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PROJECT REPORT ON COMPARATIVE STUDY OF THE PERFORMANCE OF
THREE INCOME FUNDS (MUTUAL FUNDS) WITH THE TOP THREE FIXED
DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
Ramaiah Institute of Mana ement Studies Pa e1
Chapter -1
INTRODUCTION
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THREE INCOME FUNDS (MUTUAL FUNDS) WITH THE TOP THREE FIXED
DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
Ramaiah Institute of Mana ement Studies Pa e2
Problem Definition
The Indian capital market has been increasing tremendously during last few years.
With the reforms of economy, reforms of industrial policy, reforms of public sector and
reforms of financial sector, the economy has been opened up and many developments
have been taking place in the Indian money market and capital market. In order to help
the small investors, mutual fund industry has come to occupy an important place. The
objective of this is to examine the importance and growth of mutual funds and evaluate
the operations of mutual funds and suggest some measures to make it a successful scheme
in India.
The essential purpose behind mutual funds is to secure two important benefits for small
investors:-
(a) Diversification of risk and
(b) Professional management of investments
As regards diversification mutual funds can spread their investments over dozens or even
hundreds of companies but this is not possible for a small investor. Diversification
reduces risk. As regards diversification of risk may be noted that success in the
investment game requires that one must be prepared to spend the time required for
selecting investments and one must also have the necessary skills.
A majority of ordinary investors cant devote the time required or dont have the skills.
This is not to say that all mutual funds are good. There are wide differences in their
performance. Such differences become noticeable only over a long period of 5-10 years.
Over short periods of 1-2 years, a particular fund may, at one time, be among the best,
and at another time among the worst. Hence, you should choose from among the mutual
funds those which have a record of consistently good performance and possess
characteristics (e.g. the industry composition of investments) which will help to achieve
good long term performance.
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PROJECT REPORT ON COMPARATIVE STUDY OF THE PERFORMANCE OF
THREE INCOME FUNDS (MUTUAL FUNDS) WITH THE TOP THREE FIXED
DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
Ramaiah Institute of Mana ement Studies Pa e3
In the case of equity funds, the ups and downs in the equity market have direct effect on
the performance of the equity funds. This is an inherent source of risk over both short-
term and long-term in the case of equity funds. An investor inequity funds should have
some understanding of the equity markets behaviour. How do we ensure that the mutual
fund will be managed in the best interest of the unit holders? This problem is taken care
of partly by the regulatory system and partly by fairly fierce competition among the
mutual funds for the investors money.
Deposits have some similarities with structured investment products, which offer 100%
capital protection. In both cases, returns might be linked to the performance of one or
more indices, securities or commodities. However, the mechanisms for delivering
protection of capital are quite different. In the case of a deposit, the deposit-taking firm
has an obligation to repay the depositor, while in the case of a structured investment
product, the protection is usually provided by a third party issuer of debt securities.
Firms communicating with customers in relation to accepting deposits must, from 1
November 2009, comply with the rules in the Banking Conduct of Business Sourcebook
(BCOBS).1. In relation to deposit promotions, standards have not altered, as the new rules
in BCOBS 2 are equivalent to the COBS 4 rules that applied previously.
Key issues identified
Issues we identified from our sample included:
Explanations about the nature of deposit protection or guarantees were either
omitted or potentially misleading,
Lack of clarity about the roles and relationship of the promoter and deposit taker;
Headline rates that do not clarify that it is possible to receive no return;
Complex restrictions and rates of return; and
Uncertainty and inconsistency about how to describe and categorise structured
deposits.
Firms must ensure that descriptions of structured deposits in financial promotions are fair,
accurate and sufficiently clear for the average member of the promotions target audience
to understand. This may pose particular challenges where the basis for the return on the
deposit is more complex, but inexperienced customers may view structured deposits as
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PROJECT REPORT ON COMPARATIVE STUDY OF THE PERFORMANCE OF
THREE INCOME FUNDS (MUTUAL FUNDS) WITH THE TOP THREE FIXED
DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
Ramaiah Institute of Mana ement Studies Pa e4
simple savings products. Although some structured deposits are indeed very simple, we
saw others that were either inherently complicated or described in a way that made them
appear so.
The main purpose is to examine the performance of the mutual fund industry in India and
Fixed Deposits in INDIA and compare their performance to know whether Fixed deposits
are better to invest in than Mutual Funds. The study should definitely safe-guard the
interest of Investors. Hence the research is carried to suggest the Schemes based on their
Risk Profile.ang some progress, the progress has been set with
1.1. Mutual fund
A mutual fund is a scheme in which several people invest their money for a
common financial cause. The collected money invests in the capital market and the
money, which they earned, is divided based on the number of units, which they hold.
The mutual fund industry started in India in a small way with the UTI Act creating what
was effectively a small savings division within the RBI. Over a period of 25 years this
grew fairly successfully and gave investors a good return, and therefore in 1989, as the
next logical step, public sector banks and financial institutions were allowed to floatmutual funds and their success emboldened the government to allow the private sector to
foray into this area.
There are many types of mutual funds. We can classify funds based on:-
1. Structure
v Open-ended
v Close-ended
2. Nature
v Equity
v Debt
v Balanced
3. Investment objective
v Growth
v Income
v Money market etc.
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THREE INCOME FUNDS (MUTUAL FUNDS) WITH THE TOP THREE FIXED
DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
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CONCEPT OF MUTUAL FUND:-
A mutual fund is a common pool of money into which investors place their
contributions that are to be invested in accordance with a stated objective. The ownership
of the fund is thus joint or mutual; the fund belongs to all investors. A single investors
ownership of the fund is in the same proportion as the amount of the contribution made
by him or her bears to the tota l amount of the fund Mutual Funds are trusts, which accept
savings from investors and invest the same in diversified financial instruments in terms of
objectives set out in the trusts deed with the view to reduce the risk and maximize the
income and capital appreciation for distribution for the members. A Mutual Fund is a
corporation and the fund managers interest is to professionally manage the funds
provided by the investors and provide a return on them after deducting reasonable
management fees.
Working of Mutual Funds:
The following figure explains the working of Mutual funds
Figure-1
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DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
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Common Terms Used
Net Asset Value (NAV): Net Asset Value is the market value of the assets of the
scheme minus its liabilities. Per unit NAV is the net asset value of the scheme
divided by the number of units outstanding on the Valuation Date
Beta: A measure of the volatility, or systematic risk, of a security or a portfolio in
comparison to the market as a whole. Beta is calculated using regression analysis,
and indicates the tendency of a security's returns to respond to swings in the
market. A beta of 1 indicates that the security's price will move with the market. A
beta indicates that the security's price will be more volatile than the market.
History of Mutual Funds
The mutual fund industry in India started in 1963 with the formation of Unit Trust
of India, at the initiative of the Government of India and Reserve Bank of India. The
history of mutual funds in India can be broadly divided into four distinct phases.
First Phase 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It
was set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from
the RBI and the Industrial Development Bank of India (IDBI) took over theregulatory and administrative control in place of RBI. The first scheme launched by
UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets
under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and General
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DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
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Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87),
Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89),
Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). At the end of 1993,
the mutual fund industry had assets under management of Rs.47, 004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families.Also, 1993 was the year in which the first Mutual Fund Regulations came into being,
under which all mutual funds, except UTI were to be registered and governed. The
erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private
sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulat ions 1996.
Fourth Phase since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified Undertaking of the
Unit Trust of India with assets under management of Rs.29,835 crores as at the end of
January 2003, representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
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THREE INCOME FUNDS (MUTUAL FUNDS) WITH THE TOP THREE FIXED
DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
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COMPANY PROFILE
1.1(A) SBI Mutual Fund
In November 1987, SBI Mutual Fund from the State Bank of India became the
first non UTI mutual fund in India. SBI Mutual Funds (SBI MF) is a partnership between
Indias largest bank State Bank of India and Frances Societe Generale Asset
Management. State bank of India owns 63% in SBI MF and the rest 37% is owned by
Frances Societe Generale Asset Management. As on April 30 2009, the company had
assets of Rs 37213.06 Crs.
It is currently operating a total of 46 schemes which includes Equity schemes, Debtschemes, Short term debt schemes, Equity and debt, Gilt fund.
A total of over 6 million people have invested in the funds of SBI. The fund reaches out
to investors through a network of over 150 points of acceptance, 28 investor service
centres, 46 investor service desks and 56 district organisers.
