Evaluate the statement:“Mutual funds could beat market

volatility .” Identify two mutual funds that have been able to beat market

volatility PGDBM Batch-6Group -4

Presented By: Enrolment

No.Alpha NayakE13CC1079751Anupriya Singh

E13CC1078654Karishma BiswalE13CC1081714Smruti Ranjita SuarE13CC1079865Subhasantak Mohanty

E13CC1081206Sujnani Kumari Gupta

E13CC1080945

ET F

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Agenda1.Introduction

2.Mutual Fund

3.Market Volatility

4.How mutual funds can beat market volatility to a large extent?

5.Criteria considered while selecting the two mutual funds

6.Two mutual funds that have been able to beat market volatility

7.ICICI Prudential Focussed Blue chip &

8.Its Graphical Representation

9.Franklin India Blue chip &

10.Its Graphical Representation

11.Conclusion

Introduction The Indian Mutual fund industry has witnessed considerable growth since its inception in 1963.

The assets under management (AUM) have surged to Rs. 4,173bn in Mar-09 from just Rs. 250mn in Mar-65. In a span of 10 years (from 1999 to 2009), the industry has registered a CAGR of 22.3%, albeit encompassing some shortfalls in AUM due to business cycles.

The impressive growth in the Indian Mutual fund industry in recent years can largely be attributed to various factors such as rising household savings, comprehensive regulatory framework, favourable tax policies, introduction of several new products, investor education campaign and role of distributors.

Besides, SEBI has introduced various regulatory measures in order to protect the interest of small investors that augurs well for the long term growth of the industry.

Source: www.dnb.co.in/BFSISectorInIndia/MFund5.asp

Mutual funds are trusts that pools funds from public and invest in capital market in terms of shares, bonds, debentures etc.

A mutual fund collects savings from small investors that are invested in capital market instruments such as government and corporate securities. The income earned through these investments in the form of interest & dividends along with capital gains realised are shared by unit holders in proportion to the units owned by them. Any appreciation or depreciation in value of investments is reflected in net asset value (NAV) of the concerned scheme.

Source: www.dnb.co.in/bfsisectorinindia/MFund2.asp

Investment area for Mutual Funds

MFs invest in a mostly three type of companies, they are the companies with,

Large market capitalisation (Large cap)

Medium market capitalisation (Mid cap)

Small market capitalization (Small cap)

Market Volatility

Market volatility means statistical measure of the market to rise or fall sharply in short period of time.

If the prices of a stock in a market fluctuate rapidly in a short time span, it is termed to have high market volatility. If the prices of a stock fluctuate slowly in a longer time span, it is termed to have low market volatility.

Volatility is typically measured by the standard deviation of the return of an investment. Standard deviation is a statistical concept that denotes the amount of variation or deviation that might be expected.

For example, it would be possible to see the Standard & Poor's BSE Sensex Index have a standard deviation of about 15%, while a more stable investment, such as a certificate of deposit (CD), will typically have a standard deviation of zero because the return never varies.

Source: www.investopedia.com/articles/02/051502.asp

How Mutual Fund can beat market volatility?

There are aplenty of processes for that matter, few of which are listed below:

Expert management of funds.

Investing in the stocks of large cap companies thereby subsiding the market fluctuations unlike the stocks of mid cap and small cap companies.

Benefit of diversification leading to reduced risk.

Ability to track performance transparently.

Source: www.investopedia.com/articles/basics/03/040403.asp

Criteria considered while selecting the two Mutual

Funds

Performance: Ability to deliver higher than benchmark returns consistently.

Resilience: Ability to withstand market downturns better than its benchmarks.

Investment-worthy: Their recent performances have not caused any concern, keeping them investment worthy.

Two mutual funds that have been able to beat

market volatility

Two funds that have stood the test of times; bull markets, bear markets and global market crisis and yet, continue to perform and produce results are :

ICICI Prudential Focussed Bluechip

Franklin India Bluechip

ICICI Prudential Focussed Blue chip

The fund was launched on 23 May 2008.

The fund has constantly outperformed its benchmark S&P CNX Nifty from 1 October 2008 till 30 June 2011 that is 11 times out of 12 on a quarter-on-quarter (q-o-q) basis.

The fund has a greater average outperformance of 5.39% in bear market conditions than the average outperformance of 1.04% in the bull market conditions.

The fund outperformed all 40 large cap funds belonging to the same period over 1 year and 3 years.

The fund has an expense ratio of 1.83% as on 31 October 2011. 

Source: www.fundsupermart.co.in/main/research/viewHTML.tpl?articleNo=920

Graphical Representation

Source: www.valueresearchonline.com/funds/fundperformance.asp?schemecode=7517

Franklin India Blue chip Fund

Franklin India Blue Chip Fund was launched in 1 December 1993

The fund has outperformed its benchmark BSE Sensex 40 times out of 70 on a

quarter -on- quarter (q-o-q) basis since 1 February 1994

The fund has a slightly greater average outperformance of 7.02% in bear market

conditions than the average outperformance of 6.08% in bull market conditions

The fund consistently outperformed all 40 large cap funds belonging to the same

category in 1 year, 3 years, 5 years, 10 years and since inception

The fund carries an expense ratio of 1.83%

Source: www.fundsupermart.co.in/main/research

Graphical Representation

Source: www.valueresearchonline.com/funds/fundperformance.asp?schemecode=114

Conclusion 

Its because of the fund’s (read mutual fund manager’s) vision for value that

has made it an outperformer each time.

Moreover, mutual funds not only offer investment solutions in practically any

market condition, but also, for any investment time frame, and for any type of

investor.

Hence, it would not be wrong to say that, mutual funds have the potential to

offer higher-than-market returns at lower-than-market risk.

And, as Fred Schwed Jr. says it in his book “Where Are The Customer's Yachts?”

“Speculation is an effort, probably unsuccessful, to turn a little money into a lot.

Investment is an effort, which should be successful, to prevent a lot of money from

becoming a little.”

Thank

You…