VIGNANA JYOTHI INSTITUTE OF MANAGEMENT

HYDERABAD
BATCH 27th (2019-2021)
RESEARCH PROJECT: MUTUAL FUNDS

PREPARED BY:
Y Laxmi Soumya,
191239
SUBMITTED TO:
Dr. Srijanani Devarakonda
A study on mutual funds in India:
Abstract: this report focuses on entire journey of mutual fund industry in India.
Its origin, its fall and rise throughout all these years and tried to predict what the
future may hold for the Mutual Fund Investors in the long run. A mutual fund,
also called an investment company, is an investment vehicle which pools the
money of many investors. This study was conducted to analyse and compare the
performance of different types of mutual funds in India and concluded that
equity funds outperform income funds. This study further concludes that equity
fund managers possess significant market timing ability and institutions funds
managers can time their investments, but brokers operated funds did not show
market timing ability.
Introduction: A mutual fund is a managed group of owned securities of several
corporations. These corporations receive dividends on the shares that they hold
and realize capital gains or losses on their securities traded. Investors purchase
shares in the mutual fund as if it was an individual security. After paying
operating costs, the earnings (dividends, capital gains or losses) of the mutual
fund are distributed to the investors, in proportion to the amount of money
invested. Investors hope that a loss on one holding will be made up by a gain on
another. Heeding the adage "Don't put all your eggs in one basket" the holders
of mutual fund shares are able collectively to gain the advantage by diversifying
their investments, which might be beyond their financial means individually. A
mutual fund may be either an open-end or a closed-end fund. An open-end
mutual fund does not have a set number of shares; it may be considered as a
fluid capital stock. The number of shares changes as investors buys or sell their
shares. Investors can buy and sell their shares of the company at any time for a
market price.
History of mutual funds: The modern mutual fund was first introduced in
Belgium in 1822. This form of investment soon spread to Great Britain and
France. Mutual funds became popular in the United States in the 1920s and
continue to be popular since the 1930s, especially open-end mutual funds.
established its mutual fund in June 1989 while GIC had set up its mutual fund in
December 1990. With the entry of private sector funds in 1993, a new era
started in the Indian mutual fund industry, giving the Indian investors a wider
choice of fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI were to
be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in
July 1993. The number of mutual fund houses went on increasing, with many
foreign mutual funds setting up funds in India and the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were 33
mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India
with Rs.44,541 crores of assets under management were way ahead of other
mutual funds. In February 2003, following the repeal of the Unit Trust of India
Act 1963 UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of
Rs.29,835 crores as at the end of January 2003, representing broadly, the assets
of US 64 scheme, assured return and certain other schemes. The Specified
Undertaking of Unit Trust of India, functioning under an administrator and
under the rules framed by Government of India and does not come under the
purview of the Mutual Fund Regulations
Mutual fund prospectus: The prospectus is a legal document that includes
information about the mutual fund. In this document you will find information
about the terms of the offer, the issuer, and its objectives. In the aftermath of the
1929 stock market crash the federal government in the Securities Act of 1933
required security companies to publish a prospectus. At first glance a prospectus
may seem overwhelming. The information in the prospectus is usually lengthy,
packed with tables and graphs, and written in technical and legal language. This
document is provided to help you make an informed investment decision before
you invest in a mutual fund. To gain the essential information you need, pay
close attention the following key sections: Investment Objective: A short
statement of the fund's investment objectives. Some funds intend to achieve
short-term growth while others might focus on long-term stability. Investment
Strategy: Exactly how the fund plans to accomplish the objectives. This section
describes the types of assets that the fund purchases. Fees and Expenses:
Although mutual funds aim to make money for their investors, their goal, just
like any other business, is to make money for themselves. In order to do so,
funds charge their shareholders a variety of fees and expenses, all of which must
be documented in the prospectus. A table at the front of every prospectus
contains a breakdown of the different fees and expenses, along with a
hypothetical projection of how the fees would impact a $10,000 investment over
a 10-year period. This enables you to compare fees and expenses across mutual
funds. Account Information: This section contains very basic information about
how to buy and sell shares and other account-related information. In addition to
telling, you how to get your money into the fund, the prospectus will also tell
you how to take it out of the fund. The prospectus will inform you which
redemption methods are available to you. Risks: The level of risk that the fund
takes and the risks that are associated with the specific investments made by the
fund are one of the most important sections in the prospectus. Performance:
Information about the fund's performance over the last 10 years is included.
