79 0.01 -2.37 -0.71 -2.11
Sharpe Ratio -2.49 -5.80 -60.05 -53.57 -22.71
Table No 1.18: Descriptive statistics for Mutual Funds
Company

The table no. 1.18 represents the summary statistics of all the mutual Funds
companies. The statistics consists of mean which shows the typical return of
every company , Standard Deviation which analyse the danger factor
associated with each company share , and Beta measure of a stock's volatility
in reference to the general market, Alpha the active return on an investment
and the performance of an investment against a market index or benchmark
that's considered to represent the market's movement as an entire and Sharpe
ratio is that the most vital tools to live the performance of any fund or
investment. Sharpe ratio helps in getting the proper analysis of the funds and
enhancing the returns on investment
Mean is the average value of the series. The highest rate of return is recorded for
ABSL Mf is

0.01 and SBI is 0.01, Kotak Mahindra is 0.01, Axis Mutual fund is 0.01, ICICIMF
is -0.07.

Standard deviation measures the absolute variability of a

distribution. So, ICICI i.e. 0.03 and reflects the lowest standard
deviation that is 0.03 which means it has low risk from the other
companies then comes Kotak Mahindra ltd is 0.04 , SBI is 0.04 Axis
mutual fund ltd is 0.04 and ABSL mutual Fund is 0.10.

Beta is a measure of a stock's volatility in relation to the overall

market. So High-beta stocks are supposed to be riskier but provide
higher return potential; low-beta stocks pose less risk but also lower
returns. So Kotak mf ltd reflects the highest beta potential which is
0.93 Then Axis mf ltd which is 0.69, ICICI mf ltd is 0.17, ABSL
mf is -0.05 and SBI i s - 0.23 Which is less risky than other shares
 but also give lesser return.

Alpha, often considered the active return on an investment, a positive

alpha indicates the fund has performed better than its beta would
predict. In contrast, a negative alpha means the fund performed
worse than expected given its beta. So, Kotak Mahindra Mf ltd
reflects the active return on an investment which is 0.01 where as
other companies are performed worse than expected given its beta
which is Axis Mf ltd is -0.71 then ABSL mf ltd which is -2.11, SBI
mf is -2.37 and ABSL mf ltd is –2.79.

Sharpe and is used to help investors understand the return of an

investment compared to its risk, negative Sharpe ratio, means the
risk-free rate is greater than the portfolio's return. So, SBI mf ltd is
giving the poor return is -60.05 then by axis mf ltd is -53.57, ABSL
ltd is -22.71 , Kotak mf ltd is –5.80 and ICICI Mf ltd is -2.49.

Performance Analysis Based On Sharpe Ratio Analysis and Ranking

Name of Scheme Sample Sharpe Ratio Ranking

ACC Limited Equity -30.89 6
BHEL Limited Equity -20.47 3
ICICI Bank limited Equity -30.00 5
Infosys limited Equity -35.66 8
Cipla limited Equity -32.51 7

ICICI Prudential Mutual Fund Mutual Funds -2.49 1

Kotak Mahindra Mutual Fund Mutual Funds -5.80 2

SBI mutual funds Mutual Funds -60.05 10

Axis Mutual Fund Mutual Funds -53.57 9

 Aditya Birla Sun Life Mutual Fund Mutual Funds -22.71 4

Table No 1.19: Performance Analysis Based On Sharpe Ratio Analysis And Ranking

In my analysis i have given rank on the basis of higher Sharpe’s

ratio. Higher Sharpe’s ratio gets first rank. Sharpe's performance
index measures the standard deviation of portfolio. This model
considered total risk that is both systematic and unsystematic
risk.

In my analysis i have found that ACC ltd - growth has a return

of 0.22% and on the basis of Sharpe’s Ratio its stand on 6th
rank but its standard deviation is 0.07 which is almost equal as
compared to other 9 funds.

This thing indicates that ICICI MF and other services fund stand
on 1st rank because it is providing return with moderate risk.