On the 17th of May, 2010 the company launched a PSU fund with the aim of investing in
public sector companies which offer significant growth prospects for the investors and
also take advantage of the unlocking of value of some of these companies due to
disinvestment by the government.
Products currently being offered by the company are as follows:
Equity / Growth based products -
The equity based funds offered by SBI Mutual Fund, are as follows:
v Magnum COMMA Fund
v Magnum Equity Fund
v Magnum Global Fund
v Magnum Index Fund
Debt / Income based products -
The debt based funds that are in operation now, are as follows:
v Magnum Children's Benefit Plan
v Magnum Gilt Fund
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v Magnum Gilt Fund (Long Term)
v Magnum Gilt Fund (Short Term)
vMagnum Income Fund many more.
Balanced funds -
The balanced funds that are in operation now, are as follows:
v Magnum Balanced Fund.
v Magnum NRI Investment Fund - FlexiAsset Plan.
Key Personnel:
Mr. Achal Gupta Managing Director and Chief Executive Officer.
Mr. Didier Turpin Dy. Chief Executive Officer.
Mr. Navneet Munoot Chief Investment Officer.
Mr. R. S. Srinivas Jain Chief Marketing Officer.
Mr. Vinaya Datar - Company secretary and Compliance officer.
1.1(B) RELIANCE MUTUAL FUND:-
Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act,
1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co.
Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual
Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for
launching of various schemes under which units are issued to the Public with a view to
contribute to the capital market and to provide investors the opportunities to make
investments in diversified securities.RMF is one of Indias leading Mutual Funds, with
Average Assets Under Management (AAUM) of Rs. 88,388 crores (AAUM for 30th Apr
09) and an investor base of over 71.53 Lakhs. Reliance Mutual Fund, a part of the
Reliance Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds in
the country
Sponsor:- Reliance Capital Limited.
Trustee:- Reliance Capital Trustee Co. Limited.
Investment Manager:- Reliance Capital Asset Management Limited. The Sponsor, the
Trustee and the Investment Manager are incorporated under the Companies Act 1956.
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THREE INCOME FUNDS (MUTUAL FUNDS) WITH THE TOP THREE FIXED
DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
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Vision Statement:- To be a globally respected wealth creator with an emphasis on
customer care and a culture of good corporate governance.
Mission Statement:-To create and nurture a world-class, high performance environment
aimed at delighting our customers.
SCHEMES
A). EQUITY/GROWTH SCHEMES:
v Reliance Infrastructure Fund (Open-Ended Equity)
v Reliance Natural Resources Fund (Open-Ended Equity)
v Reliance Equity Linked Saving Fund (A 10 Year Close-Ended Equity)
B). DEBT/INCOME SCHEMES
v Reliance Monthly Income Plan
v Reliance Income Fund etc.
C). SECTOR SPECIFIC SCHEMES
v Reliance Banking Fund
v Reliance Pharma Fund
1.1(C) UNIT TRUST OF INDIA MUTUAL FUND:-
'Unit Trust of India was created by the UTI Act passed by the Parliament in 1963.
For more than two decades it remained the sole vehicle for investment in the capital
market by the Indian citizens. In mid- 1980s public sector banks were allowed to open
mutual funds. The real vibrancy and competition in the MF industry came with the setting
up of the Regulator SEBI and its laying down the MF Regulations in 1993.UTI
maintained its pre-eminent place till 2001, when a massive decline in the market indices
and negative investor sentiments after Ketan Parekh scam created doubts about the
capacity of UTI to meet its obligations to the investors. This was further compounded by
two factors; namely, its flagship and largest scheme US 64 was sold and re-purchased not
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at intrinsic NAV but at artificial price and its Assured Return Schemes had promised
returns as high as 18% over a period going up to two decades.
Vision:-To be the most Preferred Mutual Fund.
Mission:-
The most trusted brand, admired by all stakeholders.
The largest and most efficient money manager with global presence
The best in class customer service provider
The most preferred employer
The most innovative and best wealth creator
Sponsor:-
v State Bank of India
v Punjab National Bank
v Life Insurance Corporation of India
Trustee: - UTI Trustee Co. Limited
SCHEMES:-
v UTI Energy Fund (Open Ended Fund)
v UTI Equity Tax Savings Plan (Open Ended Fund)
v UTI Master Index Fund
v UTI Short Term Income Fund -Retail Plan etc.
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1.2 Bank Fixed Deposits
Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit
Account, a certain sum of money is deposited in the bank for a specified t ime period with
a fixed rate of interest.
The rate of interest for Bank Fixed Deposits depends on the maturity period. It is higher
in case of longer maturity period. There is great flexibility in maturity period and it ranges
from 7days to 10 years. The interest is compounded annually and is added to the principal
amount. Minimum deposit amount is Rs 1000/- and there is no upper limit. Loan /
overdraft facility is available against bank fixed deposits. Premature withdrawal is
permissible but some penalty is levied. Tax Deductible at Source, if the interest paid/
payable on deposit exceeds Rs.5000/- per customer, per year, per branch.
1.2(A) State Bank of India Fixed Deposits
State Bank of India fixed deposit is a good option to earn higher income on
surplus funds. Bank offers flexibility in period from 15 days to 10 years and can be
opened with a nominal amount of Rs. 1000/- only. Against your fixed deposit you can
take loan/overdraft during your urgent financial requirement. There is prematurewithdrawal facility, transfer of term deposit within bank network with out any charge,
interest is accumulated in your account timely and gets compounded quarterly, automatic
renewal of your deposits on maturity. You can convert your special term deposit and vice
versa.
1.2(B) Federal Bank Fixed Deposits
Federal Bank fixed deposit gives you option to give instructions while placing
deposits with regard to closure or renewal of deposit. There is nomination facility. You
can withdraw your money at premature or can get premature renewal of the deposit. You
can take advance also against deposit.
Federal Fixed Deposit Benefits
v Minimum amount Rs.1000.
v Quarterly /Monthly interest payments.
vAdvance upto 90% of deposit.
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1.2( C) ICICI Bank Fixed Deposit
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian
financial institution, and was its wholly-owned subsidiary. In October 2001, the Boards of
Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-
owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI
Capital Services Limited, with ICICI Bank.
ICICI bank has a set of choice of investment plans attached to fixed deposit. You get a
wide range of tenures along with auto renewal facility on maturity of deposits. You canopen term deposit with nominal amount of Rs 1000/- only. Bank has a loan facility
against deposit. The re-investment plans on fixed deposits are lucrative as re-investment
fixed deposit rates do not change in fact works like a recurring debit account transaction.
Fixed Deposit Account
v Flexibility of tenure - 7 days to 10 years
v Liquidityv Premature / Partial withdrawal permitted (subject to applicable charges)
v Loan / Overdraft upto 90%of FD amount
v Option of monthly / quarterly payout available
v Competitive interest rate - Know interest rates for various tenures
v Convenient ways to open a FD
v Internet Banking
vPhone banking
v ICICI Bank Branch
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1.3 Difference Between Bank Fixed deposit and Mutual funds
FEATURES FIXED DEPOSITS MUTUAL FUNDS
Return on Investment Banks offer an assured fixed
rate of return on maturity.
Currently the rate of return
varies from 3.5% to 8.5%
depending on the maturity
period. Interest is compoundedquarterly and the proceeds are
paid on maturity.
The rate of return of a debt
fund is not assured and is
governed by movement in
interest rates and money
market conditions. Any
fluctuat ions in prices orinterest rate impact the NAV
of the fund.
Liquidity Most banks allow premature
withdrawal of the amount
invested, before the actual
maturity date. The interest
would be calculated on the
basis of the number of days the
amount stayed invested with
the bank. For larger amounts,
banks have surrender charges
or penalties. In such cases,
money would not be made
available without penalties or
until the fixed deposit matures.
Liquidity is similar to
individual stocks or equity
mutual funds which allow
investors to liquidate their
units in the market as and
when they require. On
redemption, one can expect to
receive the amount in a day
or two from the fund house.
The amount received would
be based on the Net Asset
Value (NAV) of the fund as
on the date of redemption.
Tax Implications The interest earned on fixed
deposits is added to the total
income, and then taxed at
applicable slabs. Also, if the
total interest earned on all
The short term capital gain of
a debt fund is added to the
income and then taxed at
applicable slabs. For long
term capital gain tax, it is
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fixed deposits in a bank is
greater than Rs 10,000 in a
financial year, a tax of 10.3%
will be deducted at source by
the banks.
calculated as 10% without
indexation or 20% with
indexation.