Investors should be aware that past performance is not necessarily an indicator
of future results. As important is how well the fund has traditionally performed
compared to an index, such as the S&P 500. A fund's performance is also
related to the fund's volatility, dividend payments, and turnover. Management:
The names the managers and some additional information about their
experience and qualifications is reported. It can be helpful to know whether they
have managed other funds in the past and their success or failure in order to get
a sense of their past strategies and results.
Mutual fund share classes: Morning Star is a generally accepted authority on
divides most stocks into classes or types. The use eight type designations:
Distressed, Hard Asset, Cyclical, Speculative Growth, Aggressive Growth,
Classic Growth, Slow Growth and High Yield. Each designation defines a broad
category of investment characteristics. Stocks are assigned to a type based on
objective financial criteria and Morning Star's proprietary algorithm, so stocks
of the same type have similar economic fundamentals. Classes/Types Are:
Distressed: These companies are having serious operating problems. This could
mean declining cash flow, negative earnings, high debt, or some combination of
these. Such "turnaround" stocks tend to be highly risky but also harbour some
intriguing investments.
Hard Asset: These companies' main businesses revolve around the ownership
or exploitation of hard assets like real estate, metals, timber, etc. Such
companies typically sport a low correlation with the overall stock market and
investors have traditionally looked to them for inflation hedges.
Cyclical: Cyclical companies core businesses can be expected to fluctuate in
line with the overall economy. In a booming economy such companies will look
excellent; in a recession, their growth stalls, and they might even lose money.
Speculative Growth: Don't expect consistency from speculative growth-
companies. At best their profits are spotty. At worst they lose money. In fact,
many companies never make it beyond speculative growth, going instead to
bankruptcy court. That is why they are speculative. But current profitability is
not what makes speculative-growth companies interesting. It is future profits.
Hopefully, a speculative-growth company will eventually blossom into a world-
class company.
Aggressive Growth: Aggressive-growth companies show a bit more maturity
than their speculative-growth counterparts: They post rapid growth in profits,
not just in sales-a sign of more staying power.
PROFESSIONAL MANAGEMENT & RANKING OF MUTUAL FUNDS:

each Morningstar Category, the top 10% of funds receive 5 stars and the
Professional management: Mutual funds use professional managers to make the
decisions regarding which companies' securities should be bought and sold. The
managers of the mutual fund decide how the pooled funds will be invested.
Investment opportunities are abundant and complex. Fund managers are
expected to know what is available, the risks and gains possible, the cost of
acquiring and selling the investments, and the laws and regulations in the
industry. Ranking: Funds are ranked based upon their performance as a whole
and performance against their peers by such companies as Morningstar which
has an industry recognized rating system for mutual funds. They have a one-to
five-star system in which five stars is the best. Usually the higher the rank, the
higher the quality of the fund. For example, Morningstar rates mutual funds
from 1 to 5 stars based on how well they have performed (after adjusting for
risk and accounting for sales charges) in comparison to similar funds. Within
bottoms 10% receive 1 star. Funds are rated for up to three time periods: three-,
five- and 10- years and these ratings are combined to produce an overall rating.
Funds with less than three years of history are not rated. Ratings are objective,
based entirely on a mathematical evaluation of past performance. The ratings
are a useful tool for identifying funds worthy of further research but should not
be considered signals to buy or sell.
