AN ANALYSIS OF COST OF EQUITIES IN THE PORTFOLIO OF FRANKLIN INDIA BALANCED FUND USING CAPITAL ASSET PRICING MODEL (CAPM)

Investing in equities is one of the risky investments and also generates high returns. One of the factors which influence the investment in equities is the cost of equity or the purchase price of equities. When an investor invests in equities directly or indirectly via mutual fund, the cost of equity is analyzed using capital asset pricing model. Actual return is identified using this model and compared the same with estimated return and the stock is purchased and added to the portfolio of the scheme. If the actual return is greater than the estimated return then the cost of equity is reasonable and if actual return is lesser than the estimated return the cost of equity is not reasonable to purchase and invest. The study also analyzed the performance of equity sector-wise in the portfolio of Franklin India Balanced Fund (G). The portfolio of the scheme consists of stocks from 49 companies from 19 sectors. Using capital asset pricing model, it is found that 31 stocks are underpriced which makes the scheme better for the investor to invest.