Capital Appreciation Not too good. Better
Risk Factor Assures capital protection. Not applicable to a larger
extent.
Impact of Inflation No protection Mutual funds have managed
to generate returns that have
surpassed this inflation rate
thus providing positive real
returns.
Investment Costs Banks do not generally charge
any management costs for a
fixed deposit investment.
Funds cost the investor
investment management fees
and fund distribution costs,
charged as a percentage of
the investment value. This is
borne by the investor
irrespective of the fund
performance. Fund houses
also charge an entry or exit
load from investors during
entry or exit from a scheme.
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1.4 RESEARCH OBJECTIVES
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The Research Objectives are formulated using KSA model as follows.
1.4 (A) KSA model
Definition of KSA
KSA model is a competency model of individual. KSA is the same KSAO. KSA
include Knowledge, Skills and Abilities (also called KSAs model) that an applicant must
have to perform successfully in the position. KSA are listed in the Qualifications and
Evaluation section of the job announcement.
Components of KSA:
1. Knowledge
A body of information needed to perform a task.
For example, Human Resources Knowledge includes knowledge of personnel
recruitment, selection, training, compensation and benefits, labour re lations and
negotiation, and personnel information systems.
2. Skills
Skills are the proficiency to perform a certain task.
For example, skill in operating computer peripherals such as printers.
3. Abilities
Abilities are an underlying, enduring trait useful for performing tasks.
For example, oral comprehension the ability to listen to and understand
information and ideas presented through spoken words and sentences.
Classification of KSAs
KSAs include technical elements and behavioural elements.
Technical KSAs measure acquired knowledge and hard technical skills.
Behavioural KSAs measure soft skills, include the attitudes and approaches applicants
take to their work, such as the ability to collaborate on team projects.
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Figure - 2
1.4 (B) Objective
1. To briefly study the Mutual Fund industry in India in the last eight years.
2. To give an idea of the types of schemes available.
3. To study 3 major income schemes from the mutual fund industry.( SBI MutualFund,
Reliance Mutual Fund, ICICI Mutual Fund.
4. To study the Fixed Deposit scheme of 3 banks of India in last 8 years (SBI, ICICI
& Federal Bank )
5. To compares the Fixed Deposit schemes with Mutual Fund schemes.
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1.5 RESEARCH
METHODOLOGY
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Research as a care full investigation or enquiry especially through search for new
facts in any branch of knowledge Research is an academic activity and such as the term
should be used in technical sense. The manipulation of things , concepts or symbols for
the purpose of generalizing to extend ,correct or verify knowledge ,whether that
knowledge through objective.
METHODS OF DATA COLLECTION
Secondary data:
Secondary data means already available through books, journals, magazines, newspaper,
and internet. . The major sources of secondary data are given below.
Textbooks
Websites
News papers
The required data has been collected from websites like www.moneycontrol.com,
www.bseindia.com.
ANALYSIS:
For the proper analysis of data statistical (mean, standard deviation and co-
variance) and financial (Beta and CAPM) method was used.
DATA ANALYSIS AND INTERPRETATION
Data analysis and interpretation is the process of assigning meaning to the
collected information and determining the conclusions, significance, and implications of
the findings. The steps involved in data analysis are a function of the type of information
collected, however, returning to the purpose of the assessment and the assessment
questions will provide a structure for the organization of the data and a focus for the
analysis.
Quantitative Data is presented in a numerical format collected in a standardized manner
e.g. surveys, closed-ended interviews, tests analyzed using statistical techniques
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The analysis ofNUMERICAL (QUANTITATIVE) DATA is represented in mathematical
terms. The most common stat istical terms include:
Mean The mean score represents a numerical average for a set of responses.
Standard deviation The standard deviation represents the distribution of the
responses around the mean. It indicates the degree of consistency among the
responses. The standard deviation, in conjunction with the mean, provides a better
understanding of the data. For example, if the mean is 3.3 with a standard
deviation (StD) of 0.4, then two-thirds of the responses lie between 2.9 (3.3 0.4)
and 3.7 (3.3 + 0.4).
Variance-A measure of the dispersion of a set of data points around their mean
value. Variance is a mathematical expectation of the average squared deviations
from the mean. Variance measures the variability (volatility) from an average.
Volatility is a measure of risk, so this statistic can help determine the risk an
investor might take on when purchasing a specific security.
Co-variance- A measure of the degree to which returns on two risky assets move
in tandem. A positive covariance means that asset returns move together. A
negative covariance means returns move inversely.
One method of calculat ing covariance is by looking at return surprises (deviations from
expected return) in each scenario. Another method is to multiply the correlat ion between
the two variables by the standard deviation of each variable.
Possessing financial assets that provide returns and have a high covariance with each
other will not provide very much diversification.
For example, if stock A's return is high whenever stock B's return is high and the
same can be said for low returns, then these stocks are said to have a positive covariance.
If an investor wants a portfolio whose assets have diversified earnings, he or she should
pick financial assets that have low covariance to each other.
In the project work, NAV and Nifty values are considered from 1 st January 2005 to 31st
December 2012. These values were then considered quarterly to calculate mean, standarddeviation, co variance. This was followed by calculation of CAPM. During the project 3
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mutual funds i.e SBI mutual fund, Reliance Mutual fund and UTI mutual funds was
considered. On the other hand 3 fixed deposits were also considered i.e SBI Fixed
Deposit, ICICI Fixed Deposit and Federal Bank Fixed Deposit.
The rate of return associated with the level of risk and the performance of mutual funds is
compared and analysed with respect to the performance of fixed deposits in India.
The entire aim of the project work is to analyse the fact that Fixed Deposits are better
investing option than Mutual Funds.
Sharpe Ratio: A ratio to measure risk-adjusted performance. The Sharpe ratio is
calculated by subtracting the risk-free rate from the rate of return for a portfolio
and dividing the result by the standard deviation of the portfolio returns. The
Sharpe ratio formula is:
Calculation of Sharpe Ratio:-
S(x) = ( Rx - Rf) / StdDev(x)Where,
x is some investment
Rx is the average annual rate of return of x
Rf is the best available rate of return of a "risk-free" security
StdDev(x) is the standard deviation of Rx
The Sharpe ratio tells us whether a portfolio's returns are due to smart investment
decisions or a result of excess risk. The greater a portfolio's Sharpe ratio, the better its
risk-adjusted performance has been. A negative Sharpe ratio indicates that a risk-less
asset would perform better than the security being analyzed.
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The research design followed in the study is as follows:
Title of the Study : COMPARATIVE STUDY OF THE
PERFORMANCE OF THREE INCOME FUNDS
(MUTUAL FUNDS) WITH THE TOP THREE
FIXED DEPOSITS SCHEMES OF BANKS (SBI,
ICICI & FEDERAL BANK) IN INDIA
Period : 01-Jan-2013 to 31-mar-2013
Sample size : 3 schemes of Mutual Funds
: 3 schemes of Fixed Deposits
Representative sample : 3 Mutual Funds:- SBI MAGNUM FUND, RELIANCE
MUTUAL FUND and UTI MUTUAL FUND.
: 3 Fixed Deposits:- SBI, ICICI, FEDERAL BANK.
Project Design : The project design selected for this project is
Descriptive project design. Descriptive design is one
that is concern with describing the characteristics of
consumers/ dealers who use/ sell the product/ services.
Hence here the characteristics and performance of
Mutual funds and Fixed deposits are studied through
secondary information.
Sampling technique : Systematic sampling technique used keeping in mind with
the following, funds and fixed deposits which are in to the market for more than 5 years,
different investment styles are chosen to know the importance of r isk and return involved.
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1.6 LIMITATIONS OF THE PROJECT
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The limitations of the project are as follows:-
v The time constraint was one of the major problems.
v The study is limited to the different schemes available under the mutual
funds and fixed deposits selected.
v The study is limited to selected mutual fund and fixed deposit schemes.
v The lack of information sources for the analysis part.
v Sample limitation
v Reliability: - The data collected by me is not much reliable
v Parameters: - All the parameters have not been taken.
v Lack of Awareness
v Past performance may or may not sustain in the future
v Unpredictable change in the market cond ition will prove difficulty in
analysis of preferred sector for investing
v Investor preference is analyzed based only on observation
v Market risk is not taken in to consideration due to non possibility of
information
vMicro level data have been taken in analysis; Macro level data may affectthe returns.