MUTUAL FUND ANNUAL REPORT: Every year mutual funds send each
investor an Annual Report. The Annual Report includes a list of the fund's
financial statements, a list of the fund's securities, and explanations from the
fund's management as to why the fund performed as it did for the previous year.
FEATURES THOSE INVESTORS LIKE IN MUTUAL FUND: If mutual
funds are emerging as the favourite investment vehicle it is because of the many
advantages. They have over other forms and avenues of investing parties for the
investors who has limited resources available in terms of CapitaLand ability to
carry out detailed reserves and market monitoring. These are the major
advantages offered by mutual fund to all investors:
• Professional Management: Mutual Funds provide the services of experienced
and skilled professionals, backed by a dedicated investment research team that
analyses the performance and prospects of companies and selects suitable
investments to achieve the objectives of the scheme.
• Diversification: Mutual Funds invest in a few companies across a broad cross-
section of industries and sectors. This diversification reduces the risk because
seldom do all stocks decline at the same time and in the same proportion. You
achieve this diversification through a Mutual Fund with far less money than you
can do on your own.
• Convenient Administration: Investing in a Mutual Fund reduces paperwork
and helps you avoid many problems such as bad deliveries, delayed payments
and follow up with brokers and companies. Mutual Funds save your time and
make investing easy and convenient.
• Return Potential: Over a medium to long-term, Mutual Funds have the
potential to provide a higher return as they invest in a diversified basket of
selected securities.
• Low Costs: Mutual Funds are a relatively less expensive way to invest
compared to directly investing in the capital markets because the benefits of
scale in brokerage, custodial and other fees translate into lower costs for
investors.
• Liquidity: In open-end schemes, the investor gets the money back promptly at
net asset value related prices from the Mutual Fund. In closed-end schemes, the
units can be sold on a stock exchange at the prevailing market price or the
investor can avail of the facility of direct repurchase at NAV related prices by
the Mutual Fund
• Transparency: You get regular information on the value of your investment in
addition to disclosure on the specific investments made by your scheme, the
proportion invested in each class of assets and the fund managers investment
strategy and outlook
• Flexibility: Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, you can systematically
invest or withdraw funds according to your needs and convenience.
• Affordability: Investors individually may lack sufficient funds to invest in
high-grade stocks. A mutual fund because of its large corpus allows even a
small investor to take the benefit of its investment strategy.
• Well Regulated: All Mutual Funds are registered with SEBI and they function
within the provisions of strict regulations designed to protect the interests of
investors. The operations of Mutual Funds are regularly monitored by SEBI.
ADVANTAGES OF MUTUAL FUNDS: If mutual funds are emerging as the
favorite investment vehicle, it is because of the many advantages they have over
other forms and the avenues of investing, particularly for the investor who has
limited resources available in terms of capital and the ability to carry out
detailed research and market monitoring. The following are the major
advantages offered by mutual funds to all investors:
1. Portfolio Diversification: Each investor in the fund is a part owner of all the
fund’s assets, thus enabling him to hold a diversified investment portfolio even
with a small amount of investment that would otherwise require big capital.
2. Professional Management: Even if an investor has a big amount of capital
available to him, he benefits from the professional management skills brought in
by the fund in the management of the investor’s portfolio. The investment
management skills, along with the needed research into available investment
options, ensure a much better return than what an investor can manage on his
own. Few investors have the skill and resources of their own to succeed in
today’s fast moving, global and sophisticated markets.
3. Reduction/Diversification of Risk: When an investor invests directly, all the
risk of potential loss is his own, whether he places a deposit with a company or
a bank, or he buys a share or debenture on his own or in any other from. While
investing in the pool of funds with investors, the potential losses are also shared
with other investors. The risk reduction is one of the most important benefits of
a collective investment vehicle like the mutual fund.
4. Reduction of Transaction Costs: What is true of risk as also true of the
transaction costs. The investor bears all the costs of investing such as brokerage
or custody of securities. When going through a fund, he has the benefit of
economies of scale; the funds pay lesser costs because of larger volumes, a
benefit passed on to its investors.
