Volume : 2, Issue : 3, March - 2013

Stock Selection Ability of Equity Diversified Mutual Fund Managers

Dr. S. Poornima, R. K. Sudhamathi

Abstract :

Mutual fund industry in India has grown enormously with 42 mutual fund companies and with about 7,391 schemes. The difficult role of investor comes here in the form of identifying right mutual fund scheme which produces adequate return. Firmly producing adequate return for a mutual fund scheme depends on the stock selection ability of the mutual fund managers. Jensen and Fama measure which is used to assess the stock selection ability of the mutual fund managers has been used to identify the funds generating the adequate return. Accordingly 102 funds which were performing for the period from April– 2006 to March– 2011 were selected for the study. The analysis has revealed that according to Jensen Measure out of 102 funds 73 funds have produced the return than expected from a portfolio using Capital Asset Pricing Model. Fama measure shows that out of 102 funds only 49 funds could earn excess positive return. Thus the analysis very clearly shows that stock selection ability plays a vital role in generating excess return for the mutual fund schemes