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Chapter 5 Collection of Secondary Data

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CHAPTER 5

COLLECTION OF SECONDARY DATA

In the Research Methodology, the initial stage of the researcher was to collect

the secondary data of various open-ended equity schemes from the published

data of various Fund Houses or preferably from Association of Mutual Funds

of India. As the research is confined to only open-ended equity schemes, the

NAV of only the open-ended equity schemes were collected for data analysis.

As per the research proposal, the number of schemes was subjected to the

availability of the data for the period of three years. Subject to the availability

of three years of the data, the sample size was of minimum of 30 schemes

with 3 years data. There were approximately 750 daily NAV of each scheme.

The secondary data was a purposive sample. The schemes were spread

across various types of Fund house viz Public Sector, Private Sector and

Multinationals. The secondary data collection was a purposive sample.

The amount of data on Mutual Funds is available considering the fact of

disclosure regulations and the fact that the tasks and performance are

measurable.

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Accordingly, the Researcher had approached The Association of Mutual

Funds of India (AMFI) for the required research data. AMFI was very co-

operative and had given the required data that is the NAV of all the schemes

upto 30th September, 2006. AMFI had provided the data vide its receipt no 37

dated 10th November, 2006 of all the schemes irrespective whether it was an

income, balanced, index or any other schemes. AMFI had provided all the

NAV data for all the Mutual Funds available on their public domain.

AMFI had provided 17,78,729 records for the NAV details for the period

pertaining to 1st October, 2003 to 30th September, 2006. There was a

considerable delay of more than six months for the Research and therefore, it

was felt necessary that the data for the extended period be taken from AMFI.

However, due to the delay in the Research Analysis, the additional data for

the delayed period was taken from AMFI. It was felt necessary too request

AMFI for the additional data for the extended period 1st October, 2006 to 30th

June, 2007.

The Researcher approached AMFI for the additional data for a further period

of 9 months viz 1st October, 2006 to 30th June, 2007. AMFI then vide its

receipt no 28 dated 27th July, 2007 provided the data for the extended period

of 9 months viz 1st October, 2006 to 30th June, 2007. This time too, AMFI

provided 54,294 records of all the schemes available with AMFI on the public

domain.

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In all AMFI had provided 18,33,023 records for the period 1st October, 2003 to

30th June, 2007 containing the data of all the Mutual Funds and all the

schemes NAV available with AMFI on the public domain. However, there

were some codes, which could not be interpreted like the Mutual Fund Code,

Scheme Code etc. The other data was provided by AMFI like the Mutual

Fund Master and the Scheme Master, which was available with AMFI for the

research.

Thus the collection of secondary data was done from AMFI, with a continuous

follow-up with AMFI, the required secondary data was procured from AMFI.

AMFI without any reluctance provided the data for the purpose of the

research.

The secondary data viz the NAV of the various Mutual Fund schemes for the

period 1st October, 2003 to 30th June, 2007 was available for the research.

It was proposed in the research proposal that the research is focussed only

on the performance of Open-ended Equity schemes. From the total data

provided by AMFI for the research only the required data viz the NAV of Open

Ended Equity Schemes was required for the research analysis. A list of

existing Open Ended Equity Schemes was downloaded from the AMFI site as

on 3rd August, 2007. The exhaustive list of AMFI contained all the list of the

schemes and the NAV of Open Ended Equity Schemes of all Mutual Funds.

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The list was thoroughly checked for the required data and only the required

scheme and the option were weeded out of the AMFI list.

The following schemes/options were excluded from the research sample for

the reasons mentioned thereof: -

Exchange Traded Funds

Basically exchange traded funds are open-ended Mutual Funds that are listed

and traded on Stock Exchanges. There are very few Exchange Traded Funds

in India, the most recent being the Gold Exchange Traded funds of the UTI

Mutual Fund. The concept is very new to the Indian markets and there are

not much pleasing response to these schemes. The schemes excluded are :-

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Table 1 : Exchange Traded Funds not included in the Research Study

Banking Index Benchmark Exchange Traded Scheme (Bank BeES)

Gold Benchmark Exchange Traded Scheme (Gold BeES)

Nifty Benchmark Exchange Traded Scheme (Nifty BeES)

Nifty Junior Benchmark Exchange Traded Scheme (Junior BeES)

Sensex ICICI Prudential Exchange Traded Fund

Kotak Gold ETF

UTI - Gold Exchange Traded Fund

UTI – Sunder

Income Options

Most of the Open Ended Equity schemes had the growth option or the income

option. In the Income options there are regular payouts in the form of

dividends. To the extend of the dividend payout, the NAV of the schemes fall

down on the Ex-date. Thus if the NAV from the first date to the last date is

taken for the analysis, the returns will fall down to the extend of the dividend

payout. Moreover, if we consider the dividend payout, we have to accordingly

fiddle with the data, which was not found appropriate by the Researcher.

