An Empirical Study to Find Out the Best Performing Equity Mutual Fund Portfolio During the Current Global Recession, Constructed from Selected Companies Listed on The National Stock Exchange of India Limited
Western International University
October 31, 2009
The course of time which engulfs the drafting of this applied thesis is indeed not a cheerful phase. The unstoppable Indian economy riding at the back of record highest economical growth has finally encountered a slowdown and the results are inevitable. Increased job searches, mounting loan loads, shrinking salary, swollen loan defaults, shooting inflation are the factors of so called 'worst global recession since the Great Depression'. The current precariousness of Global financial market has raised several questions in the minds of people. Insecurity of living and safety of resources has suddenly become the center stage agenda in everyone’s life.
Collapse of world’s biggest financial organizations has brought a rage across the world. There are still no concrete indicators to highlight when this carnage on the stock market would end. Indian property market’s euphoria has been severely smashed and the investor’s concerns have reached sky high. Indian stock market has witnessed a crash by almost 50 percent when Wall Street monsters sold off their investment in the country. The crisis had badly smashed the entire economy and no industry or sector had been left untouched be it manufacturing, retail, media, tourism, telecommunication of finances. This global crisis requires a global solution to prevent this economic catastrophe. The crying need of an hour has become to address the predicament of an investor. Current state of affairs has shattered an investor’s belief on one hand while also instigates an investor to save for the rainy days.
A challenge thus aggravates an investor to determine the most suitable investment alternative. The time has arrived to not just depend on theories but also to find practical and attainable solutions. This applied thesis addresses the same question and is buoyant to benefit its readers. The study draws attention to Mutual Fund and its appropriateness in today’s investor’s requirements.Mutual fund can be broadly defined as a trust which pools funds of various investors aiming a common financial goal.
Mutual fund is like a blind man’s stick which acts as the right support for an investor aiming for good returns with average risk capacity. Hence this is the most pertinent investment preference for an investor seeking diversification, risk hedge, professional management at affordable cost. Indian Mutual Funds are governed and regulated by Securities and Exchange Board of India (SEBI) Mutual Fund regulation 1996.
Presently there are many schemes of mutual funds serving an array of investors and their varying needs. However the epicenter of the research is based on equity or growth schemes of mutual funds. This particular scheme invest only in equity socks of various companies and offers promising and lucrative returns to its investors specially aggressive investors who have huge risk caliber and entice for returns.
Current research paper attempts to construct and evaluate portfolios constructed out of selected companies with the endeavor to find out the best performing pure equity mutual fund portfolio. It enveloped the period for 24 months from April 2007 to March 2009. The chosen time period covers the recessionary phase of the global economy and also its impact. An album of 11 companies is prepared and the best portfolio constructed out of the same has been discovered.Chapter one introduces and briefs the background of the research paper to its readers.
Understanding of market dynamics was also essential to digest the unfavorable risk and return results of all the constructed portfolios. Efficient Market Hypothesis was executed which efficiently brought out the efficiency of Indian stock Market over the study period. The picture of Indian stock market being painted by this hypothesis provided substance and pedestal to conclude the research further.
Researcher concluded portfolio number seven as the winner amongst the group beating the close runner up portfolio number nine marginally. Portfolio seven comprised of stocks of five leading companies in respective industries namely Infosys Technologies Ltd, Bharat Heavy Electricals Ltd (BHEL), Housing Development Finance Corporation Ltd (HDFC), Bharti Airtel Ltd and Reliance Industries Ltd.
Number of Pages in PDF File: 171
Keywords: mutual fund, equity mutual fund, recession, efficient market hypothesis, sharpe and treynor ratios, investment, saving
JEL Classification: A10, C12, E22, E44, G11, G14working papers series
Date posted: May 9, 2012
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