Priya Malhotra|Pankaj Sinha
Top-bottom investing skill and the fund alpha in Indian mutual fund industry: an empirical investigation
University of Delhi|University of Delhi
purpose mutual funds second preferred investment option india garnered considerable research interest focus indian studies thus far restricted bottomup approach investing rewards fund manager picking winner stocks generates superior returns changing portfolio allocation per varying macrotrends instrumental generating superior returns given desired attention study addresses important research gap designmethodologyapproach authors analyze industry selection ability fund manager robust sample decomposing alpha alpha due industry selection alpha attributable stock selection alpha estimates computed robust sample 34 openended indian equity mutual funds 10year duration 20112020 using three base models asset pricing singlefactor fourfactor fivefactor alpha panel data methodology findings study leads us four major findings one industry selection explains twofifth alpha crosssection time series returns two industry selection exhibits persistence four quarters across asset pricing model third younger funds level playing alpha picking right industries concerned four broad industry allocation continues explain superior returns sector allocation undergoes consolidation ongoing covid19 pandemic funds increase exposure defensive stocks consistent folio allocations per macroeconomic conditions research limitationsimplications authors find strong evidence persistence case alpha attributable industry selection component findings consistent persistence results reported empirical literature funds excel stockpicking skills others excel picking right industries skills together make winner funds attract larger investor flows investors chase superior performance authors also find evidence diseconomies scale case industry allocation alpha generated fund managers practical implications results suggest fresh approach investors making mutual fund investment decisions investors achieve superior returns assessing industry selection skills tends provide holistic picture concerning perennial question funds outperform continue contribute investors wealth social implications mutual funds become favored investment option indian investors disciplined investment option owing dismal financial literacy rates study throws light relatively unaddressed dimension choosing winner funds significance right sector allocation assumed even significance onset pandemic lends credence findings study originalityvalue research conducted secondary data extracted wellcited database indian mutual funds empirical analysis conclusion drawn based authentic statistical analysis adds existing literature