Fund
managers are primarily responsible for the performance
of mutual fund, as they are the key players in deciding
the investment strategy of a company, however, despite
the role they play in the financial markets, surprisingly
little is known about the way in which fund managers
evaluate company's annual report when taking a decision
to invest or liquidate there holding in the company.
What parameter effects their decision is very important
to know as it will help managers working for the company
to take necessary steps. It will also help investors
in deciding a strategy when they invest their funds
in the secondary market, specially when the market is
booming at 7600 points.
All
fund managers are not successful in the formation of
the portfolio and so the study also focuses on empirically
testing and form hypothetical portfolios on the bases
of ratios, fund managers use for portfolio formation. Assessment
of future earning is also crucial as many companies
command a high premium in the share market not because
their book profits are high but the investors feel the
future earnings to be more than the current earning.
It
was found that to make good investment decision fund
managers rely primarily on financial statement analysis
and key fundamental variables namely Book to market
ratio (B/M) and Price earning ratio (P/E). For
analysis, purpose fund managers generally use Balance
Sheet, Income Statement, Profit After Tax. Further,
fund managers regarded financial risk, quality of disclosure
in the annual report by the management, predictability
of earnings and corporate growth prospects as the primary
determinant when taking an investment decision. |
