Mutual Funds In India: Misclassification Of Their Investment Objectives

Authors

  • Elvin Varghese

Abstract

The Indian Mutual Fund have been increasingly attracting investments in the past 10 years and has grown in total AUM from ? 11.87 trillion as on September 30, 2015 to ?26.86 trillion as on September 30, 2020. This is a more than two-fold increase in a span of 5 years.  To make things simpler, mutual funds are designed on a pre-announced investment objective. These objectives direct the investment style of the fund manager(s) who manage these funds; it is based on these investment objectives that the investors choose their funds. Basing on the works of DiBartolomeo, D. and Witkowski, E., (1997) and Kim, M., Shukla, R. and Tomas, M., (2000) and Dennis Bams, Roger Otten, Ehsan Ramezanifar (2015) mutual funds in various countries have shown to be misclassified which is severely misleading for the investors.  It’s through this study that I tried to verify if Indian mutual funds too are misclassified and fail to follow the objectives, they pre-announced. I used the last 3 years of data with the help of discriminant analysis on 60 different funds to conclude that Indian mutual funds are majorly perfectly classified with a very few funds defaulting on their objectives.

Published

2020-11-01

Issue

Section

Articles