7.CHAPTER -7 RESULT AND DISCUSSIONS7.1 Over all returns of schemes7.2 Comparison of actual returns with Benchmark7.3 Power of compounding in mutual fund7.4 Recent trends of Indian mutual fund RESULT AND DISCUSSIONSSometimes it is seen that over analysis and carefuldecisions could not pay much because according to one equity researcher who isknown as eastern Warren Buffet noneother than Mr Ram Devo Agarwal predict about 2018 and say that whole market isfunction of two things one is price what everybody pay to buy FM units andsecond is future value what you get at the maturity and this is not certainbecause everybody perceive differently.
This is quite correct in context of IndianMF since 2010 to 2017 behavior of market is changes rapidly with change inGlobal conditions and effect of these changes seen in every schemes of MFHypothesis testing is one of method of testing the resultof schemes and hypothesis work on sample data from a big data as per objectivesof my research the following hypothesis are taken for testing Hypothesis(H0)1 There is no difference between growth fund schemeand balance fund schemes of the both mutual fund houses ( HDFC&SBI)(H1)2 Growth fund scheme of same house is better than balancefund scheme of same mutual fund house(H1) 3 Balance fund schemes (HDFC&SBI) are betterthan growth fund schemes (HDFC&SBI) (H0)4 There is no difference inperception of investors about private mutual fund house(HDFC) and public mutualfund house(SBI)(H1)5 Investors are more interested towards public mutualfund house (SBI)(H1) 6 Investors are more interested towards privatemutual fund house (HDFC) These hypothesesare test to achieve under given objectivesObjectivesTo compare growth fund scheme and balance fund scheme ofHDFC mutual fund and SBI mutual fund.To know the investors perception about private mutualfund house (HDFC) and public sector mutual fund house (SBI). And used known test usually used to test mutual fundAlpha, Beta Ratios Shapere, Trenyor ,Jeanses For testing of (H0)4: use the secondary data(H1)5: use the secondary data(H1)6 we used primary data collected by questionnaire inDelhi and Meerut Discussion (Hypothesis Testing)(Ho) 1 this is first null hypothesis of my study and itis rejected because by using all measure like Sharpe Trenyor and Jeanses ratioit found during years of study balance fund and growth fund both givesdifferent result. In long horizon period growth fund gives better returns(H1)2 is accepted because in case of HDF growth fundperforms better than HDFC balance fund(H1)3 is acceptedbecause in short run balance funds of both the hoses are performing better thangrowth fund of both the houses ( H0) 4 is rejected because study shows after interview of cities chosen for study give veryclear picture that even after silverjubilee of LPG people of tire two citylike Meerut still believing on onlyPublic sector mutual fund and otherfinancial product of same sectors .And case quite reverse in case of metro like Delhi (H1) 5 is accepted because large number of people shows their interestonly in SBI mutual funds or other financial product of same bank (H1) 6 is accepted in case of Delhi where people show thegreater interest in HDFC mutual fundsRESULTS & DISCUSSION IIInvestor first thinks about the risk than saving pattern.
Once investor puttheir money in any scheme they are hoping to get return from day first.Major holding is still in hand of big investor thanretailer.Mutual Fund is still dominated by mega city like Delhi.Due to conservativeness of Indians most of the investor focus on Debtrelated schemes.Despite being too much of awareness by electronic mediastill people of tire two cities like Meerut are not much aware about the mutualfund.
