Risk-adjusted Performance Evaluation of Indian Mutual Fund Schemes Kavita Arora 1 Abstract The present study evaluates the performance of mutual fund schemes in India using risk-adjusted meas- ures of performance evaluation, namely, Sharpe ratio and Treynor ratio, for a sample of 100 Indian mutual fund schemes selected on the basis of availability of consecutive data during the period 1st April 2000 to 31st March 2008. The findings suggest that the overall performance of mutual fund schemes during the study period was mixed. The results of Sharpe ratios of mutual fund schemes revealed that during the full study period, Sharpe ratios of 52 per cent of schemes were better than the Sharpe ratios of their benchmark indices. It was also found that 42 per cent of growth schemes, 40 per cent of tax planning schemes, 75 per cent of income schemes and 91 per cent of balanced schemes, respectively, had performed better than their respective indices in terms of Sharpe ratio. During the full study period, 70 per cent of mutual fund schemes had higher Treynor ratios than those of their respective indices. Analysis further revealed that in the full study period, 64 per cent of growth schemes, 60 per cent of tax planning schemes, 76 per cent of income schemes and 100 per cent of balanced schemes, respectively, had better Treynor ratios than the Treynor ratios of their benchmark indices. Keywords Performance, mutual fund, Sharpe ratio, Treynor ratio, benchmark indices Introduction Mutual funds are financial intermediaries, which collect the savings of investors and are supposed to invest them in a well-diversified portfolio of securities, such as, money market instruments, corporate and government bonds and equity shares of joint stock companies. The popularity of mutual funds in India has increased manifold over the years as is evident from the increase in the number of investors and the asset base of the industry. Total assets under management of mutual funds in India as on 31 March 2001 was `90,587 crore under 393 schemes which has grown to `811,481 crore under 1,184 schemes as on 30 June 2013. 1 To fulfil the expectations of millions of investors, the mutual funds are required to function as successful institutional investors. Evaluating performance for mutual fund managers vis-à- vis such a goal, is important for both the investors as well as the portfolio managers. The last decade has Paradigm 19(1) 79–94 © 2015 IMT SAGE Publications sagepub.in/home.nav DOI: 10.1177/0971890715585203 http://par.sagepub.com Article Corresponding author: Kavita Arora, H-101, Shakar Pur, New Delhi 110 092, India. E-mail: kavitaarora2007@rediffmail.com 1 Assistant Professor, Shyam Lal College, University of Delhi, New Delhi, India.