I have analysed that SBI mutual fund growth plan also has low standard deviation first rank
according to Sharpe performance index. This reason behind this is that fund is
providing lower return as compared to other 9 funds. This is indicates that SBI Mutual
funds stand On last rank because it is providing lower return with low risk
I want to conclude that according to Sharpe’s performance index it is not necessary fund
with higher return is always wellperforming fund standard first time because we also have
to consider risk associated with that funds. The return of funds should also be good
enough; it is not be so lower

Comparative Analyses between Fund and Bench Mark Return

Name of Funds Benchmark 3yr Benchmark Performance

Return Return
ACC Limited BSE 500 0.22 0.10% Outperformed
BHEL Limited BSE 500 -0.02 0.10% Underperformed
ICICI Bank limited BSE 500 0.02 0.10% Underperformed
Infosys limited BSE 500 0.02 0.10% Underperformed
Cipla limited BSE 500 -0.48 0.10% Underperformed

ICICI Prudential BSE 500 -0.07 0.10% Underperformed

Mutual Fund
Kotak Mahindra BSE 500 0.01 0.10% Underperformed
Mutual Fund
SBI mutual funds BSE 500 0.01 0.10% Underperformed

Axis Mutual Fund BSE 500 0.01 0.10% Underperformed

Aditya Birla Sun Life BSE 500 0.01 0.10% Underperformed

 Mutual Fund
Table No 1.20: Comparative Analyses between Fund and Bench Mark
Return

A benchmark is a standard or measure that can be used to analyze the allocation, risk, and
return of a given portfolio and benchmark' to measure a fund's/stock's performance.
Individual funds and investment portfolios will generally have established benchmarks for
standard analysis. A variety of benchmarks can also be used to understand how aportfolio
is performing against various market segments. Here we can see that only ACC limited is
outperformed and rest 9 funds is underperformed as compared to benchmark BSE 500.

Comparison of selected equity and mutual funds schemes in respect their Risk

Investment Mutual Fund Equity

Risk 5.8 8.4%

Table No 1.21: Comparison of selected equity and mutual

funds schemes in
respect their Risk
 Figure No 1.15: Graph of Comparison of selected equity and
mutual funds schemes in
respect their Risk

Interpretation

Equity capital and mutual funds schemes are subjected of market

risk. Based on the above analysis mutual fund have a average risk of
5.8% which is compared to equity shares risk of 8.4% is lower.
Those who whole like to take risk can go for equity investments.

Analysis

a) Mutual funds have the risk on an average of 5.8%

b) Equity shares have the risk on an average of 8.4%

Comparison of selected equity and mutual funds schemes in respect their Returns

Investment Mutual Fund Equity

Returns 1.4% 17.2%

 Table No 1.22: Comparison of selected equity and mutual
funds schemes in respect
their Return

Figure No 1.16: Graph of Comparison of selected equity

and mutual funds schemes in
respect of their Returns

Interpretation

Equity capital and mutual funds schemes are subjected of market

risk. Based on the above analysis mutual fund have a average return
of 1.4% which is compared to equity shares Return of 17.2% is
lower. Those who whole like to take risk can go for equity
investments for getting higher return.

Analysis

a) Mutual funds have average Return of 1.4%

b) Equity shares have average return of 17.2%

ANOVA RESULT:

H0: There is no significant difference between the risk and return of

equity shares and mutual fund is accepted.

H1: There is a significant difference between the risk and return of

equity share and mutual fund is rejected.

ANOVA: Two-Factor With Replication

SUMMARY EQUITY MUTUAL Total

SHARE FUND
Return
Count 5 5 10
Sum 0.0173 -0.03 -0.0127
Average 0.00346 -0.006 -0.00127
Variance 0.000291898 0.00128 0.00072348
Risk
Count 5 5 10
Sum 0.38 0.25 0.63
Average 0.076 0.05 0.063
Variance 0.00038 0.0008 0.000712222
Total
Count 10 10
Sum 0.397 0.22
3
Average 0.0397 0.022
3
Variance 0.0017603 0.0017955
02 56
ANOVA
Source of Variation SS d MS F P-value F crit

f
Sample 0.020653165 1 0.020653165 3.020247117 5.0481E-05 4.493998478
Columns 0.001571765 1 0.001571765 2.284626102 0.150159629 4.493998478
Interaction 0.000341964 1 0.000341964 0.497059847 0.490931714 4.493998478
Within 0.011007592 16 0.000687975

Total 0.033574486 19

Table No 1.23: ANOVA Result for Risk and Return of equity and mutual
fund

As you can see in the highlighted cells in the image above, the F-value for sample, column
and interaction are lesser than their F-critical values. This means that the factors have no
significant difference between the risk and return of equity shares and mutual fund and
thus we can accept the null hypothesis and also we reject the alternative hypothesis F-
Critical is less then F value.

Hypothesis summary table

Relationship Evidence Accepted/

supporte
d
H0 There is no significant difference between the “(3.02<4.49=;) YES
risk and return of equity shares and mutual fund (0.05)=,(5.04=.”

H1 There is a significant difference between the “(4.49>3.02=;) NO

risk
and return of equity share and mutual fund is (0.05)=,(5.04=.”
Rejected.