There are some suggestions based on our study for batterinvesting, for·investors that they should keep their investment for long time keeping in mindthe level of risk involves and saving pattern investors first look over therisk factor because they are investing for the maximum returns. Once theyinvested in mutual fund they need returns and if it is not giving properreturns to them again it is affecting the interest of the investors to invest inMF. There is need to work on ground level in tier two cities because there ishuge potential but is still untapped. Expert people go for make people awareabout financial product hold small gathering and show the documentary andreturn back to their home this is merely not possible .
we should go and talk tothem after knowing their future financial need things will surely improved likemetro.The findings show that mutual funds as an investmentoption have displayed tremendous growth potential when the markets areoptimistic and when wise choices are made. They have performed much better thantraditional investment options in the long term and thus help investor beatinflation to some extent. It is of paramount importance that investors do notmake a rash decision simply by looking at the return figures generated by anindividual fund, But investor belong totire two cities are not aware about good news about mutual fund and stockmarket but news of scandal and miss happening reach very fast to them.: It is observed that even though mutual fund industryseems to grow in India the growth is concentrated both with respect to investorcategory and place.
It is dominated by Institutional investors, Mega cities anddebt oriented schemes leaving huge scope for growth. But large segment ofinvestor are still outside the umbrella of the industry. The reach of the fundhouses to different segments of investors is still a key challenge. Onepossible solution could be increasing financial knowledge and awareness to stimulateinvestors in mutual fund investment.
This will attract investors towards mutualfund investment. The limited distribution network and investor service can beenhanced for wider reach beyond large cities. Discussion: 2015year is better for Indian mutual fund industry despite being many ups and downin stock market net flow remain constant. In other words flow of money intoformal sector could not break .Recent report by CRICIL in December 2015 lastaverage asset flow under the asset management company grew by 21% in sameperiod if we talk in terms of Rupee it is 13.
39 Trillion increased. This is story of last three years (2013,2014, 2015) you may call it NDA era. In same period the flow fund increase in formal system that iswhy in 2015-16 ten top performer mutual funds see the cash flow 80% and growthof SIP in same period became astronomically as high as by % it is 63%.In same period of 2014 to 2017 we see due to uncertaintyof land acquisition bill and exportduty on gold play big role to reduce thereturn of that mutual fund having these two items in its portfolio and weobserve by my study that these items having more % in SBI equity fund andbalance fund.In same period HDFC asset management company do better todo R&D and put their money into auto and pharmacy like companies and in midcap go for more equitythan debt so there looks the fear of losing principal but end of day these fundperform better than traditional mutual fund house like SBI In November 2015, the 7-year (2010 to 2016) averagereturn yielded by Indian mutual funds across all fund Schemes types andportfolio is about 10.2%.
Equity-oriented schemes have returned 13.8% and debtschemes only 7.9% 7.1Over all returns of schemes Top Performing Balanced Funds ( 2010 to 2017) MF Scheme Name Returns % Launch 3 years 5 years 10 years since Risk Grade Return grade HDFC Balanced Fund 11-sep-00 16 19 16 17 Below Average Above average Birla Sun life Balanced 95 fund 10-feb-95 16 19 14 21 Average Above average L&T Produce Fund 31-jan-11 17 20 N/A 15 Below Average Above average ICIC Prudential Balanced Fund 03-nov-99 16 20 13 15 Below Average Above average SBI magnum Balanced Fund 31-dec-95 15 20 12 16 Below Average average TATA Balanced Fund – Regular plan 8-oct-95 15 19 14 17 Average Above average Source: www.
valueresearch.com Table 7.1.1The ups and down in mid-cap stocks cannot managed towashout this fund, which has been bearing at. good rating since 2010 to tilldate and these funds are made up to verydiversified portfolio having ¾ part of growing mid cap and only little partof1/4 being in large and reputedcompanies. Large companies work as safety cover and mid Cap Company’s work asaccelerator things go well from both the side The fund uses this flexibility ina very better manner.
