IFC Mutual Fund: In Search of the Right Investment Strategy

sneak peek

 

 

Ref. No. IIMC-CRC-2016-02
Authors
  • Sahadeb Sarkar
  • Varun Jindal
Length 10 pages + teaching note.
Data Source The data were obtained from secondary sources.
Setting Fictional.
Abstract

IFC Mutual Fund is a newly started company planning to devise an investment strategy for one of its equity-oriented mutual fund schemes in order to cash in on the growth in India’s mutual fund industry. It has entrusted its newly hired employee Raman from a top-notch B-school in India with the task of devising an effective strategy. Faced with this challenging assignment, Raman seeks advice from his B-School professor Dr. Srinivasan on how to proceed. Following his professor’s guidance, Raman is able to identify some of the inputs that should go into deciding the ranking of stocks and also the identification of undervalued stocks. However, he is still surrounded by some unanswered questions. Which method should he use to rank the stocks? What kind of moving average P/E should he employ that can subsequently be compared with the actual P/E to identify undervalued stocks?

After going through the case and attempting the suggested case questions, the students will be able to:

  • Sharpen their understanding of the stock market as well as mutual funds
  • Understand and apply the statistical concepts (such as Mahalanobis distance, and exponentially weighted moving average) to analyse the financial markets data
Keywords Exponentially weighted moving average (EWMA); Investment strategy; Mahalanobis distance; Mutual fund; Normality; Price-earnings ratio, Stock market.