Table No 1.24: Hypothesis summary table

CONCLUSION

The main aim of the study was to examine the Performance Evaluation of
Risk and Return for the Equity and Mutual Funds Companies. For this
secondary data has been collected from reliable database. The data has been
analyzed and result has interpreted and the findings of this study are
reported below:

(i) The first objective is to measure the mean return and risk of the
stocks. It was found that equity share schemes have higher risk
with higher return and mutual funds schemes have lower risk with
lower return, there are some companies how can give positive
returns to their investors, the annualized returns of ACC ltd , ICICI
bank ltd , Infosys ltd , Kotak Mahindra mf , SBI Mf , Aditya Birla
sun life Mf and Axis mutual funds are positive and the investor get
the good return. The returns are positive but with minimum amount
and difference and the mean return of other 3 company is negative.

The result of Sharpe’s Ratio shows that Sharpe’s performance index it

is not necessary fund with higher return is always well performing
fund standard first time because we also have to consider risk
associated with that funds. The return of funds should also be good
enough; it is not be so lower.

A benchmark is a standard or measure that can be used to analyze the

allocation, risk, and return of a given portfolio and benchmark' to
measure a fund's/stock's performance So here we can see that only
 ACC Ltd is outperformed and rest 9 funds is underperformed as
compared to benchmark BSE 500.

(iv)ANOVA result shows that Null h(0) hypothesis is Accepted

because there is no significant difference between the return and
risk of equity and mutual fund and Alternative hypothesis is
Rejected because F critical value is more than f – value also p
value is higher than alpha value i.e. 0.05.

Investment in both equity and mutual funds are subjected to market

risk

REFERENCES

Journals:

1. Debasish Sathya Swaroop (2009), Investigating Performance of

Equity-based Mutual Fund Schemes in Indian Scenario, KCA
Journal of Business Management, 2 (2) 4-10.

2. Narayanasamy and Rathnamani (2013) Performance Evaluation of

Equity Mutual Funds (On Selected Equity Large Cap Funds).
International Journal of Business and Management Invention, 2(4),
18-24.

3. Dr. Mehta and Shah (2012) Preference of Investors for Indian Mutual
Funds and its Performance Evaluation. Pacific Business Review
 International, 5(3) 15-20.

4. Yaseen and Chakraborty (2015) Performance Evaluation of Equity

Diversified Mutual Fund Schemes. M.S. Ramaiah University of
Applied Sciences, Bangalore, 4(1), 6-10.

Pratap, Singh and Kr. Gautam (2020) Performance Evaluation of

Equity Linked Savings Schemes (ELSS) of Indian Mutual Funds.
BHU, Varanasi. UGC Care Journal

5. Jain (2012), Analysis of Equity Based Mutual Funds in India, Journal

of Business and Management (IOSRJBM).2(1) 1-4.

6. Pangestuti, Wahyudi, and Robiyanto (2017) , Performance

Evaluation of Equity Mutual Funds in Indonesia, Jurnal Keuangan
dan Perbankan, 21(4): 527–542.

7. Shukla and Singh (1997), A Performance Evaluation of Global

Equity Mutual Funds: Evidence From 1988-95. Global Finance
Journal, S (2): 279-293.

8. Gusni, Silviana, and Hamdani (2018), Factors Affecting Equity

Mutual Fund Performance: Evidence from Indonesia. Investment
Management and Financial Innovations, 15(1), 1-9.

9. Ashraf and Sharma (2014), Performance Evaluation of Indian Equity

Mutual Funds against Established Benchmarks Index. International
Journal of Accounting Research, 2(1).2-7.

Websites:

1. https://www.bseindia.com/
 2. https://www.moneycontrol.com/

3. https://in.finance.yahoo.com/

4. https://www.inflationdata.com/

5. https://www.google.com/

A financial market is a market in which people and entities can trade financial securities,
commodities, and other fungible items of value at low transaction costs and at prices that
reflect supply and demand. Securities include stocks and bonds, and commodities include
precious metals or agricultural goods.

There are both general markets (where many commodities are traded) and specialized
markets (where only one commodity is traded). Markets work by placing many interested
buyers and sellers, including households, firms, and government agencies, in one "place",
thus making it easier for them to find each other. An economy which relies primarily on
interactions between buyers and sellers to allocate resources is known as a market
economy in contrast either to a command economy or to a non-market economy such as a
gift economy.

In finance, financial markets facilitate:

 The raising of capital (in the capital markets)

 The transfer of risk (in the derivatives markets)
  Price discovery
 Global transactions with integration of financial markets  The transfer of liquidity
(in the money markets)
 International trade (in the currency markets)

– and are used to match those who want capital to those who have it.