Moreover, most of the schemes were having the growth option, which was

found to be very suitable for the research.

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Index Funds

This research is confined to the actively manage open-ended equity funds.

The index funds are passively managed funds and therefore the Index Funds

have not been considered for this Research Analysis. Index Funds are those

schemes, which invest in the proportion to the benchmark like the Sensex,

Nifty etc. Thus there is no performance on the part of the Fund Manager.

The Fund Manager has to invest his funds only in the proportion of the

Sensex to which the Index Fund is linked. The Marginal difference between

the portfolio of the Index Fund and the Index is known as the tracking error.

In case, the Index fund is linked to the Nifty Sensex then the holding in the

fund will be in the proportion of the shares of the Nifty Sensex.

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Table 2 : Index Funds not considered in the Research Study

Birla Index Fund

HDFC Index Fund - Nifty Plan

HDFC Index Fund - SENSEX Plus

HDFC Index Fund Sensex Plan

TATA Index Fund - Nifty A

TATA Index Fund - Nifty B

TATA Index Fund - SENSEX A

TATA Index Fund - SENSEX B

Franklin India Index Fund - BSE Plan

Franklin India Index Fund - Nifty Plan

ING Nifty Plus Fund - Growth Option

LICMF Index Fund - Nifty

LICMF Index Fund - Sensex Advantage

LICMF Index Fund - Sensex

Principal Index Fund

Reliance Index Fund - Nifty Plan

Reliance Index Fund - Sensex Plan

SBI Magnum Index Fund

UTI Master Index Fund

UTI Nifty Index Fund

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Institutional Options

Most of the Mutual Funds have introduced the Institutional Option in many of

their schemes. Apart from the Regular Growth option and Regular Income

option, these institutional options have been introduced for the Institutional

Investors. The expenses charged to these Institutional Option investors are

comparatively less as compared to the Regular Investor. Wherever, Regular

and Institutional options were available in the scheme, the Regular option was

taken for the analysis of the Secondary Data.

Apart form the above Schemes / options, the following schemes were

excluded from the list, as these schemes did not have any options and it was

very difficult to trace the history of the NAV of the past three years.

Table 3 : Schemes with no Option not considered in the Research Study

BOB Diversified Fund

CAN D MAT

CANFORTUNE 94

CANGROWTH PLUS

DSP Merrill Lynch Technology.com Fund

Franklin India Growth Fund

ICICI Technology Fund

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Kotak MNC

Kotak Tech

LICMF Growth Fund

SBI Magnum Children Benefit Plan - Holding Held for <= 1 Year

SBI MSFU FMCG

SBI MSFU IT

Bonanza Exclusive Growth Scheme

Taurus Discovery Fund

Taurus Star Share

TATA Select Equity Fund

The following schemes even though defined as a growth scheme, were

subsequently not taken for the research, as the Investment objective of the

scheme was not in par with the research.

Table 4 : Schemes not at par with the Investment objective of the Research, not considered for the Research Study

DWS Fixed Term Fund Series 28 - GR

Fidelity International Opportunities Fund

ICICI Prudential Equity & Derivatives Fund - Income Optimiser Plan

On application of all the above filters for the secondary data, finally 192

schemes were short-listed for the collection of the NAV data. This was further

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subjected for the NAV data for the period of three years viz 1st July, 2004 to

30th June, 2007.

On further analysis on one to one basis, it was observed that for more than

50% of the schemes the relevant data was not available for a period of three

years. The main reason was most of these schemes were launched after 1st

July, 2004 and did not have the NAV data for a period of more than three

years. There were other schemes which were either terminated like the

Principal Equity Fund (No Data after August, 2006) or the scheme was

merged into other schemes to form a new scheme like the UTI Large Cap

Fund and others, which were also excluded from the shortlisted secondary

data.

The following five schemes where taken over by Birla Sun Life Mutual Fund

from Alliance Capital Mutual Fund during September, 2005.