5. Liquidity: Often, investors hold shares or bonds they cannot directly, easily
and quickly sell. When they invest in the units of a fund, they can generally
cash their investments any time, by selling their units to the fund if open-ended,
or selling them in the market if the fund is close end. Liquidity of investment is
clearly a big benefit.
6. Convenience and Flexibility: Mutual fund management companies offer
many investor services that a direct market investor cannot get. Investors can
easily transfer their holding from one scheme to the other; get updated market
information and so on.
7. Tax Benefits: Any income distributed after March 31, 2002 will be subject to
tax in the assessment of all Unit holders. However, as a measure of concession
to Unit holders of open-ended equity- oriented funds, income distributions for
the year ending March 31, 2003, will be taxed at a concessional rate of 10.5%.
In case of Individuals and Hindu Undivided Families a deduction up to Rs.
9,000 from the Total Income will be admissible in respect of income from
investments specified in Section 80L, including income from Units of the
Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax.
 8. Choice of Schemes: Mutual Funds offer a family of schemes to suit your
varying needs over a lifetime.
9. Well Regulated: All Mutual Funds are registered with SEBI and they
function within the provisions of strict regulations designed to protect the
interests of investors. The operations of Mutual Funds are regularly monitored
by SEBI.
10. Transparency: You get regular information on the value of your investment
in addition to disclosure on the specific investments made by your scheme, the
proportion invested in each class of assets and the fund manager's investment
strategy and outlook.
 DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS:
1. No Control Over Costs: An investor in a mutual fund has no control of the
overall costs of investing. The investor pays investment management fees if he
remains with the fund, albeit in return for the professional management and
research. Fees are payable even if the value of his investments is declining. A
mutual fund investor also pays fund distribution costs, which he would not incur
in direct investing. However, this shortcoming only means that there is a cost to
obtain the mutual fund services.
2. No Tailor-Made Portfolio: Investors who invest on their own can build their
own portfolios of shares and bonds and other securities. Investing through fund
means he delegates this decision to the fund managers. The very-high-net-worth
individuals or large corporate investors may find this to be a constraint in
achieving their objectives. However, most mutual fund managers help investors
overcome this constraint by offering families of funds- many different schemes-
within their own management company. An investor can choose from different
investment plans and constructs a portfolio to his choice.
3. Managing A Portfolio of Funds: Availability of many funds can mean too
much choice for the investor. He may again need advice on how to select a fund
to achieve his objectives, quite like the situation when he has individual shares
or bonds to select.
4. The Wisdom of Professional Management: That's right, this is not an
advantage. The average mutual fund manager is no better at picking stocks than
the average nonprofessional, but charges fees.
5. No Control: Unlike picking your own individual stocks, a mutual fund puts
you in the passenger seat of somebody else's car
6. Dilution: Mutual funds generally have such small holdings of so many
different stocks that insanely great performance by a fund's top holdings still
does not make much of a difference in a mutual fund's total performance.
7. Buried Costs: Many mutual funds specialize in burying their costs and in
hiring salesmen who do not make those costs clear to their clients.

SELECTION PARAMETERS FOR MUTUAL FUND: The first point to

note before investing in a fund is to find out whether your objective matches
with the scheme. It is necessary, as any conflict would directly affect your
prospective returns. Similarly, you should pick schemes that meet your specific
needs. Examples: pension plans, children’s plans, sector-specific schemes, etc.
Your risk capacity and capability: This dictates the choice of schemes. Those
with no risk tolerance should go for debt schemes, as they are relatively safer.
Aggressive investors can go for equity investments. Investors that are even
more aggressive can try schemes that invest in specific industry or sectors. Fund
Manager’s and scheme track record: Since you are giving your hard-earned
money to someone to manage it, it is imperative that he manages it well. It is
also essential that the fund house you choose has excellent track record. It also
should be professional and maintain high transparency in operations. Look at
the performance of the scheme against relevant market benchmarks and its
competitors. Look at the performance of a longer period, as it will give you how
the scheme fared in different market conditions.