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Chapter -2
LITERATURE REVIEW
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Review of the literature plays an important role in any research, it is considering
the importance of mutual funds and several academicians have tried to study the
performance of various mutual funds. Literature on mutual fund performance evaluation
is enormous.
Standard deviation, average variance and average coefficient of variation (COV) are
techniques used for measuring the performance of Mutual Funds and Fixed Deposits.
1. Nidhi Walia-
Faculty PURCITM,
Thapar University, Patiala
2. Dr. (Mrs.) Ravi Kiran,
Assosiate Professor,SOMSS,
Thapar University
Abstract
Financial innovations have become the central driving force taking any financial
system towards economic efficiency. Indian Capital market has shown a spurt growth
with financial innovations becoming a regular feature leading to change in investor's
preferences for newly fangled financial innovations. Mutual fund has become an obvious
choice for most of the investors because of its performance in terms of providing higher
returns at high risk.
At the same time there are bank that offers Fixed Deposit schemes that look attractive
enough. And even some of the top Mutual Funds that offer income schemes often find it
challenge to compute with this FD schemes.
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1. Prof. Kalpesh P Prajapati,
Assistant Professor,
S.V Institute of Management,
Gujarat Technological University,
Ahmedabd, Gujarat, India
2. Prof. Mahesh K Patel,
Assistant Professor,
N.P College of Computer Studies & Management
Hemchandracharya North Gujarat University,
Patan, Gujarat, India.
Abstract
In this paper the performance evaluation of Indian mutual funds and fixed deposits is
carried out through risk-return analysis. The data used is daily closing NAVs.
"Security Market Line" (SML) uses the systematic risk termed beta. Beta is defined as the
covariance between a security (or portfolio of securities) and the market as a whole,
divided by the variance of the market. The market as a whole is considered the point
of tangency between the SML and the efficient frontier This is the foundation for the
Capital Asset Pricing Model (CAPM).
The CAPM is,
= RF+(RM-RF)(Beta)
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Dr. Shakti Kumar
Assistant Professor, Department of Economics and Rural Development,
Dr. R.M.L. Avadh University, Faizabad
Abstract
Equity mutual fund is risk adjusted return in which individual fund does not earn
higher returns from following the momentum strategy in stock (Carhart, 1997) because
of investment constraints (Almazan, 2004). Restriction on competing products is the
reason of the development of money market and short term bond funds (Klapper, 2000).
Therefore, an investor should invest in small equity fund whose trading activity is high
(Dahlquist, 2000) or whose expense ratio is low ( Malkiel, 1995) . Funds that heavily
underperform have very high expense ratio, while funds that are successful do not
increase revenues by raising their fees but benefit from increased size of their funds
(Elton 1996, Carhat 1997). Actively managed equity funds charge higher fees than index
tracking funds or bond and money market funds, reflecting the higher costs of employing
investment management staff to achieve diversification and strategy (James et al. 1999).
Funds charge lower fees when they have smaller boards and a large proportion of
independent directors (Tufano and Sevick, 1997). Larger and more mature funds as well
as no load funds have lower expense ratio (Malhotra and Mcleod, 1997). Aggressive
growth funds charge higher entry and exit fees to discourage redemption because they
hold more of the smaller, less liquid stocks (Chordia, 1996). However, despite the basic
academic advice offered to investors to prefer low expense index funds, actively managed
funds continue to be popular (Gruber, 1996). To decrease the risk it is advised to use
derivative. Bond mutual fund uses derivatives more than equity mutual funds. Use of
derivative is negatively correlated with fund age and positively correlated with fund size
(Johnson and Yu 2004) and it is positively correlated with asset turnover (Koski and
Pontiff, 1999). Derivatives are used for trading rather than hedging (Minton et al. 2009).
Methodology
Index formula of (P1 /P0 *100) has been followed to get the value of the invested money.
It has been adjusted with inflation by depreciation the inflated value.
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Harry Markowitz (1952)
Abstract
It provides a theory about how investors should select securities for their
investment portfolio given beliefs about future performance. He claims that rational
investors consider higher expected return as good and high variability of those returns as
bad. From this simple construct, he says that the decision rule should be to diversify
among all securities, securities which give the maximum expected returns. His rule
recommends the portfolio with the highest return is not the one with the lowest varianceof returns and that there is a rate at which an investor can increase return by increasing
variance. This is the cornerstone of portfolio theory as we know it.
His portfolio theory shows that an investor has a choice of combinations of return and
variance depending on the percentage of wealth invested in various combinations of risky
assets.
William Sharpe (1964) and John Lintner (1965)
Abstract
They show that the theory implies that the rates of return from efficient
combinations of risky assets move together perfectly (will be perfectly correlated). This
gave birth to the "Security Market Line" (SML). The difference between the Capital
Market Line (CML) and SML is the measure of risk used for the horizontal axis. The
CML uses the variance of returns, whereas the SML uses the systematic risk termed beta.
Beta 1s defined as the covariance between a security (or portfolio of securities) and the
market as a whole, divided by the variance of the market. The market as a whole is
considered the point of tangency between the SML and the efficient frontier This is the
foundation for the Capital Asset Pricing Model (CAPM).
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SUKHWINDER KAUR DHANDA
Asst. Prof. cum (Research Scholar) Department of Management Studies,
Baba Banda Singh Bahdaur Engineering College,
Fatehgarh Sahib (Punjab)
DR. G.S.BATRA
Professor,
School of Management studies,
Punjabi Univers ity Patiala (Punjab)
DR BIMAL ANJUM
Prof and HOD,
Management Studies Department, RIMT-IET,
Mandi Gobindgarh (Punjab)
Abstract
Mutual fund companies collect the savings of the investors and make a big corpus
of these savings and invested in a well diversified portfolio of different companies. It is
generally believed that mutual funds are able to diversify the risk. Mutual fund industry
has just four decades old in India. During this short span of time it has made tremendousgrowth. So considering these points this paper is an attempt to study the performance
evaluation of selected mutual funds in terms of risk and return relationship. For this rate
of return method, Beta, Standard Deviation has been used. Nifty has been used as a
benchmark to study the performance of mutual funds in India. The study period has been
taken from 1st January2005 to 31st December 2012.
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Sharad Panwar and Dr. R. Madhumathi
Indian Institute of Technology, Madras
Abstract
The study found that public-sector sponsored funds do not differ significantly from
private-sector sponsored funds in terms of mean returns%. However, there is a significant
difference between public-sector sponsored mutual funds and private-sector sponsored
mutual funds in terms of average standard deviation, average variance and average
coefficient of variation (COV).
Fama and McBeth (1973)
Abstract
They examine the return of securities, using OLS techniques and find that the
CAPM, or market model, explains returns well. They examined three testable
implications of the market model, (1) the relationship between risk and return is linear,
(2) beta is a complete measure of risk, and (3) higher risk should be associated with
higher returns. They conclude that none of the three testable implications canbe rejected.
The results are consistent with efficient markets and a sound asset pricing model,
however, the estimated intercept was somewhat higher than Rf.
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Roll (1978)
Abstract
He shows there is ambiguity when performance is measured by the SML. The
difficulty is that different market indices provide different rankings.
While previous work was mathematically, theoretically, and intellectually rigorous, the
author not only defined this market portfolio but made an attempt to estimate a covariance
matrix with it. Theoretically, the market portfolio IS the composition of all investible
assets. In practice, since this is not measurable, some proxy must be used for the true
market portfolio The trouble is that even an equally weighted and value weighted Index
of the same securities can produce conflicting performance results when used as the
proxy for the market portfolio. The ambiguity of the SML arises because a different beta
can be generated for assets and portfolios by using different indices. Therefore, beta is not
an attribute of the individual asset. Beta is a measure of the risk of an asset if included in
a portfolio of risky assets consisting of the market portfolio and a risk-less asset.Therefore, differences in portfolio selection ability cannot be measured by the SML
criterion. If the index is ex-ante mean variance efficient, it is impossible to discriminate
between winners and losers. If the index is not ex-ante mean-var iance efficient,
designating winners and losers is possible, but another index can designate different
winners and losers and there is no way to determine which one is correct.
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Prof. Kalpesh P Prajapati,
Assistant Professor,
S.V Institute of Management,
Gujarat Technological University,
Ahmedabd, Gujarat, India.
Prof. Mahesh K Patel,
Assistant Professor,
N.P College of Computer Studies & Management
Hemchandracharya North Gujarat University,
Patan, Gujarat, India.