Table 5 : Schemes taken over by Birla Sun Life from Alliance Capital Mutual Fund

Birla Sun Life Buy India Fund-Plan B(Growth)

Birla Sun Life Basic Industries Fund-Plan B(Growth)

Birla Sun Life Equity Fund-Plan B(Growth)

Birla Sun Life Frontline Equity Fund-Plan B(Growth)

Birla Sun Life New Millennium Fund-Plan B(Growth)

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For these schemes the data for the broken period was taken from Alliance

Capital Mutual Fund from the data provided by AMFI.

The same way the following three schemes which were taken over by UTI

Mutual Fund from IL&FS Mutual Fund during the month of July 2004. The

data for these schemes where taken from IL&FS Mutual Fund for analysis.

Table 6 : Schemes taken over by UTI Mutual Fund from IL&FS Mutual Fund

UTI - DYNAMIC EQUITY FUND-GROWTH

UTI - GROWTH & VALUE FUND-GROWTH

UTI - INDIA ADVANTAGE EQUITY FUND-GROWTH

The data for the period 1st July, 2004 to 30th June, 2007, that is the NAV for 3

years was taken for the research as proposed in the initial research proposal.

However, AMFI had given the NAV data for all the schemes in the Mutual

Fund Industry. The researcher had to extract only the relevant data viz the

NAV of open-ended equity schemes for the period 1st July, 2004 to 30th June,

2007 for the research.

As regards to the UTI Mutual Fund schemes, the data was available from 1st

August, 2005 onwards. On further scrutiny, it was observed that UTI Mutual

Fund schemes did not have any options in many of their equity schemes.

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They had introduced the Growth option in their equity schemes from 1st

August, 2005 onwards. For the data for the period 1st July, 2004 to 31st July,

2005, the data was taken from the earlier schemes, where there was no

option in the schemes. Out of the 18 such schemes of UTI Mutual Fund, 14

schemes had declared dividend in the intervening period viz 1st July, 2004 to

31st July, 2005. These dividends in the 14 schemes have been factored in the

NAV to ensure that the returns of the schemes are calculated correctly for the

purpose of this research.

Initially, the list of the Open Ended Equity Schemes was short-listed from the

Scheme master provided by AMFI. There were ultimately 78 schemes

considered for the research. The corresponding NAV data for 78 schemes

was extracted for the period 1st July, 2004 to 29th June, 2007 for the purpose

of our research. As 30th June, 2007 being Saturday there was no data

available for the said day. Extensive efforts have been made to synchronize

the data available in the public domain to ensure that the research gives a

correct output for further analysis.

As mentioned above, in the final data extraction only 58,304 records were

taken for the further analysis of the Secondary Data. This secondary data

was put to various analyses for the research.

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In the research, Bombay Stock Exchange (BSE) SENSEX has been taken as

the benchmark index for categorizing the scheme into a high performing

schemes or low performing schemes. The main idea for taking BSE SENSEX

as the benchmark was that it has a long history and secondly it is the most

recognized and well known index for an investor. Even Nifty is the index of

National Stock Exchange, however the BSE SENSEX is the more prevalent

index in the capital market.

Moreover, the BSE is the oldest stock exchange in ASIA established in the

year 1875. The BSE has a nation wide reach with its presence in 417 cities

and towns in India. The BSE provides an efficient and transparent market for

trading in equity and derivatives. The BSE systems and processes are

designed to safeguard market integrity and enhance transparency in

operations.

The return of the schemes was calculated for the three-year period. Based

on the returns on the schemes, the schemes were grouped into two groups'

viz high performer and low performer with the returns of the BSE Sensex as

the benchmark.

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Table 7 : List of 78 Open Ended Equity Schemes considered for the Research Study (Period 01.07.2004 to 29.06.2007)

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Figure 6 : List of High Performer and Low Performer (Open-Ended Equity Scheme vis-à-vis the Benchmark)

RETURNS OF 3 YEARS PERIOD

65.63

65.26

63.72

62.59

60.93

58.43

56.37

55.46

53.92

52.94

52.42

52.34

52.00

51.87

50.96

50.82

49.87

49.82

48.99

48.97

48.96

48.88

48.75

48.71

48.67

48.65

48.33

48.07

47.88

47.86

47.73

47.60

46.77

46.62

45.82

45.52

45.49

45.47

45.02

44.90

44.69

44.42

44.27

44.16

44.07

44.04

44.00

43.45

43.01

42.91

42.75

42.66

42.50

42.43

42.07

41.16

40.67

40.19

39.33

39.17

38.83

38.63

38.31

37.22

37.17

37.08

37.00

36.61

36.34

35.64

32.70

32.63

27.60

27.25

26.35

23.66

23.66

18.26

15.14

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