Cost factor: Though the AMC fee is regulated, you should look at the expense
ratio of the fund before investing. This is because the money is deducted from
your investments. A higher entry load or exit load also will eat into your returns.
A higher expense ratio can be justified only by superlative returns. It is very
crucial in a debt fund, as it will devour a few percentages from your modest
returns. Also, Morningstar rates mutual funds. Each year end, many financial
publications list the year's best performing mutual funds. Naturally, very eager
investors will rush out to purchase shares of last year's top performers. That is a
big mistake. Remember, changing market conditions make it rare that last year's
top performer repeats that ranking for the current year. Mutual fund investors
would be well advised to consider the fund prospectus, the fund manager, and
the current market conditions. Never rely on last year's top performers. Types of
Returns on Mutual Fund:
There are three ways, where the total returns provided by mutual funds can be
enjoyed by investors:
• Income is earned from dividends on stocks and interest on bonds. A fund pays
out nearly all income it receives over the year to fund owners in the form of a
distribution.
• If the fund sells securities that have increased in price, the fund has a capital
gain. Most funds also pass on these gains to investors in a distribution. If fund
holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive a check for
distributions or to reinvest the earnings and get more shares.

MUTUAL FUNDS DISTRIBUTION CHANNELS: Investors have varied

investment objectives and can be classified as aggressive, moderate and
conservative, depending on their risk profile. For each of these categories, asset
management companies (AMCs) devise different types of fund schemes, and it
is important for investors to buy those that match their investment goals. Funds
are bought and sold through distribution channels, which play a significant role
in explaining to the investors the various schemes available, their investment
style, costs and expenses. There are two types of distribution channels-direct
and indirect. In case of the former, the investors buy units directly from the fund
AMC, whereas indirect channels include the involvement of agents. Let us
consider these distribution channels in detail. Direct channel This is good for
investors who do not need the advisory services of agents and are well-versed
with the fundamentals of the fund industry. The channel provides the benefit of
low cost, which significantly enhances the returns in the long run. Indirect
channel This channel is widely prevalent in the fund industry. It involves the
use of agents, who act as intermediaries between the fund and the investor.
These agents are not exclusive for mutual funds and can deal in multiple
financial instruments. They have an in-depth knowledge about the functioning
of financial instruments and can act as financial advisers. Here are some of the
players in the indirect distribution channels.
a) Independent financial advisers (IFA): These are individuals trained by
AMCs for selling their products. Some IFAs are professionally qualified CFPs
(certified financial planners). They help investors in choosing the right fund
schemes and assist them in financial planning. IFAs manage their costs through
the commissions that they earn by selling funds.
b) Organized distributors: They are the backbone of the indirect distribution
channel. They have the infrastructure and resources for managing administrative
paperwork, purchases and redemptions. These distributors cater to the diverse
nature of the investor community and the vast geographic spread of the country
by establishing offices in rural and semi urban locations.
c) Banks: They use their network to sell mutual funds. Their existing customer
base serves as a captive prospective investor base for marketing funds. Banks
also handle wealth management for their clients and manage portfolios where
mutual funds are one of the asset classes. The players in the indirect channel
assist investors in buying and redeeming fund units. They try to understand the
risk profile of investors and suggest fund schemes that best suits their
objectives. The indirect channel should be preferred over the direct channel
when investors want to seek expert advice on the risk-return mix or need help in
understanding the features of the financial securities in which the fund invests
as well as other important attributes of mutual funds, such as benchmarking and
tax treatment

STRUCTURE OF A MUTUAL FUND: India has a legal framework within

which Mutual Fund must be constituted. In India open and close-end funds
operate under the same regulatory structure i.e., as unit Trusts. A Mutual Fund
in India can issue open-end and close-end schemes under a common legal
structure. The structure that is required to be followed by any Mutual Fund in
India is laid down under SEBI (Mutual Fund) Regulations, 1996. The Fund
Sponsor: Sponsor is defined under SEBI regulations as any person who, acting
alone or in combination of another corporate body establishes a Mutual Fund.
