MUTUAL FUND PERFORMANCE: A STUDY ON THE EFFECT OF PORTFOLIO TURNOVER ON MUTUAL FUND PERFORMANCE IN THE INDIAN FINANCIAL MARKET

Background:In India, mutual funds are gaining popularity however they account for less than 5% of the GDP in India. Mutual fund companies are trying to penetrate the market further with constant restructuring of models in an attempt to increase efficiency and investor satisfaction. It is, thus, important to study the effect of management style on the fund performance. It would be useful for fund investors to evaluate managers based on a known characteristic that would affect the fund return. Purpose:The aim of this research paper is to investigate the significance of portfolio turnover on mutual fund return which would provide an indication to investors on how to invest in funds based on management style. Data:In this research paper, only open ended diversified growth oriented equity funds are taken into consideration. Accordingly, dividend paying equity schemes are not considered. Result: Portfolio turnover has a statistically significant effect on scheme returns. It is weakly but positively correlated. That is, with higher portfolio turnover, there is a possibility that manager will be able to outperform the index.