Typically, a borrower issues a receipt to the lender promising to pay back the capital.
These receipts are securities which may be freely bought or sold. In return for lending
money to the borrower, the lender will expect some compensation in the form of interest or
dividends. This return on investment is a necessary part of markets to ensure that funds are
supplied to them.

1.1 Indian Financial Market

India Financial market is one of the oldest in the world and is considered to be the fastest
growing and best among all the markets of the emerging economies. The history of Indian
capital markets dates back 200 years toward the end of the 18th century when India was
under the rule of the East India Company. The development of the capital market in India
concentrated around Mumbai where no less than 200 to 250 securities brokers were active
during the second half of the 19th century. The financial market in India today is more
developed than many other sectors because it was organized long before with the securities
exchanges of Mumbai, Ahmedabad and Kolkata were established as early as the 19th
century.

By the early 1960s the total number of securities exchanges in India rose to eight,
including Mumbai, Ahmedabad and Kolkata apart from Madras, Kanpur, Delhi, Bangalore
and Pune.

Today there are 21 regional securities exchanges in India in addition to the centralized
NSE (National Stock Exchange) and OTCEI (Over the Counter Exchange of India).
However, the stock markets in India remained stagnant due to stringent controls on the
market economy that allowed only a handful of monopolies to dominate their respective
sectors.

The corporate sector wasn't allowed into many industry segments, which were dominated
by the state controlled public sector resulting in stagnation of the economy right up to the
early 1990s.

Thereafter when the Indian economy began liberalizing and the controls began to be
dismantled or eased out, the securities markets witnessed a flurry of IPOs that were
launched. This resulted in many new companies across different industry segments to
come up with newer products and services.

A remarkable feature of the growth of the Indian economy in recent years has been the role
played by its securities markets in assisting and fueling that growth with money rose within
the economy. This was in marked contrast to the initial phase of growth in many of the
fast-growing economies of East Asia that witnessed huge doses of FDI (Foreign Direct
Investment) spurring growth in their initial days of market decontrol. During this phase in
India much of the organized sector has been affected by high growth as the financial
markets played an all-inclusive role in sustaining financial resource mobilization. Many
PSUs (Public Sector Undertakings) that decided to offload part of their equity were also
helped by the well-organized securities market in India.

The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter
Exchange of India) during the mid-1990s by the government of India was meant to usher
in an easier and more transparent form of trading in securities. The NSE was conceived as
the market for trading in the securities of companies from the large-scale sector and the
OTCEI for those from the small-scale sector. While the NSE has not just done well to
grow and evolve into the virtual backbone of capital markets in India the OTCEI struggled
and is yet to show any sign of growth and development. The integration of IT into the
capital market infrastructure has been particularly smooth in India due to the country’s
world class IT industry. This has pushed up the operational efficiency of the Indian stock
market to global standards and as a result the country has been able to capitalize on its high
growth and attract foreign capital like never before.
The regulating authority for capital markets in India is the SEBI (Securities and Exchange
Board of India). SEBI came into prominence in the 1990s after the capital markets
experienced some turbulence. It had to take drastic measures to plug many loopholes that
were exploited by certain market forces to advance their vested interests. After this initial
phase of struggle SEBI has grown in strength as the regulator of Indian capital markets and
as one of the country’s most important institutions.

CHAPTER 2

1. Mutual Fund

One can define a mutual fund as a trust that pools in the savings and funds from a large
number of investors who have a common financial goal. Mutual funds issue units to
investors, which represent equitable rights in the assets of the mutual fund. Mutual fund by
its nature is diversified i.e. its assets are invested in many different securities. Investments
in the mutual funds may be in the form of stocks, bonds or money market securities or
combination of these. These are professionally managed on behalf of the shareholders and
each investor holds a pro-rata share of the portfolio entitled to any profits when the
securities are sold, but subject to any losses as well. There are a number of schemes of
Mutual Fund and all of them have different character and objective. It is the skill of the
investor to keep in view the objective and then take decision where to invest.

For example, in the wake of boom in the software sector, the Indian Mutual Fund launched
various sector specific schemes that entailed only to software stocks for that period

Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI),
and investing in mutual funds is considered to be the easiest way through which you can
increase your wealth.

Types of Mutual Funds in India

Mutual funds in India are classified into different categories based on certain
characteristics such as asset class, structure, investment objectives, and risk. Here, we will
help you understand in detail the various categories and the kinds of funds under each
category.

Based on Asset Class

 Equity-oriented Schemes
Equity funds make investments mainly in stocks of companies. Equity funds are
the most preferred investment options among the majority of investors as these
offer high returns and quick growth. As against the debt-oriented schemes, these
schemes invest the bulk of their funds in equity shares and in fixed income
avenues.