The sponsor of the fund is akin to the promoter of a company as he gets the
fund registered with SEBI. The sponsor forms a trust and appoints a Board of
Trustees. The sponsor also appoints the Asset Management Company as fund
managers. The sponsor either directly or acting through the trustees will also
appoint a custodian to hold funds’ assets. All these are made in accordance with
the regulation and guidelines of SEBI.
1.  As per the SEBI regulations, for the person to qualify as a sponsor, he
must contribute at least 40% of the net worth of the Asset Management
Company and possesses a sound financial track record over 5 years prior
to registration. Mutual Funds as Trusts: A Mutual Fund in India is
constituted in the form of Public trust Act, 1882. The Fund sponsor acts
as a settlor of the Trust, contributing to its initial capital and appoints a
trustee to hold the assets of the trust for the benefit of the unitholders,
who are the beneficiaries of the trust. The fund then invites investors to
contribute their money in common pool, by scribing to “units” issued by
various schemes established by the Trusts as evidence of their beneficial
interest in the fund. The fund should be just a “pass through” vehicle.
Under the Indian Trusts Act, the trust of the fund has no independent
legal capacity itself, rather it is the Trustee or the Trustees who have the
legal capacity and therefore all acts in relation to the trusts are taken on
its behalf by the Trustees. In legal parlance the investors or the
unitholders are the beneficial owners of the investment held by the Trusts,
even as these investments are held in the name of the Trustees on a day-
to-day basis. Being public trusts, Mutual Fund can invite any number of
investors as beneficial owners in their investment schemes. Trustees: A
Trust is created through a document called the Trust Deed that is
executed by the fund sponsor in favor of the trustees. The Trust- the
Mutual Fund – may be managed by a board of trustees- a body of
individuals, or a trust company- a corporate body. Most of the funds in
India are managed by Boards of Trustees. While the boards of trustees are
governed by the Indian Trusts Act, where the trusts are a corporate body,
it would also require complying with the Companies Act, 1956. The
Board or the Trust company as an independent body, acts as a protector
of the of the unit-holder’s interests. The Trustees do not directly manage
the portfolio of securities. For this specialist function, the appoint an
Asset Management Company. They ensure that the Fund is managed by
AMC as per the defined objectives and in accordance with the trust’s
deeds and SEBI regulations.
REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA: The
structure of mutual funds in India is guided by the SEBI. Regulations,
1996.These regulations make it mandatory for mutual fund to have three
structures of sponsor trustee and asset Management Company. The sponsor of
the mutual fund and appoints the trustees. The trustees are responsible to the
investors in mutual fund and appoint the AMC for managing the investment
portfolio. The AMC is the business face of the mutual fund, as it manages all
the affairs of the mutual fund. The AMC and the mutual fund must be registered
with SEBI. 32
MUTUAL FUNDS IN INDIA: In 1963, the day the concept of Mutual Fund
took birth in India. Unit Trust of India invited investors or rather to those who
believed in savings, to park their money in UTI Mutual Fund. For 30 years it
goaled without a single second player. Though the 1988 year saw some new
mutual fund companies, but UTI remained in a monopoly position. The
performance of mutual funds in India in the initial phase was not even closer to
satisfactory level. People rarely understood, and of course investing was out of
question. But yes, some 24 million shareholders were accustomed with
guaranteed high returns by the beginning of liberalization of the industry in
1992. This good record of UTI became marketing tool for new entrants. The
expectations of investors touched the sky in profitability factor. However,
people were miles away from the preparedness of risks factor after the
liberalization. The net asset value (NAV) of mutual funds in India declined
when stock prices started falling in the year 1992. Those days, the market
regulations did not allow portfolio shifts into alternative investments. There was
rather no choice apart from holding the cash or to further continue investing in
shares. One more thing to be noted, since only closed-end funds were floated in
the market, the investors disinvested by selling at a loss in the secondary
market. The performance of mutual funds in India suffered qualitatively. The
1992 stock market scandal, the losses by disinvestments and of course the lack
of transparent rules in the whereabouts rocked confidence among the investors.
