Portfolio Diversification and Selectivity Performance of Fund Managers in India - A Study of Select Equity Funds

Abstract

This article discusses the portfolio diversification of top 10 sectors of sample funds and evaluates selective abilities of Indian fund managers of select Equity large Cap and Small and Mid Cap funds. Researcher emphasized on secondary data only and selected 12 equity funds; 6 Large Caps and 6 Small and Mid Caps, selected from 6 Mutual fund houses  2 from public sector and 4 from private sector using  purposive sampling. To know the degree of diversification R Square is used and to measure Selectivity performance Jensen’s Alpha and Fama’s Measure of decomposition was applied and found out that, during the study period 67.67% sample funds fund managers have superior stock selection ability and 33.33% were in lack of selection skills.

Keywords: R Square, Diversification, Jensen’s Alpha, Fama’s Measure of decomposition, Selectivity, Net selectivity, selectivity performance.