 Debt-oriented Schemes
This type of schemes invests most of the funds in fixed income instruments like
debentures of the private sector companies, public sector bonds, Government
securities and money market instruments, the balance is invested in equity shares.
Given the portfolio composition of such schemes, a reasonably firm indication is
provided about the return’s investors can expect from schemes.

 Sector Funds
 As the name suggests, sector funds specialize in the stock of single industry or
market sector. The fund’s portfolio is invested among a handful of stocks in the
same industry and thus these can be regarded as aggressive funds. Such schemes
concentrate their investments in the specified sector/industry such as
Pharma/IT/FMCG etc. They also focus on Government securities. The
diversification is lower in the case of these funds and hence the risk borne by the
investor is higher. These sector fund buyers are likely to be more sophisticated and
look for a balance between the diversification of a conventional fund and the
narrow focus of buying shares in an individual company.

 Money Market Funds

Money market funds invest in easily accessible cash and cash equivalent securities
and offer returns as regular dividends. These funds come with relatively lower risk
and are ideal for short term investment.

Based on Structure

 Open-ended Mutual Funds

An open-ended scheme is a scheme, in which an investor can buy and sell units on
daily basis; the scheme has a perpetual existence and a flexible, ever changing
corpus. The investors are free to buy and sell any number of units, any point of
time, at prices that are linked to the NAV of the units. In these schemes the
investor can invest or disinvest any amount, any time after the initial lock in
period. These schemes are extremely liquid and the funds announce sale and
repurchase prices from time to time. These are not listed in stock exchanges and
can be only bought and sold to the mutual fund.

 Closed-ended Mutual Funds

A close-ended scheme is one in which, the subscription period for the mutual fund
remains only for the specific period, called the redemption period. At the end of
this period, the entire corpus is disinvested and the proceeds distributed to the
various unitholders. Thus, after final distribution, the scheme ceases to exist.
 However, such schemes can be rolled over with the approval of the unitholders.
They can be listed on the stock exchanges.

Based on Investment Objectives

 Pure Growth Schemes

A pure growth scheme aims at generating long-term capital appreciation for the
investors. The objective is achieved by investing a substantial portion of the corpus
in high growth equity shares or other equity-related instruments of corporate
bodies. The dividend can be declared and distributed as and when the boards of
trustees approve it but the principal remains capital appreciation.

 Pure Income Schemes

Their aim is to generate and distribute regular income to the investors. This is done
by investing a substantial portion of the corpus in high-income yield/ fixed income
instruments, such as debentures, bonds and so on. Declaration of regular dividends
is the main objective of the scheme.

 Balanced Schemes
The aim of these schemes is both, to distribute regular income and also provide
capital to the investors by balancing the investments of the corpus between the
high growth equity shares and the regular income earning securities.

 Tax-saving Schemes
Equity-Linked Saving Schemes (ELSS) mainly invest in equity and equity-related
instruments and offer dual benefits of tax-saving and wealth generation. These
funds, usually, come with a three-year lock-in period.

2. Based on Risk Profile

 High-risk Funds
 High-risk funds are funds which carry a high level of risk but generate impressive
returns. These funds require active management and their performance must be
reviewed regularly as these are prone to market volatility.

 Medium-risk Funds
The level of risk associated with medium-risk funds is neither too high, nor too
low. The corpus of medium-risk funds is invested partly in debt and partly in
equities. The average returns offered by these funds range from 9% to 12%.

 Low-risk Funds
The corpus of low-risk funds is spread across a combination of arbitrage funds,
ultra-short-term funds, and liquid funds. These funds are ideal in times of
unexpected national crisis or when the rupee depreciates in value.

 Very Low-risk Funds

These funds could be ultra-short-term funds or liquid funds whose maturity
extends from a month to a year. Such funds are virtually risk-free and the returns
they offer are generally around 6% at the best.

NAV (Net Asset Value)

NAV means Net Asset Value. The investments made by a Mutual Fund are marked to
market on daily basis. In other words, we can say that current market value of such
investments is calculated on daily basis. NAV is arrived at after deducting all liabilities
(except unit capital) of the fund from the realisable value of all assets and dividing by
number of units outstanding. Therefore, NAV on a particular day reflects the realisable
value that the investor will get for each unit if the scheme is liquidated on that date. This
NAV keeps on changing with the changes in the market rates of equity and bond markets.
Therefore, the investments in Mutual Funds is not risk free, but a good managed Fund can
give you regular and higher returns than when you can get from fixed deposits of a bank
etc.