Abstract
In this paper the performance evaluation of Indian mutual funds is carried out
through risk-return analysis. The data used is daily closing NAVs. The source of data iswebsite of Association of Mutual Funds in India (AMFI). The study period is 1st January
2005 to 31st
December, 2012. The results of performance measures suggest that most of the mutual
fund have given positive return during 2005 to 2012.
Sarish and Ajay Jain
Abstract
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal.
The money thus collected is then invested in capital market instruments such as
shares, debentures and other securities. The income earned through these investments and
capital appreciation realized is shared by its unit holders in proportion to the number of
units owned by them. The term risk has a variety of meanings in business and everydaylife. At its most general level, risk is used to describe any situation where there is
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uncertainty about what outcome will occur. Life is obviously very risky. Even the short
term future is often highly uncertain. In probability and statistics, financial management
and investment management, risk is often used in more specific sense to indicate possible
variability of outcomes around some expected.
Zacharias Thomas (1997)Ph D
Thesis, Performance effectiveness of Nationalised Bank- A Case Study of
Syndicate Bank, submitted to Kochin University (1997),
Abstract
Thesis studied the performance effectiveness of Nationalized Bank by taking
Syndicate Bank as case study in his Ph.D thesis. Thomas has examined various aspects
like growth and development of banking industry, achievements of Syndicate Bank in
relation to capital adequacy, quality of assets, Profitability, Social Banking, Growth,
Productivity, Customer Service and also made a comparative analysis of 'the performance
34 effectiveness of Syndicate Bank in relation to Nationalized bank. A per iod of ten years
from 1984 to 1993-94 is taken for the study. This study is undertaken to review and
analyze the performance effectiveness of Syndicate Bank and other Nationalized banks in
India using an Economic ManagerialEfficiency Evaluation Model (EMEE Model)
developed by researcher. Thomas in this study found that Syndicate Bank got 5th Position
in Capital adequacy and quality of assets, 15th in Profitability, 14th Position in Social
Banking, 8th in Growth, 7th in Productivity and 15th position in Customer Service among
the nationalized banks. Further, he found that five nationalized banks showed low health
performance, seven low priority performance and eleven low efficiency performance in
comparison with Syndicate Bank
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Singla HK
Abstract
In his paper, financial performance of banks in India, in ICFAI Journal of Bank
Management No 7, he has examined that how financial management plays a crucial role
in the growth of banking. It is concerned with examining the profitability position of the
selected sixteen banks of banker index for a period of six years (2001-06). The study
reveals that the profitability position was reasonable during the period of study when
compared with the previous years. Strong capital position and balance sheet place, Banks
in better position to deal with and absorb the economic constant over a period of time.
Subramanian and Swami
Abstract
In their paper, Comparative performance of publc sector banks in india Prjanan,
Vol. XXII, have analyzed and compared the efficiency in six public sector banks, four
private sector and three foreign banks for the year 1996-97. Operational efficiency is
calculated in terms of total business and salary expenditure per employee. The analysis
revealed that higher per employee salary level need not result in poor efficiency and
business per employee efficiency co-efficient was also calculated. Among the PSBs,
Bank of Baroda registered the high efficiency and operating profit per employee. Among
the private sector banks Indus Bank followed by Citibank Registered highest and second
highest operating profit per employee respectively. However, among the Nationalized
Banks there existed wide variations in efficiency.Frequent changes are order of the day
for the topics of this nature. Therefore, one should rely on latest information. Some
organizations like, RBI, IBA, SBI and ICRA have carried out several research studies on
various issues relating to banking and exclusive banking journals/periodicals like Bank
Quest, The Bankers, RBI occasional papers, RBI bulletins and general magazines like
Business Today, Business India, Finance India, have been publishing papers on various
aspects like NPAs, capital adequacy, branch expansion, credit dispensation, deposit
mobilization, service quality, technology, performance evaluation, etc. Same studies and
papers suitable to this study are being reviewed here.
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Chapter - 3
FINDINGS
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3.1 Tabulation of Nifty Returns :-
DATE Nifty Return (%) D D^2
31-12-2012 5905.1 5.08 0.76 0.58
28-09-2012 5619.7 7.47 3.16 9.96
29-06-2012 5229 -0.37 -4.69 21.98
30-03-2012 5248.51 0.95 -3.37 11.35
30-12-2011 5199.25 -2.39 -6.71 44.98
30-09-2011 5326.6 -2.83 -7.15 51.13
30-06-2011 5482 -4.65 -8.97 80.44
31-03-2011 5749.5 4.42 0.11 0.01
31-12-2010 5505.9 -8.50 -12.82 164.38
30-09-2010 6017.7 12.11 7.80 60.77
30-06-2010 5367.6 1.70 -2.62 6.86
31-03-2010 5278 8.11 3.79 14.40
31-12-2009 4882.05 3.62 -0.70 0.49
30-09-2009 4711.7 1.62 -2.69 7.25
30-06-2009 4636.45 33.46 29.15 849.56
31-03-2009 3473.95 20.84 16.53 273.09
31-12-2008 2874.8 -0.37 -4.69 22.00
30-09-2008 2885.6 -33.40 -37.72 1422.75
30-06-2008 4332.95 -16.12 -20.44 417.80
31-03-2008 5165.9 0.55 -3.76 14.15
31-12-2007 5137.45 -12.93 -17.25 297.57
28-09-2007 5900.65 36.64 32.33 1045.02
29-06-2007 4318.3 5.64 1.32 1.74
30-03-2007 4087.9 0.13 -4.19 17.55
29-12-2006 4082.7 9.04 4.73 22.35
29-09-2006 3744.1 19.12 14.80 219.08
29-06-2006 3143.2 -10.41 -14.72 216.80
31-03-2006 3508.35 16.90 12.59 158.41
30-12-2005 3001.1 26.58 22.26 495.59
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Table 1
Where,
D= Deviation
The Nifty data is represented below:-
Here ,
The X-axis represents the years and
The Y-axis represents Nifty basic points.
Graph-3
0
1000
2000
3000
4000
5000
6000
7000
01/03/2005
01/07/2005
01/11/2005
01/03/2006
01/07/2006
01/11/2006
01/03/2007
01/07/2007
01/11/2007
01/03/2008
01/07/2008
01/11/2008
01/03/2009
01/07/2009
01/11/2009
01/03/2010
01/07/2010
01/11/201
01/03/2011
01/07/2011
01/11/2011
01/03/2012
01/07/2012
01/11/2012
Nifty
30-09-2005 2370.95 2.54 -1.78 3.17
30-06-2005 2312.3 13.59 9.27 86.01
31-03-2005 2035.65 0.00 -4.32 18.63
Sum= 138.11 Sum=6055.85
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Formula used:-
Calculation of return:-
Return= (P1- P0) / P0
Where,
P1= Current Month
P0= Base Month
Calculation of mean:-
Mean= Total Return / N
Where,
N = Number of Month.
Calculation of Variance:-
Variance = (D)^2 / 32
Where,
D= Deviation
Calculation of Standard Deviation:-
SD= Variance.
Calculation of BETA:-
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Ramaiah Institute of Mana ement Studies Pa e41
Beta= Co Variance / Variance of Nifty.
Where,
Co Variance= Deviation of Investment * Deviat ion of Nifty.
Calculation of CAPM:-
CAPM= Rf+(Rm-Rf)*
Where,
Rf= Risk Free Rate
Rm= Return from Market
= Beta.
Calculation of Sharpe Ratio:-
S(x) = ( Rx - Rf) / StdDev(x)
Where,
x is some investment
Rx is the average annual rate of return of x
Rf is the best available rate of return of a "risk-free" security
StdDev(x) is the standard deviation of Rx
Table 2
Note:-
The following table represents the set of formulas widely used and applied to the
entire project for the purpose of computation and analysis of data.
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Ramaiah Institute of Mana ement Studies Pa e42
Calculation of Mean and Standard Deviation of Nifty:-
Property Calculation Value (%)
Mean 138.11 / 32 4.31
Variance 6055.85 / 32 189.24
Standard Deviation Root of Variance 13.76
Table- 1.1
From the above table, we have found the following:-
Mean
Standard Deviation
Note:
The above calculated data of Nifty will help us to calculate co-variance with respect to
particular mutual funds and fixed deposits.