Partly owing to a relatively weak stock market performance, mutual funds have
not yet recovered, with funds trading at an average discount of 1020 percent of
their net asset value. The securities and Exchange Board of India (SEBI) came
out with comprehensive regulation in 1993 which defined the structure of
Mutual Fund and Asset Management Companies for the first time. The
supervisory authority adopted a set of measures to create a transparent and
competitive environment in mutual funds. Some of them were like relaxing
investment  restrictions into the market, introduction of open-ended funds, and
paving the gateway for mutual funds to launch pension schemes. The measure
was taken to make mutual funds the key instrument for long-term saving. The
more the variety offered, the quantitative will be investors. Several private
sectors Mutual Funds were launched in 1993 and 1994. The share of the private
players has risen rapidly since then. Currently there are 34 Mutual Fund
organizations in India managing 1,02,000 crores. At last, to mention, if mutual
fund companies are performing with lower risks and higher profitability within
a short span of time, more and more people will be inclined to invest until and
unless they are fully educated with the dos and don’ts of mutual funds. Mutual
fund industry has seen a lot of changes in past few years with multinational
companies coming into the country, bringing in their professional expertise in
managing funds worldwide. In the past few months there has been a
consolidation phase going on in the mutual fund industry in India. Now
investors have a wide range of Schemes to choose from depending on their
individual profiles
.
 MUTUAL FUND COMPANIES IN INDIA: The concept of mutual funds in
India dates to the year 1963. The era between 1963 and 1987 marked the
existence of only one mutual fund company in India with Rs. 67bn assets under
management (AUM), by the end of its monopoly era, the Unit Trust of India
(UTI). By the end of the 80s decade, few other mutual fund companies in India
took their position in mutual fund market. The new entries of mutual fund
companies in India were SBI Mutual Fund, can bank Mutual Fund, Punjab
National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual
Fund. The succeeding decade showed a new horizon in Indian mutual fund
industry. By the end of 1993, the total AUM of the industry was Rs. 470.04 bn.
The private sector funds started penetrating the fund families. In the same year,
the first Mutual Fund Regulations came into existence with re-registering all
mutual funds except UTI. The regulations were further given a revised shape in
1996. Kothari Pioneer was the first private sector mutual fund company in India
which has now merged with Franklin Templeton. Just after ten years with
private sector players penetration, the total assets rose to Rs. 1218.05 bn. Today
there are 33 mutual fund companies in India.
 Major Mutual Fund Companies in India ABN AMRO Mutual Fund
Reliance Mutual Fund • Birla Sun Life Mutual Fund Standard Chartered
Mutual Fund • Bank of Baroda Mutual Fund Franklin Templeton India
Mutual Fund • HDFC Mutual Fund Morgan Stanley Mutual Fund India •
HSBC Mutual Fund Escorts Mutual Fund • ING Vysya Mutual Fund
Alliance Capital Mutual Fund • Prudential ICICI Mutual Fund
Benchmark Mutual Fund • State Bank of India Mutual Fund Can bank
Mutual Fund • Tata Mutual Fund Chola Mutual Fund • Unit Trust of
India Mutual Fund LIC Mutual Fund 36

FUTURE PROSPECT OF MUTUAL FUNDS IN INDIA: Financial experts

believe that the future of Mutual Funds in India will be very bright. It has been
estimated that by March-end of 2010, the mutual fund industry of India will
reach Rs 40,90,000 crore, considering the total assets of the Indian commercial
banks. In the coming 10 years the annual composite growth rate is expected to
go up by 13.4%.
