In this study, we examine the role of fund characteristics in determining mutual fund performance in India. The data comprises of 237 open-ended Indian equity (growth) schemes during the period April 2007 to March 2013. Using daily dividend adjusted net asset values (NAVs), the risk-adjusted performance is estimated employing conditional version of Carhart (1997) four factor model in a time series regression framework. A range of fund characteristics, namely, the size of fund, growth in size of fund, expense ratio, portfolio turnover, NAV and age of fund, are examined in predictive model in a panel data regression framework that may determine the future performance of the fund. The Hausman specification test is conducted to decide if individual effects are random or fixed. The results of panel regression, based on fixed effects estimator, show that the size of fund, growth in size of fund and NAV negatively affect one period ahead risk-adjusted performance in India, while the age of fund has a positive impact. Expense and portfolio turnover ratios do not play a significant role. Identification of significant fund characteristics offer valuable insights to investors as it will allow them to make prudent selection of mutual funds and make judicious investment decisions.

Purpose The purpose of this paper is to perform a relative assessment of performance benchmarks based on alternative asset pricing models to evaluate performance of mutual funds and suggest the best approach in Indian context. Design/methodology/approach Sample of 237 open-ended Indian equity (growth) schemes from April 2003 to March 2013 is used. Both unconditional and conditional versions of eight performance models are employed, namely, Jensen (1968) measure, three-moment asset pricing model, four-moment asset pricing model, Fama and French (1993) three-factor model, Carhart (1997) four-factor model, Elton et al. (1999) five-index model, Fama and French (2015) five-factor model and firm quality five-factor model. Findings Conditional version of Carhart (1997) model is found to be the most appropriate performance benchmark in the Indian context. Success of conditional models over unconditional models highlights that fund managers dynamically manage their portfolios. Practical implications A significant α generated over and above the return estimated using Carhart’s (1997) model reflects true stock-picking skills of fund managers and it is, therefore, worth paying an active management fee. Stock exchanges and credit rating agencies in India should construct indices incorporating size, value and momentum factors to be used for purpose of benchmarking. Originality/value The study adds new evidence as to applicability of established asset pricing models as performance benchmarks in emerging market India. It examines role of higher order moments in explaining mutual fund returns which is an under researched area.