Advantages of Mutual Fund

 Professional Management: Mutual funds offer investors the opportunity to earn

an income or build their wealth through professional management of their
investible funds. There are several aspects to such professional management viz.
investing in line with the investment objective, investing based on adequate
research, and ensuring that prudent investment processes are followed.

 Affordable Portfolio Diversification: Units of a scheme give investors exposure

to a range of securities held in the investment portfolio of the scheme. Thus, even a
small investment of Rs 5,000 in a mutual fund scheme can give investors a
diversified investment portfolio.

 Economies of Scale: The pooling of large sums of money from so many investors
makes it possible for the mutual fund to engage professional managers to manage
the investment. Individual investors with small amounts to invest cannot, by
themselves, afford to engage such professional management.

 Liquidity: At times, investors in financial markets are stuck with a security for
which they can’t find a buyer – worse, at times they can’t find the company they
invested in! Such investments, whose value the investor cannot easily realise in the
market, are technically called illiquid investments and may result in losses for the
investor. Investors in a mutual fund scheme can recover the value of the moneys
invested, from the mutual fund itself. Depending on the structure of the mutual
fund scheme, this would be possible, either at any time, or during specific intervals,
or only on closure of the scheme. Schemes where the money can be recovered from
the mutual fund only on closure of the scheme, are listed in a stock exchange. In
 such schemes, the investor can sell the units in the stock exchange to recover the
prevailing value of the investment.

 Tax Deferral: Mutual funds are not liable to pay tax on the income they earn. If
the same income were to be earned by the investor directly, then tax may have to be
paid in the same financial year. Mutual funds offer options, whereby the investor
can let the moneys grow in the scheme for several years. By selecting such options,
it is possible for the investor to defer the tax liability. This helps investors to legally
build their wealth faster than would have been the case, if they were to pay tax on
the income each year.

 Tax benefits: Specific schemes of mutual funds (Equity Linked Savings Schemes)
give investors the benefit of deduction of the amount invested, from their income
that is liable to tax. This reduces their taxable income, and therefore the tax
liability. Further, the dividend that the investor receives from the scheme, is taxfree
in his hands.

 Convenient Options: The options offered under a scheme allow investors to

structure their investments in line with their liquidity preference and tax position.

 Investment Comfort: Once an investment is made with a mutual fund, they make
it convenient for the investor to make further purchases with very little
documentation. This simplifies subsequent investment activity.

 Regulatory Comfort: The regulator, Securities & Exchange Board of India (SEBI)
has mandated strict checks and balances in the structure of mutual funds and their
activities. Mutual fund investors benefit from such protection.

 Systematic approach to investments: Mutual funds also offers facilities that help
investor invest amounts regularly through a Systematic Investment Plan (SIP); or
withdraw amounts regularly through a Systematic Withdrawal Plan (SWP); or
move moneys between different kinds of schemes through a Systematic Transfer
 Plan (STP). Such systematic approaches promote an investment discipline, which is
useful in long term wealth creation and protection.

Disadvantages of Mutual Fund

 Lack of portfolio customization: Some securities houses offer Portfolio
Management Schemes (PMS) to large investors. In a PMS, the investor has better
control over what securities are bought and sold on his behalf. On the other hand, a
unit-holder is just one of several thousand investors in a scheme. Once a unitholder
has bought into the scheme, investment management is left to the fund manager
(within the broad parameters of the investment objective). Thus, the unitholder
cannot influence what securities or investments the scheme would buy. Large
sections of investors lack the time or the knowledge to be able to make portfolio
choices. Therefore, lack of portfolio customization is not a serious limitation in
most cases.

 Choice overload: Over 800 mutual fund schemes offered by 38 mutual funds – and
multiple options within those schemes – make it difficult for investors to choose
between them. Greater dissemination of industry information through various
media and availability of professional advisors in the market should help investors
handle this overload.

 No control over costs: All the investor's moneys are pooled together in a scheme.
Costs incurred for managing the scheme are shared by all the Unit holders in
proportion to their holding of Units in the scheme. Therefore, an individual investor
has no control over the costs in a scheme. SEBI has however imposed certain limits
on the expenses that can be charged to any scheme. These limits, which vary with
the size of assets and the nature of the scheme.
The Equity Capital:

Investors owning equity shares of a company are owners of the company. They are issued
equity shares of the company, as evidence of such ownership. Equity investors are not
entitled to any fixed return or repayment of capital. However, they are entitled to the
benefits that arise out of the performance of the company. If the business fails, they may
lose the entire investment. Of all the financiers, they take the most risk. Total equity capital
of a company is divided into equal units of small denominations, each called a share. For
example, in a company the total equity capital of Rs 2,00,00,000 is divided into 20,00,000
units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is
12 said to have 20, 00,000 equity shares of Rs 10 each. The holders of such shares are
members of the company and have voting rights.
Shares of company and can be traded in secondary market. Investors get benefit by change
in price of share or dividend given by companies. This essentially means that the person
has a residual interest in income and wealth of the company.