3.2 Calculation of Risk Free Rate (R.F):-
DATE RF Quarterly RF31-12-2012 8 2.00
28-09-2012 2.00
29-06-2012 2.00
30-03-2012 2.00
30-12-2011 7.8 1.95
30-09-2011 1.95
30-06-2011 1.9531-03-2011 1.95
31-12-2010 7.5 1.88
30-09-2010 1.88
30-06-2010 1.88
31-03-2010 1.88
31-12-2009 7.2 1.8
30-09-2009 1.830-06-2009 1.8
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Ramaiah Institute of Mana ement Studies Pa e43
31-03-2009 1.8
31-12-2008 7.4 1.85
30-09-2008 1.85
30-06-2008 1.85
31-03-2008 1.85
31-12-2007 6.8 1.7
28-09-2007 1.7
29-06-2007 1.7
30-03-2007 1.7
29-12-2006 5.5 1.38
29-09-2006 1.38
29-06-2006 1.38
31-03-2006 1.38
30-12-2005 5.3 1.33
30-09-2005 1.33
30-06-2005 1.33
31-03-2005 1.33
Sum= 55.50
Table- 3
Calculation of mean risk free rate.
Property Calculation Value (%)
Mean 55.50/32 1.73
Table- 3.1
Quarterly Risk Free Rate is calculated to be 1.73(%).
Note:-
The above Risk Free Rate would help us to calculate Beta for mutual funds as well as for
fixed deposits.
The above interest rates have been collected from Government Deposits (Treasury bills)
yearly. Later the interest rate has been converted to quarterly data.
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DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA
Ramaiah Institute of Mana ement Studies Pa e44
3.3 SBI MAGNUM INCOME FUND
Calculation of Return, Standard Deviation, Co-variance, Beta and CAPM from the given
NAV (Net Asset Value):-
DATE SBI MAGNUM
INCOME
FUND ( NAV)
RETURN
(%)
DEVIATION (D)^2 D
(From
Table
1)
D*D
31-12-2012 28.12 2.40 1.03 1.05 0.76 0.78
28-09-2012 27.46 3.51 2.13 4.53 3.16 6.71
29-06-2012 26.53 3.07 1.69 2.86 -4.69 -7.93
30-03-2012 25.74 2.55 1.17 1.37 -3.37 -3.95
30-12-2011 25.1 2.83 1.45 2.10 -6.71 -9.72
30-09-2011 24.41 1.96 0.59 0.34 -7.15 -4.18
30-06-2011 23.94 2.09 0.71 0.51 -8.97 -6.38
31-03-2011 23.45 1.47 0.09 0.01 0.11 0.01
31-12-2010 23.11 0.92 -0.46 0.21 -12.82 5.91
30-09-2010 22.9 0.66 -0.72 0.52 7.80 -5.60
30-06-2010 22.75 1.52 0.14 0.02 -2.62 -0.36
31-03-2010 22.41 1.68 0.30 0.09 3.79 1.14
31-12-2009 22.04 0.92 -0.46 0.21 -0.70 0.32
30-09-2009 21.84 0.69 -0.69 0.47 -2.69 1.85
30-06-2009 21.69 3.09 1.71 2.93 29.15 49.88
31-03-2009 21.04 -6.82 -8.20 67.21 16.53 -135.48
31-12-2008 22.58 10.52 9.15 83.64 -4.69 -42.90
30-09-2008 20.43 -0.20 -1.57 2.48 -37.72 59.35
30-06-2008 20.47 -1.30 -2.68 7.18 -20.44 54.78
31-03-2008 20.74 -0.96 -2.33 5.44 -3.76 8.78
31-12-2007 20.94 2.35 0.97 0.94 -17.25 -16.70
28-09-2007 20.46 2.92 1.54 2.37 32.33 49.77
29-06-2007 19.88 0.76 -0.62 0.38 1.32 -0.82
30-03-2007 19.73 0.05 -1.33 1.76 -4.19 5.56
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29-12-2006 19.72 1.28 -0.09 0.01 4.73 -0.44
29-09-2006 19.47 2.04 0.67 0.44 14.80 9.86
29-06-2006 19.08 1.27 -0.10 0.01 -14.72 1.53
31-03-2006 18.84 -0.42 -1.80 3.24 12.59 -22.67
30-12-2005 18.92 0.42 -0.95 0.91 22.26 -21.22
30-09-2005 18.84 1.18 -0.20 0.04 -1.78 0.35
30-06-2005 18.62 1.64 0.26 0.07 9.27 2.41
31-03-2005 18.32 0.00 -1.38 1.90 -4.32 5.95
44.10 195.25 -13.41
Table - 4
Calculation.
Property Calculation Value (%)
Mean 44.10/32 1.38
Variance 195.25/32 6.10
Standard Deviation Root of Variance 2.47
Covariance D*D -13.41/32 -0.42
Nifty Variance From Table 1.1 189.24
Beta Cov/ Var of Nifty -0.22%
Risk Free (RF) From Table 2.1 1.73
CAPM 1.73+(4.32-1.73)(-22%) 1.729
Sharpe Ratio (1.38-1.73) / 2.47 -0.14
Table 4.1
From the following table the following has been calculated:-
Mean
Standard Deviation
Covariance
Beta
CAPM
Sharpe Ratio
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Ramaiah Institute of Mana ement Studies Pa e46
The SBI MAGNUM INCOME FUND (NAV) data is represented below:-
Here ,
The X-axis represents the years and
The Y-axis represents SBI Mutual Fund NAV.
Graph-4
0
5
10
15
20
25
30
01/03/2005
01/07/2005
01/11/2005
01/03/2006
01/07/2006
01/11/2006
01/03/2007
01/07/2007
01/11/2007
01/03/2008
01/07/2008
01/11/2008
01/03/2009
01/07/2009
01/11/2009
01/03/2010
01/07/2010
01/11/2010
01/03/2011
01/07/2011
01/11/2011
01/03/2012
01/07/2012
01/11/2012
SBI MAGNUM INCOME FUND ( NAV)
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3.4 RELIANCE INCOME FUND
Calculation of Return, Standard Deviation, Co-variance, Beta and CAPM from the given
NAV (Net Asset Value):-
DATE RELIANCE
INCOME
FUND(G)
NAV
RETURN
(%)
DEVIATION (D)^2 D
(From
Table
1)
D*D
31-12-2012 37.7 2.45 0.55 0.30 0.76 0.42
28-09-2012 36.8 8.97 7.07 50.01 3.16 22.32
29-06-2012 33.77 -2.96 -4.86 23.62 -4.69 22.78
30-03-2012 34.8 2.56 0.66 0.44 -3.37 -2.24
30-12-2011 33.93 2.29 0.39 0.15 -6.71 -2.62
30-09-2011 33.17 1.69 -0.21 0.05 -7.15 1.53
30-06-2011 32.62 1.05 -0.85 0.72 -8.97 7.60
31-03-2011 32.28 1.32 -0.58 0.34 0.11 -0.06
31-12-2010 31.86 1.05 -0.85 0.73 -12.82 10.95
30-09-2010 31.53 0.61 -1.29 1.67 7.80 -10.09
30-06-2010 31.34 1.59 -0.31 0.10 -2.62 0.82
31-03-2010 30.85 0.92 -0.98 0.97 3.79 -3.74
31-12-2009 30.57 1.33 -0.57 0.33 -0.70 0.40
30-09-2009 30.17 0.40 -1.50 2.25 -2.69 4.04
30-06-2009 30.05 3.44 1.54 2.38 29.15 44.95
31-03-2009 29.05 -5.59 -7.49 56.10 16.53 -123.78
31-12-2008 30.77 19.45 17.55 307.95 -4.69 -82.31
30-09-2008 25.76 1.50 -0.40 0.16 -37.72 15.20
30-06-2008 25.38 -0.51 -2.41 5.81 -20.44 49.26
31-03-2008 25.51 0.71 -1.19 1.42 -3.76 4.48
31-12-2007 25.33 4.63 2.73 7.43 -17.25 -47.02
28-09-2007 24.21 2.98 1.08 1.16 32.33 34.82
29-06-2007 23.51 1.56 -0.35 0.12 1.32 -0.46
30-03-2007 23.15 -0.13 -2.03 4.12 -4.19 8.50
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29-12-2006 23.18 1.89 -0.01 0.00 4.73 -0.05
29-09-2006 22.75 2.52 0.62 0.39 14.80 9.23
29-06-2006 22.19 0.77 -1.13 1.27 -14.72 16.61
31-03-2006 22.02 0.64 -1.26 1.59 12.59 -15.86
30-12-2005 21.88 0.83 -1.07 1.15 22.26 -23.84
30-09-2005 21.7 1.02 -0.88 0.77 -1.78 1.56
30-06-2005 21.48 1.85 -0.05 0.00 9.27 -0.47
31-03-2005 21.09 0.00 -1.90 3.61 -4.32 8.20
=60.81 477.10 -48.87
Table- 5
Calculation
Property Calculation Value (%)
Mean 60.81/32 1.90
Variance 477.10/32 14.90
Standard Deviation Root of Variance 3.86
Covariance D*D -48.87/32 -1.53
Nifty Var iance From Table 1.1 189.24
Beta Cov/ Var of Nifty -0.8%
Risk Free (RF) From Table 2.1 1.73
CAPM 1.73+(4.32-1.73)(-0.8%) 1.71
Sharpe Ratio (1.90-1.73) / 3.86 0.044
Table- 5.1
From the following table the following has been calculated:-
Mean
Standard Deviation
Covariance
Beta
CAPM
Sharpe Ratio
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Ramaiah Institute of Mana ement Studies Pa e49
The RELIANCE INCOME FUND (G) NAV data is represented below:-
Here ,
The X-axis represents the years and
The Y-axis represents Reliance Mutual Fund NAV.
