Comparative performance of growth oriented mutual funds and benchmark in terms of risk and return in India

Mutual fund industry has just four decades old in India. In this short span of time it has made tremendous growth. It can be seen from asset under management, increasing number of schemes and fund houses. So considering these points this paper is an attempt to examine the performance of mutual funds during the period 1^st April 2007 to 31^st March 2010 in comparison to sensex in terms of risk and return and to know the role of diversification n minimization of risk. In this paper we have taken forty four schemes from close ended growth schemes and open ended growth schemes. The analysis of data has been done with the help of Sharpe ratio, Treynor ratio, Jensen measure, Fama's measure, Beta and R Squared. The risk free rate has taken the rate of interest on fixed deposits. The findings of the study revealed that only six schemes have outperformed the benchmark in terms of return. Only two close ended growth schemes and one scheme from open ended growth schemes has shown diversification. Some of the schemes are diversified up to some extent, but these are failed to give compensation for inadequate diversification.