• 100% growth in the last 6 years.
• Number of foreign AMC's are in the queue to enter the Indian markets like
Fidelity Investments, US based, with over US$1trillion assets under
management worldwide.
• Our saving rate is over 23%, highest in the world. Only channelizing these
savings in mutual funds sector is required.
• We have approximately 29 mutual funds which is much less than US having
more than 800. There is a big scope for expansion.
• 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds
are concentrating on the 'A' class cities. Soon they will find scope in the
growing cities.
• Mutual fund can penetrate rural like the Indian insurance industry with simple
and limited products.
• SEBI allowing the MF's to launch commodity mutual funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.
• Introduction of Financial Planners who can provide need-based advice.
Looking at the past developments and combining it with the current trends it
can be concluded that the future of Mutual Funds in India has lot of positive
things to offer to its investors. 
Marketing Strategies for Mutual Funds Business Accounts
• The most common sales and marketing strategies for mutual funds is to sign-
up companies as a preferred option for their retirement plans. This provides a
simple way to sign-up numerous accounts with one master contract. To market
to these firms, salespeople target human resource professionals. Marketing
occurs through traditional business-to-business marketing techniques including
conferences, niche advertising and professional organizations. For business
accounts, fund representatives will stress ease of use and compatibility with the
company's present systems. Consumer Marketing
• Consumer marketing of mutual funds is like the way other financial products
are sold. Marketers emphasize safety, reliability and performance. In addition,
they may provide information on their diversity of choices, ease of use and low
costs. Marketers try to access all segments of the population. They use broad
marketing platforms such as television, newspapers and the internet. Marketers
especially focus on financially oriented media such as CNBC television and
Business week magazine. Performance
• Mutual funds must be very careful about how they market their performance,
as this is heavily regulated. Mutual funds must market their short, medium and
long-term average returns to give the prospective investor a good idea of the
actual performance. For example, most funds did very well during the housing
boom. However, if the bear market that followed is included, performance looks
much more average. Funds may also have had different managers with different
performance records working on the same funds, making it hard to judge them.
Marketing Fees
• Mutual funds must be very clear about their fees and report them in all their
marketing materials. The main types of fees include the sales fee (load) and the
management fee. The load is an upfront charge that a mutual fund charges as
soon as the investment is made. The management fee is a percentage of assets
each year,

CONCLUSION: With the structural liberalization policies no doubt Indian

economy is likely to return to a high grow path in few years. Hence mutual fund
organizations are needed to upgrade their skills and technology. Success of
mutual fund however would bright be depending upon the implementation of
suggestions. About the Mutual Fund investor, we are of the view that the
investor needs to adopt two crucial skills for successful investing i.e., a sense of
timing and investment discipline both need to be adopted at the same time.
Mutual Funds now represent perhaps most appropriate investment opportunity
for most investors. As financial markets become more sophisticated and
complex, investors need a financial intermediary who provides the required
knowledge and professional expertise on successful investing. As the investor
always try to maximize the returns and minimize the risk. Mutual fund satisfies
these requirements by providing attractive returns with affordable risks. The
fund industry has already overtaken the banking industry, more funds being
under mutual fund management than deposited with banks. With the emergence
of tough competition in this sector mutual funds are launching a variety of
schemes which caters to the requirement of the class of investors. Risk takers
for getting capital appreciation should invest in growth, equity schemes.
Investors who need regular income should invest in income plans. The stock
market has been rising for over three years now. This in turn has not only
protected the money invested in funds but has also to helped grow these
investments. This has also instilled greater confidence among fund investors
who are investing more into the market through the MF route than ever before.
Reliance India mutual funds provide major benefits to a common man who
wants to make his life better than previous. The mutual fund industry gets less
than 2 per cent of household savings against the 46 per cent that go into bank
deposits. Some fund managers say this only indicates the sector's potential. "If
mutual funds succeed in chipping away at bank deposits, even a triple digit
growth is possible over the next few years.