Face Value of a Share

The nominal or stated amount (in Rs.) assigned to a security by the issuer. For shares, it is
the original cost of the stock shown on the certificate; for bonds, it is the amount paid to
the holder at maturity. Also known as par value or simply par. For an equity share, the face
value is usually a very small amount (Rs. 5, Rs. 10) and does not have much bearing on the
price of the share, which may quote higher in the market, at Rs. 100 or Rs. 1000 or any
other price. For a debt security, face value is the amount repaid to the investor when the
bond matures (usually, Government securities and corporate bonds have a face value of Rs.
100). The price at which the security trades depends on the fluctuations in the interest rates
in the economy. When a security is sold above its face value, it is said to be issued at a
Premium and if it is sold at less than its face value, then it is said to be issued at a
Discount.

Issue of Shares
Most companies are usually started privately by their promoter(s). However, the
promoters’ capital and the borrowings from banks and financial institutions may not be
sufficient for setting up or running the business over a long term. So, companies invite the
public to contribute towards the equity and issue shares to individual investors. The way to
invite share capital from the public is through a ‘Public Issue’. Simply stated, a public
issue is an offer to the public to subscribe to the share capital of a company. Once this is
done, the company allots shares to the applicants as per the prescribed rules and
regulations laid down by SEBI

These can be classified into following broad categories as per stock market:

Blue chip shares

Shares of large, well established, financially strong companies with an impressive
record of earnings and dividends.

Growth shares
Shares of companies that have fairly entrenched positions in a growing market and
which enjoy an above average rate of growth as well as profitability.

Income shares
Share of companies that have fairly stable operations, relative limited growth
opportunities, and high dividend payout ratios.

Cyclic shares
Share of companies that have a pronounced cyclicality in their operations.

Defensive shares
Shares of companies that are relatively unaffected by the ups and downs in general
business conditions.

Speculative shares
Shares of companies that tend to fluctuate widely because there is a lot of
speculative trading in them.
Advantages of Equity Shares

 More Income: Equity shareholders are the residual claimant of the profits after
meeting all the fixed commitments. The company may add to the profits by trading
on equity. Thus, equity capital may get dividend at high in boom period.
 Right to participate in the Control and Management: Equity shareholders have
voting rights and elect competent persons as directors to control and manage the
affairs of the company.
 Capital profits: The market value of equity shares fluctuates directly with the
profits of the company and their real value based on the net worth of the assets of
the company. An appreciation in the net worth of the company's assets will increase
the market value of equity shares. It brings capital appreciation in their investments.
 An Attraction of Persons having Limited Income: Equity shares are mostly of
lower denomination and persons of limited recourses can purchase these shares.
 Tax Advantages: Equity shares also offer tax advantages to the investor. The
larger yield on equity shares results from an increase in principal or capital gains,
which are taxed at lower rate than other incomes in most of the countries.
 Other Advantages: It appeals most to the speculators. Their prices in security
market are more fluctuating

Disadvantages of Equity Shares

 Uncertain and Irregular Income: The dividend on equity shares is subject to

availability of profits and intention of the Board of Directors and hence the income
is quite irregular and uncertain. They may get no dividend even three are sufficient
profits.

 Capital loss During Depression Period: During recession or depression periods,

the profits of the company come down and consequently the rate of dividend also
comes down. Due to low rate of dividend and certain other factors the market value
of equity shares goes down resulting in a capital loss to the investors.
  Loss on Liquidation: In case, the company goes into liquidation, equity
shareholders are the worst suffers. They are paid in the last only if any surplus is
available after every other claim including the claim of preference shareholders is
settled. It is evident from the advantages and disadvantages of equity share capital
discussed above that the issue of equity share capital is a must for a company, yet it
should not solely depend on it. In order to make its capital structure flexible, it
should raise funds from other sources also.

 Dividend at the board’s mercy: The rate of dividend is recommended by the

board. The shareholders in the AGM cannot declare a higher rate than what is
recommended by the board.

 Illiquid: Since equity shares are not refundable, they are treated as illiquid.

 Speculation: higher dividends during prosperous periods and low dividend during
depression period shall lead to ample speculation.

Mutual Funds Vs Equity

While investing in both mutual funds as well as equity and stocks is generally considered
to be a sound long-term plan, it is important to understand the difference between the two
in order for an individual to accurately gauge which kind of investment best suits his or her
risk profile.

