How Efficient are Indian Mutual Fund Managers in Selecting Stock and Timing the Market ?

Abstract

This study utilizes few selected performance evaluation techniques on a sample of 36 Indian mutual fund schemes over the period of January 2001 to December 2013. The broad based S&P CNX NIFTY is used in the study as a benchmark. The study measures the performance on the parameters of ‘Stock Selection’ and ‘Market-Timing’ ability of mutual fund managers using Jensen’s Alpha and, Treynor-Mazuy mode. A look at mutual fund performance during the sample time period suggests that professional portfolio managers cannot consistently beat the market. While some managers do occasionally outperform the market, our evidence suggests that during this period it doesn’t happen on a consistent basis over the long run. Given the significant management fees funds are charging, this finding is relevant to all the investors. It is especially true, however, for institutional investors who are searching for returns in different markets and asking themselves whether aggressive management is the answer. The period of the study is the most recent one examined by any Indian mutual fund study

Keywords

• mutual funds
• jensen’s alpha
• treynor-mazuy model
• stock-selection ability
• timing ability