Indian Mutual fund Industry

G.P.DINESH

II MBA

SITAMS

Introduction A mutual fund is a professionally managed

type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments and other securities. Mutual funds have a fund manager who invests the money on behalf of the investors by buying / selling stocks, bonds etc.

History of Mutual Funds in India

• The first mutual fund was setup in 1963, when the Govt. of India created UTI

• Until 1987, UTI enjoyed a monopoly in the Indian mutual fund market

• In 1987, the Government of India permitted public sector banks and the Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) to enter the mutual fund industry.

• The State Bank of India's SBI Mutual Fund was the first such mutual fund to be established in 1987• Canara Bank set up Can bank Mutual Fund

shortly after in the same year.• followed by funds from Punjab National Bank

and Indian Bank in 1989, Bank of India in 1990 and Bank of Baroda in 1992.• Kothari Pioneer Mutual Fund (now merged

into Franklin Templeton Investments) was the first private sector mutual fund to be registered in July 1993.

Mutual Fund Phases• First Phase - 1964-1987• Second Phase - 1987-1993 (Entry of

Public Sector Funds)• Third Phase - 1993-2003 (Entry of Private

Sector Funds)• Fourth Phase - since February 2003

Mutual fund setup

• A mutual fund is set up in the form of a trust

• Sponsor• Trustees• Asset Management Company (AMC)• Custodian

Net Asset Value (NAV) • The performance of a particular scheme of a

mutual fund is denoted by (NAV). • Net Asset Value is the market value of the

securities held by the scheme. Since market value of securities changes every day,

• NAV of a scheme also varies on day to day basis.

The different types of mutual fund schemes

– Open-ended Fund/ Scheme – Close-ended Fund/ Scheme– Growth / Equity Oriented Scheme– Income / Debt Oriented Scheme– Balanced Fund– Money Market or Liquid Fund– Gilt Fund & Index Funds

Advantages of Investing In Mutual Funds

– Professional Management– Diversification– Low costs– Liquidity– Transparency– Tax Benefits– Well Regulated

Disadvantages of Investing In MFs

• Fees and Commissions• Management Risk• Taxes

Conclusion Mutual funds are not magic institutions which

can bring treasures to the millions of their investors within a short span of time. All funds are equal to start with. But in due course of time, some excel the other. It all depends upon the efficiency with which the fund is being managed by the professionals of the fund. Hence the investor is very careful in selecting a fund.