Banking Sector Mutual Funds and Term Deposits: Risk-Return Analysis

Dr. Sarbapriya Ray, Dr. Malayendu Saha



 Savings-psychic Indian people because of their lack of financial awareness mostly believe in putting their hard-earned savings in some term deposits of nationalized banks, post offices, insurance policies and other financial instruments on the hope getting a secured return after a period of waiting. The retail investors, on the other, with little or less financial literacy mostly channelize their savings arbitrarily alleging their destiny. Investment in mutual fund schemes, whose performance is very much associated with the equity market, still remains unwelcome to those common investors because of their earlier experience and psychosis. The key objective of this paper is to evaluate largely the performance of selected banking sector mutual fund schemes using statistical tools like alpha, beta, standard deviation, r-squared, Sharpe ratio, Treynor ratio, Jensen alpha and compare the return from the term deposits scheme after considering the risks associated with those investments. The analysis gives an insight to those market-ignorant retail investors to review their decision before investing as the banking sector mutual fund schemes provides better return than the term deposits during long run. It is perceived that concerted and effective efforts are the need of the hour to implant financial awareness and create a strong foundation of trust amongst investors resulting financial inclusion and gainfully mobilize substantial quantum of savings of them.


Keywords: Mutual fund scheme, NAV, term deposits, risk, return.

Full Text:

PDF pages 14-25



Deepak Agrawal (2011), “Measuring Performance of Indian Mutual Funds” Finance India, June 2011. Availableat SSRN:

Fama, E. F., and K. R. French, “Industry Costs of Equity,” University of Chicago Working Paper 396, 1994.

Jensen, M. C. (1968), The performance of Mutual Funds in the period 1945-1964, Journal of Finance, vol.23(2), pp.389-416.

Fama, E. F. (1970), Efficient Capital Markets: A Review of Theory and Empirical Work, Journal of Finance, vol. 25. no.2, pp.383-417.

John L. Evans and Stephen H. Archer (1968), Diversification and the reduction of dispersion: An empirical analysis, The Journal of Finance,vol. 23(5),pp. 761–767.

Mandelbrot, B. (1966), Forecasts of Future Prices, Unbiased Markets, and “Martingale” Models, Journal of Business, vol.,pp. 242–55

Prabakaran, G and Jayabal, G (2010), Performance Evaluation of Mutual Fund Schemes in India: An Empirical Study, Finance India, vol.24 (4), pp.1347-1363.

Ray, Sarbapriya (2011),Mutual Fund in India: An Analysis of Performance and Some Emerging Issues in Unit Trust of India, Research Journal of Finance and Accounting, vol.2, no.5,pp.34-46, ISSN 2222-1697, United Kingdom.

Ritter J., 2003. Behavioral Finance, Pacific-Basin Finance Journal, vol. 11, no. 4, p.p. 429-437.

Samuelson, P. A. (1965), Proof That Properly Anticipated Prices Fluctuate Randomly. Industrial Management Review,vol. 2, pp.41-49.

Sharpe, W. F. (1966), Security prices, risk and maximal gains from diversification: Reply, Journal of Finance, pp 743-744.

Sondhi, H.J and Jain, P.K (2010), Market Risk and Investment Performance of Equity Mutual Funds in India: Some Empirical Evidence, Finance India, vol.XXIV (2), pp.443-464.

Shanmugham, R and Zabiulla (2011), Stock Selection Strategies of Equity Mutual Fund Schemes in India, Middle Eastern Finance and Economics, ISSN 1450-2889, Issue 11, pp.19-28.

Statman, Meir (1987), How many stocks make a diversified portfolio?, Journal of Financial and Quantitative Analysis ,vol.22, pp.353—363.

Treynor, J(1965), “How to rate management investment funds”, Harvard Business Review,vol. 43, January-February, no. 1, pp.63-75.

Treynor, J., and Mazuy, K(1966), “Can Mutual Funds Outguess the Market?”, Harvard Business Review, vol.43, July-August, pp.131-136.

Sharpe, W. F. (1966) Mutual Fund Performance, Journal of Business, vol.39 (1), pp.119-138.

Websites :,“Understanding The Sharpe Ratio”,


Note: State Bank term deposit rate decided to revise its Retail Term Deposit Rate (Below Rs One crore) w.e.f 08.12.2014[collected from website].

Websites :,“Understanding The Sharpe Ratio”,


  • There are currently no refbacks.

ISSN: 2332-2160

Impact Factor = 0.465 (2013)