EVALUATION OF INDIAN MUTUAL FUNDS’ PERFORMANCE DURING THE COVID CRISIS

Abstract

This study aimed to evaluate the performance of Indian open-ended equity mutual funds. The primary purpose of this research was to draw parallels between the three years before COVID-19 and the subsequent three years, which included one year of hardship due to the pandemic and two years of relative calm. The second factor was the Goods and Services Tax (GST) that India introduced in July 2017. Hence, the total sample period was divided into three sub-samples: 2017-2019, which was characterized by the Goods and Services Tax (GST) that India introduced in July 2017, 2020, which was the main year of the negative effect of the COVID-19 pandemic all over the world including India, and 2021-2022 which were peaceful and productive as the world began to recover from the devastating effects of the COVID-19 epidemic. This study utilized secondary data collected from the Refinitiv Eikon database, initially selecting 477 mutual fund schemes for examination. However, due to the presence of missing values, the final sample size was refined to include 203 equity mutual fund schemes Mutual fund performance was analyzed using the Sharpe ratio, Treynor ratio, Jensen's performance measure, Treynor and Mazuy model, Henriksson and Merton model, and the Carhart Four-Factor Model over the three sub-sample periods. The Sharpe and Treynor Ratios indicate increasing volatility during COVID with a partial stabilization post-COVID. Notably, the Jensen's Alpha results show many funds failing to outperform the market during COVID, with minimal recovery post-COVID. Delving into advanced models, the Treynor-Mazuy model demonstrates the timing ability of funds, with a notable recovery and better market adaptation post-COVID. The Henriksson and Merton model highlights the wide dispersion of risk-adjusted performance, especially during the market upheavals of COVID, suggesting challenges in market timing. Collectively, these models illustrate a complex landscape of mutual fund performance, marked by resilience and gradual adaptation to a "new normal" in the post-pandemic market environment.