Performance Under Microscope Examining Indian Pharma and Tech Equity Mutual Funds

Abstract

Indian investors frequently use mutual funds because of their capable professional management, diversification and likelihood of decent returns.  With an emphasis on the technology and pharmaceutical sectors, this research work looks at the performance of sectoral equity funds in India.   Because sectoral funds invest in certain businesses, they are inherently riskier.  Assessing whether these funds have continuously generated better performance based on risk-return metrics is the objective of this study. The research evaluates performance across 1, 3, 5-, 7-, 10- and 12-year periods using data from several asset management companies (AMCs).  Chosen funds' regular and direct plans are examined.  The study employs important financial indicators like Compound Annual Growth Rate (CAGR), standard deviation, Sharpe ratio, alpha, beta, and R-squared.

Previous research yielded conflicting results.  While some discovered varying performance throughout the years, others came to the conclusion that sectoral funds performed better across specific market cycles.  By incorporating more lengthy and varied periods, this study expands on existing conclusions.  Additionally, it contrasts the direct and regular plans' cost-effectiveness, which has not been thoroughly examined in previous studies.

The study found that direct plans performed better overall and in terms of risk-adjusted return across all periods than regular plans. Regarding performance consistency in terms of risk-adjusted returns during the picked periods, every fund did better than its corresponding benchmark index. Further, the study noticed skills from fund managers in identifying quality stocks. It was noted that the chosen funds were defensive throughout the study period. Moreover, the research noticed adequate diversification of the chosen funds.