Can Balanced and Income Mutual Funds Outperform the Stock Market? An Empirical Study in the Indian Context
22 Pages Posted: 26 Mar 2009
Date Written: March 23, 2009
The general perceptions/commonly held belief among Indian Investors and Fund Managers are that (A) Market outperforms Balanced and Income Funds during Bull run (B) Balanced and Income Funds outperform the stock market during Bear run (C) Market outperforms Balanced and Income Funds over a long holding period (a minimum period of three years). The objective of the study was to empirically investigate whether the above stated perceptions are valid in the Indian context. For this purpose, six hypotheses were tested.
The performance of the 47 Balanced and 72 Income Funds were analysed in terms of Return, Risk, Return per Risk and Sharpe ratio over the past three years (2006, 2007 and 2008) during which period the Indian Stock Market had witnessed much volatility. Further, the performance of these funds was compared with that of the Market and Benchmark Indices.
The Null Hypotheses were rejected leading to the acceptance of Alternate Hypothesis in all the six cases leading us to conclude that Market outperformed both the Balanced and Income Funds over Bull run and 3-year periods while both the funds outperformed the Market over Bear run period which confirms the popular belief of the Investors and Fund Managers in India.
Keywords: Balanced Funds, Income Funds, Return, Risk, Sharpe Ratio, Benchmark Index, Market, Underperform, Outperform, Hypothesis
JEL Classification: FEN
Suggested Citation: Suggested Citation