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Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 03 Issue 08

July 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 280

Recent Trends In Mutual Fund Industry In India.

Geetha Sineni & Dr. S.Siva Reddy

1Reg.No: PP MAN 151 Research Scholar in Rayalaseema Univsersity, Deapartment of Management.

Kurnool, Andhra Pradesh.

2Assistant professor, Department of Commerce, Sri Ramakrishna Degree & PG

College(Autonomous). Nandyal,Kurnool(Dist).Andhra Pradesh

Abstract:

Mutual funds would be solitary of the major

mechanisms of capital formation and wealth saving

in the years to come, giving positive results. The

mutual fund has emerged as a potential investment

option for various categories of investors. The

mutual fund industry in India has undergone a most

successful phase in the last 10 years. However, this

tremendous growth in the mutual fund industry in

India is still lacking far behind other developed

nations. Past revisions and reports of the fund

houses have shown the upward movement in the

growth trend of Indian mutual fund industry. Since

the inception of UTI, the Indian mutual fund

industry has made significant progress regarding

the capacity of the business. A large number of

schemes have been launched by the fund houses to

cater the need of the investors. However, in several

platforms, the progress of the industry was

questioned by comparing it with other countries.

The penetration of the sector to a distinct segment

of the investors and the total contribution to the

corpus of the industry regarding GDP has always

drawn attention. This paper enlightens the readers

on the growth of the industry in recent times. The

study focuses on the key areas which are of

strategic importance to industry for its growth.

Key Words: Mutual Funds, trends, asset allocation.

1. INTRODUCTION:

A Mutual Fund is a trust that pools the savings of some

investors who share a common financial goal. Over the

past decade, mutual funds have increasingly become the

investor’s vehicle of choice for long-term investing. In

recent times, the emerging trend in the mutual fund

industry is the aggressive expansion of the foreign

owned mutual fund companies and the decline of the

companies floated by nationalized banks and small

private sector players. Growth and developments of

various mutual funds products in the Indian capital

market has proved to be one of the most catalytic

instruments in generating important investment growth

in the capital market. In this context, close monitoring

and evaluation of mutual funds have become essential.

With an emphasis on an increase in domestic savings and

improvement in the deployment of investment through

markets, the need and scope for mutual fund operation

have increased tremendously. Thus, the involvement of

mutual funds in the transformation of Indian economy

has made it urgent to view their services not only as a

financial intermediary but also as a pacesetter as they are

playing a significant role in spreading equity culture. In

this context, it becomes pertinent to study the recent

trends of the Indian mutual fund industry

The most significant trend in the mutual fund industry is

the forceful expansion of the foreign owned mutual fund

companies and the decline of the companies floated by

nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund

business in the early nineties and got off to a good start

due to the stock market boom prevailing then. These

banks did not understand the mutual fund business, and

they just viewed it as another kind of banking activity.

Few hired specialized staff and chose to transmission

staff from the parent organizations. The performance of

most of the schemes floated by these funds was not good.

Some schemes had offered guaranteed returns and their

parent organizations had to bail out these AMCs by

paying large amounts of money as the difference

between the guaranteed and actual returns. The service

levels were also appalling. Last few years there took a

series of events within and outside the Indian economy

Page 2 of 16

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 03 Issue 08

July 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 281

which deleteriously affected the industry. This research

will include study of classified growth trends in mutual

fund industry which will contribute to growth of the

sector as whole

Types of Mutual Funds in India:

Figure 1. Types of Mutual Funds in India:

By Structure:

Open Ended – These remain schemes that do not have a

fixed maturity. The Mutual Fund ensures liquidity by

announcing sale and repurchase price for the unit of an

open-ended fund.

Closed Ended – These are schemes that have a fixed

maturity. The money of the investor is locked in for the

period. Occasionally, closed-end schemes provide a re- purchase option to the investors, either for a specified

time or after a specified period. Liquidity in these

schemes is provided through listing in a stock market.

By nature and other Schemes:

Mutual Funds Based on Asset Class

1. Equity Funds

These funds are invested in equity stock or shares of the

companies. They provide a higher result, that is the

reason they are considered as high-risk funds.

2. Debt Funds

These funds are invested in the debt like government

bonds, company debentures, and fixed income assets. As

they provide fixed returns, they are known to be a safe

investment instrument.

3. Money Market Funds

These funds are invested in liquid instruments, such as

CPs, T-Bills, etc. They are considered quite safe

investment option, as you get an immediate yet moderate

return on your investment. They are a perfect option for

investors who want to invest their abundant funds.

Image result for Types of Mutual Funds

Image result for Types of Mutual Funds

Page 3 of 16

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 03 Issue 08

July 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 282

4. Hybrid or Balanced Funds

These types of funds are invested in different asset

classes. There are times when the proportion of debt is

lower than equity; it could be another way around as

well. In this manner, return(s) and risk(s) strikes a perfect

balance.

5. Sector Funds

In these funds, investment is made in a particular sector

or division of the market. For instance, infrastructure

fund investors make investments restricted to

infrastructure companies or investment instruments

offered by the infrastructure companies. Returns on

investment are directly proportionate to the performance

of that particular sector. The risk factor associated with

these schemes varies sector to sector.

6. Index Funds

These funds are investment instruments that represent

specific index on the exchange to monitor the returns and

the movement of the index, viz. purchasing shares from

the BSE Sensex.

7. Tax-Saving Funds

These funds make investment majorly in the equity

shares. Tax-saving funds make an investor eligible to

claim tax deductions under the Income Tax Act. Risk

factor involved in these funds is generally on the higher

side. At the same time, higher returns are offered if the

funds’ performance is at par.

8. Funds of Funds

These funds invest in the other mutual funds, and the

returns are dependent on the overall performance of the

target funds.

By Investment Objective

Equity Schemes – These primarily invest in shares.

Based on the objective, investments could be in growth

stocks, where earnings growth is expected to be high, or

value stocks, where the view of the fund manager is that

current valuations in the markets do not reflect the

intrinsic value. The various kinds of equity schemes are:

Equity Diversified:

All non-theme and non-sector funds can be classified as

diversified equity funds.

Mid Cap:

These funds invest in companies from different sectors.

However they put a restriction regarding the market

capitalization of a company, i.e., they invest largely in

BSE Mid Cap Stocks.

ELSS:

ELSS is an open-ended equity growth scheme that is

offered by Mutual Funds in line with existing ELSS

guidelines. The investments under this type of scheme

are subject to a lock-in period of 3 years and, as per the

Finance Act 2005, are allowed the benefit of income

deduction up to Rs 1,50,000 under section 80(C).

RGESS:

Rajiv Gandhi Equity Savings Scheme is a tax advantage

savings scheme for first time retail investors in securities

market. It gives tax benefit who invest up to Rs. 50,000

& whose annual income is below Rs. 12 Lakhs. The tax

benefit is up to 50% deduction on investment amount

under section 80 CCG of income tax act.

Thematic:

These schemes invest in various sectors but restrict

themselves to a particular theme, e.g., services, exports,

consumerism, etc.

Sector Specific:

These are schemes that invest in a particular sector for

example IT. They have a high degree of risk associated

with them as if that particular sector does not perform

then their returns will suffer.

Flexicap:

These kinds of schemes invest across market caps.

Special Funds:

There are also schemes to meet financial objective like

retirement & child plan.