Financial Analysis on Mutual Fund Schemes with Special Reference to SBI Mutual Fund Coimbatore


Dr. S. Ayyappan
Assistant Professor in MBA
PA College of Engineering & Technology

M. Sakthivadivel
M.E., (MBA)
Anna University of Technology


Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and invest the money thus collected into asset classes that match the stated investment objectives of the scheme. Since the stated investment objectives of a mutual fund scheme generally form the basis for an investor's decision to contribute money to the pool, a mutual fund can not deviate from its stated objectives at any point of time. 

Every Mutual Fund is managed by a fund manager, who using his investment management skills and necessary research works ensures much better return than what an investor can manage on his/her own. The capital appreciation and other incomes earned from these investments are passed on to the investors (also known as unit holders) in proportion of the number of units they own.


Savings are excess of income over expenditure for any economic unit. Savings flow into investment for a return but savings kept as cash are barren and did not earn anything savings are invested in assets depending on their risk and return perception of  investors like returns but at the same time they dislike risks making an investment is an art which more people lack.

There are different investment avenues. Mutual fund is one among them. This is a pool of money collected from investors and it is invested in certain investment objectives for the efficient management of fund. The mutual fund companies appoint efficient and professional fund managers but the selection on the scheme lies in the hands of the investors himself/ herself . It  requires adequate skills here comes the role of financial firms.

These studies analysis various mutual fund schemes and it will help to evaluate which scheme is better.


There is an extensive collection of literature which mainly focuses on US funds and investors but very limited work has been done on mutual funds that exist in emerging markets .This could be due to the difficulties in portfolio evaluation of these markets (Hwang and Satchell, 1998) Moreover , the literature available on behavioral finance is also limited both for developed and emerging markets and not much information is available about  investor perception, preference, attitudes, and behavior. what ever is able to select a mutual fund which is able to offer high returns with acceptable risk is a complex task.

Elton and gruber,grindblatt and titman (1989) were Consistent with these findings that there is some empirical evidence that mutual fund investors make purchase decision on the basis of past performance et all 1990 Paterl et all 1992 .However other evidence suggests that consumers are influenced by factors other than return and risk.A consumer report(1990) server of ,mutual fund in investors found that although past performance and level of risk were relevant like amount of sale charge management fees fund manager reputation clarity of funds accounting statements recommendation from a financial magazine or newsletter.

Some studies reveal that there is only a slight positive relationship or no relationship at all between previous performance and current returns (Blake et al 1993 Bogle 1992 Brown and Goetz man 1995:beown at 1992) raised  the question of why poorly performing funds still survive Harless and Peterson (1998 ) they explain that investors tend to choose funds based on previous performance but stick to these funds despite their poor return in a recent study of consumers rationally and the mutual fund purchase decision.

Capon et al 1992 explored the extent to which investors make purchase decision inconsistent with modern finance theory .The theory suggested that purchase decisions for financial assets should be made on the basis of investors beliefs regarding the future return and risk of those assets. Markowitz 1959 study results offered support the mutual fund investment decision is better considered in a multi attribute framework where return and risk are merely two aspects of a set of attributes whose importance varies across consumers however one might hypothesize intuitively that as mutual fund purchase value increases investors would behave in a more rational manner simply because of the magnitude of potential gains and losses.


With a view to find out the solutions for the problem raised above,the following objectives have been framed.

1.To find out the Performance of different schemes in relation with market performance.
2.To identify investment of funds which have generated high returns and low risk.
3. To analysis the risk involved in the selected scheme and
4. To analysis the performance of selected scheme using different models of performance evaluation.


The study was conducted at SBI ASSET MANAGEMENT COMPANY Ltd., Coimbatore for a period from 01-04-2009 to 31-03-2010.


The net asset values (NAV) of the various funds of the different mutual fund schemes under study are obtained from fact sheets and websites. The benchmarks used for the analysis is also obtained from the website. The risk-free rate i.e rate of return of the 365-days Treasury bill is obtained from the website.


The secondary data has been used in the data collection process through fact sheets of the equity funds.



It is measure of the value of the variable around its mean or it is as squire root of the sum of the squared deviations from the mean divided by the number of observance The arithmetic mean of the return may be same for two companies but the returns may vary widely


This is a measure of risk-adjusted return on a portfolio. It is a ratio of excess return to the standard deviation of portfolio is not combined with other risky portfolios. It is relevant for performance evaluation when comparing mutually portfolios. The sharp measure of performance denoted by S is given by

S = Ri-Rf

Where, Ri = the average rate or return on portfolio 'i' during a specified period.

Rf = the average rate of return on a risk free investment during the same period

¥ – Standard deviation 


Developed by Jack Treynor, this performance measure evaluates funds based on Treynor's index. This ratio of return generated by the fund over and above risk free rate of return (generally taken to be the return on the securities backed by the government, as there is no credit risk associated), during a given period and systematic risk associated with it (beta).

The formula is: TREYNOR'S INDEX (Ti) = (Ri-Rf)/Bi


Ri is the average annual rate of return

Rf is the best available rate of return of a "risk-free" security

Bi is the beta of the fund.

While a high and positive treynor's index shows a superior risk- adjusted performance of a fund, a low and negative treynor's index is an indication of unfavorable performance. The Sharpe ratio can be used to compare stock or fund to add to a well- diversified portfolio.


The convenience sample was employed for this present study.


SBI Mutual Funds was started in the year 1987. It is one of the leading fund houses in the country with an investor base of over 4.6 million and over 20 years of rich experience in fund management. 'The State Bank of India', one of India's largest banking enterprises, and Société Générale Asset Management (France). One of the world's leading fund management companies that manages over US$ 500 Billion worldwide.

Five funds have been selected from the SBI Mutual Funds for the purpose of analysis of performance. The five funds have been selected with criteria which have more than one years of track record. The funds taken for the analysis are

1) Magnum balanced fund
2) Magnum COMMA fund
3) MSFU – Contra fund
4) Magnum global fund
5) Magnum Tax gain scheme – 1993

--> Article continued on next page, click here  -->

Source: E-mail November 14, 2010


Articles No. 1-99 / Articles No. 100-199 / Articles No. 200-299 / Articles No. 300-399 / Articles No. 400-499 / Articles No. 500-599
Articles No. 600-699 / Articles No. 700-799 / Articles No. 800-899 / Articles No. 900-1000 / Articles No. 1001-1100
Articles No. 1101-1200 / Articles No. 1201 Onward / Faculty Column Main Page