The style is growth at a reasonable price. The fundselect companies that are growing at around 15-20 %, with good cash-inflow andacceptable return on Equity.The fund holding different rating see the good timeduring last three years and commutate growth is as high as 30% and ordinaryfunds earn about 10% which is higher than fixed income security and some contrafund do not perform better but this could not affect much and trailing waybehind sense of respective benchmark Some fund has not shown better resultin respect of its fixed reference mark in 2015 but it bounce back quickly innext year and also crossed .The asset under management Rs 14 k Cr in currentyear and size is irrelevant in 2016 so far and up and down is not big worry itshows more frequently positive and negative results is routine story is goodyear due demonization of most the investment go in formal sector2017 is also better year Moody and S given goodrating to PSU s after 14 years so farAs per objectives of balance funds these funds are formoderate risk and returnStake of all funds of HDFC belong to good and greatcompanies having good track records Graph7.1.1Observations from the figure given above· For one year investment period unrated perform(22.5%) better than rated fund (11.
90%)· For two year investment period unrated perform(21.5%) better than rated fund (11.70%) · For three year investment period unrated perform(17.
60%) better than rated fund (10.70%) 7.2Comparison of actual returns with Benchmark Return for selectschemes and Benchmark values (Figures in percentage) Year Market Return (CNX Nifty) Asset Management BSL Index Fund DSPBR Top 100 Equity Fund Fund ING Large Cap Eq. Fund Kotak-50 Growth Fund TATA Index Fund Sensex-B Average 0.84 0.86 1.
10 0.80 0.97 0.84 2016-17 0.40 0.
64 0.50 0.84 1.01 0.73 2015-16 -0.26 -0.
71 0.26 -0.09 -0.
06 -0.61 2014-15 0.63 1.01 0.73 0.
66 0.55 1.02 2013-14 5.51 5.03 5.31 5.
30 5.14 5.01 2012-13 -3.97 -3.
09 -2.83 -3.91 -3.73 -3.
13 2011-12 2.70 2.29 2.62 2.
02 2.91 1.99 Table 7.1.
2 Source: Compiled from NAV records ofrespective AMCs. Graph 7.1.2 The result from graph given above· For one year period marginal difference in termsof percentage return (13%, 10%, and 11%) from bench mark to actual return· For Three years period significant difference interms of percentage return (19%, 17%, and 14%) from bench mark to actual return· For five years period significant difference interms of percentage return (13%, 10%and,9%) from bench mark to actual return· For seven years period significant difference interms of percentage return (16%, 11%, and 11%) from bench mark to actual return· For ten year period marginal difference in termsof percentage return (17%, 14%, and 12%)ComparativeBalance Sheet of HDFC bank and SBI bank HDFC BANK Mar-17 SBI Mar-17 HDFC BANK/ SBI High Rs 1,478 294 502.2% Low Rs 1,043 167 626.1% Income per share (Unadj.) Rs 285.9 289.
0 98.9% Earnings per share (Unadj.) Rs 59.5 0.3 19,676.
4% Cash flow per share (Unadj.) Rs 156.5 34.6 452.4% Dividends per share (Unadj.) Rs 11.00 2.
60 423.1% Avg Dividend yield % 0.9 1.1 77.3% Book value per share (Unadj.
) Rs 358.2 272.4 131.5% Shares outstanding () m 2,562.55 7,974.33 32.1% Bonus/Rights/Conversions ESOP OI – Avg Price / Income ratio x 4.4 0.
8 552.8% Avg P/E ratio x 21.2 761.
8 2.8% Avg P/CF ratio x 16.8 3.0 562.
0% Avg Price/Bookvalue ratio x 3.5 0.8 415.9% Dividend payout % 18.5 859.5 2.2% Source: Company Annual Reports, Regulatory Filings, Capital adequacy ratio % 14.
6 13.6 107.3% Net NPAs % 0.3 3.7 8.9% CASH FLOW From Operations Rs m 172,816 774,060 22.3% From Investments Rs m -11,477 -28,321 40.
5% From Financial Activity Rs m -58,930 -41,965 140.4% Net Cash flow Rs m 102,409 703,774 14.6% SHARE HOLDING Indian Promoters % 22.6 58.
6 38.6% Foreign collaborators % 0.0 0.0 – Indian inst/Mutual % 9.9 20.9 47.4% FIIs % 34.1 9.