Graph-5
0
5
10
15
20
25
30
35
40
01/03/2005
01/07/2005
01/11/2005
01/03/2006
01/07/2006
01/11/2006
01/03/2007
01/07/2007
01/11/2007
01/03/2008
01/07/2008
01/11/2008
01/03/2009
01/07/2009
01/11/2009
01/03/2010
01/07/2010
01/11/2010
01/03/2011
01/07/2011
01/11/2011
01/03/2012
01/07/2012
01/11/2012
RELIANCE INCOME FUND(G) NAV
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3.5 UTI-SHORT TERM INCOME FUND-RETAIL PLAIN
Calculation of Return, Standard Deviation, Co-variance, Beta and CAPM from the given
NAV (Net Asset Value):-
DATE UTI-SHORT
TERM
INCOME
FUND- NAV
RETURN
(%)
DEVIATION
(D)
(D)^2 D
(From
Table
1)
D*D
31-12-2012 19.87 2.42 0.52 0.27 0.76 0.40
28-09-2012 19.4 2.92 1.01 1.03 3.16 3.20
29-06-2012 18.85 2.61 0.71 0.50 -4.69 -3.33
30-03-2012 18.37 2.11 0.21 0.04 -3.37 -0.70
30-12-2011 17.99 2.39 0.49 0.24 -6.71 -3.27
30-09-2011 17.57 2.57 0.67 0.44 -7.15 -4.76
30-06-2011 17.13 3.07 1.17 1.36 -8.97 -10.45
31-03-2011 16.62 1.53 -0.38 0.14 0.11 -0.04
31-12-2010 16.37 1.30 -0.60 0.36 -12.82 7.74
30-09-2010 16.16 1.38 -0.52 0.27 7.80 -4.08
30-06-2010 15.94 1.40 -0.50 0.25 -2.62 1.32
31-03-2010 15.72 1.09 -0.81 0.66 3.79 -3.07
31-12-2009 15.55 2.24 0.33 0.11 -0.70 -0.23
30-09-2009 15.21 1.47 -0.44 0.19 -2.69 1.17
30-06-2009 14.99 4.61 2.70 7.30 29.15 78.77
31-03-2009 14.33 0.92 -0.99 0.98 16.53 -16.32
31-12-2008 14.2 2.38 0.48 0.23 -4.69 -2.23
30-09-2008 13.87 2.29 0.38 0.15 -37.72 -14.44
30-06-2008 13.56 2.19 0.28 0.08 -20.44 -5.77
31-03-2008 13.27 1.38 -0.53 0.28 -3.76 1.99
31-12-2007 13.09 2.67 0.76 0.58 -17.25 -13.17
28-09-2007 12.75 2.16 0.26 0.07 32.33 8.41
29-06-2007 12.48 2.30 0.39 0.15 1.32 0.52
30-03-2007 12.2 0.99 -0.91 0.83 -4.19 3.81
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29-12-2006 12.08 1.26 -0.65 0.42 4.73 -3.05
29-09-2006 11.93 1.79 -0.11 0.01 14.80 -1.65
29-06-2006 11.72 1.65 -0.26 0.07 -14.72 3.76
31-03-2006 11.53 1.50 -0.41 0.17 12.59 -5.12
30-12-2005 11.36 1.43 -0.47 0.23 22.26 -10.57
30-09-2005 11.2 1.36 -0.55 0.30 -1.78 0.97
30-06-2005 11.05 1.56 -0.34 0.12 9.27 -3.16
31-03-2005 10.88 0.00 -1.90 3.62 -4.32 8.21
60.90 21.44 14.86
Table- 6
Calculation:-
Property Calculation Value (%)
Mean 60.90/32 1.90
Variance 21.44/32 0.67
Standard Deviation Root of Variance 0.82
Covariance D*D 14.86/32 0.46
Nifty Var iance From Table 1.1 189.24
Beta Cov/ Var of Nifty 0.24%
Risk Free (RF) From Table 2.1 1.73
CAPM 1.73+(4.32-1.73)(0.24%) 1.74
Sharpe Ratio (1.90 1.73) / .82 0.21
Table- 6.1
From the following table the following has been calculated:-
Mean
Standard Deviation
Covariance
Beta
CAPM
Sharpe Ratio
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The UTI-SHORT TERM INCOME FUND-RETAIL PLAIN (G) NAV data is
represented below:-
Here ,
The X-axis represents the years and
The Y-axis represents UTI Mutual Fund NAV.
Graph-6
0
5
10
15
20
25
01/03/2005
01/07/2005
01/11/2005
01/03/2006
01/07/2006
01/11/2006
01/03/2007
01/07/2007
01/11/2007
01/03/2008
01/07/2008
01/11/2008
01/03/2009
01/07/2009
01/11/2009
01/03/2010
01/07/2010
01/11/2010
01/03/2011
01/07/2011
01/11/2011
01/03/2012
01/07/2012
01/11/201
UTI-SHORT TERM INCOME FUND-RETAIL PLAIN
(G) NAV
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3.6 STATE BANK OF INDIA FIXED DEPOSIT:-
Calculation of Return, Standard Deviation, Co-variance, Beta and CAPM from the given
NAV (Net Asset Value):-
DATE Annual
RT
Quarterly
RT
DEVIATION
(D)
(D)^2 D(From
Table 1)
D*D
31-12-2012 8.5 2.13 0.09 0.01 0.76 0.07
28-09-2012 8.5 2.13 0.09 0.01 3.16 0.27
29-06-2012 9.75 2.44 0.40 0.16 -4.69 -1.87
30-03-2012 9.75 2.44 0.40 0.16 -3.37 -1.34
30-12-2011 9.25 2.31 0.27 0.07 -6.71 -1.83
30-09-2011 9.25 2.31 0.27 0.07 -7.15 -1.96
30-06-2011 9 2.25 0.21 0.04 -8.97 -1.89
31-03-2011 9 2.25 0.21 0.04 0.11 0.02
31-12-2010 9 2.25 0.21 0.04 -12.82 -2.70
30-09-2010 8.5 2.13 0.09 0.01 7.80 0.67
30-06-2010 8.5 2.13 0.09 0.01 -2.62 -0.23
31-03-2010 8.5 2.13 0.09 0.01 3.79 0.33
31-12-2009 7.75 1.94 -0.10 0.01 -0.70 0.07
30-09-2009 7.75 1.94 -0.10 0.01 -2.69 0.27
30-06-2009 7.75 1.94 -0.10 0.01 29.15 -2.96
31-03-2009 8 2.00 -0.04 0.00 16.53 -0.65
31-12-2008 8 2.00 -0.04 0.00 -4.69 0.18
30-09-2008 8 2.00 -0.04 0.00 -37.72 1.47
30-06-2008 8 2.00 -0.04 0.00 -20.44 0.80
31-03-2008 7.25 1.81 -0.23 0.05 -3.76 0.85
31-12-2007 7.25 1.81 -0.23 0.05 -17.25 3.91
28-09-2007 7.25 1.81 -0.23 0.05 32.33 -7.32
29-06-2007 7.5 1.88 -0.16 0.03 1.32 -0.22
30-03-2007 7.5 1.88 -0.16 0.03 -4.19 0.69
29-12-2006 7.5 1.88 -0.16 0.03 4.73 -0.78
29-09-2006 8 2.00 -0.04 0.00 14.80 -0.58
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29-06-2006 8 2.00 -0.04 0.00 -14.72 0.58
31-03-2006 8 2.00 -0.04 0.00 12.59 -0.49
30-12-2005 7.5 1.88 -0.16 0.03 22.26 -3.65
30-09-2005 7.5 1.88 -0.16 0.03 -1.78 0.29
30-06-2005 7.5 1.88 -0.16 0.03 9.27 -1.52
31-03-2005 7.5 1.88 -0.16 0.03 -4.32 0.71
65.25 1.02 -18.81