Some of the main differences between mutual funds and equity can be seen below:

 Risk - Mutual funds are usually considered to be best suited for those individuals
who have a low risk profile or are risk-averse by nature. However, investors in equity or
individual stocks tend to be more active with a penchant for taking risks. In this sense,
 mutual funds are seen as a ‘safer’ bet in comparison to equity stocks, due to their low
risk quotient.

 Returns - While mutual funds offer investors very decent returns over a period of
time, equity stocks have the potential to bring the investor extremely high returns over a
much shorter period of time. Investing in stocks can be tricky, and is usually only done
by individuals with an in-depth understanding of market conditions.

 Volatility - Equity stocks or individual stocks are very volatile by nature. The value
of these investments could skyrocket or plummet within an extremely short span of time,
leading to either massive profits or damaging losses. However, mutual funds are a much
more stable form of investment due to its diversity. This makes it a less volatile form of
investment since all gains and losses are spread out over a wider range of stocks.

 Convenience - Individuals who invest in mutual funds enlist the services of a fund
manager who takes care of his or her portfolio, making it an extremely convenient form
of investment. However, investing in equity requires the individual to constantly monitor
his or her investments due to the ever-changing nature of individual stocks. Investors in
equity are dependent on their own knowledge of the market while mutual fund investors
rely on the expertise of the fund manager to guide them.

 Costs - Trading in individual or equity stocks usually comes at a huge cost.

Sometimes, any profits made from the sale of a stock can be wiped out due to the high
trading cost involved. This is one of the reasons why only those investors with a high-
risk profile tend to invest in equity. Trading in mutual funds, however, comes at a much
lower cost since these expenses are spread over all portfolios within the fund

Based on the information outlined above, both mutual funds and equity stocks come
with their pros and cons. Therefore, it is highly recommended that individuals looking to
invest in either one takes the time to determine which form of investment best suits their
profile as well as their budget.
 Mutual Funds or Equity – Which is a Better Option for you?

Whether you wish to invest in mutual funds or equity shares will depend upon your
knowledge of the market. Common investors have two options to invest in equities. They
can either choose to purchase shares directly from listed companies using a demat account,
or they could hold shares indirectly by making investments in equity mutual funds. The
right choice for you will depend a lot on your investment needs. Mutual funds, however,
have been preferred over equities by a large number of people for the following reasons:

 Instant and relatively cheap diversification

 Efficient risk management
 Active management of portfolio
 Innovative models for investment and withdrawal
 Lower transaction costs
CHAPTER 4

ANALYSIS OF DATA

Benchmark: NSE CNX NIFTY

Average share price and percentage returns of CNX NIFTY is as follows:

Table 4.1: Price and returns of NSE CNX NIFTY

F.Y. PRICE(Avg) % RETURN % RETURN(YoY)

CHAPTER 6

LIMITATIONS

Limitations of the study:

 The sample size is limited by 10 each on equity shares and mutual funds

 The benchmark for equity shares and mutual funds is NSE CNX NIFTY, other
benchmarks for securities may have shown good or bad performance.

 The data was collected from the time horizon of 10 financial years starting from April
2004 to March 2014.

 The comparison here made strictly on price of equity shares and NAV of mutual funds,
the study hasn’t gone deep into other factors.  The data has been collected from secondary
sources only, relevance of information may not fully trustworthy
CHAPTER 5

REVIEW OF LITERATURE

Singh, B. K. and Jha, A.K. (2009) conducted a study on awareness & acceptability of
mutual funds and found that investors prefer mutual fund due to return potential, liquidity
and safety and they were not totally aware about the systematic investment plan. The
invertors’ will also consider various factors before investing in mutual fund.

Ramamurthy and Reddy (2005) conducted a study to analyze recent trends in the mutual
fund industry and draw a conclusion that the main benefits for small investors’ due to
efficient management, diversification of investment, easy administration, liquidity,
transparency, flexibility, affordability, wide range of choices and a proper regulation
governed by SEBI. The study also analyzed about recent trends in mutual fund industry
like various exit and entry policies of mutual fund companies, various schemes related to
real estate, commodity, entering of banking sector in mutual fund, buying and selling of
mutual funds through online. Anand and Murugaiah (2004) had studied various strategic
issues related to the marketing of financial services. They found that recently this type of
industry requires new strategies to survive and for operation. For surviving they have to
adopt new marketing tactics that enable them to capture maximum opportunities with the
minimum risks in order to enable them to survive and meet the competition from various
market players globally.

ANALYSIS OF INVESTORS PERCEPTION