7 351.5% ADR/GDR % 17.0 2.1 809.5% Free float % 16.4 8.7 188.5% Shareholders 415,166 855,889 48.
5% – Source: Company Annual Reports, Regulatory Filings, These tables gives very clear picture of performanceSchemes of SBI mutual fund house and HDFC mutual fund house as figures tellsthe true story.FY 16-17 HDFC invested huge amount in equity Rs 1,478 CrWhile in same period SBI invested only Rs.294 Cr and by percentage HDFC to SBIis 502.
2%This means more aggressive strategy is followed by HDFC than its rival PSU SBI sothis very clear rule of security if you invest more naturally lose more andgain more. While SBI used defensive strategy and play very safely that is whyin same period SBI could not gain muchAs figure …of balance sheet shows that SBI is sitting onsovereign debt of 75000 Cr rupees and amount become bigger after addinginterest .That is why SBI AMC is handy to take more risk in comparison to HDFCAMC.By observations of balance sheet of SBI and HDFC the size of NPA is only 0.3% whilein same period the size of NPA for SBI is larger by percentage and this is 3.7%This is also very key factor to determine the strength of organization .
If NPAgoes beyond manageable limit. Organization cannot run smoothly and this thevital reason SBI funds are not performing well. SBI is busy to clean itsbalance sheet Critical analysis of financial statements gives much informationabout the HDFC and SBI PSU sectors are running by non professionals and bydirective polices and customers are not been given proper attentions. Andalways run on the mercy of ministers and outdated technology. Some points arevery important in case of PSU s .
these organization get attention when theseare in verse of collapse in other words only bailout packages are given. Whileprivate sectors are very aggressive to invest in right time in right way .Thisis the difference between functioning of both the organizations and this isreflected in these financial statements. Graph 7.1.
3 7.3Power of compounding in mutual fundFigure 7.1.1 Compoundingresults Growthof Rs 1 00,000 @ 10% years 5 10 15 20 Rs one lakh grows to( Rs 1.61 2.
59 4.18 6.73 Compounding effect( Rs in lakh) .61 .98 1.
58 2.55 Table 7.1.
3By investing Rs 100,000 for 20 years give you only returnseven time while compounding make it 17 times so start early a small amountgive you better result once all time great Einstein said compounding has greatpower this is very wonderful concept which makes mutual fund most attractiveoption of investment as result of this compounding this is seen that firstthree years it look simple but after three years it begin to show real powerresult go on multiplying. Power of compounding on investment of ?1 lakh a year for 5 years Year Opening balance (?) Investment (?) 10% interest (?) Closing balanced (?) 1 – 1,00,000 10,000 1,10,000 2 1,10,000 1,00,000 21,000 2,31,000 3 2,31,000 1,00,000 33,100 3,64,100 4 3,64,100 1,00,000 46,400 5,10,500 5 5,10,500 1,00,000 61,000 6,71,500 Total investment:?5,00,000 | Value after 5 years: ?6,71,500 | Interest earned: ?1,71,500 If there was no compounding interest, your totalinvestment of ?5 lakh would have earned you ?50,000 at 10% interest. The difference made bycompounding is worth ?1, 21,500 in the aboveexample. That’s almost 2.5 times more that you have earned. 7.4Recent trends of Indian mutual fund As per reports andprediction the future of mutual fund in India is going to better each day if Italk about most tuff year for the investment globally is 2015 despite beingvariability in stock market weak performance of global economy both factorcould not check inflow of huge money into Indian mutual fund industry.Recentreport by CRISIL: In last quarter of December 2015 asset under management grew21% to Rs 13.39 Trillion this threefold as comparison to last financial year.The best performing mutual funds houses increase by little marginally by 1%that is exiting 79% and now it is 80% SIP (Growth) = 63% SIP (book value) increase to40% SIP growth (2014-2017) Graph 7.1.4Somemutual fund included real estate and gold in their portfolio have not performwell in same year