Table - 7
Calculation
Property Calculation Value (%)
Mean 65.25/32 2.04
Variance 1.02/32 0.032
Standard Deviation Root of Variance 0.18
Covariance D*D -18.81/32 -0.58
Nifty Var iance From Table 1.1 189.24
Beta Cov/ Var of Nifty -0.31%
Risk Free (RF) From Table 2.1 1.73
CAPM 1.73+(4.32-1.73)(-0.31%) 1.72
Sharpe Ratio (2.04 1.73) / .18 1.72
Table- 7.1
From the following table the following has been calculated:-
Mean
Standard Deviation
Covariance
Beta
CAPM
Sharpe Ratio
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3.7 ICICI FIXED DEPOSIT
Calculation of Return, Standard Deviation, Co-variance, Beta and CAPM from the given
NAV (Net Asset Value):-
DATE Annual
RT
Quarterly
RT
DEVIATION
(D)
(D)^2 D(From
Table 1)
D*D
31-12-2012 8.5 2.13 0.19 0.037 0.76 0.15
28-09-2012 8.5 2.13 0.19 0.037 3.16 0.61
29-06-2012 9.25 2.31 0.38 0.145 -4.69 -1.79
30-03-2012 9 2.25 0.32 0.101 -3.37 -1.07
30-12-2011 9 2.25 0.32 0.101 -6.71 -2.14
30-09-2011 8.5 2.13 0.19 0.037 -7.15 -1.38
30-06-2011 8.5 2.13 0.19 0.037 -8.97 -1.73
31-03-2011 8.5 2.13 0.19 0.037 0.11 0.02
31-12-2010 8.25 2.06 0.13 0.017 -12.82 -1.68
30-09-2010 8.25 2.06 0.13 0.017 7.80 1.02
30-06-2010 8 2.00 0.07 0.005 -2.62 -0.18
31-03-2010 8 2.00 0.07 0.005 3.79 0.26
31-12-2009 7.5 1.88 -0.06 0.003 -0.70 0.04
30-09-2009 7.5 1.88 -0.06 0.003 -2.69 0.15
30-06-2009 7.5 1.88 -0.06 0.003 29.15 -1.65
31-03-2009 7.5 1.88 -0.06 0.003 16.53 -0.94
31-12-2008 7.5 1.88 -0.06 0.003 -4.69 0.27
30-09-2008 7.5 1.88 -0.06 0.003 -37.72 2.14
30-06-2008 7 1.75 -0.18 0.033 -20.44 3.71
31-03-2008 7 1.75 -0.18 0.033 -3.76 0.68
31-12-2007 7 1.75 -0.18 0.033 -17.25 3.13
28-09-2007 7 1.75 -0.18 0.033 32.33 -5.87
29-06-2007 7 1.75 -0.18 0.033 1.32 -0.24
30-03-2007 7.25 1.81 -0.12 0.014 -4.19 0.50
29-12-2006 7.25 1.81 -0.12 0.014 4.73 -0.56
29-09-2006 7.5 1.88 -0.06 0.003 14.80 -0.84
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Ramaiah Institute of Mana ement Studies Pa e56
29-06-2006 7.5 1.88 -0.06 0.003 -14.72 0.83
31-03-2006 7.5 1.88 -0.06 0.003 12.59 -0.71
30-12-2005 7 1.75 -0.18 0.033 22.26 -4.04
30-09-2005 7 1.75 -0.18 0.033 -1.78 0.32
30-06-2005 7 1.75 -0.18 0.033 9.27 -1.68
31-03-2005 7 1.75 -0.18 0.033 -4.32 0.78
61.81 0.932 -11.89
Table- 8
Calculation:-
Property Calculation Value (%)
Mean 61.81/32 1.93
Variance 0.932/32 0.029
Standard Deviation Root of Variance 0.17
Covariance D*D -11.89/32 -0.37
Nifty Var iance From table 1.1 189.24
Beta Cov/ Var of Nifty -0.20
Risk Free (RF) From Table 2.1 1.73
CAPM 1.73+(4.32-1.73)(-0.20%) 1.72
Sharpe Ratio (1.93 1.73) / .17 1.18
Table- 8.1
From the following table the following has been calculated:-
Mean
Standard Deviation
Covariance
Beta
CAPM
Sharpe Ratio
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3.8 FEDERAL BANK FIXED DEPOSIT
Calculation of Return, Standard Deviation, Co-variance, Beta and CAPM from the given
NAV (Net Asset Value):-
DATE Annual
RT
Quarterly
RT
DEVIATION
(D)
(D)^2 D(From
Table 1)
D*D
31-12-2012 8.25 2.06 0.12 0.0133 0.76 0.09
28-09-2012 8.25 2.06 0.12 0.0133 3.16 0.36
29-06-2012 8.75 2.19 0.24 0.0577 -4.69 -1.13
30-03-2012 8.75 2.19 0.24 0.0577 -3.37 -0.81
30-12-2011 8.5 2.13 0.18 0.0316 -6.71 -1.19
30-09-2011 8.5 2.13 0.18 0.0316 -7.15 -1.27
30-06-2011 8.25 2.06 0.12 0.0133 -8.97 -1.03
31-03-2011 8.25 2.06 0.12 0.0133 0.11 0.01
31-12-2010 8.25 2.06 0.12 0.0133 -12.82 -1.48
30-09-2010 8 2.00 0.05 0.0028 7.80 0.41
30-06-2010 8 2.00 0.05 0.0028 -2.62 -0.14
31-03-2010 8 2.00 0.05 0.0028 3.79 0.20
31-12-2009 7.5 1.88 -0.07 0.0052 -0.70 0.05
30-09-2009 7.5 1.88 -0.07 0.0052 -2.69 0.19
30-06-2009 7.5 1.88 -0.07 0.0052 29.15 -2.11
31-03-2009 8 2.00 0.05 0.0028 16.53 0.87
31-12-2008 8 2.00 0.05 0.0028 -4.69 -0.25
30-09-2008 8 2.00 0.05 0.0028 -37.72 -1.99
30-06-2008 7.5 1.88 -0.07 0.0052 -20.44 1.48
31-03-2008 7 1.75 -0.20 0.0389 -3.76 0.74
31-12-2007 7 1.75 -0.20 0.0389 -17.25 3.40
28-09-2007 7 1.75 -0.20 0.0389 32.33 -6.38
29-06-2007 7 1.75 -0.20 0.0389 1.32 -0.26
30-03-2007 7.25 1.81 -0.13 0.0182 -4.19 0.56
29-12-2006 7.25 1.81 -0.13 0.0182 4.73 -0.64
29-09-2006 7.5 1.88 -0.07 0.0052 14.80 -1.07
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Ramaiah Institute of Mana ement Studies Pa e58
Table-9
Calculation
Property Calculation Value (%)
Mean 62.31/32 1.95
Variance 0.5087/32 0.0159
Standard Deviation Root of Variance 0.13
Covariance D*D -11.47/32 -0.35
Nifty Var iance From Table 1.1 189.24
Beta Cov/ Var of Nifty -0.18%
Risk Free (RF) From Table 2.1 1.73
CAPM 1.73+(4.32-1.73)(-0.18%) 1.73
Sharpe Ratio 1.95-1.73/(0.13) 1.69
Table- 9.1
From the following table the following has been calculated:-
Mean
Standard Deviation
Covariance
Beta
CAPM
Sharpe Ratio
29-06-2006 7.5 1.88 -0.07 0.0052 -14.72 1.06
31-03-2006 8 2.00 0.05 0.0028 12.59 0.66
30-12-2005 7.5 1.88 -0.07 0.0052 22.26 -1.61
30-09-2005 7.5 1.88 -0.07 0.0052 -1.78 0.13